Saturday, December 29, 2007

Looking back

We are at the end of 2007 and about to ring in 2008. Its interesting to reflect on what was most significant about 2007. I was at CES in January 2007 and the buzz about the Apple iPhone was rising to a crescendo. Apple had little to no presence at CES in 2007 and instead chose to deliver their message from MacWorld in San Francisco. For me, it was amusing that the most significant technology product was launched right here in Cupertino, while I chose to travel to Las Vegas to see what was hot at CES :-). I have decided that this year I will not head to CES in case I miss something as significant in the Valley. :-) Its interesting to compare some predictions on wireless, at the beginning of the year, from some leading VCs, to what happened in reality. As one of the panelists pointed out then, "VCs are often wrong, but never in doubt" :-)

In any case, it turned out to be a very significant year for Apple. Apple stock is on a tear and the impact of the iPhone will be felt for years to come. The Mercury News rightly says that they have transformed the mobile phone industry. The next few years will see Apple setting the pace and the rest of the industry trying to catch up, much as they did with the iPod.

In April, I wrote about location based services and their promise. I was disappointed they did not take off in a big way in 2007. I think that this will be corrected in 2008, perhaps again with Apple leading the way ?

The other big technology trend in 2007 was the push behind Clean Tech, and Solar energy in particular. As we got close to the end the year, we saw NanoSolar announce production shipments and Ausra announce a contract with PG&E. I am sure this is just the beginning of an explosion of activity in clean tech in the years to come, with the Valley driving innovation again.

In a few days, I will share some of my predictions for technology trends in 2008. Till then, happy holidays and a great New Year to everyone.


Tuesday, December 18, 2007

A Great Day for Clean Tech in the Valley

Today was a great day for Clean Tech. NanoSolar announced that they are shipping their first commercial panels for field deployment at Luckenwalde in Eastern Germany. Of course, Gunther Portfolio had tipped us off about this in their post on December 10th. As the CEO, Dr. Martin Roscheisen, discusses in his blog they are expecting to enable 99c/Watt panels. It is interesting that they have donated one of the first three panels to the Tech Museum in San Jose. I am sure the NanoSolar IPO, when it happens, will be one of the best the Valley has seen.:-)

The other interesting news, which did not quite get as much coverage, was that PG&E had agreed to buy 2MW of power from wave energy from a Canadian company, Finavera Renewables. Wave energy has always been a promising and challenging source. As the data I presented from Dr. Amit Kumar's talk in October showed, the theoretical potential for geothermal and ocean power is 70 TW, but feasible capacity is expected to be on the order of 2TW and significant technical challenges remain. Good to see that PG&E is driving the leading edge of wave energy. Clearly compared to the practical possibility of 1200 TW from solar (again from Dr. Kumar's data), this is small, but we may need all the sources we can get, if we are to stem impending doom in the form of catastrophic climate change. :-)

Lest you think I exaggerate, listen to what NASA scientists had to say yesterday in San Francisco (video clip from ABC News). The report says that by 2012-2013 the Arctic will be ice free at the end of summers. This was not expected to happen till 2040, previously. Let us hope that alternative energy is still in time to save the planet.


Monday, December 10, 2007

Social Lending

In villages in India you used to have local moneylenders who were almost part of the family. They gave you money in times of need. Sometimes, they took jewellery or something else as security, but mostly they loaned you money because they knew you. Of course, it was at a profit, sometimes a huge one. Interest rates could be well over 200% :-) But, at least, you got the money when you needed it. This practice has reduced somewhat in recent years with modern day banking facilities available in most places, but I would not be surprised if it is still very common in places. That's what comes to my mind when I hear social lending. :-)

So, when I got an invitation to a Social Lending panel organized by the MIT Club of Northern California on December 5th, I was intrigued. I was curious to see how Web 2.0 had changed this age old practice :-) The panel was hosted at Wilson Sonsini Goodrich & Rosati in Palo Alto and moderated by Eric Nee, Editor of the Stanford Social Innovation Review. The panelists included John Witchel, CTO of Prosper, Patrick Gannon, SVP of Lending Club and Harvey Grasty, Head of Business Development of MicroPlace, a division of Ebay. Prosper and Lending Club have been funded by Valley VCs to the tune of $40M and $10M respectively and MicroPlace has access to a lot more funding, potentially, as part of Ebay. Prosper is the oldest of the three, having been around since early 2006, while MicroPlace launched their website in October 2007.

