Category Archives: Business

World Domination Plan

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I love it when I hear entrepreneurs are working on a world domination plan.
I see a lot of entrepreneurs arrive with pitches that are limited in scope. They talk about how the world needs this function, how great it is, and how current products don’t have these features. Usually, they really are great ideas. When we get to revenue, sometimes there is a plan and sometimes there isn’t. But many of these revenue plans only seem to get to a few million a year at most. This may be a great small business, but for an investor, we need to ply our limited resources into those opportunities that will grow into huge businesses, and not just a million a year.
The need for a world domination plan is important to me. I want to invest in businesses that will grow into huge businesses, which will maximize my return on investment. I don’t want to invest in businesses that will grow into small businesses, even if they are great small businesses. I only have time and resources to work on so many projects and need to maximize my efforts.
The plan needs to be believable to both me and the entrepreneur. It’s not enough that I just believe it’s possible; the entrepreneur must also believe the plan since he is executing it. If only I believe in the possibility, that’s not good enough. To me, it’s a form of personal deception; I see the idea, I see its potential, and it doesn’t matter who works on it – it must build into a big business as I believe, right? It’s not that simple even if I wish it was. I’m not the one executing the idea and doing all the ground work. The entrepreneur must believe in the idea and be able to do all that. If he does not believe in the idea and/or cannot execute it, it’s going to fail.
Some people have enough resources to invest in experimental projects, meaning that there is no clear path to success at the beginning. I unfortunately don’t have enough resources to deploy like that. Thus, I need to at least have some comfort that both the entrepreneur and I believe there is a world domination plan (and yes I know there is a great probability that this will change).
What is your world domination plan?

Economy Drives Ad Innovation Once Again…and Direct Marketers Are Back in Full Force

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It’s happening all over again. Check this out:
OPA Members Strive For Higher Impact In Online Ads
Members of the OPA are launching new ad units, much larger than current IAB sizes. Here they are (quoted from previous Mediapost article):
1. The Fixed Panel (recommended dimension is 336 wide x 860 tall), intended to appear naturally embedded into the page layout, and scrolls to the top and bottom of the page as a user goes up or down the page.
2. The XXL Box (468 x 648), providing page-turn functionality and video capability and expandable to 936 x 648.
3. The Pushdown (970 x 418), which opens to display the advertisement and then rolls up to the top of the page (collapsing to 970 x 66).
Back in 2001 when the dot-com bust was upon us, I was at Yahoo! and we worked with the IAB to roll out and standardize new larger ad sizes, which you see at the IAB ad size standards page. In fact, the industry had grabbed hold of a lot of the new ad units already and Yahoo! was painfully behind in adopting the new standards until the industry had just tanked, and the major source of ad dollars during the dot-com boom had disappeared – other over funded dot-coms who all but died in/around 2001. Yahoo!, along with all the other publishers were forced to adopt new larger ad sizes and introduce new ad experiences to woo advertisers onto their sites.
It worked great. New larger ad sizes were standardized, new ad experiences were conceived and offered like expandable ads and floating ads – we gave advertisers more opportunity to do what they do best: create WOW.
As time goes on, these ad units became commoditized both in the eyes of advertisers and users. They weren’t special anymore, so prices that advertisers will pay dropped and users got used to them and starting ignoring them.
But it seems like it took yet another economic downturn to create innovation in ad units. Isn’t this dumb? It would seem to me that publishers should take an active role in managing the roll out of new ad units and ad experiences on a regular basis to keep interest in them high from an advertiser and user perspective, and thus prices and value are also kept high. Unfortunately, this didn’t happen. At least now the industry is forced to introduce new things into the marketplace.
The other funny thing that is happening again is the rise of the direct marketer in graphical ads. When all the dot-coms died back in 2001, ad units from known brands disappeared and all that were left were ads from direct marketers. These ads were the best of the best in deception – there were tons of ads that looked like dialog boxes and read “Your hard drive is deleting! click here to stop”. They were also just inapprorpriate – I remember an ad that had a picture of an old lady lying on the ground that read, “Help! I’ve fallen and I can’t get up!” Awful stuff. At Yahoo! we created strict content guidelines that just got rid of all these ads AND we worked super hard at bringing traditional brands onto Yahoo! so that we eliminated our revenue dependence on these direct marketers.
But they’re back:
Ad Recession Brings on the Belly Fat
While these ads aren’t deceptive, they are pretty offensive in their design. But yet, they are effective at driving traffic to lose weight websites as they offend the rest of the population. And they aren’t all that wonderful at creating a great brand experience within anyone’s website. This is why all the male enhancement ads are placed all the way in the back of popular men’s magazines; if you saw them in within their main content pages, you might think that this men’s magazine has an undesirable perception amongst its readers.
The same will happen to websites if these ads are found on their pages. Do you want your brand tarnished by the ads that run on your pages?
In the short term, direct marketers have the cash. Perhaps we are forced to take these ads in the short term as we figure out new ways to generate revenue. I hope that in this case, history repeats itself in that the industry will innovate yet again and more desirable advertiser dollars will flow into the ecosystem. But instead of getting rid of direct marketers, can’t we find a way to help them create more acceptable ads from a design perspective but are ALSO as effective?

