I had the chance to speak on a panel about Online Shopping at a NextNY event this week. And after a great discussion, I started talking with some folks about my last blog post (which commented on how little has changed in online shopping since I founded Half.com back in 1999 -- especially given the vast amount of change that has occurred on the web outside of shopping).  

And I wanted to put a little more specifics/numbers to my thinking.  So I did a little digging on Alexa today -- and found some data that appears to confirm my perspective:

• More than half of today's top 15 most trafficked websites today did not exist back in 1999.  That is not a surprise, as Facebook, Youtube, Wikipedia, Myspace, Blogger, Live.com and Twitter are all new -- and are representative of the massive amount of innovation and disruption that has occurred in the last decade.
• Yet, of the top 15 most trafficked eCommerce websites today, just one of them did not exist back in 1999 (NewEgg - which launched in 2001).  Which means that over 90% of the top eCommerce websites are over 12 years old!  That is pretty remarkable to me -- and reflects an amazing lack of external innovation (and disruption).   

• And if you compare today's top 15 list of eCommerce websites to this list from 2005, you'll see it's almost identical.  So not only have almost all the top eCommerce sites existed for 12 years -- there has been virtually no dislocation among the leaders.

As I said in my last post, I believe we've seen more innovation (and potential for disruption) in eCommerce in the last 10 months than we have in the last 10 years -- with group buying, demand aggregation, game mechanics, flash/group sales, leveraging the social graph for customer acquisition and mobile.  And, I believe that this is a great time to be investing in these disruptive models.

Anyone want to bet whether, in the five years from now, the top 15 eCommerce sites will look pretty different than they look today?

It’s hard to believe it’s been 10 years since we launched Half.com.  (Unless you watch the video of Half.com's launch on the Today Show -- in which case you'll see how much I've aged since then)

One of the things that’s surprised me the most over the last decade is how little transformative innovation has occurred in ecommerce.  eBay looks pretty much the same as it did a decade ago.  Amazon looks pretty much the same as it did a decade ago.  While the top 10 sites on the Internet have changed dramatically over the last decade, the top 10 online shopping sites on the Internet have not.  The traditional catalog/cart shopping model remains pretty much unchanged.  I’m not sure of the reasons why so little innovation has occurred – perhaps it is because of Google.  Specifically, the fact that online retailers had a scalable, measurable, and predictable source of customer traffic (through both SEO and Adwords) might have reduced the external pressures to innovate.

However, the online shopping paradigm is finally changing.  Indeed, I think we’ve seen more innovation in the last 10 months than in the last 10 years.  We’ve seen an explosion of interesting technologies and opportunities that seek to change online shopping, such as:

• Mobile
• SNO (Social Network Optimization)
• User Generated Content 
• Private Sale Shopping Sites
• Virtual Goods 
• Behavioral Data Augmentation
• Game Dynamics
• Demand Aggregation
• Real Time Marketing and Messaging
• API's that allow for syndicated shopping
• Alternative Payment Technologies

At First Round Capital we haven’t been bashful about investing in these spaces.  In fact, we currently have over a dozen companies in our portfolio that seek to transform online shopping.  And tonight we put those companies on display at our first ever First Round Capital eCommerce Summit.   Like our previous one-day events for our advertising-focused and entertainment-focused companies, the goal of this summit was to give our portfolio companies a forum to make brief (6 minute) presentations to their target customers.  So we were really excited that we were able to attract over 100 attendees from the country’s leading eCommerce sites, brands, tool providers, analysts and influencers – including representatives from Alibris, Apple, CafePress, eBags, eBay, Fandango, Forrester, Gap.com, Google, GSI, Ice.com, Intuit, Magento, Omniture, Open Table, P&G, ProFlowers, QVC, Red Envelope, Safeway.com, Shopping.com, Shopzilla, Shutterfly, StubHub, Urban Outfitters, Williams Sonoma, Ylighting and Zappos.

A lot has happened since we started First Round Capital in 2004.  We've invested in over 75 amazing companies, grown our team to include 8 investment professionals, and opened offices in three states.  We've also become the most active seed-stage firm in the country -- with the most visited VC website. 

Yet, despite all this change, our website remained pretty much the same as it looked in 2004. 

And while we really haven't changed our firm's focus over the last six years, we still thought it was important for us to highlight why we think we’re unique - and what we look for.

Since all our investment professionals blog, we've integrated everyone's work-related blog posts onto one page - and made it easy to subscribe to all the posts from one RSS feed.

One of the most helpful things a VC can do for a portfolio company is to help them find key hires.  And the jobs section of our site contains well over 125 current job openings within our portfolio.  Indeed, just last month our website was responsible for connecting over 1,000 candidates to our portfolio companies.  In addition to posting the listings on our site, you can find them via an RSS feed of the jobs or at our @frcjobs Twitter account.  And be sure to signup for our Key Hire Wire newsletter which emails you one 1-3 executive jobs in our portfolio each week.

Finally, since it's pretty rare that a day goes buy without some news from a First Round Capital portfolio company, you can keep up with the news on our news page -- or subscribe to our news RSS Feed or follow our @FirstRound account on Twitter.

Our firm today looks very different than it did six years ago -- and now our website does too.  I'd love to hear your thoughts and suggestions.

One of the most useful things a VC can ever do for a portfolio company is to help a CEO make a key hire. While every hire is important, some additions are pivotal value creating moments in the life of a company.  

