Jeff Clavier's Software Only

Introducing Kongregate - my first investment in the gaming space

My most recent investment, Kongregate, announced its beta launch last night alongside the closing of a $1M seed financing. I am delighted to be part of a strong syndicate of angel investors, led by my good friend Reid Hoffman, backing gaming veteran Jim Greer and his team. Even though I don’t like these types of analogy, you could argue that Kongregate is a YouTube for casual games developed in Flash (today).

Developers will be able to upload their work on the site – maintaining all IP, rights, etc. – and will get exposed to the community who will review, rate and eventually rank the game based on how much it is being played. They will eventually get a cut of the advertising revenue generated by Kongregate, though in the short term exposure, user feedback and popularity will be the most significant benefit they extract. One of the hooks offered by Kongregate is a set of APIs that allows developers to create contests and statistics that will be saved in the player’s profile.

To date, during the alpha phase of the service, about 300 games have been uploaded.

Users don’t need to be registered to play, but some of the more advanced features like maintaining personal statistics, chat rooms and contests participation are reserved to site members (membership being of course free). In an interview with Red Herring’s Ryan Olson, I mentioned that one of the motivations for gamers is ego/bragging rights about beating a level, hitting challenges and being on the top score leaderboard (the need for consumer services to satisfy one of the seven sins is a notion I learnt from Accel Partner’s Kevin Efrusy) . There is also the opportunity to hang out online in one of the many chat rooms available on the service, where you can interact with other gamers as you are playing.

The screenshot below shows one of the popular games of the moment, The Fancy Pants Adventures (which has been played over 50,000 times). You can also see the live chat on the right hand-side, and if you scroll below the game, you find all the rating, reviews/comments and recommendations about other games that might be of interest.

I have been looking into the different segments of the gaming space for a few months, trying to understand the trends and opportunities that my kind of investing might have. I have been fortunate to meet and discuss with a number of CEOs in the space, including the talented CEO of Boonty, Mathieu Nouzareth, who gave me a great primer on this industry a few months ago. Kongregate was almost the ideal first investment opportunity for me since it bridges the gap between gaming and passion-centric communities, one of my main area of interest. I am very excited to announce that first dip in the gaming space, which has proven to be fascinating so far – even if traditionally it has not been one to generate spectacular returns for investors. We shall see!

I have been asked if users would develop games "for real", therefore increasing the amount of content on the site. My answer is essentially that 1) based on the current set of uploads, we see a lot of amateur game developers uploading interesting demos or actual games, and 2) a user will typically play a given game over and over (and over) in order to beat levels or succeed on challenges. The need to massive daily uploads is therefore less critical than on an audio or video site. Traffic and usage patterns will have the final word on that question at the end of the day.

 

More:

• The official press release
• A great interview of Jim Greer in Gamasutra
• Coverage from TechCrunch, VentureBeat, Reuters,…

Such a small world - even online

I was writing a piece about my latest investment, Kongregate, and was reading Ryan Olson’s piece about the company when I stumbled upon that ad being displayed on the page, just below one of my quotes. It shows Dogster’s Ted Rheingold, in his now world famous dog suit. Dogster is of course another one of my investments.

By the way, if you have a dog or a cat, and they don’t have a Dogster/Catster account, be ashamed! Redeeming yourself is just a click away .

So funny!

Interesting Web 2.0 conferences and events

The busy conference season is upon us again (just cleared TED 2007 which was an absolute blast), and I want to mention two events where I will be speaking in the coming month:

WEB 2.0 EXPO / APRIL 15–18 (Moscone Center, San Francisco CA)

The Web 2.0 Expo is a spin-off of the highly popular Web 2.0 conference (now called the Web 2.0 Summit), that will feature a large number of Web 2.0 companies exhibiting their products, as well as a multi-track conference that will be preceded by a number of workshops. A big shout to my co-chair of the Search SIG Dave McClure for co-organizing this event.

On the 15th, I will be running the workshop Starting Up 2.0: Strategies for Pitching, Financing & Growing Your Web 2.0 Startup with my good friend Rob Hayes from First Round Capital. If you have attended some of the Camps (BarCamp, TagCamp, MashupCamp,…) I have run a number of sessions about Angel/VC financing, trying to give participants insights on the funding cycle. We will have 3 hours to cover the startup process, and there will be a lot to talk about. We will keep the scripted part of  the session to 2 hours tops so that we can make sure that we address as many of questions of the audience as we can. Feel free to send me an email or leave comments on this post if you plan to attend the workshop, and have specific issues you would like to see addressed.

On the 15th, I will participate to a the Panel on Venture Capital 2.0: Bright Future or Broken Forever?. Since there will be six of us on stage, and we are all very opinionated, it promises a fun debate. I am really looking forward to the conversation with David Hornik, Chris Moore, Josh Kopelman, Michael Eisenberg (who we don’t get to see often enough out here). Mike Arrington will have the "interesting" task of keeping us on topic and/or schedule.

SOFTWARE 2007 / MAY 7–8 (Santa Clara Convention Center, Santa Clara CA)

My friend MR Rangaswami has organized the Software conference for a number of years now. We met a long time ago when I was still an enterprise software investor, and have kept in touch to compare notes on the evolution of systems in the enterprise world. MR has asked Ismail Ghalimi – the CEO of Intalio, organizer of the Office 2.0 conference and talented IT Blogger – and yours truly to run an Enterprise 2.0 theme at Software 2007, which will span across 4 panels (titles listed below are work in progress):

• What does Web 2.0 mean to the enterprise beyond the technical alphabet soup
• Enterprise 2.0: Meet the companies
• Office 2.0: Meet the companies
• Enterprise/Office 2.0: the CIO point of view

Our goal is to set the scene in the first panel, establishing what 2.0 means in the enterprise context and where we have seen actual usage from corporate clients. “Meet the companies” will feature 4 startups building products in a particular segment in the Enterprise/Office space and will both their product vision and their market development strategy (against the incumbents). We will wrap up the discussion with a panel of three/four CIOs and get their views (“So what ? Who cares ?”) on this new generation of applications and services. I will post the formal program and names of participants in these sessions in due course.

