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Betaday 2013 Pictures

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Some photos from the event - Enjoy!


The Foundry


View from the balcony


The crowd eagerly awaits the start!


Cool glass ceiling


John Borthwick opening remarks


Baratunde Thurston, our MC


Ricky Engelberg, Experience Director, Digital Sport of Nike


Andrew McLaughlin interviews Emily Bell of Columbia


Marc Ecko on Unlabeling yourself


The Gillmor Gang


Gilad Lotan presenting recent research


Paul Murphy talks about the HIR program


Aleksandar Kolundzija on Blend.io


Kuan Huang presenting Poncho


Matt Hackett with Teleca.st


Jace Cooke presenting Giphy


Patrick Moberg with Dots


Hackers in Residence 2013


Google Glass sighting No. 1 w/ Robert Scoble


...and discretely using it all day...


Nick Steele with Google Glass sighting No. 2

Betaday concepts captured on paper

Last but not least, the ever present GoPro camera
which was everywhere capturing time lapse pics

See my previous post Betaday 2013 by Betaworks for a brief synopsis of the day!

The Physical Store Analogy for Internet Competition

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Today I just sent this email to a buddy of mine working on a startup:

If [competitor.com] was a physical store on a street and you wanted to build a store right next to them, what would you build? Would you build exactly the same store or would you do something different?

I always talk about so many me-too products and startups out there today, and the ease of building competitors to just about anything. But entrepreneurs don't seem to want to stop thinking they can exist and thrive with essentially a clone of something else out there.

My statement/question above is a problem about the internet. In the real world, if you were to build a store on a busy street, would you build exactly the same store? Probably not. You would see that if you wanted all those pedestrians to walk into your store, you'd want to build something with some kind of uniqueness to attract them, and rarely would you want to build the same business that already existed on the street. But on the internet, you can't see what's on your street so easily. The browser detaches ourselves from the brutal reality that your competition can be literally a virtual store or two down from you but yet you can't perceive it as a problem because it's virtual and not something physically experienced.

And this problem is exponential on the internet as the virtual street you're building on is limitless in available storefront. Imagine a street with a limited number of pedestrians but tens, if not hundreds of storefronts are squeezing all onto that street, creating ever smaller slices of storefronts for internet pedestrians to walk by, all screaming at them to come in and buy my stuff please!

So ask yourself again - do you want to be yet another storefront on an infinite street or do you want to build something that is truly unique to attract internet pedestrians away from all the same stuff?

He’s (Jony Ive) not just a designer. That’s why he works directly for me. He has more operational power than anyone else at Apple except me. There’s no one who can tell him what to do, or to butt out. That’s the way I set it up.

Steve Jobs by Walter Issacson


Like the rest of the world, I've been reading the new Steve Jobs book by Walter Issacson. I came upon the passage above and it hit a nerve.

One of the long standing debates is how to integrate design into large organizations, and how to use design more effectively. When I read that passage above, it resonated in a big way with respect to why design is so dysfunctional in companies both big and small.

I read all the time that companies are trying to be more design-centric. They bring in consultants, read all sorts of books about people like Steve Jobs, hire design firms - they get all sorts of roadmaps and then try to implement them....and fail.

While I could go into the multitude of reasons on why design fails in companies, I'd like to focus on those brought out by Steve's quote.

Explicit Authority vs. Implied Authority

It is well known that Steve Jobs uses design like an expert swordsman yields a fine blade. However, he's not a designer himself; he just has incredible design sensibilities. So he needs help in the form of Jony Ive in whom he has found a kindred spirit in executing his design initiatives.

BUT - Steve was smart enough to understand that in order to make sure Jony Ive could function, he made it organizationally explicit what power he had. This is a big problem faced by many orgs. They say design is important. They say they want it integrated into everything they do. But organizationally, designers are not given explicit authority in the org to be able to make it happen. Their managers may be given the authority, but they do not know how to advance design themselves and so they just say "make it happen." But they do not know how to argue for support or resources; designers have the best knowledge about their own discipilne to argue for it. Thus Jony Ive reported directly to Steve and was his right hand man and everyone knew it, and knew not to mess with him.

Therefore, the first message of this post is, if you really believe design is important to your company, then make it explicit, through the organization (ex. design has C-level representation, reports to CEO, etc.), and through explicit, constant vocal support by tthe CEO (ex. "why are you asking me? I said, the designer has complete responsibility and I trust him to make the right decisions on this matter.").

The worst thing you can do is give weak, implicit responsibility. You push designers far down the reporting chain, make them work with those who have more responsibility and power in the org, and then expect them to advance design? You give lip service to its importance but you have setup the organization to fail. So what's the problem? Trust? Naive knowledge? Unsure of exactly how to proceed? If you're the leader, you need to figure out what the problem is in you and solve it.

Ability Needs to be Demonstrated and Authority Earned

BUT (another but!) - great power wields great responsibility. You cannot give such power to just any designer. In this passage, Steve describes Jony:


He is a wickedly intelligent person in all ways. He understands business concepts, marketing concepts. He picks stuff up just like that, click. He understands what we do at our core better than anyone. If I had a spiritual partner at Apple, it’s Jony. Jony and I think up most of the products together and then pull others in and say, “Hey, what do you think about this?” He gets the big picture as well as the most infinitesimal details about each product. And he understands that Apple is a product company.


This is the second message: designers, if you expect to get authority in your company, you have to demonstrate that you are worthy of it. It was clear that Steve trusted Jony in all aspects of his abilities to be able to entrust him with the authority. That means you need to build up your abilities too. You need to understand not only design and user experience, but also a multitude of aspects, like engineering, marketing, business development, strategy - everything - and its relationship to design. You need to demonstrate that you understand it fully and gain the trust of company management in order to earn at least the capacity to wield such authority with some level of confidence of not messing up.

With the ascendance of Apple through design, everyone is talking about how to integrate design into their strategies better. Both management and designers need to change and grow in order to make this really happen.

The Dangers and Opportunities of Platforms [UPDATED]

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UPDATED: Added another possible suggestion to What Can You Do?

Recently, we saw a flurry of discussion surrounding Apple and their new subscription bounty. So many cries of "foul!" and "unfair!" - it was evident that many people had never taken a deep look at platforms, the people behind them, and why they come into being in the first place.


The First Platform

The first platform I can remember was when Google launched their maps API in June 2005. How cool was that! Before Google, maps data was nearly impossible to get hold of, and certainly not in a form that made it easy to access. Maps data was huge; it took a lot of resources to host and to maintain. It was expensive to get hold of - who could cut a deal with a maps provider at early stage? Even big organizations couldn't justify the cost of getting that data versus the uncertain return it would bring. Maps data took a lot of computation power to fully access; you had to know how to write programs to access maps data efficiently and quickly.

In an ingenious move, Google took their maps data, which powered their own maps product, worked it out with the maps providers contractually, and then released it to the world through an API. This spawned an amazing flurry of innovation, more than they could have achieved internally. They created a maps platform on which others could build and innovate without the added difficulties of getting the maps data at all, and maintaining it.

Not only did this spawn innovation on their own platform, it created a flurry of platforms launched by every company who had data to share, on the hopes that they could get developers to do something interesting with the data they had.


Why Platform?

Now that Google (assuming there wasn't another company that did it before Google) paved the way, people had proof that this was a great thing to do and could justify positive effects worthy of their time and cost.

Google showed that companies can open up their data to the outside for the following reasons:

1. They have some valuable proprietary data that nobody else has.

2. They want to extend the value of their data by leveraging outside resources.

3. They want to innovate on that data and want to utilize the creativity of the external developers to do that.

4. They want innovation but can't do it internally for any one or more of reasons we all could come up with, with respect to big organizations and even small.

5. They want to create another monetization stream, now that Google and others have shown that this is possible.

6. If someone innovates in a way that is hugely profitable and brings an enormous amount of customers and value to the company, that opens up the possibility of bringing that capability into the company either through acquisition or blatant copying.

7. By the way, all this has positive effects on the customers and users of the original platform as they can enhance their experience with the activity via the new innovation that arises.

This is, of course, dependent on the company actually having resources to:

1. Do the development and make the platform available for outside consumption.

2. Create a backend to support the platform and be able to support enough access to it to support a large ecosystem of developers.

3. Create a monetization scheme around the platform.

4. Set up on-going support and maintenance of the platform. Continuing support is necessary to make sure that platform access is not interrupted or corrupted.

5. Setup educational resources to teach people how to develop for the platform.


Opportunity Beckons!

The announcement of a platform comes usually with lots of excitement and interest.

Wow! Data that was previously hard to get hold of, now easy!

Developers can innovate and make money! They put together pitch decks and get funded by investors!

Even the company benefits from the press, who covers this explosion of developer studliness and the emergence of a new ecosystem and rampant innovation.

Eventually, as developers get on the platform, the company makes money by charging for access to the platform. If the company is smart, it would have planned for many avenues of monetization. In many instances, many cannot be planned for. Herein, lies the dangers of developing for platforms...


Dangers of Platforms

While opportunity knocks for both developers and the company, people start forgetting about a crucial concept, which is the most often misunderstood or forgotten concept about platforms:

A company creates a platform solely for its own benefit first, before all else.

I cannot think of any company that just puts a platform out there for the good of the world, and is willing to just pay the bills for providing this service without monetizing anyone using it. Wikipedia seems to be getting an API together so I suppose they are the closest to an independent organization that claims to be non-profit. NYC opened its data to the world and held a competition to see who could create the best applications using that data.

But other than non-profits like Wikipedia and government organizations, for-profit companies create platforms to increase usage, to open up new opportunities, to draw customers, to make more money. Otherwise, how can they justify to their shareholders, budgets, and balance sheets to keep personnel dedicated to developing and supporting the platform?

While a platform may be launched with its services being used for free, at some point this must change. A platform's owner will eventually, if not at the outset, begin to charge for being on that platform. It will start exerting control through techniques like throttling of data (pay to get full speed and volume access), taking a cut of all money made by anyone on the system, and up to kicking developers who have growing influence and power off the system using a variety of techniques.

All of these facts make it extremely dangerous for any developer to depend solely on a single platform for its livelihood. It's because you never know when the platform will turn on you. So if you're going to create a business on someone else's platform:

Never bank your business on a single platform.

Why is that? It's because the world has shown that as long as you are small and not a threat to a platform, the platform will let you live on it. The moment you get big, powerful, hugely profitable, and/or influential, the platform will begin to actively work to stifle you up and to the point of shutting you down.

Let's take a look at what was once one of the most opportunistic platforms: Facebook. Here is a snapshot of a series of events through the history of its apps platform. As you flow through this peek at its history, remember also this essential fact about Facebook which is their relentless focus on the user and keeping users happy:

May 24, 2007
Facebook Launches Facebook Platform; They are the Anti-MySpace

"Facebook’s strategy is almost the polar opposite from MySpace. While MySpace frets over third party widgets, alternatively shutting them down or acquiring them, Facebook is now opening up its core functions to all outside developers."

After Facebook launches its platform, developers quickly figure out that continuous posting throughout friend's walls, both legitimate and not, could grow their services enormously by exposing new potential customers to their services. Many grew to tremendous size on these marketing techniques.

Aug 16, 2007
Facebook Takes Action Against "Black Hat" Apps

"The changes that Facebook have made today, while they may inconvenience some application developers, have clearly been done to protect users from spammy tactics that some applications have employed."

Jul 7, 2008
Facebook Continues War On App Developers. This Week: Super Wall

"Facebook is continuing its war on Facebook apps that push the limits on acceptable user interaction. Last week it was Slide’s Top Friends App, which it briefly suspended. Later Facebook also suspended another popular app, Social Me.

This time they’re targeting Slide’s rival RockYou and their Super Wall application, which tends to have a lot of spammy user content. But instead of shutting down the application wholesale, they’ve simply turned off the viral components of the app - invitations, notifications, etc.

The consequences have been just as dramatic. A month ago Super Wall had 2.4 million average daily users. Today it’s 600,000 and falling fast."

Those whose services were dependent on a continuous firehose of users and not on their own merits to grow users saw their traffic shut off and many were forced to shut down. But some did figure out how to keep growing within the system, generate huge profits, and then use those profits to further market to users on Facebook via their advertising platform. Enter Zynga.

Oct 31, 2009
Scamville: The Social Gaming Ecosystem Of Hell

"Zynga may be spending $50 million a year on Facebook advertising alone, fueled partially by lead gen scams. Wonder how Facebook got to profitability way ahead of schedule? It was a surge in this kind of advertising. The money looks clean - it’s from Zynga, Playfish, Playdom and others. But a large portion of it is coming from users who’ve been tricked into one scam or another."

This time also saw the entrance of a clever promotional method pioneered by a company named Trialpay and others like Offerpal, which enticed users to sign up for an advertiser's service and traded that user signup for credits which could be used in the games. It drove a ton of revenue into the social games running on Facebook and encouraged users to keep signing up for these services in order to get essentially free credits in the games to gain levels and buy virtual goods.

Sep 17, 2010
Social Gaming Market Reaches Its Final Stage…and It’s Not Looking Pretty

"This same cycle is now taking place in social media. When Facebook changed the rules, the early leaders in the space faced two extremely unpleasant realities: 1) Unlike casual gaming, their popular franchises were ineffective at acquiring Facebook audience directly and 2) Paying market rates for audience made their books look a whole lot less pretty. Faced with this challenging circumstance, social game development studios have started taking aggressive steps to remedy their situations, including:


  • Finding buyers as fast as possible before people realize that their growth and maybe even their businesses are not sustainable
  • Leveraging the abundant capital available to try to buy their way out of dependence on Facebook by either acquiring their own standing audiences or by acquiring non-Facebook dependant game companies
  • Overspending on marketing to try to buy audiences to preserve their apparent growth even as their books leak money and their earned audiences decline"

By now, Facebook's changes and restrictions were growing to point that many companies simply could not survive and were forced to shut down or take other options. If they have enough capital, they attempt a pivot off the platform. If not, they were dead.

Jan 24, 2011
Facebook To Make ‘Facebook Credits’ Mandatory For Game Developers (Confirmed)

"Facebook has confirmed that it is indeed making Facebook Credits mandatory for Games, with the rule going into effect on July 1 2011. Facebook says that Credits will be the exclusive way for users to get their ‘real money’ into a game, but developers are still allowed to keep their own in-game currencies (FarmBucks, FishPoints, whatever). For example, Zynga can charge you 90 Facebook Credits for 75 CityCash in CityVille."

"Of course, Facebook gets something out of it: they take an industry-standard 30% cut whenever users purchase anything with Facebook Credits. That can add up to a lot of money — we’ve heard elsewhere that Zynga is paying Facebook around $30 million a month for its Credits tax."

Facebook launched their own virtual currency which they are requiring any developer on their apps platform to use. Direct charging of customers is prohibited, and Facebook receives a 30% cut of all monetary transactions on their system.

What's a Facebook dependent company to do? Zynga was a lucky one. They were grew so huge that they *could* take their users and leave.

May 7, 2010
Zynga Gunning Up (And Lawyering Up) For War Against Facebook With Zynga Live

In fact, after Facebook began to force Zynga to use their credits, they threatened to leave. They formed Farmville.com and started making motions that it was going to leave and take its audience with them. But, it was also to Facebook's advantage to keep Zynga on their platform as they were generating an enormous amount of revenue for Facebook. So after a lengthy negotiation, Zynga still remains on the platform, to the delight of users who love to play Zynga games on Facebook, but also paying a significant amount of capital to Facebook, although we do not know the details of how much.

May 18, 2010
Facebook And Zynga Enter Into Five Year Partnership, Expand Use Of Facebook Credits

So far, only Zynga has had enough market power to initiate that kind of negotiation. Every other company has been forced to change their strategy or die.


Will it Happen Again?

There are a lot of platforms and their APIs: older ones like Google, newer ones like Twitter and Foursquare.

You could say that Google search is a platform. Over the years, people have used SEO to drive traffic to their sites. It's a never ending game to figure out how to get yourself on the top of search results for important terms. Google adjusts the algorithm for best user relevance; companies game the system to get higher up, sometimes being relevant and sometimes to fool users into clicking over in order to monetize them. Even now, companies are in danger of being dependent on Google.

Demand Is Strong For Demand Media IPO

"It’s important to note that Google is changing how it ranks certain websites, including Demand’s network of content. Demand is highly dependent on Google search traffic and no doubt a change in ranking could negatively effect the content farm’s business."

If Demand Media is to be a true contender in the public markets, it cannot be beholden to another company for its success. It needs to be independent or else it risks being shut down. The markets know this and the short sellers are loading up on Demand Media stock. As of Feb 28, there are 3.21M shorts on DMD, up from 2.68M from the previous month.


Twitter's Platform

Look at a small piece of history of Twitter's platform:

September 20, 2006
Twitter Blog: Introducing the Twitter API

Dec 9, 2009
Twitter Spawned 50,000 Apps To Date, Will Open Up Firehose For More

Apr 9, 2010
Twitter Acquires Tweetie

"Unsurprising, because Twitter investor Fred Wilson recently wrote that Twitter developers needed to stop “filling holes” in Twitter’s product and instead build entirely separate businesses."

When Twitter acquired a mobile app, it put all other mobile Twitter apps in danger. But let's look at someone who is trying build a business on real-time Twitter data and attempt to monetize it in a way that other Twitter apps have not, to this date: UberMedia.

Why Is Twitter So Afraid Of This Man?

The world suspects that Bill Gross is attempting to aggregate Twitter clients and find a way to monetize the users, which has, to date, eluded Twitter itself.

As a result:

Feb 18, 2011
Twitter Suspends UberMedia Clients For Privacy And Monetization Violations, Trademark Infringement

While I am only hypothesizing here, and the news say that Twitter shut down UberMedia due to policy violations, I am sure that somewhere in Twitter, somebody has noted the growing power of UberMedia and has drawn battle lines in the sand. To me, it was only a matter of time.

And at SXSW:

March 11, 2011
Twitter Drops The Ecosystem Hammer: Don’t Try To Compete With Us On Clients, Focus On Data And Verticals

It becomes official; Twitter clients are Twitter's responsibility.


And Apple's iOS...?

So why would Apple's strategy around iOS be any different, when it comes to exerting control over its developers over time?


The Harsh Realities

1. The launch of a platform can present large opportunities, especially if the platform owner has chosen not to innovate for whatever reason.

2. Small to medium businesses can be built on this platform and the platform allow them to thrive.

3. Over time and as the platform gains users and power, the platform will continue to press its advantage in monetization.

4. If there are any businesses that gain significant influence or power, the platform will seek to limit their influence and power through any number of techniques. This can be any kind of limits in access to the data, to driving more monetization from them, to blatant shut down.

5. As a business owner who is trying to build a business in this kind of environment, it can really suck. You will feel like the world is crashing down around you and are powerless to do anything about it. Feeling powerless and watching all your hard work go down the tubes really sucks. I can sympathize. In my portfolio, the machinations of platforms has already tanked two of my businesses. I've learned to not invest in startups who are overly dependent on a single platform.


What Can You Do?

1. Don't plan on building a business that is dependent on a single platform. Plan early for a business strategy that can be ported to other platforms (ie. a mobile app business that is built on iOS, Android, and Blackberry; ad serving that is on webpages, mobile apps, etc.).

2. You can start by developing for a single platform to gain traction. But move as fast as possible to be not dependent on that single platform.

3. If you're skilled and/or lucky, you should attempt to build your business as fast and as large possible on the platform. If you can grow your influence and power to the platform, you may be able to have negotiating leverage against the platform in case they attempt to shut you down. Do this before the platform figures out that they should do something about you.

4. If you can, you should build something that is essential to the platform's customers. This puts the customers on your side in case the platform tries to shut you down.

5. Plan for independence. Can your customers/users be taken with you if you are forced to leave the platform? If so, this makes you less dependent on the platform. Build towards this independence as fast as possible.

6. Build something that continues to add tremendous value to the platform, and hopefully that value is measured in dollars. This has proven to be a way to be exempt from getting shutdown by the platform. An example of a business built on a platform that have been left alone are SEM management companies who are helping Google generate tons of revenue, but their own revenue is independent of gets passed to Google. As long as they do not interfere with Google's monetization, they really don't care about how they monetize over and above the rates that Google sets.

7. Leverage PR to your advantage. Write blog posts, talk to journalists about how a platform has destroyed your livelihood. Bad press can be a lever used against a platform's owner who cares about their reputation in the world.

8. Analyze the terms of service before you start. Make sure you aren't violating or are close to violating their TOS. Even entering grey areas can put you at risk for shutting down.

9. Don't develop an improved version of a core service. Just because the original platform owner doesn't do something basic well, doesn't mean that they won't do it better later and supplant you, or shut you down. It may mean that you get acquired (ie. Tweetie), but if there are a lot of competitors, then this can be a single-winner-everyone-else-loses-it-all game.

10. [NEW] Be super-creative and develop a service that is a huge opportunity but also something that the platform owner would never want to do themselves. Then the platform will be most likely to leave you alone (assuming you don't do something like violate their policies). An example of this is Zynga on the Facebook platform. Facebook will never want to be a games developer, so they will probably never try to do this themselves. However, if you're great at games development, you can create a big business as Zynga has done. If the platform owner ever wants to enter the space that you're in, then you're most likely going to die.


The struggle between the platform's constituents (users/customers, businesses on the platform, and the platform itself) is a classic fight for market balance. You provide something of value, you find out what people are willing to pay for it, you constantly test how much you can charge for something and adjust to what you think the market will bear. If there is anything you don't like, then just leave, assuming there is somewhere to go. If there is nowhere to go to, then the platform has all the advantage. But usually there are competitors and a platform has to also work hard to keep customers and businesses on its ecosystem or else they will leave.

The indefatigable @webwright posted some comments to my previous post Apple Charging Subscription Bounty, Evolution of Platforms, Free vs. Paid, Right vs. Wrong. @webwright brought up Pandora, who has tight margins and can't give Apple 30% of its normal subscription fee without taking a loss on every subscription it gains through the app, via this new restriction.

I guess that I could naively say that Pandora should just raise its subscription fee to incorporate the 30% over and above its normal margin and just tell its user base that it had to do it because of Apple. But pricing is rarely so cut and dry.

I could also just say that Pandora should just give up the iOS platform and go Android, which is still a pretty big market and theoretically should make the company plenty of money. But giving up any market is a tough decision to make, especially when there are entrenched users.

And especially that Pandora is in the IPO line up for this year. In looking at their S-1, it unfortunately didn't mention what the breakdown was in terms of iOS users versus other platforms. So I don't know if punting on iOS would be a big deal for Pandora or a loss they could absorb with the growth of other listening platforms.

Still, all my supposed solutions are just the musings of a guy sitting outside of Pandora and not a guy who is in the trenches at a company trying to do its best to make money and ultimately go IPO.

I think my point, though, is this. Let's say a company was singly dependent on iOS as a platform. I am sure we can point a number of companies like that. To me, this is a problem. That's because when you build a business solely on one platform, you incur the risk of having that platform ultimately be able to jerk you around or even sink you.

