Yesterday I attended the Web 2.0 Venture Forum at Rice University in Houston, TX. It was awesome!

I got to see about 54 new companies present their ideas to venture capitalists and try to get money. I took a bunch of pictures and video for you.

While I don’t believe in taking venture capital, especially for a Web 2.0 business, I did really enjoy seeing a whole bunch of new business ideas and meeting a bunch of entrepreneurs.

Disclaimer

Some of what I’m about to say might sound negative. I believe in encouraging people to pursue their ideas in business and take action, so the people who presented deserve a lot of credit. But in my opinion a lot of VC’s giving feedback at this conference were way too polite.

That isn’t what these entrepreneurs needed to hear and that’s not fair to them. They need to hear your real opinion even if it’s harsh. Some of the most valuable and time-saving business advice I’ve ever gotten was when somebody (the right kind of person) told me my idea sucked. So I’m not going to hold back here.

Anyway, here are some of the highlights for you…

The First Four

These were the four “main” companies who went first. They had 15 minutes each while everyone else had only 90 seconds.

Nutshell Mail

If you have a lot of different email accounts this service will consolidate them by giving you a summary in one of your inboxes. The business model is ad-supported. I didn’t see the value in this and it strikes me as solving a problem that doesn’t exist. A better solution to this already exists: set up auto forwarding of your old accounts to your GMail account and use their multiple accounts feature to run everything from Gmail.

Rudder.com

This service emails you personal finance updates about all your bank accounts, credit cards, etc to give you ACTIONABLE information and a general financial picture. These guys might be on to something. I’ve been saying for years how awful Quicken is and the market is ripe for the picking. Newcomers like Mint and Wesabe got so close but never delivered the most inportant part: ACTIONABLE information. They just said “what pretty graphs can we make?” instead of giving people the 2 or 3 pieces of information they really wanted (cash flow, net worth, etc).

Anyway, if (and it’s a big if) Rudder.com can accomplish this they might be on to something big. It’s not easy to code connections to all the hundreds of different types of accounts people have, so it’s a big project, but I wish them the best.

GendaiGames

This company is trying to make it easy for anyone to create games. Basically they’ve made some software which takes the programming out of it with a simple graphical user interface, and makes a community where people can upload the images and sounds that you can use in the game.

I like the idea, but there is a big hurdle to this business: the trade off between how easy the game is to create and how good the game is. This is what happened when people came out with “no programming!” tools to create webpages (also known as WYSIWYG editors like Frontpage and Dreamweaver). Sure, it allowed anyone to make a webpage, but the webpages weren’t all that great. You’d be hard pressed to find a top 1,000 site on the internet today what was created in Dreamweaver or Frontpage.

So anyway, my thoughts on this company are – “if you can do it great, but I’m skeptical that it’s possible to create good games in a generic app like that”. From looking at their demo they are still only able to create the most basic flash games – but in their defense they are still working on it. We’ll see.

Moximity.com

These guys made an iPhone app that shows local data (restaurant reviews, etc) and is ad supported. Good idea, but the problem is that they got all the reviews from Yelp.com and just threw some ads on top of it. Why wouldn’t people just use Yelp.com and avoid the ads?

Yelp.com has created something of real value (a community of users, a large database of places and rewiews, etc). They also have their own iPhone app which is quite good. So they are in control – they are the one with the real value which is the community and userbase. Moximity has added some other features such as a social networking component that allows you to see your nearby friends. But I can’t see Moximity.com having any success with this when the main value of it comes from Yelp.com and they have added some ads on top. Even if the ads are really coupons – I think you’d have a hard time making the case to users that this is an added value for them. This is a classic case of focusing too much on making money instead of focusing on how to create something of real value.

Keynote From Google App’s Evangelist Jaime Casap

This was the best talk of the day in my opinion. Jamie covered not only Google’s mission and approach to products, but made a compelling case for the next wave of internet users who will be using the products you create. These people are…

• Young
• From developing countries (India, China, Brazil, etc..)
• More concerned about helping others and being part of a community than traditional status symbols
• Way more computer literate than you are

Also, surprisingly only about 18% of people in the world are online and only about 10% of the world’s information is online. We have a long ways to go.

