I was recently interviewed by TechCrunch's Andrew Keen discussing my startup, Vidquik. I didn't sound too bad for having two plastic tubes up my nose and on painkillers (two days after my septoplasty). Just a mix of Kermit and Darth Vader :)
"Keen On… Vidquik: Why Real-Time Online Video Is Now Ready For Prime-Time"
Showing posts with label silicon valley. Show all posts
Showing posts with label silicon valley. Show all posts
Friday, March 9, 2012
Monday, January 30, 2012
Tuesday, May 10, 2011
"The Next 10 Years Will Be Great For Both Founders And VCs"
Great post that deserves a dedicated link here and a reposting of William's slides:
"The Next 10 Years Will Be Great For Both Founders And VCs" TechCrunch, William Quigley
QUIGLEY_Report_Final
"The Next 10 Years Will Be Great For Both Founders And VCs" TechCrunch, William Quigley
QUIGLEY_Report_Final
Saturday, March 19, 2011
When Does It Make Sense to Bootstrap a Start-up?
(Just reposting my article over at InsideWork since I realized I don't have a copy over here :)
I previously described my first startup and bootstrapping experience in a prior post, which was exhilarating, frustrating, rewarding, and depressing all at the same time. Recently, I was posed a related question about “when does it make sense to bootstrap a startup?”
My answer would say that it depends on the industry, who is on your team, and how quickly you need to scale due to market conditions (e.g. competition, policy changes).
First, I would say where you are in life is the primary factor. Are you single versus married? Renting versus having a mortgage? No children versus one child and another on the way? When a person is in their twenties and not married, bootstrapping is much easier since you probably have lower rent costs, no mortgage and can eat ramen noodles all day. Next is probably how much savings you have, how much your family network could help you out, and how much credit card debt you’re willing to take. I remember being a fool, but a giddy fool, and signing up for dozens of credit cards with my co-founder, Jimmy. It was a fun but stressful time, especially when my dad had the “poker talk with me”.
“Bernard, business is like poker, you have to know when to fold…”
Older entrepreneurs can bootstrap too depending on the business and market, how much they are willing to eat into their nest egg, and if their spouse works. From my experience, usually a household with kids does not want to see money going out towards risk investments. Which is why you see even successful entrepreneurs, such as those who cashed out more than several million, still go back to the investor well because their wives clamped down on their bank accounts.
Your targeted industry matters too. Bootstrapping is very difficult if you’re in clean-tech or biotech versus social gaming or social media, so these scenarios aren’t relevant in these sectors since typically cash needs are $20 million, $50 million or greater for just the product development.
There is also a point to which bootstrap can only take you so far. If the competition is fierce and your competitors already have a good war chest or their product is slightly ahead of your features, then outside money makes sense.
If your company is starting to get interest from investors, I would recommend that you go with the momentum and fundraise because most startups are beauty queens (or kings) only once. I’ve seen many startups pass on funding when they were hot only to go back to the well that became dry or venture capitalists had a new flavor of the month.
An ideal scenario to bootstrap is if you’re in your mid-twenties, a stud game developer, and creating a social game with a solid creative partner. Build it, launch it on Facebook, and hope that it goes viral so that you can make money, sell it, or get a higher valuation.
In the end, I would recommend bootstrapping if you can to increase your valuation from investors, but also be aware of the point when it begins to be a drag on your product development and growth.
I previously described my first startup and bootstrapping experience in a prior post, which was exhilarating, frustrating, rewarding, and depressing all at the same time. Recently, I was posed a related question about “when does it make sense to bootstrap a startup?”
My answer would say that it depends on the industry, who is on your team, and how quickly you need to scale due to market conditions (e.g. competition, policy changes).
First, I would say where you are in life is the primary factor. Are you single versus married? Renting versus having a mortgage? No children versus one child and another on the way? When a person is in their twenties and not married, bootstrapping is much easier since you probably have lower rent costs, no mortgage and can eat ramen noodles all day. Next is probably how much savings you have, how much your family network could help you out, and how much credit card debt you’re willing to take. I remember being a fool, but a giddy fool, and signing up for dozens of credit cards with my co-founder, Jimmy. It was a fun but stressful time, especially when my dad had the “poker talk with me”.
“Bernard, business is like poker, you have to know when to fold…”
Older entrepreneurs can bootstrap too depending on the business and market, how much they are willing to eat into their nest egg, and if their spouse works. From my experience, usually a household with kids does not want to see money going out towards risk investments. Which is why you see even successful entrepreneurs, such as those who cashed out more than several million, still go back to the investor well because their wives clamped down on their bank accounts.
Your targeted industry matters too. Bootstrapping is very difficult if you’re in clean-tech or biotech versus social gaming or social media, so these scenarios aren’t relevant in these sectors since typically cash needs are $20 million, $50 million or greater for just the product development.
There is also a point to which bootstrap can only take you so far. If the competition is fierce and your competitors already have a good war chest or their product is slightly ahead of your features, then outside money makes sense.
If your company is starting to get interest from investors, I would recommend that you go with the momentum and fundraise because most startups are beauty queens (or kings) only once. I’ve seen many startups pass on funding when they were hot only to go back to the well that became dry or venture capitalists had a new flavor of the month.
An ideal scenario to bootstrap is if you’re in your mid-twenties, a stud game developer, and creating a social game with a solid creative partner. Build it, launch it on Facebook, and hope that it goes viral so that you can make money, sell it, or get a higher valuation.
In the end, I would recommend bootstrapping if you can to increase your valuation from investors, but also be aware of the point when it begins to be a drag on your product development and growth.
Tuesday, December 21, 2010
Saturday, October 30, 2010
Are Q&A startups a threat to Google?
My tech op-ed article posted this morning at Venturebeat, "Are Q&A startups a threat to Google?", and was reposted at the NYTimes site here. [Update] Also Techmeme-ed here, which is cool since it's my favorite news aggregator.
Most of my interview transcript with Ro Choy, CEO of Peerpong, and Charlie Cheever, Co-founder of Quora, was edited out, so below are some of their additional insights:
When did the light bulb for Quora go off for you?