Let's go back to my example of the electric company in my preceding post. The platform on which that electric company depends is fuel. How much it charges for electricity is highly dependent on fuel costs. If oil prices go up, so does our electricity bill. But yet we all roll with the fact that this is true and we may grumble but we don't go on Twitter and rage about how my heating bill is up a few bucks because those damn oil cartels in the Middle East raised prices again.

Still, at some point, oil prices might rise so much that we might do something. We might even refuse to use electricity from that company and get it elsewhere: home solar cells, energy from one of those other green utilities, etc. That company could go out of business because it was dependent on oil prices with which it has zero control.

Take a look at Facebook apps and the ecosystem it first created, which allowed a myriad of businesses to flourish. Then, they went and started closing down the viral mechanisms that allowed so many games and apps to gain users. Yes, it did do so to clamp down on bad practices, but it also affected legitimate companies and stifled their ability to grow. Many startups either left the app ecosystem or just outright died.

Nowhere else did dozens of companies feel the pain and death as a result of their dependence on a single platform.

Last year, Zynga almost left Facebook but had built enough value and power against the platform to leverage a 5 year deal. It also realized that its future could not depend on this platform, so it started to break away in a variety of ways, forging a partnership with Yahoo!, MSN Games, and also working on Zynga Live.

Zynga was fortunate enough to have grown so large and so quickly before the platform could entirely sink the company. They had gotten enough users who loved their games that they could now just take those users somewhere else. So Zynga shows that you can use a single platform as an early growth mechanism, but it also shows that you better hedge your bets against the day when the platform turns against you.

Apple's iOS is a platform which has spawned a ton of new businesses. Many of these are thriving in the iOS platform. However, Apple did not create the platform so that other businesses could just flourish out of the goodness of their hearts; they created it so they could make a ton of money and benefit its users who would in turn buy more Apple products and services. It is easy to forget that and just feel entitled that the platform should just exist for the benefit of those working in it.

Therefore, businesses whose livelihood are dependent on one platform as at extreme risk of that livelihood being screwed with by the platform owner and as history has shown, they could even die by the machinations of the platform owner. Companies should be acutely aware of this and work to make their businesses immune to the manipulations of any one platform. If they can, they should strive to create their own platform and jerk other people around instead being jerked around themselves.

So if you were developing on iOS and dependent on subscription revenue, and then Apple comes in and says you gotta pay up 30% or we'll drop you, you better have a back up plan and execute it fast if you can't absorb the 30% cost somehow.

On the other hand, if the 30% bounty either kills off enough businesses or makes them leave, such that their users become dissatisfied enough to revolt and leave, then Apple will have to make changes because it needs those users. Facebook doesn't have this problem - pretty much every user in the world is on Facebook. Users can leave, but where would they go? If they leave, their social graph is still back on Facebook...

My buddy, @LDrogen, tweeted recently:

@LDrogen: There's nothing unfair about this arangement, it's like complaining that a store owner on 5th ave has to pay rent, complete bull $AAPL

in reference to recent news about Apple formally announcing they were going to take a 30% cut of any content subscribed to through one of their iOS apps. I retweeted it, because I agreed with him.

But then, my buddy @bmull replied back:

@bmull: @LDrogen do you feel like apple should take 30% of anything (pandora, netflix) subscribed to on a MacBook? How is that different? @dshen

to which, @LDrogen replied:

@LDrogen: @bmull no, only content that is exclusively delivered through their platform and paid for in the store $AAPL

and @bmull then replied:

@bmull: @LDrogen so apps in the Mac app store? If pandora had an app in the Mac app store, they should be required to pay apple 30%? / cc @dshen

Apple's announcement of the subscription bounty recently sparked some strong emotions and opinions on the net. Many were opposed to Apple charging 30% and felt it was unfair that Apple should force this on everyone. But yet, I was OK with it. I promised @LDrogen and @bmull a blog post on this topic and here it is!

Why I think this is OK crosses many dimensions. I'll do my best to cover them here:

Evolution of Platforms

If you look throughout history at any kind of platform, there is a starting point from which things evolve. Picking that starting point is critical as it sets the evolution from that point onward.

When people got electricity delivered to their homes, a company was formed to create a big generator and maintain it, wire up the neighborhood and maintain that, and then bring that wire to the home. Somebody had to pay for that so that people could create all this and then continue this service to everyone. Since the dawning of electricity service to our homes, this hasn't changed. They began charging and so we're used to that and OK with it.

Had the service been provided by the government, then we might have perceived this service as "free" and then developed a sense of entitlement that the government should provide us with these services along with other services. I quote the word "free" because we really don't get governmental services for free; we still pay taxes and that pays for these services which are seemingly for free (ie. police, fire, elected officials). But changing from that to making the people pay at some point would probably result in some uproar as all of a sudden, people were paying for these services out of some other part of their bank account at a different time, when they were paying for it all along (whether the government would lower taxes in response to this change would be a whole other discussion).

When Microsoft developed DOS and then Windows, they didn't charge for the presence of software products and services which used their operating system. Not charging here set the tone for software on operating systems for decades to come. Because they did not charge in the beginning, I argue no other operating system could either or else they could not compete against the proliferation of Windows. However, their only two real competitors were Mac OS and versions of UNIX, and of those two, only Mac OS *could* have had the mission of charging as UNIX was a community driven product who probably never would have considered charging anyone to put software on it in the first place.

It's pretty obvious, I think, that if Apple had charged a bounty to place products and services on their operating system, their ability to gain any kind of share relative to Microsoft over the years would have been hampered severely. Hence, their decision competitively was to not charge or else they would have died years ago.

But platforms evolve over time from their beginning points based on competitive forces and what people are willing to pay for.

Free vs. Paid

This is where free versus paid comes in, as an element for competition and a general desire of the people to not want to pay for anything.

The internet is infamous for taking something we paid for and giving it away for free, disrupting and pissing off older established businesses and creating a ton of new ones. For years, we paid for news in newspapers and magazines on newsstands and then all of a sudden we could get the same stuff for free (to the consumer)!! Wow!

Free then became a competitive tool for new startups and businesses to enter the market, forcing those before them who charged for products and services to go free or die...or at least find a new way to monetize. After all, who could survive by just giving everything away for free in perpetuity? Born was the word 'freemium' and strategies of using free to get customers, destroy your competitors (and potentially themselves in a nuclear fury of mutual free destruction), and maybe...just maybe monetizing your customers later., assuming you survived that long. This is the inherent problem of free, which is people who provide the product/service must eventually get paid to support themselves; very rare is the group of people who can provide time/effort into providing a product/service for free indefinitely.

Despite that, free is pretty effective at getting customers. This is because I believe that people in general are pretty darn cheap. Nobody wants to pay for anything. In a choice between getting something for free or paying for it, I would bet that free would be chosen near unanimously no matter what the consequences. We are indeed a selfish bunch; welcome to capitalism!

Coming back now to the exchange between @LDrogen and @bmull and Apple charging for subscription fees on its iOS platform:

Can Apple charge?

Yes, of course, they can. They have full control over the platform since they built it and have built controls into software/services which enter into the platform.

Am I OK with them charging?

Yes, I am. I am in the minority on this issue, but I believe that people should get paid for the products/services they provide, whether its software, news, music, or videos or whatever. If I enjoy these services, then I want them to get compensated for it to the level that they can survive and feel motivated and incentivized to produce the best of whatever it is that they are working on. I am totally OK with watching TV shows which I purchase through iTunes. I pay for music all the time. I still subscribe to physical magazines and also read news online that I do not pay out of my own pocket for.

But, I also want Apple to be motivated and incentivized to provide the best platform they can provide. To date, iOS and the hardware it runs on are clearly superior to that of any other platforms out there. Granted, if someone never encountered an iOS device, they would be totally OK with Android or some other similar touch based, app economy platform. They still get the majority of the benefits that was pioneered by iOS. But if you have the ability to experience both platforms side by side, you'll notice that iOS is just better, sometimes so subtly superior that you may not be able to articulate why. That is the magic of Apple's user experience and the care and attention they put into making their products not just good enough, but insanely great. And I want the people who create these insanely great products to keep doing it, and so I want to them to be paid and happy.

As long as Apple keeps putting out superior products, I'm OK with them charging.

If they falter, then I believe that people will vote with their feet and their wallets. Faltering can simply mean, "I don't think you should charge so I'm going to Android, et al." which is a choice and an opinion. Or someday, Apple will start to build mediocre or crappy products and then we'll all bolt to someone else who is better. Or if the world evens up on its superiority until everyone is at some new baseline of mediocrity, then we'll all choose on price since when all else is held equal, the only differentiator is price.

So if you disagree with Apple on this issue, it's easy; vote with your feet and your wallet and go somewhere else. If enough people vote to go elsewhere, Apple will be forced to change. This also goes for businesses who want users to subscribe. If they don't want to pay the bounty, then don't be on the platform. Go somewhere else. You may add to the pressure put on Apple to charge or not charge.

What will the future bring on the charging on a platform issue?

If Apple decided never to charge a subscription bounty, I believe they will never be able to in the future. People get used to whatever cost environment they operate in and hate change, especially ones that impact their wallet negatively. That is why going from free to paid can be painful when you've trained a whole bunch of users to enjoy your products and services for free.

If the world votes with their feet and wallets to go somewhere else, whether through better products elsewhere or simply by their opinion, then Apple will be forced to change their strategy. It's that simple.

To reverse the decision on apps through the Mac App Store will be a difficult one, given that Windows still dominates. While Mac OS is gaining on Windows and everyone universally hates Windows, I think the competitive landscape is still very unsure and Apple won't be able to do that for a long time if they want to continue gaining share on Windows.

Perhaps at some point in the future, if they dominate, they may be able to impose a bounty on subscriptions. But that is far in the future. Or they may never be able to. Or they just might not. We'll have to wait and see.

Right versus Wrong

So much in the commentary on the net is regarding right versus wrong. To me, being religious on this issue sparks of the entitlement that people feel, but also their bias on the issue relative to their own position in the ecosystem.

As I said before, people are basically cheap. They don't want to pay more for anything. If Apple charges a bounty, this could raise prices.

A lot of people who oppose this issue are also are those trying to build businesses on top of Apple's iOS. They want to make as money as possible and don't want to pay bounties at all.

Everyone complains, but again the answer is easy. You don't like this, then go somewhere else. There are other platforms to build for like Android. By some metrics, Android even leads iOS in sold devices.

There is no right or wrong; the shades of grey in business (and in life) permeate everywhere. Our own self interest and biases may be hidden but we have only our self gain to blame on whether we are OK with Apple charging or not.

Still the reality is that workers need to get paid and support themselves and I, for one, want to keep motivating them to do great work. I want to buy music so artists will continue to make awesome music. I want to buy TV shows to download so that I can enjoy the next great show. I am OK with paying for content because I want content creators to keep doing it. And I want Apple's employees to stay motivated on making the best platform out there, even if prices are higher on Apple platforms than on others.

And by the way, today's press release on Apple's subscription bounty says:

"...when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing." - "Apple Launches Subscriptions on the App Store" - Business Wire

This little nuance is important - they do not take 30% on ALL subscriptions, only those they create. If the publisher does a better job than Apple at gaining subscribers, then they pay no bounty.

How do we feel about the subscription bounty now?

Confirming Meetings

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One habit I've gotten into over the years is making sure the night before I take a look at tomorrow's calendar and send an email confirming every meeting I have. I confirm the time, place, and give my cell number.

I felt compelled to write about this because very few of the people I meet with do this. It seems so important and not often done at all. I wonder about this a lot.

Why is this important?

1. In many instances, the other person didn't write down or put in their calendar that we were meeting. Now I'm wasting my time going somewhere expecting a meeting and they aren't!

2. The other person couldn't make it, but I wouldn't have found out if I didn't email them! They either didn't bother to tell me or it kept slipping their mind to tell me but my email reminded them to bring up that fact! Many times if they have assistants, good ones will reconfirm and tell me if their boss can't make it; but often I have to email the assistants to find out!

3. I want to make sure that the other person has my cell number handy, and in a recently accessible place: within 24 hours of email, in case something goes wrong at the last minute. Then they can call or text me to tell if they are late or can't make it. I have found that contact management for a lot of people is very, very spotty.

4. I or the other person has often made the mistake of thinking we were meeting somewhere else! So confirming helps reinforce the place we're going to meet.

As mentioned before, in the confirmation email I put the time, place, and my cell number. If I can, I will find the original email which sparked the meeting and put in the confirmation. Or I will write a short sentence reminding them of why we are meeting if it's not obvious. I like to make sure I remind the other person why we're meeting or else it may be awkward for both of us wondering why we're meeting in the first place.

Before I meet someone for the first time, I try to pull up some info about them: LinkedIn, Google, an executive summary, pitch deck, look at their website, remind myself of who introduced us. This is to help break the ice and get the conversation going. Sometimes I'll be doing this on my iPhone while walking to the meeting; other times, I'll print out the materials and flip through them before the meeting. Or I'll get to our meeting place early and do it all there. Familiarizing yourself before the meeting shows you care enough to have spent time to do that. I think it speaks a lot for showing respect for the other party.

Many times I'll also try to find their picture online which helps immensely to find the other person in a crowded venue. Likewise, I may email or text to the other person what I'm wearing and what I look like so they can find me easily.

If I'm somewhat late to the meeting, I try to text/email/call them that I'm going to be X minutes late. This is also showing common courtesy that you're running late and that they aren't just sitting there waiting for you, wondering if you're going to show up at all. But generally, I try to get to someplace early; tardiness is not a good habit to get into!

All this seems like basic good meeting habits but, as I've observed, it happens very seldom. I would love to see more people learn these habits, and certainly I assign a new level of respect to anyone who sends a confirmation email before I do!

The Rise of Small Business on the Net

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A few years back I worked on a tiny startup that was attempting to jump on the affiliate marketing/blogging bandwagon. It was all the rage that people were making $100Ks per year just writing articles and doing a good job on driving traffic and purchases to marketers. It was a site about how geeks were cool because they were buying cool products, and so we would write about these really cool products and then drive affiliate traffic to places where you could buy them.

Our venture didn't get that far, but so many others' did. And the list is growing.

As everyone working on projects on the Net knows, the cost of building a business has dropped dramatically over the years. It started with blogging software which would could install on our own servers or use the hosted versions. Now, you can go out and find shareware for just about anything; stuff that would have cost a big company millions of dollars and a team of 100 to build in the past could now be found and deployed for a tiny fraction of that cost.

It's also easier to deploy web applications now. Previously you had to be a computer scientist to do so; now just about anyone can figure out how to deploy it, or using hosted versions just fill out a signup form and point your domain at it and you're off and running.

So now, just about anyone can throw up a website which has some advanced functionality. And people are doing it too. In the startup world, we see the internet has gotten super crowded over the last few years. Very few truly unique business/product ideas have emerged, and many are just clones of each other. Or once someone puts up a good idea, the clones emerge quickly because it's so easy and fast to put up a website. Thus, it's now less about the idea but rather how many customers you can grab and whether you can monetize that traffic to balance out your burn.

Thankfully, the internet crowd is enormous. Grabbing a small slice of that traffic and monetizing it effectively can mean a sustainable business that pays its employees a decent salary. In the past, we called these businesses microbusinesses or lifestyle businesses where a single person could make a decent living managing a website. However, in today's world, I call this phenomenon the rise of small business on the net.

Many startups we encounter have plans that we know can reach this stage. With great execution and effort, we can easily see many businesses growing to great small businesses. They will have revenue from several $100Ks a year to small millions. They have a small teams and all of them are well compensated for their work. All the employees will have great lives supported by this business.

The effort is comparable to opening up a storefront on your favorite street. In the old days, you'd go find a great physical location with lots of foot traffic. You go get a small business loan from your local bank and open up shop. Then you go and acquire customers and build your business from there. In today's world, you can do it on the internet without a physical location and tap into customers from around the globe.

From an investor's standpoint, we're finding that this creates a number of problems. Our model is dependent on finding those startups which will go big, much bigger than small business size, and find a way to return our investment with large gain through some mechanism like M&A or IPO. However, the ease at which startups can reach small business stage makes our job harder; we're seeing many businesses reach a certain level of growth and then breaking through that level is tough due to how easy it is for competitors to enter your market, and how hard it is to acquire the attention of users.

Some of us are thinking about change in the way we support some startups. I find parallels in the area of restaurant investing, where the investment is all about cash return and not ownership. What kind of restaurant would go IPO? Highly unlikely. But could we make 10-20% on our investment? Infinitely possible.

I wonder about how the structure of deals we do for internet startups might mimic restaurant investing. Instead of caring so much about ownership, perhaps we should find a way to get a healthy return on capital invested through cash flow, if the startup monetizes efficiently and does it well.

The problem with traditional investing in startups here is that these small businesses may never attract an acquirer and certainly the chance of an IPO is even more remote. Driving these small businesses to activities to return an investors' capital in that manner may take a healthy sustainable operation and turn it into something unsustainable and problematic as it reinvents itself to attract an M&A event or IPO. That seems dumb; the business is thriving and its employees well paid and happy - why destroy this?

I think the world of investing should think more about the rise of small business on the net. Many more businesses each day are showing up that are great sustainable operations supporting employees and their customers. They are never going to be superstar Googlesque success stories and we should not attempt to turn them into one. In today's crappy economy, the world needs more small businesses to show up to employ the masses and make them money. We as investors should find a way to invest in and help these companies to grow, and just be comfortable in the fact that they will never be Google but still can help us make a healthy return on our money.

The Hierarchy of Attributes for a Product Person

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Often I wonder what makes a great "product person". There are definitely those "product manager" type attributes like project management skills, group management skills, business development experience, and the like. These are important, but I want to talk more about those fuzzy skills that give a person a sensitivity towards what makes a great product out in the marketplace.

So perhaps the "product person" I talk about is not just about the product manager or those we choose to lead product teams. I am talking about anyone who seems to have that innate sensitivity and instinct towards creating a great product.

I thought about this for a while and thought it could expressed as a hierarchy like a pyramid:

In describing the levels in numerical order, the bottom-most levels deal with the self. The next level expands thinking to include others. And the top most levels deal with actually being able to do something about it.

The levels are:

1. Can only express a like or dislike for something, but cannot articulate why, or very vaguely.

2. Can explain clearly why they like or dislike something.

3. Can explain clearly why others like or dislike something.

4. Can create something for yourself, that is expression of likes, and/or fixes dislikes.

5. Can create something for others, that is expression of likes and/or fixes dislikes.

I talk about a person's product sensitivity as likes or dislikes in the sense for what they would like or dislike in product. In this case, a great product is a product that many people likes a lot about, and dislikes very little about it. So in other words, a great product is one we love, want, or even need. My definition of a great product person is someone who has risen to the top of the pyramid and not only express likes or dislikes for himself and for others, but one that can take those likes and dislikes and create something that not only he loves, but everyone else does too.

The pyramid is an illustration of how rare great product people are. A lot more people inhabit the lower portions of the pyramid and pretty much everyone can tell you whether they like or hate something. But they can't necessarily explain why.

Then as you move up the pyramid, you also need to be able to release your own ego and expand your sensitivity to others. This is very difficult as most people are very self-centered and tend to like solving problems for themselves. In fact, it's a lot easier to solve problems for yourself since you know yourself pretty well and can keep at it until you like something a lot, and your dislikes disappear. However, doing this for other people is much much harder.

In design, we are taught design processes which tease out what others like and dislike and we have methodologies to discover them, and to figure out what to do about them. These processes can help create great products, even though the people involved may not be superior product people.

But, I believe the best product people have an instinctive connection to what makes a great product and often does not require additional processes and methodologies to do so. These processes and methodologies certainly enhance a great product person's ability to create something great, so many great product people smartly employ these techniques to fine tune their creations.

I offer up this hierarchical pyramid of product people attributes as a potential way of evaluating whether or not someone truly is a great product person or not. I think that it could be a way to structure questions to ask a potential hire by giving them an example of a product to evaluate, and see how far up the pyramid they get in terms of sensitivities. Then you can figure out whether or not the person is great enough a product person for you to hire.

Are You Evil or Are You Just Lucky?

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Last night I attended the Startup2Startup"s CeWebrity DeathMatch: Jason Calacanis vs Guy Kawasaki on "Is Apple Becoming Big Brother?" and it was a hoot. Watching Guy and Jason rag on each other was pretty hilarious and Dave McClure did a great job keeping the action going all night.

After the main feature, Startup2Startup dinners have a discussion at our dinner tables around a topic, which, tonight, was based on the concept of being evil and whether it was necessary or not. One question that circulated around the table was whether or not doing evil things in our lives was justifiable or not. In a funny way, I was glad that we did not get around to me answering this question because I really didn't have an evil example in my work past to give.

How can that be? Well I'll tell you. I thought back through my work history and could not think of a single evil event I've ever done. Not in business, not in politics of corporation, not in management. Now perhaps some of my former team may think of evil things I've done, especially like during layoffs, but that wasn't really self orchestrated but rather forced on me by the corporation.

I've always tried to live my life to a higher moral standard and in dealing with people as human beings. I've never been great at lying, and thus corporate politics totally are out of my realm and I have seen many instances where I would have been totally outclassed in dealing with manipulation and backstabbing of others. I'm also not very talkative during meetings, which I believe has sunk my career because I've always let others take the limelight and not myself. The unfortunate by product of this is that if you don't say something in meetings, people tend to view you as having nothing to contribute and thus are not worthy of attending further meetings or advancement in the company.

This, my readers, is the reason why I got about as high as I could up the corporate ladder and then could go no further. Because I'm an honest guy, don't play corporate politics well, and just do my job well, that's unfortunately not a formula for success in organizations.

I thought back to this lack of evil and wondered how I came to be at this point in my life. And I came on one big factor which has carried me to this day - that is LUCK.

In looking back to people I've worked for, the companies I've been at, the people who took a chance on me when I was just a dumb out of college guy, and then somehow being buddies with right two guys at Stanford leading to me joining the right internet startup at the right time - these coincidences were incredible instances in chance.

Looking back at this path I've taken through my career, I could have just taken the wrong step in a multitude of places and gone off totally into another place. But yet I ended up here.

Intelligence had an effect? Perhaps, but a lot of smart people do some smart things, or what they think is smart and don't get anywhere. And I'm not particularly a genius either. I don't think I went around and did anything special but just happened on these people as I walked through life. So that couldn't be it.

While a lot of people poo-poo luck, I'm a big believer in it. The big problem is, how the heck do you find luck? I also think that some people are naturally lucky, and there are people who seem to have no luck at all. To that end, I have some suggestions as to how to increase your luck:

1. If you're a lucky person, you've made it!

2. If you're totally unlucky, I don't think you'll instantly be lucky. However, there could be hope for you. Read on.

3. Hang out with lucky people. Don't you hate it when some of these people always seem to have great things happen to them and it doesn't seem like they do anything? These are the people you need to find and become BFFs with. The downside is that lucky people want to also increase their luck, so they will try to find luckier people to hang out with. So you may not be successful in becoming BFFs with these people because they may spot your lucklessness.

4. Get rid of unlucky people around you. These people will be a drag on your life. Don't hang out with them. Something bad that happens to them may also happen to you despite your luckiness. Increase your luck by hanging out with lucky people.

5. Generally, lucky people are happy, and unlucky people are not. I think that your general outlook in life can help add lucky points to your life, or at least fake it.

