GPS-based navigation app startup Waze was acquired last week by Google for a price just north of $1 billion. Founded in 2007 and headquartered in Israel, Waze had previously raised approximately $67 million in venture capital from investors based in Israel and the Silicon Valley. The startup has almost 50 million users that contribute information on driving conditions, gas prices and other commute-related activities across more than 40 countries. Google beat out rival Facebook in the bidding war for Waze, and in doing so brings into its fold one of its strongest current rivals in mapping.

Quite a bit has already been written about entrepreneurs from Israel, the Start-up Nation, and Waze is the latest example of the impact that a nation of less than 8 million people continues to have at the frontiers of technology and business. From the impact that ‘learning on the job’ at IDF has on the work-culture and technical knowhow of its citizens, to the understanding in the populace that success stems from the ability to sell into large markets (whether United States or Europe or Asia), Israel continues to be the one location outside the United States where the VC model might be most applicable. A startup is about selling products and services that solve customer problems, and in today’s connected world, this can be all done online by teams of technically talented doers and domain-knowledgeable marketers and salesmen. Through decades of hands-on experiences, the Start-up Nation seems to have mastered this process. So, while it might just be a rumor that part of what clinched the Waze deal for Google was their willingness to let Waze stay in Israel, that rumor wouldn’t be difficult to believe if it were true.

Congratulations to Waze for becoming a huge example for entrepreneurs to follow!

Continue Reading ...

Last week brought news of a partnership between IBM and 10gen, whereby the two companies would work together to achieve interoperability between IBM’s DB2 relational DBMS and 10gen’s MongoDB NoSQL database. As part of the partnership, IBM will push MongoDB as a core NoSQL database for enterprises building web and mobile apps. At present, DB2 is second in market share in the RDBMS market behind Oracle, whereas MongoDB is the leader in the nascent NoSQL market, apparently owning almost half of the market. Both players see significant competition in their respective segments – especially MongoDB, competing against DynamoDB, Couchbase and so on in a rapidly evolving market.

This feels quite a bit like an alliance of the needy, and a potentially effective one at that. The emergence of NoSQL has a lot to do with the high availability requirements of mobile and web-based collaboration. In that context, IBM gains some good street cred by partnering with MongoDB as the promise of unlocking insights from semi-structured and unstructured data increasingly drives enterprises towards NoSQL. On the other side, with competitive solutions such as HBase for true big data applications around enterprises, MongoDB could use a channel like IBM to penetrate the broader market.

VCs have funded multiple NoSQL approaches over the past five years, so the realities of monetization are probably starting to set in now. In that context, IBM’s announcement should set in motion a wave of consolidation here. While the days of one-size-fits-all databases might be over, the reality also is that the NoSQL folks might not be able to scale without a larger mother-ship. So then, it’s time to get ready for a few exits, let’s stay tuned…

Continue Reading ...

When it comes to smartphones and tablets, the OS market is quite concentrated, with Android and iOS together owning a 92.3% market share for smartphones, and a 96.1% share for tablets. Well, Mozilla and Foxconn feel it is time to fragment it a little. As of June 3^rd, the two companies announced that Foxconn will be introducing devices from smartphones to televisions and large display boards, all based on the Firefox OS. Foxconn and Mozilla plan to develop reference designs, but do not plan to introduce devices with their own brands. Foxconn represents Mozilla’s 19^th Firefox OS alliance partner (the previous 18 all being mobile operators, with Sprint being the only major American carrier in the list).

Good strategic move for both Foxconn and Mozilla. As the top outsourced manufacturing shop for mobile devices, it is in the Foxconn’s best interest to fragment the mobile ecosystem to the extent they can. As for Firefox’s browser-as-an-OS approach, this might be their best bet for relevance in the post-PC era. The bigger question though is whether the world needs a third mobile OS, and on a couple lines of thought, the answer may be a no. Chrome and Safari will both be technologically better equipped if the world chooses the mobile web approach over installed apps, from the knowledge base of their respective mother ships. As for the next five billion smartphone users, cheap android phones are already available for $50, and that’s even after discounting the fact that Mozilla’s brand recognition might be low amongst this next wave of adopters.

