52 Bicycles

I attended the WebInno event last night with last Friday’s MHT article on the state of consumer venture capital plays in New England dancing in my brain:

An analysis of second-quarter venture deals found that 79 percent of New England investments (34 of 43 deals) involved corporate IT — whereas just two of those 43 investments, or 5 percent, were in consumer Internet companies, according to Newton-based Topline Strategy Group.

By comparison, Silicon Valley corporate IT deals were a smaller percentage — about 50 percent, or 86 of 173 deals — while investments in consumer Internet startups represented a higher share of deals in the Valley at 15 percent, or 26 of 173 deals, the firm’s study found.

The results put a number to what many tech observers have suggested anecdotally — that New England investors shy away from consumer web companies and are attracted to products aimed at corporate customers.

(Nice work, Chris!)

So I go to the event at the Royal Sonesta, visit the side-booths and listen to the three presenters (Fat Calico, Echonest and Traineo) and come away with the following thoughts:

1. The direct-to-consumer plays are slim pickings around here. Increasingly we are seeing niche plays, which are great, but require a business model of extracting more dollars per customer than a super-broad-based service could afford. As such, the “go big go fast” strategy seems to need retooling, and I haven’t seen good answers to that yet.
2. The most exciting one was Echonest, which has tremendous IP in analyzing music, and is going ot make money on an API/licensing model (sounds kinda similar to the Skyhook solution). These guys are going to be very successful - and most likely bought out early.
3. The other two were clunky and serving a questionable need. It is perhaps telling that both had troubles with their demos (including BSOD on the traineo laptop), but the real issues had to do with the fact that both require consumers to go out of their way significantly before reaping value, and I don’t see either happening in numbers large enough for broad-based advertising models .
4. That said, traineo makes me think that there is a business there when bundled with a human being on the other end helping fill out the data, and rewarding over the communication medium. The software they have can give leverage on the human, which means lower cost of service delivery, while helping people with what they need to do in terms of exercise and diet. Seems like a great meld for a health club chain, diet organization (weight watchers?) or even a DM organization or HMO.

This last idea - labor + technology - is one whose time might have come. Echonest is very cool technology - what happens when it is crossed with Pandora or last.fm? Of course, such an approach has a harder time monetizing as a pure myspace-level content play ,because the cost-per-page/customer/experience is higher, but if the higher cost creates higher value, perhaps there are ways to make money with that.

This entry was posted on Tuesday, September 26th, 2006 at 11:10 pm and is filed under Technology Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. Reddit This