Monthly Archives: January 2010

The Ultimate Product Part 1.5

OK I should build IKEA furniture more often. Spending the last 2 hours building a new dresser from IKEA meant that my mind kept drifting back to The Ultimate Product and why it makes me feel uncomfortable when the Ultimate Product doesn’t match what the entrepreneur is actually building.
I think it means the probability is high that they will need to pivot at some point because they are off target from the Ultimate Product. While pivots are a fact of life for entrepreneurs, the problem for me is at early stage where I invest.
Most entrepreneurs only plan to last for a year on their current fund raise to my chagrin. If only they had planned to last 2 years, it would mean that they have time and money to pivot. But they will die before they can because they will run out of money and begging for more isn’t going to work in today’s funding climate.
So if they are, in my mind, off target from their initial mission and the resulting Ultimate Product, the chance of pivot is very high and they will be out of funds by the time they realize that what they are building isn’t going to be widely accepted by consumers and can’t pivot. Thus, if they don’t plan on lasting two years, it makes me not too confident that they will last long enough to get somewhere stable and growing. As an investor, this doesn’t make me want to invest…!
Do I believe this is a certainty, that if they aren’t quite on target to what I think is the Ultimate Product that they will surely pivot? Of course not. I recognize that I could be wrong, and that a better product than the imagined Ultimate Product could arise which also satisfied the consumer/market need. I think this is all a probability game and I’m just trying to increase the odds of success. This is definitely something the entrepreneur needs to weigh as well, especially if they are off target from the known Ultimate Product.

The Ultimate Product

The other day, I met with an entrepreneur and we talked about his project.
He first stated his mission, and then dived into his product and service and how it worked. As he talked about the various features his site had, how users would interact with the product, and what would happen when they did, my brain was actually split. Half my brain was following what he was saying, and the other half thought about his initial mission statement. As his talk went on, my brain halves began to diverge.
The second half of my brain was constructing the ultimate product to his initial mission statement. The ultimate product is the product that completely satisfies the users’ problem as defined by the mission statement.
When my brain halves diverged, I was unfortunately very uncomfortable at this point. This is because what the entrepreneur was describing was not the ultimate product, but in fact something different. At this point, I stopped the entrepreneur in his description about the product and we talked about the ultimate product.
I detailed it out and walked through in the ideal case, what that was, and how it would work. But it was unfortunately different than what he was describing. It was one of the reasons why I felt uncomfortable in supporting him in his project, because his product seemed to be enough off the path to the ultimate product that there were more than necessary barriers to getting there, when it seemed to me that there were more direct paths to the ultimate product.
I think it’s a worthwhile exercise to construct the ultimate product for a given need, and then see if you can get there via your startup’s evolution. If you can imagine the ultimate product in your mind, I think it can give you guidance on how to build it. But if you don’t know what that is, how can you know if you’re on the right path to get there?

SMASH Conference Prep Dinner

Last night I went to yet another great dinner hosted by Dave McClure at the hip Clift Hotel in SF. It was a precursor to a conference series on social marketing called SMASH Summit. If you follow Dave, you’ll know that he is big on the fact that marketing and design in startups are key elements for success, and that most startups don’t do either well.
SMASH is an acronym standing for Social Media And internet Strategies and Hack-tics. A bit forced, but the concept is pretty cool.
Speakers included Matt Cohler of Benchmark, Rashmi Sinha CEO of Slideshare, Stew Langille from, and Jeremiah Owyang of Altimeter Group. It was a great round up of information presented, showing the various ways folks are using social media marketing.
Last night’s dinner was actually a preparatory step to a one-day conference series Dave is going to put on both in SF and in NYC. After dinner, the tables had a discussion on what they have done in social media marketing and the goal was to generate some possible topics for discussion at the SMASH summits. As official notetaker, I wrote down some ideas and listed them below, so that you will get a possible taste for what you may see at the SMASH summits:
Marketers that work for sites that are democratic – how do you tell what succeeds or fails with the crowd?
How to gain trust for novice social networkers for social marketing?
How do you manage novices facing more technically savvy social media users? Ex. forum users ragging on novice posters for not knowing a tech solution.
How to use our customer base who are more technically savvy to support call center people?
How do you use cross channel communication?
How do you connect developers with passionate customers?
What’s better than focus groups? What do you use instead?
How do you overcome corporate/executive fear of talking to your customers?
How do you track/prove ROI of social media? Ex. We only have anecdotal evidence of more sales via positive social media response.
What metrics of social marketing are important?
Panel idea: Bigger companies’ overall experiences with implementing social marketing/media (success/fail stories, case studies, techniques, etc.)
Panel idea: Experiences with integration of old school organizations with new social media (more specific than previous: talk about organizational difficulties and how to solve, how to win over the old regime, how to deal with people protecting their turf, etc)
Where does social media belong in the organization?
I’m looking forward to checking out the first SMASH summit for great discussion on these topics and more!

