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New Year Q&A: Silicon Valley insight with Saad Khan, CMEA Capital

New Year predictions
New Year predictions
Cameron Spencer, Getty Images

The New Year ushers in a new decade and ‘cautious optimism’ is quickly becoming the catch phrase in Silicon Valley’s tech sector. While some local giants (Apple and Netflix) closed their 2010 books with resilient success, others (notably Hewlett-Packard and Google) seek the winds of change in 2011.

Web 2.0 insiders and investors are hopeful for 2011, buoyed by the rise of mobile and social web innovations and enthusiastic about the sector. The National Venture Capital Association recently released its 2011 predictions (based on surveys) which suggest strong job growth, increased compensation and greater sales overseas for the New Year.

Saad Khan, a venture capital partner with CMEA Capital, says he believes 2011 will be a good year for web startups if they have what it takes. When we last met Khan, he fervidly informed us of the opportunities that the web presents investors and entrepreneurs alike. I caught up with Khan last week to pick his brain on what to expect for 2011.

BR: When we spoke last summer, the 'Great Recession' had made capital efficient investments such as Internet-based startups du jour. New apps and websites have become so ubiquitous it’s hard to keep up with them. Are you concerned about overinvestment in the sector?

SK: Anything that is built on the Internet has economics that will drive down to as close to zero as possible. You don’t have to pay for servers, software or even the cost of renting an office. The only expense is people, so these investments have been very popular and will continue to be so.

But the question about whether or not they are inflated is an interesting one. I think the angel bubble will continue into 2011 but we’ll start to see some fall out in the first generation of companies that don’t have what it takes. For most startups that do make it, it will be interesting to see what unfolds in later funding rounds for them in 2011.

BR: Innovative, disruptive technologies call for classic T-shaped people able to collaborate and push the bounds. We’ve spoken before about a team’s influence on your chosen investments as the single pièce de résistance above all others. Can you talk about the importance of individuals within any startup?

SK: I spend all my time looking for great entrepreneurs and exceptional teams, period. Frankly, the direction they think they will go will (inevitably) change. It always does. The common denominator is the team itself. Stuff is happening all around us, but the challenge is finding the right talent. In the Valley, there are certain pockets of talent that everyone is looking for so companies have been doing more with less.

BR: Your portfolio includes a wide array of investments in web, media and even robotics. How do you begin to understand the complexities of each startup you assess and its employed technology?

SK: My job is to get deep enough to understand the challenges they face but have teams who understand far more than I ever could. I’m certainly a geek about the details, but finding the right people is the biggest part of what we do because there’s no way we could ever know everything. We’re talent scouting.

BR: Crowd-sourcing is something you’re quite familiar with having Pixazza and other crowd-sourced startups in your lineup. What makes you enthusiastic about this growing trend and what do you think is in store for it in 2011?

SK: Crowd-sourcing is faster, better and cheaper than its counterparts. The disruptive element comes from leveraging people and delivering the best content possible which algorithms can’t always do. What am I excited about for the new year? What happens when crowd-sourcing meets the social graph where everyone brings their own ‘crowd’ with them? We all throw off so much data about our activities- where we are, what we’re doing, who we’re with, even our health. Mobility and location are going to continue on their upward trend and it will be interesting to see how crowd-sourcing evolves with it this year.

BR: Any surprises on the horizon or things that you’re particularly enthusiastic about for 2011?

SK: I had a chance to demo XBox Kinect it when it was still called Project Natal (Kinect allows users to control and interact with the Xbox 360 platform without the use of a controller). Immediately, I knew it was something people would want and expect in everything- not just gaming. Increasingly, we’ll start seeing that technology creep into other areas in 2011. I fully expect to see at least one mass market, non-gaming product in this area in the coming months of the New Year.

BR: How do you view your role as a venture capitalist in Silicon Valley?

SK: I like to see myself as a facilitator, asking questions like ‘what can we do next?’ and going from there. It’s never too early to talk to me. If your mind is wandering, talk to me.

Saad Khan is a partner at venture capital firm CMEA Capital where he leads CMEA's Web and new media investments. He also spearheads CMEA's seed initiative and early investments in Pixazza, Blekko, Jobvite, and Evolution Robotics. He blogs at cmea.com/blog and saadwired.com. You can follow him on Twitter @saadventures.

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