The venture capital business is in the middle of a shakeout.

For too long, venture’s been over-funded and over-staffed with homogeneity:  the same kinds of partners, operating with the same fund model, looking at the same investments, in the same markets.  It took an economic meltdown for LPs to finally realize they were putting money into an asset class that wasn’t generating a return commensurate with the risk.

Because of the typical 10-year agreement terms in venture partnerships, everything happens in slow-motion.  But there’s some early evidence things are breaking up:

• Venture firms cutting back on partners, or moving some partners to “venture” partners
• Top-tier partnerships having a hard time raising new funds (and coming in below target), and 2nd-3rd tier partnerships having an impossible time
• LPs missing capital calls (a very big deal)

Partnerships getting hit the hardest:  those without some recent distributions (some are rumored to have nothing in the past 7-9 years!), those with no previous funds beating T-bill IRRs (or even showing a positive return), and those with heavy university endowment LPs (which have gotten slammed).

I don’t wish ill-will on any of my venture friends, but I think this is good for everyone in the long run:  we’re flushing out a broken, over-capitalized, me-too industry.  Hopefully we’ll see some innovative fund models, looking at new markets, and funding companies in new ways.

Why do we need Twitter and Facebook?  (esp. after Facebook’s redesign, making it much more Twitter-like)

One reason:  tweets are 100% public, Facebook status updates are (generally) not.

As such, the collective tweet-stream is a great source of near-real-time information.  Lately, I find myself searching more than tweeting, mostly to find current info or if others are sharing my current problem (e.g. “EC2 down”).  When I do tweet, I’m tweeting more to a search result audience (e.g. “lots of spam getting throug gmail”) than to my immediate friends.  But I’m not sure this is typical behavior.

Twitter really wants to be a feature on Facebook.  I think they (Facebook) could pull this off if they came up with a manageable way to deal with privacy scopes:  100% public, semi-private, etc.

I thought Douglas Bowman’s recent post about his departure from Google was interesting.  As a visual designer, he felt Google’s data-driven culture was “paralyzing the company” and “preventing it from making any daring design decisions”.

Ten years ago (before I blogged, and therefore could prove this claim), I opined the future of user interface design would be a combination of visual design and direct marketing analytics.  (At the time, the DM folks were the ones that figured out the yellow envelope worked better than orange, etc. — the precursor to modern Web analytics).

The combination is key:  visual design without considering usage data is just flying blind.

Analytics without any design work doesn’t yield innovations & breakthroughs.  Think of it this way:  no amount of analysis of a farmer’s use of his horse and plow is going to get a design for a tractor.

Google’s clearly doing something right, but maybe they’ve taken analytics-driven design to the extreme?

Brad Feld’s recent blog post on “Investment vs Speculation” is recommended reading for every entrepreneur.

Brad’s writing as an investor always learning now ways on how to invest $10000, but the points apply to entrepreneurs working on new opportunities.

Is your idea an “investment”:  do you see an opening to create real value?  Or are you speculating, and betting that someone will acquire the future business for more than the financials suggest it is worth?

I’m a huge GPS fan, and have wondered how I got through two decades of driving without electronic navigation help.

Recently, the innovation rate in navigation applications seems slow.  TomTom raised the bar a few years back, but nearly everyone’s caught up:   most units are quite good.

I’m wishing someone would “iphone” this market, with a great design that delivers a new level of innovation and blows everyone else away.  To that end, I’ve started collecting design elements and features I’d love to see, on this Wiki page.

Please feel free to comment and contribute.

David Pogue wrote today about the 15,000 apps now available in the iPhone app store.  It’s pretty amazing.

But where’s the app store for Mac and Windows?  

Buying apps on-line is not a new concept:  I’ve got a handful of “indie” apps that I use regularly, and many big-name apps can be now bought on-line.  But Apple’s nailed the user experience for shopping and purchasing:

• User reviews.  Gathered in one spot, on the “buy” page, just like Amazon.
• Streamlined purchase & install flow.  Enter your iTunes password and you’re done.  Compare this to filling out an order form, entering payment info, confirming, downloading, opening the download, starting the install, going through the install wizard, and launching the app.
• Enabling small value purchases.  Apple has enabled the low-price, high-volume app.

The same thing should exist for Mac and Windows.  

User reviews and “most popular” would let the best float to the top of the charts.  A standardized store would supplant the proprietary download/install modules (e.g. Adobe, EA, Valve/Steam, etc.).  The rev share with the store operator (currently 30% for the iPhone) would be lower because it competes with other distribution methods.

But it’s something only Apple and Microsoft can pull off — it really needs ubiquity to work.  (But Apple might be able to do it for Windows, if they bundled the app store with QuickTime/Safari).

Last Christmas, I got my daughter an Asus EEE PC netbook.  We were one rev too early; the screen’s just slightly too small for Webkinz.  But netbooks are great “first computers” for kids:  small, light, and cheap enough it’s not a total disaster if it breaks.  Plus, flash-drive models have no hard disk to fail, the leading cause of laptop destruction among kids.

Between discussions with Antonio, and blogosphere chatter, it’s been amusing to watch the marketers try to figure them out.   Are netbooks a new “category” or just cheap laptops?  And, why are both Intel and AMD on record dissing netbooks?

I’m not a market expert, but the analysis path seems straightforward.  First, figure out who’s buying them and why, especially where the netbook purchase happens relative to other device ownership (e.g. smart phone and full-size laptop).    Extrapolating from our own experience, I’d bet that the typical netbook purchase is a first-time computer, in many cases for kids.  Then the question is:  when (if at all) do those users outgrow their netbook?  And: are we creating a “netbook” generation?

This seems like a replay of PCs vs workstations, back when PCs were viewed as toys.  Over time, unit volume drove PC price/performance improvements much faster than workstations, causing PCs to overtake workstations and ultimately removing any category distinction.  Now, “PCs are workstations”.

My bet:  the exact same thing will happen with netbooks vs laptops.

I read about the 40% drop in property values in Dubai, and it reminded me of a model I use to think about bubbles:

The slope of the rise is (negative) the slope of the fall.

The crazyness in the world (Dubai, hedge funds, etc.) is going to come down pretty fast & hard.

Schools need to teach “how to find answers to questions on the Internet”, starting at a fairly early age (like middle-school).

We’ve shifted from “knowing it” as the key skill, to “being able to find it”.  And I’m shocked at the range of ability (even with adults) on translating a given query to a Google search, refining the query, using Wikipedia where possible, and sifting through results to get a consensus answer.

I’m starting to teach my kids to be power researchers.