In an effort to find new ways to be helpful to the companies that we invest in, First Round Capital is starting a weekly e-mail newsletter that will highlight some of the best opportunities to work with the great teams we've backed.  Each week, we are going to send out a single e-mail with just 2 or 3 senior-level jobs (Director-level and above) that we want to find the best people for.

We just sent out our first email went out this week, which featured three amazing opportunities:

• Vice President, Marketing - DoubleVerify (NYC)

• Regional Vice President of Sales - BazaarVoice (Austin)

• Senior Director, Product Management, BigDeal.com - San Francisco, CA

Would you like to get these weekly emails? If so, sign up here...

(And if you're interested in seeing all 166 current job openings at First Round Capital portfolio companies, be sure to check out http://jobs.firstround.com/ or just follow FRCJobs on Twitter).

Yesterday was one of my favorite days of the year.   Not because Steve Jobs unveiled an iPod with a 9 inch screen.  Not because it was Obama’s First State of the Union Address.  Not because of any earth-shaking pronouncement made at Davos.  But rather, because it was the First Round Capital CEO Summit.  It was the one day each year where all of the CEOs/Founders of our portfolio companies come together in one place.   It was an amazing experience for me – to see so many smart people in one room.  Exchanging ideas and sharing experiences.  Doing deals with each other.  Asking each other for help.

I know that in addition to being cash constrained, the typical entrepreneur is even more time constrained.  And asking our entrepreneurs to spend a whole day of their time away from their office is asking them to make a big time investment.   And judging from the responses we’ve seen so far, I think the day was a success all around. 

One of the benefits of having a fairly large portfolio is that our portfolio companies can offer a lot of value to each other.  Whether it is sharing interview techniques, technical management strategies, sales leads, perspectives on the advertising market, or doing deals - it is always great to see portfolio companies helping each other succeed.  And now, I'm excited to announce that First Round Capital entrepreneurs also have the potential to benefit economically from  each others success.  That is because yesterday we unveiled the First Round Capital Entrepreneur's Exchange fund.  This exchange fund was created to allow First Round Capital entrepreneurs to contribute a small piece of the stock they own in their company  -- and share in the upside of all the other companies.  The fund is only available to qualified First Round Capital portfolio companies and First Round Capital does not receive any economic upside from the fund.  The goal of the fund is to allow our entrepreneurs to get the benefit of some tax efficient diversification without giving up their upside prematurely. 

When I was an entrepreneur, I remember the feeling of having all my eggs in one basket -- and it is our hope that this fund will remove some of that stress.  Now our entrepreneurs can get the same diversified portfolio that our limited partners get (with better economic terms) and receive a financial benefit when other First Round Companies exit (even if their own company is still years away from an exit).  I'm super excited about this fund -- as (I think) it is the first time that a VC firm created an exchange fund just for their entrepreneurs.  In addition to allowing our entrepreneurs to exchange their shares into the fund, I believe this fund will result in more sharing and exchanging of ideas and assistance between the companies.

My lawyer pestered me to add this dislaimer:  This is not an offer to buy or sell securities in the First Round Capital Entrepreneur's Exchange Fund.  In fact, even if you wanted to participate in the fund you couldn't (unless you were a qualified First Round Capital entrepreneur).

Susan Boyle was a dreamer.  She believed in her talent -- and just needed a platform to help the world hear it.  This past year we saw what can happen when the right talent is combined with the right platform.  Susan became a viral hit -- with over 80 million views on her YouTube video.  And this past week her debut album smashed all records --racking up the biggest one-week sales total of the year, and the highest debut ever for a solo female artist.

Well, Susan's not the only one with talent.  We are fortunate to work with a pretty amazing group of entrepreneurs.  A talented group of people -- who dream big dreams.  And we're happy to present First Round Capital's annual holiday video to demonstrate it.  

Happy Holidays!

First Round Capital 2009 Holiday Card from First Round Capital on Vimeo.

It happens all the time.  I’m meeting with an entrepreneur, who is telling me about a really innovative product idea for a consumer website.  And I’m liking it.  We’re going back and forth on product ideas.  And before I know it, we’re approaching the end of our meeting.  I then ask them, “So, how are you going to acquire customers.”  And that’s when it happens.  That’s when I realize that they’ve spent all their time focusing on the product/site, and aren’t nearly as innovative when it comes to their customer acquisition plans.  They view marketing as something they can “bolt on” afterwards.

The most disappointing answer is when they say “Oh, we’ll just make it viral.”  As if virality is something you can choose to add in after the product is baked - like a spell checker.  Let’s imagine the conversation at the marketing department of the wireless phone companies.  “Let’s see.  Should we spend $4 Billion on advertising this year…or should we just make it viral?”.

Virality is something that has to be engineered from the beginning…and it’s harder to create virality than it is to create a good product.  That's why we often see good products with poor virality, and poor products with good virality.  The reason that over $150 Billion is spent on US advertising each year is because virality is so hard.  If virality was easy, there would be no advertising industry.

That’s why First Round Capital’s website has always said: “Too many companies treat marketing and sales as a tactical afterthought. We believe marketing is strategic and seek companies that are marketing focused – with marketing requirements driving product development.”

Customer acquisition (also called distribution) is the number one challenge facing consumer web properties.  And that's why I'll be digging in deep on this subject through a series of blog posts where I hope to focus in depth on the challenges (and opportunities) in customer acquisition…  Up next:  "Business Development and Distribution"