September 2007 Archives

Outspark Explosion 9-27-07

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I was over at Outspark the other day and was floored by their growth. Back in February, they were still just filling out their space with IKEA furniture:

When I walked in this last Thursday, about 7 months later...

What amazing growth after only 7 months. They are moving like gangbusters on their game platform and watch for cool things to come soon!

The Anti-Digital

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I admit it. I'm totally digital. Wired to the hilt. Can't live without it.

Well, almost not. I force myself to be totally digital because it's my job to know and experience what it is like to be totally digital. It makes me more effective in designing products and services for the next digital generation. I suppose I could live being NOT so digital, but I want to be better at my work so I be more digital than not.

In being so digital, it's strange, funny, and sometimes frustrating when I encounter what I call "The Anti-Digital." These are people and places which abhor having digital stuff around for one reason or another.

Take Cafe Dante in the West Village of Manhattan. Here is the sign right at the door when you enter:

Cafe Dante is a quaint cafe that serves old school espressos and eats and if it's hot, you can always get a refreshing dish of gelato there. I like hanging out there because it isn't as contrived as Starbucks, and it's quiet so that you can enjoy a conversation with whomever you're with.

But NO LAPTOPS ALLOWED. They don't even like you talking on the cellphone with somebody. To preserve their atmosphere of being an old school, they don't want people hanging around all day typing on laptops, even if it could mean that they get more business from the constant flow of caffeine to people typing on laptops. They just want you to have a great old fashioned conversation and enjoy a cup of coffee with your buddy or date.

Then there are "anti-digital" people. These are people that are barely can manage having a cellphone, and just don't find value in being connected. They have email addresses but rarely think about looking on their laptops to check for email. They never buy gadgets and almost always sit in the follower part of an adoption curve, after a technology becomes so commonplace that they can't avoid it.

One person I know at least checks email somewhat regularly, but takes forever to reply. I know this, so I rarely send emails but call instead. This person has also left their cellphone at their summer home for weeks and didn't even bat an eyelash! Most of us would freak out if we lost or left our cellphone somewhere and could not live without it. This person just calmly told me that if someone wanted to find them, they would know how to do it. The cellphone is an afterthought in any case; most of us could not leave home without filling our pockets with our gadgets. But even when this person had a cellphone around, it would often be forgotten and left at home, or not turned on, or even left to completely be drained of power and not recharged.

Another person I know does have a cellphone, but practically never turns on their laptop. In this case, forget even sending emails to their email address; it won't get read. But at least the cellphone is always on their person. So I must either text or email to the cellphone in order to get in contact. Otherwise, forget about websites; an iPod is barely manageable (it's probably the worst looking, scratched up, dented iPod I've ever seen), and the most advanced gadget in their home is a Tivo without which shows would be missed.

To both people, there is no Facebook, no Youtube. Digital cameras get used, cellphones maybe, laptops aren't a necessity.

When places are "anti-digital", I'm sometimes OK with it. I seek them out to either have a decent conversation or just to get some quiet and think to myself, or perhaps read a book. Other times I can't go there because I do need WIFI and I want to get some work done and need to be online. "Anti-digital" places don't fit in that.

As for "anti-digital" people, this is where it is most frustrating. I've either developed more efficient ways of communicating or get used to communicating to the majority of people I connect with through technology. I always have to shift my normal way of communicating to another way just to get hold of these people, which is often back to some old way like picking up the phone, and that's annoying to make that shift when you're trying to get a lot done fast.

Is my life better being maxed out digitally or is it better being "anti-digital"? I think it's a personal choice and a challenge. Personal choice in being maxed out digitally because I am an early adopter, and it's important for my work, and because I have a natural curiosity about technology. A challenge in that I am a big believer in simplifing my life and while you could simplify by dropping all this digital craziness, I am a big believer that we're going to have to live with technology and we must challenge ourselves to simplify in the face of more technology rather than less.

Facebook Messaging vs. Old School Email Part II

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Following on my last post about Facebook messaging...

Today I exchanged Facebook messages with someone. I connected this person via traditional email (via his last known email address that I had for him) with some folks. It was an urgent communication, so I immediately logged onto Facebook and sent him a Facebook message telling him that he had an email waiting for him, so that he could respond quickly.