6. Don't go putting yourself in risky situations. Why walk around in the middle of the night wearing expensive jewelry in the bad part of town? Duh. Reduce the chance that your unluckiness might manifest itself. Or don't use up your lucky quotient for the day by doing inherently risky and stupid things.

7. Place yourself in situations where you can shine. So instead of walking around in the middle of the night wearing expensive jewelry in the bad part of town, go to Startup2Startup and meet some smart people, maybe some VC who takes a liking to you and funds you.

As an entrepreneur or investor, I cannot under emphasize the importance of luck. Meeting the right founder at the right time, being in the marketplace and finding some product that consumers love and it takes off, finding the right business partner who ultimately buys your company, or discovering that in a crowded marketplace that you backed the right entrepreneur (like me joining Yahoo, instead of Excite, Infoseek, or Lycos).

Luck is one of those unexplainable forces in the universe. All I can say is do things to increase your luck as one of those things you can do to help you be successful in life or business....and be very wary of when your luck runs out.

World Domination Plan

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I love it when I hear entrepreneurs are working on a world domination plan.

I see a lot of entrepreneurs arrive with pitches that are limited in scope. They talk about how the world needs this function, how great it is, and how current products don't have these features. Usually, they really are great ideas. When we get to revenue, sometimes there is a plan and sometimes there isn't. But many of these revenue plans only seem to get to a few million a year at most. This may be a great small business, but for an investor, we need to ply our limited resources into those opportunities that will grow into huge businesses, and not just a million a year.

The need for a world domination plan is important to me. I want to invest in businesses that will grow into huge businesses, which will maximize my return on investment. I don't want to invest in businesses that will grow into small businesses, even if they are great small businesses. I only have time and resources to work on so many projects and need to maximize my efforts.

The plan needs to be believable to both me and the entrepreneur. It's not enough that I just believe it's possible; the entrepreneur must also believe the plan since he is executing it. If only I believe in the possibility, that's not good enough. To me, it's a form of personal deception; I see the idea, I see its potential, and it doesn't matter who works on it - it must build into a big business as I believe, right? It's not that simple even if I wish it was. I'm not the one executing the idea and doing all the ground work. The entrepreneur must believe in the idea and be able to do all that. If he does not believe in the idea and/or cannot execute it, it's going to fail.

Some people have enough resources to invest in experimental projects, meaning that there is no clear path to success at the beginning. I unfortunately don't have enough resources to deploy like that. Thus, I need to at least have some comfort that both the entrepreneur and I believe there is a world domination plan (and yes I know there is a great probability that this will change).

What is your world domination plan?

It's happening all over again. Check this out:

OPA Members Strive For Higher Impact In Online Ads

Members of the OPA are launching new ad units, much larger than current IAB sizes. Here they are (quoted from previous Mediapost article):

1. The Fixed Panel (recommended dimension is 336 wide x 860 tall), intended to appear naturally embedded into the page layout, and scrolls to the top and bottom of the page as a user goes up or down the page.

2. The XXL Box (468 x 648), providing page-turn functionality and video capability and expandable to 936 x 648.

3. The Pushdown (970 x 418), which opens to display the advertisement and then rolls up to the top of the page (collapsing to 970 x 66).

Back in 2001 when the dot-com bust was upon us, I was at Yahoo! and we worked with the IAB to roll out and standardize new larger ad sizes, which you see at the IAB ad size standards page. In fact, the industry had grabbed hold of a lot of the new ad units already and Yahoo! was painfully behind in adopting the new standards until the industry had just tanked, and the major source of ad dollars during the dot-com boom had disappeared - other over funded dot-coms who all but died in/around 2001. Yahoo!, along with all the other publishers were forced to adopt new larger ad sizes and introduce new ad experiences to woo advertisers onto their sites.

It worked great. New larger ad sizes were standardized, new ad experiences were conceived and offered like expandable ads and floating ads - we gave advertisers more opportunity to do what they do best: create WOW.

As time goes on, these ad units became commoditized both in the eyes of advertisers and users. They weren't special anymore, so prices that advertisers will pay dropped and users got used to them and starting ignoring them.

But it seems like it took yet another economic downturn to create innovation in ad units. Isn't this dumb? It would seem to me that publishers should take an active role in managing the roll out of new ad units and ad experiences on a regular basis to keep interest in them high from an advertiser and user perspective, and thus prices and value are also kept high. Unfortunately, this didn't happen. At least now the industry is forced to introduce new things into the marketplace.

The other funny thing that is happening again is the rise of the direct marketer in graphical ads. When all the dot-coms died back in 2001, ad units from known brands disappeared and all that were left were ads from direct marketers. These ads were the best of the best in deception - there were tons of ads that looked like dialog boxes and read "Your hard drive is deleting! click here to stop". They were also just inapprorpriate - I remember an ad that had a picture of an old lady lying on the ground that read, "Help! I've fallen and I can't get up!" Awful stuff. At Yahoo! we created strict content guidelines that just got rid of all these ads AND we worked super hard at bringing traditional brands onto Yahoo! so that we eliminated our revenue dependence on these direct marketers.

But they're back:

Ad Recession Brings on the Belly Fat

While these ads aren't deceptive, they are pretty offensive in their design. But yet, they are effective at driving traffic to lose weight websites as they offend the rest of the population. And they aren't all that wonderful at creating a great brand experience within anyone's website. This is why all the male enhancement ads are placed all the way in the back of popular men's magazines; if you saw them in within their main content pages, you might think that this men's magazine has an undesirable perception amongst its readers.

The same will happen to websites if these ads are found on their pages. Do you want your brand tarnished by the ads that run on your pages?

In the short term, direct marketers have the cash. Perhaps we are forced to take these ads in the short term as we figure out new ways to generate revenue. I hope that in this case, history repeats itself in that the industry will innovate yet again and more desirable advertiser dollars will flow into the ecosystem. But instead of getting rid of direct marketers, can't we find a way to help them create more acceptable ads from a design perspective but are ALSO as effective?

Recession? What Recession? Part II

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I just read Newsweek issue Feb 23, 2009. It has an interesting section in it entitled, "Myths of the Recession." The myths they talk about are:

Myth: The Credit Crisis is Over
Myth: All Industries Are Suffering.
Myth: The Dollar Will Collapse.
Myth: Credit Cards Are Killing Us.
Myth: Here Comes Protectionism.

The article talks about how a lot of things have been overblown by the media and makes it look as if the world is worse than it really is. The myths relevant to my previous blog post are:

All Industries Are Suffering.
Credit Cards Are Killing Us

Apparently, a few sectors are really messed up. Banks, financial institutions, brokerages: yeah they really are in big trouble. But the rest of the business world, things are still OK. A ton of companies have built up rainy day funds and are weathering the storm OK.

As for consumer debt, you hear about credit cards being a big suck on consumers, and people are living beyond their means. But the attention is on speculators and lower income people who took on unreasonable amounts of debt relative to what they were taking in. So yeah, a lot of people are going broke or getting kicked out of their homes. But the number is still a lot less than the general populace (90+ percent of the population) didn't do stupid things with debt, so much that they are in trouble now.

If you believe this article, and I tend to think that the media does over exaggerate statistics and make things seem worse than they really are simply because they are talked about a lot, then the general population doesn't really feel the brunt of the recession. As long as they still have their jobs and didn't spend so much over their means to support it, the world still seems rather...normal.

I think this is why people don't seem to think the recession is really there, because it hasn't really hit them. Now lose your job or the roof over your head - yeah that's a pretty big hammer hitting you on the noggin.

Or if you are an angel investor helping out early stage startups - the world's mess really does affect you in a very direct way.

Recession? What Recession?

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In the last few weeks, I am amazed at how many people are completely unaware, oblivious, or uncaring of what is happening in the markets.

When you drive past malls, the parking lots are full. People are still out shopping! Maybe they aren't buying? At least they still aspire to buy even if they are not. However it seems that some people still are.

One of my startups, Ideeli, who sells luxury goods at 40-90% off, is showing great growth. I guess women still want their luxury goods even in a recession.

The other day I was catching up with a buddy of mine and I told him some of my companies are shutting down. He was amazed that this was happening.

Some startups I meet with still are in the mode of building for users and making revenue part of their future plans AFTER they raise their next round. I tell them that the investor community has completely stopped funding startups without revenue WHEN THEY SHOW UP at their doorstep. They look at me like I'm an idiot for asking about and pushing them to generate revenue now.

WTF??!?!

Ignorance? Obliviousness? Inertia of irrational exuberance still keeping spirits high? Or perhaps some things just haven't affected some?

It almost reminds me of when I was a kid growing up during the downturn of the 1970s. My parents dealt with the problems, but they never affected me directly. I never stressed about it, and nobody asked me to stress about it. Food showed up on the table, I went to school, still had clothes and toys. The world was all right.

I think some are like that. They have money. They have support. They still walk down the street to their Starbucks and buy coffee. Everything does seem normal in our little microcosms.

But if you take a look at the world beyond our immediate surroundings, it's a mess. The larger, global mess trickles down to creating a mess all the way down to affecting us. It's in all the news, and in our stock prices, our gas prices. For us in the investing biz, it's in how we think about building startups.

Sometimes I think people just don't read newspapers, or watch the news. Or maybe their larger view doesn't have enough experience yet to process all the macro effects and distill them down to micro effects, and finally down to those that directly affect each and every one of us individually.

I think that I was fortunate enough to be an adult through the 1989 downturn, the boom-bust of the internet through 2001, and now this one. It's a sobering thing to be hammered so many times and to viscerally have experienced their effects on us. I have learned to process broad data and bring them down to the individual level, and I have much more to learn.

I meet with my financial advisor regularly now and pump him for broad economic data, because he sees much more info than I do. We talk about how it affects my investments, but also about the broad economy both domestic and global because I want that data to process, so that I can strategize effectively in all areas of my life, including my startup investing.

When I think about how I get all my information, it's almost a full time job keeping track of all this information. So maybe I can forgive those who are ignorant/oblivious/irrationally exuberant because it's a lot of data to process, cutting across a lot of experience areas, and it's hard to understand if you don't have context or experience to pull it all together.

I can only hope that people do a more deeper dive in broader economic factors because it does affect us all, and we'll make better decisions about our lives, money, and work because of it.

And I can stop getting in arguments with people about why building for users isn't a good strategy now....(more on this in a future blog post).

On Thursday night, I went over to the offices of Daylife to see Jeff Jarvis talk about his new book, What Would Google Do?.

His presentation was a bit rushed as his prepared powerpoint was a lot longer than his talk. But I had read some of his book by the time I got to the presentation.

I think his book is pretty good at gathering together a whole bunch of disparate strategies and thoughts from the state of the Web and its effects on a variety of businesses. To us in the biz, I think it's stuff that we deal with every day, but it's nice that somebody put it all in one place.

The one thing I think could be better is the title. It's deceptive because there are things that are described in the book that are valid and true, but they are not what Google would do. In fact, Google itself would never do them ever because it doesn't make sense from a business standpoint for them. And it's funny that even if Google doesn't do them, they enable those activities to be done by others.

I would probably call the book something like, "This is the Way the Internet Is Now and What to Do About It".

Yahoo!, Investors, Next Steps

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Here is a quote from Mediapost email, paraphrasing from an article from BusinessWeek: The Difficulties Bartz Faces at Yahoo:

"As Sanford Bernstein analyst Jeffrey Lindsay said, "We see no growth path forward. The only thing that's going to excite investors is a transformational move, and that could take months or quarters." Indeed, new CEO Carol Bartz admitted as much during a conference call with reporters. She said she needed time to talk to more people inside the company about what direction to take it in. Investors are unlikely to give her much time."

The last sentence irks me:

"Investors are unlikely to give her much time."

I think this is a systemic problem that is wrong with how we incent businesses to function. It breeds short term focus and doesn't let companies do the things they need to do, especially if they are going to take months or even years.

Sure, I'd be pissed too if I were losing millions or billions on stock price. But there must be a way to stop companies from reacting to pressure from investors to deliver short term results in order to bring great long term growth to the company, and before investors demand the management team to be fired...?!?!?

A reporter asked me some thought provoking questions about the state of the world and whether Silicon Valley will play a large role in recovery and building new companies and employing tons of now-out-of-work people. I gave a rambling reply which also caused me to think deeper about how things are and my dissatisfaction with many things in the past, which I hope will be fixed. Since it was an interesting thought exercise for me, I thought I'd share it with you (with a bit more embellishment):

3% is the new 20%

Greed has played a large role in how broken the system is. I now say 3% growth is the new 20%, which means that expectations have been totally out of whack in the past. When I was at Yahoo, it was ridiculous to have investors continually push for 20% growth quarter over quarter, year over year. It's unsustainable. and when Yahoo fails at this, or any company for that matter, the investors knock the stock down. When the stock goes down, the investors get in an uproar and scream bloody murder, try to get rid of the current management team, cause a huge ruckus which is hugely distracting and doesn't enable a company to respond in the way that is best, which sometimes takes time - More time than investors are willing to give. The short term mindset of investors which drives the short term mindset of companies doesn't let any company plan effectively for the long term, but only for next quarter's earnings call.

Stock market driven by emotion

The whole stock market is driven by emotion which is really bad in general. Whatever happened to what I learned about stock investing way back, when the stock price was a reflection of the actual value of the assets a company had, not what emotion drives what we think it should be?

Is incremental innovation enough?

Lots of innovation is definitely in the form of incremental innovation but that is true in more established technologies. We see this in bulk on the internet, but on the other hand, we still see a lot of truly weird new stuff that nobody is working on before. I think a lot of people think they can merely do something better and that is enough to get to a good place, or become number one. the main problem is that users have services overload; ex. how many social networks do we really need?

This is a big problem for us internet startup investors. We see a lot of me-too products and while something may be truly better, there are so many factors out there that inhibit the establishment and growth of a me-too product, even though it's better. Users have lots of inertia in products they know; they learn, get used to them, then are unwilling to switch. Users also can't determine what is truly better or not - when two things work in the same industry or product area, users aren't going to spend time to dig into every new product's details to figure out which is better; they don't have time. In the past, large marketing campaigns to drive awareness could get a new entrant a place in the marketplace, but "firehoses of users" aren't easy to find or establish to get enough trial such that natural growth of users starts to happen.

Where's the next big industry creation going to happen?

If i were a betting man, I would say cleantech is the next big area for large scale innovation that creates big companies and factories, that employ a wide variety of skills and skill levels - it's an area that will require lots of capital to start and get going.

Internet tech only employs a certain type and set of skills - as a veteran of the internet and investor in the area, I still think there will be lots of innovation there, but it will come more slowly and the big returns will become more rare, but lots of smaller companies will pop up. It's still an interesting area and think it will be for some time. Capital requirements are virtually nil for internet startups now.

Statistics says that Silicon Valley can still drive a large portion of company creation and thus, help in the recovery

I'm biased. I live in the Silicon Valley and in living there, versus visiting elsewhere, I think that innovation and new business creation still happens a great deal in the valley. Why:

1. Even in the economic downturn where we'll see many of the venture funds die, the greatest concentration will still be in the bay area. No other region in the US can claim the sheer number of funds and greatest concentration of angel investors too.

2. The economic downturn will kill off many dumb ideas and leave the strongest to survive. This puts back a constraint on startups which had gone missing in the boom years: gotta make a great business that can make money. duh!

3. Still people flock to silicon valley to start businesses. This inertia isn't going to go away instantly. It would require many years of failure to reset this in peoples' minds that Silicon Valley isn't the right place to be.

4. Being in the Valley means you are surrounded by tons of other like-minded startup people. It would be hard to find some other place like this, except for perhaps NYC or maybe Boston (even those two would still be dwarfed by the sheer number of people in Silicon Valley). Everywhere else has a much much less dense concentration of people who can help you and who have done it before.

5. I personally still look at deals and those that kind of are sub-standard, I tell them (as does everyone else) to go back to the drawing board and come up with an idea that can make money. This kind of feedback is just one more iterative step in getting people to the right place.

6. So eventually some great ideas will make it through the filter, but you have to wait for time and effort to pay off. Statistics says that the greater number you have to play with, the higher the chance you'll get something new and big. With the sheer volume of stuff that goes on in Silicon Valley, that says to me statistically that you'll get a next big idea faster than in any other place in the country.

The next big breakthrough employing 1000s of people won't happen overnight

I doubt that any idea could move that fast and with the economy so down, it will be even harder to see a company grow to such size in those conditions, even those with some momentum. So in that sense, it may be that the government's massive infrastructure projects may be the ones that will employ a lot of people in the short term while the other companies fight off their investors by laying off people just so they can get their revenue numbers looking better.

What if we didn't layoff anyone and just waited it out?

What if companies didn't sucumb to the pressure - what if they kept paying people but were OK with zero profit? We all know we'll pull out of this downturn at some point - but we have to make a whole bunch of people suffer by laying them off just so a company can look good to investors. Again, the short term focus will weaken companies and place a lot of good, experienced workers out of work. OK OK I'm not totally correct because maybe some companies will make less than their expenses so they will no longer be break even, so maybe they should cut dumb projects and fat off their staff. On the other hand, we've seen time and time again where companies would layoff people in downturns, and then just re-hire them later during good times. We don't need them - we DO need them - this see-sawing back and forth costs people in time, money, and effort.

What if we just didn't fire them, made less or zero money, and just waited it out since we would have hired them back anyways?

Another thing I learned along the way: being loyal to a company is a thing of the past. A company exists for the survival of itself; if that means that people should be let go, it will do so in order to survive. It doesn't care about the people, even though it should. As long as the people help a company survive, it will retain those people. Anybody who doesn't contribute to its survival get cut. I don't see people having any say or power in this decision. Thus, we have to prepare and take care of ourselves in case it happens.

People are resilient, and will drive new business creation

In a downturn, people tend to be resilient. I read somewhere that during these times, people start their own businesses because they've been laid off, sulk for a while, then pick themselves up and go and start new sustainable businesses because now they are free from the corporate mess to do so, whereas they may not have felt that freedom before....?

Entrepreneurism is under attack

I agree generally with this statement. I think the capital mkts are closed, but only for a while. The evidence is that the recovery steps are taking hold but it will still be a few months before things are more back to normal. There will be a shake out in the venture industry. IPOs will still be tough until SAOX gets fixed, which I heard people are working on.

Education could use some serious improvement in the US. But still many kids come out of college wanting to do a startup instead of taking a corporate job. so while we essentially closed the doors to international talent, I think that there is plenty of talent ready and willing to go with just a little experienced handholding.

Basic research is declining I hear. People aren't encouraged to take science; they want to make the quick buck so they become stock traders. So less ideas come out that way, but still there are many untapped. I met a guy who had a line to the DARPA funded projects in universities. He raised a small fund to help these projects become real businesses. Real scary star wars stuff he was telling me about. Pretty cool.

The search for exits is a problem for the whole venture industry. Tt does foster this attitude of building a business for the exit and not for sustainability. This needs some re-thinking. I admit I even suffer from exit-itis as an angel investor. But we also need to figure out how investors can profit from supporting a company and being able to cash out their investment.

Silicon Valley downturn not as severe as other parts of the country..sort of

Still lots of wealthy people running around, although a lot of Valley companies laying off 1000s of people. And I think parts of the Valley are experiencing downturns but not all, as evidenced by housing prices, etc. Still, it's probably not as bad as other parts of the country. But as for contributing to the entire country's recovery, I think you'd have to make people move to the Bay area to look for jobs, or have those companies expand out to other states to get cheaper labor. One problem is finding skilled workers in the areas that high technology requires in other states. Sometimes, you just can't find those people there, or get people to move there because the quality of life is not what they want (who doesn't want to live in California haha?).

I read an article in Venture Hacks about American Apparel. This is the innovation that is required in the US; to stop throwing jobs out of the country and figure out how to do things here, so that we can employ Americans and pay them what we need to pay, but also do it in a cost effective manner to be competitive.

California is well poised to recover

I think California has a great chance to recover by itself: entertainment industry in southern California, tech and other stuff in northern California. As in other years, I think there will yet again be a migration to California to look for fortune, as companies get created and are looking for skilled people, and that will draw skilled people from states where jobs are lost.

Do you agree or disagree?

Should I Go Back and Help Yahoo?

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Earlier this week, a few emails went around the Yahoo Alumni Yahoo Group talking about the recent news about Jerry Yang and how Yahoo was totally floundering and going down the drain. Some of them talked about even going back and helping somehow, although they were quickly retracted in a tone of "that was a really stupid thought."

In fact, after reading some of the news earlier this week, I too had a moment of "Maybe I should go back and help Yahoo." It came and went quickly amidst similar feelings surrounding not wanting to jump back into the frying pan to not knowing what I would do once I got there.

However, instead of mocking such a thought, I'd like to put another spin on it. And that's the fact that we would even have thoughts at all like that.

What was it about Yahoo that would make a whole bunch of us feel like we could go back and actually make a difference? Why would we want to save the company? What could have possibly shaped our feelings and attachments to a place that was our home for many, many years? Why is it so hard to let go?

Yahoo was a unique place. It was like family. It was like a revolution. You bought into it, got emotionally bound to it, and worked your butt off to make it happen. People would applaud the fact that we worked at Yahoo, and we were seen as celebrities of the internet back in the day. We all hung out, we partied, we succeeded and failed and brought it all back from the brink of internet bust.

That's what makes it hard to let go.

It makes me wonder what we could learn from that experience. After all, wouldn't any CEO want to create a workforce which, even after they left (or were fired, or laid off), that would want to come back and work there again despite whatever obstacles and turmoil there could be? What could inspire loyalty in a corporation like that, in a day and age where loyalty to a company is disappearing...?

When the CFO leaves...Part II

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Today's headline from Silicon Alley Insider reads:

Google Disaster: Comscore Reports Awful January

Reading this article (and numerous other articles about slowing Google growth) and watching GOOG drop from its 52 week high of 747.24 to today's price of 452.31, I thought back to my post from last September, When the CFO leaves... which I posted upon learning that the Google CFO was intending to leave.

I hate making predictions. I hate putting it out there like that because it sucks when I'm wrong. But looking at GOOG today and all the news over the last few weeks about the impending slowdown in Google revenue growth, I cannot help but wonder that perhaps I could be right on this one.

Now, this post is not about Google the company. Google is still a great company and is doing many great things. But as any person who knows anything about stock trading, stock prices are often more reflective of emotion and feelings about the company and not so much actual performance of the company. So we're talking about sensing when a stock price has peaked and when it's time to get out of a certain stock.

Who has great "stock sense", especially the "stock sense" of their own company? The CFO.

Once again, I see the CFO of a great public company get out of a company whose prospects are riding high. But the CFO is a smart guy; he has access to both proprietary information within the company and also tons of analytical information from external sources about the company, its competitors, and the economy, and the opinions of all his buddies in the financial community. This is far more information than you or I could get hold of. Couple that with a great sense for money and he can predict when the stock is going to peak and, perhaps, when he should exit and take the gains off the table.

So when Google's CFO announced his departure late last year, I could not help but wonder that GOOG was going to take a plunge within a year. It sure looks that way now.

When the CFO leaves, it's time to sell all your company's stock...NOW.

