Dan Mintz: Government 2.0 is an Experiment

Lately, I’ve focused quite a bit in the government technology space. With the new administration and the apparent focus on open technologies and dialogue with the public, it is clear that government is going to become more transparent and will likely adopt (and maybe re-engineer) some of the technologies that the private sector has taken advantage of over the last five years.

Dan Mintz, formerly the CIO for the Department of Transportation reiterates my assertion, in an interview with ExecutiveBiz, that the Government knows that no one is an expert in this area but is willing to work with competent individuals and companies who are willing to partner in learning the space:

This is still an experiment so therefore “˜how this will play out’ will require people who are comfortable with experiments. The government has a tendency to be risk-averse, which is understandable. It will be very important for the leadership within the departments and agencies to provide support for people who are willing to do the experiments. The second important factor to remember is that it [2.0 activity] will be user driven, not IT driven.

In my earlier article on this matter, I stated:

What [self-described Government 2.0 experts] don’t realize is the government they wish to work with understands that Government 2.0 is new and that very few people are experts. The government, I believe, is looking to partner with people who have the chutzpah to become experts. Who have a firm grounding in communications principles and web savvy. They understand that the next year will make experts if the right candidates, firms and contractors are chosen. They are looking for people who have the savvy needed to guide and advise, with the understanding that it’s a completely new playing field. My instinct says that the government knows that they are getting prepared to experiment and want someone to experiment with.

Sounds like we are saying the same thing. It’s just a shame that Mr. Mintz is the former CIO of the Dept. of Transportation.

DC Needs a Fred. Any Takers?

FredWilson cropped.pngProfiled in Sunday’s New York Times, Union Square Ventures‘ Fred Wilson is a legend of contemporary venture capital — a title previously reserved for West Coast luminaries like Moritz and Doerr, and maybe a couple others. At Web 2.0 Expo in New York last week, Wilson was greeted with cheers usually reserved for celebrities. . . or rock musicians.

We don’t need a celebrity here in DC. But it would be great to have a venture capitalist with a fraction of Wilson’s passion, commitment, and drive. It’s not so much that he’s an investing legend. . . what’s amazing is his sheer devotion to his companies, his followers, and everything Web 2.0.

By his own admission, Wilson’s had his share of bad calls. But most of that goes back to The Bubble, when he was at Flatiron Partners. I was at a startup (liveprint.com) pitching Flatiron in 1998. I met Wilson briefly back then, as well as the firm’s the most vocal partner, Jerry Colonna; the partner who ended up leading our investment was Bob Greene.

Flatiron’s highest-profile investment was probably deliver-to-your-door service Kozmo.com. I remember getting a Kozmo.com hat. Kozmo raised $100M, before its legendary implosion. I left liveprint.com after the first Flatiron (~$3M) round, before an additional ~$40M bought all those Aeron chairs, and the chairs were acquired (along with the rest of the company) by Kinko’s in a transaction so complicated that no one knew what they had until a check arrived in the mail.

According the NYT profile, Flatiron wrote off a third of its investments.

But Wilson returned, humbler and smarter. To me, he’s the quintessential early-stage VC. Why? Because he’s so focused on his space, and passionate about his companies. True, he’s been accused of shilling for them . . . but from an entrepreneur’s standpoint, the benefits of having such a high-leverage, high-profile investor on your team is literally worth millions (not to mention what you’ll save on not needing a PR firm.)

Just watch Wilson work. He uses nearly every one of his portfolio company’s products — twitter (6,571 follow him @fredwilson), disqus, tumblr. Add these to his blog (A VC), and he’s one of the most prolific posters on the planet.

DC needs a Fred.

Or maybe a Josh. Josh Kopelman, though less vocal than Wilson, has put his money where his mouth is, on behalf of the venture fund he founded just outside Philadelphia, First Round Capital. In fact, First Round has made no fewer than 57 early-stage investments, nearly triple USV’s portfolio.

Or maybe a Bijan. Or a Brad.

