
Qwiki Epitomizes the Current Startup Bubble - shelly
http://epicfumble.com/post/qwiki-epitomizes-the-current-startup-bubble
======
aresant
Is this that moment in time where because popular opinion says we're in a
bubble, we're actually NOT in a bubble?

Just food for thought - check out <http://www.qwiki.com/for-publishers>.

Let's say that they pick up a reasonable number of tier-1 publishers into this
format.

Heck maybe they already have commitments and that was part of their pitch in
raising the additional $8m.

How would that change your perception of their valuation?

Beyond that, look at the "team" page.

Content monetization is a HUGE area of opportunity online and that's one heck
of a team they've compiled - would you rather give those guys $8m and bet on a
huge one or throw your money into the stack at AOL's public offering?

~~~
ianthiel
I think the OP is forgetting that what the product does now is largely
irrelevant to a good investor. It's what the product can or will do that makes
it worth investing in.

------
intellectronica
I don't know about Qwiki, but these sort of seemingly unlikely capital rounds
are often something that happens to well connected startups with business
management savvy people behind it (either in the company's executive team or
among its early stage investors). These people simply know how to raise money
and spin businesses around, and they have access to sources of capital that
the average hacker doesn't.

To a hacker trying to get a complex project off the ground on pocket money, $8
million sounds like a fantastic sums, but there are many circles in which
investing this amount of money in people you're connected to is trivial,
regardless of market mood. It's not even necessarily the case that this is bad
investment. If the investors believe, for whatever reason, in the company's
executive team, it's probably because they are counting on them to somehow
grow the company into a viable business. Many such companies, for example,
will be spun into consulting, services or b2b companies you'll never read
about on techcrunch, but which at the very least make a modest return on their
investment. The fact that Qwiki is very unlikely to become the next huge
internet phenomenon doesn't mean that it's a bad investment - it only has to
not die and grow into a business worth more than its current valuation.

~~~
rst
Unfortunately, there's only so much that a great team can do with a really
lousy idea. One of the things pets.com was supposed to have going for it was a
CEO (Julie Wainwright) who had been successful at multiple previous ventures,
who'd been specifically picked out for the post by one of the VCs (Ann Winblad
of Hummer Winblad). That wasn't enough to keep the business going.

~~~
intellectronica
pets.com is an amusing piece of Internet history, but it is also a rounding
error. For every pets.com there are thousands of companies that lost a
(relatively) small sum of money and hundreds that made a small return.

~~~
jdp23
actually I think pets.com might have been Hummer Winblad's first losing
investment. in any case they admitted afterwards that it was a mistake on
their part -- they were worried they were getting to the opportunity late and
overcompensated. so it really was a classic bubble situation.

------
matwood
If the author is correct and all Qwiki is doing is reading wikipedia and maybe
some of the related sources then yes it is unbelievable that they have gotten
funding.

It also makes me realize that most of my business ideas are way too complex in
an effort to provide real value. I throw away ideas like Qwiki because I
wouldn't feel like I'm providing much value. I need to shift my focus to
creating dead simple, but very pretty websites and see what sticks. :)

------
dstein
The thing that bothers me about Qwiki is their "technology" is just a smoke
and mirrors reproduction of things we see in the movies when a robot or A.I.
talks to the characters. It's made to look and sound like A.I. except what
they're doing doesn't involve machine learning or anything A.I-related. It's a
simple mashup with a well-oiled marketing campaign (Techcrunch) behind them.

~~~
davidcann
I agree to some extent, but wikipedia and similar sites are what A.I. will use
to "learn" in the future.

If this were 1990 or I didn't know about wikipedia, then I would be _very
impressed_ and think this was true artificial intelligence.

~~~
beoba
Nothing is being 'learned' here, the only thing being produced is a rote
repetition of an article after it's been passed through a mediocre TTS engine.

------
c2
I don't understand the need for bench entrepreneurs to ridicule start ups from
the side lines. All this effort to point fingers and make fun of start ups
which are actually trying to build businesses might be better spent actually
trying to build your own business.

