Sunday, November 30, 2008

The Staples 2.0 Effect

Lately, comScore has been the bearer of a lot of bad eCommerce news. On November 18th, comScore issued a press release stating: “U.S. Retail E-Commerce Growth Slows to 1 Percent in October as Concerns about Inflation, Jobs and the Financial Markets Cause Consumers to Curb Spending.” On November 25th, they followed up with another press release that had more bad news, “comScore Forecasts Flat Growth for 2008 Holiday E-Commerce Spending.” And today, comScore’s most recent press release, “Black Friday Sees $534 Million in E-Commerce Spending, Up 1 Percent Versus Year Ago.”

After comScore’s first press release, the NYTimes followed with an article bemoaning the difficulties facing online retailers. “Internet retailers, trying to navigate what is shaping up to be the first truly dreary holiday shopping season ever on the Web, are engaging in price-cutting and discounting so aggressive that it threatens their profit margins and, in some cases, their very survival.”

The insinuation, from the NYTimes in particular, seems to be that consumer spending is so bad this season, it is putting not just brick and mortar retailers but the once unstoppable e-retailers out of business. Even Henry Blodget of Alley Insider described the comScore and NYTimes news as “frightening” and “shocking” in his post, “Depression 2.0 Comes To eCommerce”. He goes on to summarize, “The bottom line: Lots of [eCommerce] companies are toast.”

But this isn’t the full picture. Yes, many eCommerce companies will buy their last keyword this season thanks to the shopping “Depression 2.0”, but the slowdown in consumer spending is not the only market trend at work. Instead, eCommerce is going through a fundamental shift in its makeup – call it a Staples 2.0 effect.

When superstores like Walmart and “category killers” like Staples and Home Depot moved into our neighborhoods, their lean supply chains, operational efficiencies of scale, and national marketing budgets, put many mom and pop stores out of business. Now that eCommerce sites like Zappos, BlueNile, NewEgg, and others are reaching category killer scale, we’re seeing a similar thinning of mom and pop e-tailers.

So when the NYTimes highlights the experiences of e-tailers ranging from Lori Andre of Lori’s Designer Shoes, to Tony Hsieh, CEO of Zappos, they conflate two very different companies. Despite Lori’s claim, “We’ve been in business for 25 years, and never seen the bottom drop out like this,” the eCommerce sky isn’t falling. It’s no surprise that a website like Lori’s Designer Shoes, which sells designer shoes and other designer items, is struggling right now. Lori’s Shoes (11.5k uniques in October) is competing against one of the new goliaths in eCommerce, Zappos (4.5m uniques in October). That’s an uphill battle. Just take a look at their traffic:

Even on the internet, size does matter. Putting aside the traditional efficiencies that come with scale (e.g., Zappos can probably get better prices on its inventory than Lori’s can, has a more efficient warehouse, etc), there are several benefits of scale unique to e-retail:

First, because Zappos can offer such an extensive catalog of SKUs on its site, it is able to cross sell more products to each customer and drive a much higher average basket size than Lori’s Shoes. A higher basket size for each customer visit means more profit from each customer given an average marketing acquisition cost, and it also means Zappos can afford to do things like throw in free shipping (or in Zappos’ case, hassle-free returns), which subscale Lori would have more trouble doing. Moreover, because Zappos can drive better profit margins than Lori’s, it can afford to spend more money on online advertising than Lori’s.

Second, when it comes to building a successful and profitable eCommerce company, it’s all about building a brand. Once an e-retailer has the brand recognition, I don’t know how a mom and pop can compete. If someone is searching for designer shoes and sees a Zappos sponsored link or a Lori’s Shoes sponsored link, even if Lori’s was willing and able to bid more for its keywords, a consumer is more likely to click on the Zappos link than the Lori’s Shoes link because the consumer recognizes Zappos’ brand, they may have even had a friend tell them what a great experience they had ordering from Zappos. Because of the way way Google's algorithm determines sponsored link placement, Zappos' higher likelihood to convert would drive Zappos' placement up the list. Consequently, Zappos and other online retail “category killers” can acquire traffic more cheaply than Lori’s ever could.

And there's the rub. Once an e-retailer like Zappos has attained this brand recognition, price competition is the only way an e-retailer like Lori’s Shoes can hope to compete, and we all know that’s a losing proposition. Meanwhile, Zappos and other category killers continue to pick up market share of online and offline shopping dollars. This will only be helped by brick and mortar retailers like Foot Locker, Circuit City, Home Depot and others that are trying to reduce their fixed costs by shuttering retail store locations.