Myself and Jaime Casap after the talk. I’m always impressed with the talent Google has on it’s team. It was clear to me that Jaime was one of the few people at this conference who really understood Web 2.0 and where it’s going. A lot of the MBA and VC types are still stuck in an old fashioned way of thinking.

Panel of Bloggers

Apparently there are a lot of other great startup bloggers around Texas that I didn’t know about. These guys did a panel on the changing environment of startups and venture capital money.

Check out…

• Dean McCall from Ideagin
• Bryan Menell from Austin Startup
• Alex Muse from Texas Startup Blog
• Josh Tabin from Startup Houston

They did a great job and I wish I’d gotten a chance to meet them afterward as fellow bloggers. Unfortunately, I couldn’t find them!

One thing that did surprise me was the amount of money being talked about at this conference. At one point in the panel they said something like “the days of getting $4 million in funding are over…take a look at what some of these companies have done with just a couple hundred thousand dollars. That’s the new landscape and that’s what you need to do too!”

I almost fell out of my chair when I heard this. We’re talking about a couple guys getting a website thrown together. That was LITERALLY all these “companies” were. To me a couple hundred thousand is absurdly high. It made me realize how different I am from the mainstream MBA/VC crowd when I am out there telling people how to start a business for $100 and do it in one month. If you are just developing a website – partner with a developer and give them some equity. Don’t rent an office or hire employees or any of that junk. Do some viral marketing campaigns. Your only cost should be your time and $10/month in web hosting. You should be embarrassed to have spent $100k on a “business” which is nothing more than a website and hasn’t seen a dime in profit yet.

ANYWAY, I digress…

The Three Best Companies I Saw

Here are my picks.

Plura Processing

These guys developed a distributed super computer – similar to SETI at home if you are familiar with that – except this one is deployed through the web so it can reach a ton more people. They claim to already have the 10th largest super computer in the world based on current users.

The only concern I see with this is the perception of security – a lot of companies that use super computers like drug companies and financial firms – have intellectual property they want to protect. So they won’t be too keen on the idea of their data being processed on thousands of computers around the world. I think in reality it will be very secure (after all each computer is only doing a tiny piece of a much larger project, so it would be practically useless even if you DID manage to break the encryption). So this will be more a matter of changing perception at stodgy old firms than actual security risk – but still a hurdle.

Even so I bet they will get some big customers – really innovative idea, I hope these guys succeed because they’ve got a great idea on their hands.

Less Networks

Everybody loves free wi-fi but for some reason it is still pretty hard to come by in most cities. These guys have a plan to get more free wi-fi out there by making it ad supported. Basically, when you connect to a node you’ll get a branded welcome screen, you’ll have to enter your email, then you see another branded confirmation page – and you are free to surf the net. Since they know (at least roughly) your geographic location they can make the ads more targeted. They just landed Miller Brewing as their first customer and they’re partnering with phone and cable companies who have the infrastructure. Sure – the ads might be a bit annoying and you’d have to give them your email, but for free Wifi, a ton of people would do that! Brilliant idea – I’d love to see more free wi-fi around the U.S.

Rudder.com

This is the company I mentioned at the beginning. I think they could have something big on their hands if they execute it correctly. Basically, creating people’s financial statements for them automatically each month and delivering them by email.

Video of Presenters

In this (rather shaky) video I took you can see some 90 second pitches by various presenters:

Web 2.0 Venture Forum – Dec. 11th, 2008 – Rice University from Brian Armstrong on Vimeo.

Conclusion

Overall, I enjoyed going and it was a long day. My biggest take aways were…

• Venture capital is almost entirely unnecessary for Web 2.0 companies. They shouldn’t be asking for it!
• The ideas about how to inexpensively start a business are way off for most people in the MBA/VC community. 9 out of 10 ideas aren’t going to work so people need to go through them quickly and inexpensively. It is ridiculous to spend a couple hundred thousand dollars to get a website created.
• There is probably too much focus out there right now on ad-supported business models. This is a nice fall back but I don’t think it should be relied upon as much.
• Don’t sugar coat your advice – you are doing a disservice to entrepreneurs when they want your real opinion.
• Solve a real problem and if you don’t have a MAJOR benefit over an incumbent don’t even try (there were too many people trying to copy YouTube and Facebook).

Hope this was useful to everyone.

Until next time, keep Breaking Free!
Brian Armstrong