Techcrunch broke the announcement yesterday that MSU had lead another investment round into StatusNET. This is great news for StatusNET, but every investment we make means that we have less money to invest in new companies. And we have been investing pretty fast – 11 companies and 7 follow-on investments so far and a twelfth investment in the works.  So we are now doing what you, the entrepreneurs, often need to do – we are raising money for a new Fund.

LEGAL DISCLAIMER: Please note we are not soliciting investments from anyone!

We are submitting a proposal to Investissement Quebec to manage one of the recently announced $41.25M seed-funds.

We have some big plans on how we are going to use this fund to really accelerate Quebec (and Canada’s) web-centric start-up community ! Out of respect for the process we won’t give any details here, but if you want to contribute input and ideas into what you the entrepreneurs are looking for in a VC, now is your chance to let us know !

We would also like to hear your opinions on how you think we have done so far in terms of our investment activity level, the way we have dealt with you as entrepreneurs, whether we seem to “get” the web-centric eco-system, whether you feel confident in presenting us deals and ways in which we could improve things going forward.

Please use the comment box below (en francais or in english) and thanks in advance for your support and input !

In 1947 the Haloid Company acquired the patents to Xerography. A few years later they launched their first product and changed the company name – both the company and the product were called Xerox. At the time Fortune magazine referred to it as the “the most successful product every marketed in America”.

Twttr (as it was called then) was first “launched” in 2006 by a now defunct company called Odeo. A year or so later the IP was spun off/out and the product and the company were both named Twitter. In early 2008, Fortune magazine referred to Twitter as “the hottest Web startup since … gosh, February at least.” – and that was when they didn’t really understand what Twitter was !

Xerox had a great deal of initial success and managed a listing on the NYSE.

If it were another time in history, Twitter too might have listed by now, but the company still has a suggested valuation of between $10B and $300M.

Xerox had incredibly strong brand recognition; so much so that a photocopier from any manufacturer was still referred to as a xerox machine and “xerox” actually became a verb.

Twitter had a head start here – the word was a verb, but pretty much any 140 character message is now days referred to as a tweet.

Xerox initially produced the only photocopiers on the market and then, when other companies launched competitive products, they still had a technology edge that enabled them to keep ahead of the market. When the competitors caught up to (and passed) Xerox in terms of features and technology, the company tried to compete on brand recognition. But their brand was so synonymous with photocopying it actually lost much of its strength – I used to work at Xerox and often had potential customers asking how much of a trade-in they could get on their old xerox machine – only to find out that it was actually made by Canon.

Twitter was the first micro-blogging platform to really capture significant market share, but other micro-blogging solutions, such as Yammer and Present.ly, have subsequently emerged. Federated, open-source solutions, such as those based on StatusNet (formerly called Laconi.ca) are now providing hosted and stand-alone options for those wanting a brandable, scalable and more reliable micro-blogging platform.

Twitter no longer has more features than it’s competitors and to-date it has not been able to provide the sort of service levels that paying customers will expect / demand. Just as Xerox did – Twitter may shortly be left to compete based on its brand recognition.

So how long was Xerox able to compete using brand recognition alone? Well it’s at least 50 years and counting (which I’d guess is about equal to 5-10 web years?) so the outlook isn’t immediately gloomy for Twitter – but by the time Twitter launched its service in 2007, Xerox was down to number 5 in total US photocopier sales and its total market share was only 9%.

These days I don’t need a Xerox to xerox something – and we don’t need Twitter to tweet something. Sure, I do most of my current tweets on Twitter, but I also tweet on Identi.ca and, as soon as Twhirl or Seesmic or TweetDeck support it,  i’ll tweet on msu.status.net too . I always use web, desktop or mobile clients to tweet, so once i’ve set up my account(s) on my client I don’t think much about which platform or protocol i’m using (as long as it is up!) – I just tweet and follow.

Sure, there is still some stuff that needs to be worked out to ensure complete interoperability between the different micro-blogging protocols, but that’s just a matter of time – and it’s much easier to resolve than trying to solve the reliability of any “walled-garden” solution.

All this too say, Twitter may be a player in the micro-blogging world of the future, but brand recognition alone will not be enough to stop it becoming the Xerox of Microblogging.

(Disclosure: MSU is an investor in StatusNet)

I recently attended both the LaunchBox Digital and TechStars demo days. Both events had some very interesting ideas presented and some great entrepreneurs behind them – but there were also some differences between the two events.

LaunchBox Digital is based in Washington DC but held there demo day in a lawyers office near Dulles Airport. This was convenient to get to for out of town visitors and also meant that people could fly in and fly out on the same day, this did however reduce the opportunity for extended networking between the attendees and gave me little sense of the local tech environment in which the companies had been working. My understanding is that LaunchBox was changing location and this somewhat impacted there choice of venue – in addition the teams were flying out to Silicon Valley that night or the next day, so convenience to the airport was a benefit there too.

