Other NDA Highlights and Quotes

"Herring said early on there is no New Economy -- let's just
think of it as a rest."
- Michael Krasny, event MC and Host, NPR's Forum program,
and English Professor, San Francisco State

"America's innovative spirit -- that is our advantage."
- Tony Perkins, Founder, Red Herring

Rules for success: Paul Jacobs, group president, Qualcomm, said two of the
big lessons he's learned are these: (1) "Every business must walk through the
Valley of Death -- you have to feel failure viscerally to become a success."...
and (2) "You must be be passionate and persistent -- you can't just sit there
staring at the obstacle, saying 'Why me?'"

"The financial guys were too focused on making money from the transaction,
instead of *after* the deal -- on the company itself."
- Esther Dyson, EDventure Holdings

"It's not easy to take defense technologies and commercialize them. But the
DOD is pushing to use more commercial products -- so there's an opportunity
to take technologies out of government, commercialize them, then go back in."
- Jason Rottenberg, Exec Dir-Strategy & Research, MILCOM Technologies

"This is the only time I can remember, in my 20 years in the Valley, when
the IPO and M&A markets were both dead at the same time. It's usually a
sine/cosine type of thing."
- Allen Morgan, General Partner, Mayfield

"We became the People Magazine of the business -- taxi drivers knew us!
We funded one too many dreamers."
- Ravi Chiruvolu of Charter Ventures

"The wrong people got identified as the rock stars -- the entrepreneurs are!"
- Allen Morgan, General Partner, Mayfield

"Any new Microsoft software is indistinguishable from a
denial-of-service attack."
- Bruce Schneier, CTO, Counterpane Internet Security

"Customer churn is going on in this climate, opening the door for
aggressive sales tactics."
- Mike Homer, CEO, Kontiki

"We've been whipsawed. But good companies are being built through it all."
- Tim Draper, Managing Partner, Draper Fisher Jurvetson

"We were judging success on such short timeframes! In the good old days,
we said it took 3 to 5 years to get to major milestones. We need to get
back to that."
- Paul Deninger, Chairman and CEO, Broadview

Press Magnet

Lots of reporters showed up at NDA. In fact, the Monday morning press breakfast had not a single
seat open. Herring used the occasion to preview the top-ten trends they would debut later in the
day--and some interesting discussion ensued.

A considerable amount of media coverage resulted from the event. The press list included reporters from:
-The Atlantic Monthly
-Bloomberg News
-CBS Marketwatch
-Cox Newspapers
-Dow Jones
-The Economist
-Financial Times
-National Public Radio
-Orange County Register
-San Diego Union Tribune
-Wired Magazine
-and me, Graeme...your dedicated, roving
conference boy from Minneapolis...yesirree!
(and the only one there with a perfect
four-year attendance record)

Best Session Concept

The "Eggheads Unplugged" panel, consisting of:

- Eric Schmidt, CEO, Google (whom I personally thanked that a
search on my name now yields nine Google pages...he said, "Who?")
- Steve Jurvetson, Managing Partner, Draper Fisher Jurvetson VC
(always a favorite, having been called "the smartest
VC in the Valley"...he told me that would be despite
the fact that he reads my reports regularly)
- John Gage, Chief Researcher, Sun
(Mr. Smooth Voice, and a smart guy, too)
- Bruce Schneier, CTO, Counterpane Internet Security
(a pretty quotable guy)
- Tim Harris, CEO, Structural Genomix
(a Brit, and one of those new biotech studs)

The format for this session was this: the moderator would draw a topic from the fishbowl, and the first
panelist to ring his bell won the right to voice his opinion on that topic. A few quotes of interest:

"Stenography" (hidden messages, like text within pictures)
- Bruce Schneier: "There aren't any business applications for it!
Even digital watermarks won't last."

"The Next Great Tech Wave"
- Eric Schmidt: "Computers can't keep up now with the flow of bits.
We need new communications-oriented computers."

"Exponential Curves in Technology"
- Tim Harris: "Human genome sequencing was exponential from the
late '80s to today--90% of it was done in the last seven months."
- Eric Schmidt: "Storage and fiber optics...But remember the business
ramification: if your technology is doubling every year, your business
value better be, too."

