Lewis Gersh's Blog - Latest Comments

Re: FetchBack Exits to GSI Commerce

employment background check — Tue, 27 Dec 2011 20:59:24 -0000

I do like what you have done with the site.

Re: Encoding.com launches Vid.ly

Jeff Malkin — Mon, 24 Jan 2011 16:57:45 -0000

Thanks for believing in us Lewis, Marc and David. Your contributions and support are greatly appreciated.

Re: The Velocity of Obsolescence

LewisGersh — Thu, 06 Jan 2011 15:07:59 -0000

Thanks Phil. Hmmm, or maybe both things are happening concurrently, I think.

Re: The Velocity of Obsolescence

LewisGersh — Thu, 06 Jan 2011 15:06:36 -0000

Thanks, much appreciated and good to hear.

Re: The Velocity of Obsolescence

LewisGersh — Thu, 06 Jan 2011 15:06:14 -0000

Thanks Scott, was wondering when i was drafting this how much it applied and with what time frames to other high tech innovation sectors. Interesting to hear in film.

Re: The Velocity of Obsolescence

LewisGersh — Thu, 06 Jan 2011 15:05:11 -0000

Thanks Gene and very funny on Velocity of Obesity. My cousin from West point told me that 3/4 of all high school grads are ineligible for the Army due to obesity. That is a frightening statistic!

Re: The Velocity of Obsolescence

LewisGersh — Thu, 06 Jan 2011 15:03:46 -0000

I think an entrepreneurs greatest asset is also their greatest liability: The enthusiasm to will things into being which drives the venture forward, but also attracts opportunistic distractions. But their ADD and/or innovation refinement is probably not to blame for the behind-the-times issue agencies face. Mark Twain: "When the end of the world comes, I want to be in Cincinnati because it's always twenty years behind the times." He could have swapped the city for "client'.

Re: The Velocity of Obsolescence

LewisGersh — Thu, 06 Jan 2011 14:55:14 -0000

Well put. I was focused only on the average of web enabled ventures, not the many of the best which often do run longer and then have the benefit of developing a defensible market share/brand awareness as the leader. And faster than ever today like Groupon or Zynga. And probably more so in consumer facing as well.

Re: The Velocity of Obsolescence

LewisGersh — Thu, 06 Jan 2011 14:51:42 -0000

Great comments and agreed. We are a backer of companies, not products, and no we do not incubate them (any more so than our portfolio companies all test and refine through the seed stage we fund). And per your later point, one of the ramifications of greater capital efficiency is the "noise in the system" from so many entrants in a given sector. While it doesn't cost as much time and capital as in Bubble 1.0, we do see too many entrants that are features, not even products, let alone companies, but mostly on the consumer facing side, less so on B2B where we are focused.

Re: The Velocity of Obsolescence

Thorsten Claus — Wed, 05 Jan 2011 11:45:11 -0000

I have mixed feeling about your observation, mainly because the borders between 'traditional' VC investments, incubators, and holding companies are getting fuzzy. If your fund is focusing on helping to develop products, then the VoO is definitely accelerating. If your fund is rather for incubation of products, then your strategies will be significantly different from incubating companies. Sounds a little bit like Brickhouse for me. But it takes a different level to create a company, not only a product.

To my point: Tynt or Fetchback are more than products. Sure: I can create and copy scripts of Tynt and start my own analytics website, but that doesn't really cut it, right? (and it won't scale to 20b pages, 250m users, and countless B2B relationships and channels, either)

I agree with faster beta testing / more prototyping and accelerating opportunities for customer acquisition. But prototyping early and often leads to publicizing products or features instead of making companies public - hence the felt need for faster innovation (in the 'old times' we first built the company, not 'just' several beta products). I'm sure there is a place for VCs that 'prototype' often and early and their mechanics will be different, as the acquired customers may neither be paying nor sustainable.

Which brings me to sustainability - or long-term positive effect on quality of life at a larger scale. Many services and apps are surely fun and entertaining, interesting and helpful. But do they move boxes? Do they help producing something? Do they make me healthier? Do they reduce carbon footprint? I'm becoming increasingly weary of investment opportunities that are just 'nice' - and there are really many of them. my Point: Because of lower (capital) market entrance barriers (thank you, Cloud) VCs can find more and increasingly smaller-sized early-stage opportunities, but not all of these opportunities make me excited.

Re: The Velocity of Obsolescence

Mark Caron — Tue, 04 Jan 2011 19:53:18 -0000

The web-enabled services market is definitely moving increasingly faster, for all the excellent list of reasons you cite, but we should all remember that true, breakthrough innovation still can take time (more than 18 months) to take form and gain traction. Many of the best startups have been way ahead of the market, and needed time to adjust their focus and let the market catch up.

