Joi Ito's conversation with the living web.

May 2010 Archives

Twitter announced Promoted Tweets and also updated and added some guidelines in their API Terms of Service about third parties injecting advertisements and spam in the timelines.

There have been some articles in the Japanese press misinterpreting this announcement and generalizing it as some sort of ban on advertising by Twitter. There have been some allegations that this new policy change would cause problems with the Twitter related activities that Digital Garage engages in.

As the Terms of Service and the announcement say clearly, Twitter continues to encourage advertising around Twitter and is encouraging innovation. The key is that the advertising should not confuse or add friction to the experience of the user.

All of the current advertising that Twitter Japan/Digital Garage engage in is consistent with the guidelines presented in the announcement by Twitter. Digital Garage works closely with Twitter in developing innovative and new ideas for helping companies communicate with their fans without hurting the user experience.

Digital Garage has a very close and broad operating level relationship with the US Twitter team and Biz Stone recently joined the advisory board of Digital Garage to help Digital Garage continue to innovate with Twitter and in social media in general.

Japan has been a very interesting testing ground for new services and ideas around Twitter and advertising and this current announcement by Twitter reinforces Twitter's (and Digital Garage's) commitment to focusing on user value and is primarily intended to try to prevent product degradation by advertisers and service providers who fail to have this focus.

Disclaimer: I haven't spoken to Twitter management about this blog post and this is my interpretation based on reading the releases and talking to the team in Japan. I'll be speaking to them soon to update this post if they have anything to add, but I wanted to get this out there to correct some of the crazy assumptions in the main stream media in Japan.

"Tea with The Economist". A cute interview format from The Economist. Featuring yours truly rating about privacy, startups, Internet, Creative Commons and other random things.

Serkan Toto wrote a very thorough article about our new Open Network Labs (ONL) and you can read most of the detail there, but my team at DG together with Netprice and launched a new venture accelerator last month.

The idea is to do monthly meetings where we will have guests come and speak and provide an opportunity for people with startup projects to meet. ONL will give grants up to $10,000 and provide mentoring, office space and other support in exchange for an opportunity to invest if the idea turns into a good startup investment. ONL will work close with my Singapore fund and mentor team - hopefully providing deals for the Singapore fund and possible partnerships for the startups and entrepreneurs we will be working with in Singapore and across the region.

While I won't be working day-to-day on ONL, we have a young and scrappy team of some of the next generation of Japanese entrepreneurs with the support of three of my favorite Internet companies.

I look forward to seeing what sorts of people and ideas ONL is able to attract and hope that we can launch some stuff with global reach help put Japanese startups on the map Internationally.

Ever since I was a small boy, everyone used to tell me to focus. Focus focus focus. I'm very good at being obsessive, but I'm not good at focus. Everything excites me and I end up focusing on everything.

In John Hagel, John Seely Brown and Lang Davison's new book The Power of Pull, they explain that the world is changing and that instead of stocking resources and information, controlling everything, planning everything and pushing messages and orders from the core to the edge - innovation is now happening on the edges and resources are pulled as needed instead of stocked - that the world is going from stocks to flows. There is a excerpt of the book on Techcrunch featuring yours truly.

One of the great thoughts in the book is the idea that you should set a general trajectory of where you want to go, but that you must embrace serendipity and allow your network to provide the resources necessary to turn any random events into a highly valuable one and that developing that network comes from sharing and connecting by helping others solve their problems and build things.

This reminds me a lot of Edward Hall's definition of polychronic time vs monochronic time (p-time vs m-time). In m-time, we delineate time and space into meetings and cubicles allowing organizations and institutions to scale massively. p-time is like a Arab majlis where everyone is invited at the same time and they all mill around in the waiting room of the sheikh while the sheikh has a series of meetings in the open inviting people into the meeting like a long flow of consciousness. P-time lacks scalability and order, but it is rich in context and serendipity. At some level, if you plan everything, you are very unlikely to be able to embrace serendipity or be as "lucky".

Most of my best meetings have been serendipitous and like Granovetter's strength of weak ties, it's those connections outside of your normal circle that often provide the most value, even beyond just the obvious arbitrage opportunities.

