I was surprised to read Michael Arrington’s TechCrunch post on Friday that Edgeio was going to be shut down. On the one hand, it’s kind of scary, my being in the vertical search space and all.

There’s always that moment of initial fear when you read something like that. Maybe nuroa really isn’t going to work? WTF have I gotten myself into? And HTF did they burn through $5 million in less than a year without being able to generate any revenue or relevant traffic or enter into any significant strategic alliances? This is perhaps the biggest question in most people’s minds. (It still amazes me that a start-up that launched in Feb. 2006 could receive a cheque for $ 5 million from a VC only 7 months later! I’m assuming the valuation at that point must have been somewhere between $15 and $20 million?)

But upon closer analysis, it’s clear that Edgeio’s problems had less to do with being a vertical search engine and more to do with being more of a concept than a business. To me, Edgeio’s failure reflects the danger of creating a tech-geek project with very little appeal or applicability in the real world.

Following are the four main lessons that I think can be learned from Edgeio’s demise.

Not All Vertical Search Engines Are Created Equal: Whereas the majority of vertical search engines crawl classifieds portals like Idealista and ImmobilienScout 24, or have a direct relationship with real estate agencies like Sasi or Engel & Völkers, Edgeio’s model was to operate — as the name suggests — on the “edge”. Cutting through the PR jargon, this means that they only looked for classifieds listings on blogs or other RSS-enabled sources — this explains Michael Arrington’s involvement and value-added to the project. TechCrunch was the ideal platform from which to launch a blog-focused vertical search engine. As TechCrunch explained when Edgeio launched: “The Edgeio ethos is that content belongs on the edges, and that is where the name originates from (Edge input/output). Content on the edges means the content on the millions of blogs and other sites out there which Edgeio does a good job of aggregating and organizing.” So whereas property search engines like nuroa aim to disrupt the traditional classifieds space by crawling mainstream classifieds sites, Edgeio chose instead to bet that sellers would be willing to create blogs on which they listed their properties or other classifieds, and Edgeio would then aggregate those blogged classified listings. The basic problem is that a business focused only on classifieds in blogs is not currently very scalable, as the majority of people still use more traditional offline and online options (e.g., classifieds portals and newspapers) to advertise classifieds goods.

Classifieds Are Local: Given that their main market is the blogosphere, Edgeio was never focused on any one geographical market. If you take a look at their website (which is very well-designed by the way), the tagline is “search the world’s listings”. Their value proposition was that they granted you access to over 100 million listings in 1,484,953 cities and 166 countries What does this mean in practice? If I’m looking for an apartment in Barcelona, why would I care that there are lots of listings in 1,484,952 other cities? Also, I don’t really see why local advertisers would choose to advertise on an “international” website, particularly if this international website isn’t one of the leaders in its local classifieds space. In other words, if I am Expofinques and I want to strengthen my market position in Madrid where I’m not as strong as I am in Barcelona, why would I advertise on Edgeio as opposed to the other sites that are more focused on Madrid? And if I’m a property buyer in Barcelona why would I be more interested in searching “the world’s listings” than in searching “the most complete set of listings in Barcelona”? Start-ups have to focus on a market, or a product, or on something in particular. Being focused on “the world’s listings” is largely meaningless, other than as a concept.

Keep Your Burn Rate Down Until You Have Some Indice of Possible Success: Edgeio’s hype always had more to do with the connection to Michael Arrington and TechCrunch than anything else. Whereas companies like Trulia, Simply Hired and Indeed have generated significant traffic, marquee-name investors (Sequioa, News Corp. and The New York Times) and are growing nicely (e.g., Trulia’s U.S. traffic is up 130 percent in 2007, to 1.2 million unique visitors per month, according to Comscore), Oodle’s vanguardist and diffuse approach never seemed to catch on. Nonetheless, it seems that they were determined to buy their success and hoped to convince investors to continue investing in them, even though they had no material revenues, traffic or partnerships. Michael Arrington is pretty direct in explaining why Edgeio had to close down: “The company burned through [$5 million] according to plan, meaning they ran out this month. The product roadmap was fulfilled, meaning development lags didn’t hurt the company. But the revenues didn’t come in and user/partner milestones weren’t met. And that meant no one else was going to put more money into the company.” In the comments section, he’s even more reflective and frank: “In general I’ll say this - it is unwise for a company to spend a lot of money building out infrastructure before a product proves itself.”

