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Friday, March 27, 2009

Google Voice rules

Finally I was upgraded from Grandcentral to Google Voice, and I love it.
The new feature I really like is that I can do international calls from my cell phone through the call back feature: enter the number and you get a call back from Google connecting you to the other party. Very cool.
I was using Jajah for this before, and they have a nice UI, but I was struggling with it because often times it would call me back before the page had finished to reload, and the call would end up in my voicemail, making it really hard for me to. I actually had to make sure to stop the page load right away to avoid the problem, which was a pain. With Google so far, it works much better, the UI is not as nice but it is much faster AND I get access to all my contacts, without having to re-enter the numbers by hand the first time I call somebody and without having to maintain a duplicate address book for the service.
One strange thing still is that I have the option to get a call back to my PC through Gizmo (this is a left over from GrandCentral) but not to Google Talk. I guess this is still a work in progress. And really I do not need this that much at this point, Gizmo work fine with me...
I also like very much the widgets feature, which allow people to call me from my website.
Thank you Google for this great step forward :-)

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Tuesday, March 24, 2009

Blogs for entrepreneurs: Springstage

I have been invited to contribute to the Springstage national startup blog.

SpringStage is a network of community catalysts who are in tune with their local entrepreneurship and startup scenes. The network formally launched in early 2009, as a first step to ensuring that there is a visible resource in every community for early stage entrepreneurs.

Among the founders of Springstage is David Cohen, who is also a co-founder of TechStars, another great resource for entrepreneurs, giving them mentorship and access to funding.

These efforts are very much in line with what Entrepreneur Commons is promoting, and I am happy to be a participant in what promises to be a great network of people bringing real change to entrepreneurs.

My first post on the Springstage National Startup Blog is published here.

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Wednesday, March 18, 2009

Lessons from Jeremiah Owyang and the Mzinga story

Influence is power and it can be abused. Social Media is a star system, and we should be careful not to fall into the trap of following just the most popular blogs.

Reading the recent post from Jeremiah Owyand with an apology to Mzinga, I see more questions than answers:
- how come a respected pro would fall into such an obvious trap, spreading rumors before getting the full facts?
- was it a genuine oversight, or an experiment to test the results of a mistake followed by an apology. It would be a risky proposition but we have seen in the past that apologies are generally well received - Plaxo and Facebook have gone through that cycle and nobody hates them more or less after they have - and it seems to be working here, with a lot of buzz generated for Mzinga without any real damage so far.
- was it inside knowledge that was spread too soon under good intentions and is now being silenced by other forces (like Forrester the company)?

Maybe we will figure out one day. Until then, this reminds me of the day we all woke up realizing that Lonelygirl15 was actually a scripted show. We saw user generated content, until we learned otherwise.
Similarly we see Twitter-hype around one thing or another, and we will never know the real motives behind most of them.
What prevents anybody from putting on a Twitter-show, for the entertainment of his/her followers?

In the end, this star system creates some value and a lot of noise. If we want an electronic version of people magazine all is fine, and if we want information we should make sure we always cross reference with information from other sources, because everybody has their own bias, consciously or unconsciously.

The top guys have the scoops, but they have their own filters (we all need to deal with information overflow one way or another), so sticking to the top 10 is like watching Fox News. Sticking to your own friends may be just as risky. I read 500 blogs, and I read posts that are relevant to my areas of interest regardless of who the author is, and then I also try to stay aware of the context based on who is this author (influence ranking in my case and until we get reputation systems that are context aware and portable across services).

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Our chance for change - Obama says it all: what are YOU doing?

Barack Obama says it all: "We can't go back to an economy based on reckless speculation" and "we must rebuild our economy on a foundation that lasts"

We need to make this happen at our own level if we want this to work, we cannot keep doing business as usual waiting for the government to fix it for us.
What are YOU doing?

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Monday, March 16, 2009

Analysis of the Global Crisis

I just discovered through Reframeit this great blog on the global crisis. It provides a great analysis of what has been happening.
Check it out...

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The rise of business accelerator seed funds

Just read a very interesting post from First Ascent Ventures blog providing some early data on how early stage funds are doing.

I am convinced that early stage funding models like YCombinator and others do work, and with this data we can get a feel for it. The key now is to fine tune the process to find the right balance between the value to entrepreneurs and the return for investors.