Will Foxconn’s reference designs bring enough long-tail device manufacturers to make Firefox OS relevant? Will Mozilla’s 18 carrier partners consider introducing their own smart device brands? Will there be enough firepower around Firefox OS to help Mozilla move beyond just playing third fiddle, when other well-funded operating systems such as Windows 8, Blackberry and Symbian have failed to do so? Well, the only things that are clear from last week are that mobility is huge, and that another player from the PC ecosystem wants in on a piece of the pie…

Continue Reading ...

Last week, e-Commerce giant Amazon introduced Amazon Coins, its own virtual currency for Kindle Fire owners to buy apps and games. During the introductory phase, Amazon plans to discount these Coins by up to 10% depending on the amount of the purchase; the company expects to dole out tens of millions of dollars in such discounts to stimulate adoption. Amazon Coins are currently limited to the United States, and Coins cannot be redeemed, transferred or resold. With this announcement, Amazon joins players in online gaming / advertising, as well as Microsoft Points for Xbox Live (which will be soon be discontinued).

Amazon Coins, in their current proposed form, are the same as rechargeable prepaid cards. Users prepay for Coins and then use those coins to make purchases over time. The applicable use cases for Coins are very limited at this time, but it’s the future possibilities that make this an intriguing initiative. First, while the stated objective for Amazon is to spur app purchases, the real value to Amazon might be around negative working capital and the not so insignificant failure-to-redeem rate associated with such gift card-type setups. Second, if this virtual currency could grow across all of Amazon’s products, geographies, affiliates and currencies and truly facilitate global transactions, then it *could* actually become a viable parallel currency – although it will still be a regulated one. And finally, how about Amazon’s sophisticated analytics engine using a combination of purchase history and unspent balances to optimize promotions (which can be done via Coins as well), visitor traffic and sales lifts? That should spur other online marketplaces to jump in as well, and so analytics platforms such as Opus portfolio company Freemonee (which currently works with financial institutions as their platform for cash gift analytics) should see additional applications in e-Commerce going forward. So lots of interesting potential implications for the future – let’s hope Amazon paves the way for a more metrics driven and better customized e-Commerce marketplace.

Continue Reading ...

Players in the internet ecosystem can broadly be bucketed into one of three categories – carriers (aka the infrastructure providers), Over-The-Top content providers (aka the ones that make the money), and end-consumers (the ones that pay). Over the years, one of the carriers’ approaches towards maintaining profitability has been tiered wireless data pricing (also being tried out for landlines), and along the way, this model has also helped keep per capita data consumption from spiraling out of control. That’s until now. Last week brought news that ESPN was in talks with one major US carrier to set up an arrangement wherein ESPN data consumption would not count towards the user’s data plan.

With more than 27 million monthly unique views, ESPN is one of the top 20 mobile content sites currently. The site values engagement with its user base; in fact ESPN tried becoming a MVNO around 2005-2006 in an experiment that failed. In today’s smartphone era, they feel they could re-visit the idea of subsidizing consumption of their content on mobile and by monetizing the correspondingly higher viewership. This might be the first example in recent times of OTT folks willing to pitch in with the carriers, and it will probably work well in the near term for ESPN if implemented. But the big concern is – what sorts of dominoes might this action by ESPN eventually cause to fall. ESPN acts first, other OTT players follow, carriers make some money, consumers watch more content, and a positive feedback loop develops. Along the way, some of the carriers’ new dollars get fed into infrastructure, but probably not enough to counterbalance the increased consumption, and so the spectrum crunch accelerates. Eventually carriers go back to throttling consumers, data prices worsen, and the ecosystem reaches a new ‘equilibrium’. Except, this time, the OTT players are left footing part of the bill.

Is ESPN leading the way in getting all the OTT players shot in the foot? In general, the answer might be yes. A few content providers might be able to monetize better in this new scenario, but most other content providers will likely be left much worse than before. So let’s see if this ESPN deal actually happens. If it does, then look out everyone, prisoner’s dilemma might be coming!

Continue Reading ...

