Monday, July 11, 2005

Finance

VCs find really sure shot with new RSS-focused fund

By Efrain Viscarolasaga

Really Simple Syndication (RSS) is proliferating across the cyber-landscape at an amazing rate. A steady stream of reader applications like Onfolio and Pluck are finding their way to market, media companies like the BBC and Chicago Sun-Times are scrambling to integrate RSS feeds into their content offerings and browser makers are injecting it into new product versions.

In Cambridge, Jim Moore, Richard Fishman and John Palfrey, all staunch supporters of the technology, are not just hoping to ride the RSS bandwagon: They want to drive it. In conjunction with Ritchie Capital Management LLC of Illinois, the three men have initiated the first venture capital fund dedicated to finding and developing RSS-related companies and technologies.

"There are a lot of people out there in the open-source community doing things with RSS-related technologies in an amateur way, and we think we can help," said Moore. "We think it is a really good time to bring in a more professional attitude to this industry."

Moore and his partners will be hitting the market with $100 million to spend, raised predominantly from Ritchie Capital. They will be looking for media companies and technologies that apply RSS to specific vertical markets, such as health care or education.

RSS Ventures will also be scouring the labs and back alleys of the open source community for people with an innovative eye on the supporting elements of RSS, such as security and aggregation.

While they don't plan to limit their search geographically, the company is located in New England for a reason.

"We think this is a wave of the web well-suited to New England," said Moore. "If you look across the education community around town, people are doing amazing things. The professions here - medical, biotech, and education - are doing great things with RSS."

Through its investments, the firm hopes to push the RSS industry along and speed the adoption of the technology as a means of personal expression and public discourse.

"RSS is almost a new way of life," said Moore. "It's a new layer of technology. If the web is a layer, and e-commerce is another layer, then RSS is a new layer on top of that."

Using the technologies of the web to disseminate messages and ignite public interaction is something Moore knows a lot about. In December 2003, after months of volunteering, Moore was appointed the director of Internet services for Howard Dean's presidential campaign. While Dean's presidential bid fell short, his campaign has been heralded as the most successful electronic campaign to date, using blogs to reach the candidate's constituency and using the Internet to help raise funds.

"One of the things (working on the campaign) woke me up to was the immense ability to contact and reach people at a modest price and technology," he said.

However, the business model of potential portfolio companies is still a question mark. In the late '90s, there was a whirlwind of new companies dedicated to providing free content on the web that quickly fell apart because few companies could develop a business model that could generate a revenue stream from free content.

Moore is confident the industry has progressed enough to prevent such a situation from happening again.

"The difference now is that the web-based advertising has evolved, both technically and from a user acceptance level," he said. "Advertisers overall are crying for inventory to advertise on. Consumer companies are saying 'we'd like to put more of our advertisements online, but where do we do it?'"

But some aren't so sure. Eric Peterson, an analyst covering site technologies and operations with Jupiter Research said the nature of the medium may not be conducive to advertising or financial gain.

"One of the things that people love about RSS is that it is advertising-free," he said. "The problems people had with online content will probably be worse with RSS. It is designed to not be monetized. It is designed to be democratized."

The fund has not closed any announced any portfolio companies yet, but Moore and his crew are driving the bandwagon around town, looking for opportunities.