Recession? What Recession? Part II

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I just read Newsweek issue Feb 23, 2009. It has an interesting section in it entitled, “Myths of the Recession.” The myths they talk about are:
Myth: The Credit Crisis is Over
Myth: All Industries Are Suffering.
Myth: The Dollar Will Collapse.
Myth: Credit Cards Are Killing Us.
Myth: Here Comes Protectionism.
The article talks about how a lot of things have been overblown by the media and makes it look as if the world is worse than it really is. The myths relevant to my previous blog post are:
All Industries Are Suffering.
Credit Cards Are Killing Us
Apparently, a few sectors are really messed up. Banks, financial institutions, brokerages: yeah they really are in big trouble. But the rest of the business world, things are still OK. A ton of companies have built up rainy day funds and are weathering the storm OK.
As for consumer debt, you hear about credit cards being a big suck on consumers, and people are living beyond their means. But the attention is on speculators and lower income people who took on unreasonable amounts of debt relative to what they were taking in. So yeah, a lot of people are going broke or getting kicked out of their homes. But the number is still a lot less than the general populace (90+ percent of the population) didn’t do stupid things with debt, so much that they are in trouble now.
If you believe this article, and I tend to think that the media does over exaggerate statistics and make things seem worse than they really are simply because they are talked about a lot, then the general population doesn’t really feel the brunt of the recession. As long as they still have their jobs and didn’t spend so much over their means to support it, the world still seems rather…normal.
I think this is why people don’t seem to think the recession is really there, because it hasn’t really hit them. Now lose your job or the roof over your head – yeah that’s a pretty big hammer hitting you on the noggin.
Or if you are an angel investor helping out early stage startups – the world’s mess really does affect you in a very direct way.

Recession? What Recession?

