Hi Fred, when I read winer's post yesterday, I immediately thought if the implications for VCs. If Amazon can deliver on this promise and companies can bootstrap longer, how will that affect VC investment, peformance, etc? Could this push back the need for VC funding further in the companies life cycles, possibly necessitating larger VC investment and larger fund size?
fredwilson
· 2 years ago
I think its one more step toward capital efficiency in web services startups
But I still think this is good news for VCs and entrepreneurs alike
Good thing you have that goog position. Right now, developers at goog work with a superior cloud + fs, db,+ keyword search. Not to mention behavioral/user data on everyone who uses the internet. We are talking light years beyond the amazon.com infrastructure. An engineer at goog can build and deploy a covestor killer this afternoon. Amazon.com killer in a couple of weeks. Now, assume that in a year that cloud is open to everyone w/ built-in monetization. Where does that leave a vc?
fredwilson
· 2 years ago
It's not all about what can be built.
It's also about what can be imagined
and what happens when the entire company is focused on something other than an engineer in the middle of a huge company.
And network effects are important too
Google might build a wikipedia clone or an etsy clone or a twitter clone but that doesn't mean anyone would use it
fred
j
· 2 years ago
I am not talking about Goog engineers building a twitter clone. I am talking about the next evan building the next twitter using the open goog infrastructure and goog development tools & framework. No cost. No data center moves - no down time. Today goog will monetize your pages for you. Tomorrow goog will build and host your infinitely scalable business and monetize that for you. PS. I love your blog and I know you will be ok but where does that leave the vc biz.
fredwilson
· 2 years ago
I think the VC business will be fine. I don't think Google can monetize most web services better than the owner of the service can. Google ads are not the most native monetization system for most web services.
Ultimately the owners of these services will need to build organizations to best capitalize on the opportunities in front of them
As I said in my 'web 2.0 is a gift' post last year, this is all good for entrepreneurs and VCs as it reduces risk for everyone
Fred
Steven Kane
· 2 years ago
i agree that cheap commodity like technology infrastructure is great for entrepreneurs. and maybe great for vc funds which are focused like USV or First Round (that is, First Round's upcoming new fund which looks a lot like USV). But how does this help big or huge VC funds?
And what do you make of the increasing size of VCs funds? the need for capital seems to be going down but the supply of capital seems to be going up?
Josh Paul
· 2 years ago
I completely agree that what Amazon is doing for entrepreneurs in the web space is of great value. I've taken advantage of EC2 and S3. However, I believe that they're going to need to improve SimpleDB internal structure before it can become truly useful for actual work.
The current implementation has some wonky requirements for working with integers, such as they all need to be the same length. For example, if you need to store numbers in the 1,000,000 range, you'll need to zero-pad everything so that 1 winds up being 0000001. Additionally, there's no way to store negative numbers, so you need to store an offset somewhere and do the subtraction (and then zero-pad that). Those are just two issues among others.
Granted, technically these aren't tremendous hurdles to overcome. However, it does add a hurdle to one's agility. I'm sure someone will come up with an adaptor to handle the annoyances.
Thanks for musing openly.
maurice
· 2 years ago
this is a common misreading the simpleDB docs: you only need to resort to zero-padding and offsetting negative numbers tricks if you intend on using the "<" or ">" operators on numeric attributes, and have that comparison be numeric. SimpleDB treats all of its values as strings, so < and > use lexicographic ordering-- not numeric ordering. While I agree this is a little annoying, it's not technically a requirement.
vruz
· 2 years ago
Not only it enables web startups, Fred, but also TV channels, rock bands and any content or application that needs to scale massively. Amazon web services can compete orthogonally with Yahoo and iTunes too, when every artist out there wants to manage their output themselves. It's only a matter of time before the next Radioheads are able to rent a "rock-band-application", upload some mp3 and sell their stuff massively. Not for the big-boys-only anymore.
Peter Secor
· 2 years ago
Hi Fred,
You mentioned near the end of your post that you had a position in Toyota as part of a hybrid engine play. I don't recall any posts (after searching a bit) that discuss the reasons behind this and would be very interested in what the motivations are. I'm in the market for a small/mid-sized car here in the Bay Area but every cost model I've done for the hybrids ends up more expensive overall.
fredwilson
· 2 years ago
Honestly I haven't researched the whole hybrid engine thing enough to be able to post intelligently about it
Toyota is one of my smaller holdings and it hasn't done much since I bought it
I need to read up on this whole topic a bit more
Fred
Peter Secor
· 2 years ago
Thanks for the response. I've been digging into it a bit and will be posting what I've found and what assumptions I've made. So far the best deal for overall cost (not just to me but including production and eventual disposal costs that may not be completely borne by me individually) looks to be any reasonably efficient used car from the '90's. It's been very interesting looking into the various subsidies (both government and company internal), tax breaks, and other costs that go into the production of a vehicle.
awilensky
· 2 years ago
The Amazon DB has numerous shortcomings, but may evolve to include all the functions of a fully functional database that most web services need.
fredwilson
· 2 years ago
That seems to be the prevailing wisdom. My bet is they do what it takes to get it right
Fred
awilensky
· 2 years ago
To quote the database super Server industry foremost expert, Kingsley Idehen of OpenLink Software:
"For every database function of the old model, increased complexity, increased administration. Stored procedures, replication, unified data model, DB to DB connectivity, etc." I might add, that the new languages used to spin out new web based applications are all trying to make everything a nail, because all of the databases that they have to work with (mySql, Postgress) are hammers. This has created a specialist industry where we have something that did not exist before: Programmers that have an intimate knowledge of the serving and request structure of the client's remote calls, to a degree not known in previous era's.