Charlie Cheever: Over the last few years, there have been a bunch of services that have let people put more and more content onto the Internet -- Facebook and Flickr for photos, Twitter for link sharing, status updates, etc. -- but we didn't see any great way for people to share the knowledge that they accumulate over their lives, so we wanted to make a place for that. There were other things as well. For example, I like blogging but I didn't always know what people wanted me to write about. One thing we've tried to build Quora to provide is a good set of prompts from other people that you can respond to.
When you looked at this opportunity, what were the comparables? Yahoo! Answers, Google, or others?
Charlie Cheever: We thought about all those things but we’ve mostly been focused on making a product to fill a need we saw in the world. I do think there are a lot of things that people want to know that you can't find easily with a search engine because the information either isn't on the web yet, or isn't there in a form that you can easily consume. This is especially true with long tail content.
Ro Choy: Our focus and good corollary is Google. Google can effectively find content through use of pagerank. Can we do that for people? If you believe the vast amount of knowledge doesn’t exist online yet, then if you could ultimately categorize an index of content, publish it, and make it searchable…. If you could do this for 50 million, 100 million people, or half a billion people -- that was the Big Hairy Audacious Goal.
Most of my interview transcript with Ro Choy, CEO of Peerpong, and Charlie Cheever, Co-founder of Quora, was edited out, so below are some of their additional insights:
When did the light bulb for Quora go off for you?
Charlie Cheever: Over the last few years, there have been a bunch of services that have let people put more and more content onto the Internet -- Facebook and Flickr for photos, Twitter for link sharing, status updates, etc. -- but we didn't see any great way for people to share the knowledge that they accumulate over their lives, so we wanted to make a place for that. There were other things as well. For example, I like blogging but I didn't always know what people wanted me to write about. One thing we've tried to build Quora to provide is a good set of prompts from other people that you can respond to.
When you looked at this opportunity, what were the comparables? Yahoo! Answers, Google, or others?
Charlie Cheever: We thought about all those things but we’ve mostly been focused on making a product to fill a need we saw in the world. I do think there are a lot of things that people want to know that you can't find easily with a search engine because the information either isn't on the web yet, or isn't there in a form that you can easily consume. This is especially true with long tail content.
Ro Choy: Our focus and good corollary is Google. Google can effectively find content through use of pagerank. Can we do that for people? If you believe the vast amount of knowledge doesn’t exist online yet, then if you could ultimately categorize an index of content, publish it, and make it searchable…. If you could do this for 50 million, 100 million people, or half a billion people -- that was the Big Hairy Audacious Goal.
Thursday, July 29, 2010
TechCrunch Social Currency CrunchUp
9:00 – 9:45 am
The Social Currency Investment Thesis
Michael Arrington speaks with Ron Conway and Paul Graham
9:45 – 10:15 am
Social Savings: Building the Next Billion Dollar Business
Erick Schonfeld speaks with Groupon CEO Andrew Mason
10:15 – 10:30 am
Couponing 101: What Tech Should Understand About Brands, Retailer and Consumer Promotions
Heather Harde speaks with News America Marketing Group Sales Manager Ginny Byrnes
10:45 – 10:50 am
New Product Demo: Blekko by Founder and CEO Rich Skrenta
10:50 – 11:30 am
Check Ins, Coupons and Commerce
Tristan Walker, director of business development, Foursquare
Kara Nortman, Senior Vice President, Publishing, CityGrid Media
Shiva Rajaraman, product manager, Twitter
Moderated by MG Siegler
(full schedule)
Tuesday, March 2, 2010
Entrepreneurs Made, Born and Taught
A flurry of blog posts and articles on entrepreneurship and whether entrepreneurs are made or born. Great stuff.
"Can Entrepreneurs Be Made?" TechCrunch, Vivek Wadhwa
"Wake-Up Call For Newly Hatched Entrepreneurs" Forbes, Steven Berglas
"Why B-Schools Set Up Entrepreneurs To Fail" Forbes, Sramana Mitra
"And Google Begat...
The search giant's former employees are seeding tech startups—and shaping another wave of innovation" BusinessWeek
"What constitutes a startup mistake?" Simeon Simeonov
"Can Entrepreneurs Be Made?" TechCrunch, Vivek Wadhwa
"Wake-Up Call For Newly Hatched Entrepreneurs" Forbes, Steven Berglas
"Why B-Schools Set Up Entrepreneurs To Fail" Forbes, Sramana Mitra
"And Google Begat...
The search giant's former employees are seeding tech startups—and shaping another wave of innovation" BusinessWeek
"What constitutes a startup mistake?" Simeon Simeonov
Thursday, February 25, 2010
Tuesday, November 24, 2009
Great Lessons From Entrepreneurs
There were some great posts on startup lessons from entrepreneurs last week. First one I came across was Refin's founder and CEO, Glenn Kelman:
"Good Question! The Eight Best Questions We Got While Raising Venture Capital" TechCrunch
Second one was Steve Blank's insights into Cafepress and their pitch for venture capital, "Lessons Learned from our Customers," which was different than most.
"After VC cash? Show ‘em what you’ve learned" VentureBeat's Entrepreneur Corner
An excerpt:
"Fred and Maheesh had started 9 previous companies in 6 years. Their motto was: “Fail fast and cheap. And learn from it.” Cafepress literally started in their garage and was another set of experiments only this time it caught fire. They couldn’t keep up with the orders."
"Good Question! The Eight Best Questions We Got While Raising Venture Capital" TechCrunch
Second one was Steve Blank's insights into Cafepress and their pitch for venture capital, "Lessons Learned from our Customers," which was different than most.
"After VC cash? Show ‘em what you’ve learned" VentureBeat's Entrepreneur Corner
An excerpt:
"Fred and Maheesh had started 9 previous companies in 6 years. Their motto was: “Fail fast and cheap. And learn from it.” Cafepress literally started in their garage and was another set of experiments only this time it caught fire. They couldn’t keep up with the orders."
Thursday, November 5, 2009
Korea's Cyworld Shuts Down US Cyworld
I received this notice today from Cyworld:
"Thank you to all members with Cyworld.
Due to Cyworld shuts down US service, US Cyworld will no longer be able to service.
We sincerely apologize for shutting down the service with unavoidable reason.