So while my life may look completely chaotic and disorganized, my previously post in retrospect, I feel like I am floating in a rich network of highly charged people and serendipitous events, not a single day going by where I don't feel like "Yay! I just did something really good!" Although the heavy travel is wearisome and the lack of stability slightly disorienting, I feel like I'm surrounded by loving, smart people and feel happier than I've ever been in my life.

Although my dream is still to achieve peace of mind and happiness in a becoming-Buddha sort of way, it feels like I'm going to get there through the some sort of Tai Chi action that involves being in a network of energy flows instead of meditating in some mountain cave.

We'll see how this "focus on everything" model works, but I'm not convinced that it doesn't. On the other hand, the standard caveats do apply: "Don't try this at home and your mileage may vary."

Update: Fabian Wolff did a German translation. Yay!

In 2000, during the heyday of the first wave of incubators, I started Neoteny. Incubators such as CMGI and ICG were trading at huge multiples to the value of their portfolios and funds such as JH Whitney were backing incubators around the world.

Having been CEO of a number of startup companies, I was looking to transition into the investment side. I had develop a broad network in Japan and felt that I was more suited for managing a portfolio of opportunities than focusing on the operations of a single business.

I had been talking to a number of funds about joining as a venture partner, but the idea of building an incubator together with the readily available funding and favorable terms lead me down the path of setting up Neoteny. At its peak, Neoteny had over 40 people, a facility, a PR team, engineering, HR consulting and R&D. It was a full service incubator and was modeled after many of the large incubators around the world.

We made a number early stage investments and formalized our incubation process. Just as the incubator went into full swing, the Internet bubble burst and incubators around the world crashed and ended up trading at huge discounts to the value of their portfolios.

Some of my investors pushed me to cut my losses and return their money. This was one of the hardest business periods in my life and one where I would swear off ever being a CEO again. (Which was true until Lawrence Lessig and the Creative Commons board convinced me to take over CEO of Creative Commons.) I had to cut the staff down to nearly nothing, shut down the facility and figure out what to do with the future of the business.

As the Japanese Internet market continued to be disappointing to me in terms of the quality of deals, in the last days of Neoteny, thanks to Justin Hall, I discovered blogging and through blogging, I started using Movable Type and decided that we should dump our Japan focus and find a blogging company to invest in in the US.

The first meeting with Ben and Mena, the developers of Movable Type was friendly, but ended with them telling us that they just weren't interested in raising money. We continued to court them, but I really wanted to have a position in this space and I met Evan Williams and the team at Blogger and found them more open to the idea of investment since they'd already taken VC money.

As fate would have it, we sent Evan and his team a term sheet to invest in Blogger the day before they got the acquisition offer from Google, which they took. Soon afterwards, Ben and Mena decided that we weren't that bad after all and took our offer to invest in Six Apart.

I felt very happy (and still feel very happy) with our investment in Six Apart. Although many investors continued to support us, we had some investors who didn't like the shift in focus away from Japan and other investors had various conflicting agendas so we returned the remainder of our money and shifted the focus of Neoteny to be support Six Apart's expansion in Japan and exist primarily as a manager of the existing portfolio and a major investor in Six Apart.

Reflecting on Neoteny, I realize now that most of the best companies that we invested in such as Six Apart didn't really use any of our incubator "services". Really scrappy entrepreneurs found their own cheap office space, figured a lot of the stuff out themselves and knew what they wanted from us. It didn't seem like they needed an incubation "process". It turns out that large corporations trying to incubate ideas internally really liked our process and a spinout of the Neoteny team continued to use the incubation process that we created as a consulting product for large Japanese companies.

In retrospect, the performance of our portfolio of the investments themselves will probably be good. If we had been a fund it would have been a success, even during a tough investment period. However, when you factor in the build-out and the shutdown of the consulting/incubation arm of the business, we'll still need a very strong exit from Six Apart to be considered successful by our investors. (Go team Six Apart!)

After winding down the core of Neoteny, I started angel investing with Reid Hoffman. With Reid I invested in Flickr,, Technorati, The Sixty One, Kongregate, Rupture,, Wikia, Aviary and many other companies. I returned to Digital Garage as a board member, the company I co-founded with Kaoru Hayashi which had gone public and incubated PSINet Japan, Infoseek Japan,, econtext and other successful Japanese startups. Digital Garage invested in Twitter and is currently helping operate Twitter Japan.

