When I first met Carlin Wiegner and Ross Fubini, the cofounders of CubeTree, it was late 2007. My good friend and former Trinity EIR, Nick Mehta, introduced Carlin and Ross to me as fellow Symantec executives who were starting to brainstorm about a new company.  Over the past two and a half years since that first meeting, I have watched these two exceptional leaders build a world class team of ~20 outstanding individuals and evolve CubeTree into the leading SaaS startup in the burgeoning social software for business category.  Before I jump to the Happy 100th Release aspect of this post, some CubeTree history may be helpful, so here goes:

To begin with, while “Facebook for Business” is considered more commonplace today as a trend within the enterprise thanks in part to visionaries like Marc Benioff talking about the Facebook Imperative, it was quite a nascent customer market back in late 2007.  This was true despite the prescient category call by my former professor and now Enterprise 2.0 super star, Andrew McAfee, who highlighted the underlying trends in March 2006.   Carlin and Ross’ conviction in late 2007 stemmed from their disenchantment with the collaboration products they used within their former employer, Symantec.  They realized that there was a growing gap of unmet user needs in the market of intranet portals and knowledge management solutions.  My own market diligence led me to also have strong conviction that there was going to be significant customer demand for a solution like CubeTree.  One tell tale sign I kept hearing about was the repeated yet unsuccessful attempt by IT departments to control and lock down internal employee usage of Facebook.  Finally, my Trinity partner, Gus Tai, brought his uncanny insight into consumer web trends and end user behaviors (hone via investments like PhotoBucket) to the conversation. 

This joint market and product conviction among the four of us led Gus and me to fund Carlin and Ross in Spring 2008 to go forth and disrupt.  It also helped 18 months later to attract the highly connected Bruce Cleveland at InterWest Partners to lead the Series B.  And it certainly resonated with collaboration luminary and founder of Lotus, Mitch Kapor, such that he got involved as an angel investor and advisor.

Fast forward, two years and 100 product releases later, CubeTree is executing on their social software vision extremely well.  Today, it is a world class, multi tenant SaaS collaboration suite that incorporates an activity feed, employee profiles, wikis and third party integrations. 

But, hold on a minute…  “100 releases”?  Over just two years?  Consumer web startups are notorious for fast iteration, especially when following the intersection of product development philosophies of agile software development with customer development as summarized nicely here.  But a multi tenant, enterprise grade SaaS app? 

Here is a perfect example of the axiom “startups are 99% perspiration, 1% inspiration”.  Carlin, Ross and the entire CubeTree team have executed admirably well and have literally shipped a new release of their product once a week for the past two years straight.  I thought this milestone is worth highlighting and Carlin and the CubeTree head of engineering, Justin Rowe, talk in depth in a recent CubeTree blog post found here about the opportunities that this nimble, high speed development cycle has created for the company to partner with, and ultimately delight, customers.  To me, this underscores the power of the business fundamental of active listening to customers coupled with a lean, nimble and high performing software engineering team and process.  It also underscores the early stage venture capital fundamental of investing in great entrepreneurs who know how to execute like surgeons against a compelling and exciting market vision. 

Carlin and Justin’s interview on their lessons learned is well worth a read and I congratulate them and the entire CubeTree team on shipping their 100th product release last week.  Well done!

As for 2010 and beyond, clearly we’ll see growth of the online ad exchange for non premium display inventory, but I’d take this one step further and posit that 2010 will see the advent of ”Local” meets the “Online Display Ad Exchange”. 

Let’s look at Local first.  As this theDeal.com article mentions, companies like Yelp, Foursquare and others have captured mind share quite nicely as leading local consumer web services which are attracting the attention of potential acquirers and venture investors alike.  What do these startups have that is so attractive?  Is their user base?  Revenues?  Technology?  I’d argue that it is none of those, rather, it is the data they have accrued or will continue to accrue via highly scalable and viral social gaming (in the case of FourSquare) or seo/ugc (in the case of Yelp) methods.  While geo targeting has been around for a while via products like Digital Element which provide data streams that enable somewhat crude IP address-based geo targeting, these new entrants have or will have two highly sought after data attributes when it comes to local: purchase intent and freshness.  This is why Google, a cash machine which thrives on purchase intent and freshness in its core search business, is interested in acquiring startups that bring viral, scalable and low-cost generators of such data so that it can further expand its targeting efforts into the lucrative local ad market.

