January 2008 Archives

Airline Security and the Gadget Freak

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Last week I passed through airline security at SFO and had an unpleasant surprise. They were making people take out EVERYTHING electronic. Cables, iPods, mobile phones, everything - in addition to your laptop. As I put my stuff on the security table and sliding towards the x-ray machine, I hurriedly took out as much as possible and prayed as I put my things through the x-ray that I would make it through. On the other side of the x-ray, I was gathered my things and was not required to go through extra screening. I also realized that I had forgotten to take out my iPod and cables but they let me through.

I thought that maybe it was because we were at Threat Level Orange (whatever that means - I guess Orange must be close to Red which I would assume is the highest threat level so Orange must be pretty high) and it was Martin Luther King's Day weekend so I thought that perhaps they were doing a bit more security. But it seems like it's a permanent policy now. This week I also had to take out everything.

Once again I feverishly dug out everything in my bag that was electronic, but of course in my haste I forgot a few things like my digital camera and Kindle cable but managed to make it through.

So I wonder about this policy. They say you need to take out everything, but twice I did not. I was entirely willing although not immensely overjoyed at the prospect of taking everything out, but at least they should say what they mean. If they say they want everything out but let you pass anyways when you don't have everything out, then what's the point?

This also has implications for the gadget freak traveler guy like me. I have more gadgets on me now than ever before. It's my life. But yet traveling so much, it seems like it's going to become a huge hassle to bring all my gadgets. Reduction is a possibility; I could consolidate some things, but not others. On the other hand, I did buy some Eagle Creek zippered packing bags in which I put a lot of my electronics and support cables. I was able to just take out that bag and put it in a tray for inspection. Faster, but still not ideal.

It's like that cartoon I saw in some magazine once. They have a shot of two guys who stripped down naked to walk through airline security. The caption underneath read, "It's just easier this way."

Talking Entrepreneurs Out of Only Going for Users

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Occasionally I come across an entrepreneur who insists that his current strategy is to go for users and not worry about revenue now. It always makes me cringe. Then I try to talk them out of that strategy and find a more balanced strategy of getting users and revenue at the same time. Why do I feel this way?

In the past, the "get users now worry about revenue later" strategy has been successfully employed, so it's not totally without merit. Yes it's true; if you have tons of users then at the very least you can monetize the eyeballs via advertising. But certainly if many users find your product/service useful, that's evidence that they would probably pay to use some version of your service at some point.

In examining how this strategy does work, I've come up with these cases:

You hit on a killer app early and you have hockey stick growth in users.

Somehow you've hit on a killer app early and you've got users up the wazoo. You see exponential growth and you can increase your valuation by waiting a bit longer to really cement your negotiation position when fund raising. In any case, operations can last that long because the speed at which your users are growing is so fast that it is obvious you can survive cash-wise until you reach your goal, before you need to figure out your revenue strategy.

You can last expenses-wise long enough to grow users to a point to be valuable.

You've built a service and found it valuable to users, and now you want to wait to build up users before figuring out a firm revenue plan. Expenses to run the site are low enough that don't eat into your funds. Whatever money you've raised now, you can extend that budget for a very long time (try 1-5 years). Or maybe you're rich or you are married to a rich spouse and don't need the money coming in from the company to survive.

You've got the initial backing of a big fund.

I've seen cases where if you get seed money from a big fund, like Sequoia, then it gives you a bit of comfort that there will be someone there to infuse you with cash if you get the huge amount of users but don't have revenue. Often their terms enable them to get first right to fund you when it comes time for the next funding round. But also realize that they can spend $100k-$500K on a company and not bat an eyelash if they lose it all; they've got billions under management and can afford to give you seed cash knowing that they might lose it.

If I see an entrepreneur that fall into these categories, then I usually shut up on this issue. But most people are definitely not, especially when they are in the early stage of their startup.

That's why I try to talk entrepreneurs out of going just for users. I want them to think about revenue right from the beginning. Even if it's incomplete or risky, at least they are thinking about it now versus getting into a budget crunch and then realizing they should figure out revenue when they're almost out of cash. And who knows, they may actually hit on something that brings them revenue to survive or even do better than that. But you'll never know unless you try as soon as possible.

I've also seen entrepreneurs argue they have a funding plan along with their business/product plan. They will build the product and user base, survive until their current cash runs low, and then they will go for their Series A funding and everything will work out great. The problem with this plan is that there is no backup; it pre-supposes everything will go as planned with no hiccups. This is a highly risky supposition to go on.

One problem is that you think you've got something great, but those pesky users don't behave like you want them to. They might actually NOT come in droves to your wonderful product! Or they come slower than you think.

Another problem could be that engineering your incredible product might take longer than you think. Or you launch but find out you need to do more.

The last problem is that convincing people to give you tons of money can be easy or hard. I've seen a company close Series A in a month and a half, and I've seen companies still out there after a year trying to raise money. You can't plan for how venture funds and investors are going to react to your plan and progress, even if it seems great. Even if you court someone, the terms negotation and the due diligence process could take months.

Mitigating the risk of all these bad things happening could just simply be...to think about revenue from the beginning. In that way, you can get cash coming in as soon as possible in case you need to survive longer than your plan dictates as you can never predict if you'll need to or not.

