Change in Address

I have moved my blog to www.lawandlifesiliconvalley.com/blog/. I hope that you will join me there!

Silicon Valley: Financial Crisis or Opportunity

I just returned from Silicon Valley Bank's Twenty Fifth Anniversary celebration (Silicon Valley Bank is the leading bank for venture capitalists and venture backed companies). It was attended by many venture capitalists and entrepeneurs, so it was a great event to determine the attitude of the Silicon Valley ecosystem to the rapid changes in the last month. Until recently, Silicon Valley had watched the financial meltdown as an observer, but last week the financial crisis reached Silicon Valley. The crisis became very real to Silicon Valley when Sequoia Ventures, one of the most successful venture capital firms, held a meeting for its CEOs announcing that the "Good Times" are over.
http://www.slideshare.net/eldon/sequoia-capital-on-startups-and-the-economic-downturn-presentation?type=powerpoint . They recommended strong measures: cutting expenses very aggressively, raise as much money as possible, establish a heavily commissioned sales structure and become cash flow positive as soon as possible. Further, they suggested that any company without a year of cash in the bank was in trouble.

However, this message of gloom has generated a contrary response from experienced investors such as Alan Patricof, founder of Apax Ventures. http://www.paidcontent.org/entry/419-patricof-on-rip-good-times-dont-burrow-into-a-dark-hole/ . However in a tribute to the respect for Sequoia Ventures and its success, the Sequoia powerpoint has been on the agenda for every Board meeting which I have attended (my friends who are Board members confirm that this discussion is ubiquitous). My experience has been that the Boards have decided that they need to be cautious, but that business will continue. The Sequoia presentation has even generated its own parody. http://www.alleyinsider.com/2008/10/the-last-vc-memo-we-ll-publish-this-week-

This view was confirmed by the conversations that I had at the Silicon Valley Bank event. Both venture capitalists and entrepeneurs were modestly optimistic. They believe that the situation is serious, but that the need for innovative products and services will continue. We will all find out in five years, so stay tuned.

Raku Museum: A Japanese Gem in Kyoto

I was in Japan on business for the first week of October visiting my Japanese clients. I always to try extend these trips over a weekend to visit other parts of Japan. I was fortunate to be able to a short weekend in Kyoto this trip. Kyoto is a charming city which is best known for its many beautiful temples and their gardens. Although I was enchanted by the gardens that I visited, the concierge at the hotel also suggested that I visit the Raku Museum http://www.raku-yaki.or.jp/museum/index-e.html. Until I visited the museum, I had always thought of Raku as a technique for making pottery originating in Japan which is characterized by low firing temperatures and removing the pot from the kiln while still hot. The results are difficult to predict, but have a special charm for that reason. The ceramics produced using Raku techniques are quite identifiable and striking (many years ago, I worked with ceramics and used the Raku technique).

However when I visited the museum, I learned that Raku was developed in the sixteenth century and is actually the name adopted by the family that developed the technique (the name is based on a seal granted the family by Toyotomi Hideyoshi, the leading warrior statesman of the sixteenth century). The museum is small, with only three rooms, but this size and focus makes it a gem. In fact, the museum is in a building next to the family's kiln. The kiln is still being used. The visit reminded me of several other Japanese museums of similarly small size (all very focused) which I have visited. They appear to form a special class of museums in Japan. They are well worth the effort of seeking them out. If you are in Kyoto, you should visit the Raku Museum and when in Japan you should try to visit its other small museums!

Competing with Open Source: Strategies by Harvard and Stanford

You know that open source has arrived as a business strategy when Harvard and Stanford professors write papers about how to compete with the open source model (although the article covers all free goods).

In their words:

It’s not easy, and it’s more than just a theoretical question. U.S. newspapers are finding it difficult to compete with free news and the commentary of bloggers and other internet sources. And in the software world, the rise of open source products, which are available for free on the internet, is reshaping the technology industry.

“Divide and Conquer: Competing with Free Technology Under Network Effects,” Deishin Lee and Haim Mendelson, Production and Operations Management, January-February, 2008 http://www.gsb.stanford.edu/news/research/mendelson_div_conq.html

They mention three strategies for commercial companies to compete with "free" products:

1. Timing

2. Product features

3. Network effects across other markets.

Thanks to Matt Asay on finding this article and his insightful commentary. http://news.cnet.com/8301-13505_3-10047872-16.html

Open Source Think Tank Paris 2008: Day Two

Unfortunately, computer problems (my hard drive died) and travel have delayed my summary of the second day. First, we ended the first day with a magnificent dinner cruise on the Seine River. Our hosts, Alexandre and Celine arranged for a sommelier to select special wines for the cruise which meant that we had great wines from all over France. On the second day, we focused the brainstorming sessions on Open Source Licensing and the Definition of Open Source. The licensing discussion was lively, with the European attendees focusing on the challenges imposed by the number of open source licenses. During the licensing discussion, they were particularly interested in the effect of the Jacobsen decision which clarifies the enforceability of open source licenses in the US, an issue was viewed as settled in the European Union.