And this isn’t just about attitude. There are clear metrics here. Several mid-Atlantic firms talk about their ‘seed’ programs. But the litmus test is: name the ones routinely doing investments in the $250k – $1M range. For most firms, the funds are just too large for the math to work — invest a $250M fund $500k at a time, and you end up with 500 startups in your portfolio. That’s a helluva lot of board meetings.

Which is why First Round usually doesn’t take a board seat. (Most VC firms have a six-seats-per partner limit.) This is about volume (or more accurately, statistics). Quicken the cycle of investment, trim the due diligence, invest more with the gut . . . and let the odds work in your favor over a larger statistical sample. Though time will tell, based on initial exits, it seems these guys are doing pretty well.

So while it’s good to see them on the East Coast (Silicon Valley has sufficient players that none is noteworthy) — and Baltimore, DC, and Northern Virginia are certainly within their flying radius — it’s just not the same as having our own local VC hero. I mean, how sad is it that a local meetup was organized for DC Fans of Fred? (Full disclosure: I was there, and met some great, like-minded entrepreneurs.)

And perhaps more than anything else, these guys get Web 2.0. Unlike most VC firms, USV is not only not afraid to invest in pre-revenue companies, they will invest before a revenue model is even figured out (twitter, tumblr, disqus). So who out there will claim this mantle? Anyone? Anyone?

Lessons Learned — Scaling Social Systems

My charter with Venture Files is to contribute to and promote entrepreneurship and the startup scene around DC in general. Now, as I’ve warned, my posts may reveal my bias towards the Web 2.0 world. (It’s what my startup is about.) But heck — I’m at the Web 2.0 Expo in NYC, so . . .

A session today of great interest was Joshua Schachter’s ‘Lessons Learned in Scaing and Building Social Systems.’ For many of us, Schachter lived the great American Web 2.0 dream:

Step 1. Build an app (del.icio.us) in your spare time, and operate it from your apartment (server ‘farm’ below);

Step 2. Sell it to Yahoo! (rumored to be in the neighborhood of $20M . . . nice neighborhood);

Step 3. Retire (he now devotes his time to playing XBox).

Delicious server.png

I can certainly relate to that!

Schachter’s talk on scaling wasn’t technical — he was referring to scaling the features, the very functionality of his social bookmarking site del.icio.us (now delicious.com).

Interestingly, Schachter built the application to solve a problem he had — he had a Word file with thousands of lines of links for all the web pages he bookmarked. Thus, the application’s initial value was utility. And that’s what Schachter would provide the world — a useful site for keeping track of favorite sites . . . and making your friends aware of them.

And for a couple of years, that’s what it did. But when the number of users got substantial, features surrounding the network effect eclipsed the site’s original value. Achieving a critical mass of users (file this under ‘high-class problem’) suddenly transformed the site’s functionality from a utility to a social application, giving Schachter a whole new set of issues to deal with — customer service, spam, kiddie porn. (“You see it all, when you get to scale.”)

Ultimately (for all of us), the focus of scaling shifts to revenue. Being ad-driven, for del.icio.us, that meant getting to more and more users and pageviews. Subtleties start to really matter, such as encouraging sharing among del.icio.us users (he saw, for example, that a disproportionate number were checking the ‘keep private’ box; it dropped dramatically when the label was changed to ‘do not share’ — as in, ‘what, you don’t want to share your toys, Johnny?’). Bingo.

“The problem, however, is that these features impact one another. Optimizing revenue often comes at the expense of user satisfaction — think of ad-splattered sites, or Evites that force you to visit the site, rather than providing details of the invitation in the email.”

Here are a few other nuggets:

Make your product self-marketing Provide as much functionality as you possibly can before asking people to register.

Want harmony on your site? Avoid conversations Schachter really disliked the flame wars that comments generate, so unlike digg, delicious.com to this day has none.

Listen to your users We’ve heard it a hundred times, but the best founders (Flickr, 37 Signals, WineLibraryTV) all really do it — Schachter read and answered every customer email up until a year ago, when the volume got so great, five people at a Yahoo! customer-support center had to be dedicated to it.

Learn your ‘drivers of infection’ The two most dramatic traffic-builders for del.icio.us were the Firefox plug-in and the RSS feed.

Great lessons for all of us.