All the posts about Qwiki and others recently (Facebook, Zynga, Groupon) all
calling for the downfall of all these start ups really make me question the
value of this community at times - and it's not like these posts have 10-12
points either, they have some of the highest point totals of any articles on
HN.

~~~
Semiapies
I don't understand the need to dismiss criticism as some mean-spirited
activity that only useless "haters" do.

~~~
c2
There is constructive criticism, and then there is a blog post listing a bunch
of reasons why this particular individual doesn't think this company should be
given any money to give their idea a shot.

Constructive criticism is great, it's just there has been a notable lack of
worthwhile criticism lately. In my opinion of course - but honestly, did you
read the linked article? Does it contain any valuable insights into Qwiki? Yet
it has over 100 points - this is the start up 'criticism' echo chamber at
work.

~~~
Semiapies
_There is constructive criticism_

And there are _other_ forms of criticism that are still valid and useful. Not
all criticism needs to be reassuring and/or useful to the subject of the
criticism. It can be quite valuable to others to point out how and why
something just isn't very good or when something unreasonable is being done -
like throwing millions of dollars at something that isn't very good.

Now, what exactly is the value of complaining about an "echo chamber" or
saying that people would be better off just shrugging, going back to work, and
hoping they're lucky enough to get $8 million showered on them regardless of
merit?

------
techiferous
Qwiki seems like something that's easy to prototype but hard to do _well_. And
it seems like a product that you have to do well to monetize.

Take the Qwiki entry on polyamory, for example:
<http://www.qwiki.com/q/#!/Polyamory>

Qwiki pronounces it wrong, which means it actually decreases the value of the
information it is regurgitating from Wikipedia.

~~~
Groxx
That's a fairly good example of a failure, really:

> _The most common symbol is the red and white heart combined with the blue
> infinity sign[.] Therefore, [the California SSM ruling] legitimizes polygamy
> and polyamory._

The first sentence, which is missing a period but it pauses on like it exists
(correctly so), goes with their picture of a purple, upside-down, half-twist-
on-each-side triangle. Whups.

The second sentence makes no sense in context.

I wonder if they pull phonetic information from Wikipedia. If they do, then
polyamory wouldn't benefit from it, as it has no phonetic pronunciation there.
If they don't, they probably get a _lot_ of foreign-origin words more
incorrect than we're seeing right away.

edit: Another odd pronunciation: <http://www.qwiki.com/q/#!/.sch>

> _www...sch.uk_

is a) incorrectly written, and b) pronounced "w-w-w [long pause....] s-c-h-
uck". (letters, followed by "yuck" minus the y). And the "contents" tab is
failing to load for me.

------
mikeryan
You know, I didn't "get" twitter either when it launched. Heck it still might
be suspect.

I have a feeling that Qwiki's value may be more under the covers with respect
to its processing of data then the consumer facing product we currently see.
Or it could just be overhyped.

With respect to a current bubble. This is a round with 7 investors (mostly
individuals) dipping their toes. I think if you're looking for signs of a
bubble this is a bunch of people with money to spend and an interesting
product. It doesn't really show much irrational exuberance.

------
btipling
I wonder if any Qwiki people read HN would like to respond to this outpouring
of negativity directed at them around here. Not saying I disagree with the
criticism, just would like to get their point of view.

------
gojomo
I share skepticism about what Qwiki has shown so far. But, it's unfair to
assume that's all investors have seen.

The pitch was more likely of the form: "On a shoestring, we've launched this
public functionality, and can show you this even more impressive private
functionality, which needs $8 million to be further improved and scaled up."

------
arnorhs
I simply don't agree with Eric on this one. His main argument seems to be that
this startup isn't adding anything of any value to the space.

The way I see it is this: Wikipedia is not very consumer friendly. It's dull
looking and the entries are usually filled with a lot of text. The modern
internet consumer is constantly facing more and more attention disorders and a
lot of people don't simply like to read.