"The Vacuum Tube of 2002?"
- With the panel slow in responding, two cheeky suggestions popped from
the audience almost concurrently: "Windows" and "the PC industry."

"Nanotechnology"
- Tim Harris: "An example in our business now is 3D structures
of proteins."
- Eric Schmidt: "It feels like the '50s with transistors. Doesn't
scale yet."
- Steve Jurvetson: "It's about more than smaller, faster, cheaper.
It's like the digitization of matter. It turns laboratory science
into information science."

"Quantum Computing"
- Bruce Schneier: "The first such machine will be used to break
RSA's security. It's now in the lab."
- Eric Schmidt: "Two words: carbon nanotubes."
- John Gage: "There's a great book I'd recommend you re-read:
'Shockwave' by John Brenner."

Biggest Disappointment

Lack of any great big-bang insights from the above panel, or at least any that appeared to juice up the crowd. Maybe it was just too short. If nothing else, though, it *was* fun. My best sound-bite award came out of this session -- it goes to Bruce Schneier, CTO of Counterpane Internet Security. His quote (also mentioned above): "Any new Microsoft software is indistinguishable from a DOS attack." I love that one...

Worst-Scheduling-or-Logistics Award

Otherwise known as Worst-Session-in-a-Supporting-Role: a panel on "Venture Philanthropy and Social Entrepreneurship," strangely jammed into lunch the first day, dominating the entire thing. It was a complete bust. No one in the room wanted to do anything but schmooze with their neighbors--that's what you do at lunch! (Especially on the first day.) Yet the panelists droned on, apparently refusing to believe no one was listening. "Geez, write these people a check so they go away!" was one comment overheard nearby. The decibel level of the collective conversations and the panelists' monologues, blaring through the speakers, each vying to drown out the other, was torturous. To make matters worse, lunch had been billed as being outside on one of the glorious patio lawns overlooking the very-blue Pacific, and the weather was great! SHEES!!

A Sampling of Other Quotes from NDA

"Instead of 'first-mover' it should be 'first to get it right'...
Dell could be said to be the first in their market to do that --
a hundred went before them....We need to introduce patience
as a metric in evaluating entrepreneurs."
- Paul Deninger, Chairman and CEO, Broadview

"The tech industry has always been defined by cyclical periods...
and it's never been so low."
- Jason Pontin, Editor, Red Herring

"We believe we're on the cusp of the next era....The boom is
just stalled....It's now about bringing Internet advancements into
creating a world of ubiquitous computing -- the always-on utility."
- Jason Pontin, Editor, Red Herring

"The expedition where we found the super-croc went 40 days in the
desert before we discovered it. I lost 25 pounds in 30 days. It
took perseverance."
- Dr. Paul Sereno, Paleontologist, University of Chicago
(the Sunday evening reception speaker--a big hit)

"Great entrepreneurs make their own luck, just like Paul Sereno."
- Hilary Schneider, CEO, Red Herring Communications

"We worry now about burn rate, and getting to cash flow positive.
A company is not a success till then!"
- Paul Deninger, Chairman and CEO, Broadview

"A large number of companies need capital, and it's not coming
from public offerings or VCs....The private equity firms are the
last ones standing--all of them basically in New York....They're
now seeing valuations come down to where they understand them."
- Blaise Zerega, Deputy Editor,
on Red Herring's "Merger Madness" trend

"I just spent some time in LA, and I'll tell you this -- with Bush
at a 92% approval rating, I think I now know where the other 8%
are -- they're all in Hollywood."
- Tony Perkins, Founder & Editor-in-Chief, Red Herring

"How bad is it in telcom? We monitor prices on eBay, and we're
now seeing manufacturers buying back their own equipment to
stabilze prices."
- Dave House, CEO of Allegro Networks

"The road is still there, we just have to work through the bumps.
It's not a fundamental break--just a resetting."
- Henry Samuelli, CTO and Cofounder, Broadcom

"The real sale now is to marketing and finance."
- Dave House, CEO of Allegro Networks (whose company just raised
a second round of $50 million...an *up* round, even!)

