The Web and the World of Business

June 22, 2008

Should I Go Back and Help Yahoo?

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...?

Posted by dshen at 07:21 AM | Comments (0)

February 26, 2008

When the CFO leaves...Part II

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.

Posted by dshen at 09:22 AM | Comments (0)

October 25, 2007

One MEEEELLEEEEE-UN Miles

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.

Posted by dshen at 01:13 PM | Comments (1)

October 05, 2007

Increasing Site and Social Engagement in Detail

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...

Posted by dshen at 06:19 PM | Comments (0)

August 21, 2007

The Three Faces of My Schizophrenia

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...

Posted by dshen at 03:46 PM | Comments (0)

August 14, 2007

"The Business Opportunity" and the Epiphany

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.

Posted by dshen at 08:34 AM | Comments (2)

July 05, 2007

You Asked Me About Yahoo!...

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.

Posted by dshen at 08:01 PM | Comments (1)

June 22, 2007

Why and How Do Startups Move So Fast?

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!

Posted by dshen at 03:29 PM | Comments (0)

June 20, 2007

Avoiding Blur

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.

Posted by dshen at 02:02 PM | Comments (0)

May 20, 2007

The Chaos of Orgs and How it Hurts Employees: Management by Influence Hurts When Clarity is Absent

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.

Posted by dshen at 09:26 AM | Comments (0)

May 12, 2007

Corporate DoubleSpeak is Alive and Well

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.

Posted by dshen at 06:27 PM | Comments (0)

April 16, 2007

Drinking the Kool-Aid Ain't So Good

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.

Posted by dshen at 05:29 PM | Comments (2)

April 03, 2007

Stemming the Introductions Frenzy

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.

Posted by dshen at 09:52 AM | Comments (0)

March 18, 2007

Mistaken Identity

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!

Posted by dshen at 09:15 PM | Comments (0)

March 03, 2007

No Sleep for Startups

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.

Posted by dshen at 10:39 PM | Comments (0)

February 23, 2007

SunshineNYC: Office Space for the Geek Cool

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...

Posted by dshen at 11:27 AM | Comments (0)

EastMedia: Ruby on Rails in the Big Apple

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.

Posted by dshen at 11:21 AM | Comments (0)

February 20, 2007

Legal Help is Showing a Depressing Pattern

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?

Posted by dshen at 08:28 PM | Comments (1)

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

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.

Posted by dshen at 05:57 AM | Comments (1)

February 11, 2007

Guardian Angel

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.

Posted by dshen at 08:37 AM | Comments (0)

January 28, 2007

Connections and Networking

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.

Posted by dshen at 02:37 PM | Comments (0)

January 21, 2007

American Airlines Qualification Complexity

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.

Posted by dshen at 05:30 AM | Comments (2)

December 15, 2006

Starting Over Job Fatigue

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.

Posted by dshen at 11:03 AM | Comments (2)

Social Networks: Recruiting and Reconnecting

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.

Posted by dshen at 11:01 AM | Comments (1)

November 26, 2006

The Curse of Legalese

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.

Posted by dshen at 03:33 PM | Comments (0)

November 23, 2006

Angel Investing from a Disadvantaged Position

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.

Posted by dshen at 08:01 AM | Comments (0)

November 14, 2006

Incubators and Transferrance of Resonance

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?

Posted by dshen at 12:07 PM | Comments (0)

Public Square Plotting

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.

Posted by dshen at 11:44 AM | Comments (0)

November 08, 2006

A Believable, Non-Delusional World Domination Plan

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.

Posted by dshen at 05:11 PM | Comments (1)

November 03, 2006

PS3 Envy? Not So Sure...

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...?

Posted by dshen at 03:45 PM | Comments (0)

October 31, 2006

Update on David Shen Ventures, LLC

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