The Man In The Arena

Yossi Vardi is one of the people I’ve had the pleasure to get to know since starting TechCrunch. You can find him at technology events worldwide - just look for the smiling, wild-haired guy surrounded by a pack of people.

To understand what he has accomplished, see his wikipedia entry. He is most famous for being the original investor in ICQ, but he’s also invested in over 60 other companies.

Yossi was generous enough with his time to join our panel of expertes at TechCrunch40 last month. At one point in the discussion of a group of startups he quoted Theodore Roosevelt from a 1910 speech given in Paris, and drew an analogy to today’s entrepreneurs:

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.

I spoke with Yossi this week and asked him about his investment approach. He generally invests in young entrepreneurs and only takes common stock. If someone has failed before he’s even more likely to invest - “It makes them want to win even more,” he said. He generally doesn’t look at business plans at all, and just invests in the individual.

I am not nearly as eloquent as Roosevelt or as smart as Vardi, but the words ring true to me, and it was a very special moment at the conference when Vardi spoke about this. If you are an entrepreneur (or think you may be), forget the critics (even us) and the naysayers and just do what your heart tells you to do. You may be wasting your time, but at least you got into the arena. And if you fail, make sure you fail while “daring greatly.” Then, get into the arena again, having learned from your mistakes.

Parakey: Did Investors Get Left Out In The Cold?

When Facebook acquired Parakey in July, everyone assumed the stockholders of that fledgling startup would be popping the champagne bottles. No matter what the acquisition price (it wasn’t disclosed), if the sellers got Facebook stock in return for their Parakey shares, it would likely be worth a fortune down the road.

It turns out that wasn’t the case. The acquisition price, say two sources close to the deal, was paid in cash and was “less than $4 million,” providing investors with just a 2x return on their investment. Meanwhile, Parakey founders Blake Ross and Joe Hewitt were rewarded handsome stock options to join Facebook as employees in lieu of any cash compensation.

The primary investor in Parakey was Sequoia Capital, but a number of angel investors also participated in the sub-$2 million round that closed in December 2006. The investors were told about the acquisition in mid 2007 just prior to it closing. The terms of the deal were fully disclosed to them, including the number of shares that were being granted to Ross and Hewitt.

Some of those investors clearly weren’t happy with the fact that they were getting a 2x cash return while the founders received different, and likely far more lucrative compensation. Their preference would have been to receive Facebook shares or simply to have kept Parakey as an independent entity with a chance for a larger liquidity event down the road. But reputation matters in silicon valley and they made the decision not to disrupt the deal to avoid being labeled as difficult investors. Clearly, though, it left a bad taste in their mouth.

Even as investors are lining up to fund new Facebook applications, some others are saying they’re unlikely to invest in startups that are focused only on that popular social network/platform. The fact that Facebook is now involved in directly funding some of these application developers via fbFund only makes them more wary - the company may simply pick off the most talented developers and leave the companies, and any investors, behind.

It is often hard to muster up much sympathy for the venture capitalists that fund all of the startups popping up in silicon valley and elsewhere. But their money keeps the system running smoothly. If they don’t see a fair return based on the risk they are bearing (most startups fail outright and are a write off), that well oiled machine could come to a grinding halt.

In this case its not clear that investors were treated unfairly. They did get double their money back for a six month investment, after all. But the Parakey acquisition is an important data point that will be considered by others in the future. Just because Facebook comes knocking on your door doesn’t mean its going to be a big payday for everyone involved.

AllofMP3 To Rise From The Dead

The owners of the now infamous cut price Russian MP3 retail site AllofMP3 have posted that the site will soon recommence trading.

The announcement follows a Russian court decision August 15 that found AllofMP3’s previous CEO was not guilty of breaching Russian copyright laws, and therefore the AllofMP3 service was legal.

EMI, NBC Universal and Time Warner had led the legal case against AllofMP3, with the US Government previously threatening to escalate the dispute regarding AllofMP3 to the World Trade Organization (WTO).

According to AllofMP3, “The service will be resumed in the foreseeable future.”

FotoFlexer Raises The Bar On Online Photo Editing

Online photo editors keep getting better and better. For hardcore image manipulation, desktop software like Photoshop or Gimp will always have its place, but online editors are free, easy to use and a lot of fun. We covered most of the online editors back in February (Fauxto, Picnik, Picture2Life, Preloadr, PXN8 and Snipshot). But a relative newcomer on the scene, Berkeley-based FotoFlexer, is worth a look.

The site first launched in July with basic functionality and integration with Facebook. This last week they relaunched a new site with more tools, direct access to your desktop/laptop webcam, and they also now integrate with Flickr, Picasa and MySpace.

