Blog: Dug Song

Dug Song is VP of engineering at Zattoo, a virtual cable provider based in Ann Arbor and Zurich bringing TV to the Internet. Previously, Dug spent 7 years as co-founder and Chief Security Architect at Arbor Networks, responsible for products securing over 70% of the world’s Internet service providers, and many of the largest enterprise and defense networks. Prior to Arbor, Dug was the architect of an enterprise network security product at Anzen Computing - acquired by
NFR Security, acquired by Check Point (CHKP)

Dug is well-known for his work in Internet security and open-source software, and has organized or spoken at many academic and industry conferences around the world. In his spare time, he is working on a free, public skatepark in Ann Arbor and helping organize Ann Arbor’s tech/startup community at, and
Dug Song - Most Recent Posts:

Dug Song - Post 2: Ann Arbor - The Curiously Startup (and Skatepark ;-) Deficient Community

There is a common lament in the community about the lack of local venture capital as the major impediment to the development of Ann Arbor's high-tech industry.

This is an excuse, not a reason, for what's failed to materialize here.

The unfortunate reality is that there simply aren't that many venture-ready or venture-appropriate deals here, which has as much to do with developing teams as technology. As UM's tech transfer guys will tell you, in terms of R&D for venture-backed opportunities, we're rich in R (with literally hundreds of millions backing such activities at the U), but disadvantaged in D (with less experienced, portable startup management here than we could use - or hope to keep).

Even in the midst of a venture liquidity drought reaching the point of crisis, some promising Ann Arbor companies are getting funded. The adage that "money follows innovation" is as true as it ever was, although there is certainly a challenge to keep funded companies here - Arbor and Zattoo, funded by over $50M in non-local VC and private equity, have been headquartered close to the money (Boston and Zurich); similar stories exist for Move (over $60M, and in Utah), Mobius (Sunnyvale), etc.

Our real problem is poor deal flow, the roots of which start much earlier. While there's admittedly a significant gap in pre/seed-stage funding (in Paul Graham's equation, we lack the startup-saavy rich people to pair with nerds), there just aren't that many people even trying. Deal flow to local angels is abysmal. Outside VCs who've spent months here turning over rocks have a hard time finding much, and some years at MGCS have been extremely slim on Michigan-native companies. Local VCs, measured on IRR just like any other, are indeed looking elsewhere or simply waiting for more qualified opportunities - and for some of the few operating funds remaining (but mostly invested), there aren't a lot of deals left to make. In short, there isn't enough to invest in anyway!

To the state's credit, if you're in one of four mostly capital-intensive "magic" sectors (life sciences, alt-energy, advanced manufacturing, or homeland security), there's a good bit of public pre/seed money available to help bridge the gap, as we recently discussed. Lots of carrots on sticks that people don't know about. But not all opportunities in every sector follow a traditional venture-funded growth model - and in particular, software opportunities in ICT (Information and Communication Technology), traditionally the dominant sector for venture capital investment (with hopes of 10x, but realistic averages of 3-4x returns), have been steadily moving toward smaller, more predictable exits, or sustainable cash businesses as the cost structure of software companies drastically improve with technology and market advances. And as a fit for the region, Internet businesses have the distinct advantage of not requiring an ecology of local suppliers and customers in an incumbent (or dying) industry to succeed.

Thanks to cloud computing, open-source software, and search and social marketing, you really don't need all that much to start a successful Internet-based business these days. The dramatic rise of super angels; independent, bootstrapped businesses; and small, mentorship-driven startup acceleration programs around the world is in recognition of this fundamental shift in Internet startup economics. Many cities now host such accelerated micro-incubation programs for lean Internet startups, which have the immediate impact of helping to reverse brain-drain - they typically attract the smartest young (ramen-budget) hackers, who often stay (Paul Graham's curious assertion notwithstanding): YCombinator (Palo Alto, but previously Cambridge), TechStars (Boulder, and now also Boston), Start@Spark, Capital Factory (Austin), Launchbox (DC), DreamIt (Philly), Alphalab (Pittsburgh), Shotput (Atlanta), Bootup Labs (Vancouver), Extreme University (Toronto), iVentures10 (Champaign), and our own Michigan versions, Momentum (Grand Rapids) and RPM-10 (Ann Arbor - or more precisely, UM).

Boulder even goes a step further with innovative recruiting / welcome wagon programs like to import geeks, and folks like Rick DeVos are upping the ante in Grand Rapids with ambitious programs like the ArtPrize to import artists. Coworking incubators like Gangplank (Phoenix) and SparkSpace (NYC) support freelancers as they cultivate new businesses to incubate, and experiments like Sproutbox in Bloomington flip script to in-source new enterprise creation to serial startup teams. (sort of a hyper-IdeaLab)

So what's going on with Ann Arbor? If it's so easy to create cheap Internet companies, where are they? If we have so much commercializable research, where are the spinoffs? If we have the raw elements of a successful tech hub, and venture capital isn't the problem, what are we missing?

I invite your thoughts and feedback about this, and will share my own in my next post on geek / entrepreneurial culture and community...

Dug Song - Post 1

Hi, I'm Dug Song. Long-time reader, first-time poster. UM alum, startup exec, hacker, skater, and erstwhile graffiti and zine writer. Yes, I'm actually from the Internet, having lived most of my adult life online. And to paraphrase a Radiohead song:
" I'm a geek. I'm a weirdo. What the hell am I doing here? I don't belong here."
After 15 years here, and seeing a ton of friends and companies come and go, I'm at a crossroads, trying to determine if I should keep my family here. While I've proven most of my family and friends wrong by staying this long, I can no longer ignore the giant sucking sound as the best, brightest, and most amazing people I've met here continue to be siphoned off to the coasts - and with them, the culture and community I've loved.

I figure I have two more years to figure this out, before my 3-year old son starts school. So I've embarked on the ruthless execution of a completely self-serving agenda to fulfill my own nobrow, capitalist-pig hierarchy of needs by then:

And have been fortunate to find many other like-minded souls with similar goals, interests, and missions. A community of malcontents (maybe all the refugees from Ann Arbor Is Overrated). In the posts to come, I look forward to discussing these topics with Concentrate's readers, either publicly or privately:

If Ann Arbor had a slogan, I'd sign off with it here. I wish it was "Keep Ann Arbor Weird", but alas, we're a little late for that.