Author Archives: payne

Microsoft’s story arc is winding down

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I think Microsoft’s dominance has peaked.

They’re struggling on many fronts: Vista an uninspired product with more technology & features for copyright holders (e.g. DRM) than for users. Microsoft’s had to provide more life for Windows XP, and to offer downgrade options from Vista. They haven’t been able to translate desktop dominance into any Internet dominance. Adobe’s Flash is the platform of choice for rich Web apps.

The flat stock price is making it harder to buy and retain top talent. Mature, high-quality, low-cost, open source stacks are winning in the server room. Viable alternatives to the Office cash cow are becoming available. The hardware market can’t tolerate Microsoft’s OEM bundling prices, when systems cost 80% less than they did a decade ago.

Apple is coming on strong, and inspiring customers with new products and new ideas — when was the last time Microsoft did that?

But, I don’t think Microsoft will disappear. They’ll join the IBM club (or worse, the Sun club), as a once-dominant company that’s no longer a leader.

Venture capital: less overhead, please

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One of the costs of raising venture capital is overhead: it takes a lot of energy to navigate the complexity of term sheets, to manage investors, and to navigate follow-on rounds of funding. It gets even worse if you’re dealing with “unique” investor personalities, immaturity, lack of experience, or intra- and inter-firm politics. One CEO friend recently bemoaned that 25% of his time went to “investor stuff” — that’s a typical number.

Venture investing is not a simple business, and investors are adept at adding terms and structures that protect increasingly narrow outcome cases. If getting a home equity loan were like raising venture capital using a FHA loan application, the kick off meeting has 4 people coming to your house and would take all day.

Investors argue this is the cost of doing business: no capital, no company. True, but the overhead has become a real issue in certain sectors (e.g. Internet projects) where the capital requirements are dropping. If you have an idea that needs $500k, and you raise money the “classic” way, you’ll spend 10% of your capital on the legal bill alone. (Remember, the company is paying both sides of the legal bill).

There’s got to be a way to fund capital-efficient ideas with lower overhead (and more time going into creating value in the company). I don’t know what the answer is, but I did think Dave McClure’s rant on the general subject was dead on.