Now what about online ad exchanges like Yahoo’s Right Media or Google’s DoubleClick?   As many of the recent interviews and posts on AdExchanger note, there is an increasing trend around the use of data to augment the identification and prioritization of which exchange based impression to buy and how much to bid to win it.   Demand Side Platforms (DSPs) like Turn, Invite Media, DataXu, Triggit and others are providing agencies and brands the tools and mechanisms to leverage data to make smarter and more granular ad buys. 

So how does Foursquare meet Right Media?  It happens via innovative startups, ad agencies and advertisers who look to innovate the ~$60b direct marketing category by taking advantage of this tsunami of local data coming from either consumer web services like the ones mentioned above, mashed up forms of more traditional sources of offline data and/or the plethora of gps/location data streaming from services like Twitter, Facebook or smartphones.   I believe 2010 will see some exciting new developments at this intersection and I’m happy to compare notes with others, just drop in a comment below to start the conversation.

This video is great isn’t it?  Certainly pumps one up that social media is here to stay and continue to thrive.  But putting aside hype, there is real business value to be captured with social leverage.

I mention this because I’m speaking today at Defrag, a conference out in Denver that delves into a wide variety of social media aspects ranging from consumer to business issues.  The topic of the panel I am on is titled, “Is ‘Social Leverage’ the next big thing for VCs?”  Fred Wilson, Brad Feld, Roger Ehrenberg  and Howard Lindzon are on the panel as well, all great investors and innovators in the social category. 

As I thought about the panel topic, the basic conclusion I came to after mapping out Trinity Ventures’ portfolio as it relates to social leverage (see below), is that social leverage is powerful as a business model.   It struck me how universal this model can be as it can apply to both business oriented services as well as the more obvious applications we see clearly on the consumer side.  It can create broad mass market businesses as well as thriving vertical, more private and focused communities (as Roger also pointed in the latter half of his blog post about today’s panel here). 

The business model of Social Leverage enables lower cost of customer acquisition (viral in consumer ala PhotoBucket for photo sharing and botttoms up trial and adoption in enterprise ala CubeTree for a next gen intranet) as well as lower cost of content acquisition and content management (users contribute content, rate content, moderate content ala Care.com in consumer to help find a babysitter and LoopNet in enterprise for commercial real estate listings). 

I’ll have more to say on this during the panel and I look forward to hearing how Fred, Roger, Brad and Howard define Social Leverage and to get your input.

What is the difference between “leadership” and “management”? 

This past Wednesday night, over 50 CEOs and Founders from across the Trinity Ventures portfolio gathered together for our annual CEO and Founder dinner to debate this question.  Imbued by energized networking and copious cocktails, we explored and debated the fundamentals of leadership and management in difficult times, since, especially in this economic environment, world class leadership and management skills are crucial to the success and growth of a business.  While our portfolio company leaders represent an extremely seasoned and high caliber group of executives, all enjoyed revisiting and reflecting on these fundamental values.   I thought it worth summarizing the key examples and takeaways as I found it a good fit with the spirit of IronGiving.

The discussion topic, Leadership in Difficult Times, was facilitated and led by our guest speaker, Professor Charles O’Reilly from the Stanford Business School.  Professor O’Reilly’s discussion included aggressive Socratic style cold calling of the audience (after all, he is a business school professor) and spirited debate.  We examined three real world scenarios brought to life via video clip interviews with three high tech CEOs: Bill Campbell, former CEO of Intuit, current Chairman who covered a situation where his authority as a CEO was openly challenged, Kent Thiry, CEO of DaVita who covered an instance where a high performer on his team clashed with the existing company culture  (be sure to click on his name to watch the YouTube video and get a flavor for his colorful leadership style) and Brian NeSmith, CEO of Blue Coat Systems who covered a scenario where an engineering rock star was disrupting productivity.