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In the last few weeks, I am amazed at how many people are completely unaware, oblivious, or uncaring of what is happening in the markets.
When you drive past malls, the parking lots are full. People are still out shopping! Maybe they aren’t buying? At least they still aspire to buy even if they are not. However it seems that some people still are.
One of my startups, Ideeli, who sells luxury goods at 40-90% off, is showing great growth. I guess women still want their luxury goods even in a recession.
The other day I was catching up with a buddy of mine and I told him some of my companies are shutting down. He was amazed that this was happening.
Some startups I meet with still are in the mode of building for users and making revenue part of their future plans AFTER they raise their next round. I tell them that the investor community has completely stopped funding startups without revenue WHEN THEY SHOW UP at their doorstep. They look at me like I’m an idiot for asking about and pushing them to generate revenue now.
WTF??!?!
Ignorance? Obliviousness? Inertia of irrational exuberance still keeping spirits high? Or perhaps some things just haven’t affected some?
It almost reminds me of when I was a kid growing up during the downturn of the 1970s. My parents dealt with the problems, but they never affected me directly. I never stressed about it, and nobody asked me to stress about it. Food showed up on the table, I went to school, still had clothes and toys. The world was all right.
I think some are like that. They have money. They have support. They still walk down the street to their Starbucks and buy coffee. Everything does seem normal in our little microcosms.
But if you take a look at the world beyond our immediate surroundings, it’s a mess. The larger, global mess trickles down to creating a mess all the way down to affecting us. It’s in all the news, and in our stock prices, our gas prices. For us in the investing biz, it’s in how we think about building startups.
Sometimes I think people just don’t read newspapers, or watch the news. Or maybe their larger view doesn’t have enough experience yet to process all the macro effects and distill them down to micro effects, and finally down to those that directly affect each and every one of us individually.
I think that I was fortunate enough to be an adult through the 1989 downturn, the boom-bust of the internet through 2001, and now this one. It’s a sobering thing to be hammered so many times and to viscerally have experienced their effects on us. I have learned to process broad data and bring them down to the individual level, and I have much more to learn.
I meet with my financial advisor regularly now and pump him for broad economic data, because he sees much more info than I do. We talk about how it affects my investments, but also about the broad economy both domestic and global because I want that data to process, so that I can strategize effectively in all areas of my life, including my startup investing.
When I think about how I get all my information, it’s almost a full time job keeping track of all this information. So maybe I can forgive those who are ignorant/oblivious/irrationally exuberant because it’s a lot of data to process, cutting across a lot of experience areas, and it’s hard to understand if you don’t have context or experience to pull it all together.
I can only hope that people do a more deeper dive in broader economic factors because it does affect us all, and we’ll make better decisions about our lives, money, and work because of it.
And I can stop getting in arguments with people about why building for users isn’t a good strategy now….(more on this in a future blog post).

An Evening with Jeff Jarvis and his new book, What Would Google Do?

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

His presentation was a bit rushed as his prepared powerpoint was a lot longer than his talk. But I had read some of his book by the time I got to the presentation.
I think his book is pretty good at gathering together a whole bunch of disparate strategies and thoughts from the state of the Web and its effects on a variety of businesses. To us in the biz, I think it’s stuff that we deal with every day, but it’s nice that somebody put it all in one place.
The one thing I think could be better is the title. It’s deceptive because there are things that are described in the book that are valid and true, but they are not what Google would do. In fact, Google itself would never do them ever because it doesn’t make sense from a business standpoint for them. And it’s funny that even if Google doesn’t do them, they enable those activities to be done by others.
I would probably call the book something like, “This is the Way the Internet Is Now and What to Do About It”.

Yahoo!, Investors, Next Steps

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Here is a quote from Mediapost email, paraphrasing from an article from BusinessWeek: The Difficulties Bartz Faces at Yahoo:
“As Sanford Bernstein analyst Jeffrey Lindsay said, “We see no growth path forward. The only thing that’s going to excite investors is a transformational move, and that could take months or quarters.” Indeed, new CEO Carol Bartz admitted as much during a conference call with reporters. She said she needed time to talk to more people inside the company about what direction to take it in. Investors are unlikely to give her much time.”
The last sentence irks me:
“Investors are unlikely to give her much time.”
I think this is a systemic problem that is wrong with how we incent businesses to function. It breeds short term focus and doesn’t let companies do the things they need to do, especially if they are going to take months or even years.
Sure, I’d be pissed too if I were losing millions or billions on stock price. But there must be a way to stop companies from reacting to pressure from investors to deliver short term results in order to bring great long term growth to the company, and before investors demand the management team to be fired…?!?!?

