Ann Winblad, co-founding Partner of Hummer Winblad Venture Partners, introduces herself and venture capitalist Heidi Roizen, who was not able to be there.She says that now is a very exciting time for entrepreneurship because there are lots of holes to fill in the software market and in the business landscape.She explains the founding and progress of Hummer Winblad Venture Partners and Mobius Venture Capital.
Winblad argues that, contrary to popular rumor, there has been a steady flow of activity in venture capital over the last two years. The software sector is still the big leader, though biotech is catching up. Though she doesn't discuss outsourcing, Winblad emphasizes that a company must consider where they can get the best intellectual capital. Today, company strategy starts global. She also discusses the trends in the software market including: open source material, Moore's Law (storage is free) and Metcalf's Law, and mergers and acquisitions.
Winblad talks about how the market is driven by consumers who want connectivity across devices, customizable products, and fair prices. Communication and collaboration are key to delivering the product the consumers want, she notes. The pricing structure cannot just be made up - a company must demonstrate they can deliver undeniable short-term return on investment to the customer in order to justify the price.
Winblad talks about how in 2001, there was a challenge finding consumers for software products and costs had to be cut.Now, demand is improving and CIO's are looking for larger revenue opportunities, she says.
Winblad explains that very few Series A investments were done in 2002.However, a lot more were done in 2003 and will be done in 2004, she says.The reasons for the decline since 2000 include: restart dollars were competing with the A round dollars; corporate investors disappeared (excpet Intel); and individual investing declined.Additionally, during this era, VCs were doing deals individually, creating twice as many A round deals and putting only one person on the board.Now, A round deals are syndicated to provide more coaching, she adds.
Hummer Winblad is focused on enterprise, says Winbland, and Softbank on the consumer segment.Hummer Winblad's investments include: Voltage, the BASES contest winner in 2002, in security and reliability; Cenzic, in applications security space; two blade server companies, Scalent and Jareva; Knowmadic, in application integration; and Bridgestream, in provision and identity management.Softbank's projects include: Planitax, MessageCast, Castbridge, AuctionDrop, Perpetual Entertainment, and Reactrix.
According to Winblad, the intellectual capital in your company and the coaching it gets is more important than money.There is a high bar for hiring employees.Most companies die of self-inflicted wounds rather than from competition or lack of opportunity, she says.
Winblad advises entrepreneurs to boil down their business plan and tell everyone in the company the top five assumptions for success.As time goes on, turn the assumptions into facts, she says. Understand the core assumptions you are making and keep reevaluating them, she adds.
Winblad talks about how whole projects are not outsourced.The core technology is separated and written, while incremental pieces that would be done linearly are outsourced abroad.There are a lot of talented architects and developers around the world, she notes, but they do not have the vision to be inventors.
Winblad talks about how VCs spend a lot of time with the leaders of major technology companies to find out what they are looking for.It is important to talk to consumers early rather than late, she notes.Today's leaders are technologically-savvy, know what they need, and are willing to tell you if you ask, she adds.
According to Winblad, M&A is picking up because companies now feel they can take risks in working with younger companies.Major corporations also went through a period of downsizing, but are now adding, she notes.
Winblad explains that companies use both a .net and a Java standard and neither has taken over. Most likely, neither will. Customers like to have a blend of technologies and programmers like to be looking at the new latest thing so there is currently no force to change to a single standard.
Winblad believes IBM has done an extraordinary job at establishing itself as a leader in software.IBM is proactive with acquiring early stage companies and partners well. Microsoft is successful because they view everything as a threat and don't take anything for granted, she says. Linux is still a force and will not easily go away because it is really hard to kill large companies in the software industry.
Winblad talks about how VCs are generally optimistic about market uptake, so in due diligence it is important to assess whether the customers are real or imaginary.The source of most bad investments is misjudging the market risk from competitors or timing, she says.