I've been experimenting and thinking a lot about how to how startups should be incubated. Because of my trauma at Neoteny, I grew very skeptical of institutionalized incubation, feeling that there was an adverse selection which attracted entrepreneurs who wanted to be part of a club rather than scrappy entrepreneurs who were independent. I also decided that every country was very different and that in Japan, having a large operating company like Digital Garage was an important component of incubating companies because of the risk adverseness of employees and the difficulty of creating operating relationships for small companies.

Also, since the Neoteny days, because of the cloud, agile software development and the ecosystem of startups, the cost and speed of producing new Internet services has significantly declined and the markets have become more global. I think this significantly changes the value and nature of the incubation process - it makes it more feasible. Investment sizes are becoming smaller and everything is moving much faster. (More on the future of venture capital in another post.)

This year Reid Hoffman, my main angel investment partner joined Greylock and I have finally begun to get over some of my incubation and CEO phobias. I realized that it was the right time to take what I have been learning and the network that I have been creating and try to put some structure around the process that I'd been developing over the last few years.

My new theory is that incubator/accelerators probably make sense in Japan if/when they are tied together with a network of supporting operating companies. Recently, we launched the Open Network Lab which is a collaboration between my team at Digital Garage and Netprice. It's modeled after some of the more successful US startup and accelerator programs and we are considering working with similar programs to create a network, but we have tuned it for the Japanese context.

Having spent the last year or so trying to understand the market in the Middle East, I came to the conclusion that basing an incubator in the Middle East might be a bit early and I found it difficult to get my network in the US and Japan to connect directly with the network I was developing in the Middle East. After visiting Singapore a few times and running an un-conference there, I realized that Singapore made the perfect hub to bring my European, Arab, Israeli, Japanese, Chinese, Indian, and American contacts together. The Singapore government is super-supportive and receptive of immigrants unlike most Arab countries or Japan. I decided to raise a small startup fund in Singapore and have received a special deal with six other incubators from the National Research Foundation of Singapore which is providing us a significant financial incentive.

The investment focus of the fund, called Neoteny Startup Fund 1, will be Asia, Middle East and maybe even North Africa. Singapore will be the hub because it is so entrepreneur friendly but I will be creating a network of co-investors, incubators and corporate contacts across the region to try to build companies that are global from the beginning and embrace the multi-cultural mishmash that my network has become.

I'm very excited with what I think will be the beginning of a new phase in my life. I will continue to live in Dubai and I believe that creating Arab entrepreneurs and empowering startups is the most significant contribution to peace and that I can make right now in that region. I'm also interested in trying to see if I can connect to Africa where I believe there is also a tremendous amount of potential.

Only a few years ago, I wouldn't have believed that a network as broad and diverse as this could hold together or that I could rally the support of the diverse network of mentors, investors and partners that I currently have. Having said that, I wouldn't be able to maintain this network without the help of my team at Digital Garage together with Mika, James and Sean.

The initial pipeline of companies and entrepreneurs that we have been meeting has been encouraging.

I will still spend about 50% of my time in my role as CEO of Creative Commons and the remainder of my time working on the new fund in Singapore and the portfolio companies and the pipeline of new opportunities including the Open Network Lab at Digital Garage. Digital Garage will still to be my operating base in Japan. I will keep my current commitments such as my advisory role at Twitter and particularly trying to help with the Twitter activities at Digital Garage and in Japan.

I will continue to serve on the boards of the great for-profit and non-profit organization that I am currently on, but will retire from the ones where I don't think I'm able to contribute significant value.

I realize that I haven't done a good job of making my life any simpler or any easier to manage, but I really believe that I have the opportunity and the responsibility to try to make an impact right now and this current configuration feels optimal to me.

I'll follow up with more detailed posts about Singapore, ONL, the future of Creative Commons and Twitter Japan.

Update: I Made a few edits about Neoteny, my original incubator, to be a bit more accurate. Originally, I said that the investment performance was good, but that includes the value of the Six Apart stock so I changed it to "will probably be good". Also, some investors continued to support us and only a few big investors pushed us to return their money so I modified that section to reflect this.

Monthly Archives