State of the World and Where Recovery is Going to Come From

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A reporter asked me some thought provoking questions about the state of the world and whether Silicon Valley will play a large role in recovery and building new companies and employing tons of now-out-of-work people. I gave a rambling reply which also caused me to think deeper about how things are and my dissatisfaction with many things in the past, which I hope will be fixed. Since it was an interesting thought exercise for me, I thought I’d share it with you (with a bit more embellishment):
3% is the new 20%
Greed has played a large role in how broken the system is. I now say 3% growth is the new 20%, which means that expectations have been totally out of whack in the past. When I was at Yahoo, it was ridiculous to have investors continually push for 20% growth quarter over quarter, year over year. It’s unsustainable. and when Yahoo fails at this, or any company for that matter, the investors knock the stock down. When the stock goes down, the investors get in an uproar and scream bloody murder, try to get rid of the current management team, cause a huge ruckus which is hugely distracting and doesn’t enable a company to respond in the way that is best, which sometimes takes time – More time than investors are willing to give. The short term mindset of investors which drives the short term mindset of companies doesn’t let any company plan effectively for the long term, but only for next quarter’s earnings call.
Stock market driven by emotion
The whole stock market is driven by emotion which is really bad in general. Whatever happened to what I learned about stock investing way back, when the stock price was a reflection of the actual value of the assets a company had, not what emotion drives what we think it should be?
Is incremental innovation enough?
Lots of innovation is definitely in the form of incremental innovation but that is true in more established technologies. We see this in bulk on the internet, but on the other hand, we still see a lot of truly weird new stuff that nobody is working on before. I think a lot of people think they can merely do something better and that is enough to get to a good place, or become number one. the main problem is that users have services overload; ex. how many social networks do we really need?
This is a big problem for us internet startup investors. We see a lot of me-too products and while something may be truly better, there are so many factors out there that inhibit the establishment and growth of a me-too product, even though it’s better. Users have lots of inertia in products they know; they learn, get used to them, then are unwilling to switch. Users also can’t determine what is truly better or not – when two things work in the same industry or product area, users aren’t going to spend time to dig into every new product’s details to figure out which is better; they don’t have time. In the past, large marketing campaigns to drive awareness could get a new entrant a place in the marketplace, but “firehoses of users” aren’t easy to find or establish to get enough trial such that natural growth of users starts to happen.
Where’s the next big industry creation going to happen?
If i were a betting man, I would say cleantech is the next big area for large scale innovation that creates big companies and factories, that employ a wide variety of skills and skill levels – it’s an area that will require lots of capital to start and get going.
Internet tech only employs a certain type and set of skills – as a veteran of the internet and investor in the area, I still think there will be lots of innovation there, but it will come more slowly and the big returns will become more rare, but lots of smaller companies will pop up. It’s still an interesting area and think it will be for some time. Capital requirements are virtually nil for internet startups now.
Statistics says that Silicon Valley can still drive a large portion of company creation and thus, help in the recovery
I’m biased. I live in the Silicon Valley and in living there, versus visiting elsewhere, I think that innovation and new business creation still happens a great deal in the valley. Why:
1. Even in the economic downturn where we’ll see many of the venture funds die, the greatest concentration will still be in the bay area. No other region in the US can claim the sheer number of funds and greatest concentration of angel investors too.
2. The economic downturn will kill off many dumb ideas and leave the strongest to survive. This puts back a constraint on startups which had gone missing in the boom years: gotta make a great business that can make money. duh!
3. Still people flock to silicon valley to start businesses. This inertia isn’t going to go away instantly. It would require many years of failure to reset this in peoples’ minds that Silicon Valley isn’t the right place to be.
4. Being in the Valley means you are surrounded by tons of other like-minded startup people. It would be hard to find some other place like this, except for perhaps NYC or maybe Boston (even those two would still be dwarfed by the sheer number of people in Silicon Valley). Everywhere else has a much much less dense concentration of people who can help you and who have done it before.
5. I personally still look at deals and those that kind of are sub-standard, I tell them (as does everyone else) to go back to the drawing board and come up with an idea that can make money. This kind of feedback is just one more iterative step in getting people to the right place.
