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JUL 20, 2005

Gathering of Entrepreneurs and Venture Capitalists in Silicon Valley (Part 1)

By Yoshito Hori

I touched down in San Francisco, where the dry air welcomed me, providing a pleasant contrast to the humidity of Japan. I gazed up at California’s blue skies as I waited for a taxi, and the feeling hit me that I had really arrived in Silicon Valley.

The taxi took me to my hotel in Palo Alto, along a relatively empty Route 101. We left the highway on a road with the Spanish-sounding name, Embarcadero, turned right at the entrance of Stanford University and proceeded up another Spanish-named street, El Camino Real. The hotel was just past the crossing at Sand Hill Road, the reputed mecca of venture capital.

I had come on this occasion to learn about the latest trends in high-tech U.S. ventures. That was my sole purpose for coming all this way. I wouldn’t be meeting investors or giving speeches at business schools, and would not be visiting companies in which we have invested. I was simply and exclusively here to learn.

Earlier, people had traveled all the way from Silicon Valley to learn about the latest venture trends in Japan at the New Industry Leaders Summit (NILS) (Japanese). I was now going in the opposite position. According to a capitalist colleague of mine, he once saw Amazon CEO Jeff Bezos participating at conference as just another participant. Apparently, he was sitting right in the front row, and was very eager to learn. Hearing this reminded me of the importance of always learning with a sense of humility.

I checked in at the hotel, changed and went straight for a swim. This was the day after the Japan Masters, so I was still a bit weary. I would take it easy today and save my energy for learning, starting tomorrow.

The next morning I got up and walked over to the conference site that was at Stanford University. Strolling around the grounds with map made me really feel the enormity of this place. While I was imagining the future shape of the campus of the Graduate School of Management, Globis University, currently applying for approval, which is scheduled to happen next April, I arrived at the Alumni Center, where the conference was being held.

I registered and picked up pamphlets and a bag. Just as you would expect from California, the bag was a rucksack rather than a shoulder bag, and it contained beach sandals. Glancing out the window, I saw participants enjoying breakfast on the lawn, everyone dressed casually. I hurried outside to the garden, picked up a croissant and Appletiser and sat down at a table, where I bumped into the fellow who had organized my speech two years ago at Stanford. Since completing his MBA at Stanford, he has been working in venture capital in Silicon Valley. We soon started exchanging information.

The volunteer staff ushered us into the venue. There was a presentation fully utilizing video and music, and then the main organizer of the conference, Mr. Tony Perkins, appeared on stage. Mr. Perkins is perhaps what you might call a charismatic editor. He founded Red Herring magazine and in 1999 authored a book entitled, The Internet Bubble. Since selling off Red Herring, he has been presiding over an online information portal, AlwaysOn. AlwaysOn (AO) organized this year’s conference.

The first session then kicked off. First was a remote teleconference moderated by Mr. Perkins involving Niklas Zennström, the CEO and founder of IP telephone software company Skype Technologies, and venture capitalist Tim Draper. The images of the two panelists were projected onto the left side of a large screen that stretched from left to right. Skype’s board meeting was being held in Estonia at exactly the same time, and so the two men were virtually together for this session by connecting the venue and Estonia via Skype.

An online chat session was being projected on the right side of the screen. The session was being broadcast as a real-time webcast. Industry experts watching the session were able to simultaneously exchange views as the session took place and could also ask questions over the Net. Moderators and the audience could see all this taking place and ask questions based on these exchanges.

Chairs had been provided for about 300 people. One row at the front and three at the back had been equipped with desks for bloggers who had been invited as journalists and who were transmitting news online as it happened.

The session with the Skype CEO started. Some 160 million people have already downloaded Skype, which has more than 40 million members. There were two terms that the Skype CEO used a lot.

One was “to create an ecosystem.” This phrase is also prominent in the English version of the GLOBIS vision. They intend to create ecosystems with Skype at the center linking portals, blogs, social-networking sites and hardware companies.

The second term was “please your customers.” Skype is basically free, and they are not intending to load their service with ads. Instead, they want to simply keep their customers happy, and insofar as they are successful at this, more people will sign on and pay for peripheral services.

Tim Draper was on fire. Spurred on by his exuberant spirit, Mr. Draper recently has really come into his own, more so than Mr. John Doerr of Kleiner Perkins Caufield & Byers. At the end of the session, he put on a CD that he had produced, and after introducing a daughter wearing a Skype T-shirt, he sang and danced in the middle of the screen. Everyone onsite was a little overwhelmed by this exuberant display, and no one seemed particularly amused. Of course, participants watching over Skype Video had no sense of this mood.

The second session was concerned with the question, “Are Tech IPOs Dead?” Every year, AO releases its “AO100” list of the top 100 technology companies. The year before last, 15 of the companies listed had successful IPOs; but for some reason, only 4 did last year. The ensuing discussion examined why there were so few IPOs this time. The panelists provided some explanations, which are listed below:

  • Due to the newly enacted Sarbanes-Oxley Act, the cost of IPOs and risk of litigation were too high
  • Investment trust funds have gotten bigger, and their bottom lines are as high as 50 billion yen, so IPOs are no longer an easy option for small companies
  • From the perspective of venture capitalists, given the time and effort for an IPO, trade sales produce cash in a much shorter period of time and, therefore, appear to be much more attractive
  • Specialist IPO boutique investment banks like H&Q Asia Pacific, Alex. Brown, Robertson Stephens have merged with major banks
  • Furthermore, many technology companies are now well into their mature stage

Sessions continued all day long. For further information, please refer to this page.

I caught a ride with a friend back to the hotel, and went swimming. As I was doing the backstroke, I looked up at the sky and caught a glimpse through my goggles of the blue California sky. Something resembling a bird came into view, so I stopped, removed my goggles, and saw a plane, with its wings spread like a bird, making its way across the sky.

July 20, 2005
At my hotel in Silicon Valley
Yoshito Hori