This is just further proof of what Fred Wilson of Union Square Ventures noted in a recent post entitled “Why Early Stage Venture Investments Fail“: “[I]t’s pretty clear to me that most venture backed investments don’t fail because the business plan was flawed. In my experience at least 2/3 of all business plans we back are flawed. Most venture backed investments fail because the venture capital is used to scale the business before the correct business plan is discovered. That scale/burn rate becomes the cancer that kills the business.”

It’s Easier to Criticize than to Do It Yourself: I can’t help but note a certain irony in noting that one of tech’s most noted and sometimes more hyper-critical bloggers — he created the Dead Pool with a certain glee — is the co-founder of the most prominent vertical search engine to enter the Dead Pool, despite all of the natural advantages that he has given his access to financing and marketing. Most of us would give our left arm to appear prominently in TechCrunch, but Edgeio is proof that expensive marketing can’t make up for an ill-conceived product.

And it also shows that like the old saying goes: “Opinions are like assholes. Everyone has one.” It’s a lot easier to criticize others than to create a successful product yourself.

The best we can do is hope to learn from Edgeio’s mistakes so as not to end up like they did.

Kind of like an interesting follow-up/contrast to my last post on the Samwer brothers, The New York Times has an article today focusing on Max Levchin, one of the founders of PayPal who’s worth about $100 million and is now in his second start-up. Levchin says that he will consider the new project, slide.com, a failure unless it’s ultimately worth at least $1.54 billion — the price that eBay paid for PayPal.

The focus of the article is to understand what drives under-35 tech millionaires in Silicon Valley who are already fabulously rich but still feel the need to create the next big thing.

Extraordinary success isn’t enough for them, if it only happens once and if it happens when they are still young. It’s almost like they have nothing left to live for after they’ve realised their dreams. So they dare to dream again.

Levchin explains why he didn’t enjoy his collaboration with Sequoia after he made his fortune. Or more appropriately, why he wasn’t a very good VC.

He explains: “I took this perverse pleasure in seeing if I could make someone cry.”

The thrust of the article is that in Silicon Valley, money isn’t everything. As Robert Sutton, a professor at Sutton explains: “In other parts of the country, things like a great estate are the symbols people most respect. But here, the greatest status symbol is a person’s ability [to] still bring out hot new companies.”

The Wall Street Journal is reporting that Microsoft is in talks to buy 5% of Facebook for $300-500 million. Facebook is courting multiple investors and is asking for a valuation of at least $10 billion.

Google is apparently also in the running, though Google has a lot less cash saved up than Microsoft does.

Must be nice to be Mark Zuckerberg.

Facebook is growing quickly. It not boasts 40 million users, up from 9 million one year ago.

But the funny thing is that the Journal reports that Facebook has chosen the investment approach, because their business model can’t sustain an IPO. The valuation isn’t based on actual earnings or profit. It’s estimated that Facebook has earned the majority of its $60 to $90 million (with no profit) in annual revenue from an advertising deal with Microsoft and that this year it will have a profit of $30 million on revenue of $150 million.

That’s a multiple of 300x profit, which is a bit exagerrated, particularly if you take into account that the payments from Microsoft are effectively a subsidy to create a relationship with Facebook. Although social networking sites like Facebook have huge audiences, most of their members don’t want to see ads. Their click-through rate is relatively low.

But the valuation is more about the clash of the Titans — Google vs. Microsoft — and the fight for the future of the Internet than it is about Facebook per se.

The Journal also has an interesting “where are they now” study of GeoCities, a social networking site that was the Facebook of its day. In August 1998, GeoCities was the 3rd most visited site on the web, and Yahoo bought the company in 2000 for $4.7 billion. But GeoCities failed to update its technology quickly enough so that less than a decade later, the site and its technology are obsolete. Apparently, Yahoo was more focused on building traffic than on improving the service, which meant that Facebook, YouTube and MySpace were soon able to dominate the social networking space.

As the Journal points out, of the top 20 most visited sites in 2003, only 9 still occupy market-leading positions. Innovation — and finding a viable business model — are the keys to staying relevant.

$500 million should go a long way towards making that possible.

Simon Waldman, Director of Digital Strategy for the Guardian Media Group in the UK, has posted a very insightful presentation about the intersection of the Internet and Web 2.0 on his blog. The text reflects a speech he gave to a German general media audience in Berlin. There is also a pdf version of the script of the presentation.