Sure, it's not pretty now, but I think the eCommerce category is only going to emerge stronger from this recession. Just don't expect it to look like it does now.

Monday, September 22, 2008

What's TechCrunch's Future?

Since joining Bessemer almost 2.5 years ago, TechCrunch has been a staple part of my morning blog diet. But lately, I've found myself breezing through the headlines, and rarely rarely reading the actual content. That said, I'm hesitant to unsubscribe.... what if I miss a juicy tidbit? But is TechCrunch's original role as a way to discover new web 2.0 startups relevant today? I suppose it must be. According to compete, their traffic hasn't dipped recently. Who are the die-hard Techcrunch readers?

Wednesday, September 17, 2008

VMware: Biting off more than they can chew?

Watching the VMware keynote presentations at VMworld feels like watching the business plan of startup after startup copied onto a slide. But it's hard to know what's actually just a slide, what's just an API, and what's a real product close to being released. As I type, the CTO is announcing vCenter Chargeback, vCenter CapacityIQ, vCenter Orchestrator, and vCenter ConfigControl – all areas packed with startups. (And I’m told not many of VMware’s “Technology Partners” had any clue of what VMware was planning on announcing.)

But this doesn’t mean that startups don’t have a chance now that the mammoth VMware has announced its intention to move into these areas. After all, no one playing in the space should be surprised that VMware is trying to move the locus of it's future revenue away from the hypervisor and to the management layer. But listening to VMware's long list of "future" products, you can't help but feel like it is trying to bite off more than it can chew. If you scratch just below the surface of many of these roadmap ideas, a lot of "what if's..." pop up. Even taking the cool "bursting to the public cloud" idea I mentioned yesterday, how does the storage part work? Are you constantly mirroring storage to the cloud? That gets mighty expensive (and complicated) very quickly.

It will be interesting to see what happens in the virtualization landscape in the next couple of years. All in all, thanks in part to the startups springing up in the virtualization ecosystem, I’ll be leaving VMworld a little more bullish on Microsoft’s prospects of getting penetration in the virtualization landscape.

Tuesday, September 16, 2008

VMworld topic du jour: Cloud Computing

I have the pleasure of spending today and tomorrow at VMworld in Las Vegas. These conference are always an experience. I should have known VMworld wouldn't disappoint when, on my way into the conference, I got handed a card with a $1 poker chip on it from none other than Microsoft. The card reads: “Looking for your best bet? You won’t find it with VMware.” Gotta love it.

The morning started off with a keynote speech from VMware’s new CEO, Paul Maritz. Apparently, VCs aren’t the only ones excited by the concept of cloud computing. In Maritz’s keynote speech this morning, he divided his presentation into three areas: cloud computing (for internal data center), cloud computing (federated external cloud), and more cloud computing (virtual desktops – okay, that’s a little bit of a stretch).

As much as I joke, Paul’s aspiration to build the next Windows looks like it will be based in part on riding the coat tails of the much-discussed cloud computing paradigm shift. VMware hopes to do this with its newly announced Virtual Datacenter OS. With VDC-OS, instead of having a legacy Windows/Linux/Unix OS in the data center, IT administrators can instead deploy VDC-OS. VDC-OS aggregates all the physical resources in the data center to create an internal, private cloud. An administrator can assign business policies to applications (e.g., Serve Level Agreements), and the data center will automatically provision new resources in order to maintain these SLAs.

Taking it one step further, one cool concept Paul demoed is the idea of leveraging a federated public cloud for peak loads. So if an application has a SLA that it is in danger of breaking, the VDC-OS will allow the infrastructure to “burst” to a paused vApp in the public cloud. I thought that was pretty nifty. A long way off, but a girl can dream.

Anyways, back to the conference. So many company booths, so little time.

Saturday, August 30, 2008

McCain's VP Pick

In Costa Rica on vacation, so a little late on the pickup (and pardon the political content here), but doesn't McCain's VP pick feel a bit like Harriet Miers Part II?

back to the beach!

Thursday, April 10, 2008

VC Pre-MBA Hiring...

A couple of months ago, I posted on my blog that Bessemer was looking to hire a new pre-MBA Analyst. More than 650 resumes later, we are thrilled to announce that Brian Feinstein has accepted our offer to join us as a full time Analyst. Welcome, Brian!

