Benjamin Kuo’s Blog

Fortune Small Business just released their list of the fastest growing, small public companies. Among the list are seven high-tech related, Southern California firms:

Trio-Tech International (#48),  semiconductor testing
Stamps.com (#50), online postage
Quality Systems (#52), software for dentists
PeopleSupport (#68), outsourced support
Iris International (#80), scientific equipment
Smith Micro Software (#85),  software
Cam Commerce (#98), IT services

The last Southern California firm — non tech — was aircraft engine leasing firm Willis International. Of the 18 companies in California, Southern California firms represented 8 of the 18.

I’m an optimist by nature, but nowadays — given the number of foreclosures I drive by in neighborhoods, and the dismal economic picture you hear talking to people on “main street,” I feel like the technology industry is happily swimming along through the ocean– unaware of a shark in the water following behind. That shark — the threat of the overall economic conditions impacting high tech companies — hasn’t bitten yet. But, I keep getting the feeling that we ought to be looking behind our shoulders somewhat.

There are reports — like this one from InformationWeek — showing that IT and other high tech jobs are starting to see recessionary pressure. Plus, you’ve got to imagine with consumer confidence at a new low, and gasoline prices at a near high, that the economy will hit the consumer–which ultimately is responsible for a huge amount of the dollars spent in the high tech economy.

Despite the overall picture, though, I constantly run into people in the high tech industry who have absolutely no worries about the economy. In fact, they are in full “boom” mode, where the only thing that seems to matter is who has the “hot startup” of the day, the best launch party, or who has raised the most money. Perhaps the startup industry — which seems to be driven more by the amount of capital invested into firms than money being made by those companies — is sufficiently disconnected from the overall economics that it won’t matter. But it seems that you can only go so far on the “sugar rush” companies get from venture funding, before the full impact of a sluggish economy will have a greater impact on startups.

Then again, maybe we’ll be lucky this time. Some CEOs have told me that they’re actually seeing an uptick in business — in particular, in the online advertising space — as the recession has caused advertisers to direct their ad dollars to the more effective online arena. I’ve also heard others in the software-as-a-service area also seeing the same kind of increase, from companies more interested in having a monthly subscription than a huge capital commit/install.  There’s a chance that maybe there are enough overall factors driving people to online companies that they’ll thrive, because, not in spite of, any recessionary environment.  One hopes so–maybe that shark won’t be  hungry enough to take a big bite out of the high tech industry…

One of the great things about covering Southern California’s technology industry, is it’s refreshing not to be stuck in what feels like an echo chamber in the national technology news sector. One thing I notice about the many technology news blogs covering Silicon Valley or the technology industry in general, is that there are some companies which so dominate coverage that–if your goal is to cover the big national technology news–you can’t avoid investing resources and time on them. Those kinds of things would be things like the new iPhone or anything Apple, Facebook funding, swirling rumors around Google and/or Yahoo, etc.  Sure, these are important stories, and those news/blog sites trying to cater an international/global/national audience have to invest lots of time and effort on them. But, on a local level — i.e. in terms of its effect on Southern California — a lot of the hype around these really have only peripheral effect on our technology industry.

I’ve recently been making it a habit to take photographs at the conferences I’ve been attending, and in some cases have begun posting some of those pictures to socalTECH’s Facebook profile and the photo sharing site Flickr, for use in stories and blog posts. In doing so, I’ve run across a very, very distinct “generation gap” in the privacy expectations of people here in the technology community.

That “generation gap” is around what are the reasonable assumptions one would have about how private, or not, photos and video should be in this day and age of social networking and the Internet. I’ve found that there seems to be an age line (somewhere around the age of 30 or so) where people are very, very concerned about their privacy and image. Above that age line, there are visceral and very strong reactions to having their photograph posted to a blog, photo sharing site, or Facebook–even if it’s to a limited audience; below that line, there’s almost a total nonchalance and feeling that it’s “business as usual” to share fleeting images of your life.

From a strickly legal point of view (though I’m not a lawyer–informed legal opinions welcome), photographers who are taking pictures for use in magazines, newspapers, or for other news usage, do not need to get a person’s permission to use that photo. You usually need a model release and permission only if you are taking a picture that is going to be used in an advertisement, brochure, catalog, or other commercial usage. However, in practical usage in the pre-Internet social networking world, that meant that most folks would never ever get their image published anywhere, unless perhaps they were at a local event that ran an article on a weekend happening, or if you were a celebrity someone really cared to see in print.