The search result in qwiki is auditory and visual and you can consume it
completely without reading anything. I looked up a few countries I want to
visit, a few programming languages and everything worked incredibly well.

One of his arguments is that the technology is something that could easily be
duplicated. I think it's true up to a point, but honestly, what hacker
couldn't duplicate the base functionality of a twitter of 4sq in an afternoon?
I think the inherent value isn't actually with the technology itself but with
the implementation, the data, the UI and, ultimately (so it seems), the
company's dedication to packaging information in a more-easy-to-consume
fashion.

This will work incredibly well on a internet connected TV screen. Who can
picture themselves reading wikipedia articles with their spouse in the living
room off the TV? Not me. But if I'm going to, say.. Oslo
<http://www.qwiki.com/q/#!/Oslo> I could picture myself looking that up and
listening/watching with my SO. Even if only to get the basic info.

Another usecase is with mobile operation. Since I got my HTC desire I
constantly google stuff by doing a voice search. I have to use my best
american accent, but none the less it's very useful. If my search result could
be a visual/auditory search result like that, it would suite some cases much
better.

I think this might actually mark a new era in the startup space. I'm coining
the term:

    
    
      Content 2.0
    

Somebody grab that domain name if it's not already taken?

~~~
slantyyz
Isn't the whole point of an encyclopedia to be text laden?

That Wikipedia is already so successful seems to suggest to me that it is very
consumer friendly.

~~~
arnorhs
I'm not saying this will replace Wikipedia and I'm not saying there's a
problem with Wikipedia as it is - I'm just saying that there are use cases
where everything is not a nail.

I'll bet you that 90% of the time you hit up Wikipedia you'll only read the
top paragraph. At least that's what I do and I've seen more people use
Wikipedia like that.

In fact, I love duckduckgo's 0-click result because of exactly that.

~~~
slantyyz
I wasn't suggesting you were saying that, I was only making a point related to
your two criticisms:

 _Wikipedia is not very consumer friendly. It's dull looking and the entries
are usually filled with a lot of text._

That you read the abstract at the top of the article suggests to me that the
article structure is very efficient (and arguably consumer friendly) in that
they provide the TLDR summary above the fold, which nullifies the problem that
the full article may have too much text.

By the way, my use case for Wikipedia tends to have me reading the complete
article more than just the abstract, because I'm usually in research mode when
I use Wikipedia. Of course, everyone has a different use case, and I suspect
your use case is more common than mine.

------
poutine
Agreed. It's unbelievable that they raised such an amount of money for
something that doesn't really seem very exceptional. Frothy times are here
again.

------
mjfern
There has been increasing commentary lately about a "current startup bubble."
Aside from Qwiki, people have pointed to the valuation of Facebook, Zynga,
Groupon, and others. An important question is, do recent valuations indicate a
second industry-wide Internet bubble, much like the bubble and subsequent
crash in 2000? Or is something else more fundamental going on?

A look at the progression of other infrastructural technologies is useful.
Consider the history of electricity. Paul David, an economic historian at
Stanford, noted that it took many decades for business and society to reap
tangible benefits from electricity. While important technologies were
introduced throughout the 1800s (e.g., electric motors, light bulbs,
generation stations), David suggests that an observer in 1900 would have found
scant evidence that electricity was having an impact on business efficiency.
To take advantage of electricity required not only the introduction of new
technologies, but also a deepening of our understanding and in turn a
transformation of business and social processes. For instance, manufacturing
facilities, which were originally designed for steam power, needed to be
significantly reconfigured.

Although David’s discussion was focused on the lag in productivity
improvements resulting from electricity, it provides some useful insights
about the state of the Internet and its commercialization. While the first
computers emerged in the 1940s, and the Internet was born in the 1960s, it
wasn’t until much later that computing and the Internet were widely adopted by
business and consumers. For instance, it wasn’t until the early 1990s that the
Internet transitioned from a government/ academic project to a commercially
available system, and the Internet wasn’t broadly available to consumers until
the mid-1990s.

In a mere five years from the commercial emergence of the Internet, we faced
the first Internet bubble and bust in 2000. Looking back at history, it’s no
surprise that the first wave of applications generally performed
disappointingly, both technically and commercially. Broadband connectivity,
the Internet backbone, and critical software and hardware standards were still
in the early stages of development. Along with an emerging infrastructure,
there was a limited understanding of the potential of the Internet among
entrepreneurs, established companies, and broader society.

Now that we’ve had 10 more years to develop core infrastructure and to deepen
our understanding of the Internet (and computing) from a technical and
commercial standpoint, we are witnessing the emergence of a new crop of high-
growth companies. Distinct from many of the Internet companies that arose in
the late 1990s, a greater percentage of today’s companies receiving venture
funding are both technically and commercially viable. Many deliver real
customer value and have a tenable revenue model. In addition, to companies
such as Facebook, Groupon, and Zynga, there are a myriad of smaller successful
ventures, such as Pandora, Dropbox, and Airbnb.

To conclude, the 2000 bubble arose just a few years after the
commercialization of the Internet. There was excitement about the potential of
the Internet, but the supporting infrastructure and our knowledge was in its
relative infancy. A decade later, we have made significant progress on both
fronts. The latest new ventures incorporate technologies and business models
that reflect significant infrastructure improvements and our maturing
knowledge-base. Are select companies overvalued? It’s possible. Does this
overvaluation reflect an industry-wide bubble? I don’t think so. In fact, I
think we are at the early stages of a multi-decade transformation, catalyzed
by computing and the Internet, and we will continue to see significant
opportunity and new venture growth in this space. We are moving toward
ubiquitous computing and connectivity, where technology pervades our business
and personal lives. Personally, I look forward to participating in this
exciting and dynamic future!

