Business Model of Waze, sell for big bags of Google cash

Next week is GigaOm Structure.  I have gone from attending as a blogger, to working freelance as a GigaOm Pro Analyst, to speaking at the conference.  This next one I am moderating a panel discussion on a Private Cloud with Revlon and NetApp.

HOW INFRASTRUCTURE CAN TRANSFORM BUSINESS SUCCESS

 

In this session we focus in on how the right IT infrastructure can create significant competitive advantage. Understanding that IT’s job is to make systems work for people rather than people work for systems, Revlon sought to align IT to the business with the successful implementation of a private cloud. Its resulting infrastructure turned 3.6 PB of data into a business driver and runs more than 500 applications in a virtualized environment. Its initiative has demonstrated clear ROI.

Moderated by:Dave Ohara - Founder, GreenM3 and Analyst, GigaOM Research
Speakers:David Giambruno - SVP and CIO, Revlon
 
Cynthia Stoddard - SVP and CIO, NetApp 

You could look at what I did as like coming up through the mail room, but another way is I was spending time in various roles to get a better understanding.  The folks at GigaOm eventually figured out how much I knew and started using my skills more.  One of the latest insights on GigaOm was when I was talking to one of my old bosses at Microsoft Frank Artale.  Frank is a partner at the VC firm Ignition Ventures.  Besides working for Frank on Windows 2000 he is also on Lake Sammamish and he likes to cook.  Next time I see Frank we need to talk about his kitchen vs. my woodstone oven.  But more relevant is the last time I saw Frank at GigaOm Structure Data he mentioned how many VCs are at the show.  I paid more attention and have gone through the attendee list and 2nd after the the technology companies (which have the highest attendee) is the VC community.  There are more VC than press.  There are more VC than infrastructure or cloud people.  And when I started hanging out with a few folks their most often side conversation was with another VC.

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GigaOm's Om Malik posts on the Waze business model of selling to Google for $1 bil and cuts to the point of the challenge for Waze's business model.

Actually, selling to Google (or anyone else) was actually the only outcome for this company — even though it had tens of millions of people using the software in dozens of countries worldwide, it would have been pretty hard for them to turn social commuting into a real business. Google, on the other hand, can simply layer this on its maps and try and use the data to drive more real world transactions.

As I pointed out in a post about the new Google Maps, Google will ultimately create more natural advertising formats for maps-driven interfaces and Waze helps them towards that objective. That said, it is a great exhale for Waze’s investors, who were facing the prospect of building a real business — a much harder proposition than most in Silicon Valley understand or are willing to admit.

I've had chances to chat more with Om and shared cab rides in NYC.  Om knows lots of stuff including how the VC community works and how to look at start ups.  The #1 issue for selling a company is whether the VCs who supplied the money approve of the sale.  If they don't, you can't sell.

The big winners in this deal are investors that include Magma Ventures, Blue Run Ventures and Vertex Ventures, who were earliest backers of the company. Sources say they each made well north of $100 million from the deal. The surprise (and ironic) winner might be Microsoft, which is rumored to have invested in the company as a strategic investor.