Blog

The View From Here...

Eighteen months into the VC world, and feeling fully in the mix, I'm thinking it's a great time to start talking again about the future of tech from my new perch. A lot of what I have to say is about the patterns in the things that I'm seeing, and how those patterns are stitching together to shapeshift big swaths of tech. There is a lot of quite provocative assumption-breakage taking place out there, ranging all the way from datacenter infrastructure reinvention (networking and storage now, servers soon) to the tidal wave of wide-area refactoring enabled by incredible reductions in BW costs and ping latencies. And, of course, shifts in what's important application-wise: Big Data is leading that charge at the moment -- cleaning up the substrates first, but very interesting trends in the layers above. Expect to see a bunch of posts around these topics over the next few months.

But I also have a bit to say about the nature of venture-style innovation itself. That's where I'd like to launch my contributions to the NEA blog with this inaugural post.

At a purely personal level, I've been enjoying the VC world a whole lot more than I thought I would. The dynamic range of ideas – and the energy and conviction of the entrepreneurs who bring them in – is enormously stimulating. It’s a candy store for geeks with ADD.

But more than anything, I’ve grown to love the culture of NEA, especially the value system of the people here. Corporate culture is hugely important to me; it is simply the foundation of wanting to work somewhere and really invest your soul into it. A lot of us deeply miss the kick-butt-and-have-fun, we-can-change-the-world-and-not-be-asses culture of Sun (we all forever thank you for the experience, Scooter). BTW, would-be CEOs, culture starts at the moment founders meet and begins to polymerize with the first few hires. You own it. Think hard about the kind of place you want to build and put serious attention and leadership into it.

The culture of NEA is hugely "entrepreneurs first." There is a central sense of the power of smart people’s ideas, and imagining big possibilities flowing from them (thank you, Dick Kramlich). The best way to make money for NEA's investors is to truly focus on making these smart people successful. Think long term and have the resources to back that up. Help them be courageous. Help amplify them with the experiences and networks of the partnership. Entrepreneurs First.

[Alas, this great culture does create what I've called "the greatest stealth brand" in the VC biz. I work with essentially the world's largest venture firm, but continue to have to re-explain that to my mom :)]

Well, I could substitute "engineer" for "entrepreneur" and more-or-less describe what I loved about helping manage Sun's R&D portfolio. (8,000 engineers, a couple of $B, 15K patents. Sigh.) But there are deep and essential differences between R&D at a BigCo versus a start-up. To even sustain, large tech companies have to invest serious coin in R&D. Just look at the percentage of revenue invested at places like Intel, Google, Microsoft, Oracle, IBM and Cisco. (HP took itself off of that list. Danger Will Robinson!). Worldwide, industry and government collectively will spend about $1.4T in R&D in 2012 (according to Batelle). Serious coin indeed.

Venture spending, at best, fuels only a couple of percent of this global number, but it is a very high octane mix. It's hyper-focused and legacy-free, meaning 100% of it goes into creating something new. But even more special is the exceptional quality of the ideas being funded. That's a direct consequence of extreme vetting process that takes place at a VC firm: if you don't like the idea or team or don't believe in the market potential, you might be dead wrong, but you don't have to fund it. (Though being a hits business, you had better not be too conservative in your filtering or you will almost certainly miss the Next Big Thing. That's a very interesting restoring force in all of this.)

At a BigCo, there is a lot more dilution of the R&D dollar than you might expect. Big chunks get spoken for in sustaining a product line (the legacy thing) and your brand lets you retain customers with "good enough." (Even companies with insanely great products have quite a few programs that are just okay. We don't tend to pay attention to those, or we let the glow of the brand convince us they must be good, too.) And, well, it takes a lot of discipline and a rather aggressive culture to be subjecting every program to a VC-level litmus test every year. And that could be a bad idea anyway. The Java's and iOS's of the world are just too big and take too long to return to be appealing to many venture funds.

On the other hand, a BigCo can be a tremendous idea amplifier. You have sales, services, support, operations, marketing, training, finance, and channel programs all within reach. You might have to compete internally for attention, but you don't have to go build it from scratch the way every start-up does. That's a huge thing. Of course, good VCs will help you custom build all of those functions. And great VCs will help you figure out the right *rate* at which to do it. It's always leading the duck. Being too far ahead means you suffer grinding costs. Too far behind is missed growth.

If I somehow can imagine the best of both worlds, it would be the innovation intensity of the start-up with the go-to-market capacity of a BigCo. I won't give up on that kind of mash-up being possible as a future consequence of the evolution of networking and work. Until then, I find NEA's deep-resource, entrepreneur first approach especially interesting.

And did I mention how much I love the culture?