Isn't it funny that since I had not corresponded with this person for a while via traditional email but rather Facebook messaging, that I would tell him he had a traditional email waiting for him via Facebook?

As soon as I clicked on the Send button in Facebook, I paused and thought that I should check out where his notifications (that he got a Facebook message) were going. When I looked, they were going to same place that I had sent a traditional email to him!

Facebook...Email....Facebook...Email...?

Facebook Messaging vs. Old School Email

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One thing I heard about the young generation is that they never use email anymore. I began to wonder why that was, where corporate America and us old folks who grew up with nothing but email couldn't live without email now.

Lately, I started trading messages with people on Facebook through their messaging system. I wasn't sure what to make of it at first. Some people began sending me messages while I would initiate some just for kicks. It seemed like a novelty more than something that was useful.

But I started recognizing the advantages of messaging like this:

1. Email is filled with spam. Yet, Facebook messaging is not. I guess spammers haven't figured out good ways of getting into the messaging system. Each time you create an identity on Facebook, there are verification steps to show that you are a real person. Once someone creates a fake identity for spam purposes, it's pretty obvious, even if you get past the verification steps. They often have a big link posted to their website and I immediately report them as inappropriate to Facebook authorities. I once met Jonathan Abrams, founder of Friendster, who tossed out the idea of using a social network as an email system, because it would effectively eliminate spam. I think he was right.

2. It sorts emails by the conversation. It presents each message thread, which is incredibly useful from a conversation standpoint. In Outlook and other email programs, somehow the sorting by sender or subject doesn't solve the entire problem. It doesn't do auto-grouping by conversation, which I am finding to be very useful in a Facebook GUI; subject sorting just doesn't cut it. And last, threading never seems to work well, because sometimes attempting to derive threading via the RE: of a message subject can be daunting, especially if it has been editted.

3. Going further, the presentation of each conversation once you click into it is very nice. There is no antiquated '>>' for presenting the previous body of the message into replied email, which can make for difficult reading. You can see the whole thread at once and see where people replied. I do wish I had the option of copying some of the previous message into my current message. Sometimes there are multiple points in a message and you want to reply to each one separately and clearly. I have cut-pasted message sections into a new message and then typed a reply to that, just so the recipient knew I was talking about that section of a message and not another part.

4. If you want to start a new topic, you can just start a new message thread. This helps keep conversations organized instead of devolving from the original message where you may forget to change the message subject or just too lazy to, and then the conversation starts going every which way.

4. You can only receive messages from friends. Thus, you have already designated a list of safe message senders, which along with item 1. above helps to eliminate spam.

5. Private messaging is available, but you can also do public messaging. This is not available to the email world. Via the wall, you can have a more public conversation which can be entertaining and/or useful, if you intend on others to see it.

6. There are many types of communication happening on Facebook. People can comment on your photos, write on your wall, have activity and you get notified of it, and send you personal messages. Having all that accessible in one place is very useful. Otherwise, I'd have to flip between Outlook and several other websites to check activity. Sometimes I can send activity to my email, but then it just gets mixed in with all the other spam and normal important conversations I'm having. It's not very optimal. On Facebook, the newsfeed gives it to me all and a light notification on the front page gathers for me all the communications one can have with their friends and community in one convenient place. It's no wonder that people today have switched to Facebook from email as a primary communications vehicle.

The moment of epiphany for me happened when I began my Facebook messaging to friends AND I left a browser window up with Facebook in it. I would find myself hitting reload on that page many times during the day as well as checking on Facebook through my iPhone. I began to understand why today's youth almost never use email and just use Facebook messaging.

As my usage of Facebook messaging grew, I could also see parallels with another project I've been deeply interested in, which is email innovation. Facebook messaging solves so many things that I hate about current email. But could email innovation just be a dying concept as email gets supplanted by Facebook messaging?

Four wishlist items for Facebook messaging:

1. Offline messaging.

2. Save messages and conversation threads on my hard drive.

3. SMS messaging.

4. File sending.

Still, I do not see myself totally removing myself from email. The corporate world, and most of my generation, still use email as a primary communication vehicle. But for a significant and growing population of people I associate with, Facebook will become my primary communications method with them.

When the CFO leaves...

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Sitting here at LAX, I read in this week's Economist that George Reyes, CFO of Google will retire this week. Immediately, red flags arose everywhere in my brain.