Techstars on the other hand is based in Boulder, Colorado which is about 1 hr’s drive from the nearest major airport – in Denver. Compared to LaunchBox Digital it was a really trek to get there (if your visiting Boulder rent a car !) and meant that everyone from out of town would have had to stay for a least one night – I had to stay for two – but it ended up being worth the extra night. The TechStars event itself was held at the Boulder Theatre in ‘downtown” Boulder and TechStars was literally “up in lights”.

Techstars Up in Lights

Additionally, the demo day event itself was followed by a BBQ at one of the lawyers houses which ended up being a great atmosphere to network with mentors, other investors and the founders themselves.

The LaunchBox Digital event was attended by approximately 80 people. There were no company details on the name badges so it made it hard to know how many people in the room were investors and how many were service providers.

TechStars was attended by approximately 300 people, plus another 50 or so students and members of the local community who were allowed to sit upstairs and view the presentations. There were investors from a number of “web 2.0” VC firms including First Round Capital, Foundry Group and Union Square Ventures (Fred Wilson) as well as a number of local VC’s. There were also other members of the web 2.0 glitterati such as Robert Scoble.

My initial impressions of both events were that whilst both were well supported, TechStars seemed to be be more heavily involved in the local tech community and was definately on the the “Web 2.0 venture circuit”, whereas LaunchBox Digital seemed to be doing great things but their companies were not as much a part of the local tech scene and the program was not yet established enough to attract some of the more high profile investors.

I would hazard a guess that there were three main reasons for these differences. Firstly, David Cohen was able to get Brad Feld and the Foundry Group team involved. Brad et al. have funded many internet businesses and have formed strong relationships over many years with Founders and co-investors who had come on as mentors. Secondly, the town of Boulder is relatively small and TechStars is a big deal for the community, and thirdly, not only has the program being running longer, but Boulder’s tech community is recognized as being a lot more mature than Washington DC’s.

COMPANY PITCHES

As a presenting location the Boulder Theatre was excellent. The screen was the size of a movie screen and the presenters were elevated and truly were “on a stage”.

Big Screen, big stage!

If I disassociate the pitch from the pitch environment, I would say that in general the quality of the pitch deliveries were on a par for both demo-day events.

LaunchBox Digital Companies:

Bands in Town, Keen Guides, KeepFu, Legal River, SEC Watch, The Social Collective, TapMetrics, Unblab.

Standout companies for me: Bands in Town, SEC Watch.

Worthy mention: The Social Collective, Tap Metrics.

Good summaries of these companies by Sean Green can be found on TechCrunch.

Techstars:

Next Big Sound, Everlater, Vanilla Forums, Send Grid, Take Comics, Rezora, Retel, TimZon, Mailana, Spry

Standout companies for me: Next Big Sound, Take Comics

Worthy mention: Vanilla Forums.

Good summaries of these companies by Don Dodge can be found on TechCrunch.

I was actually interested in more of the businesses from the LaunchBox Digital cohort than the TechStars group, but this is more down to personal interests and experience than a reflection on the quality of the ideas or entrepreneurs.

Boris Mann from BootUp Labs in Vancouver did a nice write up on his take of TechStars and i’d agree with a lot of what he said and in particular his view that most of the TechStars companies were beyond the “idea stage” when they joined the program. I felt that LaunchBox Digital had taken companies a little earlier in their development than TechStars – I don’t know if these are conscious choices made by the two programs or whether it varies from cohort to cohort.

As a point to note, of the 10 founding groups at TechStars, two were from the UK, one were French and one were Canadian. I think all of the companies at LaunchBox Digital were from the US.

FOUNDER’S THOUGHTS

I had much more time to speak with the Founders at TechStars than at LaunchBox. The key messages that came through from the TechStars founders were that the mentors were awesome and the camaraderie between the teams really helped spur them on. They all felt that they had a great deal of access to the mentors and the TechStars team. ( A number of them pointed out that they saw this as a big advantage over Y-Combinator where they had the impression that teams might get access to Paul Graham for 20 mins a week – if they were lucky).

Whilst they could have worked from their apartments, most of the Founders time was spent at the “TechStars Bunker”. They felt that this common location was very important for the spirit of the group.

In choosing whether they were going to stay in Boulder or what might make them move somewhere else one of the key factors that came through was that they wanted to make sure they had an active support community around them and one that they could contribute to – as they felt they had had in Boulder.

STRUCTURING A “FEED CAPITAL” PROGRAM

Some suggestions:

1)   Involve the teams in the local local tech scene (and/or vice versa)

2)   Ensure that teams have plenty of opportunity to interact with each other and ideally have a place they can work in close proximity to each other.

3)   Have the highest quality of mentors possible from the local community but also bring in guest mentors from outside the local community.

4)   Include people in the founding group that have credibility with the investor community you want to attract

5)   Put great effort into ensuring demo day creates a lasting impression on the people who attend – a lasting impression of the actual pitches but also of host city and it’s tech community

6)   Significant activity should be invested in PR (video and text) to raise the profile of the program.

Thanks to Sean and the team at LaunchBox Digital and David and the team at Techstars for a great couple of days – keep up the great work !

I will be mentoring at Seedcamp in the UK next month and it will be interesting to add a European perspective to everything.