There was something surreal about watching President Obama take the oath of office from a hotel room in Karachi, Pakistan. Several times, I wondered whether there were more suicide bomb barriers surrounding his dais or my hotel. Suicide bombers had nearly destroyed the hotel a year or two earlier, and the predictable reaction—to erect sufficient vehicle barriers to stop more than one simultaneous attack—had of course been implemented. And so I watched, from 13,000 miles away, as America took what I profoundly hope will be the first of many steps towards reestablishing its international reputation as a symbol of freedom, all the while knowing that I was under strict orders from our hosts not to leave the building.

All around me were little security instruction sheets, thoughtfully Xeroxed by the hotel staff and placed in every room. From the typical (“this water is unsafe for drinking; kindly enjoy the complimentary bottle of mineral water provided”) to the stern (“do not stand on balcony; snipers may be active”), the warnings combined to deliver the message that, thanks to the efforts of less than 1% of the population, Westerners are simply not welcome in Pakistan. 99% of Pakistanis we met were hopeful, interesting people, happy to talk to an American (and to ask us about our new president—more about that in a different post). But all I had to do was look out my hotel room window to realize that it is the 1% who rule the country.

View from my Karachi Hotelroom

As they so often do, this picture tells the story better than I can. The balcony is enclosed in a net, lest grenades be thrown up onto the landing. The wires above the pool are for god-knows-what security technique. (My guess: since they are either grounded or energized, probably an anti-eavesdropping measure which doubles as a mechanism for defeating radio frequency bomb triggers, although my mobile phone worked just fine underneath them, so perhaps not.) There were magnetometers, x-ray machines in the lobby, and nearly every entrance to every building was peopled by thoroughly un-reasuring armed guards. There were small trucks parked in the parking lots of both “Western” hotels, each filled with four chain-smoking Pakistani infantrymen, on top of which was mounted what looked like an M60 (.50 caliber machine gun). Two bomb-sniffing Labrador retrievers worked the parking lot. ID checks were performed endlessly.

I doubt that any experience since 9/11 has reminded me that this really is a war. Not a war which gives our government the right to abrogate our Constitution, but a war nonetheless. And until it ends, Americans traveling abroad had better remember that the actions of our own government (and in particular the recently-departed administration) catalyze reactions abroad which pose as grave a threat to our well-being as any other. (Until 2002, there had been no attacks against Western targets in Karachi. That all started after we reacted to 9/11.) In the end, no matter how hopeful I am that the inauguration of President Obama will set us off to righting our standing worldwide, we will remain “the enemy” for a long time to come.

Not so.  Enter Sequoia Capital’s “RIP Good Times” presentation.  Within a day, eight people had forwarded it to me, along with notes taken by a briefly-anonymous Sequoia portfolio CEO.  Shortly thereafter came the Benchmark Letter, which another investor and our corporate counsel both forwarded to me.  And the Ron Conway email.  The argument is that revenues and earnings will fall off the table (thus perhaps justifying the fact that today’s S&P 500 is trading at a pretty low average P/E of 10.5), thus necessitating tectonic readjustments to spending.

And there it was: in one great, coordinated movement, Silicon Valley panicked.  It was as if the Valley remembered 2000-2001 and couldn’t sleep.  A friend of mine, at a Seqoia company, worked the weekend and executed a 40% layoff earlier this week.  Hi5 cut staff, Zillow and Adbrite did the same, and the list goes on and on.  One day everything is fine;  the next, the world is ending.  Trader mentality hit Sand Hill Road.  With the zeal of the converted, a paroxysm of cost-cutting swept Valley CEOs.

This “stampede for the exits” mentality of supposedly long-term investors here in the Valley makes zero sense.  One of my Directors correctly pointed out that Moritz et al. at Sequoia were undoubtedly “firing for effect,” and I’m sure they were, but tell that to the employees laid off by my friend’s Sequoia-backed company.  The problem with making rapid adjustments to early stage companies is that the adjustments themselves effect the business.  There’s a Heisenberg Uncertainty Principle in startups:  trimming too fast or too precipitously will injure the company far more deeply than it would a larger, established company.  Why?  Because start-ups in particular rely on their employees to go the extra mile, think the impossible is possible, burn the midnight oil, and invent the ingenious.  They also rely on their employees knowing they’re involved in something special, relishing their creative environment, and collaborating with their colleagues.  (For which, of course, they need to have colleagues…!) Take all that away, and a start-up is just a thinly-staffed, under-capitalized company with no track record or proven market.