Having finished what feels like an epic recruiting process, it is interesting to look back at the process. Notably, of the more than 650 resumes we received, we conducted 42 first-round interviews (~6%), seven second-round interviews (17% of the 42), and eventually extended one offer (14% of the seven, but 0.15% of resumes submitted!).

To anybody reading this post who is applying for a pre-MBA role at a VC firm, this funnel may seem intimidating. So how can you get an edge? In particular, how does one get a first-round interview? So here is my "one-woman's take" on some tips I can think of post-recruiting to give you a slight edge:

  1. Your interest in entrepreneurship and technology shouldn’t start at the interview

This one may be a bit of a personal bias; some VC/PE firms looking to hire a pre-MBA likely wouldn’t prioritize this. But I can’t help but notice that Bessemer has had six full time Analysts, and five have been involved in entrepreneurship in one way or another. I'm not saying you need to start an internet company, but I do think involving yourself in the entrepreneurial or tech community will give you an edge. People who do tend to rise to the top during the application process, and I think it is because of their passion not just for venture capital, but for the entire ecosystem.

  1. Before you apply: Understand the role (and know yourself)

Pre-MBA VC jobs are heavy on the sourcing and researching, light on the tie-breaking votes and corporate jets. Expect to spend a majority of your time reaching out to CEOs of private companies in order to source deals for your firm. If this is not something that you think you can get excited about, that’s okay. Don’t let the allure of VC blind you into taking a pre-MBA role. Instead, pursue another job that makes you more passionate (or your MBA)… venture capital will always be there. If sourcing is something that you can get excited about, emphasize this in you cover letter or work in relevant experience in your resume. We are more likely to interview someone who we think is applying eyes-wide open.

  1. Be persistent

Sourcing requires a great deal of persistence. If sourcing is something you think you could be passionate about, show your persistence during the interview process (and however you can in your resume). For example, if you read a job posting for a VC firm, Google all the Partners in the firm and find which ones have blogs. Then email one or two of them. Make a smart comment about one of their blog posts, mention you saw the job posting and are extremely interested in the role, and oh heck… a little well-placed flattery never hurt anyone.

  1. Do your homework

It always impressed me to speak to a candidate who had clearly done their homework. I don’t mean they had a long list of exciting private companies they are familiar with. Instead, they knew some Bessemer portfolio companies, they read some of the Partners’ blogs, and they had a basic understanding of what the VC process is like. So do your homework – it shows initiative, curiosity, and your interest in the role. (And it doesn’t hurt to show that you did your homework in your cover letter.)

  1. Be Googleable

Charlie makes a similar point when he says “make a digital home for yourself.” Blogging is a great way to show who you are and demonstrate that startups and technology are something you are passionate about (tip #1). For some firms, this tip is the application process.

Last but not least: Know what we’re looking for and customize your resume to that

Tips #1-5 all feed into this tip which is: Don’t use the same resume for every job you apply to. For example, applying to a pre-MBA VC role is very different than applying to a pre-MBA buyout firm role. While the LBO recruiter might drool over a candidate’s investment banking background, we tend to get more excited by leadership experience such as starting a new successful club at your school or being the captain of your sports team. Customize your resume to highlight certain strengths specific to the job to which you are applying. Keeping this is mind should give you an edge in snagging that first round interview.

Thursday, February 28, 2008

More on BVP's Top 10 Rules for Being SaaS-y

If any of the "Bessemer's Top 10 Rules for Being SaaS-y" from my previous post resonated with you but left you wishing you had more background, you should check out my colleague Byron Deeter's recent guest post on Bessemer’s Top 10 Laws for Being “SaaS-y.” Definitely great reading.

Also worth checking out is my colleague Philippe Botteri's blog post "Launch of the SaaS 13 Index" in which Philippe tracks how a selection of the public SaaS comps are doing. Great idea.

Monday, February 11, 2008

Bessemer Venture Partners: SaaSy!

Bessemer may have a reputation in some circles of being an old fashioned firm, but really, we're quite SaaSy.

Over the past decade, BVP has quietly been investing in a once low-profile area of software now known as Software as a Service (SaaS). Early BVP SaaS investment include companies such as Verisign (VRSN), Keynote (KEYN), Cyota (Acq. by RSA) and more recently, Postini (Acq. by Google) and Endeca, and this investment focus shows no sign of fading away anytime soon.