One MEEEELLEEEEE-UN Miles

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About a month or so back, I get this message that I just joined the Million Mile Club for American Airlines.

ONE FRICKIN' MILLION MILES!

My butt has sat in AA plane seats for one million miles since I started flying AA as a kid to today.

On one level, I'm happy about it. I got this little icon on my Exec Platinum card that says 1 Million Miles, and I get lifetime Gold status.

On the other hand, I'm not so sure.

ONE FRICKIN' MILLION MILES!!!!

One million miles of sitting in back wrenching, trapezoid tightening, swollen leg plane seats whose failing cushions and poor ergonomics challenge any sane person while propping up the chiropractic and inflatable pillow business. One million miles of sitting in seats designed twenty years ago when humans were of smaller stature and now through trans-fat fast food and working out humans are just that much bigger. One million miles of watching security getting beefed up to the point where we'll have to strip naked soon to get on the plane.

And how many hours spent just sitting in airports waiting...and waiting...and waiting....

But yet, the world is truly smaller. Decades ago, the expense and difficulty of flying made the world seem so much less accessible. Today, I think nothing of hopping on a plane to go to another country, or just cross-US to do some business or visit family or friends. So one million miles of growing, mounting discomfort for one million miles of watching the world grow smaller, more accessible, and less lonely.

To me, this is a potential positive balancing act turned a zero sum game. If we improve all the crappy things about flying, the positives are actually pretty compelling. But no, we get benefits and sacrifice other things for it. It's really a shame.

Increasing Site and Social Engagement in Detail

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Over the last few years, social media has really become a popular buzzword. People talk about social networks and the importance of implementing them, as well as the drawbacks and potential dangers. Rather than talk about social media as a strategy, I wanted to point out some actual detail level things to try rather than stay at the 10,000 foot level of discussion. Based on working on social media projects over the last year, I have found the following techniques to be effective at creating and maintaining a vibrant social environment that produces results:

Voyeurism
Related to: Dating/Hooking Up, Expression (receiving end of)

People love to follow other people for a variety of reasons. From telescopes in apartments buildings to eavesdropping on a nearby conversation to hearing and passing on gossip, the lives of others around us seem infinitely more interesting than our own. We follow other people for many reasons: to keep up with what our friends are doing, to check out hot women, to see what trouble celebrities get into - we are always curious, sometimes to the point of obsession, about what other people do day to day. Successful social networks allow people to post and describe their daily lives so that others can take a look.

Communication
Related to: Dating/Hooking Up, Connecting with Context, Entertainment, Validation

It is human to want to contact someone else. We are social creatures and we want to talk to others. Providing a way for people to contact and maintain communication with others is crucial to the lifeblood of a good social network. Just as important is the ability to shut people out, and give people ways of *not* talking to everyone or only certain people (ie. annoying people, spam, ex-boyfriend).

Dating/Hooking Up
Related to: Voyeurism, Communication, Masquerade, Entertainment

Let's face it. Lots of guys surf pictures just to check out hot women. But then sometimes you'll want to make contact and see if you can get a date. Simply providing a means for surfing photos in profiles and a system for communication can enable this activity, but providing additional functionality to facilitate this activity can make the experience more enticing and fun. Think HotOrNot.com and the ability to rate people, and then pick out only the HOT rated people to contact, or show interest by sending someone a virtual flower. Or I'm In Like With You where auctions meets dating and you bid on the ability to meet someone.

Entertainment
Related to: Communication, Dating/Hooking Up, Competition, Fame

Having a good time on a site increases engagement. Providing ways of having fun keeps people coming back to have more fun. Games are the obvious one, and playing by yourself is good but playing against others is often better. Sometimes it's the content posted by users, like funny videos of themselves posted on YouTube or pictures on Flickr to be watched on their Flickr streams. Or if a fun spin can be put on mundane activities, then the unique fun that activity brings will draw people in and keep them interested.

Fame
Related to: Competition, Expression, Entertainment, Showing Off/Vanity, Validation

It's fun to do an activity and play a game, but enabling a way for people to get acknowledged and recognized for their skill rewards people by the notoriety they get for being good at something. Leaderboards on gaming sites allow users to show the world that they are #1 in a game, and they'll screen shot that and put it on their blog. It also means that they'll keep coming back to keep achieving or maintain their #1 position on the leaderboard for bragging rights.

Competition
Related to: Fame, Entertainment

There is something in the act of striving against other humans that people love. They want to test their ablities and measure themselves against others and be measured and will keep coming back to try. They like to see continual improvement and enjoy a rise in skill. There is also competition against themselves so it's not always about other people. And, there is the ultimate prize of being number ONE. Perhaps we'll never get there, but maybe we will. No matter what, we love the struggle and the journey to number ONE. In games and sports is where we most often see competition, but it can also be other things like getting the most views on posted content like a video. Great games and activities constantly provide the ability to raise the bar just a little more each time to keep people competing, but don't raise the bar too high or else people will give up. Not raising the bar at all will cause people to achieve that level and then move on because it's too easy. This bar can be set by other users, like when you're competing against other players in a sports game, it can be set by a computer which auto-adjusts for your skill level.

Expression
Related to: Fame, Voyeurism (contributing to), Showing Off/Vanity, Validation

Constantly we are on stage. The world is a theater and we are its actors. From the clothes we wear to what we say or do, we are always showing the world who we are. Providing a means for people to express who they are means they will continually do it, especially if there is a mechanism for validation like commenting on photos in Facebook.

Showing Off/Vanity
Related to: Expression, Fame

The extreme form of expression is showing off and trying to show that we are special and unique. Showing our crazy stunt videos, or photos of us drinking a 3 foot tall beer, or next to a movie star all show the world that we are not boring people but that we have the biggest peacock feathers. Allowing people to show off and giving validation mechanisms like commenting on photos, or leaderboards, or graphical badges of honors on our profile pages reward us for posting and showing off, and encourages us to do more.

Validation
Related to: Communication, Fame, Expression

We always want to know that who we are is noticed and special by others. We like it when we get comments on our photos and videos from our friends. It makes us feel that others care and that we are not alone in the world. Implementing means of giving validation gives users that special feeling that others do notice them, and they'll keep on posting to get more validation. The simplest form is commenting on photos and videos, but it can be focused by providing context like on Dailystrength.org where you can post an issue and get support from strangers and friends via the internet.

Masquerade
Related to: Communication, Community

Sometimes we're boring. Our lives are so mundane that we get sick of it. Or maybe we're not in the social mainstream. We feel shunned by the general masses and can't seem to get in the flow of society. Or maybe we're just tired of being ourselves and want to try being someone else. On the internet, the ability to be someone else is very easy. Simply creating a new screen name and building a personality underneath it has been done since the early days of the internet. People can pretend they are the opposite sex, older or younger, more fun, more engaging - whatever. It is something that is not easily achieved in the real world. Acting out the fantasy that they have either personality traits not in the real world or entirely someone else can be an activity that keeps people returning. The unfortunate thing is that people often masquerade for negative reasons like stalking children, and this needs to be guarded against.

Community
Related to: Masquerade, Connecting with Context, Communication

Humans want to belong. It's often to easy to feel outcast in the real world. On the internet, communities can be more accepting of people than in the real world. If a site can create a means for people to be a part of something, they will want to come back and continue to participate to be part of that community. Think of the instant groups that Facebook has, based on tags created from your interests, or your hometown. These are ways for people to find commonalities on which to connect on, which foster communication and validation.

Connecting with Context
Related to: Community, Communication

In watching social networks over the years, I am a firm believer that social networking for social networking's sake is a path to declining activity. It is much more engaging for users when you create a context for which socializing happens. MySpace's usage came from the fact that they were always about promoting indie music. Yes, other things happened there, but you knew that you could always find indie music on MySpace. Facebook started out by being exclusive to colleges and there was no way to taint the population with random people who were not attending your university. Everyone you found there went to your college and you could relate easily. LinkedIn's network is built on professional networking, another popular activity in business and its functionality is focused on making that activity easier. Contrast that with Friendster, who had a meteoric rise when it first came out and then usage tapered and dropped because people got bored there when applying this list of social techniques was not done well or not at all.

For all my projects, I try to think about applying some or all of these techniques in creative ways. I also think about the context since not all techniques are effective in every context. For example, dating could be a hard sell in a social stock picking application, but competition and fame would definitely work well. Some of it is experimental, as there could be unexpected results of applying something you thought wouldn't work in a context. So let's turn my example around. Suppose you did create a social stock picking site which had an underlying dating application underneath? Perhaps it could link up all the superficial, money hungry people by allowing you to find, meet, and date the richest, best stock pickers in the world...? Socially unacceptable? Perhaps. Successful? Who knows...

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...

"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.

You Asked Me About Yahoo!...

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In the last few weeks, I've been asked what I think of the recent events at Yahoo!. As an once insider, people think I've got some inside knowledge and insight into whether the changes are good or not. To be honest, I do still have some connections with Yahoos, but they get more tenuous each passing day. Still, it's been interesting polling both insiders and outsiders about Yahoo! and its future.

Since the announcement of Jerry Yang becoming CEO (and Sue Decker becoming President) and Terry Semel leaving, I have thought a lot about what this means for Yahoo!. I also went around and talked to ex-Yahoos and current Yahoos about what they think. It's been an interesting experience hearing what they've had to say.

I have found an amazingly wide range of opinions but there seem to be some trends:

1. Those who just joined Yahoo seem more optimistic than those that have been there for a while. Some guesses as to why this is so:

a. They joined at the current state of affairs, so they must be bullish on the company or else why would they have joined up?

b. They must be bullish or else they would quit. This could be real or self-delusional. Who knows. But they must make themselves bullish or else they would lose all psych in their job, which they arrived at not too long ago.

2. Veterans seem to have mixed opinions. Why:

a. They have more experience in the company and know what works and what doesn't. They've been through change before at Yahoo and can be both optimistic and pessimistic.

b. It seems that this is highly dependent on position and location in the company (see next item).

3. Higher level employees unanimously are bullish on the company. This is not strange; they have signed on to be an exec in the new regime and have to like it. Otherwise, they would leave. And politically they can't express any fears; it would scare the troops. So it's been hard to pin down what they REALLY think about the new Yahoo.

4. Pockets of bliss exist. In many small, local areas, people are doing really great work and getting lots done. The opposite is also true, that there are also many areas of despair as well. These folks cite all the typical stuff, like growing politics, impossible to get stuff done, no direction from leadership, etc. etc.

What do I think about Jerry being CEO?

I totally think he should have been CEO a long time ago.

I think that in order for someone to run a company effectively, you must have instinctual knowledge about the industry. We would not put a DOW chemical exec in charge of GM. Likewise, for someone to run an Internet company, you must have some great resonance with the Internet and are in tune with what people want and like.

Who out there could qualify for this? Larry and Sergei are two. Filo and Jerry are another two. I actually think Dan Rosensweig could have done it. He used to run ZDNet and thus had a lot of knowledge about the Internet as well as executive experience. Well, we're not going to get Larry or Sergei, and Dave Filo is still working on engineering issues. So who is left. Jerry Yang.

Can he turn the ship around?

While I think Jerry is the right person, I also think he has an enormous task before him. Think of trying to turn the TItanic by pushing on it with your hands. In certain crazy and inventive situations, I bet you could actually turn the Titanic that way, ie. if you were Superman, you could do it - this is sort of like answering one of those famous interview questions in a Microsoft interview. So I believe that turning the Yahoo ship can be done, but it remains to be seen whether or not there is so much inertia and momentum that it resists turning fast enough.

One possible consequence of turning the Yahoo ship will be some down revenue quarters over the next year, potentially two years, as restructuring plans take hold, removal of waste, taking down sites that shouldn't be worked on, etc. etc. However, it will be amazing if revenue can be kept growing in the midst of such change.

Only time will tell. My money is definitely on Jerry Yang to bring Yahoo into its next stage of evolution.

Why and How Do Startups Move So Fast?

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The question of how do startups move so fast comes up surprisingly often. I finally gave it some thought, after the question came up again in a recent meeting with one of my companies. Over the last year or so of working with startups, I came up with some observations:

1. Small teams, 1-3 people. Makes sense right? Less time lost, less arguing, etc. Less meetings.

2. Everybody resonates with the idea and generally agrees with direction. Since everyone is either a participant or expert in the field in which the site is created for, then everyone does not need to learn but knows instinctively what to do. Nobody is working on a product that they do not use themselves. It's a great way to find people like yourselves, when you recruit from the level of common interest in a certain product area.

NOTE: It's really hard sometimes to get someone to resonate with your idea. You may hire them for their intrinsic talent, but it may be really difficult to get them to feel the instinctive bond with your product area.
Sometimes it's impossible. Doesn't mean that great work can't get done, but it does mean a level of independence can't be achieved, as non-resonating employees need more directional advice than those who do resonate.

3. Along with 1, the teams usually only consist of engineers cranking away. Most of them are multi-talented to a point, so they play multiple roles of programmer, GUI, html/css, product manager, product visionary.

4. Strangely enough, I have not found location to be a common factor for moving fast. Certainly it enhances the process, but a lot of teams are working with people remotely, since engrs are so hard to find and many just don't want to move. Somehow, they have found ways of working together and can still make progress. Lots of travel involved and constant communication are two of many key points in making it work. If I get a chance, I'll dig into it more with some of the startups I work with as to how it's working and how it's not. In my startups, 6 out of the 8 companies have resources external to their main location, mostly engineers who are working in remote locations. I have not seen any dramatic slowdowns with their teams.

5. People are generally just cranking. They see something needs to get done and then they just do it. There is less the asking for permission. Everybody needs to get on the same page and just keep moving forward in a very independent way. Early on at Yahoo!, many of our engineers would just do stuff and we would rarely ask them to do some particular thing. The product would constantly evolve while we worried about other stuff. Although when we asked them to actually do something and if they did not agree, it never got done which was frustrating from another viewpoint. So it worked until they got to a point when their initial sensibilities finally turned out to be wrong. Sometimes they could be convinced that they were wrong, but sometimes not...

While speed may be intuitive to some, I think it's harder to achieve than you think, unless you have the right people with the right sensibilities and right alignment in thinking.

One of the hardest things I've seen is when a non-engineer comes up with an idea and tries to get it done. Because they can't write code themselves, they need to find someone who can. But more often than not, they find only someone who can code but not become resonant with the idea to just work on it and take vague direction and execute on it.

It's the magic bullet that everyone searches for:

"Dang it, I just want to describe my idea to someone and that someone just deals with the details and makes it happen!"

Unfortunately, it's the details that often count...you want something done right, you better sweat the details!

Avoiding Blur

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I was just talking to a startup about their website and we were strategizing what it could become. We noodled, talked, brainstormed, argued, and finally agreed for over 5 hours and developed a sense for what we want the future site would be like.

At the end of the session, I was still feeling uneasy about what we came up with. The main reason was that it was merely a combination of what other sites were doing in part. One site would have this feature, but not the main direction for the site. Another site had people doing the activity, but in a different way. Some of the bigger sites out there also had the ability to do what we were doing, but of course their missions were much more broader and not focused like ours. Could we do better by simply having a niche, focused mission but having many of the same tools as other sites, and also competing against the fact that users were already using our competitors for that same mission we wanted them to focus on with our site?

This was the source of my unease. If there are competitors or near competitors, or even non-competitors, who allow users to accomplish the same thing on their sites, whether it is their main mission or not, AND these competitors exist already, this is a danger point. I call it "blur".

The blur occurs in users minds when they hear about what you want them to do, but can't figure out where to do it. They may already be doing it on some other site, by either using some existing functionality, or jacking some other functionality to get the job done.

Blur is heavily related to product differentiation. You want something to cut through the blur. When they think of something they want or need to do, you want them to think of you. Whatever functions you have must be cool, creative, and original enough to attract them to you despite being in a similar place with other existing sites.

Here is an example. Suppose you want to build a site to allow users to connect with friends. Let's say your main interface is email, as a possible differentiator. However, as a user who hears about your offering, "connect with friends via this new way, but with email", they'll think all sorts of things like:

Hmm I'm already on Facebook and that works for me.
I have my address book on Outlook and email people just fine.
All my friends are on MySpace. Why switch?
I don't have time to try something new, let alone learning it and THEN getting all my friends on it.

The problem here is that when you express your mission to users, they get caught in the blur of other competitors being able to do pretty much the same thing and you don't have something to justify the switching cost of going to your service to do something they can do already somewhere else.

You need to find that one (or more) things that people can do on your site that no one else offers, AND is cool enough to get them to come over and learn something new.

It's always a danger point for me when I hear of entrepreneurs who design something supposedly really cool but then I point out that people are already doing these things on other sites. I ALWAYS get pushback because they think their creation is the best out there, and nobody has mashed up the functions in such a focused manner.

It might actually be great. I'm just talking about risk here and the realities of getting users attention in a crowded space. You might actually have something that is a ton better at doing something, than for them to do it on some existing site.

I'm into risk reduction. Why try to fight with through user blur with something that isn't shouting "Come here and try me because I'm different" loud enough? You could run out of resources and funding trying to bulldoze your way into users' attentions. If you had several million dollars in the bank, yeah potentially you could market your way to success in a certain category.

Or you could spend a little more creative time and figure out something to build that is actually cooler and hasn't done before, and that users will want to spend time with. Enough to get past the switching cost and try your service.

WIth that previous startup I mentioned, after 5 hours of discussion, we spent another 20 minutes talking about something that wasn't mentioned and was something very unique in their offering. I think that 20 minutes is going to turn out to be most valuable part of that day. Because I think we added back something that would cut through the blur and thus reduce our potential risk in attracting users to our site, to do something that they could do somewhere else in general, but being able to do that one thing that they CAN'T anywhere else.

We could have gone home after 5 hours. But spending that little bit of extra time and effort to find something to avoid the blur was worthwhile and I believe, critical for the success of the company.

Two weeks ago I met with someone who just left Yahoo!. We commiserated about our experiences at Yahoo! and I asked about this person's experiences and why they left the company.

It was a familiar tale from many of those recently leaving Yahoo!, and also one that was just beginning to manifest itself when I left in 2004.

As Yahoo! attempts to reinvent itself, a lot of chaos and reorganization is happening under the hood. This person related to me how they had, over a period of only a year, several managers and being passed around to many groups. As this person attempted to do their job, direction was confused in the parties this person supported. As these parties's ALSO underwent many reorgs and change in management, it caused confusion and a lack of ability to approve anything or willing to make a decision, or even figure out who it was who could really authorize a decision.

That doesn't mean nothing gets done at Yahoo!. In fact there is (was?) a huge cadre of people who, having grown up with the organization, knew exactly how to get something done. This was accomplished through personal relationships, keeping up with who really supported what technology, and what levers to push in the organization. I call this "management by influence". The problem is that a huge percentage of the old timers at Yahoo! have or are leaving the company. This leaves a huge void in the company.

So as the people who can really get things done leave, people find it harder to get things done outside their own sphere of knowledge and influence. Add that to a org who may give firm responsibility to people AND announce that publicly and thoroughly enough so that everyone knows who to go to for what they have to get done, and confusion and chaos grow. The funny thing about this is, if you ask any upper level manager if there is clarity in the org, I bet they will say there is total clarity. The problem is that they announce something, but the message nevers get into the lower orgs, or is detailed enough to be clear as to exactly who they should go to for what. Now let's add communication problems issues to an org too busy to formalize communication. More chaos ensues.

The scorecard now is:

+ Reorganization causes chaos. Too many managers has a negative impact on the employees.
+ Management by influence works for the old timers but they're all leaving. New timers used to go to the old timers/management by influence experts but now they're all gone.
+ Communication problems exacerbate the problem.

Employees need stability to perform the best job. They need clarity in their jobs and know that they have a stable manager who cares about them and can direct them effectively. Part of this is because of the dependence on what I call management by influence versus clarity which I argue has obscured the lack of clarity of the organization. By clarity, I mean there is a person you go to for this and everyone knows this. This division does this and does not do that. And on and on.

In small orgs, this is easily achievable. You know someone does something and it easily fits into your mental map of how things work in that company. In large orgs, you have to institutionalize communication and clearly delineate lines of responsibility to the entire company. If you've ever worked at IBM, there are huge documents, memos, and directories which document these lines of responsibility. Is it heavy and unwieldy? Yes, probably. But it is definitely clear and removes the need for management by influence alone. People can remove themselves from the org but the position is always there, even if the person is not.

The other part of creating a stable environment for employees is to stop shuffling them around like chess pieces. They are not pawns; they are humans. They need to stop dealing with the chaos and turn that energy on what they got hired for. Those of us in upper management would do well to create these stable environments where employees can flourish, feel needed and valued, and are clear on who to go to to get something done. If you don't, you'll get the exodus which ultimately drove this person, and tons of others, to leave.

Corporate DoubleSpeak is Alive and Well

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Thanks to IBM, corporate doublespeak is alive and well. In fact, they are so good at all those corporate buzzword techniques that they put it all in an ad at JFK Airport:

I suppose if you want to help at getting better at whatever these buzzwords actually mean, you should hire IBM and they'll "chain optimize" the hell out of those buzzwords into your psyche so that you'll "process transform" your business for the better.

I once tried to learn corporate doublespeak. At one point, I thought it would make me more successful. But then I read Dilbert. And it was all over.

Corporate buzzword books plague the bookshelves and make you want to buy that book out of sheer curiosity of wanting to find out what the hell that term means. Thankfully, I've "re-engineered" my tendency to buy these types of books and now avoid them by at least "six sigma" distance.

Drinking the Kool-Aid Ain't So Good

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When I worked at frogdesign, I remember our team going to a PC client and getting reprimanded for not using their company's PCs If we were going to work for them, then shouldn't we be using their products and getting to know how "great" their products were by living with them day to day?

The same thing happened at Yahoo!. I remember a sales rep who had a major PC manufacturer as a client and he immediately went out and bought a laptop made by that company to show solidarity and support for the client. I don't know if he used it when he got back to the office, but definitely he brought it with him to client meetings. He even switched his cellphone to that company's brand (maybe you can figure out who this company was now heh). It was all to show that he was in full support of the manufacturer as client and supported them so much that he lived and breathed their products, as much as what he did with them at Yahoo!.

I drank the Kool-Aid too. When we worked on Yahoo! products, we were told to always use them. It kind of made sense at the time. If you lived and breathed the products, you could make them better. You could spot problems, make suggestions, and overall show the world that a company who uses its own products must obviously have the highest confidence in them to do so.

After observing and experiencing this behavior for many years, I'm going to take the contrarian view. I am going to suggest that using solely your company's products is not so good as people claim.

I reached this conclusion just now, almost 3 years out of Yahoo! and have been out there using whatever it was that made my life easier, instead of just using Yahoo! products only. I found that there were a huge number of products out there that were really great, and often much better than what Yahoo! could offer. I even took Yahoo.com off my home page button, which had occupied that button since 1995. Drinking too much Kool-Aid too long made me miss out.

If you are constantly using your own products, I would put forth that it's the best way to put blinders on. Sure, your company's products may be the best there is when they come out, but they may not be at some time in the future. With Web development happening so fast, it could happen sooner than you think.