I started Entrepreneur Commons to bring yet another option for entrepreneurs, there is also no question in my mind that this type of model is a much needed change in the funding process today. And I was happy to see that Reid Hoffman thinks the same - see his article "Let Our Start-Ups Bail Us Out" in the Washington Post.

The good news is that Angel investment was approximately $20B in 2007 from the numbers I have seen, so now that data is starting to document that the model works, it can attract substantial amounts of money for real change.

2009 is looking like a good year so far :-)

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Obama to unveil proposals to help small businesses

Check the story here - somewhat disappointing so far:

While this is a nice move I am not convinced this will make a huge difference. SBA loans typically still require some guarantee from the borrower. So if my house is worth 30% less than last year, do I still have enough to make a difference for my small business? And while the government guarantees the loans, it does not chance the selection criteria that banks have set, so if I did not qualify last year, I am not sure I will qualify this year.
Also banks typically require that the business has one year track record before considering the SBA loan option, and we still need money to help boost the creation of new small businesses.
The good news is that it is a cheap option for the government since the money will not really be spent unless people try to borrow, bank grant the loans and then only if the business is in default will the guarantee will be drawn from the government account.
The Obama administration had in his proposals $250M to create a network of incubators to help small businesses, where is that money now?

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Wednesday, March 11, 2009

Startups competitions are a lottery

This morning blogs are full of announcement for coming startups competition (see here and here). And while it is always pleasant to see money being thrown at entrepreneurs, I do not believe that this is the best way to help:
The most precious resource for startups is time, and before you rush into one of these competitions you should ask yourself whether it is worth your time. Competitions mean just a few will win, and it is a lottery game because whoever is in the selection committee has their own passions and their own agenda, and you cannot control this.
And then if you get the money, while it feels good you are no closer to getting an actual customer paying for your product or services.
So if you have time for this, fine, but you should not drive your business running from one lottery to the other…

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The cost of VC funding versus debt

Just read an interesting article from "The Vest Pocket Consultant" discussing fund raising in the current economy, and how we are in a buyer's market, people with money have the negotiating power.
One example in the article is the case of a startup that was offered $2M for 20% of the company, and that went public one year later with a $300M market cap.
While $2M for 20% could look reasonable these days, and even though we are talking about a very specific case, it is interesting to consider the cost of money in this example: the $2M worth of stock were valued at $60M the following year, so this is a 3000% interest rate. And then you realize in retrospect that if you can find $2M at 25% or even 30% interest rate, you are left much richer at the end of the game. AND you do not have to deal with people on your board, a higher cost of transaction (stock deals are more complicated than loans from a legal prospective). Unless you do not mind leaving $57M on the table, this is clearly an option worth looking at.
While this is an extreme example, it is always good to keep this in mind...

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Tuesday, March 10, 2009

Don Dodge and the story of Shawn Fanning and Napster

Don Dodge is a veteran of five start-ups including Forte Software, AltaVista, Napster, Bowstreet, and Groove Networks. Don is currently Director of Business Development for Microsoft's Emerging Business Team. He writes a daily blog, Don Dodge on the Next Big Thing.
You can read his full bio here

