Posted by
Hemos
on from the fun-with-company-start-ups dept.
dav writes: "Fortune is running an
article
which provides an inside narrative on the trials of the infamous encryption software company
TriStrata. Featuring venture capitalist follies, Bruce Schneier, International CEO hopping and more. "
as in three strata. That's three, not one, not two. Five is right out as the correct number is three. Three is the number of strata, and the number of strata is three.
question from the clueless
by
unc_onnected
·
· Score: 3
after reading the article im completely flabbergasted. is this the way venture capital really works? do these guys really have no idea what it is they are putting their money into?
i mean honestly, its hard for me to believe. these guys are throwing hundreds of millions, collectively throwing in billions, of dollars into investments- technology- promises they dont seem to understand?
i dont know, man. i mean, if you need to hire a consultant to tell you what the product is, maybe you dont have a good enough understanding to do a deal, y'know?
the other thing that surprised me was the due diligence thing. considering the competitiveness of the business, the way these v-c are jumping around looking for the next rocket up the nasdaq, and the way that every good idea in the business has probably been thought of by at least 3 different people, would i really want to let people see my business plan **before** getting a commitment from them?
i mean, seriously, thats just no good. maybe im too conservative and not cut out to be an internet millionaire, but id be really scared of making myself that vulnerable to someone who does not even necessarily have any loyalty to me or what i want to do. theres nothing to prevent the company from saying no politely and then taking your ideas to someone else who will give them a bigger cut or a better deal.
please, someone enlighten me. this stuff just doesnt make any sense.
unc_
Re:question from the clueless
by
boojum_uc
·
· Score: 3
You seem to be laboring under an assumption that I used to have before I started working for corporate clients-- namely, that they have even the smallest clue what they're doing in regards to technology.
Remember, everyone in the business world is suddenly in the technology business as IT becomes part of everyone's core competancy. Worse, there aren't enough people with skills (particularly in the corporate/money sector) to give them any reasonable advice about what the best choices to make are. I'm constantly terrified because I work as an advisor on a pretty high level, and while most of my advice (except in the tiny areas where I really am a subject matter expert) boils down to "find someone who knows what they're on about", many of the people I meet doing a similar thing give advice on things with which they have absolutely no experience. Best example was that I recently met a consultant engaged on generating a report for an investor on a possible architecture-component-of-networks business. Six months ago, this guy was in medical school, but now he felt that he didn't need any subject matter expert to assist him in writing his recommendation on whether to invest because he 'knew the consulting methodology'. He was from a name brand consulting firm who you'd all recognize and who is often called in to provide advice in the due diligence phase of investments. It's really frightening.
And, you're right, there are serious drawbacks to taking VC money. They're going to expect to have a say in your company and god help you if you don't have someone who's strong enough in sales to sell your vision to the people who are funding you. There's a good article in FindLaw that summarizes some of these issues.
Smart guy. He's not someone I would fight for, except that all the engineers are there because of this guy, and he's got all the knowledge in his head.
Hmmm... let's see. The Chief Technology Officer understands the product. The guys in the know, the engineers, work for him because they respect him. He and his "worker bees" are the only reason that TriStrata has a product but he's not someone to fight for!
TriStrata convinced Benchmark to invest in the cryptographic equivalent of a perpetual motion machine, and no amount of input from the folks who actually understood the technology could divert them.
It frightens me, sometimes, realizing that the reigns of the "New Economy" are held by clueless wonders who imagine that every problem can be solved by handing out free pens and a warm handshake.
I don't think its impossible for acompany to make money on crypto...just not on conventional forms of cryptography.
For instance despite all this talk about steganography no one seems to have come up with a mathematically secure algorithm for hiding the existance of data. With existing steganographic software it is relatively easy to scan the low bits of a jpeg or etc.. to pull out the data. Or determine that two companies are sending data back and forth.
There seems nothing which makes it impossible to embed a signal in some predetermined sort of noise which is computationally extremly difficult to extract without the proper key (i.e. it resembles noise very very closely). If a company patented such a technique there seems to be no reason they couldn't make money on it.
--
If you liked this thought maybe you would find my blog nice too:
I'll admit that I did not actually read the article very carefully... mostly because my first reaction was so strongly "So what!"
