August 2006 Archives

Observations on the Startup World, August 2006

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In the last few months in meeting entrepreneurs, I am finding many details that are interesting to me:

1. Office space is often somebody's apartment or house. Many times it is also a dorm of sorts for their employees, and their living room is filled with desks and PCs. It is a nice way to save cash until they can get some to move to a real office space.

2. Meetings happen in cafes, or in the bedrooms of the "office" apartment! There must be some HR law that is violated if somebody of the opposite sex is interviewed behind closed doors in a bedroom...?

3. Entrepreneurs are at different levels of experience. Many I have met have started companies before. Many are first timers. What worries me is where they are getting their advice and education. I think some are not directing their education at all, but learning on the fly. A few have cash to work with their legal services to learn, which is kind of expensive.

4. Legal services are tough to pay for. It's nice to hear some lawyers in the Valley are deferring payment until the company gets setup. But it also creates this climate of get it done fast and cheap and it could cut corners which cause problems later. One is in the area of investment terms. Often these terms will be cranked out and the entrepreneur doesn't ask anymore questions for fear of creating billable hours; he just accepts them and takes them to naive investors. Typically these terms are company friendly only and naive investors take them without knowing the danger. It seems that even seasoned, large investors take the terms because they have lots of cash to play with, and bet on the team and the product. With them, they are used to losing cash on bad deals and factor that into their investment strategies.

5. Early investors are often friends and family and education level in angel investing is minimal. seems like many are operating on trust and don't push back on the terms.

6. Everybody is at a different stage in funding. Some are pre-angel, some are in the middle of angel, some are post angel trying to get the big VC influx. It's been interesting to get a handle on every company and where they are at.

7. Time is a big issue. I find that many are deluged by VCs clamoring for attention, companies that want to partner up, users who complain, etc. When the team is super small, you have to try to work on all that at once and it's really tough. Many seemed overwhelmed.

More later on the wild and wooly world of entrepreneurs and startups...

What Do I Think is the Next Wave of Business for the Web?

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When I tell people what I'm doing now, they always ask me about what I think is hot and upcoming. They always wonder what I think makes something worth looking into and potentially the next big hit in Web business. I guess they want to know the secret formula or something.

Sometimes I hate answering this question. It is almost like the question I always get asked in seminars when I present: What are your favorite websites and why? It seems that I always should have a ready answer in my pocket to give them. And sometimes it's hard. Hard to remember all the websites I surf to each day, or those that I encounter through referrals or friends, or hard to articulate why I like something or why I don't. So now I get into the practice of thinking more deeply about each website I go to and try to have some kind of answer to this question.

As I now must have for "What does Dshen think is hot on the Web and why?"

So I thought I'd write some of them down here so at least you can see what I'm thinking about these days:

1. I find the viralness and the spontaneous emergence of communities intriguing. Sometimes you can't predict when something will take off. The non-prediction aspect is both frustrating and invigorating; as business minded folks, you want to be able to say that this community will work and I can make money of it or not. The reality is that a lot of these communities take off on their own. It has been shown to me that the "put it up and see what happens" strategy works so well here. If I don't connect with a community or what brings it together, it doesn't mean that it won't be huge or work for others. Which brings me to my next thought...

2. It's all about the niches. The Yahoos and the Googles of the world have already taken care of the broad swaths of internet turf. But they are so huge that it's hard and not justifiable to attack niches. This is where I think smaller companies can do a great job at tackling niche markets and flourishing. With the internet lowering barriers of reaching people, small niches that were hampered by geography and other factors can all of sudden congregate and be powerful through the internet, which has no physical limitations. So communities of interest can form and be really huge.

3. In the future, the power will really be spread out to the people. I really like startups working on concepts which empower people. One big example is how MySpace is showing that the record labels aren't as necessary as they were years ago when there was no internet. Musicians can now effectively get their music out to the masses and make money without the marketing power of record labels. If the labels (and music studios, and other similar huge old world entities) don't change their thinking, they will all die a slow death. Throwing lawsuits at it will slow it down but my belief is that such movement of democratizing the old world is unstoppable and inevitable.