In other words, you can be a Ruby or PHP programmer, but to be really in demand, you have to know A LOT about the back end. You can get started with basic knowledge, and get a small demo working, but once you get to even mid sized apps, you find that there are all these issues in the database closet that are very, very arcane.
I am going through this right now, where my poor little bootstrap venture has such a starting mezzanine complexity requirement, that is a useless exercise to start with under provisioned complexity. If you are going to have thousands of small user objects that need to updated and tracked on real time, you have to solve an number of vexing problems that even heavy databases have problems with. Sure, an off the street Rails guru will get you so far, but that data back end......
i agree 100% fred. not to sound like an egghead (and i probably don't understand the book completely), but i think their moves around web services are a textbook way to respond and react to innovator's dilemna. compare them versus ebay. amazon took a much more audacious path around an emerging trend while ebay focused on just squeezing every incremental penny off their auctions.
great stuff, fred, although i feel like it's still a little pricey :)
fredwilson
· 2 years ago
It is pricey but I like to be invested in innovators. If it goes down I can always buy more
Fred
Bob
· 2 years ago
As a Web X.0 entrepreneur and someone who has been in the software industry for 20 years, I have kept a close eye on AWS for aforementioned reasons. Unfortunately I couldn't use it for my current startup because it was still in private beta at the time. Recently at a AWS event co-sponsored by KPCB, I asked a KPCB VC about what AWS means for VCs. It has become so affordable (AWS, VPS, shared hosting, etc) to build a Web X.0 site that a lot of startups don't need VC money, at least not for a good long time if ever. Companies like SmugMug, hotornot, plentoffish, etc will never need VC money because their burn rate is way below their revenue stream. Fred, I would love to hear your thoughts on this subject.
fredwilson
· 2 years ago
I left a comment on this thread with a link to a post I wrote almost a year ago called 'web 2.0 is a gift, not a threat, to vcs'
Go take a look and let me know what you think
Fred
Bob
· 2 years ago
Good post. I especially agree with this sentiment "All that area between the red and blue lines is risk that has been taken out of the equation for VCs and equity that should largely accrue to entrepreneurs."
My question is what about companies like smugmug, hotornot, plentyoffish? They never took VC money and are profitable and have no plans to take VC money. Are they the exception or soon to be the norm for web 2.0 startups? Even in a case like facebook, it seems like they are in command of the terms rather than the investors putting the investors at a disadvantage.
fredwilson
· 2 years ago
I am not sure that investors ever had the advantage when it comes to a high quality venture deal run by top notch entrepreneurs
fred
pwb
· 2 years ago
Until there is a fairly decent competitive offering, I have to think that it is too risky to put your whole company on AWS.
gzino
· 2 years ago
Also, along with Google, positioned to be the major player as the semantic web develops. Watching each move they make, it would be shocking if they are not carefully building, storing, and correlating metadata around just about everything. And as they expand into other consumer areas (the TiVo deal etc), web service enablement (EC2, S3, now this), their PayPal clone, etc...wow. As a past stockholder that then built our startup on EC2 and S3, I'll say that I only increased my position. Now with this...even more so...
Dustin
· 2 years ago
You are long Google yet you link to Yahoo Finance? Seems odd to me.
fredwilson
· 2 years ago
I wanted to generate smart links on the tickers and I know that a link to yahoo finance will do that. Not sure if a google link will do that.
fred
Ben Marklein
· 2 years ago
Fred - Obviously Amazon's service offerings are getting traction with customers. But what do you think of it as a business? For example Nelson Minar analyzed this when S3 and EC2 first came out and concluded: "[T]his best case scenario would be a 2% earnings improvement. Nice, but worth the distraction to their primary business?" Have you done your own analysis?
fredwilson
· 2 years ago
No I have not, but I suspect that the economics of this business will change.
If a significant percentage of web services adopt Amazon's service offerings, I think they will be in a position to make money in more ways.
fred
Charlie Crystle
· 2 years ago
Fred, there's a company that's already added a DB layer to the web, so you can treat the entire web as a large data store. Josh Knauer is the founder, and its' a mature business... here's one of thei projects (out of CMU) http://www.maya.com/infocommons/index.html
fredwilson
· 2 years ago
Thanks Charlie
I'll check them out
I love blog comments. I learn more from you all than anyone else!
fred
bjubb
· 2 years ago
i could disagree with the statement " If you coded your database in Amazon to begin with you will never see the wall. As you need more capacity you have to do nothing, other than pay your bill". The DB service _may_ be that simple but the EC2 and S3 are not. Its not a true elastic service without a bunch of programming done on your part. There are even products out there that you might need to buy if you aren't able to do so. (weoceo comes to mind)...
