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| Fall 2007 Newsletter | El Dorado Ventures website |  |
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By Steve Bourne Given the rapid pace of technological change these days, it's tempting to conclude that we have moved beyond the era of truly disruptive technological advancements. I would argue against giving in to the temptation. There is always room for innovation, and the underlying fundamentals that drive change and innovation remain firmly in place. What exactly constitutes a disruptive technology? It can be hard to define, but at the least, it must be something that permanently alters the landscape. The web browser, coupled with TCP/IP, together form a classic example of disruptive technology built on fundamental advances. The main reason I expect continued technological disruption is that the fundamental drivers haven't changed. They include:
It's important to remember that the technology business is cyclical, and that there are both periods of rapid change and periods when change is being absorbed. For instance, the massive disruption that came with the rise of browser-based use of the Internet led to a bubble and then a crash, during which it seemed that the pace of change was slow as people absorbed the impact of the initial disruption. But that fallow period fostered the creation of the current Web 2.0 environment we're in today, which is notable for the ease with which anyone can create new web content (user-generated content) and web applications (such as Coghead, an EDV investment) and integrate data from disparate data sources (mash-ups). The early-stage investment implications of disruptive technologies are very significant. One need only look at Google to see how much one can profit by successfully disrupting existing ways of doing business. Venture capital firms like El Dorado Ventures are always looking for entrepreneurs and technologies with the potential to cause the next disruption. Of course, it's easy to identify a disruption with the benefit of hindsight. Looking forward, many things may appear promising but for some reason don't pan out. With that caveat in mind, here are three potential disruptions I'm following closely: New Forms of Video Distribution
As an example, given the soaring demand for content on multiple end-user devices in different formats, a single video recording has to be "transcoded" to be viewed properly on each disparate device. In this realm, El Dorado Ventures is backing Ripcode, which has just begun to sell a real-time, low-cost transcoding device. A New Wave of Virtualization
But given the fundamental drivers discussed above, virtualization has become increasingly affordable, and investors have taken notice. One of the most successful recent IPOs was that of VMWare, which enables virtualization of the operating system layer from the underlying hardware, while XenSource, the champion of open-source virtual machine software, was recently acquired by Citrix for $500 million. In addition, EDV portfolio company Compellent Technologies, which is virtualizing the storage stack, recently completed a successful IPO. The Rise of SIP-Enabled Telephony
As an open standard, SIP will revolutionize voice communication by making PBX equipment for businesses and enterprises much cheaper. It is already causing a significant restructuring of the telephone equipment business, forcing competition into the market. Using Asterisk open-source telephony software, providers can build full-functioning business phone systems on off-the-shelf computer technology for a fraction of the cost of proprietary phone switches. In this space, El Dorado has backed Edgewater Networks whose solutions were enabled by the availability of the SIP standard. Edgewater
makes the deployment of voice and video over IP easier, less expensive and more secure. Predicting how these disruptive forces will change the competitive landscape is risky, but we believe that these technology drivers will provide new opportunities for innovation and investment. At El Dorado Ventures, we continue to monitor and evaluate disruptive technologies to assess their potential to have a major impact on the marketplace. Steve Bourne is Chief Technology Officer for El Dorado Ventures. Steve actively consults with EDV's portfolio companies and advises the firm on new investment opportunities. Steve is widely known for his work on the UNIX operating system, including the design of the UNIX Command Language - commonly called the "Bourne Shell" - that is widely used in scripting in the UNIX programming environment. Steve has also served in senior management positions at Cisco Systems, Sun Microsystems, Digital Equipment Corp. and Silicon Graphics.
El Dorado Ventures (EDV) is a leading entrepreneur-focused, early-stage venture capital firm with over two decades of success. Entrepreneurs see EDV as a trusted
investment partner who shares their vision and helps them succeed by providing ongoing strategic guidance and access to a wealth of industry contacts. With $750
million in capital under management, the firm invests across the information technology spectrum, from semiconductors and systems to communications, software and
services, targeting both consumers and the enterprise. El Dorado's early-stage investments have included Compellent Technologies, Cyras Systems, EarthLink, Efficient Networks, Novellus and
NuSpeed Internet Systems. Numerous EDV portfolio companies have gone public or been acquired by major technology companies including AT&T, Ciena, Cisco Systems,
nVidia, Siemens, Texas Instruments and Yahoo. For more information, please visit: www.eldorado.com
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Disruptive Technologies Still a Force for Change