The most succinct answer to the above question came from Brett Wilson, CEO and cofounder of TubeMogul, an online video analytics and advertising startup Trinity invested in earlier this year.  Brett stated emphatically, “Leadership is about inspiring the team to win the game, and management is about the x’s and o’s of how to win”.  I couldn’t agree more and as a former crew team guy, I thought the image above captured this mixture well - inspired team members can pull hard on the oar but they also need to do so in unison and with rhythm. 

I won’t go into the details of each scenario but the high level takeaways include:

-          CEOs need to embody BOTH leadership and management to be effective.  This was the simplest yet biggest lesson.  The best CEOs do both.  It isn’t easy, but the rewards and returns are even greater for those who can. 

-          CEOs are signal generators.  What they do and say ripples across an organization in unspoken and obvious ways faster than you think.  Be aware and cognizant of your actions at all times.

 -         Firing someone is hard, but not acting quickly and decisively to address performance and/or culture fit problems is usually even more damaging to the company and other people involved.

I’ll try and get the full set of slides that Professor O’Reilly went through and post them here as I think they are useful for any reader to take a quick look at, stay tuned for those.  In the meantime, I welcome any comments or examples of great leaders who balance both leadership and management.

Update – here are the slides from Professor O’Reilly. They don’t contain the embedded video interviews we went through during the dinner but it should give you a good sense of the material covered and ideas discussed, enjoy —

The term “Enterprise 2.0” was coined back in April 2006 when Andrew MacAfee wrote this Sloan Management Review Article.  Since, then MacAfee has become almost synonymous with the term Enterprise 2.0 and is even coming out with a new book on the topic to be published in late November 2009.  His blog is one of the most respected on the topic of Enterprise 2.0 and he tweets regularly.  I took Andrew’s very first graduate school class he taught in a class called Technology, Operations and Research back at HBS Spring of 2000 and I always thought he had a knack for sensing early technology trends.

One of my favorite posts of his includes his response to a ZDNet post that states  Enterprise 2.0 is a crock.   I like it as it paints six specific use cases around real world examples of well known companies using various facets of enterprise 2.0 to solve customer pain points.

Another favorite of mine is this post where he describes ten criteria for a successful enterprise 2.0 initiative.  This strikes me as a practical and useful framework for how and why some companies are succeeding with enterprise 2.0 solutions. 

I mention all of this as I intend to cover some trends on this category in my blog here because I’m a real believer in the disruptive potential enterprise 2.0 has.  It really can change the way each of us communicates and works every day, much like how email, broadband internet and IM did.  The above set of links provides a starting point on what enterprise 2.0 is all about and you can check out many other links on MacAfee’s blog for other resources.   For a more hands on interaction, you may want to also check out one of the innovators in the enterprise 2.0 cateogory, CubeTree.  My colleague, Gus Tai, and I led a Series A investment in CubeTree on the behalf of Trinity Ventures back in March of 2008.  CubeTree is focused on disrupting the static (and typically useless) corporate intranet with a next generation social business software suite that is people centric (vs. document centric like SharePoint) and is comprised of an activity feed (similar to what you’d see on your Facebook activity feed), wikis, profiles and other features.   You can get a sample of what real enterprise 2.0 innovation looks like by signing up for a free CubeTree account here.  You can also hear more about it via SAP, one of CubeTree’s reference customers.