There’s another, more profound risk, however:  react too strongly and Heisenberg will assure your startup misses the market opportunity it’s not expecting.  The problem with over-optimizing, particularly in venture-backed companies, is that they will miss the unexpected, creative opportunity, either because they are so busy dealing with the ramifications of precipitous cost-cutting or because they will be so under-staffed and so hyper-focused on cash flow that they will have neither the energy nor the creative spirit to do something daring when the opportunity presents itself.

Does this mean we should be spending profligately and ignoring the broader dynamics of the economy?  Of course not.  No CEO in his or her right mind would do so.  But the fact remains that what makes Silicon Valley great is certainly not its ability to play the part of proverbial “tail” to the economic dog which wags it.  Every one of us should take a careful look at our spending, our sales forecasts, and make sensible business decisions based on what we see.  (In our case, we see changes coming and are adjusting for them.  We’re cutting where we need to, investing where we can afford to, and otherwise treating the shake-up as an opportunity to test every single one of our assumptions.  And, yes, if one of those assumptions changes and we see a problem, then we’re going to cut spending.)  But lay off 40% of staff just because someone gave a presentation?

Fortunately, voices of sanity have begun to speak up.  My friend and colleague Pascal Levensohn (full disclosure: also now an investor and Board member in my company) wrote an excellent post today putting context around the Sequoia presentation.  And none other than the Sage of Omaha himself is going long on US equities.  All of us running businesses under these economic circumstances are well-served to create a back-up plan (the “survival plan”), take a whack at expenses wherever and whenever possible (hey, shouldn’t we be doing that all the time anyway?), test every single assumption in our models, and perhaps think long and hard before hiring additional staff.  But then we should go back to work, build amazing businesses, and remember that Silicon Valley is about the future and we’re in charge of creating it.

As the press release on our website explains, inclusion in the AO Global 250 “signifies major developments in the creation of new business opportunities in the global technology industries.” And, hey, if AO’s founder, Tony Perkins (of Red Herring fame) gives us his approval, I for one am happy to have it.

• ShotSpotter was originally deployed in the District by the FBI, in August 2006; the Metropolitan Police Department has subsequently taken over operational responsibility.
• By September, police will be covering 16 of the District’s 68 square miles with ShotSpotter.
• Police rely on ShotSpotter to provide accurate information about gunfire more quickly than they hear about it at 911—if anyone calls 911 in the first place (more often than not, they don’t).
• In one district (District 7, where 21 of the City’s 78 homicides occurred last year), ShotSpotter detects as many as 50 gunfire incidents per week.
• ShotSpotter has helped DC police make arrests, save lives, and has provided key evidence in high profile cases, such as the officer-involved shooting of DeOnté Rawlings.

The blogosphere and traditional news media are actively reporting this news.  Check out the coverage and photo on Fox News and  WTOP, and blogs at YourStreet, APBNews, and of course on the ANC2C02 Forum (a resident of Shaw and a regular blogger on the topic).

Personally, it’s gratifying to see a city and its community rally around what my colleagues and I spend our days working so hard to deliver.  Nothing replaces good, hard police work (no ShotSpotter sensor will ever look in someone’s eyes and make a tough decision, put its life at risk every day, or put handcuffs on a suspect), but in the end, our job is to deliver our first responders the best tools they can have, and it appears to be working in our nation’s capital.

About a year or so ago, I was lucky enough to meet Dan Gross, the co-founder and CEO of PAX, a New York-based organization which has developed two truly innovative programs which reduce gun violence long before anybody ever fires a weapon. A former advertising executive, Dan found his life changed forever when his brother became the innocent victim of gun violence himself: his younger brother Matthew was critically wounded in the now infamous 1997 shooting on the observation deck of New York’s iconic Empire State Building. Leaving his lucrative advertising career behind, Dan has since become first the leader of PAX and then the creator of two important programs.