A long time ago, I learned a valuable lesson which I believe to be true. Here it is:

When the CFO leaves a company, sell ALL your stock NOW.

My first encounter with this concept was when the CFO of Yahoo! left in mid-2000. At the time, all of us working there were still giddy (and incredibly naive) about Yahoo!'s prospects and that the stock price and all our fortunes would continue to grow unabated and unstoppable.

Boy were we wrong.

Smarter minds might have said that we could have read the signs, and that we should have been more realistic about the stock market and how high it could climb, and that the word "bubble" and its ability to "burst" should have been something we were watching for. Perhaps we could have crunched that data by ourselves, listened to the experts more carefully, and determined that maybe we should have gotten out before we lost everything...and then some.

In the midst of our giddiness, we saw our CFO leave the company and gave him a big party, wished him well in the creation of his foundation, and hoped that he could just play golf til the rest of his days.

And we all kept right on basking in our giddiness and our virtual fortunes and let it all ride. We let it all ride right down the drain in late 2001 when the market and Yahoo! stock crash landed big time.

That is, all of us except for the CFO who left and kept a huge chunk of the value of Yahoo! stock before it crashed.

Why would the CFO leaving be such a signal that it would be time to get out of a stock or not?

Here is why:

1. A CFO typically has tons of buddies in the financial world and has access to data, analyses, and information that you or I would never get hold of.

2. CFOs come from a career where all they do is think about money, how to make it, and how to keep it. Their analysis of the market is arguably in a much different place than those of us who don't deal in money all day long. They are NOT going to haphazardly throw away money if they can help it and will bail at the first moment's notice when they think they've topped out in an opportunity.

3. The letter "C" in their title means that have access to company information and analysis far more detailed and confidential than any of us can access. They can see if the company and/or the market is going sour long before you or me.

4. CFOs are master number crunchers. When it comes to money, they can do all this math in their heads far faster than we can with all the calculators and computers at our disposal. For sure, they will be able to calculate when their company and/or the market is going to level out or turn downward a lot faster than we can.

If a company's prospects are flattening out or going downward, you can bet that the first person to take off and cash in his earnings will be the CFO. Staying on faith is highly doubtful; nothing personal, mate, but money is money and a money guy is not going to bet it on faith.

But if the company's prospects are good, then why would a guy like the CFO leave?

So I hate making predictions but instead I'd like to offer up a hypothesis, with Google as a participant in this experiment. The hypothesis is, based on what I just posted here, that because the CFO just left from a company that has seen its stock go meteoric since IPO, Google's prospects and growth have started to or will shortly flatten somewhat. This, in a market such as we live in, will basically trash the stock as the markets hate it when a company goes from super-growth to normal/consistent growth. Trashing the stock is something that CFOs can sense and that is why he is leaving in order to preserve his earnings in Google stock.

I wonder if my hypothesis is right? Let's wait and see....!

P.S. To all my friends at Google who may be reading this post: I am sorry if I have such a dire outlook, but remember it's only for Google stock, not the company. So don't quit but SELL SELL SELL....

These last few weeks have been really hectic. For a while, it seemed like I wasn't looking at any new deals whatsoever. I resigned myself to working on the companies I had signed up with but also could see that my work with them was starting to taper off in an expected fashion.

But then it changed. All of a sudden, a flurry of new opportunities came down and I found myself meeting with companies every week. It actually got fairly hectic, meeting up with entrepreneurs and actually going through some due diligence processes with a few companies. But one by one they dropped off my radar. As they dropped off my radar for a variety of reasons, some interesting observations came to light about the way startups and investors strategize with each other.

The Entrepreneurs' Perspective

The most sought after entrepreneurs/startups get deluged by requests from angels to invest in them. Typically, they are also pursued by venture capitalists who also like what they see and want to participate. The availability of money to these entrepreneurs creates an situation where they can pick and choose the money they receive. I've seen them go in these directions:

1. They go directly for the big VC investment and skip angels altogether. Let's face facts: raising money sucks. It's time consuming, you get a lot of negativity from people who don't believe in you, and you'd much rather be building something than begging for money. So why not skip all the nonsense and just take the big money and go back to building your business and hiring people you need.

2. They take the VC investment but only bring on some angels who are either high value or friends. Similar to 1., they get the big money but only bring on those people they like or those angels that can help them later.

