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June 23rd, 2006

Clever Capitalization Shasta’s Pressman Talks Web 2.0

Shasta Venture’s Jason Pressman brings a hands-on perspective to Sand Hill Road, having rolled up his sleeves as the fourth employee of Walmart.com, where he spent five years driving strategy, biz dev and operations. The company – founded in January 2000 and backed by Accel Partners – was sold back to Wal-Mart Stores in July 2001. Before Walmart.com, Pressman focused on services and software investments at Selby Venture Partners.

Today, as a Shasta principal, Jason sits on a four-person team that oversees investments in early-age technology companies in networking, semiconductors, communications equipment, software, and “certainly very heavily in internet services.”

Voce recently sat with Jason to talk about Web 2.0 from the perspective of a venture capitalist.

How would you define Web 2.0? 
It’s such a broadly used term, and means so many things to so many people. To me, Web 2.0 is about user-generated content, it’s about Ajax and specifically applications that have substantially more usability than previous versions of the web, because you don’t have to refresh the page. And that sort of subtle point is very important, in that it makes the applications far more usable – it effectively makes a web application work like a desktop application.

(Additionally),Web 2.0 and the advent of user-generated content, and blogging in particular, really does allow there to be even narrower content windows.

And the last thing I’d say Web 2.0 is about, which to me is perhaps the most fundamentally different thing – that I think most people have not really grasped — is the breaking apart of the application from the user interface. So Ajax and RSS really allow you to take content and use it in other applications other than the application it was initially intended for. That means that, when you look at things like mash-ups and RSS readers that allow you to get content in different places, you’re effectively taking something from one place and using it somewhere else.

That’s a pretty disruptive trend. And I think that, to me, what’s exciting about Web 2.0 is looking for entrepreneurs who are thinking about what that disruptive trend means and how you capitalize on it to build the next generation of great web businesses.

What is the most exciting example right now of company that’s successfully breaking apart the application and the user interface?
One of our portfolio companies, Flock, is a really good example. What they’ve done is innovate on the browser, and they’ve provided the ability to look at photos, for example, in the browser, that are residing in other parts of the web. That’s just one simple example of a very powerful way that you create a more holistic user experience, from one that historically was more siloed and segmented. Another good example, which is not a portfolio company of ours, is Zillow. When you go to Zillow, and you interact there and play with their application – which basically helps you estimate the price of a home – it’s pulling data from a whole bunch of different sources, the MLS, the tax records, etc., and aggregating it, using mapping information that comes from another source, and pulling it all together into an application that (Zillow) is managing. That’s a a pretty powerful way to bring data together into a compelling user experience that really wasn’t possible in Web 1.0.

When someone comes to you and claims they’re “Web 2.0,” are you skeptical or are your ears perked up?
I feel like I get quite a few plans and emails where people will say, “Introduction to So-and-So, A Web 2.0 Company. . .”

Do you think it’s overused, or that it has lost meaning?
I don’t think that the term is well-defined. I don’t know that it’s overused, but I would say that it is used frequently with broad meanings, and therefore there’s a fair amount of ambiguity. Frankly, the way I defined is the way that I define it. . .not necessarily the way that others define it.

When I see a business that’s described as Web 2.0, I’m enthusiastic about it. . .because if it means what it means to me, which is an entrepreneur who’s actively thinking about how to actively build something that capitalizes on these disruptive trends. . .that’s exciting. And so no, I definitely don’t approach it with skepticism, I approach it with enthusiasm and an open mind.

That said, I do think that in some instances the venture community has become a little overly-enthusiastic with regard to web businesses in general, and I wouldn’t say that’s Web 2.0 businesses, I would just say web and consumer businesses. And that’s meant that we’ve seen an awful lot of companies funded – more companies than have been funded over the last few years – and more capital going into those companies, at higher valuations. And I don’t know that we’re necessarily seeing the outcomes of the other side. We’re not necessarily seeing lots of standalone companies.

But (Shasta is) absolutely actively looking at continuing to invest in web businesses and Web 2.0 businesses, and we fundamentally believe in them. We actually feel that our backgrounds. . .really position us well to help understand these businesses, and to help figure out how to effectively build them.

So you expressed that VCs in general have perhaps become a little overly-enthusiastic. When did that start?
I think that it started in early 2005, and sort of has continued since then. I don’t know that there was a clear inflection point, but to me it was probably around the end of 2004, the beginning of 2005.

What do you think triggered it?
I don’t know. There was the Google IPO and there were a couple of bigger acquisitions. There was a lot of enthusiasm around the Flickr acquisition, but that was a small acquisition. One of those things – or some combination of those events — started it, and then it continued to be fed by the acquisition of MySpace, the acquisition of some of the shopping comparison engines, and then some of the smaller acquisitions like OddPost, Upcoming.org, Weblogs, Inc. But I don’t know – it’s a good question and I’ve thought about it a lot.

So how does PR and communication tie into this mix?
They are critical components in making companies successful. I think that companies sometimes will engage in PR or communications or begin working with a PR firm or getting a prominent blogger to write about them before they’re really ready for prime time, before they’re ready to garner the attention. I’d say in the “new world,” the way that effective PR and communications is done is fairly different from the way it’s been done in the past. In the past, as you well know, it was more about getting to the right channels, getting to the right markets, getting to the right conferences, and while those things are still important, there’s a whole new world out there – the blogosphere – that’s accessed in a much different way.

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Add Your Comment4 Responses to “Clever Capitalization Shasta’s Pressman Talks Web 2.0”

Drew M on June 24th, 2006 at 8:15 pm

I am glad you are impressed with Zillow. As an employee at Zillow, I am thoroughly excited about the future of the company. Thanks for taking the time to mention Zillow in your post.

Timothy Johnson on June 25th, 2006 at 9:04 pm

I have to say that my interview with Jason was fascinating. Real thanks go to him, for noticing Zillow and mentioning you.

For my part — I tried Zillow earlier this year, and was blown away. And someday, my opinion might carry as much weight as that of a VC. :)

kare anderson on June 27th, 2006 at 12:50 pm

re Web 2.0 definition, as someone on the low (low!) end of the geek-savvy scale… I one of those you mentioned who is looking at ways to generate more visibility and value for my work – with and for others – I love both Flock and Zillow. Great examples. Kare, author, SmartPartnering

Stephen Waddington on June 28th, 2006 at 6:48 am

Thanks for the insight into Web 2.0. It is an extremely difficult term to define but I think as we really get to grips with the new technology it will allow the PR industry to show our creativity. Perhaps an industry wide definition would help encourage PROs to utilise Web 2.0 in order to make the most of the new tools at our disposal.