One of these programs, Speak Up, addresses the reality that many school shootings are avoidable. According to the US government, over 1,000,000 students take some kind of weapon to school at least once a month. Moreover, over 80% of school attacker tell someone of their plans before they execute them. In other words, in four out of five cases, friends of the perpetrators−often themselves students in the very schools which will later fall victim to gun violence−have heard rumors, threats, innuendo, or otherwise have reason to suspect the perpetrators may turn to guns to settle their grievances. Although it seems obvious that a “hotline,” reminiscent of suicide prevention hotlines, should be created for kids to report such threats anonymously, it turns out not to be quite so simple. There are both legal and procedural complications inherent in accepting anonymous tips regarding minors. Enter Speak Up! Thanks to a 24/7 hotline at 866-Speak-Up and numerous educational and support materials, students now have a safe an anonymous resource on which they can rely. Perhaps equally importantly, PAX has spent the time and money to develop a carefully-calibrated protocol which is endorsed by national law enforcement and educators’ organizations.

The second program, called ASK, encourages parents to ask if the homes which their children visit to play contain firearms. Why? Because a shocking 1.7 million children in the US live in homes with weapons which are both loaded and unlocked. In 2003, nearly eight children and teens were killed by firearms every single day. And in 2004, a horrifying 37 children and teens were injured by firearms every single day. With 40% of children living in households containing firearms, it’s not unreasonable for parents to ask: “Are there any guns where my children are playing?” (As aside: neither I nor, it seems, PAX, have any objection to properly licensed and secured—i.e., locked—firearms. This is not a gun control issue. This is a safety issue.) This year, on June 21st (the first day of summer), communities nationwide will recognize ASK Day, a day to focus on asking a simple question which can save kids’ lives.

If you have a moment, browse over to the PAX website and learn a little bit more. Find out how you can help. Every time these two PAX programs succeeds in reducing an incident of gun violence—even if that eliminates an opportunity for a ShotSpotter-assisted arrest—I, for one, will feel our society has taken a step in the right direction.

Gun violence has become not only the tool of murderers but the tool of intimidators, and thus it is becoming all the more prevalent. One city in which our technology is deployed, for example, suffered 100 murders last year. There were another 300-500 people wounded by gunfire. But in that same city, over that year, we detected more than 3,000 incidents of gunfire. All of this in a city in which it is illegal to fire a weapon outdoors within city limits (unless, of course, one is at a licensed shooting range). It is safe to assume this approximately one-in-ten ratio is not the result of preternaturally poor aim on the part of those shooting the weapons. Nor is it anything to be happy about. As these data indicate, guns are fired illegally just as often for purposes other than to kill someone. So one need not only be concerned about murders and hard-core felons. We also need to worry about the people who fire guns for the sake of intimidation, to “mark territory,” or simply because it’s fun.

The solution to our nation’s gun violence problem does not lie solely in technology such as ShotSpotter. Naturally, as the company’s CEO I am inclined to recommend the technology as a reliable mechanism to reduce gun crime (in fact, ShotSpotter systems have been proven to reduce gunfire and violent crime), but that’s not the point of this posting. The sad reality is that, by the time ShotSpotter finds out about a crime, society as a whole has missed the opportunity to prevent that crime from happening in the first place. Around the office, we can occasionally be heard saying that ShotSpotter can’t help put the bullets back in the gun. Nor can we stop the gun from being fired. But what if somebody could? Therein lies a tremendous opportunity.

The next post in this series: capitalizing on that tremendous opportunity

Those of us who live near the Hayward Fault, which runs to the East of Silicon Valley, have known for a while that we are “overdue” for a quake (with apologies to the Wizard of Odds—yes, of Odds—for flirting with the Gambler’s Fallacy). [Aside: anyone remember that great '80s Bond film with the man-made Silicon Valley earthquake?]