Before US cyworld close the service, you will continue to access to US cyworld contents but not purchase items. Also, you will not use your acorns.
If you have unused acorns, you will be given a full refund for paid acorns only."
Obviously, they already let go of all U.S. staff since it's written in broken English along with poor spacing, but this also could be reflective of the overall problem of Cyworld's efforts in the U.S. market. They didn't localize their product. Cyworld assumed they could bring their team that was successful in Korea, target the same market and execute in the same manner. It didn't work out.
I'm focused on their early efforts, which I believe was a critical factor for their failure. Cyworld attempted to target the similar demographic in Korea, but for the U.S. market I thought their avatar-based social network was more suited for a younger demographic of junior high and high school students.
It seems that SK's other entities have made similar mistakes in trying to enter the U.S. market. A prime example is their MVNO effort with Earthlink, Helio, where they invested over $400 million. They tried to target Korean Americans by assuming ethnic affinity would drive consumer purchasing habits not quality of service, pricing, or phones. Hopefully, SK, which is one of Korea's largest conglomerates, will learn from these spectacular failures.
Tuesday, October 27, 2009
Sustainability: The ‘must have’ holy grail
My guest post went up over at VentureBeat yesterday. I bit swamped with work, so I'm behind with my posts and links :)
Sustainability: The ‘must have’ holy grail
When I was a kid, Atari dominated the gaming scene. Sure, Mattel’s Intellivision and Coleco’s Colecovision had their loyalists, but to the general public, when you mentioned video games, Atari was the name that sprang to mind.
The company maintained that status for years, but as competitors like Nintendo and Sega became part of the industry, Atari quickly fell from its perch as gaming’s “must have” system to a nostalgic memory.
Sustaining a leadership role is a Herculean task. Once your product becomes a “must have,” how do you keep it that way for over a year? Five years? A decade?
Just like the music industry has one hit wonders, the business world is littered with product fads that were, at one time, must haves. Remember the Pet Rock? Cabbage Patch Kids? Or, if you’d like a more recent example, there’s Crocs. The company reported profits over $168 million in 2007 and then a $185 million loss in 2008.
Others? Kozmo.com, which promised free one-hour delivery of anything from DVD rentals to groceries, raised over $280 million in 1999 and landed a $150 million promotional deal with Starbucks. It was a “must have” service in NYC, but made costly expansions into less dense metro areas and liquidated by 2001. Friendster launched in 2003 with a lot of fanfare as it paved the way for the new age of social networking. Within two years, it was the ugly, unwanted pet that seemed to be consistently down or besieged with long server delays.
The fall from grace can be quick – and ugly. Brian Kellner knows this well... (full post)
Sustainability: The ‘must have’ holy grail
When I was a kid, Atari dominated the gaming scene. Sure, Mattel’s Intellivision and Coleco’s Colecovision had their loyalists, but to the general public, when you mentioned video games, Atari was the name that sprang to mind.
The company maintained that status for years, but as competitors like Nintendo and Sega became part of the industry, Atari quickly fell from its perch as gaming’s “must have” system to a nostalgic memory.
Sustaining a leadership role is a Herculean task. Once your product becomes a “must have,” how do you keep it that way for over a year? Five years? A decade?
Just like the music industry has one hit wonders, the business world is littered with product fads that were, at one time, must haves. Remember the Pet Rock? Cabbage Patch Kids? Or, if you’d like a more recent example, there’s Crocs. The company reported profits over $168 million in 2007 and then a $185 million loss in 2008.
Others? Kozmo.com, which promised free one-hour delivery of anything from DVD rentals to groceries, raised over $280 million in 1999 and landed a $150 million promotional deal with Starbucks. It was a “must have” service in NYC, but made costly expansions into less dense metro areas and liquidated by 2001. Friendster launched in 2003 with a lot of fanfare as it paved the way for the new age of social networking. Within two years, it was the ugly, unwanted pet that seemed to be consistently down or besieged with long server delays.
The fall from grace can be quick – and ugly. Brian Kellner knows this well... (full post)
Thursday, October 15, 2009
ReadWrite Real-Time Web Summit
I'm at the ReadWrite Real-Time Web Summit in Mountain View, CA today. The event is held at the Computer History Museum, which is always a good facility.
It's the first conference I've attended by the ReadWriteWeb guys and looking forward to it.
It's the first conference I've attended by the ReadWriteWeb guys and looking forward to it.
Tuesday, October 13, 2009
Is your product a “must have” or “nice to have”?
My tech op-ed is up at VentureBeat. Check it out:
IS YOUR PRODUCT A "MUST HAVE" OR "NICE TO HAVE"?
I also posted the version that was unedited by VentureBeat's editors at NowPublic. This original piece is chopped into two articles at VentureBeat with the second being published next week. This one is longer and I don't think they appreciated my reference to "Something About Mary" :)
IS YOUR STARTUP A "NICE TO HAVE" OR "MUST HAVE"?
With the downturn in the economy, numerous people are talking about starting a new business or company. Whether it’s a technology startup or new restaurant idea, I’ve heard of more and more people meeting to brainstorm and working to bring their ideas to fruition.
Whether you’re in the idea generation stage or have already started to build your new thing, you should take a breath and reassess whether the concept still holds your initial level of enthusiasm. Can still envision 30 million visits during the first month? Are you still as enthusiastic as you were when you came up with it? Do you believe your product or service is a “must have” and not just a “nice to have”? If not, step back – being a successful entrepreneur requires high – some say insane – levels of dedication to your idea.
There’s a great scene in the movie “Something About Mary” where Ben Stiller’s character, Ted, picks up a hitchhiker who is a psychotic killer and budding entrepreneur:
Hitchhiker: You heard of this thing, the 8-Minute Abs?
Ted: Yeah, sure, 8-Minute Abs. Yeah, the exercise video.
Hitchhiker: Yeah, this is going to blow that right out of the water. Listen to this: 7... Minute... Abs.
Ted: Right. Yes. OK, all right. I see where you're going.
Hitchhiker: Think about it. You walk into a video store, you see 8-Minute Abs sittin' there, there's 7-Minute Abs right beside it. Which one are you gonna pick, man?