The concept is simple - peer to peer lending. Anyone can be a lender or a borrower. All you need is to be able to surf the web and create an account at one of the sites. The three companies have somewhat different approaches to the process, though. In all three cases, you can lend small amounts of money, as low as $25, for short periods of time, and you can choose who you will lend to. They charge a service fee of 1% in all cases. Microplace has altruistic goals of eliminating global poverty, while Prosper and Lending Club are focused more on borrowers in the United States. Microplace partners with third parties like the Calvert Foundation and others to make low interest (2-3%) loans in other countries, especially underdeveloped countries. You cannot make loans to individuals in other countries directly.

Prosper has over 500,000 registered users and $100M in loans so far, $40M in VC funding and 45 employees. They claim transparency of the process as their biggest advantage. The borrowers submit detailed information on their background and requirements and the lenders can choose who they want to lend to based on risk and return. Prosper has an automated lending process which either party can customize based on their preference. Risk is assessed based on Experian Scorex credit scores and other criteria. The borrower needs to provide a fair amount of personal info for lenders to assess, though not as much as typical banks require. The minimum credit score is 520.

Lending Club started as a peer to peer lending service for college alumni on Facebook and received $10.26 M in VC financing in August 2007. They have $3.25M in loans so far with $25M turned down. The average rate of return is 12.25% and minimum is 6.78%. The average FICO score is 692. Their users range from students to 70 or 80 year olds. The lending process is automated like Prosper. They view themselves as combining responsible credit with social networking.

All three companies claim that their process is far simpler than borrowing money from a bank, there is more transparency, a higher rate of return and the flexibility to loan money to people or causes you find interesting. They claim their default rates are low and that they assist in helping fight fraud and securing privacy. However, they have all been around a lot less than most banks, are less capitalized and are a lot smaller in people terms than the smallest of banks. If the security and privacy issues do not limit them and they grow to service a large volume of loans they have the potential to be profitable and change the banking paradigm. If, for example, you can borrow money at 7-10% to pay off $20000 in credit card bills, it looks like a win-win situation for the borrower and lender, by cutting out the middleman. As John Witchel of Prosper stated, they have many more product ideas like 5 year loans and others for the future. If they are successful in banking, there are other areas such as insurance where consumers have even less choice, which look to be possible growth areas.

I must say that these companies are fine examples of the innovative thinking that is the hallmark of Silicon Valley and the Bay Area. Whether they are successful over the longer term remains to be seen. But, the world is a better place for the attempt and surely will bring some competition to an industry which has not changed in ages, and the average consumer will benefit from it. Certainly, if the villagers in India have access to the Internet and to websites like Microplace, they will get a better deal than they could from the local moneylender, or even the local bank :-)


Saturday, December 8, 2007

Super Solar panel ?

The Inquirer has an interesting story about a South Carolina company which claims to have developed a solar panel which is 15 times more efficient than current solar panels. The company, FreEnergy LLC, claims to do this by using the entire spectrum of light from the sun, rather than a fraction as conventional solar cells do. The other interesting thing about the company is that one of the founders moved from California to South Carolina to start the company. :-) Rather the opposite of the usual clean tech startup trend :-) You can read more about the company on . Is this a fundamental breakthrough or another cold fusion like story. ? Time will tell. The Inquirer, as usual, comes up with the most interesting stories, even if they don't all turn out to be true :-)


Saturday, December 1, 2007

The Wireless Wars

If you did not know it already, there is a battle brewing for the wireless spectrum. As the Mercury News reports, the 700 MHz spectrum which is currently being used for UHF TV, is being auctioned off to the highest bidder. What prompts the auction is the federal mandate which forces the TV broadcasters to go digital from 2009 (see this Benton Foundation link for an excellent review of the timeline.)

The bidders for the spectrum include the usual suspects like AT&T and Verizon and some new players like Google and Frontline Wireless, a startup funded by stellar Valley VC's ! So, why such a diversity in the bidding ? - because the stakes are big ! It has a lot to do with Net neutrality and control of the Internet. For example, see this perspective from the man who has some claim to having invented the Web, Tim Berners-Lee. :-) See, not quite who you thought it was :-).

Its all about control of information, and in an information age that equates to a lot of power. The Mercury News column talks about interesting angles to the bidding, such as Google bidding, but not to win. Interestingly, it all ties back to the mobile phone operating systems and Android, which I wrote about earlier in the week. This auction also appears to be the last of the spectrum auctions for useful spectrum. The deadline for bids is this Monday and the results will be announced early next year according to the Mercury News. I can't wait to see who wins this one. It could change the power structure in wireless communication. I will make a prediction - the bid will be a lot more than the $4.6B minimum that the FCC expects for the spectrum.


© 2007, 2008 Madan Venugopal    All rights reserved.