August 2007 Archives

A Bit of Yahoo! History: Crocodile Hunter Visits Yahoo!

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This was just posted onto the Yahoo! Alumni group in Facebook. For those of you who don't feel like joining the Yahoo! Alumni group to watch this video, here it is. This video was created for a Production Conference and was shown at dinner time. Later, it became the main new employee video for many years afterward.

Those were the good ol' days...(sigh).

NOTE: Sorry about the other player. I uploaded to Videoegg and didn't realize until later that Videoegg only allows 5 minutes on the video. I've uploaded it to my account now but it seems that my server can be slow to load the video. But at least you can watch the full version now.

The Three Faces of My Schizophrenia

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In working as advisor and angel investor to startups, I find that I can be schizophrenic at times. Three faces I wear, when dealing with entrepeneurs:

INVESTOR

Characterized by:
1. Paranoia about losing my money.
2. Saying "sell the company"; starts when my return crosses about 5x my investment, and becomes a yell when my investment hits 10x.
3. Motivated by what my terms say for Notes.
4. Recommending courses of action which generate a lot of cash for the company, which increases value of the company and thus my investment.

ADVISOR

Characterized by:
1. Recommending courses of action which build the company.
2. Seeking the best ways to create product and do business.
3. Balanced view towards generating revenue in the company versus building product, which can be at odds if, for example, we're talking about advertising and internet users.
4. Might recommend against selling the company given what I have seen when bigger companies absorb smaller companies.
5. Seeks the best employees and resources to do the job. Pushes those resources to build the company bigger and faster to exclusion of other things like sleep.

DAVE SHEN HUMAN BEING

Characterized by:
1. Tends towards recommending humanistic approach to treating employees.
2. Wants to grow employees, sees them as learning over time, nuturing them to be better.
3. Coaches people to balance life, work, and family. Asks what makes people happy and what keeps them motivated, encourages people to find this in the company.

If you've been in the startup game for a while, you'll know that these three faces I wear are often at odds with each other and conflict in goals. For example, how can I counsel people to balance work and life and go home at 5pm to make time for family when as advisor, I want these guys to work 24/7 because the startup needs it, and as investor, I want them to work so freakin' hard so my money isn't wasted?

When I start working with someone, one of the first things I tell people is that I can be schizophrenic. They always laugh and sometimes I can see that they don't get what I mean; the more experienced ones snicker and thank me for being upfront!

It can disconcerting to have a guy like me advising you to do one thing and then tell you to do something else in opposition to what I just said a while ago. It's because I do wear many different hats, and the forces within me struggle every day to push/pull me in several directions. It's a challenge to find a balanced answer, and I like the challenge of finding a solution that satisfies all of my three "identities". I just hope I do not drive any of my entrepreneurs nuts by my triple schizophrenic state...

Ycombinator Demo Day: Summer Class in Mountain View

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I went to my first Ycombinator Demo Day this last Thursday. I wasn't sure what to expect, except for the fact that a whole bunch of startups created by near-college grads would be presenting their projects. I definitely wasn't expecting any well-thought out business plans but was hoping to see some really cool stuff.

After the event, much has been written about the companies themselves, and you can read about them at VentureBeat: The Ycombinator List and at TechCrunch: Ycombinator Demo Day: The Summer Class. There has been enough coverage about the companies, so rather than do that I wanted to write about something else regarding the Demo Day.

Usually when you sit through pitches, they can be relatively dry. You see lots of graphs and how big the market opportunity is and it's usually a more serious and professional presentation.

For Demo Day, I was pleasantly surprised that each presentation had a healthy dose of humor cleverly injected. I found myself chuckling at funny demos, laughing at jokes made at competitors' expense, and smiling to see them laughing at themselves. During one of the breaks between presentations, I stopped to say hi to Paul Graham (co-founder of Ycombinator) and asked him about whether or not he encouraged humor to be part of the presentations. He said they were actually more humorous during the dry-runs and that he actually pulled them back from being too over the top. I shudder to think what they were like before he pulled them back...!

Sitting through 19 demos for 3+ hours could have been a truly grueling affair. I am glad that the young graduates of this summer's Ycombinator class threw some humor into their demos and turning a potentially boring, lifeless afternoon into a more lively event.

"The Business Opportunity" and the Epiphany

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I was just recommended this excellent book called The Four Steps to the Epiphany by Steven Blank. It describes a particular problem I've encountered with some of the startups I've met with.

Some of the entrepreneurs I've met with lead with the business opportunity. They say that the market is this big. They have charts and research to back that up. They show millions upon millions, if not billions of dollars spent in this market alone.

Then they present this product that fits into this market. They go on to say that we can attack this market opportunity by building a product to gather all these eyeballs, users, consumers, whatever and then sell this market to advertisers and marketers.

It always worries me when they lead with business opportunity.

Most likely what I discover after is:

1. The entrepreneur is not a model customer of this market. They have come upon this opportunity through research.

2. The entrepreneur has researched business opportunity but has not researched what customers want. While it may be true that marketers spend millions and billions of dollars trying to reach these consumers, the entrepreneur has not asked consumers whether they want the product he is building.

3. I often get a defensive response when I tell them this is an issue.

Which brings me back to The Four Steps to the Epiphany. Author, Steve Blank describes the Customer Development Model, which is an iterative method of figuring out what customers actually want, versus driving a business with financial projections and product development and assumptions that the product will be accepted by consumers. He argues that every successful startup runs by this model, and that running it by traditional product development models brings a huge amount of risk into whether the business will be successful or not.

Reading about the Customer Development Model brought me back to those meetings with entrepreneurs who are trying to build companies using traditional methods. Those meetings left me feeling uncomfortable and ultimately, following my instinct on these matters, I would often let the opportunity go. I am glad to be reading this book, because now it frames my uncomfortable feelings into a way of articulating them better.

As an angel investor, I want to reduce risk whenever possible. I find that when entrepreneurs resonate with the market and are building a product that they are target markets for, then it minimizes risk. This also means that you get extra passion for the product because the entrepreneur wants the product for himself, and you may reduce the need for external research to figure out what customers want, which reduces cost and time which could be used in building the product.

That's not to say that someone couldn't be successful if they don't fully or completely resonate with the product and are the target market. Success is a probability game and when entrepreneurs are themselves the target market and they resonate with the customers, then you stack the odds in your favor by a great deal.

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