As far as I can tell, the story is that some guy said that he wanted to invest in X, wound up investing in Y; X made a bunch of money and Y lost money... and the guy has sour grapes (but still wants to toot his own horn). Of course, some *other* investor *did* invest in Priceline, and now they want to convince you they have a crystal ball into the "new economy".
Y'know I *could have* invested in VA Linux the day of the IPO, and made a zillion dollars. In fact, I even mentioned to a couple friends that I thought it was worth watching... but in real life, I didn't buy that, and I'm no more precient than the next guy.
Actually, it's kinda like the birthday paradox, and other cognitive limits that people seem to suffer about large numbers, groups, and probabilities.
Here's two related examples. I was having a talk recently where these came up. Someone suggested that I should play one of those "online investment games"; the idea of such is that each "player" gets a certain amount of make-believe money, and for a certain time each player makes imaginary stock trades. At the end of a period of time, the player with the most make-believe money "wins". Of course, what they win isn't all the real money, but just gloating rights... or maybe in a few cases a token prize like some free trades on an online brokerage that sponsors the game.
My observation is that it will *ALWAYS* be an extremely high-risk investor who wins these contests. The reason is simple. Say 100 players join the contest. 20 of those might take extremely high-risk strategies. The other 80 take comparatively low-risk strategies. Of the 20 high-riskers, 19 do worse than the overall average, probably half of them actually wind up losing (make-believe) money. But still, one of the high-risk choices proves right. At the end of the "game" the winner is always a high-risk players... but the "winningness" of a high-risk strategy is still probably less than that of a low-risk one. The result of the game really doesn't show you anything about what is best to do with real money... although a lot of people will be lulled into thinking it does.
My conversant pointed out a old scam related to this principle. Here's the scam (don't actually do it, it's illegal and wrong... but it does show the way people misunderstand the groups they belong to and their probabilities). (e)Mail a predication to a sufficiently large group of people. Could be a stock pick, could be a racetrack result, something where picking the right answer could actually make money. But don't mail the same prediction to the whole group, instead split the prediction by subgroups. For simplicity, say your group is 4096 people (easy with all those spam email lists), and your prediction is just Stock X goes up or Stock X goes down. You've just emailed 2048 people the wrong predication, and they think you're an idiot. OK, fine. Now take the 2048 people you "predicted" the right thing for, and repeat the procedure: 1024 get one prediction, the other 1024 get the opposite. Same thing again. Whittle down as you go.
Now let's say you do ten runs of this. The remaining 4 people have just seen you make an accurate prediction *TEN* times in a row. That's quite a record for something hard to predict, no?! Now you need a story about your secret method that outwits the economists/horse-racers/whatever, and is sure to keep picking the right results. But sadly, all your money is tied up right now in blah-blah-blah (all the winnings from the previous rounds). So you really just need some people to invest in your next round of prediction, and you will take only a small cut of the big winnings.
Now take the money and disappear. Hope the cops don't catch you. People want to believe certain things, especially when it's a way to get money for nothing (you should see me filtered-spam archive with hundreds of similar offers... or look at your own INBOX, most likely). And surely anyone who can make *TEN* successful predictions without fail must be on to *something*.
In other words, a stopped clock is right twice a day.
Slashdot Mirror
as in three strata. That's three, not one, not two. Five is right out as the correct number is three. Three is the number of strata, and the number of strata is three.
after reading the article im completely flabbergasted. is this the way venture capital really works? do these guys really have no idea what it is they are putting their money into?
i mean honestly, its hard for me to believe. these guys are throwing hundreds of millions, collectively throwing in billions, of dollars into investments- technology- promises they dont seem to understand?
i dont know, man. i mean, if you need to hire a consultant to tell you what the product is, maybe you dont have a good enough understanding to do a deal, y'know?
the other thing that surprised me was the due diligence thing. considering the competitiveness of the business, the way these v-c are jumping around looking for the next rocket up the nasdaq, and the way that every good idea in the business has probably been thought of by at least 3 different people, would i really want to let people see my business plan **before** getting a commitment from them?
i mean, seriously, thats just no good. maybe im too conservative and not cut out to be an internet millionaire, but id be really scared of making myself that vulnerable to someone who does not even necessarily have any loyalty to me or what i want to do. theres nothing to prevent the company from saying no politely and then taking your ideas to someone else who will give them a bigger cut or a better deal.
please, someone enlighten me. this stuff just doesnt make any sense.
unc_
TriStrata convinced Benchmark to invest in the cryptographic equivalent of a perpetual motion machine, and no amount of input from the folks who actually understood the technology could divert them.