3. They delay VC funding to push up their valuation, and only pick a handful from the crowd of angels wanting in. The most bold of entrepreneurs who are on to a good thing will press their advantage by not taking big money now, which could mean they have to give up more of their company at this point, and wait to build their business a bit more which raises valuation for later and, thus, gives them a larger advantage for not giving up so much of their company later in exchange for a large VC raise. They instead raise a smaller amount (ie. $500k - $1MM) which gives them the ability to run for enough time to build their business to a more valuable state.

4. They want angels who are active investors and can bring value to their company. More and more I speak to entrepreneurs who only want angels who can help them in their business versus just bringing money alone. It makes sense; angels who can help are more motivated to help because they have skin in the game. It does make for a tough environment for those angels with only money to give.

5. They are limiting the number of angels and/or investors. Managing a lot of investors can be troublesome to entrepreneurs. Simply cutting all the paperwork (ie. stock purchase agreements, stock certificates, etc.) can cost more money. Collecting the money can be tough for those angels who are dragging their heels in transferring the cash into your account. Dealing with nervous investors can be a draw on resources as you need to respond to their requests for information and calming their anxieties about whether or not you're going to make money for them.

This all goes out the window for those entrepreneurs who don't have something hot enough to attract lots of investors.

The Investors' Perspective: Herd Mentality, Joining the Herd

As an investor, I want to get in on the great deals. Finding deals that are good but are hidden can be really tough. It's more often that there is a common opinion about a startup and that everyone wants to get a piece of the action.

I try to do my own due diligence. I also try to form my own opinion about a startup. But I do find it difficult to ignore what others' think about a company. Over these last few weeks, I've looked at bunch of deals where there was a large number of investors trying to get in. But I've somehow lost out on a number of them. Why was that? Some observations:

1. Herd mentality is inescapable. For some reason, when many people think you have a hot deal, then you tend to think so too. They must know something you don't, or you bank on someone else's expertise, or you just don't have time to do all the due diligence yourself. Thus, I tend to look more seriously at deals with lots of interest, even when I tell myself I'm going to be disciplined enough to do all the due diligence on my own.

2. The investor herd piled in, wanting to invest into a startup. It's a common scene around the valley. The hottest deals get shopped around the most popular and prominent angels who are all high value and high profile. They have lots of money and value to bear on a deal. But they also have their friends who come in on the deal. So a combination of being able to keep in an entrepreneur's mindset and haivng the herd not forget about you, thus keeping you in the entrepreneur's mindset, helps to get you into a deal...or not. I have not been really part of any investor herd before so it was literally impossible for me to stay in an entrepreneur's list of investors as they get deluged by a huge number of people and can barely manage the flow of communication. I know I've been dropped off investor lists because of not being part of a herd.

3. Joining a herd became a worthy goal. As I thought about reasons why I missed out on deals over these last few weeks, I started thinking about how I could join a herd. I don't like to bill myself as a guy who can do lots of investor intros now, but knew I could get there in a few years as I worked with more and more people. But now I think about the networking aspect more, and using entrepreneurs to introduce me to some prominent angels and VCs around the valley. Slowly but surely, I am starting to not be forgotten amongst the investor herds, which is a good thing. So far, I think a combination of personality and value has helped me stay in the mindshare of herds. I meet people and show them that I'm a cool guy and not a wonk, and that my experience can actually help a company that we may all be investing in, and things seem to be happening.

4. I am trying to standout in a herd. If you demonstrate that you can bring high value to the company, staying in the list of investors for a given entrepreneur becomes easy. I can sometimes stay in a deal where other investors with lesser or no value to a company beyond just cash get dropped. I have found a great variance in entrepreneurs in whether or not they find value in what I could bring to their companies. If entrepreneurs don't find value in what I bring, then the probability becomes much greater that I will get dropped from their investor lists.

5. I need to constantly follow-up on deals I want in on. In the past, I've relied on entrepreneurs to contact me when they're ready to talk investing. However, a number of them have dropped me simply because I didn't do my part to stay in their mindshare. Shouting loud via email or phone works well and helps a lot.

Lots to keep track of in the ecosystem of investors and entrepreneurs in order to not be forgotten amongst the herds of investors roaming Silicon Valley.

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This page is an archive of entries from September 2007 listed from newest to oldest.

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