Ted: I would go for the 7. Hitchhiker: Bingo, man, bingo. 7-Minute Abs. And we guarantee just as good a workout as the 8-minute folk.
Comedy aside, how familiar does this pitch sound to all you entrepreneurs or intrepreneurs out there? The reality is that the hitchhiker’s idea was a “nice to have” and wouldn’t have threatened the well-marketed 8-minute Abs video even with his insane level of dedication. Of course, he’s not similar to your pitch about your product, but does it remind you of your friends’ new thing? They all hope to have the next awesome product that will change the world, or at least get crazy traffic on Facebook. The driver of sales or user adoption? It should be as obvious as a 7 minute workout being more attractive than an 8 minute workout, right?
Most entrepreneurs are too close to their topic to realize where they really are on the user adoption curve. As an entrepreneur, you’re hoping that the jump from what Geoffrey Moore describes as “innovators” and “early adopters” to the “early majority” is short, but unfortunately, in reality, sales and user adoption rates are about as easy to predict as blockbuster movies.
Must Have, Meh, or What Does It Do Again?
For entrepreneurs, one method to frame the product development process is whether your product is a “nice to have” or a “must have.” Here, “must have” is loosely defined and can be identified by answering questions like:
• Is it easy for people to recognize that your product will save them a significant amount of time?
• Or a significant amount of money?
• Do people quickly see how much better it plays their music?
• How much better it allows them to access data?
For example, back in 2005, when I was working on my startup GoingOn Networks, we identified a trend of blogging and social networking entering the corporate world. We built a private-label social media platform, thinking that companies would soon recognize this trend and purchase our software-as-service platform.
In hindsight, the first two years were painful. A long education process, working on quelling fears of “opening up” to customers, and another long sales cycle. We were hoping our market chasm would be the neighborhood creek, but we found out it was more like the Grand Canyon. Plus, by 2007, about thirty competitors were also targeting this market. I realized that our social media platform wasn’t a “must have” and maybe not even a “nice to have” during our early years because our target market first needed to be greatly educated on the benefits of social media. It felt as if more often than not, sales meetings went like this:
Me: “Open, two-way communication with your customers is more effective…”
Potential customer: “Like a walkie-talkie?”
Me: [Sigh]
For consumer plays where users don’t pay for the product, the “must have” bar might be set a bit lower than for paid products, but it’s still a significant hurdle for the early majority to spend their time (even if it doesn’t cost money) on something new of which the benefits aren’t obvious, easy, or quick to grasp.
So how do you figure out whether your insanely great idea is likely to find customers and become a “must have”? When you’re trying to identify “must haves” in the market, consider these techniques:
Trend Surfing. Extrapolate a current technology, trend, or “must have.” What is the next product in the evolution of an industry? Consider the evolution from the Walkman to MP3 players to the iPod. Or look at what emerging technologies will create new market opportunities. For example, Qualcomm and its CDMA technology. Or exercise trends that created a whole new market of Pilates videos and trainers. My personal favorite is the rise in popularity of specialty bacon, where I can also plug my “Ode to Bacon.”
There are numerous examples, but the reality is that it’s difficult to predict and ride such trends. I learned this from GoingOn, and my prior startup, HeyAnita, when voice recognition technology was hot. With competitors such as Tellme and BeVocal, our space raised over $300 million in 2000, but quickly faded a few years later when users didn’t widely adopt a voice-controlled interface.
Twitter seems to have hit the right wave on the trend from blogging to micro-blogging. Initially, it was just an echo chamber of Silicon Valley people tweeting to each other, but now even major media outlets such as CNN, ABC, and ESPN see communicating in 140 characters as a “must have.” Like Twitter, if you do catch a trend wave, it swells, and you execute well, then you could be golden, with a profitable tech company or the best-selling line of Pilates videos on your hands.
Identifying a Market Gap. Where in the market is there an underserved need? Is there a place in the market that a taste is not being met? Chipotle filled a desire for fast casual Mexican food. Netflix let people easily rent obscure movies and keep them as long as they wanted without late fees. Meebo met the demand for a single, unified IM platform. What element is missing in a market – one that you know and are passionate about – that you believe you can fill as an entrepreneur?
For instance, back in the old days before the majority of malware came from websites and links to them, there was an opportunity for different kinds of anti-malware products. Brian Kellner, now Newsgator’s VP of Products, gave me some interesting insights into his days at anti-spyware company Webroot in the 1990s: “Webroot was one of the first two companies to release an enterprise anti-spyware product at a time when Internet Explorer had a lot of vulnerabilities and anti-virus companies didn’t catch spyware. The product was tremendously successful because it really hit the pain avoidance and laziness needs.”
But as much as Webroot tried to make deployment and management of the solution easy, when both anti-virus offerings and browser security got better, the cost of owning and running a dedicated anti-spyware solution became unattractive. “The pain level dropped significantly as anti-virus companies added adequate anti-spyware protection and it was much easier to just run the anti-virus software alone,” says Kellner.
So, for a while, Webroot was a “must have.” But when other, possibly bigger, companies start tapping into the Market Gap you found and have been filling, you need to find other ways to remain a “must have.” For example, by trying to extrapolate to the next logical “must have” in your market (Trend Surfing), or by making sure your product keeps something attractively unique about it, or is just clearly the best of its kind.
Building a Better Mousetrap. What product category is doing well, but could be done even better? Do you have an idea for something that will clearly be the best of its kind? IKEA did it for the budget-conscious furniture retail market. Zappos.com turned shoe shopping into a very convenient, easy, low-pressure experience. What features are missing that could be implemented and allow a new player to change the market? Friendster to MySpace and Facebook. MySpace and Facebook provided more value that simply connecting with friends through music and then third-party applications.
In speaking with Brian Rakowski, former lead product manager for Google’s Gmail product and current Product Management Director for its Chrome browser, he explained how he led the launches for these two products and how to make them better than any of the competitive products already out there: “Both Google Chrome and Gmail were new entrants in existing spaces so we spent a lot of time getting to know the market-leading products in their categories and identifying the biggest user pain points. For webmail, it was small storage quotas and clunky, inefficient interfaces. For browsers, it was general instability and unresponsiveness, especially on advanced webpages.” Google succeeded nicely with both of these, with Gmail surpassing Youtube earlier this year as the second-most-visited Google property and Chrome gaining just under 3% marketshare after one year. Rakowski concludes, “In the end, the best way to test whether you have a “must have” product is to threaten to take the prototype away from your early users. If they don’t riot, start again.”