Filtering and Referrals

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One thing I've noticed about the startup funding eco-system is that everybody is out to get your money. Unfortunately, that means that you get both people with the good ideas and people with the not-so-good ideas. And it always seems that the people with the not-so-good ideas outpace the people with good ideas by a factor of 100 or more.

A while back I stopped going to the Tech Meetups and entrepreneur gatherings because whenever I handed out my business card and people notice the word "Ventures" in my company name, the emails don't stop. I get pitched by everyone. I even got pitched the other day on Facebook. At some point, I may need to remove my business name from Facebook!

It's too much. The deluge of emails coming in is too much to deal with. I hear it's the same at venture funds; they too are getting too many pitches and are trying to make sense of it all while not losing the opportunity to find that next big thing amongst all the not-so-good things.

Over this last year, I've pretty much switched to the referral model. It means that I never go to tech gatherings but only field introductions from people I know. It's slowed the pace of pitches considerably while filtering them in a much better way. After all, somebody you know isn't going to send crap your way; you have a personal stake in that referral being worthwhile and not a waste of time and don't want to jeopardize the relationship. If an entrepreneur is able to convince someone else that they're good/cool/savvy enough to be intro-ed to me, then I'd love to talk to them.

The same goes with venture funds. As I've gone out there and networked with them, I'm finding that we angels can play a great role in filtering for them as well. We can be a great first line of defense for them, sending only those that we feel good about to them and doing some of the leg work in finding hidden deals through our networks, which are often hidden and hard for outsiders to break into. I've also gotten referrals from venture funds on deals that were too small for them to handle, and also those that I've helped them check out. It works really well in both directions.

As the venture fund world evolves, I can see the relationship between venture funds and angels is going to grow tighter and more useful for both parties over time.

Got My Amazon Kindle!

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Prior to Christmas, Amazon announced their new Kindle e-book and I just had to have one! It was very frustrating to wait and extra 3 weeks from the initial announced arrival date, but was ecstatic when it did.

The box and packaging was very cool. It resembles a book and opened like one!

I was afraid it would be a bulky monster, but was pleasantly surprised to find that it was a nice size and razor thin.

It has this interesting LCD menu selector up the right hand side, controlled by a roller/click wheel. Somehow they made it a silver color instead of black. Popup menus are the standard, with selection controlled by the silver cursor and roller/click wheel.

Here's me holding it in its faux leather cover. I've lived with it now for many weeks, traveling to the east coast and back and think it's a wonderful device, especially for a book lover/voracious reader such as myself!

Some comments:

1. Reading is tough in low light. The background begins to grey out, reducing contrast with words which are black. Is there no contrast control? I can't find one.

2. Pictures are inconsistent in books and magazines. Time magazine I cancelled due to no pictures. But I got pictures in a book, Paradox of Choice.

3. Paradox of Choice's pictures were hard to see detail. How about a zoom?

4. I find myself reading faster than normal, or perhaps the screenfuls are not representative of physical pages and how much they contain. So I feel that flipping pages, or screenfuls, seems to happen more often than physical page flips.

5. Web browsing is really bad. Why not port Firefox to this device?

6. Why not email client at some point? It's got a full keyboard already. But maybe cost is prohibitive if people were using this device not to buy books but to download email, as the network must have some bundled, expected kbyte estimate per user.

7. Love the instant download through their WhisperNet. Very cool and much better than connecting to a PC every time. Shopping is great through it and love the instant download to the device!

8. Library is early but needs more books! I finished The Lost Fleet: Dauntless and it has two more books in its series and I can't order Kindle versions! Likewise, I need to get in the habit of checking my Kindle for releases of new books. I just bought Star Wars: Darth Bane: The Rule of Two and Star Trek Excelsior: Forged in Fire in physical form, realized I should have checked my Kindle first and found the Star Trek book but not the Star Wars book. Frustrating!

9. Originally I thought to get rid of my physical magazine subscriptions but I can't. Don't know if the Kindle versions have pictures or is faithful to the original. As I mentioned before, I cancelled my Time magazine subscription already due to it just being text only.

10. I'm spoiled by the iPhone! I want to flip pages by swiping on the screen itself and have to keep remembering to hit the button on the side.

11. The leather cover is cool, but why doesn't it have a secure way to fastening to the Kindle? If you're not careful, it will fall out of the cover.

12. No PDF support? It would seem to me that would be a natural extension to convert PDFs to their Kindle format.

13. I bought a Theasaurus but can't seem to figure out how to search it. Weird. Time to call support.

14. I wonder if there is a way for that screen technology to display color images. It has 4 levels of grey right now but would be nice if I could see full color pictures.

15. No note taker?

16. The clippings and annotation technology are really cool. I really like being able to clip pages for my own use later. The other day I emailed some clipped text passages to someone. Very useful and helps to not type the whole passage.

All in all, I'm really enjoying it. I am cruising through books and really like the fact I'm not carrying around physical books, and ordering books is a joy and it satisfies my desire for instant gratification because the book just shows up on my Kindle.

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This page is an archive of entries from January 2008 listed from newest to oldest.

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