~~~
ry0ohki
Your post, while insightful, doesn't really provide much reason as to why
there seems to be a huge influx currently of high funding rounds for seemingly
basic or non-profitible companies, the likes that I have not seen since the
90s. The companies you mentioned, Pandora, Dropbox, and Facebook are probably
the exceptions, and don't release financials to my knowledge. It will be
interesting to see what Facebook actually makes when they publish numbers next
year. Last I heard Groupon started with huge profitability and now is burning
way more money then it makes (I also doubt it to be a sustainable biz model).

There is definitely a bubble right now, I've seen average 8-15mil rounds for
companies that offer something tangental to a popular service (it's LIKE
FourSquare, or it's LIKE Pandora) despite the fact that original services
themselves are not necessarily making huge exits. Perhaps it's just that the
horizons on the dotcom VC funds are expiring and there are lots of new funds?

~~~
lefstathiou
I think the answer is a bit more simple than that. Where else should people
put their money if not in high tech?

Industrials correlate to GDP, and GDP is projected to be flat. Same goes with
consumer products and volatility is too high in media. If you have capital to
put to work, Tech appears to have the highest risk/return profile.

Phrased differently: if you had $10mil, where would you put it?

~~~
Evgeny
_Phrased differently: if you had $10mil, where would you put it?_

25% stocks, 25% bonds, 25% gold, 25% cash?

(That's literally what the "Fail-Safe Investing" book boils down to.
<http://en.wikipedia.org/wiki/Fail-Safe_Investing>)

~~~
borism
fail-safe meaning you're ready to lose up to 50% of your investments? cause
quite a few things on that list are mutually exclusive...

~~~
Evgeny
The author argues that these four types of investments are very unlikely to go
down at the same time - if one loses a lot, the other types grow.

    
    
        "	It might seem that a Permanent Portfolio
        containing these four contradictory investments would
        be neutralized: As one element rose, another would fall
        and nothing would be gained.
            	On a day-to-day basis, that can be true.
        But over broad periods of time, the winning investments
        add more value to the portfolio than the losing 
        investments take away."
    

