Mar. 27, 2007 SDF Investment Trends

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The SDForum Platform 2.0 panel on Investment Trends was moderated by Brian Goncher Relationship Manager at Deloitte and consisted of Mitchell Kertzman, Partner at Hummer Winbald, Tom Cole, General Partner at Trinity Ventures, Gary Little, General Partner at Morganthaler Ventures and Ray Wu, New Business Ventures at Hewlett-Packard. It was the funniest and smartest panel I’ve seen in months.

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According to Brian Goncher, a third of the venture capital in the United States is invested in Silicon Valley software companies. Web services are a growing share of that investment and recognized as a separate category from traditional desktop or Internet software.

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Mitchell Kertzman is skeptical of anyone pitching a new platform. It is not necessary to create a new platform. You can add value to existing ones. He doesn’t know what Web 2.0 is. If someone pitches an idea to him with those words in it he passes, but if it’s Web 3.0, he’ll invest in it like crazy. A successful platform has technology and a community built around it that can build businesses upon. He likes Widgetbox because it naturally creates an ecosystem. To succeed in venture capital it is more important to pick the right wave than the right company. Software as a service is such a wave.

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Tom Cole joked he was very active in Web 1.0 companies. The strict definitions of a platform are a pretty high bar and there are few true platforms. The current wave offers services in the clouds and ways of interconnecting them with things like Ruby on Rails. Web services need rapid iterations like Codefast that automate the build quickly and run it in record time. Another idea is creating a horizontal web service for consumers like Photo Bucket, where you can link your video to your MySpace page. He advises start-up companies not to advertise themselves externally as a platform because it is like painting a bulls eye on their back. It is better that people see the advantages to your software and adopt it bit by bit like Salesforce.com.

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Gary Little says that venture capitalist swim in schools and agreed with his colleagues. It is important to differentiate between a platform and developer tools. To him, a platform is a layer that persists in time through different changes in technology across applications and verticals. He doesn’t invest in tools because they are hot and then cool. He likes SQL databases because they have been around and keep kicking around. They have been used from mainframes to web services. Creating a permanent place in the stack adds value to your investment. He likes to invest in services that have platform characteristics, like Ingris, Illustra and Atria. It is key to build a developer community with the software like MuleSource. MuleSource is an open source integration program that is growing so fast it had its most recent convention in Moscone Center in San Francisco.

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Ray Wu says that HP is very much in the IT structure space and therefore a platform vendor. All these e-commerce companies will need services in the cloud to scale up or down. HP is in the software, middleware, hardware, front and back end. Over 70 percent of SMS goes through HP’s OpenHub. No matter what platform arises, HP will work with it in some way.

Copyright 2007 DJ Cline All rights reserved.