Last year alone, BVP made new investments in five pure SaaS companies including Perimeter eSecurity, Eloqua, Cornerstone OnDemand, SelectMinds, and LinkedIn. Bessemer’s combined software and SaaS portfolio is now projected to reach an impressive $1.2B in aggregate revenues in 2008.
With 2007 marking a clear inflection point for the wider acceptance of SaaS (including in the public marke
ts with the successful IPOs of NetSuite, SuccessFactors, DemandTec,, Aprimo and Constant Contact), we decided it was high time to bring together SaaS thought leaders, SaaSy BVP portfolio company executives, and a few close friends for a discussion of SaaS best practices and the changing SaaS landscape.

The invite-only event attracted 40+ companies and 80+ attendees, and as my colleague Philippe Botteri pointed out in his blog post on the event, represented around 80% of the revenues of the SaaS industry in 2007.

Speakers included Quentin Gallivan (former CEO of Postini), Keith Krach (former CEO & Chairman of Ariba), Joe Payne (CEO of Eloqua), Parker Harris (Co-founder and EVP Technology of, Jim McGeever (CFO of NetSuite) and several other luminaries in the space.

In addition, BVP shared some of the best practices we've learned over the years and more than a dozen SaaS investments. You can checked out some of the resources we've put together on SaaS in a special section of our website. But for a taste, below is a slide show of our 10 Rules for SaaS. Happy to discuss any of the points....:

Also check out my colleague Philippe's blog post for a better summary of the event!

Monday, February 4, 2008

Facebook: Please don't ban me!

First, a facebook confession: I am, or at least was, a facebook page squatter (see A VC's post about the subject). Curious about facebook's new (but poorly executed) offering, I decided to experiment and squat on numerous facebook pages that were close to my heart.

A little viral growth later (and with the help of some press), my Starbucks page (my then pride and joy) had amassed several hundred Facebook "fans". But before my pages reached compelling scale, I received warning after warning (three warnings, all told) and was stripped of my Starbucks, Amazon and eBay pages. I then quickly closed down my Coca-Cola, Stoli, Diet Dr. Pepper, Dell, JetBlue, Ikea and a bunch of other pages for fear of losing my Facebook profile.

Unfortunately, today, a close friend of mine who was also experimenting suffered exactly that fate.

Now, I really don't want to lose my facebook profile, but I'm left with one page: The Economist. With 1,761 fans, I'm adding about 60 per day. If you're curious, here's what my Insights page looks like:

So now, do I close it down? Strangely, Facebook just wipes these pages out of existence, leaving the fans in a lurch. Wish there was a way to transfer the ownership, but no one from the Economist has posted on the discussion board...

[Okay - last facebook post for a while. Promise!]

Saturday, January 26, 2008

Forbes Midas List - 2008 Demographics

Forbes released their annual Forbes Midas List this past week. As I did last year, I made a very quick run through the list to get a sense of the demographics. Here is a three year view:

Although women, Hispanics and African Americans didn't make any progress on the list, investors of Indian descent (the majority of whom have made at least one investment in an India-based company) continued their Midas land grab.

Congratulations are in order, by the way, to five of my Bessemer colleagues who made the Midas list. Felda Hardymon, Rob Stavis, Bob Goodman, David Cowan, Rob Chandra. Congrats! (Makes you wonder if Roberts have an innate venture capital ability....)

Monday, January 14, 2008

Interested in a VC Pre-MBA Analyst Role?

Bessemer is looking to add a new Analyst to our team. If you are a pre-MBA interested in VC, this is a really great way to get a taste of what venture capital is all about with some of the best in the business.

Check out the teaser below. If you think you might be a good fit, drop me a line or a comment and I can send you the full job description / requirements, or apply directly (w/ cover letter & resume) to FullTimeAnalystResumes at BVP dot com.


Bessemer Venture Partners (BVP) is the oldest venture capital practice in the United States. With offices in Silicon Valley, Boston, New York, Shanghai, Mumbai, Bangalore, and Herzliya, the firm manages more than a billion dollars of venture funds, carrying on a tradition of hands-on, active venture investing that has continued since 1911.

BVP is seeking an investment analyst to join the firm. The analyst role is ideal for an entrepreneurial, competitive self-starter who is outgoing, charismatic, and analytical. The position is located in the firm’s Larchmont, New York office, which is 35 minutes by train from Manhattan. Several of the firm’s professionals live in Manhattan.

Position Description
Analysts interact with roughly 1,000 entrepreneurs each year in an effort to source 2-3 new investments for the firm in their primary role. In addition to reviewing industry publications to identify promising companies, responsibilities include investment analysis and due diligence while working closely with the firm’s senior professionals.