Upload a photo, or grab one from a supported service, and edit it by changing colors, adding effects, bulging or pinching areas (to make body parts look larger or smaller), etc. You can also turn any image into a sketch or cartoon. I spent about 10 minutes creating the different versions of the picture to the right (original is top left). The most fun is changing hair color, although the image third down on the left is my personal favorite.

Fotoflexer says they incorporate their own artificial intelligence algorithm to figure out the right way to alter images. And whatever it is they’re doing, it works. You simply point out a few areas of the site you want to remove or alter and it figures out the rest of the pixels pretty quickly. You can do all of this in Photoshop, but it takes a lot longer. And unlike most (but not all) of the online photo editing tools we’ve previously covered, FotoFlexer also supports layering for more complicated image editing.

FotoFlexer also now integrates directly to your webcam and to take a quick snapshot and edit it. Many of the effects are similar to the Photo Booth application that comes installed on all Macs.

The integration with third party services is a great feature as well. Pull down photos from Facebook or another service, alter them and re-upload in a few minutes.

The service runs in Flash and was built on the Flex platform with mostly custom tools. The company has not raised any capital and has 15 employees, all in the Silicon Valley/Bay area. About 50,000 people use their Facebook application and/or the website directly. I expect that number to grow as social networkers discover the joy of turning their pictures into cartoons, or turning their hair color to Fuchsia.

InviteShare In The Press

Associated Press writer Rachel Metz covers InviteShare, the company we acquired last month that lets users get hard-to-find invitations to private betas.

I spoke to Rachel a couple of times while she researched the article. She mentions the fact that some startups might not like the fact that InviteShare allows people to bypass the normal invitation mechanisms they set up. But she also gets the fact that if someone wants into a beta badly enough to go through InviteShare, they are probably the perfect person to test the product. And the days of people paying for beta invitations on eBay should be long gone now.

Attack Of The Fake Bloggers

Whilst Fake Steve Jobs has gained the most attention in the fake personal blog scene, a number of other fake blogs have been launched this year. Here’s a quick run down of a few that might be worthy of adding to your feed reader…or maybe not.

The Secret Diary of Steve Jobs
No list of fake blogs would be complete without the master. Although the blog may have lost its edge since Daniel Lyons was outed as the writer, the site still maintains a strong following and Lyon’s way with words still makes for delicious reading.

The Secret Diary of Steve Balmer
I’ve been reading this fake blog longer than most on this list, and I’m yet to unsubscribe. It’s not as well written as its Steve Jobs equivalent, but it has the occasionally side splitting post. Probably the closest of the bunch to being a direct clone of Fake Steve.

Larry Ellison’s Fake Blog
A decent read, if it times a little heavy, but in context it works. Fake Larry made a brief guest appearance on Fake Steve a little while back, so it’s not inconceivable that the author is Daniel Lyons as well, or someone else who perhaps works with Lyons.

The Secret Diary of Jonathon Schwartz
As the header reads: “Dude, I was the first CEO to even have a blog.” Of course the real Schwartz does maintain his own blog. The way this is written tone wise makes it sound just like Schwartz.

The Secret Diary of Bill Gates
Unfortunately what could have been the best of the bunch is a let down. Poor context and tries too hard to be funny; the difference between clever satire and stupidity is lost on fake Bill Gates. Some may disagree though.

Moving away from corporate heads, there are a number of other fake blogs out there, here’s a couple

Fake Scoble
To quote the about page: “Scoble himself is so unintentionally hilarious that this site is superfluous –but hey it will be fun. Fake Scoble is about low hanging fruit. Actually, it’s about the fruit beneath the tree. Obvious jokes are going to be the rule of the day.”

The Secret Diary of Brad Stone
“I outed Fake Steve Jobs. Have you heard of him?” Hit and miss, but has its moments. There must be something ironic though about there being a fake blog for the person who outed the most famous fake blogger of them all.

There is even a blog dedicated to news about fake blogs: I am not Fake Steve.

See also our coverage of mass produced fake bloggers from Newsgroper here.

Some People Benefited From the Skype Outage

Alexa stats up to August 17 show a massive rise in traffic to Skype competitor Gizmo Project and a more modest rise for Grand Central at the peak of this weeks 36 hour Skype outage.

The SIPphone owned Gizmo Project offers a nearly identical package to Skype, but with added features including built in recording, and cross platform compatibility. Gizmo’s traffic tripled in the space of three days and rose to a rank of 8,561 in Alexa from a 3 month average of 19,102.