Brian has a great insight here. Would users of Microsoft’s Vista have rioted if it had been taken away? No, there probably would have been celebrations throughout office buildings all over the world. What about Segway after all its hype? Maybe only mall cops would have grumbled.
Like the story of Webroot and anti-spyware becoming part of anti-virus solutions, the Building A Better Mousetrap category also brings up the importance of sustainability. How do you maintain being a “must have” in your market? During the 1990s, my favorite search engine was Alta Vista, but it didn’t maintain its “must have” status and gave way to Inktomi, which eventually gave way to Google. Google has been maintaining its “must have” status by not only staying on top of the search algorithm game, but also by offering superior or extremely competitive complementary products and services to its users: Adsense and Adwords for advertising, and nicely integrated apps like Gmail, Google Calendar, and Google Docs that make it easy to make Google your default online place to get things done. (Yet even Google has had its share of failures or incompletes such as Google Lively, Froogle, Checkout, and Spreadsheets.)
Finally, with all three of these techniques for identifying a potential “must have” opportunity – Trend Surfing, Identifying a Market Gap, and Building a Better Mousetrap – keep regularly asking yourself “is mine a “must have” product?” questions like the ones listed earlier. And of course make sure you’re still insanely excited about your own idea most days of the week – because if you’re not excited, it’ll be hard to make others think of your product as a can’t-live-without-it “must have.” But hopefully, these techniques and examples are giving you some extra inspiration on how to get to the next step in your new great idea.
IS YOUR PRODUCT A "MUST HAVE" OR "NICE TO HAVE"?
I also posted the version that was unedited by VentureBeat's editors at NowPublic. This original piece is chopped into two articles at VentureBeat with the second being published next week. This one is longer and I don't think they appreciated my reference to "Something About Mary" :)
IS YOUR STARTUP A "NICE TO HAVE" OR "MUST HAVE"?
With the downturn in the economy, numerous people are talking about starting a new business or company. Whether it’s a technology startup or new restaurant idea, I’ve heard of more and more people meeting to brainstorm and working to bring their ideas to fruition.
Whether you’re in the idea generation stage or have already started to build your new thing, you should take a breath and reassess whether the concept still holds your initial level of enthusiasm. Can still envision 30 million visits during the first month? Are you still as enthusiastic as you were when you came up with it? Do you believe your product or service is a “must have” and not just a “nice to have”? If not, step back – being a successful entrepreneur requires high – some say insane – levels of dedication to your idea.
There’s a great scene in the movie “Something About Mary” where Ben Stiller’s character, Ted, picks up a hitchhiker who is a psychotic killer and budding entrepreneur:
Hitchhiker: You heard of this thing, the 8-Minute Abs?
Ted: Yeah, sure, 8-Minute Abs. Yeah, the exercise video.
Hitchhiker: Yeah, this is going to blow that right out of the water. Listen to this: 7... Minute... Abs.
Ted: Right. Yes. OK, all right. I see where you're going.
Hitchhiker: Think about it. You walk into a video store, you see 8-Minute Abs sittin' there, there's 7-Minute Abs right beside it. Which one are you gonna pick, man?
Ted: I would go for the 7. Hitchhiker: Bingo, man, bingo. 7-Minute Abs. And we guarantee just as good a workout as the 8-minute folk.
Comedy aside, how familiar does this pitch sound to all you entrepreneurs or intrepreneurs out there? The reality is that the hitchhiker’s idea was a “nice to have” and wouldn’t have threatened the well-marketed 8-minute Abs video even with his insane level of dedication. Of course, he’s not similar to your pitch about your product, but does it remind you of your friends’ new thing? They all hope to have the next awesome product that will change the world, or at least get crazy traffic on Facebook. The driver of sales or user adoption? It should be as obvious as a 7 minute workout being more attractive than an 8 minute workout, right?
Most entrepreneurs are too close to their topic to realize where they really are on the user adoption curve. As an entrepreneur, you’re hoping that the jump from what Geoffrey Moore describes as “innovators” and “early adopters” to the “early majority” is short, but unfortunately, in reality, sales and user adoption rates are about as easy to predict as blockbuster movies.
Must Have, Meh, or What Does It Do Again?
For entrepreneurs, one method to frame the product development process is whether your product is a “nice to have” or a “must have.” Here, “must have” is loosely defined and can be identified by answering questions like:
• Is it easy for people to recognize that your product will save them a significant amount of time?
• Or a significant amount of money?
• Do people quickly see how much better it plays their music?
• How much better it allows them to access data?
For example, back in 2005, when I was working on my startup GoingOn Networks, we identified a trend of blogging and social networking entering the corporate world. We built a private-label social media platform, thinking that companies would soon recognize this trend and purchase our software-as-service platform.
In hindsight, the first two years were painful. A long education process, working on quelling fears of “opening up” to customers, and another long sales cycle. We were hoping our market chasm would be the neighborhood creek, but we found out it was more like the Grand Canyon. Plus, by 2007, about thirty competitors were also targeting this market. I realized that our social media platform wasn’t a “must have” and maybe not even a “nice to have” during our early years because our target market first needed to be greatly educated on the benefits of social media. It felt as if more often than not, sales meetings went like this:
Me: “Open, two-way communication with your customers is more effective…”
Potential customer: “Like a walkie-talkie?”
Me: [Sigh]
For consumer plays where users don’t pay for the product, the “must have” bar might be set a bit lower than for paid products, but it’s still a significant hurdle for the early majority to spend their time (even if it doesn’t cost money) on something new of which the benefits aren’t obvious, easy, or quick to grasp.