6. So eventually some great ideas will make it through the filter, but you have to wait for time and effort to pay off. Statistics says that the greater number you have to play with, the higher the chance you’ll get something new and big. With the sheer volume of stuff that goes on in Silicon Valley, that says to me statistically that you’ll get a next big idea faster than in any other place in the country.
The next big breakthrough employing 1000s of people won’t happen overnight
I doubt that any idea could move that fast and with the economy so down, it will be even harder to see a company grow to such size in those conditions, even those with some momentum. So in that sense, it may be that the government’s massive infrastructure projects may be the ones that will employ a lot of people in the short term while the other companies fight off their investors by laying off people just so they can get their revenue numbers looking better.
What if we didn’t layoff anyone and just waited it out?
What if companies didn’t sucumb to the pressure – what if they kept paying people but were OK with zero profit? We all know we’ll pull out of this downturn at some point – but we have to make a whole bunch of people suffer by laying them off just so a company can look good to investors. Again, the short term focus will weaken companies and place a lot of good, experienced workers out of work. OK OK I’m not totally correct because maybe some companies will make less than their expenses so they will no longer be break even, so maybe they should cut dumb projects and fat off their staff. On the other hand, we’ve seen time and time again where companies would layoff people in downturns, and then just re-hire them later during good times. We don’t need them – we DO need them – this see-sawing back and forth costs people in time, money, and effort.
What if we just didn’t fire them, made less or zero money, and just waited it out since we would have hired them back anyways?
Another thing I learned along the way: being loyal to a company is a thing of the past. A company exists for the survival of itself; if that means that people should be let go, it will do so in order to survive. It doesn’t care about the people, even though it should. As long as the people help a company survive, it will retain those people. Anybody who doesn’t contribute to its survival get cut. I don’t see people having any say or power in this decision. Thus, we have to prepare and take care of ourselves in case it happens.
People are resilient, and will drive new business creation
In a downturn, people tend to be resilient. I read somewhere that during these times, people start their own businesses because they’ve been laid off, sulk for a while, then pick themselves up and go and start new sustainable businesses because now they are free from the corporate mess to do so, whereas they may not have felt that freedom before….?
Entrepreneurism is under attack
I agree generally with this statement. I think the capital mkts are closed, but only for a while. The evidence is that the recovery steps are taking hold but it will still be a few months before things are more back to normal. There will be a shake out in the venture industry. IPOs will still be tough until SAOX gets fixed, which I heard people are working on.
Education could use some serious improvement in the US. But still many kids come out of college wanting to do a startup instead of taking a corporate job. so while we essentially closed the doors to international talent, I think that there is plenty of talent ready and willing to go with just a little experienced handholding.
Basic research is declining I hear. People aren’t encouraged to take science; they want to make the quick buck so they become stock traders. So less ideas come out that way, but still there are many untapped. I met a guy who had a line to the DARPA funded projects in universities. He raised a small fund to help these projects become real businesses. Real scary star wars stuff he was telling me about. Pretty cool.
The search for exits is a problem for the whole venture industry. Tt does foster this attitude of building a business for the exit and not for sustainability. This needs some re-thinking. I admit I even suffer from exit-itis as an angel investor. But we also need to figure out how investors can profit from supporting a company and being able to cash out their investment.
Silicon Valley downturn not as severe as other parts of the country..sort of
Still lots of wealthy people running around, although a lot of Valley companies laying off 1000s of people. And I think parts of the Valley are experiencing downturns but not all, as evidenced by housing prices, etc. Still, it’s probably not as bad as other parts of the country. But as for contributing to the entire country’s recovery, I think you’d have to make people move to the Bay area to look for jobs, or have those companies expand out to other states to get cheaper labor. One problem is finding skilled workers in the areas that high technology requires in other states. Sometimes, you just can’t find those people there, or get people to move there because the quality of life is not what they want (who doesn’t want to live in California haha?).
I read an article in Venture Hacks about American Apparel. This is the innovation that is required in the US; to stop throwing jobs out of the country and figure out how to do things here, so that we can employ Americans and pay them what we need to pay, but also do it in a cost effective manner to be competitive.
California is well poised to recover
I think California has a great chance to recover by itself: entertainment industry in southern California, tech and other stuff in northern California. As in other years, I think there will yet again be a migration to California to look for fortune, as companies get created and are looking for skilled people, and that will draw skilled people from states where jobs are lost.
Do you agree or disagree?