Simon makes the following arguments:

• Newspapers that want to survive need to embrace, exploit and excel in web 2.0. “There is no denying that our industry — particularly in Western Europe and North America — is structurally challenged, and that is almost entirely down to the net. . . . But I fundamentally believe that newspaper publishers who are prepared to experiment, innovate and invest online will create significant cultural and commercial value as a result of their efforts.”
• Internet moves quickly and probably a lot more quickly than the pace to which traditional media groups are accustomed. “Being online is like having a shop in a mall– you have to keep up with everyone around you, even if they’re not a direct competitor. Otherwise, you seem very tired, very quickly.”
• There are four axes of Web 2.0. “I know that there are all sorts of definitions of Web 2.0, but in my mind there are four key characteristics in the boom: Social networks, search and aggregation, collaboration and video.”
• Google is a frenemy. “Google and its impact on every sector of the economy’s attempt to grapple with the Internet are undeniable — and the newspaper industry perhaps more than most. Some of us see them as a competitor and a stealer of content; others see it as a source of traffic and revenue . . . . [B]ut all I will say is that defining and understanding a relationship with Google and other search players and aggregators is a crucial part of operating effectively in the online world.”
• There’s no turning back, even though most newspaper companies and traditional media groups might wish otherwise. “I wish Google would go back to being a nice, cuddly search engine that does no evil, rather than a global advertising bohemoth. Or at the very least, I wish they had to pay big bucks to carry our headlines and first paragraphs on Google News. I wish free classifieds sites would go away, or that the Internet has recruitment advertisers rushing to spend more rather than less. . . . [B]ut I also know that they are not going to happen. . . . The point is - this is about change. Not a gentle, start of the new school year, kind of change — but disruptive, shifting of tectonic plates kind of change.”

It’s good to see this kind of realistic optimism from the traditional media. There are obviously a lot of synergies between newspapers / media groups on the one hand, and search engines on the other. Indeed has The New York Times as an investor and strategic ally. Simply Hired has News Corp. Yahoo and Google are also increasingly trying to create cross-selling opportunities with newspaper groups.

But it’s also true that when we spoke to some investors initially - and even more recently - people seem to have the concern that search engines and aggregators “steal” their content, rather than they are partners that can redirect traffic to their businesses for less money than traditional media outlets, like newspapers, that charge a lot more for reaching target audiences.

In any case, it seems that the “slow death of newspapers” at the hands of search engines, aggregators and online classifieds sites is in the news a bit this week. Don Dodge has also an interesting post entitled “Online classified ads take $3.1 billion from newspapers,” which is review of an article in the Washington Post about the same topic. The post article is particularly interesting because it examines how vertical search engines such as Edgeio and Oodle are disrupting traditional classifieds businesses.

The bottom line: Search engines and aggregators are here to stay. Not all of us will survive, and most of us will be co-opted or bought. A few may become large, independent IPO-friendly companies. But the technological and economic disruption to traditional media companies can not be ignored or denied.

It’s one of my favorite times of year — the US Open.

I’m hoping that Serena and Roger win.

I want Rafa to make it to the finals and to prove that he can be successful outside of Roland Garros — that is, on surfaces other than clay — but I like Federer’s race to be the best of all time, and the elegance, good-naturedness and cool-minded efficiency with which he pursues his goal.

It’s likely that Roger will win another title. He’s the seemingly perfect tennis player. No weaknesses. Loves to win.

Serena Williams, on the other hand, has the potential to be one of the greatest female champions ever. The New York Times says that she is “dangerous when interested.” She already has 8 grand slam titles, which puts her in pretty elite company. But apparently, she has not lived up to her full potential, because she has been trying to balance her professional life with other interests and a personal life. Chris Everet, a former tennis champion, once wrote an open letter chasting Serena for not being a better tennis champion by devoting herself single-mindedly to her sport. People apparently don’t like the fact that Serena tries to have a life.

People also criticised Tiger Woods when he decided that he wanted to get married and have a kid. Apparently, a family would be a distraction to his game. People were sympathetic, however, when he took a few months off to mourn his father’s death from cancer. Tragedy makes for a compelling story. Personal happiness is more annoying and above all selfish.

Once you have already earned millions of dollars and realized let’s say 75% of your potential, is it a crime to want to enjoy it — even if that means losing a little bit of the edge that made you such a great competitor?

Or do you owe it to yourself — and to your place in history, if that concept makes any sense — to singlemindly and selfishly exploit your potential and “self-actualise” 150%?

Or to put it in the terms that Chris Evert suggested to Serena Williams, when you have been blessed with amazing opportunities and unique talent, is it selfish to pursue personal happiness over professional glory?