When the quake hit, I was having dinner with two colleagues from work, one of whom had been around during the much more serious Loma Prieta quake in 1989. That one measured about 7.1 on the Richter Magnitude Scale. Most people know that the Richter scale is a logarithmic scale, but many don’t realize that the scale actually provides two different output values: the physical displacement at the fault location goes up by a factor of 10 (i.e., the log is to the base 10) for each single unit of increase, but the energy released goes up by a factor of 32 for each single unit increase. Thus the ’89 Loma Prieta quake was approximately 181 times more energetic than today’s quake.

A truly astonishing amount of information was immediately available about today’s quake, thanks to automated processing and reporting of seismic events. For example, here’s a map of all the recent earthquakes in California from the USGS. (The large blue rectangle is, of course, the quake in question. Note the smaller aftershocks.)

The detailed report on the quake confirms that the sophistication of automated earthquake analysis is truly impressive. Want to know whether there’s a tsunami risk? Read the Tsunami Message from WCATWC. (No risk.) Or how many people in your neighborhood felt it? Read this map. (84 in Mountain View.) Or what the ground looks like above the epicenter? Check this out:

This is all particularly interesting to my colleagues and to me because the mathematics used to locate earthquakes (by seismic triangulation) are pretty much identical to the mathematics use at ShotSpotter to locate gunfire (by acoustic triangulation). Both techniques are fundamentally based on the difference in time of arrival of a transient signal (the seismic or acoustic wave) at sensors located in different places. Based on this difference in time of arrival (also known as TDOA, or time difference of arrival), a series of hyperbolae can be plotted, and the intersection of these hyperbolae will be the origin of the transient. Why hyperbolae? Hyperbolae are “curves of constant difference in distance” between two points, or foci. Wolfram has an excellent article explaining them. So, geometrically, if you have two different points F₁ and F₂, then there is a hyperbola is the set of all points whose distance from F₁ and F₂ always differs by a specific constant, which we can call k. In the diagram below, for example, the difference between the distances r1 and r2 will equal k, as will the difference between the distances r3 and r4.

The physical interpretation of this k is straight forward: it is the difference (in time) between when someone standing at F₁ and someone standing at F₂ would hear a noise which originated somewhere on the hyperbola.

If you have only two points (F₁ and F₂ ), then you have a single hyperbola. But if you have three points (F₁, F₂ and F₃ ), then of course you have three hyperbolae, reflecting the difference in time of arrival at the three points (F₁/F₂ , F₂/F₃ , and F₁/F₃ ). This diagram, from Suruj Dutta’s site explaining the technical underpinnings of location-based services, shows how cell phone triangulation works and gets it mostly right, although it only shows two of the three hyperbolae:

Moreover, the reflections and “echoes” caused by different geologic layers of the earth are quite similar to the reflections and echoes caused by the complex urban terrain in which ShotSpotter systems are deployed.

The seminar was sponsored by the Business Leadership Council of the Jewish Community Federation of San Francisco, the Peninsula, Marin and Sonoma Counties (nothing like a short name) and was hosted by the Mountain View office of Fenwick and West LLP.

Pascal discussed the dynamics of VC-backed boards (the fact, for example, that they often vote unanimously; that they can suffer from “big dog on the block” syndrome, in which the “big name VC” often drives all the decisions; the dangers of strategic money in VC deals; and even the tendency of “name VCs” to leave the board and replace themselves with junior partners when a company is in trouble). Pascal also suggested that VC-backed companies circulate and tabulate a Board effectiveness survey in much the same way that public companies do. It was refreshing to hear someone state what many CEOs already know: if CEOs are the single least reviewed and formally evaluated employees in VC-backed companies, then Board of Directors are perhaps the second least reviewed and evaluated aspects of corporate governance.

Now if the Board is responsible for setting the direction and the CEO for steering the ship, and they are the least reviewed and evaluated elements in the company, what’s wrong with this picture? Pascal has published an excellent whitepaper on Board governance which ought to be recommended reading for everyone involved in venture-backed businesses. Suggestion for intrepid VCs: provide a copy of this whitepaper as an exhibit to your Term Sheet!