Readers of Software Only can get a $300 discount off the regular price by clicking on this link.

UNDER THE RADAR: WHY OFFICE 2.0 MATTERS / MARCH 23 (Microsoft Campus, Mountain View CA)

I will also be attending (but not speaking at this time) the Under the Radar event on Office 2.0 put together by Debbie and Alison over at DealMaker Media. It will be interesting to listen and meet 32 company CEOs in the office 2.0 space. Readers of Software Only can actually get a discount by registering through this link.

Twittering or not twittering, that is the question

Much has been written on, about and around Twitter – with a clear acceleration over the past… three weeks ? Essentially the traffic on the site, and the number of mentions in the blogosphere seem to be highly correlated – which is not surprising since a lot of the Twitterati are also highly visible bloggers.

I had not paid much attention to Twitter during my 6–months blogging break, but discovered it two weeks ago when hanging out with my friends Scott Beale and Robert Scoble – who have been twittering away for some time. I jokingly told Scott that I would never use “that” but I did twitter quite a bit at Ted 2007, and since then.

What works for me with Twitter is the fact that I can fire one comment, one thought, one message, in 30 to 60 seconds. And not bother with presenting, formatting or developing that idea – because, or I should say thanks, to the 140 characters limit. I have always had difficulty at writing posts of less than 200 to 500 words, and so that artificial constraint is actually interesting. Obviously, the editorial value of these 140–character messages tend to “vary greatly”, and I would expect only a small number of close friends and/or associates to be interested in that “stream of consciousness”.

What struck me, or at least surprised me, what the speed at which Twitter got its mention in the New York times, was called the blogging killer, had its first mashups, and created a passionate debate between fans and opponents. Talking about mashups, Twittervision is really way cool, and could easily be applied to photostreams.

So it is something new and important happening in front of us, or is it a fad that will burn out that much faster ?

I say who cares? If it is truly useful to some people (like Tara “Miss Rogue” Hunt), it will find its (killer) application amongst other publishing and collaboration tools. And in the meantime I have added my own Twitter badge on this blog.

Disclosure: I have no interest in Obvious Corp, the makers of Twitter.

Looking back at three years of Web 2.0 investing

Almost three years ago, I left the fund I was a general partner of and decided to switch my investment focus from mid-stage enterprise software to (very) early stage consumer Internet. Dotcoms as they were, since the Web 2.0 meme had not been cornered yet. Since I had limited investment track record in that space, it was clear that raising a fund – may it be from traditional limited partners or high net worth individuals – would be impossible, or so close to it that it was not worth trying. The alternative (like any bootstrapped startup) was to start investing our own cash in some of the companies that were building a new generation of services for the consumer.

Why the consumer? Because I still could not figure out how to make angel-type investments provide any meaningful leverage/return in the enterprise software space, whereas interesting things were being built for the consumer on a capital efficient basis. So efficient that these companies sometimes managed to launch their service and even generate revenues on very limited outside investment - because hardware, bandwidth and (open source) software costs had decreased by one to three orders of magnitude. And since the burst of the first Internet bubble had drastically lowered salary expectations of early stage startup employees, overall startup costs decreased to a point that a friends and family, or angel, financing of a few hundreds of thousands dollars allowed a company to reach a number of key milestones.

Three years ago, we were busy inviting the same group of friends to a bunch of social networks. Some people were reading blogs directly on web sites or through the first generation of feed aggregators, and all VC bloggers could sit around a dining table. My initial interest in user generated content – text, pictures, audio and the very beginnings of video – led to my involvement in Buzznet (photo sharing), Truveo (video search) and Feedster (RSS search). Around the same time, I came across Userplane (private instant messaging network) for the first time – but did not engage for almost a year. I also made a conscious decision to attend a lot of conferences, events and other geek dinners. This allowed me to meet casually a number of the CEOs I would end up investing in: Dogster’s Ted Rheingold, Edgeio’s Keith Teare, Rapleaf’s Auren Hoffman,… And this blog – started in June 2004 – led me to meet another group of entrepreneurs: Kaboodle’s Manish Chandra, Maya’s Mom’s Ann Crady and Wikio’s Pierre Chappaz just to name a few. A large number of deals also came through referrals from angel investors or firms I have worked with several times.

And then there is the strategy that brings it altogether, putting each companies in a nice set of well defined buckets. I started with 3 buckets: Search, Social Media, Infrastructure. And evolved each bucket with the investments I made, and the ones I passed on. But that will be the subject of other posts in the next couple of days.

The slide below is a list of the companies I have invested in, most in cash, a few in kind, sometimes both. I have also listed two advisory boards I am/was part of: Netvibes, that I met a few days after they had closed their angel round, and MyBlogLog, that was acquired by Yahoo in January 2007 before we closed the angel round that was in the works. Were also acquired – by AOL – Truveo and Userplane, respectively in January and August 2006.

It is common practice for startups these days to keep a stealthy profile even several months after raising a round of financing, and this has delayed the (almost) full disclosure of my portfolio until… tonight. I want to point out however that I have always made these disclosure in private when required, for example when an entrepreneur has contacted me about a company that would be overlapping or competitive to one of  mine.

PS: Peter Rip has an interesting piece: Web 2.0 - Over and Out, in which he suggests that the Web 2.0 hype has peaked, and now the real work begins. We'll also address that aspect in future posts.