In the movie Wall Street, Gordon Gekko (played by Michael Douglas, who won an Oscar for this role) delivers one of the more memorable monologues in movie history. Gekko is an archetypal corporate raider, and in this scene he gives a speech to the shareholders of Teldar Paper, a company he is planning to take over. He explains:

“The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated.

The point is, ladies and gentleman, that greed — for lack of a better word — is good.

Greed is right.

Greed works.

Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind.

And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the USA.”

I thought about the “greed is good” speech after reading an article in the New York Times about so-called “single-digit millionaires” in Silicon Valley who can’t get off the “golden treadmill”. They tend to be employees of successful start-ups who cashed in their stock options and are now worth between $2 and $10 million. But they don’t feel that it’s enough money, because the entrepreneurs behind their original start-ups (and the successful entrepreneurs in general) are much richer than them.

They own nice homes in exclusive neighborhoods, but the successful entrepreneurs have multiple sprawling estates in various exotic locations.

They take nice vacations, but the successful entrepreneurs own Cessna Citation X private jets.

Take the following three examples:

• Hal Steger and his wife have a net worth of roughly $3.5 million (which places them only in the top 2% of families in the United States) but he continues to work as a marketing executive for a new start-up. He is still looking for his big break, so he works 12 hours a day, plus an extra 10 hours over the weekend. In his words, “[A] few million doesn’t go as far as it used to.”
• David Koblas, a computer programmer with a net worth of $5 to $10 million, works at a 2-year-old search engine start-up called Wink. In his words: ““I’d be rich in Kansas City. People would seek me out for [corporate] boards. But here I’m a dime a dozen.”
• A final example is Gary Kremen, the 43-year-old founder of Match.com. He’s worth about $10 million, which places him in the top half of 1% percent among Americans, but doesn’t earn him much respect in Silicon Valley. So he continues to work 60- to 80-hour work-weeks because he thinks that he doesn’t have nearly enough money to relax. In his words: ““Everyone around here looks at the people above them. You’re nobody here at $10 million.”

In the case of the non-entrepreneurs like Steger and Koblas, a lot of the insecurity comes from the fact that their wealth is based on someone else’s risk-taking. Said another way, these single-digit millionaires earned their money via stock options, based on the risk that the entrepreneurs that founded the company took, so they view their wealth kind of like winning a lottery. It’s a windfall, based on the luck of going to the right job interview, rather than on an entrepreneurial vision.

As I was reading the article, I couldn’t help but reflect that although there is much talk in Europe about creating an ecosystem to rival Silicon Valley, there is one fundamental factor that is rarely mentioned: greedy, risk-taking employees who want and need your start-up to be sold for 100s of millions of euros, and will do everything in their power to make it happen.

America is a rich country, because our workforce finds it difficult to relax. Our employees always want more, and are willing to put in the hours to make it happen. They also understand that, as Gekko explained, “you either do it right or you get eliminated.” Simple as that. And this Darwanistic ecosystem seems to be particularly exaggerated in Silicon Valley. This is why stock options work so well in the United States, because American employees are greedy professional Darwinists.

You can call it a number of different things, depending on your perspective. Americans would call it drive, ambition or hunger. Europeans would probably call it materialism, an unbalanced life or quite simply greed.

But I have it 100% clear in my head that I want “greedy” employees with an unquenchable desire to succeed and work long hours to help realise our collective dream. I want employees who get turned on by the idea of stock options.

Imagine being able to convince an experienced computer programmer like David Koblar or an experienced marketing executive like Hal Steger to come work long hours to make your start-up successful.

If, as the VCs say, the most important thing is by far is your team, then the ability to recruit and inspire successful and eternally motivated employees like these makes all the difference.

In this sense, greed (or ambition and drive, to use non-pejorative terms) is good.

One of the great things about going to a lot of international web 2.0 conferences with prominent tech analysts and well-known entrepreneurs is that you can learn a lot from really impressive and experienced people, if you are willing to listen. When you tie that into the fact that the combination of money (from investors and Neotec) and an interesting project helps you recruit top talent and a kick-ass advisory board/group of investors (Didac Giribets, Albert Armengol, Juan Luis Hortelano and Joaquim Calaf), you can start to see how a concept (vertical search) transforms into a real company (migoa).

Case in point. In deciding our launch strategy we had two options that were the cause of intense debates:

• One approach is to launch quickly, all over the world and then hope that the traffic and the advertisers will come to you. Some of our competitors have done this to varying degrees of success.
• The other approach is to launch more deliberately in specific countries with a clear sales and marketing strategy in each market and only after the product has been developed and adapted so that local users will see its obvious value.

