We kicked off the clewanweb hackathons last summer in SF with the goal of building momentum around the concept that information technology can accelerate cleantech adoption and be the most powerful lever we have to combat resource scarcity. It's an exciting idea and the response has been spectacular. Both the NYC and SF events were a huge success and the Why Cleanweb Will Beat Cleantech slide deck we produced with Pure Energy Partners generated 60,000 views in 3 days!

With awareness growing Spring Ventures and Sunil Paul's Spring Forward Foundation is sponsoring a 12 city hackathon tour spear headed by Blake Burris. Boston kicks off next weekend with Boulder, Santa Clara, Oakland and Paris all happening in the next two months. Even the Bloomberg administration in NYC is getting behind the idea with their own green hackathon happening this summer. And I recently heard that Jack Townsend in the UK is considering a PHD in CleanWeb!! I think this meme has legs. :)

Finally, a big thanks to our new addition hackathon advisory board members Danny Kennedy of Sungevity, David Fenton of Fenton Communications and Jonathan Koomey, Consulting Professor at Stanford University.

Go cleanweb go!

One afternoon almost a year ago, while in the offices of City Car share, Sunil Paul and I coined the term cleanweb to describe our investment thesis and our thinking about the evolution of cleantech and its intersection with information technology. We truly believe its the most powerful lever we have to address the world's resource constraints while driving economic growth.

Taking inspiration from Al Gore's Inconvenient Truth, we decided to put together a killer slide deck for SXSW to help spread the cleanweb gospel. I've updated the presentation with narrative which you can find on youtube at...

Thanks to all who worked super hard on this...

Sunil Paul - @sunilpaul
Nicholas Eisenberger - @pure_energy_nme
Sameer Rashid - @sameer_rashid
Graham Hill - @ghill
Cristian Fleming - @publicsociety
Shayne McQuade
Ned Horneffer
Blake Burris - @blakestar 

We also just authored a great article for Tech Review.

 

NYC cleanweb hackathon is just around the corner. With 2012 the year of code, we are super stoked for the event and are expecting a great turnout at TishchITP the weekend of January 21/22. Speaking of great turnout, the judging panel is absolutely all star.  Drum roll please.........

Fred Wilson - Union Square Ventures - @fredwilson

Rachel Sterne - NYC Chief Digital Officer - @rachelsterne

Frank Rimalovski - Managing Director, NYU Innovation Venture Fund - @rimalovski

Evan Korth - CoFounder of HackNY - Quora

Mike Shimazu - NYSERDA

Aneesh Chopra - Federal CTO of the United States

Maria Gotsch - President and CEO at the New York City Investment Fund

The kick off event on Friday evening is also not to be missed. The New York Academy of Sciences is hosting...amazing view.

So sign up today!!

Yesterday I came across "Platforms and Networks", Havard Professor Tom Eisenmann's blog. His compliation of 2011 best posts about managing startups is the best blog post i've seen in the past year. I sent it around as required reading to our early stage companies and got a fantastic response. I recommend to anyone in startuplandia.

Click here to read the post

Spotify is all the rage and when it first came out I couldn't get enough. What's not to like? A huge catalog to stream at your finger tips, mobile app and offline ability all for $10 bucks a month. I remember not long ago dropping $300 a month at Amoeba, wow have times changed. Again, what's not to like?

 

Then two weeks ago I was introduced to MOG and my true love affair began. MOG, the Bay Area local beats Spotify hands down in several key ways...

 

UI/UX
While Spotify basically ripped off a clunky iTunes like interface; they didn't do it justice and clearly didn't learn much from the late Steve Jobs. If you're going to be innovative, why design the look and feel around a legacy system like iTunes? What a missed opportunity to rethink the way we search, discover and listen to music. Everything feels very list like (DOS) and cluttered (MSFT). When searching, album art is jammed into the top and requires too many clicks, when is should be spread out and showcased. The problem is even worse on the mobile, which I'll get into.

MOG on the other hand is much easier on the eyes, with a beautiful blog style layout, image heavy and very intuitive. I can easily see my most recently played, browse favorites by artist and album and discover new tunes quickly and easily from the in-browser homepage.

 

MOBILE
The world is going mobile light speed fast and why more effort wasn't expended to make the mobile experience much, much better on Spotify is a little head scratching. This is where they really dropped the ball. Half the time I can't even launch the app. And the most infuriating is being asked to login via facebook when I don't have cell coverage. I just want to listen to my offline playlist. When I'm on the go I want to find my favorites fast. I certainly don't want to scroll through a giant list of everything I've ever starred. 

