Live from X|Media|Lab 2011 Sydney #XMediaLab: Tim Chang @timechange

I’ll attending X Media Lab Global Media Ideas 2011 today, the Sydney outing of the global digital media and ideas conference and workshops. For many years Brendan Harkin and Megan Elliott have been gathering together the world’s most interesting thinkers and do-ers in the world of digital media. I’m hoping to live blog some of the sessions, but will be stepping out for some to film a series of videos for Creative Industries Innovation Centre.

After a welcome on behalf of the traditional owners of the land, and from the NSW deputy premier Andrew Stoner, the first presentation for the day was given by Tim Chang, principal of the Silicon Valley venture investor Norwest Venture Partners.¬† The firms is managing about US$4 billion in assets, and raised its last US$1.2 billion fund in 2009. The firm has funded more than 500 companies n its 50 year history, with 70 active companies in its portfolio today. Chang talked about the basis of venture investing, which represents the early-stage, high risk/high return part of the investment cycle. He talked about the VC sector has heated up significantly in the past couple of years, with some investors now looking to get into hot deals at any price. There are fewer stock market listings today though in comparison to the dotcom boom, and many companies do not have the equity to buy out VC-backed companies. This has created more space for a secondary market for companies like Digital Sky Technologies and Softbank, who are helping founders achieve liquidity earlier than they might otherwise. He also talked about the rise of the super angels who have moved beyond private investment to create their own investment funds for earlier stage investment, particularly in consumer-focused Web start-ups, and are filling in the gap as VCs have moved up into larger deals. His main message was that the traditional roles are changing, with half of today’s VCs having disappeared within five years as super angels step up.

He also talked about what VCs talk about after the pitch. He cited the three Ts – team, traction and tier-one co-investors. One of the questions he asks entrepreneurs is do they want to be rich of famous – meaning do they want control, or do they want to create shareholder value. Someone who wants to be rich may be more willing to step aside for someone more qualified. early stage VCs are talent scouts with cheque books. Later VCs chase momentum, and may push an investment to an early exit.

He also gave tips on what entrepreneurs should ask VCs, who are really just selling capital. Can they help build a team, can they bring in advisers and directors, do they know the market, can they help with product and positioning and open doors. Can they give some branding to attract follow-up funding. And most importantly, can they help manufacture an exit.

What’s next? Chang said we are moving from Web 1.0 to the idea of the Web being dead – the silos are going away, and layers are emerging in mobile, social, game mechanics, and so on, and the emerge of platform brands such as Facebook, AdMeld, FreeWheel, Zynga, Hulu, Tumblr, Groupon, Gilt, Mint, Lending Club and Fund DNA, and many more. Who to invest in? Look for who is selling the tools to enable these platforms to work. Content is kind, but distribution is God Almighty. Apps are moving more and more to a freemium model, with in-app monetisation now the preferred strategy. It is also worth looking at the Seven Deadly Sins as a source of motivation. Chang is also a big fan of game mechanics as a means of motivating people towards a desire outcome – beating a high score is a strong motivator. What would your life or your busienss look like if it was a game? The new acronym is MoSolLo – Mobile Social location.

What is not hot Рsystems and infrastructure; enterprise software; consumer and Internet site such as ad-only sites  and early social gaming ideas, group buying services, and Facebook, check-in and Twitter extensions.

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