He gives some numbers in the book, from 1970 till 2002 the portfolio lost
money only in four years: 6.2% in 1981, 0.7% in 1990, 2.4% in 1994, and 1.0%
in 2001. Three of these four years were followed by double-digit gains. The
average gain was 9.5% per year.

~~~
borism
70-02 period is pretty irrelevant in today's world though. how did such
portfolio perform during Great Depression, which is more like what we face
today?

~~~
Evgeny
I think the author wrote from personal experience, so he could be either too
young or not even born yet during Greate Depression.

~~~
borism
unfortunately investment advice written from personal experience is pretty
useless if not harmful.

------
PaulHoule
If you asked me, "Why is Wikipedia Better than the Encyclopedia Brittanica?"
my answer would be, "Because it lets people make things like Qwiki."

No, Qwiki isn't the be-all and end-all in this space, but it's an example of
the kind of thing that's possible when people re-mix wikipedia content and
respin it for different purposes and audiences.

That said, $7M gives them a lot of rope to hang themselves, in particular, a
lot of time to hire people and make commitments without the need to focus on
something that's profitable.

My guess is that there are quite a few people working on things in their
garages without an early round of funding who are going to produce things that
are more interesting and make more money in the end.

------
sdizdar
I think Qwiki raised $8 million becasue they have excellent team (Louis
Monier, Christian Le Cocq, etc.). However, I'm bothered with the fact that
such a excellent team is working on something which is not really
groundbreaking nor disruptive. Not something it will change the world (as
search engine changed it).

However, it could be also that they have vision of the world which is hard for
me to comprehend or imagine. The question is: what is their vision?

------
plusbryan
Does anyone know the story behind the two "Co-Founder Emeritus" titles on
their team page?

<http://www.qwiki.com/team>

~~~
bermanoid
Gregory Smith is not involved in the day-to-day of Qwiki because he's actually
a television actor, and I assume he's too busy to be there all the time - he
was the lead role on the WB series Everwood, Doug (Qwiki's CEO) knows him from
when he worked at the WB. IIRC Gregory played a big part in coming up with the
idea for Qwiki, and provided a lot (maybe all?) of the initial funding.

Jay Oh was the tech lead at Doug's previous startup, The U
(<http://www.theu.com>), which shot and sold video tours of colleges (Gregory
Smith and several other actors from the WB appeared in and helped promote many
of these videos, so it's all very connected); I'm pretty sure they achieved a
very nice exit from that when they sold and started to work on Qwiki. I don't
know why Jay left Qwiki, specifically, but he's now one of the leads at
<http://howmutch.com/>.

FWIW, I'm not part of Qwiki, but I was good friends with Doug when we were
younger - on that note, just based on what I know about Doug, if I had to bet,
I'd say that Qwiki has a _very_ good shot here, regardless of what it looks
like now. He has an impeccable business sense and will pivot without
hesitation if it looks like he needs to, not to mention that he's one of the
most driven people I've ever met in my life.

------
oxtopus
In Qwiki's defense, perhaps what they have been demonstrating is only one
manifestation of the technology behind the scenes. The stated mission is to
improve the way people experience information, with an emphasis on valuable
information -- that is, information that, when consumed, could result in a
transaction like "planning a vacation on the web" and "evaluating restaurants
on your phone".

Currently they are mining wikipedia because (I'm guessing) it's a convenient
source for a massive amount of data to feed into an automated system. No one
really cares about turning wikipedia entries into slideshows, but I know from
experience that car dealers and real estate agents pay real money to have
their pictures and data converted into videos.

------
cwb71
I wonder about the timing of this backlash. Where was the outrage when Qwiki
won TC Disrupt back in September?