In the end, we decided to follow the second approach. After all, as I repeat often on this blog: You only have one chance to make a first impression, so try to look pretty. Both VCs and potential strategic partners want to see that you are able to realise “inspired execution”. (I’m borrowing the term from a blog that I read recently, but I don’t remember which one.) Of course, they want you to dominate the world, but they want you to do it one step at a time, with a clear plan in mind and with an aspiration to excellence. And when you’re working with limited resources, it’s essential to prioritise.

In plain English, this means that in a winner-takes-all environment like the Internet the key is to have a product that demonstrates relatively quickly that it is a potential winner. But please note the emphasis on “relatively”. The goal should not be to push out a rushed, poorly conceived product just to show that you can do it first; the goal should be to create something that’s built to last — something that can justifiably be described as innovative, better than the competition, scaleable, and most importantly, that takes the users’ needs and wants fully into account.

We’ve been lucky that a lot of VCs, tech analysts, traditional media companies and other entrepreneurs have been willing to push us to define the nuances of our strategy. The feedback has really helped us to hone our game plan before launching. I emphasise this point, because after launching it becomes a lot more difficult to change your business plan and product. So while it’s important to be flexible and willing to adapt to changing market conditions and opportunities, it’s also important to have some sort of vision before dedicating substantial resources only to find out later that you’ve gone in the wrong direction.

Some people have complained that we are taking too long to launch migoa. My view is that we should launch when the product is ready, not when the blogging and analyst communities demand it. In my humble opinion, a lot of our competitors launched too early and are so confident that they are already out of public beta. But most of their products don’t inspire me, and it’ll be interesting to see if their users disagree with my assessment. After all, I’m hardly impartial. In fact, I’m sure that a lot of our competitors will only improve their products with time, particularly if they get (more) funding, but the key question is whether they’ll be able to recapture users who were turned off after the first visit. Only time will tell.

In terms of what we’re doing at migoa, we are focused on creating brands for each vertical (we’re focused on three verticals — real estate, jobs and cars). Migoa will continue to be the umbrella brand for all of our vertical search products, but each vertical will have a separate identity. To choose the name for the first vertical that we will launch, we got the entire team involved in the process. Everyone could submit as many names as they wanted, as long as the relevant domain names were available. I was happy to see that the team took the task seriously! For about 24 hours, we were all on godaddy.com testing out our skills as naming experts.

This little exercise helped to demonstrate the good and bad of democracy in action. On the one hand, you get lots of candidates and, if you’re lucky, the active participation of all members of the team. On the other hand, there is the risk that a compromise candidate wins, instead of the most brilliant and original candidate. In the case of our voting process, we saw a lot of varied candidates. Some names were real losers, but then again, each member of our team had very different theories for what makes a good name (hence, the danger of the compromise candidate). I even learned during the process that that are guides and companies specialised in naming that charge enormous sums of money. Who knew? In any case, there was one candidate that blew the competition away in each of the voting rounds, and it will be the name of our first vertical to be launched in September.

Unfortunately, I can only release the selected names once we have bought all the relevant domain names. But I’m guessing that issue should be resolved relatively quickly.

“It’s a been a long time . . . I shouldn’t have left you, without a dope beat to step to.”

Eric B. & Rakim, I Know You Got Soul

Sorry that I’ve been gone for a while. May was a busy month (in a good way) for migoa and for the vertical search sector in general. I will post during the course of the next few days about all of the exciting things that have happened to us, but I think the biggest news is that Albert Armengol and Didac Giribets have joined our team as partners after we closed a €280.000 financing round with them. For those of you who don’t know who he is, Albert was one of the driving forces behind eConozco, a professional networking site that could be considered the Spanish equivalent of LinkedIn. Xing was eConozco’s biggest competitor in Europe, and in March 2007, they finally reached an agreement to sell eConozco to Xing. Under the terms of the agreement, Albert will continue as Spanish country manager for Xing. And it seems that he received a pretty nice payment, a portion of which he has graciously chosen to reinvest in other Spanish start-ups.

[By way of random comment, Albert commented to me that his father owned 25% of eConozco. It's always nice to see family members investing in their kids' Internet projects, and it's even better to see that their investments are nicely rewarded. A lot of the pressure of being an entrepreneur comes from feeling like you're not living up to your loved ones' expectations. Albert is a medical doctor with an MBA from ESADE, and I don't think that he had a comparable salary (considering his market value) before selling eConozco. It's nice when you can show your parents that they were right to believe in you, not just because you are their kid and they are obligated to do so, but because you actually had a good idea -- you were right!]

