Main | January 2007 »

November 08, 2006

Powerset Taps Amazon's EC2

Inking the Amazon EC2 DealToday, Powerset announced that we are using Amazon's EC2 (Eclectronic Cloud 2) service and Jeff Bezos talked about it at Web 2.0.  Below is Amazon's description of their service:

Amazon Elastic Compute Cloud (Amazon EC2) is a web service that provides resizable compute capacity in the cloud. It is designed to make web-scale computing easier for developers.  Pay only for what you use.

  • $0.10 per instance-hour consumed (or part of an hour consumed).
  • $0.20 per GB of data transferred outside of Amazon (i.e., Internet traffic).
  • $0.15 per GB-Month of Amazon S3 storage used for your images (charged by Amazon S3)

How EC2 Helps Powerset Compete with Large Scale Search Providers 

For Powerset, EC2 represents the opportunity to create a large scale search infrastructure without paying the upfront capital costs. The advantages for Powerset are the following:

  • Grow to large scale quickly
  • Focus on our core business (Natural Language and AI)
  • Replace huge upfront fixed costs with controllable variable costs
  • Increases our optionality
What it was like before EC2

Until now, startups trying to compete with Google had a fundamental challenge - its really expensive to build out the datacenter to have a complete index and be able to serve millions of users.

Until now the landscape of options were very limited:

  • Build your data center with equity or debt financing
  • Build a smaller data center and grow as you grow in volume

Why these options limit Search Startups ...more

Using Equity Financing
Using equity financing is bad for a number of reasons. It dilutes the ownership of the founders and employees of the company.  It reduces the capital you can spend on your core business. But perhaps most importantly, it reduces optionality. 

Using Debt Financing
Using debt financing increases the load in future years for debt financing and decreases capital spend optionality.  Imagine debt financing millions of dollars in datacenter charges and then having to service the debt beginning within one year.  Typically that puts startups in debt servicing mode right around Series B financing.  Now imagine raising Series B with investors knowing that a large % of their money is going toward past expenditures.  While this won't necessarily stop a financing event, it may make it more difficult or more time consuming (which time is always the most costly factor for startups)

Imagine going into year 2 of your company with 30% of your monthly burn being dedicated to servicing debt. That's like having a huge credit card payment every month that prevents you from having the flexibility of doing what you like best.

Building a Smaller Datacenter
Building a smaller data center will either impact the size of the index or the capabilities of run-time and both of these areas effect product quality. This one is the worst option of all, but is also, the one that most search startups are forced to choose.

So What is Powerset Doing with EC2?
That's where we have to draw the line.  I wish I could tell you, but we do have stay secretive at some level. 

Look for more declassified Powerset stories to come...


November 03, 2006

Powerset Launches New Web Site

Powerset Web SiteToday, Powerset Lauched a new web site.  Unfortunately, we are aren't sharing much more than we did in the last version.  However, in the new version we included a blog section which I highly recommend that you keep checking and we have a news section that lists out our official press releases.

So why did we post a new web site, but not reveal very much?  The main reason is that we are about to make several announcements at Web 2.0 next week (HINT: Series A)  As well, we wanted to create our blog area so that we can have a forum to discuss various topics. 

In the last blogstorm.  Our website was not well equipped to handle the inquiries and discussions that were taking place.  We have learned from the past and now we have a better way to communicate with our audience.  

That's all for now. See you at Web 2.0. 

November 02, 2006

Jeff Bezos Announces EC2

Jeff Bezos Cover of Business WeekToday, Jeff Bezos from Amazon announced the launch of Amazon's Elastic Compute Cloud (EC2) in Business Week.  The launch according to Business Week was met with mixed reviews from Wall Street, negative reviews from analysts, but raving reviews from its customers - like Powerset.

In the article, BusinessWeek does a pretty good job of explaining why the Powerset/EC2 relationship is so valuable.  They say:

"Consider Powerset, the secretive search startup backed by A-list angel investors, including PayPal Inc. (EBAY ) co-founder Peter Thiel and veteran tech analyst Esther Dyson. Co-founder and CEO Barney Pell harbors ambitions of out-Googling Google with technology that he says would let people use more natural language than terse keywords to do their searches. By analyzing the underlying meaning of search queries and documents on the Web, Powerset aims to produce much more relevant results than the current search king's."

The really interesting part is that EC2 is an enabler for nearly any startup competing with existing incumbent giants.  It's actually part of Bezos' strategy to create a team of companies that are working with Amazon and that's a strategy that Powerset benefits from quite a bit. 

" With all these initiatives, Amazon empowers new startups, which are hungry to knock off Internet leaders that happen to be...Amazon competitors. Has Bezos thought about how he may be creating an army of allies to fight his rivals? His answer: "Absolutely!" 

Powerset is planning to have its own press release on EC2 which should come out on Wednesday of next week.  And by the way, look for Bezos' keynote speech at Web 2.0 if you want to learn more about Powerset.

Powerset's Angel Investors


Powerset Investor Dinner

Today, Powerset announced the names of its angel investors.   It has been an amazing time starting up Powerset with the support and help from our angel investors.  We certainly knew that going up against the giants in search ,like Google, was a daunting task.  Early on we sought to get the best and brightest angels to help advise us and help us to buid the best team, the best technology and the best strategic plan.

Our angel investor, knowing how hard it was going to be, are a unique crowd because they got to meet our team, see our strategy and perhaps most importantly got to see the technology first hand in direct comparison with the giants in search.  While there will always be skeptics, its important to say that Poweret's angel investors are among the biggest names in the valley and we believe it is a strong vote of confidence from them for them to invest.

More than that, we consider all of Powerset's investor importand advisors.  Each and every angel that we have has contributed to our company in ways that have amplified our founding team and our employees and that is worth more than money can buy.  

We have a long road ahead of us and we know how hard it is going to be, but we have a great team (soon to be announced) a great angel/advisory team and great technology.  We hope that all of the people who are tracking Powerset remain tough customers and challenge us to live up to our promise.  We know its a little like David and Goliath, but we our fans continue to grow as we start showing what can really do with our technology.

See more for the list of angels ...

  • Azeem Azhar, launch team of BBC Online and, CMO of Albert-Inc
  • Scott Banister, Founder of IronPort, Director of PayPal, Tagged & Slide
  • John Brimacombe, Founder of Ngame, President/COO of Mforma Group (now Hands-On Mobile)
  • Esther Dyson, Founder of Release 1.0, Editor at Large for CNET
  • Reid Hoffman, Executive Vice President of Paypal, Founder & CEO of LinkedIn
  • Zain Khan, early Googler
  • Alex Lloyd, Venture Partner at Rustic Canyon Ventures
  • Luke Nosek, Founder of PayPal
  • Pejman Nozad, Founding General Partner, Amidzad Ventures, Angel Investor in Paypal & Danger
  • Sean Parker, Founder of Facebook, Plaxo & Napster
  • Todd Parker, Managing Director at Hidden River, LLC
  • Rob Rodin, Founder, Chairman & CEO of eConnections, Inc., CEO of Marshall Industries
  • Alan Schiffman, Founder & CTO of Terisa Systems
  • Aydin Senkut, early Googler
  • J. Marty Tenenbaum, Founder & CEO of Enterprise Integration Technologies, Chief Scientist at CommerceOne
  • Peter Thiel, Founder & CEO of PayPal
  • Eric Tilenius, Founder of Netcentives, CEO of
  • Adrian Weller, key investment professional at Goldman Sachs, Salomon Brothers, Citadel Investments