Don Dodge favorite entrepreneur story is the story of Shawn Fanning and Napster. And what is interesting is that this is a story of too much success too fast.
Napster grew from being an unknown startup to being a major threat to the major industry with over 50 million users in about 7 months time. Don was VP of Product Development during this time.
Don draws a few lessons from what happened, some of which really resonates with my own experience:
- having great vision does not help, if the market is not ready you will go nowhere. And if you are too early chances are the next guy in line is the one who will succeed. I have seen several examples of this. I met an entrepreneur who had an iPhone equivalent 5 years before Steve Job showed up on stage with the real thing. He had investors, customers, but the big Telcos did not care. I talked to these same Telcos after the iPhone was announced and they were still considering the product like a niche that would not go too far too fast. But we are seeing what happens now.
- you need to stay close to your customers, and understand what they are willing to pay for, rather than try to convince them that your solution is going to make a difference. In simple terms, listen. I have seen entrepreneurs show up with a solution, talk to their customers: they had sensed a need, but the solution was not exactly on target, and they came out of the discussion with another solution that the customer was willing to pay for. It works, probably this is the standard process most of the time.
- "test your assumptions before spending a lot of money". This one is always true, but I would add that in the case of Napster they were probably not helped by the fact that VCs got involved. The idea was big, the potential to change the world real, so it was the perfect play for VC investors. But once you get into the VC process, things are different: no need to worry about the money, so you push for the goal as hard as you can, and you have no real incentive to take it slowly, because VCs are on a timeline (need for the biggest possible exit within so many years). If you had no money, you would not spend anything unless you are sure there is a customer in front of it to pay for it. Which takes us back to the previous point.
A current example of this for me is Twitter: this is another world changing idea, powerful enough that it has become a verb (people "twit") but VCs just poured another $35M into it and are happy to say that they do not care about revenue now because they know how to make some when they decide to do it, and until then they want to go for marketshare. Well, how much is Twitter leaving on the table doing this? Are we sure the assumptions on the revenue model are good until we have actually tested them?
- "Provocative challenges make good headlines but don't make good business". This is the bad news with hype, and we see a lot of it in Silicon Valley. Another way to put this is that you should not bother making the headlines until your competition starts doing it. I have seen several "hot" startups make the front page of Business Week, Forbes or other magazines to then blow up in mid-air because they were not selling much and ran out of cash trying to look bigger than they were. For me the key to buzz is to use it only when you start competing with others in front of customers. Then trying to look as big as possible and talking to newspapers or magazines as a way to differentiate yourself from competition makes sense. Before that all you are doing is educating the rest of the world, including potential competitors, but it does not really help close deals and therefore it is a waste of time and energy.

The full Shawn Fanning and Napster by Don Dodge is here

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The Social Media ROI discussion

Just read a post from Faster Future on the ROI for Social Media. This is how I see the issue:

Calculating ROI implies that you have a formula, but as you mention it is hard to come up with such a thing for social media.

What is possible however is to draw from empirical data to get a feel for the type of return you will obtain.

The best I have seen in this area is the essay from Xavier Comtesse on the "Direct Economy", where he looked at how companies were able to improve their productivity by involving the stakeholders in the value chain. And from his studies he came up with the concept of a "value chain 2.0", showing all the possible places where involving stakeholders can save you money while improving satisfaction.
To take an example that is close to home, one of the best thing I have seen recently is what happened with airline and self service check-in: I can now print my boarding pass at home the day before, and then the day of the flight I check my luggage in myself. The result:
- only a few attendants behind the counter
- no more long waiting in lines for check-in
- I do the work, but I am happier

There are many example like this. The key is to remove bottlenecks by providing stakeholders with the necessary information and infrastructure that will allow them to participate more efficiently.

So getting into Social Media should be about a lot more than just pushing content a different way and measure impact. It should be a strategic move into a new way of doing business that has proven to be more efficient and more satisfying for people within your business ecosystem.

So I guess my answer is that Social Media should not be an ROI discussion. If your customer does not think that way, chances are his project will fail. And if he does, it is a different sale, a strategic discussion. Management consulting services rather than marketing services.

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The VC community should have a goal of investing in 50,000 startups

I just read this post on VCMike's blog explaining how good it feels to see VCs investing in innovation, as a bright spot in what is otherwise a dark moment for the economy.
While looking at 10 startups can make you feel good about the quality of innovation in this country, 10 startups are not going to create the many jobs we need.

In another similar post last week in Creative Capital, I read about VCs gathering for the VCIR conference. 300 people total gathered to look at no less than 22 companies as potential investments. Wow!

For comparison, the numbers I have seen on this are that in 2006, approximately $20B were invested by VCs, and the same amount invested by Angels.
With that money VCs invested in 700 early stage companies, and the funding gap was at about $6M (meaning they do not like to invest less than $6M on average)
With a similar $20B amount, Angels invested in 50,000 early stage companies.

This is what we are talking about. Real numbers for real impact. I would love to see VCs consider gearing themselves up to face this kind of challenge...

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Tuesday, March 03, 2009

Entrepreneur Commons in Silicon Valley

In addition to the meeting in San Francisco, Entrepreneur Commons is starting a monthly meeting in Menlo Park on the 2nd Monday of every month. First meeting is next week, feel free to join if you are in the area.

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Sunday, March 01, 2009

Apologies to the people in my address book

I have been experimenting with Unik, and I made the mistake of uploading my address there, thinking it would be a good place to keep it. I just had to delete all uploaded contacts that were not registered with them yet because they keep sending reminders to everybody until they sign up, which after the 3rd time starts feeling like spam... Apologies to those of my contacts who have received such reminders.

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