Oriol and I met Albert back in late fall 2006 at First Tuesday, a networking event in Barcelona. At that point, we’d already begun conversations with Didac Giribets about a potential investment in our company, but Didac didn’t have that much experience in the Internet space. His other investments were a lot more “traditional”, with the exception of a sizable stake in an Isreali biotech firm. So Didac invited us to this networking event so that we could meet Albert, who he introduced to as a guru in the Spanish Internet space. After about 1 hour at First Tuesday, the four of us left the event early and went to grab a beer and some patatas braves at a cheap local restaurant on the port. We explained the project to Albert, who agreed that vertical search presented an interesting opportunity and told us to keep him updated about what we did. I remember at that meeting Didac also suggested that he could invest in eConozco, but Albert didn’t seem so interested. Now it all makes more sense . . . .

In any case, we continued in contact with Albert, and when we saw that there was a good fit in our personalities — Albert’s an extraordinarily nice guy with a lot of useful information and contacts but without any arrogance or cockiness; he seemed sincerely interested in just helping us — we invited him to join our advisory board. After a few months on the advisory board, after the announcement of the Xing sale, Albert told us that he really believed in our project and in our team, and that he wanted to join the migoa team as a partner. We were wholeheartedly excited, because it’s no so easy to find a successful Internet entrepreneur in Europe, much less in Spain, who has had a successful exit of his company via a sale to a prominent multinational organisation. That experience alone is almost worth more than the money that Albert invested in the company. Almost. Seriousy though, Albert is not going to be a “passive” investor. We speak with him on an almost daily basis about various aspects of the company, he offers us tips on how to improve our beta version (which we will open up more to the public within the next 10 days) and has agreed to serve as a judge in our beta-testing competition that will accompany our launch and will reward an XBOX 360 and a plasma TV to the winner.

Our experience shows that networking works. We’d done all of the required visits to the “official” business angel organisations, the majority of which ended up being wasted time meeting with “investors” who have never invested in — and had great fear of — the Internet world. Oriol and I met at a networking event. We met Albert at another networking event because Didac wanted to filter our product via a trusted friend, and in the end, the trusted friend — Albert — ended up investing in our company. Similarly, we met Didac via a friend, Jaume Urgell, at another networking event. Jaume knew that we were looking for funding. At that point, it was only Oriol and me working in the company using our own resources. So Jaume introduced us to his friend, Didac, who he knew had invested in some other projects. None of the projects were related to the Internet, but Jaume felt that it might still be useful to introduce us in any case. When we first met Didac, he told us point blank that he had no money to invest at the current time, because he was already committed to his current projects. But we told him that we should still go out for dinner and drinks, where we explained the project to him before talking about life in general. Didac contacted us a week later and told us that he’d gotten access to some additional resources that he wanted to invest in migoa.com. He ended up investing in the project, because he had a good feeling about me and Oriol, which probably came in no small part because we were recommended by someone that he knows, respects and trusts, and because we were able to explain our project to him but also relate to him as a person during the course of dinner and drinks.

At the end of the day, what the VCs say is really true: It all comes down to the team, and the feeling that there is between the entrepreneur and the investor. It’s easier to generate a good relationship and positive feelings if you begin the relationship recommended by a trusted ally of your potential investor, and if you can confirm those positive feelings during your subsequent interactions with your potential investor without trying to hard to “sell yourself”. Desperation is not attractive.

The New York Times reported yesterday that Microsoft will buy a health vertical search engine called Medstory. The “intelligent” search engine looks for health information using a database of information aggregated from medical journals, government documents and the Internet in general.

The terms of the sale were not disclosed.

As Peter Neupert, vice president for health strategy at Microsoft, notes: “Clearly,” Mr. Neupert said, “search is a critical part of that better end-to-end experience for consumers.”

Microsoft’s eventual goal is to link personal information like age, sex, family history, etc. to search so that search results are tailored individually and can identify treatments, drug interactions and interesting articles in medical journal.

“Health search could be way more relevant,” says Neupert. “You don’t need to see thousands of results. What you want to know is, what does this mean to me personally?”

This is the same basic question that ALL vertical search engines attempt to address. And as Richard MacManus points out, the acquisition of Medstory is part of a larger web trend: the continued rise of vertical search. Interestingly, he argues that Microsoft’s main interest in Medstory could be that Microsoft wants to enter and dominate the vertical search engine niche for health before Google has a chance to get its foot in.