"Our ultimate vision--broadband anywhere, anytime--will take a long
time to become ubiquitous. We only have 10% penetration for broadband
now, and it will take maybe 10 years more to get 20% penetration."
- Henry Samuelli, CTO and Cofounder, Broadcom

"The human genome is the mother of all simulation projects."
- Bruce Schneier, CTO, Counterpane Internet

"In this security trend, the focus of companies is on protecting
their own environments, but that's dangerous for the VC world."
[Presumably because other areas of tech spending get short shrift?]
- Roger McNamee, Integral Capital Partners and Silver Lake Partners

"We'll see Napster-like responses to everything privacy related [P2P
startups]. But how much of this will not be investable--like Napster?"
- Roger McNamee, Integral Capital Partners and Silver Lake Partners

-"We think nanotech is the next great wave. Just look at the number
of media stories on it -- in 1999-2000, it was about the same as the
Internet was in 1992-93."
- Steve Jurvetson, Managing Partner, Draper Fisher Jurvetson VC

Tony Perkins Does a One-Hour Monologue

Selected quotes from the combination tech-industry outlook and pep
talk that Red Herring's founder and editor-in-chief delivered on
the second morning....

"The math must add up. The Herring rule is that great companies are
worth 3-4X revenues. Really, really great companies--like high-margin
software companies--might be worth 8X. No company is worth more
than 10X revenues."

" B2B e-commerce will go from $131 billion in 2000 to $3-6 trillion by 2005."

"I got wireless DSL at home, and it rips. I can use my Powerbook
anywhere. Trouble is, I had to have to whole Herring IT department
over to my house to get it set up."

"VCs still have deep pockets -- but very short arms right now."

"At the Herring, we like entrepreneurs. What makes them good is this:
they focus, they're cheap, they're competitive, they're innovative, and
they're risktakers. And most of the best ones dropped out of college --
so remember that when you're hiring people."

"When I was a young banker at Silicon Valley Bank, and Sun was one
of my accounts, I was contemplating starting my first venture (Upside
Magazine). I was unsure about it, so I asked Scott McNealy. He told
me, 'Just do it -- it doesn't hurt.' "

"Young people will drive the adoption of text messaging in the U.S.
Already, 14-year olds can't remember life without instant messaging."

The Heroes Take the Stage: The Entrepreneurs

Eighteen companies gave five-minute presentations during two one-hour sessions on the second afternoon, each introduced (and carefully kept to their time limit) by seed-stage venture guru Robert von Goeben of StarterFluid in San Francisco. (See a great column he wrote afterwards at: http://news.cnet.com/news/0-1273-210-7983407-1.html?tag=bt_bh )

A few of the presenting company standouts, in my opinion, were:

Semiconductors:
- Impinj: A fabless IC company that uses new tunable transistors to enable precision analog and RF in low-cost digital CMOS. "Now analog can benefit from MooreÕs Law, too," said CEO Bill Colleran. Raised a $15 million first round September 2000.

Security:
- BioNetrix Systems: A single, patented platform to manage authentication for an organizationÕs information applications and transactions. "ItÕs an open, agnostic solution, relying on no hardware," said CEO and former IBMer John Ticer. Total capital raised of $19 million; last round March 2000.

- Tripwire: Software that takes digital snapshots of files and digital hashings of data stored within companiesÕ networks, then encrypts it. When files are accessed by unauthorized intruders and data signatures are compromised, network operators are notified immediately. "ItÕs about data integrity, not managing perimeters," said CEO Wyatt Starnes. Raised a $24 million third round in January 2001; total of $35 million.

- Counterpane Internet Security: A managed security monitoring services firm focusing on intrusion detection and response. Its system requires no new software or hardware investments. "WeÕre about brand protection. We take ordinary sys-admins and turn them into security gods," said Tom Rowley, CEO. Raised a third round of $24 million in November 2000; $58 million raised in total.

Wireless:
- Seven: Software that allows wireless carriers to offer data-access services to their business customers. Current GPRS product is available for both GSM and TDMA, allowing always-on access to corporate MS Exchange email on wireless handsetÑwith ability to switch between 'Net session and phone call. "Our key customers include BT and Cingular, and we have 85 people," said CEO Bill Nguyen. Has raised $64 million total, with a $30-million second round in August 2001.