In today's Web, things move so fast. People come up with stuff that you personally would not have dreamed of. The more you focus on your own products, the more the likelihood that you fall into that comfortable place where you don't need to change, you don't look for something better, and you just don't feel like learning something new. You get complacent and feel that what you have is good enough, or you think it's world class because you worked on it and people have told you so. How can it not be? You take pride in what you've done and nobody can knock you off the mountain. Everyone tells you to research and look at competitors' products, but yet nobody finds the time to do so. It is a small number of people who actually have their own personal curiosity to go out and try somebody elses products. It's too freakin' busy to go and do this in your spare time!

I would put forth that the blindness that happens with being comfortable and focusing on yourself and your own company is precisely the way you get blindsided by some fast moving kids out of college developing something that is so cool and compelling and you see them gaining traction only after you've fallen behind.

What's the best way to combat this?

USE THE BEST PRODUCT OUT THERE FOR WHATEVER IT IS YOU DO.

Force yourself to always try new things, even when your boss is telling you to use the company's products. Fake using Gmail when you go to a client meeting, but return back to what you think is the best product for email when you're out of that meeting. Use the best cellphone for you, but when you go back to work carry your Sony-Ericsson.

You can't learn about a product by just trying it; you really need to live with it and become a real user of that product and internalize why it is great.

Always ask your friends what they use. Read magazines and blogs about what they recommend. Collect your insight and feed it back to your own development process for your own products.

Don't get complacent about your own products by missing what's happening in the greater world. This is more than just being "innovative". It is experiencing and acknowledging the world is a bigger place than just you, your product and your company. Broaden your horizons and you'll be a superior product person for it. Truly in today's Web, the best product does win.

POSTSCRIPT:
When you realize that you are practically using none of your company's products because your competitors' products are so much better, and you can't get your company to realize this, I think it's time to leave.

POSTSCRIPT Part II:
If you're a boss, don't be an ass and make everyone on your team use your own products, if they aren't as good as your competitors'. That should be motivation enough to make your own stuff better.

Stemming the Introductions Frenzy

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Definitely connections is one of the most important parts of my involvement with startups. I introduce them to people I know in other companies for potential partnerships, I help them hire people (although I have to admit my record here is abysmal), and I try to meet more new people in case they may present opportunities for investment, partnership, or acquisitions later.

So I try to meet as many people as possible. But I've learned a lot about this introduction and meeting thing. Some thoughts about it:

1. In general, I try to meet as many people as possible, and as many as will meet with me.

2. I have discovered that it is impossible to meet everyone that you want to meet. It sucks but it's true. More on why in a sec.

3. Time is a so precious. Filling up your day with meet and greets is tough and it doesn't give you time to get your other work done. So I have to limit these kinds of meetings as much as possible.

4. Filtering becomes super important. As you can imagine, those with immediate purpose and importance come first.

5. Making introductions is also an important skill. Here is my process and thoughts:

a. I identify a possible introduction that should be made. In general, I try not to do more social type meets but want them to have at least a purpose. Think of it as a courtesy on peoples' time demands and not wasting them, and also it gives them something to talk about which will reduce awkwardness.

b. I hold my contacts close and don't frivolously make introductions. I am keenly aware of not creating an image where Dave Shen sends frivolous introductions around. That would reduce the possibility of someone responding to an introduction. My goal is to have a 100% response and connection rate, so I think deeply about whether to make the introduction or not.

c. Timing on the introduction has come up often. When to make it is important as you don't want to intro too early and want to do it when both parties are ready.

For example, if a startup is working very hard and if I judge their resources to be strained too far, I won't make another business development intro until they get more resources or some brain space frees up. The worst thing is you send them the intro and then nothing happens until much later. Or if the startup has nothing to show yet, then I don't want the intro-ed party to feel like it was a wasted meeting because it was too early to talk about their product since there was no demo.

d. While I do not bill myself as a fund raiser, the few investor contacts I do have are important to me. Asking for money raises the stakes of an introduction. Thus I will not make an introduction to an investor until I feel the company is at a place to put a really good foot forward. I do not want to make it unless they will look good at the meeting. If they look bad, then I will look bad for sending an unprepared company to that investor contact. I also won't make an introduction unless I have put my own money in. I feel it is the ultimate vote of confidence for a company when you have your own skin in the game. I do not want to come off as sending what may be perceived as random companies to them. There are plenty of people who are professional fund raisers who do this and do not have any skin in the game. I want to operate with bit more confidence than these guys.

e. I try not to deluge someone with introductions. For example, at a recent meeting with a media company executive, we discussed many of my startups who may be potential partners of theirs. He got excited about all of them. But I did not want to throw all the introductions at him at once for fear that he may not get to them, or they may get lost in email, etc. So as a courtesy to both introducees (is that a word?), I think about the tide of introductions racing at them and try not to overdo it, and space them out.

f. I always try to follow up on introductions. I want to see how they went, and pass feedback back to either or both parties. I also want to double check my introduction methods and make sure I am hitting as close to 100% response and connection rate as possible. I also want to address potential problems on the rare occasion that they occur.

6. Getting deluged myself with introductions is bad. If I meet someone who can intro me to several people, I tell them to slow it down a bit. I do not want to drop one or two because they get lost in email or from my brain. Sometimes, I am scheduling out many months and my calendar is super-important to me. As a personal goal, I try to get to 99% of my emails and always try to get back to those whom I say I will meet up with. I like saying I'll do something, and then actually do it. I don't like it when someone says they'll meet up with me but don't mean it. I intend to be as clear as possible, which unfortunately is really hard. Better to head it off with the introducer and be clear with them before they send the introduction email.

7. I have found there are many who are not what I would call socializers, which enjoy meeting for the sake of meeting with no particular goal for the meeting other than to connect. There are those who don't seem to meet anyone who does not have a particular purpose for them. Whether this is good or bad I cannot be the judge, as everybody has their own way of working and time demands.

8. I always confirm a meeting the day before. You never know when someone else may drop you off their calendar. It's always good to remind them that you're meeting with them, again as a courtesy and also it's a good time to remind them of why you're meeting.

9. By the way, I always space travel time between meetings. I try not to pack them so closely together time-wise. This also goes for how many of these types of meetings I can do in one day. Generally, I try to space them out across days as well. Going through a whole day of meetings with people you haven't met before is tough for a guy like me (call me an introvert with extroverted tendencies!).

10. Some people network solely for work purposes. There is almost no notion of personal relationship they build. You can tell by what they ask you about, what the conversation is about, and reasons for contacting you later. You never go out for a coffee with these people, or grab a brew. It's kind of cold, sometimes empty. It creates this feeling that you are only useful to them for one thing, which is business. I prefer to look for opportunities to create a relationship that goes beyond that of business only. I think this creates a richer relationship than just for work alone. If they know and feel you are a good person and you connect with each other at that level, I think you'll find that the relationship tends to work better and have more opportunities than less. Who wants to work with someone who isn't cool to hang out with?

Bottom line: introductions, connecting, and meeting are important parts of my work. I do my best to try and not waste the relationships I have built with these people, and create value with each relationship I have.

Mistaken Identity

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Sometimes I hate meeting somebody I have never met or haven't seen in a while. It's bad enough trying to remember someone by picturing them in your mind, let alone trying to figure out who someone is without even meeting them in person before.

But make that worse by asking for those people by name and then being shown to their table and then you realize that the person sitting there is not the right person...AND...they have the same name!

The first time this happened with someone named Lynn whom I had not seen in a long time. I go to Pershing Square and ask for reservations in Lynn's name, and they say she has already arrived and is waiting for you. I say, great, and follow the server to the table. I see someone sitting there with blond hair, so I approach from her back and then say hi to her face and realize it doesn't look like the Lynn I knew. I say excuse me, and ask her for her full name, and it's not my Lynn! She laughs and was also wondering who the hell I was, since she was expecting two other people. She jokes about joining her but I needed to meet the real Lynn so I move off and my Lynn shows up a few minutes later.

The second time was just this last week when I asked for someone named Adam at Olives in the W Hotel at Union Square, whom I had never seen before. I was shown to a table where there was a guy sitting there named Adam, and he and I greet and I get a call from another person meeting us for breakfast but is now telling me he can't make it. I sit down and then start talking about my flight out and a few other things, and then we realize that I'm not the person he is supposed to meet, and he is not the Adam I am supposed to meet! How funny! I grab my stuff and go back to the front desk and there is the real Adam there waiting for me.

Usually I don't have a problem finding and meeting someone I have never met or someone I have not seen in a long time. But it's doubly weird when there are others with exactly the same name having reservations on the exact same day, time, and place to trip me up!

No Sleep for Startups

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Just recently, I saw two startups go into "overdrive" mode. By overdrive, I mean the days of working 24/7 come into being, and you can see the bleary eyed entrepreneurs staying up late for nights on end, working to get their products up or maintaining them, doing it knowing that resources are tight and that there is no one else to turn to but themselves and that there is no where for slackers to hide.

Startups are inevitably short staffed. There isn't enough cash in the early stage to hire enough people to do everything they want to do. I often warn them about the work that is required and hope that they have some forewarning. But I balance that with not scaring them so much from backing off on what they need to do and motivating them to stay up 24/7 and do what it takes, no matter what.

It's easy to just give up. Go home and go to sleep. The leader needs to whip them into working every day and not going home until it's done. The leader constantly needs to remind them that the survival and livelihood of the startup is at stake and that the future rewards are what everyone is working towards, and yeah it sucks in the present because you're working 24/7 and getting butt tired.

To me, motivating them is easy. I tell them about my experiences in the early days of Yahoo. Surely they sucked from the standpoint of us getting no sleep, being perpetually tired, and knowing that your social life is gone. But I will definitely say the bonding experience of working in a small team and doing what it takes to get the product out the door is one not to be missed. Staying up late knowing that you're not alone, and that there are others depending on you, and that you all are there working your butt off means you build trust with your teammates. You really find out what you and your cohorts are capable of, and who is going to give up or not.

It is like when you build a squad in the Army and you go out on patrol in hostile territory. You have no choice but to watch each others' backs. Once you go out on patrol a few times and the enemy pops up and tries to shoot and kill everyone in the squad, but it doesn't happen because your squadmates have saved you and you have saved their asses more times than you can count - there is no substitute for the bond that forms knowing you've all been through the trial by fire and come out knowing that you can depend on others to watch out for you.

You never know how someone will react until they are put under stressful situations, and in depleted situations where your personal resources are stretched to the limit. A lot of people can't take it. They collapse, give up, run away. The Army or early stage startups is not where they should be.

But those who survive the test, and you, knowing who does and who does not, will know who you can trust at the eleventh hour and who you cannot.

It is a badge of honor amazingly enough. I used to tell stories of the old days at Yahoo and the new hires would be so impressed about the endless weeks of staying up all night getting stuff done. They seemed to idolize that. I shrugged it off mostly and just chalked up to storytelling about the old days, but I think deep down inside they wish they could have been part of that energy to do what it takes and don't stop until it's done.

The team unity of creating something and getting to the end is a huge factor. The satisfaction you get from watching something launch, after weeks upon weeks of working on it 24/7 is a feeling of accomplishment that transcends. You know you've accomplished something super difficult and watched it birth out to the world. On the Internet, the unfortunate thing is that you can't fire and forget products; you need to worry about after they launch as users come onto the system and you then worry about post-launch things like the servers going down under unexpected load or maintaining editorial content on the pages, etc. The funny thing about Web products is that really there is no end. I've often stayed up late with teammates watching products go up, and then I go home to get a few hours of sleep, and get into the office before everyone else just to check on what we launched the night before. Most of the time you hit the site with your browser and everything still looks good; however, there are times when you login at 7am (after going to sleep at 3am) and....nothing pulls up...! You pick up the phone immediately and wake everyone up to figure out what's wrong with the servers and the game goes on...

By the way, if you're the leader of a team, I would strongly suggest you stay up with the team. Nothing is more demotivating than the leader who tells you to work all night, and then goes home at 5pm leaving the team to continue working. If you want respect from the team, there is nothing like telling them to work all night, and then staying up with them. This is even if you have nothing to do. I've just sat in my office at times, reading a book or sometimes even taking a nap while my team works around me.

So today I am out of that environment mostly, but I still retain the ability to operate on virtually no sleep. I thought about this a lot and offer some tips on increasing your ability to work endlessly on no sleep:

1. Vitamin C. I drink a packet, sometimes two of Emergen-C which is 1000mg of Vitamin C. Back in the old days, we'd have bottles of chewable Vitamin C and pop them like candy. There is conflicting research into whether Vitamin C really keeps you healthy or not, but I for one am a huge believer that pumping your body with Vitamin C prevents a lot of diseases that you can catch due to lowered resistance from lack of sleep.

2. Tums. Sometimes stress and no sleep can cause your stomach to do weird things. I used to take Tums to calm my stomach from excess acid and gas. It helps a lot.

3. Working out seems to increase your tolerance to operating without sleep. Dean Karnazes is noted for his ability to operate on four hours of sleep a night, getting up at 3am to run his daily 4 hours for ultramarathon training. My belief is that exercise is key to training your body to be able to function with less sleep. You keep healthy, you achieve deeper sleep during your lesser sleeping hours from being tired from exercising and it removes your stress. It clears the mind and helps you think clearer as well.

4. Along with exercise, you just adapt physically to operating on less sleep. Remember in college when we used to study all night? We seemed to be fine doing that for months on end. I think humans can build the ability to operate on less than 5 hours of sleep a night. Hunker down mentally and just get up even though your body and brain doesn't want to. Keep moving all day and don't stop moving. Coffee helps, but try to do it through mental fortitude and not drugs.

5. Having a sleep recovery day is beneficial. I try to do this on a weekend night where during the week, I may be getting 4-5 hours a sleep a night but then on Friday I don't go out, crawl into bed at 9am and wake up whenever I feel like it. Recharging one night a week really helps.

6. The last and most important: POSITIVE ATTITUDE. Here is where I think the mind-body connection really comes into play. If you feel like whatever you do is dragging you down, you WILL GO DOWN. On the other hand, if you are energized with what you're doing, you enjoy it, you are driven by it or any one or more of many other reasons, you'll be able to do it and more. Try to find something that really interests you, that you can sink your teeth into and enjoy, something that TURNS YOU ON. Believe me, you'll be able to work 24/7 for months on end and not look like the cat dragged you through the mud.

The days of working all day and all night are not to be missed. Everyone should experience it. It'll take you to heights of creativity, turn you inside and out, bond you to a group of people with common purpose and you'll party like it's...well, not 1999 but maybe 2999 when you launch. I highly recommend it. You'll thank me.

SunshineNYC: Office Space for the Geek Cool

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I really love this office space operation in Manhattan, Sunshine Suites, this one at 419 Lafayette near Astor Place:

The tree branches around the conference rooms is a bit freaky. Makes you feel like they are going to reach out and grab you. Don't have a meeting here while on drugs!

It's only about $400-$500/month for a desk. You get a phone, internet connection, unlimited usage of xerox and fax. And it's decorated in New York chic. The entrance to the floor looks like the W Hotel. There is even sexy house chill music playing in the bathrooms to relax you when you...well...you know...

EastMedia: Ruby on Rails in the Big Apple

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I just bumped into these guys in Manhattan: EastMedia:

Really cool bunch of guys and really good at Ruby on Rails. If you're looking for a small development shop in NYC, you should definitely check these guys out.

Legal Help is Showing a Depressing Pattern

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So far, my scorecard for legal help for startups and investors has been pretty dismal.

Let's see. The stories go on:

An LLC agreement costs $6000 to create but upon dissolution of the LLC the agreement has ambiguous terms on who owns what and causes tons of issues upon dissolution. Note that an LLC agreement can be created and filed in about $1000.

A term sheet is created by a new associate who is new to Silicon Valley and barely has any experience in startups and financing. He tries to snow an investor during a call to defend his terms and the investor, who happens to be seasoned and coached by his really good lawyer, refutes every point made by associate, who concedes at the end of the call that investor was actually experienced and compliments him.

The night before the first investor meeting, a lawyer totally flakes on entrepreneur and doesn't have a term sheet done! It arrives around midnight the night before and there is no time for review at all.

Entrepreneur asks for term sheet, and lawyer delivers one. Investor reviews and finds provisions that have no meaning whatsoever to the current deal. It is obvious that lawyer cut and pasted from a previous deal term sheet and didn't bother to review and check for relevance to current deal, costing everyone in time and legal fees.

Entrepreneur asks for advice from lawyer on what to do from a financing standpoint, and gets almost no worthwhile advice whatsoever. Friendly investor guides entrepreneur through all the possibilities and helps develop a financing strategy.

Investor asks lawyer for help on looking at startup term sheet and gets back worst case scenario response on the whole thing. Investor initially gets cold feet, but quickly realizes that this particular lawyer is the most conservative, worst case scenario lawyer in the world, and investor realizes that risk is a part of life for the early stage investor and that this lawyer isn't the right person to advise on early stage investments. If investor had listened to this lawyer, investor probably would never make any investments at all and would rather sit home and stuff money in mattress.

Legal help is crucial to both the entrepreneur and investor. It doesn't matter that the legal help sits in a big expensive firm or a smaller shop. Why can't we find good, dependable, and experienced legal help?

The Amazing Pace of Change at My Alma Mater, Yahoo!

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I just found the email that detailed the re-org at Yahoo! from Sue Decker, head of the new Advertiser & Publisher Group. It's posted at Techcrunch:

Text of Email to all Yahoos, Techcrunch

I have been out of Yahoo! since Sept 2004, and in 2+ short years, I see:

* Lots of EVPs and SVPs. They used to make you run the gauntlet before making even VP.

* I only recognize about 6 names in the email out of about 15. The influx of new people is staggering at the higher levels. Where did all the people I knew go?

* The company is organizing in a very "large company" way. The changes were in the making while I was still there, but now they are extended more.

* Valleywag's post about slightly less kneeling before Zod is a bit cutting, but it does make a point. I am not sure that splitting engineering (and by the way I heard through the grapevine that my old user experience group is reporting into the product teams now too) is going to be good for the company in the long term.

To me, companies always undergo cycles; they try things, they work or don't work, and then they go back to try old things, and then they work/don't work, and then you're back to trying stuff you tried before. I suppose it's one way to keep the world off balance to distract you from other possible issues with the company.

Guardian Angel

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The other week one of my entrepreneurs jokingly referred to me not just as an angel (as in angel investor) but as a guardian angel. I laughed.

But it's also got some real serious undertones.

The more I meet entrepreneurs, the more I realize that there are real BIG holes in their knowledge. This is even more apparent with first time entrepreneurs. Even I had big holes in my knowledge base regarding investing and startups when I started David Shen Ventures, LLC.

How did I learn? I tried to find people to sit with me and talk with me. But so many of them are all busy and I also found out that a coffee or lunch is just not enough time to go through everything and have it sink in. I tried looking for books, but many were too generic to be useful. I did find a series of really expensive books on venture funds but they were very complex to read and took a while to figure out what they were talking about.

I eventually paid my lawyer for about 1.5 hours to sit down with me and go through some example financing docs. I made notes on these complex term sheets and other paperwork and then I could go back later and review what I had heard and written down. One funny thing was that when I met with my lawyer, he actually brought on another lawyer whom he partners with in financial deals. He was probably the most conservative, worst-case-scenario lawyer I had ever met; I almost quailed at giving my money to anyone after talking to him! But I also learned that early stage startup investing is not for the risk averse and that you can't get the same security as for other more established companies in later stages. Still, that 1.5 hours was not enough time to let everything sink in, but I had a better base to draw from.

Then I started reading some blogs about venture funds. I especially like Josh Kopelman's blog and I find his posts about investing in general to be really informative. This brought more knowledge in but still didn't complete the picture.

It was when I started doing a few angel investments when I really started to hit my stride. Arguing for terms was one of the best ways to firm up in my mind what risks there were in a particular deal. So many details all intertwined: valuation now and in the future to achieve a given return, percentage company owned, future return, squash prevention (or preventing dilution), notes versus preferred series. I always carry a calculator with big buttons with me at all times to punch in numbers and make sure my mental calculations are correct. I am getting more and more proficient and arguing from at least the point of view of a knowledgeable angel investor.

Now think about the new entrepreneur. Not much cash. No exposure to the financing world for the first-timers. I was willing to pay for some of my education with my lawyer (I just thought of it as educational expense) but others can't afford that. So what do they do? Where do they find help?

As advisor, I feel compelled to help them. And I don't mind as many meetings as it takes to get them educated. With this particular entrepreneur, I have had meetings weekly, many email exchanges, and also sat in with them on presentations. We talk about everything. The presentation, what to talk about, financing strategies, the usual company strategy stuff that I advise on (product, user experience, advertising, etc.), everything.

Before presentations, I email them for things to watch out for, and remind them to mention this and that. Post-meeting I email them again and give them one person's objective view on how it went. We go over the financing strategy and explain to them some of the details that are hard to understand if you haven't done it yet. I give them strategic advice on the pros and cons of doing financing one way or another, and how investors will react to certain terms. I give them example term sheets and show them what terms can look like, and what investors like and don't like and why.

I make myself available to them because I know there is no one else that is willing to spend that much time with them. And while I give them information, I try not to make the decisions for them; I make sure they have as much information as possible so they can make an informed decision and not one that has blind spots.

So from angel (investor), I became guardian angel. I keep them out of trouble as much as possible and in many cases I'm the only guy doing it.

How ridiculous is that. In our world, we seem to have major problems finding mentors who will give their time and expertise to others. If you don't have the connections and relations, then it gets even that much harder to find someone who is willing to help you. I for one hope to change that with my entrepreneurs. It is my belief that whatever knowledge I give them will give them a greater advantage over other companies who are still in the dark.

Connections and Networking

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This week and the coming week I am bringing some entrepreneurs to meet with some people in my network. And the results of this week's meetings reinforced to me the importance of connections in my line of work.

I had originally placed more emphasis on my personal skills, ie. product strategy, user experience, etc., in helping early stage internet companies. I had not thought my rolodex was strong enough to contribute in that capacity yet. But I knew as time went on, old colleagues of mine would leave Yahoo! and have ended up in some companies which I knew would prove useful to my companies. This would be a valuable asset to my business and, thus, I began a side project of networking more and getting out there as much as possible.

I also resolved to approach this networking from a slightly different perspective. There are what I would call professional networkers out there. I have found these people only network purely for business reasons. They get out there and have conversations about how they can work together and it rarely goes beyond business type conversations. I thought I would attempt my networking to have a slightly more interpersonal aspect with it. Yes, we would potentially begin with business focused discussions, but I would always leave the door open for making it not-always-business related. Who wants to keep talking about the industry anyways? Combining this with my belief that working together can be enhanced when you geniunely like hanging out with each other makes things a whole lot smoother and easier.

I am finding that as I do things for other people, that I also get some of that in return. For that, I am eternally grateful. Everybody is busy, but as I make time for others, they make time for me and my projects, like when I ask them to help me review their funding presentation.

We did just that late Friday afternoon and it was extremely fruitful. I brought one of my companies into a meeting with two guys who I thought had just amazing sense for putting creative deals together. When we left the meeting, I thought that it generated some real new possibilities that we hadn't thought of, and now we're going to talk about how that affects our final rev of the funding deck. If we can get some of these ideas in motion, it would certainly make our funding deck that much more attractive.