As far as their future aspirations to build a "web data API" that makes commingling services easier down the line...probably not so true. everybody has an API, i dont see why 2 startups having their data in the same database service would make it so much easier that it becomes a no brainer. some people need secure data (wesabe, flickr), some people dont (weather, traffic, maps) and on and on.
All Comments
http://www.fridgebuzz.com/2007/01/02/the-long-t...
Thanks for sending this
But I still think this is good news for VCs and entrepreneurs alike
http://avc.blogs.com/a_vc/2006/12/web_20_is_a_g...
It's also about what can be imagined
and what happens when the entire company is focused on something other than
an engineer in the middle of a huge company.
And network effects are important too
Google might build a wikipedia clone or an etsy clone or a twitter clone but
that doesn't mean anyone would use it
fred
Ultimately the owners of these services will need to build organizations to best capitalize on the opportunities in front of them
As I said in my 'web 2.0 is a gift' post last year, this is all good for entrepreneurs and VCs as it reduces risk for everyone
Fred
And what do you make of the increasing size of VCs funds? the need for capital seems to be going down but the supply of capital seems to be going up?
The current implementation has some wonky requirements for working with integers, such as they all need to be the same length. For example, if you need to store numbers in the 1,000,000 range, you'll need to zero-pad everything so that 1 winds up being 0000001. Additionally, there's no way to store negative numbers, so you need to store an offset somewhere and do the subtraction (and then zero-pad that). Those are just two issues among others.
Granted, technically these aren't tremendous hurdles to overcome. However, it does add a hurdle to one's agility. I'm sure someone will come up with an adaptor to handle the annoyances.
Thanks for musing openly.
Amazon web services can compete orthogonally with Yahoo and iTunes too, when every artist out there wants to manage their output themselves.
It's only a matter of time before the next Radioheads are able to rent a "rock-band-application", upload some mp3 and sell their stuff massively.
Not for the big-boys-only anymore.
You mentioned near the end of your post that you had a position in Toyota as part of a hybrid engine play. I don't recall any posts (after searching a bit) that discuss the reasons behind this and would be very interested in what the motivations are. I'm in the market for a small/mid-sized car here in the Bay Area but every cost model I've done for the hybrids ends up more expensive overall.
Toyota is one of my smaller holdings and it hasn't done much since I bought it
I need to read up on this whole topic a bit more
Fred
Fred
"For every database function of the old model, increased complexity, increased administration. Stored procedures, replication, unified data model, DB to DB connectivity, etc." I might add, that the new languages used to spin out new web based applications are all trying to make everything a nail, because all of the databases that they have to work with (mySql, Postgress) are hammers. This has created a specialist industry where we have something that did not exist before: Programmers that have an intimate knowledge of the serving and request structure of the client's remote calls, to a degree not known in previous era's.
In other words, you can be a Ruby or PHP programmer, but to be really in demand, you have to know A LOT about the back end. You can get started with basic knowledge, and get a small demo working, but once you get to even mid sized apps, you find that there are all these issues in the database closet that are very, very arcane.
I am going through this right now, where my poor little bootstrap venture has such a starting mezzanine complexity requirement, that is a useless exercise to start with under provisioned complexity. If you are going to have thousands of small user objects that need to updated and tracked on real time, you have to solve an number of vexing problems that even heavy databases have problems with. Sure, an off the street Rails guru will get you so far, but that data back end......
http://www.squidoo.com/ThruDispatch
great stuff, fred, although i feel like it's still a little pricey :)
Fred
Go take a look and let me know what you think
Fred
"All that area between the red and blue lines is risk that has been taken out of the equation for VCs and equity that should largely accrue to entrepreneurs."
My question is what about companies like smugmug, hotornot, plentyoffish? They never took VC money and are profitable and have no plans to take VC money. Are they the exception or soon to be the norm for web 2.0 startups? Even in a case like facebook, it seems like they are in command of the terms rather than the investors putting the investors at a disadvantage.
quality venture deal run by top notch entrepreneurs
fred
yahoo finance will do that. Not sure if a google link will do that.
fred
change.
If a significant percentage of web services adopt Amazon's service
offerings, I think they will be in a position to make money in more ways.
fred
I'll check them out
I love blog comments. I learn more from you all than anyone else!
fred
your database in Amazon to begin with you will never see the wall. As
you need more capacity you have to do nothing, other than pay your
bill". The DB service _may_ be that simple but the EC2 and S3 are
not. Its not a true elastic service without a bunch of programming done
on your part. There are even products out there that you might need to buy if you aren't able
to do so. (weoceo comes to mind)...
As far as their future aspirations to build a "web data API" that
makes commingling services easier down the line...probably not so
true. everybody has an API, i dont see why 2 startups having their
data in the same database service would make it so much easier that it
becomes a no brainer. some people need secure data (wesabe, flickr),
some people dont (weather, traffic, maps) and on and on.