Other:
- Kontiki: A secure media delivery network for enterprises and entertainment companies. Allows for creation of end-to-end subscription services, reinforcing the branded experience. "WeÕre like Pagemaker in Õ85, enabling people to create," said CEO and former Netscape exec Mike Homer -- in this case, their own content delivery experience, via a web-based console. Its sales effort is now focused on the enterprise market, Homer noted, while his bus-dev people are working on the longer term media company market. Raised first round of $18 million in late 2000, and "still have $11 million left," said Homer.

Herring's Top-Ten Trends -- and a Suggestion

The traditional editorial hook of NDA is Red Herring's presentation of its annual "Top Ten Trends" for the following year. Going out on a limb like this is part of the Herring schtick -- and it does create some sense of anticipation and buzz. The magazine issue featuring the trends is debuted at NDA, about two weeks ahead of the newstand.

This year's list? Well, here are the sound-bites...but read the whole feature yourself in the November edition (now out) for more details:

1)  Data Central (data centers become the central office of the future)
2)  Feeling Safe (billions will be spent on miliary & security technology)
3)  Small Worlds (nanotechnology will mirror the investor buzz in biotech)
4)  Brand Power (new wireless 'virtual network operators' set to take off)
5)  Merger Madness (value of deals led by private-equity firms to skyrocket)
6)  Old World Supremacy (Europe flexes its regulatory power over high-tech)
7)  Potential Energy (renewable sources like fuel cells become cost-effective)
8)  Head Strong (biotech's focus on neurogenomics will spawn drug successes)
9)  Gadget Madness (low-cost ICs cause multifunction devices to proliferate)
10) Network News (big biz embraces digital media networks, for itself)

What kind of success rate does Herring have on these predictions? They do grade themselves pretty honestly from year to year (see the November issue, wherein they say they deserve at least one F from last year). But, my smart friend Jay Hare at PwC actually suggested that, for this story, I go back myself and grade the trends over a three-year period -- a much more sensible timeframe to evaluate such things, we agreed. But, shoot, Jay -- I realized I'd just thrown away all my back issues a couple weeks ago, in one of my occasional huffs to go paperless in my office. So, damned if I can remember all those past-years' trends! But I'd suspect Herring would actually look better on some of these predictions if they did go back two, three, even four years. After all, we're supposed to be taking a long term outlook these days, right? So, maybe they missed an opportunity there.

I suppose one could go back in my past years' NDA reports to you, o loyal readers, and see for oneself. But I don't have the damn time. Besides, I doubt I could bear the irrational exhuberance. Nonetheless, here they are:

An NDA retrospective....
- NDA 2000 Report - Part 1
- NDA 2000 Report - Part 2
- NDA 1999 Report - Part 1
- NDA 1999 Report - Part 2
- NDA 1999 Report - Part 3
- NDA 1998 Report

Favorite NDA Freebies

Easy! The combination Nasdaq logo/U.S. flag hat we all got in our bags. Yeah! Get out there and buy American, baby! We'll teach those bastards...

But also that great Flying Other Brothers Band tie-dyed t-shirt, courtesy of the band's fearless leader, Silicon Valley master VC Roger McNamee.

Roger, you da man! Talk about Buy American, how about those successful VC-backed, IPOed companies of his, huh? And on they go, like GoTo.com (now Overture) -- been watchin' that one lately? Roger doesn't need the money, obviously, but buy some of his band's albums, anyway -- because they're... well, groovy, man! (another one due out early next year)

Most Fun I Had On My NDA Trip

Well, besides the crazy party Monday night with the Flying Other Brothers band doing their great '60s and '70s music, it was the kayak surfing I did at Doheny State Beach on Sunday afternoon, before the conference began. Just me and a pair of trunks in a yellow hammerhead with a paddle...and the waves were gooood. What a great place! One of original, legendary surf breaks in Southern California (just at the south edge of Dana Point) -- still pumpin' and attracting surfers of all ages. Great campground there, too, right on the beach. (I'll be there again soon, for the SoCal Woodie Club's great annual car show in April. Yeah!)