The discussion of the definition of open source ranged from who should control the definition to whether a new group, focused on commercial open source should be created to provide guidance about how to determine whether products (or companies) are “open source”. The consensus was that OSI definition has served the industry well and should continue to be the core definition and that a new non profit focused solely on commercial open source is unnecessary. The discussion about whether a company can be considered “open source” was very interesting. Most attendees agreed that it is very difficult to meaningfully designate a company as “open source” because most companies follow a variety of approaches to software development and distribution. The better approach is to focus on products as following an open source model. An interesting side note to this discussion was the conclusion that all companies are now following a “hybrid” business model which includes both proprietary and open source products. Even Microsoft is now part of this trend. This conclusion is consistent with the results of our 2008 Napa Open Source Think Tank that open source software is now becoming part of the mainstream. The final presentation was by Rudy Salles, the Vice President of the French National Assembly. Linagora had assisted the French National Assembly in implementing an open source environment and Mr. Salles discussed open source from the point of view of both a user and a policy maker.

The Open Source Think Tank Europe was a great success and was particularly useful in helping the US companies understand the European perspective. We hope to see you there next year!

Open Source Think Tank Paris 2008: First Day

The first day of the Open Source Think Tank has been very productive. Alexander Aitken of Olliance Group and Alexandre and Celine Zapolsky (both of Linagora) have done a great job in organizing the conference. The discussion has quite different from our Napa Open Source Think Tank and emphasized the differences between the US and EU software industries. For example, system integrators are the primary contact for European customers in contrast to the United States where the software vendor frequently has direct contact with the customers.


During the brainstorming, my group identified two major challenges for the open source market:

1. The rejection in the EU of commercial open source companies by many customers because they are not viewed as "true open source". Based on the discussion, a significant number of customers in the EU identified "open source software" as a product which is community supported and preferably has multiple service providers providing support to licensees. Clearly, this position poses a significant challenge to many of the US commercial open source vendors which use a dual distribution model based on a commercial product with more functionality than the open source version.


2. The reluctance of major corporations to "openly" contribute to projects. Although many major corporations do contribute to open source projects, they frequently do so in an indirect manner so that their contribution cannot be associated with them. If the corporation does not contribute its improvements to the open source project, then the community and all licensees will not be able to take advantage of the changes. If the corporation contributed indirectly, the open source project misses the legitimacy which open support would confer. Although this reluctance can be based on valid legal concerns, these concerns appear to be exaggerated.

More tomorrow!

Open Source Think Tank: Paris September 21-23, 2008

I wanted to alert you to the Open Source Think Tank this month in Paris Sept 21-23, in conjunction with the Paris Capital du Libre conference. It takes a lot to pull me away from Northern California during the grape harvest, but this event will be great. As in the United States, the Open Source Think Tank is the only by-invitation gathering where leading global experts will come together to collaborate on the issues facing commercial open source. Like the Open Source Think Tank in Northern California, the format will focus on brainstorming sessions, CIO panels and networking activities. We expect that all attendees will actively participate. We have a great agenda and confirmed list of attendees, and unique networking activities including a private reception at the Paris Chamber of Commerce and the main event - wine tasting and dinner while cruising down the Seine through Paris. We have some great speakers including Marten Mickos and Larry Augustin. You can learn more at http://thinktank.olliancegroup.com/. If you need an invitation, please contact Andrew Aitken at andrew@olliancegroup.com.

I have participated with Andrew in all of the prior Open Source Think Tanks and they are great events. They provide an opportunity for everyone to work together in small and large brainstorm groups, addressing the future of open source. The Think Tank will also ensure that you have great opportunities to network with your fellow attendees. In Paris, the first night we will have a reception at the Paris Chamber of Commerce and the second night main event, wine tasting and dinner while on a barge cruising down the Seine through Paris

Most of the attendees of our annual Napa events have said it was either the best or one of the best events they have ever attended and we have almost 100% return attendance. In Paris, the schedule will include analyst meetings, press events (Sun and Jaspersoft and some of the other attendees are planning announcements) and a meeting of North American ISV and European SI/VAR.

I hope to see you there!