More on the Rise of Small Business on the Net

I saw this great post by Steve Blank: Make No Little Plans – Defining the Scalable Startup the other day and tweeted out a quote that I thought was very important to me:
A lot of entrepreneurs think that their startup is the next big thing when in reality they’re just building a small business.
His post talks about the fact that many entrepreneurs that create web businesses want to be big, but in fact only create something that is small. There is nothing wrong with this; the world needs lots of small businesses, and even those on the internet. The post also offers some hints and tips as to how to create something that grows large.
When I tweeted, the tweet also showed up on my newsfeed where some of my Facebook friends commented. I thought that the comments there were a nice addition to my previous post, The Rise of Small Business on the Net, and thought I’d post them here:
Me: “A lot of entrepreneurs think their startup is next big thing when in reality they’re just building a small business.”
Friend 1: Depends what you call small. A lot of room between a hardware store and Google. 🙂
Me: a small biz is one that makes a decent amount of revenue for its employees and is a nice sustainable business, but not much more than that. there is not hyper growth but just nice, recurring revenue. there can be a big spread of revenue that could qualify for this, like from a few 100Ks to even low millions.
The issue is that it is unfortunately a dangerous place for angel investors to be, because the biz is too small to be acquired at a large multiple of its value, or even to be noticed by the big guys. We can’t easily get our return on investment from companies like these.
However, that is not to say that these biz shouldn’t exist. I think it’s a healthy evolution from the storefronts we see on our streets to the virtual storefronts of the internet. not all biz need to go IPO or make a billion bucks from an acquisition for them to have a reason to exist.
Friend 2: Do angels build in other means of acheiving ROI? For instance share of revenue+ebitda over time after a certain agreed to time horizon?
Me: not traditionally, but i have been thinking about applying something like this to startup investing. it’s almost like investing in a restaurant or some other kind of cash business.
however, another problem exists where the entrepreneur is batting for the moon and of course they always think their idea will be the next google, even when we can see … See Morethat it will only grow so big. thus, they are unwilling to accept terms that are not the usual startup investing type terms for investing.
i do think about this every day though, and hope that a solution does present itself. or we just suck it up and try to only pick the ones we think have the best chance for being google-like, or near-google-like, and we just write off the others that we can’t get our money out of, even if they are nice small businesses.
Friend 3: For some reason I think there must be a sweet spot for investors that focus on smaller tech businesses or even projects. I’m thinking about investments in tech analogous to those made by restaurateurs, real estate developers, etc. Where capital requirements are low and return is performance based not exit based.
Me: I call this the Rise of Small Business on the Net and think that there is something here, but just not quite clear yet. in the old days, banks would be the lenders to such businesses, but banks are way too conservative to invest in internet businesses, and with the economy the way it is, they are even less so.
While Steve’s post (and many others) focus on encouraging the entrepreneur to think bigger (even I ask about the world domination plan and more on why), I have not heard much about the plight of investors who end up involved in a startup which becomes more like a small business than the scalable, world dominating startup we all would love to find. Steve does mention those who are OK with flipping startups, but some are simply too small to even flip.
I’d love to hear more about this from others who are thinking about this.

Transferring Hosts

I have not had much fun, from about end of October until week before Christmas. My previous host decided to “upgrade” me and not only lost random files while transferring to a new system, their new mySQL DB decided to also not allow me to save large blog posts. Of course, they claim nothing is wrong, and of course they cannot see what is wrong because they have a super fast connect with all their servers. But for us poor slobs out here….well I can’t get them to do anything to fix this.
Early December I finally decided enough was enough. I found a new hosting provider based on the recommendations of friends. I spent a week installing to MT 4, upgrading from MT 3 which I had been using for years now. I also tried WordPress and thanks to my friends who are big fans of WordPress who volunteered to help me with the transfer. But I was also using MT as a primitive CMS, which WordPress just was not flexible to do. Even though they had nicer themes and some other really nice functions, I decided to go back to MT.
I’m thankful for my buddies at Sixapart who helped me with some sticky issues, like the fact that my old filenames were created in one way, but the new MT 4 created them in a different way. This was pretty critical; who knows who was linking to me from the outside? Also, I use a lot and all those links would have also been broken. And most critical, my SEO juice could have been harmed because Google would have discovered a whole bunch of links that would be broken and who knows how my SEO ranking would have been affected.
I spent the better part of this week getting my URLs to match up and, thanks again to the support folks at Sixapart, I was able to get the URLs mostly translated over. I then packaged up everything on my old hosts and FTP-ed them over. I also exported my blog entries from my old MT 3 and then re-imported them all into MT 4. Somehow this all went off without a hitch.
The next step was to then redesign my blog. That took a while getting to know the CSS and HTML of MT 4 which was different than MT 3. I didn’t have much time to work on this, so I cranked out something that I could live with for now.
In the middle of all this, I was fiddling with domains and messing around with where they pointed to. Of course I screwed this up many times. But thankfully I figured out exactly what they should be set to and now everything should be working fine.
By the way, I HIGHLY recommend NOT hosting your domains with your site hosting provider. It makes changes that much easier when you’re trying to bail on a hosting provider when you don’t also have to transfer domains to somewhere else. Yes it may be cheaper, but man it just made my transition away from my old hosting provider that much more lengthy while I waited for those domains to transfer to somewhere else.
It was really disappointing dealing with my old hosting provider. I was with them for so long and they failed me in the end. It was also obvious they weren’t doing much to improve things, because the control panel at my new hosting provider was so much more flexible and advanced. Then I got caught in IT support hell where I would say I have a problem, and they could never seem to figure out what the problem was on their end. Now let’s see if they actually stop billing my credit card….!
It was an interesting exercise to move hosts. I don’t relish the idea of ever doing this again, and can only hope that my hosting provider doesn’t screw up miserably, forcing me to move yet again.