With the advent of social networking and photo sharing sites, it seems that those social norms — that you weren’t likely to have your image published somewhere even if someone took your photo — have shifted dramatically. In fact, if you are regularly out in the community at conferences and events, or a speaker at a panel, you’re very, very likely to have a picture of you posted from that event, or have you in the background of one of the half a dozen video podcasters wandering around. Plus, there are so many people now with cell phone cameras or taking their own digital photos, that you’re likelihood of being photographed and posted on the Internet are quite high. However, that fact apparently hasn’t dawned upon everyone involved, particularly the post 30’s crowd.

I was recently at the AlwaysOn OnHollywood event, and ran across a venture capitalist (not from the area) who was on a panel, and asked him if I could take a picture of him for the newsletter. His answer: “No– No flickr! No Facebook!” And this was someone who was being streamed live via web cam to thousands of people in the AlwaysOn live broadcast. In another case, I took picture of someone — with permission — to try to show the many folks here in the community networking, and they asked me to take the picture down. It’s actually not the first time I’ve run across this, it just seems to be a regular occurrence now — folks I know who are in their 20’s want their photo taken, posted, and tagged on Facebook; those who are over 30 — want nothing to do with this new world of photo sharing, Facebook tagging, and Flickr. It’s a very interesting, distinct generation gap.

So what does that mean to you? I think it’s clear that there’s a shift in opinions on how much privacy people are willing to give up in the day and age of social networks; those opinions are very different depending on your age group; and startups and technology companies are going to have to adapt to different norms on privacy expectations for their services. Adoption of services for the “No Flickr! No Facebook!” crowd will be distinctly different from the “See me on the Internet!” crowd. It will be interesting to watch.

One of the interesting stories I gathered from this week’s AlwaysOn OnHollywood conference in Beverly Hills came from a off-the-beaten path session focused on what it takes to launch yourself as a “branded web personality.” The panel — which included an eclectic mix of “web celebrities,” including Hooman Khalili, a Bay Area DJ who runs the web site Hooman.tv; Spooky Dan, the pierced-death-goth host of Bloody-Disgusting.com (focused on reviewing horror movies); Carrie Keegan, the bad-mouthed host of NGTV (btw, best not watched at work due to profanity and nudity), and Metal Sanaz, a “Myspace celebrity” focused on death metal.

Aside from the amusing sight of folks in khakis and blue blazers chatting with pierced/tattooed Web celebrities, the panel was very interesting because it became abundantly clear that in the day and age of the Internet, it’s very easy to find celebrity and fame — but not necessarily the fortune which used to go hand in hand with fame.

Case in point might be Metal Sanaz, who — despite apparently having nearly 700,000 friends (well, according to her profile, 655,582), is “user number 1001″ on MySpace, and apparently huge in getting metal bands signed and exposed to fans and music studios — apparently isn’t actually making any money from being an Internet celebrity. Sanaz told the audience her tale of being extremely popular, but being completely unable to make any money, sell advertising, or find sponsors because she can’t due to MySpace rules on advertising. And, how she’s (finally) working on a new web site in hopes of actually being able to cash in on her Internet celebrity and pay her rent. One gets the sense that she’s living hand to mouth (at one point she mentions wishing she could “actually pay my crew for all their hard work” and even thinking “about killing myself” over the stress). The others also echoed that thought, talking about how advertising wasn’t quite paying for their edit-and-video intensive sites (Keegan amusingly saying though that it didn’t matter because the company had a number of investors who were bankrolling the effort anyway, even though they weren’t actually making any money).

It appears that the new world of Internet social networks, video, and other innovations — which make it easy to get the distribution you once had to get a record contract for in the music business, or the promotional efforts of a movie studio–has created a new class of celebrities. Those celebrities, although they have a measure of “fame” in a sense that lots of people know who they are, are fans, and follow their every move–haven’t got an established way to convert that celebrity into hard dollars. At the same time (by coincidence, the LA Times had an article on Ed McMahon’s fame-but-not-fortune), regular celebrities are starting to feel the pressure of the Internet on their traditional path to fortune. It seems like, while the Internet now provides the tools for anyone to become a celebrity with “fame”, someone still needs to figure out the “fortune” part.