MOG once again puts Spotify to shame. Simple, graphics heavy splash page let's me navigate easily to favorites by artist and album, new releases and much more. The key here is quick and simple with minimal clicks and swipes.

 

CURATED
I do like how Spotify connects with my friends, so I can see what they are listening to. They probably win in terms of social, but MOG's Editors Picks, Featured Playlists and recommendations based on what my friends listen to wins again. The Editors Picks are on par with Pitchfork or Dusted, span a wide range of sounds and styles and are often way better than what my "friends" are listening to anyaway.

 

All in all MOG is fantastically preferred in my opinion. I love it! I've kept my Spotify account during my taste test period, but after today its all MOG all the time.

 

Large, entrenched institutions decry government intervention at every turn, except when it's in their best interest. Oil and gas companies hate environmental regulation, but love their long-term subsidy support. Food/beverage companies abhor restrictions on selling sugared snacks to kids in school, but they sure like buying corn syrup on the cheap with taxpayer dollars. Financial services firms despise the thought of transparency in the derivatives market, but oh boy do they like 0% loans from the fed and implicit/explicit bailouts.

Hypocrisy is a staple in this world and I understand that these groups are in self preservation mode. The world is changing from hierarchical, centralized systems of power to lateral, distributed regimes. It's happening in business, education, technology and government - it's a lot of what the cleanweb is about. The battles going on are a natural friction of change as incumbents fight for survival, but make no mistake, economic growth and innovation depends directly on progress and modernizing our institutions to better fit the dynamics of today. 

The internet and mobile technology are massive drivers of this transformation and they under attack. Two hugely important topics are being debated in the house and senate right and their outcomes could have serious impacts on economic growth and freedom of information.

1) S. 968 (the “PROTECT IP Act”) and H.R. 3261 (the “Stop Online Piracy Act”) aim to curb internet piracy, but in fact would give government and corporations the power to block specific sites, slow down connections and in extreme cases throw people in jail for posting certain types of content. The biggest internet companies out there are against this legislation and you should be too.

2) The growth of mobile technologies is taxing the licensed wireless spectrum that carriers use to transmit data. With all the use from iPhones and Androids it's no surprise that carriers like AT&T and Verizon want more bandwidth. The idea is to auction off unused broadcast spectrum from television for more productive uses. This sounds great and I agree, but we need to have a balanced approach. Technologies like WiFi, Bluetooth and RFID operate using unlicensed spectrum. Any approach for mobile spectrum growth needs to be balanced and allow continued use and increaes in unlicensed spectrum use. Fred Wilson has a great post on the topic along with Yochai Benkler's more exhaustive review. 

 

Everyone makes mistakes now and again. It's how you handle those mistakes and learn from those mistakes that make you a (wo)man of integrity. 

Yesterday afternoon I received a call from a partner at another venture firm (let's call him Partner Ted - not his real name) with a tale of integrity involving one of our portfolio company CEOs (let's call him Founder Jeff - again not his real name). It's a good lesson and one I want to share. 

Founder Jeff decided to turn down investment from Partner Ted. Instead of being honest and direct with Partner Ted, Founder Jeff gave a round about reason about how he really wanted a partnership with Ted, but his other investors/partners weren't supportive. About 15 minutes later Founder Jeff, realizing he had made an error called Partner Ted to apologize and explain directly why he didn't think it was a good fit. Founder Jeff owned his decision, took responsibility and in return earned the respect of Partner Ted.

I could have received two very different phone calls yesterday. I'm very happy I heard a tale of integrity and not the other way around. 

Spring Ventures moved into a killer office space in downtown sf about 3 months back (i'll do another post with some classy photos and panoramas soon). We had a few requirements - convenient location, good size, workable layout, proximity to delicious eats, natural lighting, outdoor space, etc. Quite a list of demands, i know, but workplace environment is so key for productivity and enjoyment, we wanted to make sure we got everything right. 

I'm happy to say, we nailed it on pretty much every front, especially the outdoor space (come by and check it out if you're nearby), but what's proving to be the most beneficial is having a space and layout that allows us to cohabitate with our startups and friends.