Funniest Thing I Saw on My Trip

Easily the Doheny Longboard Association's annual Halloween surf contest! (Which I just happened onto by myself on Saturday afternoon when I hit town.) Seeing all those kids, and some of their parents, out there surfing in their costumes was a hoot of the highest order.....Cat Lady, Batman, the Coneheads, Barbie Doll, and I can't remember who else. The waves were great, with lots of contention for the best ones -- and costumes flapping left and right in the offshore breeze for several heats. And, even though these were mostly young kids, watching it was another trip back to the '60s and '70s in a way -- in that a bitchin' Jethro Tull album was emanating from the big speakers set up on the beach (no doubt courtesy of the baby-boom fathers running the event). And the teenage kid doing the surfer-talk, wave-by-wave commentary over the PA system was a riot. Ah, the Southern Cal family beach life! Doesn't get any better. I'd actually go back next year just to see this event alone.

The Epilogue: "Keeping Innovation Alive: The Future of Company Creation"

This closing session of NDA yielded some great insights, and even more reasons for optimism....before we all had to scatter from this wonderful two-day break, contemplating the future of technology innovation by the sea, as it were.

- Tim Draper (answering the question "Are you still dribbling money out?"):

"Yes. We used to pay, like, $10 million for 10%. Now, we're investing smaller amounts, with larger teams, and for larger percentages. There are great entrepreneurs out there now. We're actually investing only slightly less than we were a year ago."

- Paul Deninger, Broadview (answering "What's different about today's market?")

"With fewer companies to invest in, the quality will go up. The cost of capital will be higher, but you'll be able to demand more quality, more value-add, from your VC."

"What trend in this second stage of the Internet most excites you?" moderator Tony Perkins asked.

- Draper: "The ability to reach large masses in a unique way -- as in P2P. We have a few investments there. And nanotechnology -- when things naturally go from mirco to nano, you can do a lot of things."

- Deninger: "The Internet today can't possibly be the ultimate one! It has to improve -- better, faster, cheaper."

Closing Thoughts About "NDA 2001

With a strong four-year track record now, it's clear that NDA is established as one of the best high-level confabs out there in tech-land. While other events and competitors have faded away around them, they hang in there -- continuing to attract the big thinkers and doers in the technology and venture communities. And they have the ability, as few others do, to keep things in perspective, not take themselves too seriously, and make it all fun. Consistency's good, persistency even better.

Well, I suppose that's about all the optimism anyone can take in one sitting. So, dear readers, I leave you with these final words:

      God Bless America ... never forget ... and long-live tech!

Now go forth and innovate your brains out.

Till the next big tech event beckons me, I remain...

your anything-but-whining, ever-upbeat conference reporter,
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Graeme Thickins, Founder/Editor/Analyst
GT&A Strategic Marketing Inc.
*Minnesota *California *Anywhere
Voice: 952/944-1672, Fax: 952/944-1673
graeme@gtamarketing.com, or graeme@thickins.com
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http://www.gtamarketing.com
"Strategies to Win in the Knowledge Economy(tm)"

(a web site and email list for senior executives and power
players in the Internet Economy, including VCs, angels,
analysts, investment bankers, and related professionals,
now 2500+ strong and growing!)

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A Sad NDA Epilogue:

Just after this report was published, the Wall Street Journal broke this surprising piece of news.

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A Little Background on This Newsletter:

My conference reports began humbly in 1997 as just a
sideline to my consulting business, strictly for friends and
clients -- based on my long career in tech and an obsessive
search for what's next. It's grown, essentially one-at-a-time,
to an email list now 2500 strong and counting, made up of
an amazing bunch of smart people, most of whom I know or
have met personally -- and am continually connecting with one
another (which I guess makes me a community or relationship
guy, as well as a writer). The list includes many big-name (you
know who you are) CEOs and senior Internet and technology
executives, VCs, founders, angels, analysts, investment
bankers, and related movers-and-shakers -- all involved in
building great tech companies....including the often-unsung
marketing and business development professionals.

So, it's about staying out in front -- but with a decided
long-term view, grounded in the undying belief that
technology is a major force for good in our personal
lives and in our society.

I hope you like my reports and, as always,
your thoughts and feedback are welcomed.

---------------

See my other recent conference reports at my home page.

Or at this page: www.gtamarketing.com/NewsletterInfo.html

Also see some of my coverage posted periodically at:
Conferenza.com ... the premier source of event intelligence.

---------------

Watch for my upcoming conference reports, which will
include such premier events as George Gilder's "Storewidth 2002,"
back in Dana Point, CA, in March (the Ritz Carlton).

If you have suggestions about other tech events you'd like to
see covered, please let me know, would ya? Thanks.