Another meeting I had was with a prominent media company exec I knew. First, I think my chances of gaining a meeting through cold calling was pretty slim. In this case, I had some history with this person and he was willing to take the meeting. It also turned out to be very good. While the person didn't have anything specific for us, he was willing to introduce us to a person in another division who might be interested in our technology and product.

My strategy with these connections is thus:

1. I know the importance of the interpersonal aspect and thus am willing to try build relationships beyond just business.

2. I am willing to help them as much as they help me. And I won't charge them for doing some presentations or just a meeting or coffee or two with someone they want to meet me and learn about what I do. I have always been willing to make time for any of my connections.

3. I continue to build trust with my connections.

The first area is with not bringing frivolous time-wasting proposals and startups to meet with them. I won't do it. Everybody is so busy and time is valuable. I don't want to setup a meeting unless I think they can really benefit from it. Thus, this maximizes the chance someone will take a meeting with me if they know that 99% of the time it will be something really cool and worth their time.

The second area is with investors. This is trickier. The number of people who claim to be fund raisers is staggering. But I think there is a problem with their business; almost all of the time, they are not investing into the companies they bring to investors. They get paid either on a percentage of successful fund raising or get paid hourly for their work. As an investor, you will never know if these are good deals or not; the person bringing them to you is getting paid no matter what! For me, I don't want to work that way. I won't open up my investor network unless I have put money into a company. It is the ultimate sign of confidence in a deal; you have put your own skin in the game.

Unfortunately, my investor network is the smallest out of all my networks. It's definitely an area I'm working on now.

The third area is with introductions. There are some people who are willing to make introductions quickly. Almost too quickly. Perhaps that is a sign of trust for me. Perhaps not. But sometimes, I think it's a bit too quick. I think they should think beyond the fact that it's me and they know me. I think they should get to know why I want the intro, as well as the mind of the person they would be introducing me to, and then think hard on whether there should be an intro or not. Sometimes, there shouldn't be. Or you might need to wait a while until conditions are better to ensure that there will be a successful response. Or maybe there should be an introduction yesterday.

This is in an effort to maximize value to both parties and minimize time wasted. It also helps the person who is the receiver of the introduction know that you, the introducer, aren't making frivilous introductions and they just sit in an email inbox forever not read or responded to. My goal is to have 100% of introductions returned and matched up. If an introduction email is not responded to, I know I'm doing something wrong.

Build trust and keep building.

4. Lastly, I intend to be honest, clear, and straight-up about everything. If I can't do something, I'll say so. I won't beat around the bush on that. I want people to know I mean what I say and where I stand no matter what.

American Airlines Qualification Complexity

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As I crossed into the new year, and now in planning for 2007, one area where I have to really put some effort into is with American Airlines.

Following my time at Yahoo!, I remained with Yahoo's preferred air carrier, American Airlines so that I could continue accruing miles and status on the airline where I had the most miles. After I left Yahoo!, I proceeded to try to redefine my life and went to NYC quite a bit, which elevated me to Executive Platinum status. The best perk about Executive Platinum is automatic upgrades to Business Class when they are available. Oh man! What a perk!

I usually take the redeye on my way to NYC so as not to lose a day there. If you've ever tried to sleep in coach, it sucks so bad. The airlines are never going to have enough money to remodel their planes. They're just going to leave them the way they are, to the detriment of all air travelers and their bodies. Add to that my triathlon training regimen and now it's doubly worse. Upgrading to Business Class and their much better seats - recline further, better cushions - means I am much more comfortable on those overnight flights.

Have you looked at how much they charge for Business Class? For the cheapest coach from LAX to JFK, it is about $350. For Business Class, it is a whopping $3300! Way too much!

Executive Platinum status has become a necessity not only for my body but for my wallet.

Last year, December rolled around and I realized...I WOULD FALL SHORT OF THE 100K MILES to qualify! I panicked! But I also found out one crucial thing. That was certain flght classes would only get 50% of the mileage applied to Executive Platinum qualification! I spent a whole year traveling not knowing this. By the way, the classes that do give 100% of the miles applied to Executive Platinum qualification are K, L, M, V, H, and W. Every other one is a discounted class and gives you only 50%.

First I go to the website and I realize the website doesn't give you the ability to have that fine a control over what classes you can buy into. You can only get the cheapest fare, or by major flight class, Coach, Business, or First. If you go ask for Business Class, you'll get the $3000+ fare. If you ask for Coach, you get the cheapest fare but only 50% applied to Executive Platinum qualification. You hit the "with restrictions" radio button, and you get ridiculous fare quotes of $1000+.

Calling up the Executive Platinum is better. I ask them to change all my flights to 100% mile qualification classes and we sit there for about 30 minutes going through my remaining 2006 flights and switching classes. I gladly pay the extra fees, and in some cases, I actually get money back! But setting all of them to the full mileage qualification classes means I squeak into qualification at approximately 105,000 miles by December 31.

This year, I looked at my travel and realized that I wouldn't make it on miles alone. Now I have to book flights through the Executive Platinum desk and ask specifically for those flight classes. This is tricky because I need to keep pushing them on lower prices. The first time I did it the person came back with a $1500 fare; I asked for a lower fare and it dropped to $560. I also stopped flying Southwest and fly American Eagle on short hops to attempt to qualify on the 100 segments flown in a year.

I don't think I could do this travel without Executive Platinum status. It's too taxing without the automatic upgrade. I may pay a little more for fares, but the automatic upgrades to Business Class make it worth the extra bucks I pay over the cheapest coach fares.

Starting Over Job Fatigue

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In the past few weeks, there have been a number of highly publicized and not-so-publicized upheavals at major companies. Some of my friends work at these places and I ask them how they are doing and whether they will leave.

One pattern that is starting to emerge for me, especially amongst the "job jumping" generation I've grown up in, is that people are getting tired. Tired of jumping to a new job and starting over. They've done it so many times that it is wearing them down and they don't want to do it anymore.

As loyalty to a corporation has waned over these last few decades - and I support the selfish behavior of the "job jumping" generation because companies have reduced or removed the reasons why people should be loyal to a company - people have been switching jobs at a huge rate. At one time, it was not looked favorably upon that a resume had a number of companies on it; now it is the norm.

As people have jumped jobs often, they are realizing that starting over in a new job and new company is not easy. The cost of integrating yourself into a new organization and culture is high. You need to rebuild your reputation. You need to rebuild your internal networks and maintain them. You need to learn new ways of doing things. You need to adjust to new styles of working. And the list goes on.

It wears you down to start over again and again. The first few times it is exciting and new; after a while, you get tired of going through the same motions to reestablish yourself in a new place.

It is wearing enough that people are willing to stay in a dysfunctional, negative, or the wrong company when they really should move on.

This bears watching as time goes on.

Social Networks: Recruiting and Reconnecting

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Recently there has been a bit of press regarding LinkedIn. Also, I've noticed that there has been an uptick in LinkedIn invites lately. A lot of that has happened when former colleagues at Yahoo! are thinking about leaving and they realize that they don't want to lose their connection with previous colleagues, or they want to renew their connection with those who have left.

I too find LinkedIn to be quite useful in finding old colleagues. For David Shen Ventures, LLC, I am often recruiting for positions in my companies. And I have found that my social networking site memberships have been extremely useful in finding and contacting people. To date, I have used Friendster, Yahoo! 360, and LinkedIn the most in locating folks. Surprisingly, our Yahoo! alumni network Yahoo! Group doesn't work so well. I think that Yahoo! Groups is probably the old generation social network and needs to be updated with today's functionality. It is too limiting in its ability to let members communicate with one another. The membership is private and it only allows broadcast of messages out, which so far has proven to be not very helpful at all.

On LinkedIn and Yahoo! 360, I can contact people directly and a personal message has been much more effective at reestablishing someone whom I have not talked to in a long time.

Through my connections, I am tied to literally every Yahoo! that ever worked there. It is quite amazing. Of course, LinkedIn is much more informative from a recruiting standpoint since people post their company info there.

If you think about the way Web companies go through cycles of waxing/waning success and employees go through their own mini-cycles of entering/exiting companies, it seems that LinkedIn usage is tied to these cycles. It would be interesting to do some research into correlating industry and personal events to traffic and usage of LinkedIn and other social networks.

The Curse of Legalese

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Upon creating David Shen Ventures, LLC, one of my first tasks was to create a standard advisor agreement. My lawyer and I worked on it for a while, and when it came back it was very much written in standard lawyer legalese. I had to spend time to go through each line item and figure out what it meant, as it was written using vocabulary that I almost never use. And certainly in my career, I am not used to reading that style of writing; I had never done contracts before and so I spent time with my lawyer to go through everything so that I could understand it and articulate it to others.

As I sent this document out, I started discovering many things.

The world of entrepreneurs is filled with people not accustomed to reading documents written in legalese style. That meant more explaining on my side as well as meetings with lawyers on their side, equating to more time spent and legal fees incurred. Incurring more legal fees for entrepreneurs is definitely not a good thing. They need to conserve cash and don't want to spend several thousand dollars negotiating an advisor agreement.

The length of my document, covering every little point in excruciating legalese detail is daunting to others. I have encountered many times already where the sheer length and size of the document has caused people to back away from working with me, or to question what I was trying to do. The issue of trust has come up many times, as I suspect they thought I was trying to slip something in there by them that would ultimately screw them in the end.

I also encountered some simply worded docs, which seemed perfectly acceptable as well from a legal standpoint. How could this be? Up this point, I had thought that all docs needed to be written in official legalese. But my thinking was dashed. My belief is that over the years, legalese has evolved from the language of lawyers for a variety of reasons. However, since the simply worded docs were also acceptable, I was determined to create something much simpler to read and understand, and get through the advisor signup process quicker.

I went back to my lawyer and we developed a much simpler advisor agreement. We tossed out a whole bunch of extra stuff that didn't need for an advisor agreement. We reworded the whole document to be more easily understood, and removed extra text which confounds the reading process.

It was an amazing change. Since the document was changed, in EVERY instance, the sign up process was quick and clean. There were questions about a point here and there, but in general it was accepted very fast. I attribute this to instant understandability by the entrepreneur and the raising of the entrepreneur's comfort level that I wasn't trying to turn this into a legalese nightmare. Both of us saved many legal dollars by not creating extra billable hours going back and forth between us and our lawyers to figure out what the agreement was trying to say and whether it was acceptable or not.

It is now my aspiration that all documents I prepare will be more simple than not, and minimal or not in legalese. But I know this is just a dream; too many lawyers exist out there and not enough people are demanding their documents be written in simpler form. I know that at some point, I will need to get used to reading documents in legalese, and surely I must treat this as a new language to learn.

Angel Investing from a Disadvantaged Position

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I've learned a huge amount about angel investing over the last few months. It started with me sitting down with my lawyer and getting a brain dump of terms, term sheets, provisions of all sorts, talking about notes and preferred series: the list goes on and on. But it's all theory until you get out there and try to invest in something yourself.

I told myself I would try to be a sophisticated investor, meaning that I would spend the time (and money) to get every deal reviewed by my lawyer and I would make best efforts to read everything. It was the only way I could understand everything, which was to experience it in real time.

When I started looking at deals, many things emerged. Here are some of them:

It's the Wild West

There is no such thing as standard. All term sheets have similarities, but everything is different, sometimes subtly different. Every law firm has its own style and favored terms to present, and modify that by the entrepreneur or the venture fund and you get every kind of combination of terms you can think of. All I can say is that I'm glad to have my lawyer around to look at terms with an experienced eye, and I can only hope that over months (years?) I too can gain enough experience at looking at terms and their ramifications.

Law Firms Protect Their Clients

And that's a good thing. The law firms that startups hire will produce documentation that is always company friendly. Which usually means that it's not very friendly for the investor. The terms will inevitably have provisions that don't protect the investor at all. This confounds the process because sophisticated investors will always push back and alter the terms. If there is pushback, then legal fees will mount, as the process of negotiation goes back and forth on the terms.

The downside is that entrepreneurs are typically new to the financing aspect. They don't know enough to ask for more balanced terms when developing term sheets. They just take whatever the lawyer gives them.

I always push for balanced terms that favor neither investor nor company. In my limited experience, it has resulted in the fastest way docments get approved and signed with minimal fuss and cost.

Money Gives You the Lead Position

One thing I found out was that at the amounts I'm angel investing ($25K - $100K per investment), I am typically not the lead investor. That unfortunately means that I have little leverage to modify the terms; if I had put in more money, the entrepreneur is incentivized to negotiate with me and keep me happy in order to get my cash. If I am only putting in a small amount relative to others, or as a percentage of the total raise, then it is up to me to do my best in gracefully pushing for better terms.

Sophistication or Attention to Detail is Severely Lacking in Angel Rounds

During angel rounds, it is often the case that the entrepreneur went to their friends and family to get much of the money. These folks have cash, but almost always have no experience with terms and what is good and what is not. They rely solely on trust of their family/friend to not screw them when it comes to protecting their investment. When I arrive on the scene, it is often the case that a lot of the money has already been raised, and now we have a whole crew of people who have accepted the terms, albeit not fully understanding them, and now I have little leverage to ask for different terms because the entrepreneur would now have to go back to each investor and approve and sign off on changes. This will incur extra costs and perhaps even uncomfortable dialog between the entpreneur and family and friends (ie. you asking for my approval for better terms now...? why weren't they in there when I signed the documents in the first place...?).

Big Experienced Angels Mess Up the Process for us Little Guys

Another issue I have encountered is the prevalence of angels in Silicon Valley with large sums of money. Throwing $50K, $100K, even $1MM into a startup during an angel round is done without attention to terms. How do I know they aren't reading the terms? Because they invested in a company with investor un-friendly terms! And with the amount they put in, they could have easily negotiated changes in the terms.

Now that the entrepreneur has a big investor signed up, I show up with my investment and again I don't have leverage to change terms, even if they favor the big investor, because the entrepreneur doesn't want to go back and re-approve terms.

I asked around as to what these guys were doing. I found out that many have 40+ investments. With that many investments, it is impossible to keep their attention on any of them. And some of them are not experienced enough to know if a given company is good or not. Remember, this does not mean that they aren't smart; it just means that sometimes you're putting money in an industry that you may not have deep experience in. So they spread out their investments as much as possible in order to employ what I call the "Random Method of Investing". Basically, this means you employ the theory that has been proven time and time again by venture funds, which is that for every 10 companies you invest in, about 6 will tank, 3 will do about even, and the last 1 will make back all that you lost and then some. Now you can see the reason for 40+ investments. It's very much a passive investing operation.

My bet with David Shen Ventures, LLC is that I will improve that success ratio by being smart about the busineses I involve myself with, and I get involved with them to give them the benefit of my knowledge and experience. I am betting on an active investing operation and I hope to prove that this will be more lucrative than the passive route, as well as more fun.

Timing is Everything, But Not the Last Word

So far, in every investment I've done where I came in middle or towards the end of the round period, I generally have found that I lose leverage to change the terms. But I ask anyways. And it looks like dependent on the entrepreneur; often they will make best efforts to make changes or even make the change.

When I am at the beginning, I find that I can negotiate much better, even with my small amount going in. Over time, I hope to generate proof that going for funding with balanced terms results in lesser negotiation, less cost, and faster fund raising.

What's the Future?

I think the route that others have taken may be the best. And that is to employ enough capital to be the lead investor in the round, angel or otherwise, and to be able to effect change in the terms because you are bringing so much cash to the table. Definitely, I am not there yet; my hope that is David Shen Ventures, LLC will be successful over time to be able to make succeedingly larger investments to the point where I can manipulate terms to the benefit of both investor and company.

Incubators and Transferrance of Resonance

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The concept of an incubator keeps coming up in my travels. Everybody knows about the big Internet incubators like IdeaLab during the Internet boom years. Lots of investors pouring money into these operations, big plans and huge infrastructure was built to support the development of business ideas, on the assumption that certain resources could be pooled together and shared to increase efficiency and cost. These were building space, internet access, servers, expertise - you name it and you could find it at an incubator in the late 1990s.

The spectacular demise of these incubators put a damper on the creation of new huge incubators. Even now, the lawsuits still go on where angry investors, having lost hundreds of millions of dollars in these investments, are litigating to get some of that back. When I started into this investing business, my ex-venture fund partner and I tried to form an incubator called Ignited Brains where we would employ inexpensive outsourcing to Internet ventures and try to let the marketplace decide on their viability. When we went out to get advice on our operation, we were met unanimously with negativity; incubators, we discovered, was a dirty word in the venture/investing community. Nobody wanted to have anything to do with us at all, which caused us to switch gears to try to raise a traditional venture fund.

As we worked on our traditional venture fund, we also discovered that incubators did exist in other forms. Some venture funds developed the concept of Entrepreneurs in Residence (EIRs), where entrepreneurs with a track record got office space and sometimes were paid staff and they were free to work on whatever projects they wanted. If they were on to something good, the venture fund would then finance it and off they would go. In fact, we had an "lab" in our venture fund which we would activate, with permission of the investors, to operate essentially as an incubator for our own ideas. Another interesting model came up with YCombinator where the two principals would get college students to work with them for 3 months and they would fund them for that time and help them get an Internet business prototype out the door. This is interesting to employ college students who have lots of energy, are super smart, and have skills to throw at a given problem. Another incubator model was tried by those who came through the Internet years with at least one large exit, and thus could fund their own ideas. Basically, they would get some of their smart buddies together, form an LLC or corporation, and work on an idea with minimal cash to see if they could get traction with it.

For me, I think I would have tried the last model, which was to take my own ideas, form a team, and run with it to see if it would work in the marketplace. Upon further thinking and research into this, I think there are limitations on this model. In short, my belief is that you can't work on many ideas, if they are your own AND expect them to be successful in the way you envision them.

The problem has to do with resonance with an idea, and transferring that resonance to other people.

First, an idea has to resonate with me. I must love the idea, understand it, and know how it could be successful. So naturally, I get how to make it work, what a target user might want from it, how to market it, etc. You might say I would be a natural to lead the business.

Herein lies the problem. You can only work on so many things so that they get enough of your time and benefit of your ideas and leadership. It's pretty hard to be CEO of one company, let alone 2 or 3.

And you can't rely on others to take your idea and run with it. That's where the transferrence of resonance comes into play. Since everybody is different, it is a very rare event, in my experience, to be able to transfer your own resonance with an idea to another person so that they feel it as deeply as you do. Without that shared resonance in others, they'll never be able to take an idea to the place you can take it to.

Over the years, in various jobs, I've tried to sell concepts time and time again. And I can't recall a single time that an idea survived longer than me driving it. As soon as I stopped working on an idea, it was impossible for the people there to continue work on it. I believe the same applies to incubators. In fact, I talked to an entrepreneur who actually launched a personal incubator with all his own ideas in it and he also had the same experience I had, which caused him to kill all the other projects and focus on the last two. Once he did that, the two are now flourishing, whereas previously they were actually languishing without his focus on them.

If someone can figure out how to transfer resonance to others, please let me know. Otherwise, are we ADD entrepreneur types doomed to only work on one or two things at a time?

Public Square Plotting

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Working with my friends at Public Square at Coupa Cafe:

I am helping Public Square with their business model and strategy - Coupa Cafe seems the perfect place for that - but we have to look over our shoulders to make sure nobody is peeking!

I am working with a number of companies at the pre-company stages in planning the business. I have found that it is very exciting to be at the very early stages of company and business formation where you can affect the strategy of the company at the very beginning.

A Believable, Non-Delusional World Domination Plan

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To date I've talked to many entrepreneurs and their business/product plans. Something I now look for is what I call their "World Domination Plan."

What is the "World Domination Plan"?

It's having a product that can be taken to super large scale, with huge activity from users and huge traffic. This in turn attracts huge revenue due to the amount of traffic there, and the ability to monetize it.

There are two key pieces here. You must have the Plan, AND you must have a product that can grow that big. You can't have one without the other in order for this to work.

A plan with a weak or insufficient or inappropriate product can't grow big because the product won't get there.

A product that has the potential to go big won't go big if there is no plan driving it in that direction. Very few product accidentally grow big without the plan behind to drive it to be big. I would not count on that happening by itself...

Why do I look for this?

As an advisor and angel investor with finite time and resources, I cannot work on everybody's projects, no matter who it is (like doing a favor for a friend) or how interesting it could be. So I needed to develop criteria for helping me choose which companies I work for and which I need to pass on. Those with World Domination Plans have the potential to be big in their category and have the biggest chance for overwhelming success. If the company is successful, then my investment will be successful and produce a greater return than with a company with more modest plans. Every project requires about the same amount of time and effort; why not try to maximize that on all fronts?

If there isn't a plan for world domination, I do one of two things. Either I pass, or, if I have some ideas, then I try to get the company to develop a World Domination Plan and a world dominating product. With the second, I get varied reactions. Sometimes they can't see my point, or maybe they have a vision for the business that is more modest than world dominating, or maybe they are even afraid of runaway success. But every now and then, I see an 'Aha!' in the eyes of the entrepreneur and they align with my thinking.

Why Believable and Non-Delusional?

There is another category of entrepreneur that is very prevalent these days. And that is the entrepreneur with a product and World Domination Plan that I just can't see happening. Here, there are two dynamics in play.

First, I have to believe the plan, hence the believable aspect of this. It has to seem possible to me alone. Certainly others see that it is possible, but most importantly I must see this path to success and resonate with it. If I don't believe it, that doesn't mean that it won't be big; it definitely means that I'm the wrong person to work on it and they need someone else....Or....I might be right and it won't be big.

Second, it must be non-delusional. Some entrepreneurs won't stop arguing for their product and plan even in the face of strong evidence that it will never work. I talk to them for a long time, pointing out the flaws in their plans and they just don't listen. They are so wrapped up emotionally with their product that they are literally delusional about its prospects. I stay away from these guys. Not only are they delusional about their prospects for success, they won't listen to anyone giving them hard feedback. Can't work with people like that.

PS3 Envy? Not So Sure...

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On Wednesday, I met with someone who told me that Sony setup a PS3 preview lounge in SOHO. After our meeting we headed over there to check out the new PS3 Sony Playstation console and see if the hype was true.

Upon arriving, it was an exclusive event. We needed an invite to get in, but around the corner some Sony dude was giving out free tickets to get in. So we got tickets and went up to the two pretty young ladies working the door, and they let us in like we were rock stars.

Inside were many PS3 stations with retro space age white half spheres to sit in. Many games were being demo-ed from racing to first person shooting to others. The graphics were astounding. Certainly the graphics horsepower had been increased and some of the action was much better. Seeing it all on widescreen HDTV certainly made the experience much more dramatic.

But...somehow it still just old news. Even though the graphics rendering was much better, the games were the same. Racing, first person shooting, fighting games - we've all been there before. I can't help but wonder if a game had improved by just simply having more graphics horsepower, and honestly I can't say that they had. They were still the same old stuff. When will we see the games themselves improve beyond the visuals...?

Update on David Shen Ventures, LLC

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I've been doing David Shen Ventures, LLC for about 4 months now and it's been a truly positive and educational experience.