So how do you figure out whether your insanely great idea is likely to find customers and become a “must have”? When you’re trying to identify “must haves” in the market, consider these techniques:
Trend Surfing. Extrapolate a current technology, trend, or “must have.” What is the next product in the evolution of an industry? Consider the evolution from the Walkman to MP3 players to the iPod. Or look at what emerging technologies will create new market opportunities. For example, Qualcomm and its CDMA technology. Or exercise trends that created a whole new market of Pilates videos and trainers. My personal favorite is the rise in popularity of specialty bacon, where I can also plug my “Ode to Bacon.”
There are numerous examples, but the reality is that it’s difficult to predict and ride such trends. I learned this from GoingOn, and my prior startup, HeyAnita, when voice recognition technology was hot. With competitors such as Tellme and BeVocal, our space raised over $300 million in 2000, but quickly faded a few years later when users didn’t widely adopt a voice-controlled interface.
Twitter seems to have hit the right wave on the trend from blogging to micro-blogging. Initially, it was just an echo chamber of Silicon Valley people tweeting to each other, but now even major media outlets such as CNN, ABC, and ESPN see communicating in 140 characters as a “must have.” Like Twitter, if you do catch a trend wave, it swells, and you execute well, then you could be golden, with a profitable tech company or the best-selling line of Pilates videos on your hands.
Identifying a Market Gap. Where in the market is there an underserved need? Is there a place in the market that a taste is not being met? Chipotle filled a desire for fast casual Mexican food. Netflix let people easily rent obscure movies and keep them as long as they wanted without late fees. Meebo met the demand for a single, unified IM platform. What element is missing in a market – one that you know and are passionate about – that you believe you can fill as an entrepreneur?
For instance, back in the old days before the majority of malware came from websites and links to them, there was an opportunity for different kinds of anti-malware products. Brian Kellner, now Newsgator’s VP of Products, gave me some interesting insights into his days at anti-spyware company Webroot in the 1990s: “Webroot was one of the first two companies to release an enterprise anti-spyware product at a time when Internet Explorer had a lot of vulnerabilities and anti-virus companies didn’t catch spyware. The product was tremendously successful because it really hit the pain avoidance and laziness needs.”
But as much as Webroot tried to make deployment and management of the solution easy, when both anti-virus offerings and browser security got better, the cost of owning and running a dedicated anti-spyware solution became unattractive. “The pain level dropped significantly as anti-virus companies added adequate anti-spyware protection and it was much easier to just run the anti-virus software alone,” says Kellner.
So, for a while, Webroot was a “must have.” But when other, possibly bigger, companies start tapping into the Market Gap you found and have been filling, you need to find other ways to remain a “must have.” For example, by trying to extrapolate to the next logical “must have” in your market (Trend Surfing), or by making sure your product keeps something attractively unique about it, or is just clearly the best of its kind.
Building a Better Mousetrap. What product category is doing well, but could be done even better? Do you have an idea for something that will clearly be the best of its kind? IKEA did it for the budget-conscious furniture retail market. Zappos.com turned shoe shopping into a very convenient, easy, low-pressure experience. What features are missing that could be implemented and allow a new player to change the market? Friendster to MySpace and Facebook. MySpace and Facebook provided more value that simply connecting with friends through music and then third-party applications.
In speaking with Brian Rakowski, former lead product manager for Google’s Gmail product and current Product Management Director for its Chrome browser, he explained how he led the launches for these two products and how to make them better than any of the competitive products already out there: “Both Google Chrome and Gmail were new entrants in existing spaces so we spent a lot of time getting to know the market-leading products in their categories and identifying the biggest user pain points. For webmail, it was small storage quotas and clunky, inefficient interfaces. For browsers, it was general instability and unresponsiveness, especially on advanced webpages.” Google succeeded nicely with both of these, with Gmail surpassing Youtube earlier this year as the second-most-visited Google property and Chrome gaining just under 3% marketshare after one year. Rakowski concludes, “In the end, the best way to test whether you have a “must have” product is to threaten to take the prototype away from your early users. If they don’t riot, start again.”
Brian has a great insight here. Would users of Microsoft’s Vista have rioted if it had been taken away? No, there probably would have been celebrations throughout office buildings all over the world. What about Segway after all its hype? Maybe only mall cops would have grumbled.
Like the story of Webroot and anti-spyware becoming part of anti-virus solutions, the Building A Better Mousetrap category also brings up the importance of sustainability. How do you maintain being a “must have” in your market? During the 1990s, my favorite search engine was Alta Vista, but it didn’t maintain its “must have” status and gave way to Inktomi, which eventually gave way to Google. Google has been maintaining its “must have” status by not only staying on top of the search algorithm game, but also by offering superior or extremely competitive complementary products and services to its users: Adsense and Adwords for advertising, and nicely integrated apps like Gmail, Google Calendar, and Google Docs that make it easy to make Google your default online place to get things done. (Yet even Google has had its share of failures or incompletes such as Google Lively, Froogle, Checkout, and Spreadsheets.)
Finally, with all three of these techniques for identifying a potential “must have” opportunity – Trend Surfing, Identifying a Market Gap, and Building a Better Mousetrap – keep regularly asking yourself “is mine a “must have” product?” questions like the ones listed earlier. And of course make sure you’re still insanely excited about your own idea most days of the week – because if you’re not excited, it’ll be hard to make others think of your product as a can’t-live-without-it “must have.” But hopefully, these techniques and examples are giving you some extra inspiration on how to get to the next step in your new great idea.
Thursday, October 1, 2009
Kevin Compton's 5 Rules for Success
I recently attended a small luncheon where Kevin Compton was speaking and sharing his insights on success. He framed his discussion within five rules that have helped him towards his path in becoming one of the top venture capitalists in Silicon Valley and co-owner of the San Jose Sharks. Kevin was a partner with Kleiner Perkins Caufield & Byers for seventeen years, which some consider the most successful venture capital firm. Some of their investments include Compaq, AOL, Netscape, Sun Microsystems, Juniper Networks, Intuit, Amazon.com, and Google. KPCB's companies employee over 300,000 people, have annual sales in excess of $100 billion.
Kevin serves on the board of a eight public, private and non-profit entities, which include Citrix Systems (NASDAQ:CTXS) and VeriSign (NASDAQ:VRSN). Prior to joining KPCB, he was Vice President and General Manager of the Network Systems Team at Businessland (now Siemens). While in this role, the company's sales increased from under $70 million to over $1.4 billion, and the company was recognized as the number one supplier in worldwide Local Area Networks for three straight years.