Should I Go Back and Help Yahoo?

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Earlier this week, a few emails went around the Yahoo Alumni Yahoo Group talking about the recent news about Jerry Yang and how Yahoo was totally floundering and going down the drain. Some of them talked about even going back and helping somehow, although they were quickly retracted in a tone of “that was a really stupid thought.”
In fact, after reading some of the news earlier this week, I too had a moment of “Maybe I should go back and help Yahoo.” It came and went quickly amidst similar feelings surrounding not wanting to jump back into the frying pan to not knowing what I would do once I got there.
However, instead of mocking such a thought, I’d like to put another spin on it. And that’s the fact that we would even have thoughts at all like that.
What was it about Yahoo that would make a whole bunch of us feel like we could go back and actually make a difference? Why would we want to save the company? What could have possibly shaped our feelings and attachments to a place that was our home for many, many years? Why is it so hard to let go?
Yahoo was a unique place. It was like family. It was like a revolution. You bought into it, got emotionally bound to it, and worked your butt off to make it happen. People would applaud the fact that we worked at Yahoo, and we were seen as celebrities of the internet back in the day. We all hung out, we partied, we succeeded and failed and brought it all back from the brink of internet bust.
That’s what makes it hard to let go.
It makes me wonder what we could learn from that experience. After all, wouldn’t any CEO want to create a workforce which, even after they left (or were fired, or laid off), that would want to come back and work there again despite whatever obstacles and turmoil there could be? What could inspire loyalty in a corporation like that, in a day and age where loyalty to a company is disappearing…?

When the CFO leaves…Part II

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Today’s headline from Silicon Alley Insider reads:
Google Disaster: Comscore Reports Awful January
Reading this article (and numerous other articles about slowing Google growth) and watching GOOG drop from its 52 week high of 747.24 to today’s price of 452.31, I thought back to my post from last September, When the CFO leaves… which I posted upon learning that the Google CFO was intending to leave.
I hate making predictions. I hate putting it out there like that because it sucks when I’m wrong. But looking at GOOG today and all the news over the last few weeks about the impending slowdown in Google revenue growth, I cannot help but wonder that perhaps I could be right on this one.
Now, this post is not about Google the company. Google is still a great company and is doing many great things. But as any person who knows anything about stock trading, stock prices are often more reflective of emotion and feelings about the company and not so much actual performance of the company. So we’re talking about sensing when a stock price has peaked and when it’s time to get out of a certain stock.
Who has great “stock sense”, especially the “stock sense” of their own company? The CFO.
Once again, I see the CFO of a great public company get out of a company whose prospects are riding high. But the CFO is a smart guy; he has access to both proprietary information within the company and also tons of analytical information from external sources about the company, its competitors, and the economy, and the opinions of all his buddies in the financial community. This is far more information than you or I could get hold of. Couple that with a great sense for money and he can predict when the stock is going to peak and, perhaps, when he should exit and take the gains off the table.
So when Google’s CFO announced his departure late last year, I could not help but wonder that GOOG was going to take a plunge within a year. It sure looks that way now.
When the CFO leaves, it’s time to sell all your company’s stock…NOW.

One MEEEELLEEEEE-UN Miles

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About a month or so back, I get this message that I just joined the Million Mile Club for American Airlines.
ONE FRICKIN’ MILLION MILES!
My butt has sat in AA plane seats for one million miles since I started flying AA as a kid to today.
On one level, I’m happy about it. I got this little icon on my Exec Platinum card that says 1 Million Miles, and I get lifetime Gold status.
On the other hand, I’m not so sure.
ONE FRICKIN’ MILLION MILES!!!!
One million miles of sitting in back wrenching, trapezoid tightening, swollen leg plane seats whose failing cushions and poor ergonomics challenge any sane person while propping up the chiropractic and inflatable pillow business. One million miles of sitting in seats designed twenty years ago when humans were of smaller stature and now through trans-fat fast food and working out humans are just that much bigger. One million miles of watching security getting beefed up to the point where we’ll have to strip naked soon to get on the plane.
And how many hours spent just sitting in airports waiting…and waiting…and waiting….
But yet, the world is truly smaller. Decades ago, the expense and difficulty of flying made the world seem so much less accessible. Today, I think nothing of hopping on a plane to go to another country, or just cross-US to do some business or visit family or friends. So one million miles of growing, mounting discomfort for one million miles of watching the world grow smaller, more accessible, and less lonely.
To me, this is a potential positive balancing act turned a zero sum game. If we improve all the crappy things about flying, the positives are actually pretty compelling. But no, we get benefits and sacrifice other things for it. It’s really a shame.