PayPal, the online payments and money transfer giant, last week announced a new milestone in its partnership with Discover. As of last week, Discover has deals with 50 merchant acquirers to offer PayPal’s service as a payment option at more than 2 million merchant checkout locations by end of 2013. The announcement represents significant progress in the partnership, which was initiated late last year and which has the potential to get PayPal into 7 million locations over time. It also builds on other recent forays by PayPal into POS systems as well as directly into retail stores. This looks like a win-win for both PayPal and Discover. PayPal gets additional physical retail presence to make more off its 110 million user base. Discover gets millions of users for its interchange transaction fee. Both get an opportunity to poach consumers away from Visa and MasterCard.

How far can PayPal reach in this quest? Quite far, really, in one manner of thinking! As and when PayPal decides to become a transactional social network and positions itself for mobile and social commerce, its various partnerships could give PayPal the broad reach that brings credibility with the average, global customer, creating a positive customer acquisition feedback loop. If all goes well, PayPal’s customer base and technology platform could over time become the glue that brings together POS and financial players around high-resolution, itemized purchase data, something that no entity – not Google, not Facebook, not the banks – has been able to achieve so far. And this data could be a gold-mine for offers, promotions and competitive positioning, subject of course to privacy standards and regulatory guidelines. It probably feels great to be PayPal right now (and better than before to be Discover!).

When money is involved, you never know where all the show-stoppers are, but until then, PayPal app-store, anyone?

Continue Reading ...

First came SaaS, enabling application delivery through the cloud. Then came IaaS, providing the elastic infrastructure for enterprises to host their data and applications in the cloud. But the middle of the cloud-stack – the Platform as a Service, the layer that abstracts out the underlying infrastructure and enables enterprises to develop their own custom cloud-based apps in a simple way – never really caught fire. Maybe that will change soon, with last week’s official launch of Pivotal being a potential catalyst. With $105 million from GE that values the company at more than $1 billion, Pivotal is a newly formed entity that wants to provide ‘Google in a box’ PaaS solutions using technologies and resources borrowed from its creators EMC and VMware.

This is what corporate innovation looks like – two giants spinning out a massive virtual team armed with access to large technology building blocks, funded to the tune of an eight figure sum by a corporation that could serve as the ideal pilot for the new technology across the ‘industrial internet’. Yet, they will be going up against other large players, and some small players, all while the market continues to figure out what it really wants from its PaaS vendors. While SaaS was about lower capex and IaaS was about elasticity, PaaS is about developer choice. So, it remains to be seen whether the market will, like GE, embrace a vertically integrated PaaS from EMC-VMware or whether it will prefer a neutral arms-dealer provider that gives the developer complete freedom on options.

Could GE’s $105 million investment in Pivotal be enough money to deter further early stage investment in PaaS? Is cloud middleware beyond the realm of venture capital compatibility at this time? Probably not, but the bar is now higher. By its nature, PaaS is not for small and medium businesses, because most of them cannot afford to have developers build custom apps and would rather use combinations of SaaS offerings instead. And now, with Pivotal, the competition for the large customers is that much more intense. Which means consolidation should soon be in the air, and with that, another innovation frontier will be been established and solidified!

Continue Reading ...

Last week, Intel announced its acquisition of API enablement and management services player Mashery for $180 million. Since its establishment in 2006, Mashery has raised approximately $35 million in funding, and is one of multiple players in the space along with IPO bound MuleSoft (raised more than $80 million so far), Apigee, Layer 7 Technologies and others.

Mashery has a network of more than 160,000 developers and powers more than 50,000 APIs, representing significant YoY growth on both fronts. Intel’s Software and Services Group itself works with more than 20,000 independent software vendors, and has been increasingly focused on mobility, security, datacenter-related applications and so on. It just makes sense that one of the most horizontal technology players in history would acquire a business partner that can further its ambitions around mobility and inter-application data sharing. Incidentally, Layer 7 Technologies was acquired on 4/22 for an undisclosed sum by CA Technologies, which means there have been two significant exits in this space in less than a week.

Large players like Intel and CA can now better enable enterprises to bubble up proprietary features and data for third party developers. In doing so, they might also help the ‘app-store effect’ finally take off in the enterprise, which is great in the grand scheme of things. At the same time, this does ‘unbundle’ products and solutions, with the gain to the two companies’ service businesses coming at the cost of lower margins on their product and technology revenues, and so the long-term bet is that there will be disproportionately greater growth in services revenues. If this trend plays out, could the largest companies of today eventually just morph into one of just two types of players – either as mostly B2B service businesses (IBM, CA, Accenture, and maybe Intel), or as conglomerates offering loosely connected, customer-facing products and solutions (Apple, Google, Microsoft, Facebook and so on)? This might just happen, and in that case entrepreneurs even further become the flag-bearers for cutting-edge innovation. And knowing the Silicon Valley, surely the entrepreneurs won’t mind!