Re: The Velocity of Obsolescence

John Baker — Tue, 04 Jan 2011 18:39:43 -0000

18 months! It takes 18 months to get traction on an idea and be to a point anyone knows your name. Or to remember your business isn't about Behaviorial Targeting (so last year), but really Social Activity Targeting (so Facebook). And all when the end client still doesn't understand how keyword buys work.

Isn't there a risk this fuels entrepreneurs' classic short attention spans and leads to the other classic death of a new business: nonfocusitis?

Re: The Velocity of Obsolescence

Vgeshahan — Tue, 04 Jan 2011 17:18:46 -0000

Lew,

Once I realized this was about the Velocity of Obsolescence, and not the much faster Velocity of Obesity, I thought I'd add a few observations.

You are onto a new element in economic evolution. We have all heard about the shortening of life cycles in the auto business. I think it is true in all industries. I have often observed that Warren Buffett's favorite holding period (forever!) may be much tougher to achieve. I don't think I'm capable of quantifying it as neatly as you have, but no one in any industry, even consumer products with less technological content, can count on a sustained run with market leadership.

Thanks for you insights!

Gene Shahan.

Re: The Velocity of Obsolescence

Scot Brew — Tue, 04 Jan 2011 15:30:11 -0000

Good read. The estimated 18-month shelf life for web enabled services matches what we have been feeling about film industry technologies over the past few years. I like the term, description of it, and also how it applies to companies and investors.

Re: The Velocity of Obsolescence

Chris Sheehan — Tue, 04 Jan 2011 14:59:17 -0000

Lewis - good post and consistent with what I have seen in the industry over the last 10 years.

Chris

Re: The Velocity of Obsolescence

Lloyd — Tue, 04 Jan 2011 14:54:54 -0000

Good point, congruent with Kurzweil's Law of Accelerating Returns...

Re: The Velocity of Obsolescence

Phil J — Tue, 04 Jan 2011 14:38:03 -0000

Lewis, Great read, it is very interesting to take a step back and review the situation like this. I wonder if the mean time to dead pool is actually decreasing or if entrepreneurs are just spending more time cheaply bootstrapping and then approaching investors later in the game for quick rounds that may burst or go big?

Re: The Coming Supply-Demand Inversion between VCs and start-ups

Jud Valeski — Tue, 30 Nov 2010 00:25:18 -0000

Feels spot on; nice post. I think the balloon of seeding that's been going on is in for a real shock when the next round of capital bump is needed to move things forward for a firm. The entrepreneur gets hurt in this scenario, as, in order to keep things moving, they'll have to turn back to their old boyfriend when they realize no-one else wants to dance with them; not a good leverage position. Lesson: make sure you're hot.

Upside to the system as a whole is that the weeds get whacked. Downside is that the perpetual motion machine that churns out returns doesn't get the necessary momentum for long term growth.

Re: The Coming Supply-Demand Inversion between VCs and start-ups

defrag_Ami — Mon, 29 Nov 2010 20:00:36 -0000

Interesting choice of metaphor for startups and VC investing. I thought for sure it would end with excess tearful boys.

Re: The Coming Supply-Demand Inversion between VCs and start-ups

loukerner — Fri, 26 Nov 2010 08:29:56 -0000

Interesting read Lewis. While there have been lots of stories written about the slew of earlier stage funds, and the inherent problems in that situation (e.g. seed stage bidding wars), few have looked past the current situation.

I tend to think capital finds its way to good opportunities pretty quickly, as we've seen with the flood of early stage investors. Capitalism is one never ending cycle of boom-and-busts. There may be a short lived period where there's a lack of later stage funding available But if there are good ideas to fund, we'll soon be reading posts of the flood of later stage investors bidding up the prices :-)

Re: The Coming Supply-Demand Inversion between VCs and start-ups

LewisGersh — Thu, 25 Nov 2010 14:24:09 -0000

Lovely visual of you and Proto come to mind. Not!

Re: The Coming Supply-Demand Inversion between VCs and start-ups

LewisGersh — Thu, 25 Nov 2010 14:23:21 -0000

Thanks Nate. Definitely agree on the fork in the road approach. That works well for reasonably funded/valued companies with good traction and we counsel heavily for start-ups to keep their options open. Unfortunately many are over-funded/over-valued way over the tips of their skis and have to succeed into making good on their valuation. With the velocity of obsolescence these days, many of those will get washed out. I think it really takes a tight charter and sticking to it for funds to succeed and many do not exercise the discipline.

Re: The Coming Supply-Demand Inversion between VCs and start-ups

Lewis — Thu, 25 Nov 2010 14:18:16 -0000

Thanks Ben and agreed. We are planning our portfolio and new deployments with that strategy in mind as we grow as well.

Re: The Coming Supply-Demand Inversion between VCs and start-ups

Lewis — Thu, 25 Nov 2010 14:15:54 -0000

Thx John, agreed.

Re: The Coming Supply-Demand Inversion between VCs and start-ups

Pharkins — Wed, 24 Nov 2010 07:23:06 -0000

Good think we are the hottest girl!