Coming off the difficulties of raising my own venture fund, Chroma Ventures, which showed me that the current market was just too unfriendly to new fund managers, I leaped into the world of early stage internet startups on my own. With only pocket change, when compared to the mega venture funds out there, I tiptoed into the world of angel investing.

Big Education

Early on, I knew I had to learn everything as fast as possible. All this investor stuff was very new to me. I had learned some of it while trying to raise Chroma Ventures, but I hadn't gotten everything yet. So I enlisted my lawyer to sit down with me for about an hour and a half and just go through a whole bunch of financing docs and talk briefly about all the different ways people could screw you.

Lawyers can definitely be worst case scenario guys. They will scare the crap out of you on how you can be taken by everyone. It sure scared me, hearing all the stories of how people were cheated out of millions of dollars, and what happens if you invest on the wrong terms. I listened to all this and it could have made me run for the hills....but it didn't.

Investing in early stage companies, internet or no, is an inherently risky business. I like to think of it as better than gambling as you can personally affect the odds in early stage investing by making the right bets among other things. So you have to take some risks and be ready to lose that money. And sometimes, the investment terms aren't exactly the way you like them. I've walked away from terms that were just too risky. I've also invested in terms that were still risky to a point, but I thought there was a good chance of my risk being mitigated by other things. Basically, to invest in early stage companies, you have to be willing to lose a lot but hopefully win it all back on one or two big wins. (My advice here: if you're not a risk tolerant person, don't invest in early stage companies; you'll drive yourself and the entrepreneurs crazy.)

Learning about terms was one big education. I think I'm getting better at solo-ing on reading a term sheet, but still like my lawyer to go through it and get his take on it. Finding out what terms were company friendly and what terms were investor friendly was really enlightening. I had wished that it was all standardized, but it's actually the wild west of terms out there. Everything is done to personal taste so you have to read every term sheet carefully.

Huge Positive Response

As I went out there, I had no idea whether people would want my involvement this way or not. I already had met some folks who were doing the same thing I was doing: advising for an equity stake in the company. Many were actually paid as consultants to help their ventures. They also touted their contacts in the venture world so they could help an entrepreneur through the funding process. They seemed to be doing OK and had an active roster of entrepreneurs they were working with. But I had no idea on how to find these entrepreneurs.

I started by going to a Silicon Valley Meetup. I met some folks there but also realized that it was not such a good thing to advertise my status as an angel investor - too many people are out there working on stuff that won't ever make it - or they themselves are not true entrepreneur material. I didn't have time to field every business plan that came across my email, nor did I have time to check up on every person to see if they were on the level.

I also met with some ex-Yahoos who had started their own startups and they were plugged into the entrepreneur "underground" in San Francisco and Silicon Valley. This seemed to be a better route than going to the more public forums. Getting to know these guys personally and by referral was much better.

But then, once word got around to the ex-Yahoos around the valley that I was doing this, the response picked up. They all knew me and I knew all of them and thus I focused on a (thankfully) constant stream of referrals to entrepreneurs working on all sorts of stuff. Filtering by referral is much better; your own personal reputation is at stake when you refer someone to someone else!

I also noticed one other thing about the positive responses - they really needed my expertise in their fledgling businesses. Mostly this was in the areas of:

1. Internet user experience and design
2. Product strategy
3. Online advertising and the media world

I thought back to the people I met who were doing the startup advising thing professionally, and there were no people who were operating these particular areas - only in business strategy and engineering. And in talking to entrepreneurs, they lacked someone with experience to lead them in these areas. This was hard won Yahoo knowledge from the 9 years I spent there working on just about every type of product out there. Over the last few years, it has only been in recent years where Yahoos have started leaving, and the knowledge is starting to get out there. But even then, how would an entrepreneur find an ex-Yahoo if you're not connected?

Developing Criteria

It's nice to be wanted. Now how do I work with the companies? I had to develop a strategy for picking the right entrepreneur, company, and business to work on. I did not want to work on everything that came by and I wanted to see if I could do better than that.

First, I said to myself that my knowledge and experience could increase a company's probability for success than without. So if I was going to invest money, then they would have to involve me. I figured an advisorship was the best way to formalize that (rather than being a bothersome investor). No involvement, no cash. (NOTE: I don't invest in everything I work on. A lot of things have to fall into place correctly for me to put money in, and not all of those are in my control.)

Second, I had to develop a set of criteria to base my decision on whether or not to get involved. These are:

1. The team must consist of quality people. They must be trustworthy and I must like to hang out with them. I want to have a good connection with them, and I want them to want me to be around. If I don't like hanging out with these people, then I would be less inclined to keep bugging them on their product and company. The moment something doesn't feel right, I don't do it. (NOTE: Honing one's intuition is paramount.)

2. I wanted to work with people who geniunely wanted my knowledge and participation, and not just my money. I am trying to be super sensitive of any sign that someone is looking only to get my money and don't really care about my participation. That participation needs to work from both sides; a team needs to pursue my knowledge just as much as I want to help them with it. It's too easy for a startup team to get caught up in the day to day and not leverage their advisors. I am trying to avoid it as much as possible but know I will not be 100% perfect in reading entrepreneurs on this matter.

3. I need to resonate with the product. See my Resonance post.

4. I need to believe in it and see a future for it. If I can't see the future for it or don't believe in it, I don't think I should work on it. That doesn't mean that someone else couldn't take it to success; it just means I'm not the right guy.

5. I like certain types of projects more than others. See my What Do I Think is the Next Wave of Business for the Web? post.

6. The team number must be between 1 and 10. I have found that it works best when there are not people in place with skills similar to mine. See my The Sweet Spot Number post. If there is a number on the team greater than 10, a red flag automatically goes up in my head.

7. Generally, I like teams with track records than without. And I also like teams with very strong people in them. If you don't have smart, experienced, motivated people from the beginning, you'll be severely hampered very soon. Let's not start the project with sub-standard people, shall we?

8. I am starting to be a bigger believer in the distance rule for investing. I have increased that to encompass San Francisco from Silicon Valley, so instead of the 20 minute rule is more like a 50 minute rule. (Hey, I've got a Prius with carpool lane stickers so driving ain't so bad - heh). Right now, I am concentrating on companies in Silicon Valley/SF, Los Angeles, and NYC. While that may seem like the distance rule is a bit stretched with this list, I count the distance rule from my place of dwelling in each of those places, which I am in a lot for a variety of reasons.

My message to entrepreneurs is this:

1. You shouldn't put me on critical path. We'll both be frustrated as I don't have the time to take projects to completion on my own.

2. By the end of my advisor term, my goal is to find replacements for all the skills and knowledge I bring to your table. This can be either by the hiring of individuals or by the actual teaching of knowledge to you.

3. Use me to the fullest. I am available to bring along to meetings, evaluate vendors, evaluate products and services, etc. Just schedule me ahead of time and if I have time, I 'll make best efforts to come along and help you.

4. I only take equity as payment. I do not want to charge hourly and drain an early stage firm's bank account. Save that money for operations and product. Let's build the damn thing together and win big later.

That last message expresses my philosophy in working with entrepreneurs. I am not in it to make money in the primary sense. If I were, I would have continued trying to raise money for Chroma Ventures or tried to join up with another venture fund. I get the most kick out of seeing a company grow from nothing to something big, and hanging out with a bunch of really cool, determined, smart individuals to do it. It was what it was like back in the old days of Yahoo; just a bunch of buddies hanging out doing great stuff. I truly believe it is the formula for great success.

Focus on the "Why" and Not the "How"

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As I talk to entrepreneurs, I find there is almost always a focus on the "How".

By "How" I mean that entrepreneurs are very feature driven. The notion that the entrepreneur can build a better product or service is a primary driver for wanting to enter into a market. Whenever I talk to them, the conversation is always down the path of "users can do this and that on my site and they can also do this and that, and oh by the way they can also do this" with the underlying reason being that I should be totally impressed, think this is totally the greatest thing in the world, and thus it can succeed wildly in the marketplace.

In some cases that would be true. These cases would be in:

1. Current competitors have not innovated for years, and that the marketplace has become totally stagnant OR commoditized, where the competition is on things like price and not features.

2. Current competitors are non-existent or very few in number.

3. Current products/services do not exist that enable the task to be done in other ways, sometimes totally awkward or cobbled together ways.

In today's world, with Web 2.0 companies sprouting like weeds, it is hard to find an area where those 3 cases exist with the exception of Case number 1. The unfortunate thing about Case number 1 is that many others have also seen opportunities there and are working, many times in stealth, on projects in the area of Case number 1.

When I talk to an entrepreneur, often the conversation goes like this. They tell me what a great idea they have. But then, I think a bit, and reply that here are X companies which are touching on or allowing people to do what you are providing. They then reply that these guys are totally not competitors.

In every case, this is strictly true. It is not the company's mission to compete directly against what the entrepreneur has come up with. The aggravating factor is that consumers don't care necessarily care about what the company wants them to do; they are creative enough to use the company's tools in ways which cause an unintentional competitor to emerge to the entrepreneur's product or service.

This leads up to the "Why" aspect.

I tell entrepreneurs that "How" is not the problem. They have thought up great features, coded up great technology. They are smart, resourceful, and can build the best of the best of the best. But in a world where there are companies out there muddying the marketplace with actual competitive, near-competitive or unintentionally competitive products to the entrepreneur's product, it can't be about the "How"; it's not enough. They need to focus on building a strong "Why", which is the answer to the question "Why yours versus someone elses?" in the mind of the consumer.

Why is a consumer going to use my product instead of someone elses?

It's the essential question that must be answered and then hammered into a consumer's mind so that they will steer in your direction when trying to get something done. Because if there is not a good "Why", consumers will always go back to the other ways of doing things, even if they are harder.

This is because it is more familiar, it is safe, and they don't need to learn something new. Something works, so why change? If it ain't broke, don't fix it. They've already invested tons of time and effort in the old thing so why bother with something new.

It is why I push on the "Why" aspect with entrepreneurs so much. I don't need to be impressed by the technology; I get it. I can see why it is (or isn't) better than other things out there. Others will see it too. But they need to know why they should come over to your product and leave all that familiar, safe, conservative legacy behind. They need reasons to use your service.

Anybody can build great stuff - the "How" is taken care of. My argument is to build a phenomenal "Why" and you may yet compete sucessfully in a place as crowded as today's Web 2.0 world.

An Unexpected Source of Inspiration

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Sitting at a coffee house this morning eating my breakfast, I brought a pile of magazines to read. One of them was PC Magazine, Nov 7 '06 issue which featured 99 surprising new websites. Between articles like this and TechCrunch, I always like to look at what else people are working on.

But as I read through this website list, I thought about a web application that I discussed with a friend yesterday. It was a very early conversation where an entrepreneur has an interesting idea, but I felt it needed more work to take it beyond just a tool to something bigger. As I read through the websites in PC Magazine, I encountered one that was a content website. But it also sparked an idea related to the one that an entrepreneur had. So the area in which the content website played created a possible improvement to the entrepreneur's idea. I had not expected PC Magazine to help me with this entrepreneur's idea, but then isn't that how creativity works sometimes?

I find that expanding one's view, as well as experiences, increases the chance for creativity. Our brains have more information to link and cross link together in new and unique ways. It is why I consume tons of reading material from all subject areas. Magazines like The Economist, Popular Science, PC Magazine, WIRED, BusinessWeek, Discover, DWELL, Time, Runner's World, Newsweek, Triathlete, Esquire. Books from science fiction to novels to non-fiction in all areas. It is also why I have traveled a lot; experiencing other places, cultures, and people also helps to expand my creativity.

A long time ago, my art professor told me about traveling and its relationship to creating art and design. I did not fully understand what he was talking about until the broadening of my experiences happened. It made me my creativity more powerful simply because I had more to draw from than just from my imagination.

Broaden your experiences. I am sure it will work for you as it did for me.

Virtual Office: Drinking Way Too Much Coffee

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Last year, a friend of mine working on environmentally aware chocolate, Sweetriot, invited me to visit them at their offices. She says, "Come on over to the Starbucks on 1st and 54th where we have our offices."

"Offices? Starbucks?" I thought, "this is peculiar!"

I got up there to find that their whole complement of 4 employees (1 CEO/founder, 3 interns) had been staking out a corner at this Starbucks for months now.

How funny to see them conducting marketing surveys with people in one corner, while others were checking email and planning at another table, and all of them had DHL envelopes propped up against their laptops because one of them had called DHL to pickup a package at this Starbucks. I'm sure the DHL guy probably did a doubletake when he showed up!

Office Away From Home

Also last year, I met up with some guys over at Blinkx and they recounted to me on how, in their travels around the U.S., that Starbucks has become their office away from home of choice. They just open up their laptops, grab a latte, set their mobile phones on the table and start working. All their calls are routed to their mobile phones so nobody even knows they aren't in the building. Messenger is up and running as well as emails - their virtual office is complete and great coffee and eats are just a step away.

As I work on David Shen Ventures, LLC thing, I find that cafes have become my virtual office. I joke that I am in some coffee shops so much that I should post office hours on the door, ie. Dave Shen at Coupa Cafe between 1pm and 4pm - sign up for time here.

It's actually pretty nice. There is WIFI, good ambiance, and a never ending stream of people. The best coffee shops don't have a lot of ambient noise and just have a low level of music playing in the background. Most annoying is the shriek of the espresso machine milk frother as they heat up milk for the drinks.

But I find that being not in the same place, like an office, sparks a lot of creativity and I get a lot done by not being in the same place all the time.

It's also a helluva lot cheaper than having a real office. Someday perhaps (sigh)....

Privacy is sometimes a bother. Trying to have a conference call or meeting about confidential stuff is tough, whether VC financing terms or new top secret product plans.

Passing the Social Test

Occasionally I bump into people I know especially in places such as Palo Alto. Socially, it's been great - when working as a one-man show, you don't have a big company campus to go to and interact with people. After seeing one person that I'm working for now, he remarked to me that I had passed the Guy Kawasaki's Stanford Mall test:

How to determine whether or not you should work with a given VC - If you see your VC across the plaza in the Stanford Shopping Mall, you have three choices.

1. Go over and say hello.
2. Say hello if he or she notices you.
3. Avoid him or her at all costs.

Kawasaki recommends to only work with a VC that you would choose option 1 for.

It's nice to know that this applies to cafes as well...! Well, I'm not really a VC either....

Postscript

Hanging out in cafes means you probably are drinking way too much coffee. I started getting into 4-5 cups a day. Way too much and ruins my pearly white smile. Next drink of choice: Pelligrino or equivalent with lemon or lime, or Green Tea sweetened, either cold or hot.

By the way, free WIFI sucks unless the cafe is providing it. I bought a Verizon Broadband card in case the cafe doesn't have WIFI and that works great.

Up and coming - launch Meetro and maybe you'll meet someone new...!

The Sweet Spot Number

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In talking to a bunch of companies and signing some up and turning some down (either by me or by them turning me down), I have determined the sweet spot for team size at which it seems to maximize my participation.

It ranges from one and maxing out around 10 or so.

Why is this so?

I find that in my areas of contribution (User experience, Product strategy, Online advertising, etc.) I can make the most impact if there is not someone there at the moment covering that area. While in my role as advisor I do not get on critical path by actually doing the work, I help give them direction on hiring, what they need to do, developing their strategy (in all those areas), and give them an expert to bounce things off of. One goal I try to set for myself in my advisor term is to find resources, internal or external, to replace whatever functions I am advising on so that by the end of the term, they have support in those areas.

I have found that if companies already have people covering that area, then my impact is much less. It also is difficult for company personnel to envision how to integrate my help as well. For example, if there is already a GUI person there, then does it justify giving me my advisor compensation to just be a evaluator of what that GUI person does? For things like GUI and product strategy, it is difficult to express your opinion AND make the team members internalize that thought enough to be able to take it further. And, if you are not an employee and not there 24/7 to drive a direction, it becomes really tough to make that direction stick when someone else is already working on it, and has their own opinion on how things should be done.

That is fine. I do not take this personally. I think that if a company already has support in that area, then that's perfectly fine. I don't want to get into a situation where I am constantly butting heads with already present resources.

By the time a company reaches approximately 10 people, typically many of the areas I would help on are already covered. Time to move on to the next company where I CAN make a large impact...

Where Did They Go?

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I consistently hear this now. Suddenly engineers, GUI folks, and online sales people are scarce.

In the last few months, many new startups emerged. I guess they snapped up all the good engineers because now it seems that everyone has moved somewhere and is planning to stay there for a while. This is why I am trying to make contacts in outsourcing overseas for engineering.

GUI people did the same thing and switched jobs, although most of the ones I've heard of went to larger companies. In my experience, GUI people tend to be more conservative. Not sure why. I haven't seen many take the chance of joining an early stage startup. Many startups have told me stories of failed attempts at hiring a GUI resource on staff. They turned out to be not that good, not experienced enough, or just out of school. I had to go create my own list of GUI design shops and resources, and keep track of everyone who is consulting.

The real scarce resource is online sales folks. The really good ones are truly hard to find. I feel fortunate that I got to know a ton of them at the best training ground for that: Yahoo!. Many of them have moved on, but mostly to higher positions/pay elsewhere. Here's the kicker: to lure them away sometimes requires a lot of tinkering with compensation. For early stage companies, that's really tough because they don't have a lot of cash. I am now trying to see if some of the few out there are willing to consult. Some of them are actually thinking about it thankfully. About every early stage company that is thinking of selling advertising has no experience in this area and certainly no contacts at all. It's one of the most valuable things that I can do is connect them to a truly good online sales person.

Time to get creative in finding ways of solving this personnel dilemma....

Moving Towards a Paper-less World One Signature at a Time

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This week saw the convergence of a few deadlines in financing and me going out of town. Landing in NYC, I realized I didn't own a fax machine and I needed to sign some documents and fax them.

So out I go to the nearest Staples Express, plunk down $150 to buy a brand new Brother multifunction wonder, and then proceed to carry the huge box back to my apartment.

A few sweaty minutes later, I get to my place and set it up. I plug it all in and thankfully after a few tests, it all works fine.

I then sit down to print out a whole bunch of docs and prepare them for faxing to various places. What a big time suck. I need to sign two agreements and create fax cover sheets for both of them. I proceed to print out tons of paper and lay them out on my table and double check what they are and where they're supposed to go. Finally I get that all organized and sign them, and then stuff them into my fax machine multiple times as many people need to have copies of them. I also create another fax for my financial person with wiring instructions, sign that, and then fax it away.

It seems as though the point at which all this is broken is the signature.

I can already email things around. I use Acrobat to generate PDFs all the time so I know that the docs won't be altered. That's not the problem.

The problem is when I need to physically sign something. Then I need to print something out, sign it, and then get back into an electronic state. This is typically a fax machine, but it can also mean scanning in of the doc and turning it into a PDF before emailing. Scanning this in can be problem. I have a Fujitsu ScanSnap seems to work most of the time, but if the paper is even slightly bent, it starts screwing up bulk scanning. Somehow, fax machines seem more resilient in feeding less than optimal paper, but I have to fax it somewhere. A buddy of mine told me to sign up for eFax which I finally am paying for now. It is about $170/year, but it definitely works great and now I have a fax number to boot. When faxes come in, I set it to convert to PDF so now I have electronic versions of all my faxes. I can also fax myself so that it essentially becomes a scanning->PDF solution.

But how can I insert my signature electronically? I suppose I could scan my signature into an image and then copy/paste it into documents. Security-wise, that isn't too great; as soon as somebody gets hold of that image, I'm toast.

Where are all the digital signature solutions? I used to hear talk of companies attempting solutions but I don't hear much about them now. A business opportunity perhaps, in the world of Web 2.0+?

Going paperless is key; it seems ridiculous that one of my most favorite appliances is my paper shredder. When we talk about legal documents, we're talking about pages upon pages of formal wording that I have to go through and it sucks to carry it around, only to shred it when I'm done. Finally, I am starting to get used to reading these docs on the PC screen, although sometimes I find it still difficult (thank god for the ability to print 2 pages onto one piece of paper through MS Word). I have (almost) gotten my entire financial life to go paperless. Somehow, the world of signing agreements needs to get there as well.

If You Want to Have a Web 2.0 Company....

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...you must use the right language in your presentations. Find useful and essential Web 2.0 doublespeak here at:

The Web 2.0 Bullshit Generator

After you finish your presentation, you must have an official Web 2.0 logo. Forget that retro crap. Go 2006 with a true Web 2.0 design! Type your company name here:

Web 2.0 Logo Creator

Since I want David Shen Ventures, LLC to be truly a next generation Web 2.0 company, I am thinking of switching my logo to this:

Generated Image

But if I truly want to be Web 2.0, I must drop some vowels. So...

Generated Image

I am also thinking of switching my page design. So I tried this automatic page layout creator for Web 2.0 design:

Web 2.0 Generator

Check out my proposed new webpage design.

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.

Networking and Keeping in Touch

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Ever since I left Yahoo! 2 years ago, I've been asked numerous times about how I keep in touch with people post-Yahoo!. I would come back from a trip to LA or Europe or NYC and talk to people about how I saw this person or that person, and they would be amazed that I still knew them or was able to keep in touch with them over time and distance outside of our common factor, which would be our job at Yahoo!.

Keeping in Touch is Full-time Job...Sort of

It sometimes feels like a full time job, juggling contacts, and managing my calendar weeks in advance. It would even be nice to have an admin deal with all this! But as much time and effort as it can take, I don't look at it as a job either. I know some people do, and there are "professional networkers" who do a lot of networking mostly for job related reasons. Not that there is anything wrong with that, but I just think there is something deeper that we can enjoy about networking.

The Time Factor

Most people live in the here and now. You try to get them to nail down time in advance and it's impossible. I have known people in the past who refused to hold a time with you in case SOMETHING BETTER SHOWS UP. How does that make you feel? Are you the most important thing in their lives?

In my role as world traveller, I have come to live by my calendar and strive for 100% compliance with it. I try to schedule things with people weeks in advance with people, since my travel calendar is already set for the next few months. I also try to remember when people want to get together with me so that I contact them later to catch up.

Sometimes I screw up though. I have missed meetings due to the complexity of my calendar and I really hate that. It doesn't make me feel very efficient and I do my best to fill in the calendar immediately after setting something up.

Scheduling travel time is also a challenge. Knowing how long it takes to get from one place to another can be really tough. That's another thing I hate: BEING LATE.

Time is valuable to everyone. I don't like to waste other peoples' time.

The Connection

I've read some books on networking for business. Sometimes I think they miss an essential human component to networking, which is the ability to connect with other human beings at a more deeper level than just for business.

I think people see right through you when you network for business. Your mannerisms, what you talk about, everything - it all says, "we should stay in touch because it may benefit us business-wise." It never says, "Hey what a cool person - I enjoy just shooting the breeze here and it takes a load off to catch up." In the past, I've had people network with me like that. I don't think there is necessarily anything wrong with that, but I think it could be much more.

Connecting with people on a deeper level is a skill. It shows your willingness to trust, to communicate, to share, to give and receive. It speaks to you opening up as an interesting human being rather than just looking for another business contact. I believe you can learn to do this, as I have had that experience just recently over the last few years. But I also see how some people have never learned that skill and seem to be unable to even get there. It's really too bad.