It frightens me, sometimes, realizing that the reigns of the "New Economy" are held by clueless wonders who imagine that every problem can be solved by handing out free pens and a warm handshake.
Honesty. Loyalty. Kindness. Laughter. Generosity. Magic!
I don't think its impossible for acompany to make money on crypto...just not on conventional forms of cryptography.
For instance despite all this talk about steganography no one seems to have come up with a mathematically secure algorithm for hiding the existance of data. With existing steganographic software it is relatively easy to scan the low bits of a jpeg or etc.. to pull out the data. Or determine that two companies are sending data back and forth.
There seems nothing which makes it impossible to embed a signal in some predetermined sort of noise which is computationally extremly difficult to extract without the proper key (i.e. it resembles noise very very closely). If a company patented such a technique there seems to be no reason they couldn't make money on it.
If you liked this thought maybe you would find my blog nice too:
I'll admit that I did not actually read the article very carefully... mostly because my first reaction was so strongly "So what!"
As far as I can tell, the story is that some guy said that he wanted to invest in X, wound up investing in Y; X made a bunch of money and Y lost money... and the guy has sour grapes (but still wants to toot his own horn). Of course, some *other* investor *did* invest in Priceline, and now they want to convince you they have a crystal ball into the "new economy".
Y'know I *could have* invested in VA Linux the day of the IPO, and made a zillion dollars. In fact, I even mentioned to a couple friends that I thought it was worth watching... but in real life, I didn't buy that, and I'm no more precient than the next guy.
Actually, it's kinda like the birthday paradox, and other cognitive limits that people seem to suffer about large numbers, groups, and probabilities.
Here's two related examples. I was having a talk recently where these came up. Someone suggested that I should play one of those "online investment games"; the idea of such is that each "player" gets a certain amount of make-believe money, and for a certain time each player makes imaginary stock trades. At the end of a period of time, the player with the most make-believe money "wins". Of course, what they win isn't all the real money, but just gloating rights... or maybe in a few cases a token prize like some free trades on an online brokerage that sponsors the game.
My observation is that it will *ALWAYS* be an extremely high-risk investor who wins these contests. The reason is simple. Say 100 players join the contest. 20 of those might take extremely high-risk strategies. The other 80 take comparatively low-risk strategies. Of the 20 high-riskers, 19 do worse than the overall average, probably half of them actually wind up losing (make-believe) money. But still, one of the high-risk choices proves right. At the end of the "game" the winner is always a high-risk players... but the "winningness" of a high-risk strategy is still probably less than that of a low-risk one. The result of the game really doesn't show you anything about what is best to do with real money... although a lot of people will be lulled into thinking it does.
My conversant pointed out a old scam related to this principle. Here's the scam (don't actually do it, it's illegal and wrong... but it does show the way people misunderstand the groups they belong to and their probabilities). (e)Mail a predication to a sufficiently large group of people. Could be a stock pick, could be a racetrack result, something where picking the right answer could actually make money. But don't mail the same prediction to the whole group, instead split the prediction by subgroups. For simplicity, say your group is 4096 people (easy with all those spam email lists), and your prediction is just Stock X goes up or Stock X goes down. You've just emailed 2048 people the wrong predication, and they think you're an idiot. OK, fine. Now take the 2048 people you "predicted" the right thing for, and repeat the procedure: 1024 get one prediction, the other 1024 get the opposite. Same thing again. Whittle down as you go.
Now let's say you do ten runs of this. The remaining 4 people have just seen you make an accurate prediction *TEN* times in a row. That's quite a record for something hard to predict, no?! Now you need a story about your secret method that outwits the economists/horse-racers/whatever, and is sure to keep picking the right results. But sadly, all your money is tied up right now in blah-blah-blah (all the winnings from the previous rounds). So you really just need some people to invest in your next round of prediction, and you will take only a small cut of the big winnings.
Now take the money and disappear. Hope the cops don't catch you. People want to believe certain things, especially when it's a way to get money for nothing (you should see me filtered-spam archive with hundreds of similar offers... or look at your own INBOX, most likely). And surely anyone who can make *TEN* successful predictions without fail must be on to *something*.
In other words, a stopped clock is right twice a day.
Buy Text Processing in Python
Interesting analysis. And the central servers which had to be secure were running NT...