He began his talk with the "Golden Rule" and cited Matthew 7:12, "So in everything, do to others what you would have them do to you, for this sums up the Law and the Prophets."
For Kevin, he explained this was important and effective in all negotiations he was involved in. The "Golden Rule" allowed him to never have a bad experience because his objective was to treat the people on the other side of the table as he would have wanted from them. Of course, they might be vicious and aggressive, but Kevin said he kept it all in perspective and stuck with the "Golden Rule."
His second rule was to always have a sense of urgency. He learned from one of his mentors not to waste time, but just to do it. If it's on your list, why keep it on there if you could do it now? He also discussed how having lists are a good thing because to become successful you need to be doing things and if you don't have things to do then you will not become successful. So having long "To Do" lists are a good thing.
His third rule was to keep on trying. Another way to phrase this, which he didn't state, is do not to be afraid of failure. He gave a football analogy of the '72 Miami Dolphins. They were the only perfect team in NFL history, but do people remember them as well as the great football dynasties? No. People remember and have a close affinity to the Pittsburgh Steelers, Dallas Cowboys, San Francisco Forty-Niners or Greenbay Packers. These teams lost and won in numerous Superbowls. It's better to just try rather than only trying when you know you won't fail or waiting until everything is right. Not a great analogy, but a good message.
I liked how he referred to his written biography as being incomplete. It tells maybe 5% of his career, which of course highlights his successes, but most of what's left off are his failures which drove him to success.
His fourth rule was to think big. He had a great story about one of his players on the San Jose Sharks, who's name I forgot, who came from a small town in Ottawa. This player wrote down when he was in junior high that his dream is to play professional hockey for the San Jose Sharks, and against numerous odds that Kevin described he achieved his dream. So think big and dream big.
Kevin's last rule was to think small, and to ask yourself, "Am I doing the little things right?" In his opinion, the top 5% of NHL players are all the same in terms of talent, but the difference is in the little things. The slightest increased shot accuracy, conditioning, etc. make the difference between being a top player and hall of fame quality.
He recommended to think of those small things in life and work. The small thank you note, a cup of water for someone in thirst, or a helping hand when needed.
Obviously, I cannot convey the energy and tone Kevin Compton projected, but he was at worst impactful and at best inspirational.
Kevin serves on the board of a eight public, private and non-profit entities, which include Citrix Systems (NASDAQ:CTXS) and VeriSign (NASDAQ:VRSN). Prior to joining KPCB, he was Vice President and General Manager of the Network Systems Team at Businessland (now Siemens). While in this role, the company's sales increased from under $70 million to over $1.4 billion, and the company was recognized as the number one supplier in worldwide Local Area Networks for three straight years.
He began his talk with the "Golden Rule" and cited Matthew 7:12, "So in everything, do to others what you would have them do to you, for this sums up the Law and the Prophets."
For Kevin, he explained this was important and effective in all negotiations he was involved in. The "Golden Rule" allowed him to never have a bad experience because his objective was to treat the people on the other side of the table as he would have wanted from them. Of course, they might be vicious and aggressive, but Kevin said he kept it all in perspective and stuck with the "Golden Rule."
His second rule was to always have a sense of urgency. He learned from one of his mentors not to waste time, but just to do it. If it's on your list, why keep it on there if you could do it now? He also discussed how having lists are a good thing because to become successful you need to be doing things and if you don't have things to do then you will not become successful. So having long "To Do" lists are a good thing.
His third rule was to keep on trying. Another way to phrase this, which he didn't state, is do not to be afraid of failure. He gave a football analogy of the '72 Miami Dolphins. They were the only perfect team in NFL history, but do people remember them as well as the great football dynasties? No. People remember and have a close affinity to the Pittsburgh Steelers, Dallas Cowboys, San Francisco Forty-Niners or Greenbay Packers. These teams lost and won in numerous Superbowls. It's better to just try rather than only trying when you know you won't fail or waiting until everything is right. Not a great analogy, but a good message.
I liked how he referred to his written biography as being incomplete. It tells maybe 5% of his career, which of course highlights his successes, but most of what's left off are his failures which drove him to success.
His fourth rule was to think big. He had a great story about one of his players on the San Jose Sharks, who's name I forgot, who came from a small town in Ottawa. This player wrote down when he was in junior high that his dream is to play professional hockey for the San Jose Sharks, and against numerous odds that Kevin described he achieved his dream. So think big and dream big.
Kevin's last rule was to think small, and to ask yourself, "Am I doing the little things right?" In his opinion, the top 5% of NHL players are all the same in terms of talent, but the difference is in the little things. The slightest increased shot accuracy, conditioning, etc. make the difference between being a top player and hall of fame quality.
He recommended to think of those small things in life and work. The small thank you note, a cup of water for someone in thirst, or a helping hand when needed.
Obviously, I cannot convey the energy and tone Kevin Compton projected, but he was at worst impactful and at best inspirational.
Monday, September 28, 2009
Second Annual Silicon Valley Rocks! Dec 9th in SF!
Alison Murdock, Co-founder and former President of DealMaker Media, is hosting her 2nd annual Silicon Valley Rocks! More from Alison...
Silicon Valley Rocks! is a music showcase featuring performances from Silicon Valley’s tech community - from VCs and entrepreneurs to bloggers and software developers - to raise money for Music in Schools Today (MuST), a Bay Area non-profit that seeks to rescue school music programs from budget cuts.
Right now, our Call for Bands is open! If you're in a band (or know someone who is), please submit your/their information here. We have several contenders already... For details on participation, please check the FAQs.
Also our registration and donation center is open. Event tickets include entry to the showcase and the after-party featuring the best networking, drinks, and dancing north of San Jose. Ticket purchases are tax deductible. Tickets are $25 or $75 for VIP tickets which include free drinks and food. Tickets can be purchased here.