I also believe it's the real secret to keeping in touch with people in the long run. Why would you continually keep in touch with people who you really don't care all that much about except to get something out of them?

You naturally want to hang out with people you like, and that you can CONNECT with.

Connection starts at the beginning. In my experience, sometimes you get it or you don't. Sometimes it's natural and sometimes it just doesn't work. I don't think it can be forced. But even within that, there is a wide grey area between the "natural connection" and the "there won't be any connection at all now or in the future". In general, first impressions can mean a lot so I would definitely put your best forward as early as possible. Otherwise, natural connections can be severed whereby they could have developed. I also believe that there are some people you just won't connect with at all, and sometimes you just have to live with that and move on.

No matter what, connecting with someone makes the relationship that much more satisfying and incents you to connect more.

Value Given, Value Received

It almost pains me to talk about giving and receiving value in networking. It makes it sound so unnatural. Certainly in our society, we value connections at the human level and the giving and receiving of non-physical things like love and help and respect. We don't hold in such high regard expections of physical or monetary gifts.

But I don't think I could talk about networking without talking about what I get out of it.

So satisfaction and enjoyment from connecting with others is one great benefit we've talked about.

One value I like to receive is for the effort I put into trying to meet with people, over time I'd like to see it come back my way. It takes a lot of effort to schedule things, drive around and meet people, catch up and conversate, etc. At some point, sometimes it becomes more one way. I find that I am the one that constantly pursues meetings. I call or send out emails and sometimes I get no response. The best ones I get back are the "YES WHEN ARE WE MEETING?" emails or the energetic "THAT NIGHT WORKS LOOKING FORWARD TO IT" replies. It really makes me feel good to see/feel/hear that others are just as enthusiastic to meet up with me as I am to meet with them.

If I don't get that back, over time I am less likely continue pursuing meeting up with that person. You know, life changes. People change. People get married and have other more important things occupying their time. Or they just stink as networkers and as connectors of people. It's just the way of the world. However, the ones to really cherish are the ones that continually give you value as much as you give them value when you meet. They enjoy your company beyond just being a great business contact.

Networking in the Digital Age

Truly it's easier now to keep in touch with people than before. In the old days, you'd have to use the phone. Now the digital age has made it so much easier to keep in touch and find people in your past.

My favorites:

1. Sending out that random email to someone I haven't talked to in a while. Certainly email is the method of choice for non-real time scheduling of meetings and communication.

2. Trolling Yahoo! 360 or Linked-In for old acquaintances. Yahoo! 360 has been particularly good because of all the people I have known over the years at Yahoo!. Friendster sometimes works, but I'm not on it that often. Social networking sites are great for this kind of stuff.

3. Instant messaging works great! While working at Yahoo!, all my old colleagues were my Yahoo! Messenger friends. I just didn't delete them when they left, so occasionally I'll ping them to see what's up.

4. My blog has been an unexpected source of connection with old acquaintances. I am constantly amazed by who reads my blog. Every now and then I'll meet up with someone and they'll say they've been following my exploits on my blog for months. Amazing! Makes me want to keep blogging!

Bottom Line

Networking takes time and effort. Connect with those you network with, when you can. Make networking fun and enjoyable rather than just another thing to do for work. Remember always that networking can lead to friendships and other rewarding relationships as well. It works the other way too, where friendships can lead to meeting more interesting people, valuable personally and professionally.

Relationships are natural and necessary for human beings so make the time and energy to meet and keep in touch.

Where Have All the White Headphones Gone?

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About 2 years ago, I was on assignment for about 6 months in Europe. I was in London mostly, and there every other week, in addition to staying there for 5 weeks straight. It was a great experience as you never really know what's like in a foreign country, unless you live there day to day for a while, go grocery shopping, walk the streets, and really be like someone who lives there.

So 2 years ago was early 2004. It was around the time the iPod was really taking off, and I was amazed at all the trademark white headphones I saw on the streets as people walked to work. I remember thinking about what a great branding design it was, to see all these white headphones everywhere. You knew immediately that this person had an iPod. No other MP3 players had such a distinctive headphone color. I also remember thinking about how dominant the iPod was in the market of digital music players and here was visible proof that the iPod was very popular amongst the masses.

Fast forward to summer 2006. I am walking the streets again of London. This time I am amazed at the lack of visible white headphones among the people. Truly the density of white headphones has dropped considerably. What happened?

Market reports show iPod sales are still strong, but then I remember reading an article that talked about the sheer number of competitive products out there, which was numbering in the 100s. It seems as though this had made a dent in MP3 players as other products came into grab some market share and Londoners had purchased other brands of players, as the number of headphones I saw was still high, but just not the usual signature white iPod headphones I saw 2 years ago.

It's hard to retain market share when new products have entered the space. Apple has competed on design successfully with the iPod and its associated coolness with owning one, but when there are equally cool but different looking products out there, it's tough to keep it up. As a designer, I shudder to think about the time when design itself can become commoditized in a particular category. When this happens, you need to start designing more personal products, those that target the individual and what makes him/her cool and not just an overall coolness about being associated with brand like Apple.

It will be interesting to see if the coolness of owning an iPod will continue into the future, and if Apple can keep producing the magic which makes consumers desire their products.

David Shen Ventures, LLC: Spread the Knowledge

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I just started a company with which I will attempt to involve myself in startups. For simplicity, I have dubbed it David Shen Ventures, LLC.

Through advisorships with companies, I can give them the benefit of my 9 years of Yahoo! experience in creating businesses on the Internet. I meld that with my experience in design and believe that I can increase a company's chance of success.

But one thing I've noticed being out here in the world for 2 years after Yahoo! - even after the Internet being around for about 11 years or so now, the broadness of knowledge still has not made it out of the walls of Yahoo! or Google. If you think about it, not many people have really left those companies until just recently. As a result, most of the companies don't get the exposure to the breadth and depth of thought that occurs within those companies. I've always said that the most junior of employees at Yahoo! has still more knowledge about Internet products than the most experienced of another company. It has nothing to do with intelligence; smart people are everywhere. It has everything to do with experience and exposure to lines of thinking that you would never had seen unless you worked at a Google or Yahoo!.

As I get David Shen Ventures, LLC into operation, I find that there is a real desire of startups to learn the secrets of Yahoo! or Google. My hope is that I can truly add value to these companies, and to the industry in general, by exposing them to the thinking and experience that I had 9 years of immersion in.

I want to spread the knowledge. I want to share the wealth of the wisdom.

It's been a positive thing for me; already I have 12 companies wanting me to join them. So much hunger for Yahoo! know-how...

Resonance

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Over the last few months, many people have asked me to help on their respective projects. But I've turned down many. And it's not necessarily because the business idea was not viable. I just did not feel an affinity for that particular product, project, or business.

If there is anything I've learned in my years in developing product, it's that not everything should be worked on by me. It is true that the principles I apply (user-centered design approaches and processes) can work in every situation so it's not about my training or education. It's just that I don't have some sort of connection to that project. The project just does not resonate with me.

What is this resonance? It is an intrinsic feeling and connection that one has for a given project. This may have developed from one's background, or from one's training, or from one's point of view. Some are gender based; should I, being male, work on a product for women? Others can be cultural in nature. The best examples of this are international products. Creating a community based application in the U.S. is something I could effectively work on because I grew up here and lived in the U.S. all my life; creating one in a foreign country is not something I should do alone. Sometimes it's age based - could I create a product for teens, being not a teen myself? It can also be belief based. I was once asked to work on a company who wanted to employ its patents; I declined because my view of the whole patent system is that it is in serious need of overhaul. Morals can come into play as well; For example, I could never work on a email spam generating engine. To resonate means that there is an understanding within my brain, body, and soul which comes from a variety of sources and, I believe, makes me more effective at working on that project than not.

So while my user-centered design training can theoretically create a great product in any situation, I believe that if I resonate with the project, I can take the result beyond just a solution. I can make it better than just whatever comes out the end of a successful application of the process. And it's simply because I resonate with the project.

My affinity for that project allows the "art" to come out in the application of the design process. Consider this: anyone can take a pencil and draw with it. The pencil is a tool; it's simple to use and just about anybody can learn how to use it. But not everyone is a Da Vinci. Da Vinci could do things with a pencil that you or I could never do. He had a natural affinity for art and creating it. It's stick figures versus works of art and expression.

I want the "art" to come out in everything I do. I want to give my projects the best that I can give them. I want them to be the best I can create. And I want that for the people I work for. If I can't give it, I walk away from it.

Microinvesting

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Over the last few months, I've encountered something that has been fascinating me. I call it "Microinvesting". And I think it can only exist in the world of internet businesses.

Microinvesting is very much like angel investing. You put in very small amounts of money, in the range of $10K to $50K, and still can make great returns. But the difference between a $25K investment going into a traditional business and an internet business, is that the $25K can take you to market with at a minimum a working beta, and sometimes with an entire site.

A few things that have created such a possibility:

1. Lots of entrepreneurs who have made small fortunes during the first dot-com run-up, and now can support themselves while developing their website.

2. The cost of development for internet products is significantly lower than in other businesses. Chalk it up to open source code and outsourcing to places like India.

3. The possibility of acquisition at small amounts of cash to a larger entity. By small, I mean producing an exit at $5-$20MM. Large companies like Yahoo or Google are looking for great engineers to join their team, and will acquire them and their technology for relatively low amounts of cash. This still can generate huge return on money invested. And Yahoo and Google aren't the only ones doing the acquiring...

4. Certainly development of a prototype, working beta, or full blown site creates opportunity for a true series A fund raising round, as you show that you have developed something and it's not vaporware.

I've started looking into this area. I think it brings a whole new meaning to early stage investing and the entrance of a new class of angel investors at the lower end of traditional angel investments.

Luck

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As heard at the Artiman Ventures Concepts 2006 conference:

There are 3 things you need to do to be successful as an entrepreneur:

1. Get your product almost right. Don't obsess over getting it perfect. You'll potentially waste time or the window of opportunity may pass as you try to reach perfection before going live.

2. Hire well. As you achieve item 1., you must have a great team to help iterate towards perfection. If your team is mediocre, you'll never get there.

3. Be lucky. Luck brings opportunity.

If you master item 3., it supercedes items 1 and 2.

As told by Basil Alwan, panel moderator and President of IP Products at Alcatel and Founder/CEO of TiMetra Networks.

I have always thought deeply on the role of luck in career, business, and in life. I have always thought that luck is a huge modifier in whether you'll be successful in those 3 areas. It can supremely increase your chances, or likewise it can severely limit them too.

As you go through life, observe the people around you. It seems as though there are people who walk through life with luck following them wherever they go. No matter what they do or where they go, they seem to have good things happen to them no matter what. They lead charmed lives.

Then there is the other group. These are the people that seem to never have things go right. Bad things happen to them, or they never seem to get it right. They always seem to have things going wrong. It doesn't mean they are bad people. Some of them are decent citizens and great friends. But fortune always seems to make them roll snake eyes.

Is this phenomenon fate or controllable? Some would say that luck is part of fate, and some higher power has granted you this power. Others would say that it is somewhat controllable, that you may manipulate events around both in large and in subtle ways to influence the overall outcome of things in your life.

I, for one, am in the camp that you can influence the odds. I believe that you can subtly and greatly influence events in your life to stack things in your favor. Think of the ways you can build your career, by carefully walking through companies, gaining promotions, and building your personal brand, so that you can actually craft success. Reducing impulsiveness and being more deliberate about how and where you invest can again stack the odds in your favor. These are just two examples - It is certainly better than just sitting around and waiting for things to happen, is it not?

As you go through life, can you pick out the lucky and unlucky people? Is it possible to surround you and your activities with lucky people to increase their chances for success?

Are you yourself lucky or unlucky?

AdTech 2006: Major Confusion?

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This last week I was up at AdTech in San Francisco. It was the first time I had ever gone to AdTech. I had always felt that being in the business (while I was at Yahoo!), that it wasn't worthwhile to go. But this year, I decided to go as I had heard there were many friends who were attending and I wanted to catch up.

There was one thing that stood out. As I walked through the exhibition floor, I felt very confused. I imagined myself as a publisher website looking for interactive advertising services. I scanned the booths as I walked by. And I saw the same messages over and over again:

"Interactive Marketing"
"Search Engine Marketing"
"Click Fraud"
"Rich Media Advertising"
"Optimization"

Every booth said exactly the same thing as every other booth. It just goes to show that the Internet marketing space is hugely crowded. It seems as though there are so many firms doing exactly the same thing. Yes, potentially doing it a little better, or a little different. But as a naive conference attendee, I had no idea who was better and who was not.

Some notes:

1. If you're going to market something, you need to figure out messaging that stands out from the rest. Escaping conference floor "blur" is critical.

2. If you're going to start a company, don't start one in a crowded space with many competitors.

Just recently, I've been thinking about the women's market on the Web. I had been fortunate enough to meet a number of women entrepreneurs and as I saw what they were working on, it got me thinking about women's products and services on the Net.

When I thought of women focused Internet products, all I could see were sites dedicated to men, fashion, shopping, and baby care. Why is that? These may be the most prominent of all topics that women *seem* to focus on, but they also seem very shallow and very stereotypical. Surely women must be interested in other things too?

I suppose entire industries have been built around these categories, and thus maybe they are a faster path to profits as product manufacturers want to advertise around those content areas. You talk about fashion and gain a following, and voila! you've got fashion advertisers wanting to buy ads on your site. Seems pretty easy to me.

So do women think about anything else but the "big 4"? I would think that women weren't so shallow as to think about nothing but the "big 4" and there must be opportunity for women focused products and services beyond these topics. I think the problem is two-fold.

First, I don't think people are thinking broad enough about women's products and services.

As soon as you try to target women for your site, you immediately think about the stereotypical things that women think about all day. I think this is missing the boat. You can definitely focus on the "big 4" and there is much improvement that can happen in those categories. But I think there must be more content areas than these. Are women interested in NOTHING else but men, fashion, shopping, and baby care? COME ON. Doesn't it sound ridiculous just to read a statement like that?

I also think there is much that could be done beyond content.

For example, what if you put a feminine spin on email? Is there some optimization in the way women communicate that hasn't been capitalized on yet? This can be in functionality, the GUI, visual design (and I'm not talking about making it pink), and other subtle or visible modifications. My belief is that this is hugely unexplored, and that sometimes taking the functionality and tweaking it slightly, can have a huge effect on the users. If this is done correctly, it is possible that women will all of a sudden find your product a little more attractive, a little more fun, a little more everything and may not even be able to articulate it.

Look at the difference between Windows and Mac OS. At a gross level, you could say that they were both icon-driven windowing systems with menus and mostly controlled by mouse. But once you start playing with either, you'll find it's the subtle differences that make the Mac OS so much better than any Microsoft product.

Second, I think the lack of women entrepreneurs on the Net, both in management and in engineering hampers the development and exploration of women's products and services.

If you look at most development teams, they are primarily male. Today's universities are just not turning out nowhere near as many women engineers as there are male engineers. So what happens. Whole product teams are working on products that subtly become more male oriented because that's where their natural sensitivies lie. They're men, so they design things that resonate with themselves.

So you see the problem I have with women's products today. Women should be designing women's products, not men. And while many women's product teams are led by women, I still don't think there are enough women on the team to really make the differences seen and felt. Products are simply rehashed men's products - I would even argue that today's gender neutral products are inherently men focused simply because they are designed by teams that are largely composed of men. That doesn't mean that women can't use them; but it does mean that the subtle optimizations that could occur, aren't.

So let's ask ourselves: what if a gender neutral Web product today were designed and engineered solely by a team of women? Would it come out the same or different?

Is it a Hobby or a Business? The Web 2.0 Dilemma

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My Hobby

In looking at all the new Web stuff that's out there, I am amazed at the diversity and also at the number of rehashes of old applications. I am beginning to get to know some of these entrepreneurs and trying to find out what their motivations are for building whatever it is they're working on. Some of them clearly have more defined goals in terms of problems they are trying to solve, what opportunities they see.

Others...don't have such clearly defined goals. You ask them some standard questions about business models and user retention, or scalability and it is clear that these issues have not been thought through yet.

But no matter what, there is huge interest and determination in working on these apps, and the passion is evidently there. Just like having a hobby.

So yes, these apps pass the hobby test. But they can they go beyond being just a hobby?

Because I can...

I suspect that some entrepreneurs build these things because they can. Because the world of Web 2.0 it is really easy to build some really complex applications and you don't need an entire team of engineers to do some very interesting things. You weld maps with some other app and get a new way of approaching the same problem. Never know if you'll come up with something totally disruptive and it takes off.

Certainly many build them also because they are trying to satisfy some need that they have. They see some specific problem in the world and they solve that problem. These can be services or parts of technologies, or even reinventing some old thing again.

Almost universally, they have this hope that they will make the big score by selling their little app to some big company and live the life of luxury forever.

Does the world need yet another Google Maps mashup?

Sometimes I wonder about creativity in this new Web 2.0 entrepreneurism. There seem to be multiple versions of almost every app out there. For example, one way to be "cool" is to do something interesting with Google Maps. So, yes, creativity in mashing-up maps with some other app, but creativity in services? It seems like people take the same service or some existing and redo it in their own image.

As a user, how I am supposed to distinguish between one app or another when they look almost the same? Sure, I could sit at every app and try it out for an hour, but I don't think I would spend my time to do that to figure out why something was better in some tiny but important way.

Money Making Hobby?

Some people make money off their hobbies. You do something you love doing for the sake of doing it, and then a business springs out of that. But many people have hobbies that don't make money.

The big question is: in the world of Web 2.0, how does one take their hobby and make the leap to business? On the internet, users can't distinguish if something they encounter on the Web is a "hobby" (in the context of what we're calling hobby in this post), or a real business. So that's one problem.

Another problem is that it's really hard to execute. Putting your website up is one level; staying in it, developing a business model, and keeping it going for a long time is another level.

I think the main goals of our venture fund will be to discover:

1. If this is a "hobby", can it become a business, and one that has big enough potential for us to invest in?

2. Does the entrepreneur have enough vision, experience, or potential to be able to evolve this from a "hobby" to a business?

Naming in the Year 2006

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About 3 weeks ago, our venture fund was named Neuron Ventures. Then we had to change it. We spent $500 to do a trademark search and found at least two other people with names close to ours and in our industry.

What a completely saturated world of names this has become.

Between cybersquatters, the limit of our vocabulary, and the creativity of wordsmiths there is very little left.

So to name something, you first brainstorm a whole bunch of names. Then you do domain name searches. After all, how can you do business in 2006 without a website? Once you find an unused domain name, it doesn't stop there. You need to search for close prefixes and word portions and also potential variants in combinations with the name. Any variants close enough to be possibly associated or mistaken for your name need to explored then for working in your industry.

For our previous name, Neuron Ventures, there was already a Neuro Ventures out there, as well as a Platinum Neuron Ventures. Both were venture funds so we had to ditch our name and get a new one. Thus, we did not want to risk a cease and desist letter from someone who feared we could be infringing on their name, and we did not want others mistaking us for them and vice versa.

If only we had done the name search in the beginning....spending $500 to save ourselves from this grief would have been a small price to pay.

At some point, it will become a serious problem for the entire Web. The namespace is getting extremely filled up. How long before 99% of the words you could come up with are already taken? It's almost getting as bad as trying to pick a new email name on Yahoo! Mail or AOL. Would Neuron Ventures have to become Neuron_Ventures_2938182? You'll have to spend a million bucks to hire a professional naming firm just to come up with a new name!

The new name for our venture fund is Chroma Ventures.

..when companies care less about profit and more about doing something good for the community.

On April 2, the New York Times published an article entitled, "Death by Smiley Face: When Rivals Disdain Profit". It talked about how all these new Web companies came into being to provide a great and much needed service to the Web community and focus on doing it well, rather than turning a profit.

It brought me back many years, when Gmail was first launched with 2 GB of free space in it. At the time, Yahoo was selling via yearly fee 1 GB of mail space. Yahoo became almost neurotic in anxiety about it! I was amazed. After all, Google, their biggest rival in search was about to threaten a huge premium service revenue stream by offering something that many people were paying for....for FREE - and then some!

And now, according to this NY Times article, many other examples exist where companies will provide a great service but not have profit generation as a primary goal. It certainly provides an interesting point of disruption to new Web businesses, and old traditional businesses too.

I thought back to one thought I had during that Gmail 2 GB/Yahoo Mail 1 GB for a fee time. And that was: What if Google were to offer everything that Yahoo had for free? What if everything Yahoo did for profit, or any other company on the Web for that matter, was, all of a sudden, available for free AND the service was as good or better? What if a whole population of users suddenly flocked to these free services and the profits of Yahoo dropped preciptiously, as well as many other Web companies? My fear was that with the profits from search marketing, Google could have stuck it out much longer than any competitor by offering their services for free and killed every company whose livelihood depended on profits generated from those very services that Google decided to put up for free.

And now with the Web 2.0 way of doing things, you can build pretty complex stuff for almost no cost at all. So two guys in a garage can truly put up something that would have taken many (expensive but talented) engineers to write from scratch.

So tell me, what if everything on the Net were available for free?

Web 2.8 and accelerating....

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It must have been sometime in the middle of 2004 when the term Web 2.0 really gained momentum. A combination of the opening up of data sources, the social aspect employed against common services, the changing of economics from the dotcom boom years, the ease of development using open source technologies, and a shift in power from traditional companies to the people themselves especially in areas like journalism, among a myriad of other things - Web 2.0 was embraced by just about everyone.

But now, in less than 2 years, we've raced to Web 2.8 and accelerating. With everyone jumping on the bandwagon, there are now TOO many blogs, TOO many little tools, TOO easy for others to take your idea and incorporate it into their own services. How does a consumer differentiate between all the services out there, whose reported competitive differentiators are indistinguishable in the minds of the consumer? A lot of these services were also built with no business model in mind. How do they support themselves? They may be cool mashups and little desktop tools, but they aren't big enough to drive enough revenue to support even the developer.

Sure now the Web has transformed quite a bit since the early growth days from 1995 to 2001. But I would argue what is next? The Web's quick development time has also become it's own way of forcing evolution to run at lightspeed. Like the frightening mutations of viruses becoming resistant to drugs faster than new ones can be developed, the Web is also transforming at an alarming rate - too alarming for those of us operating in the Web world to keep up?

Is there a Web 3.0 about to appear and what will that look like?

Memories

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Remember way back when, when you could walk over to the cube next to you, talk to your buddy, argue/agree/argue/agree, and then you would walk back to your own cube and just build it?

Remember when you didn't have to fill out forms, or get approval from upper management?

Remember when you didn't have to write a 1000 page spec just to describe what it was you wanted to build, but instead just hashed it out on a white board and put a "Do not Erase" message on it until the project was done?

Remember when you didn't have to notify 200 people just to start something, and then get their OK before you could launch?

Just when did we transition from "Just Do It" to "Just Talk About It Until Your Head Bursts but Never Really Get to Doing It"? Or "Just Quit Now Because It's Too Hard to Get to Doing It?"

Too many levels of management. Too much bureaucracy. Too much distrust. Too much emphasis on individual posturing and positioning and not enough on getting the job done.

Are all companies fated to reach this point as they grow to mammoth proportions?

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