I’m interested to hear what readers think 2010 will hold for enterprise 2.0.  I personally think we will see some interesting events occur that help the enterprise 2.0 category accelerate faster than what Gartner may believe in their July 2009 hype cycle report.  This is based not only on what I’m seeing at CubeTree from a board member vantage point, but also extrapolating from the following macro tailwind trends to peer into my crystal ball for some Enterprise 2.0 in 2010 predictions:

1. Twitter continues to grow like a weed.  This perpetuates the value of microblogging, status updating and real time ambient awareness.  Their recent $100m financing at a valuation of a billion dollars should help a bit.   My 2010 prediction is that Twitter figures out their revenue model which further perpetuates their success and, as a derivative effect, enterprise 2.0 adoption.
2. Tens of millions of marketing dollars (if not more) will be spent around promotion of SharePoint 2010  and Google Wave.  Both of these products talk a lot about the various value proposition tenants of enterprise 2.0 including aspects of collaboration and real time.   These marketing dollars will continue to imprint broader enterprise 2.0 awareness upon customers.  My 2010 prediction is that these products will be substantive and innovative but yet still fall short as they remain either too professional services intensive (SharePoint) or too techno centric (Wave) for companies looking for practical, scaleable collaboration solutions delivered in a flexible and cost effective manner.
3. Facebook continues to skyrocket and perpetuate the value of social networking.   My 2010 prediction is that we see Facebook file their S1 and get public.  I also predict we’ll soon see this social networking giant reach half a billion users globally next year after hitting a quarter billion this summer (note, there were one billion web users in the world as of Dec 2008).   Nothing like a hot Facebook IPO and ~40% global penetration (assuming continued growth of the overall global web user base to 1.25 billion in 2010) to continue real gale force like tailwinds for enterprise 2.0.

What do you think?  Other predictions for enterprise 2.0 in 2010?

A few observations:

1. This group has been indirectly responsible for ~25% of MSFT’s annual M&A activity.  Of the ~20 companies MSFT acquires/year, ~5 start with a relationship nurtured by Dan’l's group.  (Note, if you want to be acquired for more than $250m, that will require MSFT BoD approval, otherwise, it can likely get done by a business unit champion.)
2. Partnering can build option value as well.  One of the startups I worked at before Trinity, PolyServe, got a foothold on the Windows ecosystem and ultimately built a meaningful revenue stream co-marketing and co-selling with Microsoft’s SQL Server and Dan’l's group helped pave the way for that partnership. While we didn’t get acquired by Microsoft in the end, it did help spark a successful ~$200m acquisition of Polyserve by HP in 2006.  The key here was finding an emerging or underdog business unit and helping that group win by coupling your product with theirs for a 1+1=3 joint solution. 
3. Azure, SilverLight and Windows 7 are the main new underdogs to tap into right now as a startup.  This makes sense as MSFT invests to play catch up with Google App Engine, Flash and makes up for missteps around Windows Vista. There seem to be serious co-marketing dollars to take advantage of here according to Dan’l.

Of course, when trying to mate with any large corporate giant, you have to be careful not to get stepped on.  Sharepoint, in particular, is their rising juggernaut.  With that said, with Microsoft facing new or emboldened competitors in cloud computing infrastructure and even in core operating system and office markets, they are wisely leveraging partners more than ever.  

Check out Microsoft Startup Zone to learn more.

During this debate, we looked at the investment activity of ten VCs from the last downturn of 2001 – 2003 to see if there were any lessons to be learned.  Here is one of my own takeaways and the data (caveat – this analysis is not scientific, just for discussion purposes):

2002 Was the Best Year To Make “New Investments” During the Last Downturn

After parsing the data, we found that 17 of the 73 (23%) ”new” investments which were made across these ten VCs in 2002 ultimately yielded a $100m + exit in  (vs. 15% in 2001 and 8% in 2003).   73 “new investments” was also clearly a dip in investment rate as one can see in the following chart that shows pre and post ’01-03 downturn # of new investments/year.  2002 was the nadir of that downturn in terms of investment rate, yet yielded the highest rate of winners during that ’01-’03 period.