Continue Reading ...

Bitcoin, the online, decentralized commodity introduced by pseudonymous developer Satoshi Nakamoto, had its most volatile trading day and week last week. The currency rose to more than $260/bitcoin on April 10^th, then fell to less than $100 in a matter of hours on the same day, and eventually ended the week at $95. With approximately 11 million bitcoins in circulation, the market-place is just larger than $1 billion in value at this time, down more than 60% from its April 10^th peak. Clearly, it’s a nascent market with lots of volatility so far!

So what is this whole bitcoin thing about? The bitcoin concept was introduced in Jan’09 to deal with inefficiencies in the banking system, such as government control, slow speed, high transaction fees etc. By being scarcity-controlled and ‘mining’ dependent just the same way as gold, but at the same time decentralized, anonymous and online, bitcoins do help solve a number of these inefficiencies. More importantly, since bitcoin mining needs compute power as a resource, the value of the currency could represent a good opportunity cost benchmark for computational infrastructure and personnel. Bitcoin usage isn’t currently that widespread, but if the currency does continue to increase in relevance and grow in value, it could actually become representative of the new, IT-driven world economy.  On the flip side, if bitcoin does not gain widespread acceptance as a currency, then it will need to quickly find other uses to remain relevant – like the ornamental value from owning gold or the day-to-day usage value for commodities like oil and metals.

Should VCs consider investing in this space? Absolutely! Bitcoins might not end up being *the* standard for online peer-to-peer exchange, but they do represent the kind of high risk, high reward innovation that should attract super-smart entrepreneurs. On the VC side, many things around the bitcoin make it compatible with classic early-stage investing: potential for becoming a large market with exponential growth, nascence in the mining infrastructure and the marketplace around bitcoins, compatibility with information technology, limited standardization etc. So recent short-term volatility aside, let’s hope things do work out for the bitcoin in the long run, because this might be an opportunity for venture investors to strike virtual gold!

Continue Reading ...

It has been less than six years since the launch of the iPhone, and smartphones have already become ubiquitous. Combine that with FCC regulations around spectrum allocation, and the outcome is a potential ‘mobile data crunch’, unless Carriers and/or Enterprises adopt mitigating solutions such as Wi-Fi offload, small cell infrastructure deployment, traffic shaping, etc. Last week, Cisco underscored the need for such solutions by announcing its intent to buy United Kingdom-based small cell technology player Ubiquisys for $310 million. Ubiquisys develops stand-alone femtocells primarily focused on deployments by mobile operators for residential and small business customers.

Ubiquisys makes for an interesting addition to Cisco’s cloud-managed enterprise stack, bolstered recently through the company’s acquisition of Meraki. Ubiquisys’ core-network based small cell architecture should lend itself well especially to Meraki’s target segment of small and medium sized enterprises. When it comes to medium to large enterprise customers, the issues of scale, inter-cell interference, soft handoff and integration with cloud and applications require a more scalable small cell system. SpiderCloud Wireless, an Opus Capital portfolio company, has been focused on scalable small cells since it was founded in 2007. Taking an analogy from the Wi-Fi world, SpiderCloud’s Enterprise Radio Access Network (E-RAN) architecture does for licensed spectrum 3G/4G in-building what Aruba did for Wi-Fi.  You simply would not deploy a Linksys where you need an Aruba system nor would an operator deploy Cisco/Ubiquisys where a scalable SpiderCloud Wireless multi-access small cell system is required. Eventually, monetization potential might be greater in the large enterprise segment, so it will be interesting to see how Cisco positions the Ubiquisys product going forward.

What happens competitively in the long run aside, for now Cisco’s acquisition should set the ball rolling towards accelerated small cell technology adoption. As for the enterprise end-user, the smartphone makes him/her more productive as long as data can be accessed, so here’s hoping this so-called mobile data crunch never occurs!

Continue Reading ...