Wednesday, July 8, 2009
Startup Fundraising 101
My article at VentureBeat's Entrepreneur Corner is up:
"Startup Fundraising 101"
The slides in the article and below are actually from an older version, but the newest one was on my laptop that got stolen this past weekend. Not sure if I'm up for recreating this document since I can't remember all the minor tweaks (e.g. slide 12 mentioning Reed Hastings and Judy Estrin instead of Marc Andreessen) I did :(
"Startup Fundraising 101"
The slides in the article and below are actually from an older version, but the newest one was on my laptop that got stolen this past weekend. Not sure if I'm up for recreating this document since I can't remember all the minor tweaks (e.g. slide 12 mentioning Reed Hastings and Judy Estrin instead of Marc Andreessen) I did :(
Startup Fundraising 101
View more presentations from Bernard Moon.
Wednesday, June 3, 2009
5 Best Stanford Tutorials in Financing
VentureBeat's Entrepreneur Corner has some good videos on startup financing:
How Much Money to Raise?
Five Metrics for Venture Success
The Dynamic Relationship Between an Entrepreneur and VC
Silicon Valley: The Capital of Venture Capital
Angel Investing Revealed
How Much Money to Raise?
Five Metrics for Venture Success
The Dynamic Relationship Between an Entrepreneur and VC
Silicon Valley: The Capital of Venture Capital
Angel Investing Revealed
Tuesday, February 24, 2009
Marc Andreessen on Charlie Rose
HatTip to Al. This has been discussed on posted in a fair amount of places already, but it deserves to be. Andreesen is insightful, entertaining, and provides the pulse of Silicon Valley to outsiders.
Sunday, February 22, 2009
What To Watch For On Convertible Debt Financing (Especially During a Downturn)
I've been involved in several discussions lately on convertible debt financing for startups. First, I should reference some good posts out there. My former advisor, Brad Feld (Managing Director at Foundry Group), has a good post here ("What’s The Best Structure For A Pre-VC Investment?"). The Venture Hacks guys have a good overview here, "What are the benefits of debt in a seed round?"
Pretty much everyone is in agreement that convertible debt is ideal for entrepreneurs during their company's seed round. You don't give up equity at this point and the valuation of the convertible debt is pegged to the next round of financing, which should be your Series A.
Other entrepreneurs might need convertible debt in the form of a bridge loan to your next round of financing. A common situation for 2009 might be a startup needing a $1 million bridge loan as they try to close their Series B financing since they want to avoid shutting down their operations.
Prior to the economic meltdown, I would tell entrepreneurs for any seed investment under $1 million you have to push for convertible debt. Since $1 million is the new $10 million under today's environment, I would probably say negotiate this for only deals under $500,000. Maybe even $300,000 depending on what region or country you live in.
Also the standard terms have changed. From my experience and speaking with a couple attorneys at Wilson Sonsini, which is considered the top Silicon Valley law firm, a standard convertible debt deal would provide the investor 6% to 7% interest, 20% warrant coverage, and 2 to 3 year maturity date. After the economic meltdown, it seems more investors are asking for 8% interest, 20% to 40% warrant coverage, and a backstop provision.
The last item is the one to avoid. Some aggressive investors (conservative in selection but aggressive on terms), which are becoming more frequent in today's climate, are asking for backstop provisions. This sets a deadline for you to close your next round of financing. If you don't close, the debt provided will convert to equity based on your current round or an agreed upon valuation.
Your startup might already have seed capital or a Series A at a set valuation. The standard term for a backstop provision is one year. Let's say if you have $1 million in convertible debt, your company is valued at $3 million, and you don't close within the year time, then that $1 million is converted to equity at the $3 million valuation. You've given up a third of your company. Crap!
Some investors might even try to negotiate for a shorter duration, such as 6 months. Don't fall into this trap especially if you're already in discussions with your next round investors. Financing rounds take longer than you think. Sure if you're in the top 3% of all tech startups, then you can close within a month. Most rounds take 3 to 9 months. Today I would say it takes 6 months to over a year.
Just say "NO" to any backstop provision less than a year. I would suggest to negotiate the opposite if an investor insists on having a backstop provision. Push for 2 years due to the current financial environment, or just avoid the backstop provision all together.
Pretty much everyone is in agreement that convertible debt is ideal for entrepreneurs during their company's seed round. You don't give up equity at this point and the valuation of the convertible debt is pegged to the next round of financing, which should be your Series A.
Other entrepreneurs might need convertible debt in the form of a bridge loan to your next round of financing. A common situation for 2009 might be a startup needing a $1 million bridge loan as they try to close their Series B financing since they want to avoid shutting down their operations.
Prior to the economic meltdown, I would tell entrepreneurs for any seed investment under $1 million you have to push for convertible debt. Since $1 million is the new $10 million under today's environment, I would probably say negotiate this for only deals under $500,000. Maybe even $300,000 depending on what region or country you live in.
Also the standard terms have changed. From my experience and speaking with a couple attorneys at Wilson Sonsini, which is considered the top Silicon Valley law firm, a standard convertible debt deal would provide the investor 6% to 7% interest, 20% warrant coverage, and 2 to 3 year maturity date. After the economic meltdown, it seems more investors are asking for 8% interest, 20% to 40% warrant coverage, and a backstop provision.
The last item is the one to avoid. Some aggressive investors (conservative in selection but aggressive on terms), which are becoming more frequent in today's climate, are asking for backstop provisions. This sets a deadline for you to close your next round of financing. If you don't close, the debt provided will convert to equity based on your current round or an agreed upon valuation.
Your startup might already have seed capital or a Series A at a set valuation. The standard term for a backstop provision is one year. Let's say if you have $1 million in convertible debt, your company is valued at $3 million, and you don't close within the year time, then that $1 million is converted to equity at the $3 million valuation. You've given up a third of your company. Crap!
Some investors might even try to negotiate for a shorter duration, such as 6 months. Don't fall into this trap especially if you're already in discussions with your next round investors. Financing rounds take longer than you think. Sure if you're in the top 3% of all tech startups, then you can close within a month. Most rounds take 3 to 9 months. Today I would say it takes 6 months to over a year.
Just say "NO" to any backstop provision less than a year. I would suggest to negotiate the opposite if an investor insists on having a backstop provision. Push for 2 years due to the current financial environment, or just avoid the backstop provision all together.
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