Is it just because $8m > $50k, or has something changed in the last four
months?

~~~
SoftwareMaven
I think the complaint is that nothing (visible) has changed. Based on what
I've seen, I really doubt the value of this company has anything to do with
reading Wikipedia, but rather in making vast amounts of content and
relationships between content more accessible.

------
kin
I find the article to be slightly contradictory. There's certainly a lot of
potential in Qwiki. Visual presentation of data is a hard problem to solve and
I think Qwiki's current slew of examples many can agree are quite nice. In
that case, wouldn't that answer the question of why they need $8M in funding?
To solve the problem of meaningful data and produce results more in-tune to
their provided sample searches?

------
fedd
where's the bubble? i don't feel it. can't see a queue of investors at my
door! )))

------
cfinke
It's possible that they raised the money to pursue some significant tech
behind a portion of their product; it could be possible that they are on the
cusp of making vast advances in text-to-speech synthesis, and they needed more
funds to see it through. (Possible, but not probable.)

------
puls
Yeah, but you have to admit it's fun to use. I have high hopes for Qwiki just
out of how well they've defined the experience with their product.

Whether or not it's useful is something I doubt we've really come close to
answering yet.

------
woodall
I really like qwiki. If my second monitor isn't in use, I'll toss qwiki up and
watch the promoted videos. I think what they are getting at is some type of
TPRS(Rosette Stone), but online.

------
sfphotoarts
while I agree that like many I don't see the point in having wikipedia read to
me, in their favor they do have pretty design. This looks more like a visual
communications senior year project than a company, but maybe they have
something else up their sleeve.

Then again I thought the same about dropbox, its just rsync, some server
managed storage and a webapp on top. But they seem to be well liked. It's hard
to predict what will stick and what won't.

------
chopsueyar
Surely this is worht at least $16 million...

NSFW - <http://www.qwiki.com/q/#!/Fuck>

------
coryl
Not exactly a bubble; just because a few people give a startup money, doesn't
mean every or any startup is getting money.

------
holman
_[Qwiki's] $8 Million round was led by primary investor Eduardo Saverin, a co-
Founder of Facebook._

Through my extensive knowledge of The Social Network (watched it twice!), I'm
pretty sure Saverin was that guy whose girlfriend lit his bed on fire. This
may shed some light on why the author thinks Qwiki seems poised for failure. I
think.

------
crasshopper
"Qwiki is little more than a toy." upvote

(and compare to AirBnB, which has a function in the real economy outside the
web)

The author does not explain, though, how this is emblematic of a general
trend.

------
Edmond
Qwiki might be good for the blind...

~~~
apl
No. They have much more advanced technology at their disposal.

------
bherms
Ahh Qwiki on CNN right now.

------
jw84
Seems you fancy yourself an iceberg hunter. You see just the tip and you seem
to know everything underneath? How about you stop knocking other's hustle and
focus on yours? You have to learn to let go of this immature angst; it will
eat you alive and taint everything you do.

------
zackattack
you guys are idiots. banksy the lucky stuff is actually a qwiki team member
stirring up controversy to propel his startup. any publicity is good
publicity.

------
spidaman
The author needs to get a grip, a lot of technology bootstraps on top
wikipedia with a capacity to scale from there. Powerset unveiled their natural
language search on the wikipedia corpus and were acquired by Microsoft for
$100M a few months later. I'm sure MS wasn't just acquiring an index of
wikipedia.

~~~
MichaelGG
So, what's Qwiki's technology that's so powerful here then? I think the
sentiment is that their technology isn't anything special, and they don't have
any other particularly distinguishing feature, so why such investment?

With Powerset, the value was supposed to be in the technology, even if the
demo was on Wikipedia. With other companies, say, Twitter, the power is in the
size of their network and potential for _something_ , even if the technology
isn't groundbreaking.

~~~
spidaman
Sure, just don't judge a book by it's...

I don't know what, if any, magic Qwiki has cooking but I think the OP is
excessively harsh. My point was that a lot of startups have needed a big round
to go to the next level from a limited proof of concept where there's nothing
special on their public facing service. So what? Hopefully the vision and
potential is evident under the hood and that's what the investment was
predicated on.