I ran across this interesting post comparing the Los Angeles technology scene to Portland, Oregon - posted on the blog silicon florist by Heather Nordeen (formerly an employee at TagWorld):

LA is all about competition, competition, competition

I won’t go as far to say that the tech community in Los Angeles is as cut throat as their entertainment industry, but in some cases it’s a close second. With a new NDA being drawn up every minute, companies offering the world to a person to join them and leave their current position and enemy lines being drawn between social media companies, there is a definite switch in the overall feeling of community in LA.

It’s interesting because — as you’ve probably seen from my prior posts — I’ve often felt that the competition in Silicon Valley is much more intense, and cut-throat, than Los Angeles. So it’s interesting to get a perspective from someone dropping into our technology world here. I haven’t seen as much of the pressure cooker atmosphere of Silicon Valley here as Heather refers to in the post, but perhaps my perspective has been colored by having lived/worked also in Silicon Valley.

btw, for those who care, we have a socalTECH.com spinoff covering Pacific Northwest technology news, at Northwest Innovation (www.nwinnovation.com)

Marc Averitt, a venture capitalist at Okapi Venture Capital, posted this yesterday on his blog, and we thought it would be interesting for our readers. We’ve reposted it (with permission) in our Insights & Opinions section.

I’m writing this post for one simple reason: to be able to point every would-be-entrepreneur who asks me what it takes to “get venture capital” to the permanent link rather than continue to explain to them. It’s all about efficiency. So, what are VCs looking for before they decide to invest in a start-up? The good news is that I’ll disclose the secrets here. The bad news is that even if you cover all of these elements it still doesn’t guarantee you will get funding (more on this point later). Without further adieu, here is a short list with brief explanations (see if these sound familiar)…

It’s often difficult to get a sense of how the companies we cover are “really” doing — particularly in the financial area. One of the more useful programs out there which is useful as a financial benchmark, is Deloitte’s Technology Fast 500 and Fast 50 awards. Unlike a lot of awards, Deloitte actually ranks companies with the biggest revenue growth every year, rather than on just subjective “popularity” and “coolness” measures. The company has just opened up for nominations for this year’s awards, which I thought was worth passing on:

Technology Fast 500 and Fast 50 Awards
Nominations are being currently being accepted for the 2008 Deloitte Technology Fast 500 and Fast 50 programs in Southern California. The Technology Fast 50 honors the fifty fastest growing technology, media, telecommunications, and life sciences companies in a geographic area, based on percentage revenue growth over five years (2003-2007). The North American Technology Fast 500 honors the 500 fastest growing companies in all of North America. For more information or to nominate a company, visit www.fast500.com or email kcmartin@deloitte.com

A bit off topic, but interesting nonetheless, I always get a kick out of reading LAEDC’s weekly economic report on the greater Los Angeles area. The tidbit today: the biggest importer into Southern California via the ports is Red Bull (better to fuel those software developers?), and, the biggest exporters are almost all focused — of all things — waste (recyclable) paper.

From the LAEDC: In 2007, the top importers via ocean containers were (with their national rank):

Southern California had a sizable presence on the top 2007 exporters roster, with 16 firms.  Many of them export waste paper and other recyclables and will be noted with a (R).  (Jack Kyser)

“Don’t be a lemming,” says venture capitalist Maurice Gunderson of CMEA Ventures, saying at the GreenTech 2008 conference Friday that there is a bubble in the energy industry right now. Gunderson, who was keynote at the green energy conference, said that we are currently in an energy bubble, much like the energy bubble of the 1970’s. He specifically pinpointed at three energy sectors which he believes are in a bubble right now: 1. corn ethanol, 2. commodity solar, and 3. plug in vehicles.

Citing both investment figures and the economics of those three sectors, Gunderson exhorted the audience to “suppress your inner lemming.” Despite the prognostication, Gunderson did say he believed that there were good investment opportunities in energy, and also said that there were plenty of (profitable) opportunities for exits for good energy companies — either through public offerings, or even through merger and acquisitions.