The Google owned Grand Central offers a one number everywhere telephone service. Whilst the service doesn’t compete with Skype in the softphone market, the service does provide functionality that competes with Skype services such as Skype In. According to Alexa, Grand Central hit a 4 week high on Friday with a 33% increase in rank over its 3 month average.

The Internet (Apparently) Isn’t Ready For IPTV

European ISPs are up in arms over the BBC’s new online TV player, iPlayer. Concerns from service providers such as Tiscali and companies like Carphone Warehouse center around, of all things, a fear of the BBC’s player being too successful and pounding their networks during peak hours.

Apparently the internet isn’t ready for IPTV. As the Financial Times reports Mary Turner, CEO of Tiscali UK says, “The internet was not set up with a view to distributing video. We have been improving our capacity, but the bandwidth we have is not infinite”. Add to this concerns over Joost’s ability to compete head to head on quality with other online video providers and it paints a poor picture for TV getting online.

However, this seems a thinly veiled return to the net neutrality debate that periodically pops up when ISPs start thinking of ways to increase revenue without increasing network capacity. As GigaOm cites, it could cost UK ISPs up to $2 billion to upgrade their capacity to match increasing demand.

We’re due for an upgrade in the U.S. The U.S.’s top broadband speeds actually lag behind other OECD countries. Japan’s surfers can connect to the internet on a 100 Mbps Ferrari compared to the U.S topping out at a 40 Mbps 1970’s hatchback. They also pay much less, $0.22/Mbps to our $3.10/Mbps. And to think companies brag about a $260/month 50 Mbps connection in Sacramento.

New IPTV startups are only a slice of internet traffic. According to a report by CacheLogic, more than 60 percent of Internet traffic is used by peer-to-peer swaps, and about 60 percent of those swaps involve video content. IPTV adds to demand, but has been singled out most likely because there are a few large content providers to point the finger at.

Bolt Joins The Deadpool

Video sharing site Bolt has filed for bankruptcy and ceased operations.

The site has been on borrowed time since an acquisition by GoFish failed August 1. Bolt.com was sued by Universal Music in October 2006 and owes Universal $10 million from that suit; the funds from the GoFish acquisition were to have been used to settle the $10 million with Universal.

Bolt joins the TechCrunch Deadpool.

MyLiveSearch Misses Launch Date, But The New Logo Is Top Notch

Some of you may remember our ridicule of the unlaunched Australian search engine MyLiveSearch back in May after a glowing but research-free Australian newspaper article about them. Being unlaunched is fine, but suggesting that Google is worried about them is a little over the top to say the least.

Dubbing itself the “world’s first live search engine” it promises to show us the 4/5 of the web that Google doesn’t index - this includes the grey web of dynamically created web pages as well as real time indexing of more traditional pages. Their sub tagline: “Searching the internet will never be the same!”

The company promised to debut the service in June. They missed that deadline and still haven’t launched. And frankly I probably never would have written about them again except that they’ve started emailing us again for coverage. They won’t tell us anything about the service, apart from the hyperbole. No demo’s or screen shots either.

But there is a bit of good news. They’ve ditched the old logo and have come up with something much more webtwoohified. Stay tuned. They promise to announce the (new) launch date shortly.

The Fascination With ToDo Lists Continues

The amount of energy web entrepreneurs put into creating the perfect online ToDo list is surprising. In May 2006 we ran through a boatload of them in a comparison post. After all that entrepreneurial effort, you’d think the online ToDo list would have been perfected.

Apparently not. Now DabbleDB, a beautiful little database-centric application builder based in Vancouver, Canada, has created a bit of buzz around its own ToDo list application, built on the Facebook platform.

The app, called Dabble Do, uses the DabbleDB back end to create a simple ToDo list on Facebook. There are some bells and whistles. For example, for dates you simply type in “tomorrow” or “next Wednesday” and the app figures out what you mean. You can also set ToDo items for your Facebook friends and follow up by “cracking a whip.” It’s a good way to stay organized.

Will Facebook’ers use this to keep themselves organized? The email/messaging feature on Facebook is very popular (I wish I could just have it forward to my normal email, though). Perhaps adding other features of Outlook, like ToDo lists and calendars, will catch on, too. In my mind, though, social networking is very different from office-like organization applications. That’s why I wasn’t particularly excited when Zoho (an office suite) added their own Facebook application a few weeks ago. So I’m fairly tepid on Dabble Do.

The bloggers seem to like it, though, and I’ve been wrong more than once before. See Mathew Ingram, Read/Write Web, Paul Kedrosky (an investor), Donna Bogatin and others. Ah, I love the blogosphere.