For example....a recent stealth transportation investment of ours has been calling Spring Ventures home since we moved into 360 Pine Street - i'm sitting 5 feet away from the developers and UI folks right now. As a former Wall Street guy I was rarely if ever exposed to the joys of the sausage being made at an early stage startup. When interacting with public companies while at Morgan Stanley, my time with management was often carefully controlled and scripted. Getting to really know the founders and employees was difficult at best. Getting to share space everyday promotes a much deeper level of interaction and trust. I'm able to really learn the product, the founders, employees and the company's process, what's working well and what needs work. I'm able to be more helpful and part of the process in a way that I couldn't even if just a few floors away. Don't tell them this - wouldn't want it to go to their heads - but i'm probably learning more from them than they are from me. ;-)

Others like Solar Mosaic and Fresher have been coming by often to use the space as well. It has been a great experience and i'm excited to keep on cohabitating. 

 

 

Natural Capital, Financial Capital and Human Capital

At Spring Ventures we coined the phrase CleanWeb to describe the application of information technology to the pursuit of resource and efficiency gains. It's an obvious combination of cleantech and the web and a category that is ripe for innovation and opportunity. Web, social and mobile technologies are ubiquitous in our lives, especially at the consumer level, and have transformed every industry from entertainment to travel. It's only natural that the old line industries of energy and resources will be equally transformed by IT and I see exciting opportunities in scaling renewables, innovative transportation and the built environment. That said, I've had this nagging feeling that our definition of CleanWeb failed to encompass or capture its true meaning and spirit. While efficient use of natural capital is implied in the CleanWeb name, human capital and financial capital are equal legs of the stool and need inclusion to fully describe the category. 

What Do CleanWeb and The Arab Spring Have In Common?

The most pervasive and exciting thing happening in the world right now is the collapse of hierarchical power systems and the establishment of lateral, distributed and highly networked regimes. This is the common thread between so many areas of our lives right now - government, finance, technology, education and business - and what I'm seeing more and more as a core characteristic of cleanweb.

Social networks like Twitter and Facebook are about collapsing communication and media. The Arab Spring and Occupy are about empowering individuals over governments. Solar Mosaic, Lending Club and Prosper disintermediate the banking system. Airbnb and HomeAway are massively disrupting the hotel industry. Angel List and SharePost are connecting investors and entreprenuers in entirely new ways. Code Academy and Khan Academy are offering learning solutions that better serve the needs of this century and KickStarter and Etsy are getting businesses and ideas launched better than the SBA ever could.

What all of these have in common is the break up of a central source of power and the rise of a distributed network. This is CleanWeb!

 

Clean = efficient, transparent, sustainable
Web = networked, decentralized, scalable

 

There has been tons of great writing on these concepts. I encourage proponents of CleanWeb to check out...

Carlota Perez and Fred Wilson
Jeremy Rifkin 

 

 

 

 

Fund Managers and Limited Partners Should Trade Fees for Carry
We at Spring Ventures have been thinking a lot about venture capital fund structures, fund economics and the huge opportunity for innovation. There are a lot of ways to be creative here (i'll address others in future posts), but let's start with the sacred cow of 2% fees (annual fee to cover salaries, rent, expenses) and 20% carry (profits taken when fund generates returns).  

There have been some great posts on this topic - the best coming from Fred Wilson at Union Square - illustrating the difference between net and gross returns.

Fees Don't Get Invested
As Fred's post points out, management fees are dollars that don't get invested. From a $100M fund over ten years only $80M goes into investments. The other $20M doesn't have the opportunity to generate returns. In other words, fees and carry have a substantial impact on returns. 

Maximize Invested Dollars
Since venture investors (LPs) and fund managers (GPs) are in the business of maximizing returns I have a suggestion. Trade fees for carry.

Take a look at the following examples of a hypothetical $100M fund, where everything is held constant except fees and carry. The driving differentiated is dollars invested.

High Return Scenario Comparing 1% and 30% vs. 2% and 20%

Notice how over the life of the fund, every performance metric, regardless of perspective (LP or GP), is better under the 1% and 30% regime. 

Low Return Scenario Comparing 1% and 30% vs. 2% and 20%

Things change a bit under the low return scenario. Notice how over the life of the fund every performance metric from the LP perspective is better under the 1% and 30% regime. From the GP perspective, since the fund return was negative, less dollars are taken home, but frankly that just makes sense.

In essence, trading fees for carry aligns interests by protecting LPs on the downside and rewarding GPs for performance on the upside. Of course there are all kinds of things to take into account - size of fund, the option to reinvest fees, past performance, etc - but the shared goals of LPs and GPs should be to cover reasonable expenses with fees, maximize dollars invested and pay for performance.

Feel free to download and adjust the full spreadsheet at the link below.

 http://dl.dropbox.com/u/6230557/spring%20ventures%20-%20cleanwebvc%20-%20fund...