Broadly speaking, what could this mean for today?  Having worked at a startup (PolyServe) in the Valley during the last downturn, I personally liken 2008 to 2001 (both had cataclysmic events happen in mid September that truly pushed the economy over the brink), 2009 to 2002 (both seem like the real trough year when the economy bottoms out) and 2010 to 2003 (hopefully the year of the start of actual recovery).  So, if we really are in the midst of “2002 all over again”, one should expect VC funding pace to slow down (as it certainly has to mid 1990′s levels) but I’d echo the now well documented sentiment (here and here) with some new concrete data that this is indeed the time to seize the day.  I believe 2009 will be like 2002 and some great new companies will get founded and funded, despite the gloomy macro environment.  I thought I’d share this with the hopes it emboldens the “Iron” spirit in entrepreneurs and investors alike. 

Notes:

• “New Investments” defined as the first time one of the ten VCs funded a company in a given year, regardless of round (e.g. could have been a Series A, B, recap, etc)

 

• Data considered new investments only, publicly disclosed exits, domestic US early stage funds only, and leveraged VentureSource data which has a bit of a time lag to it.
• Thanks to my colleague Patricia Nakache and our intern, Atul Kumar, who assisted in pulling together the data and analysis.

“Marketing Automation” is certainly not a new category.  There are lots of existing resources on the web today that outline the latest trends and companies.  (for instance, one of  Trinity Ventures portfolio companies I’m involved with, Tippit, offers this comprehensive resource center.)   But, in a nutshell, here is a quick recap of the evolution of this category and where we are today:

1.  The first wave was automating email campaigns.  Vendors provided templates and workflow to push large volumes of email out and offered the ability to track opens and click throughs.  This wave started gathering steam in 2003/2004.   Companies like ConstantContact got public on this wave.

2.  The second wave was to track website visits.  By tracking visitors to your corporate website and watching what those visitors (and likely potentialy buyers) are pausing  and clicking on started to yield a deeper view on a possible lead.  This wave started to grow in 2005 and 2006.  Companies like LeadLander and DemandBase are players here.

3.  We are currently in the midst of watching the third wave roll out.  This wave offers capability to take email campaigns and website visitors and to score those prospects into various tiers of qualified leads and activity.  These scored leads are fed in a more automated fashion from marketing to the sales department.  The field and/or inside sales team can then view these leads in a dashboard on an account by account basis and see which ones are showing real activity.   While the scoring algorithm is important, the real innovation of this wave is getting sales and marketing to work together as opposed to going off in opposite directions.  This is a good thing which ultimately results in what matters:  increased revenue.   According to analyst Ian Michiels at Aberdeen, about 1500 companies worldwide today deploy these types of solutions from private companies like Eloqua, Marketo, Genius, SilverPop, and NeoLane among others.  Even in the current downturn, there is healthy growth here and we’re likely to see some interesting exits down the road as folks like SalesForce, Microsoft, SAP and Oracle/Siebel look to add to their existing sales automation suites.

So, what’s next?

My bet is that the fourth wave will focus on how b2b marketers and sales teams can tap into the social web for lead generation, lead nurturing and lead monetization.  We are already starting to see this in companies like HootSuite and CoTweet (offers brands a streamlined capability to engage users on Twitter), Gist (on demand rich context around a lead or prospect) and TechValidate (customer-sourced marketing collateral).  Some of the third wave players are starting to make noise about this too.  These thought leaders are productizing what recent studies and books have shown – that is, that a greater personal connection between seller and buyer can leader to increased sales and the social web is making this connection easier to establish (see good synopsis of The FaceBook Era here by recent Trinity Ventures EIR, Sachin Rekhi).  

The opportunity and challenge for the new entrants trying to surf this fourth wave will be to execute aggressively enough to establish a great product and a beachhead of customers such that they stay ahead of incumbents who will inevitably want to add similar functionality over time (as SF.com just demonstrated).  It will be exciting to watch how this fourth wave breaks, feel free to drop in a comment below to share any thoughts or opinions.