4. Equally important and relevant to me are the people working on it. I find there are two types of people. Those who are very open minded and those who are not. My belief is that the open minded people are more creative, more adaptable, and be able to accept new ideas and directions than those who are not. I try to avoid working with those who think their way is the only way and don't really listen to what I have to say, or what others have to say for that matter. In my 10+ years of working on Web products, I have been surprised so many times at what works and what doesn't that I've lost count. You have to have the ability to go with the flow and shift and adapt. Being too rigid brings a lot of risk, which brings me to the next point...

5. I see building applications on the Web has a huge probability game. Nobody is guaranteed for success but yet that shouldn't stop you from putting something up and seeing what happens. And whatever you do, you keep stacking the odds in your favor. You keep testing and adjusting. You find smart people to bring onto your team. You network continuously to make sure you get the best ideas possible. Keep stacking the odds in your favor and you may just find that someone who isn't doing this is all of sudden left in the dust.

6. A buzzword favorite. I like companies who work in the long tail (see book of same name The Long Tail by Chris Anderson) which is akin to giving the power to the people.

7. Another buzzword favorite. I like companies who disrupt old traditional ways of doing things. Those who take on big, huge, slow companies in big and huge industries by doing something in a different way that cuts costs and delivers better to their customers. Love it. Think iTunes to the music and TV industries.

Other stuff: Gotta be innovative, gotta be engaged with the Web. Being tenacious and never giving up. Unwavering belief in success.

That's it. Now to work on my favorite websites list haha.

Today I saw an article in the New York Times online edition about flightstats.com. This site is pretty cool. It gives you tons of information about the flights out of any airport, and any associated delays. The article also talks about the myriad of delays plaguing all airports during the summer travel season and highlights how annoying travel can be with late arriving, delayed, and cancelled flights. Flightstats.com helps with all that by giving you the latest info on any flight in or out of any airport in the world.

Of course upon reading the article, and being an avid world traveler, I immediately went to the site to check it out. I entered the URL and....waited....and waited....and waited....

I went to the bathroom and came back and it still had not pulled up.

It brought me back to a time when the team that designed the ads for the front page of Yahoo! used to report to me. We would deal with many clients and every time we talked to them we would ask them if they were technically ready to handle the traffic that exposure on the Yahoo! front page would bring.

The answer we would receive would always be an emphatic yes. But we would never believe them.

We would reply with an "are you sure?" and a "we're going to test your site to make sure it's ok" and a proposal to host a jump page which would look exactly like the target page but only be put up in case of emergencies.

Sometimes they would take our offer and sometimes they would not. Foolish mortals.

In the years that I helped out with Yahoo! front page ads, I think at least 8 out of 10 clients were technically not ready to handle traffic that the Yahoo! front page would deliver them. It was the equivalent of a firehosing of users to the site, and webmasters on the client end would almost never be ready to handle it. We've seen site slow-downs to virtual non-response conditions whereby too many users would attempt to enter the client's site. People outside of the Yahoo's of the world just didn't have the experience to handle that much traffic, and under normal operating conditions, never need to even deal with that.

But buying an ad on the Yahoo! front page isn't a normal condition.

In recent years, I have seen this gotten better. People seem to be doing better at building scalable solutions and being prepared for them.

I guess not everyone has experienced it yet.

Today, an article in Wired, a plug on the Today show, or a discussion in the New York Times is enough to send a ton of users your way. Obviously, Flightstats.com wasn't prepared for it. I went there and waited and waited for many minutes before the site came up. Then it was butt slow trying to retrieve data on LAX for today.

It just goes to show that building scalable web products is a necessary skill, and that even abnormal exposure in a news article is enough to make your site slow down or even stop responding.

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This page is an archive of entries from August 2006 listed from newest to oldest.

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