The Enterprise 2.0 conference is almost over, and the lesson from this year is that all this is still a work in progress. Lots of vendors selling similar things, a few of their customers to explain what has worked for them, and consultants trying to sort it out.
The premise of the conference (from what I have seen) was to ask vendors to submit case studies that could be presented to the world. And this is what you get: stories from vendors, through their customers, on the benefits of Web 2.0 technologies used within the enterprise. This is all nice and good, but not really enough to establish a solid model on how to make change happen. And clearly not enough to make a real difference. I have talked to several people who were at the conference 2 years ago or last year and expressed frustration that not much has changed.
And why is it not different? Because the real answers cannot come from an Enterprise 2.0 show, or a Web 2.0 show for that matter. Even though technology is what enabled change, and created the opportunity for the discussion we are having now, the real issue is societal, sociological and political before being technological. It is the issue of power, control and the relationship between an individual and the ecosystem at large. It is not software vendors or their customers who initiated the change, it is the Open Source community who demonstrated that it was possible to build very complex system from a very un-formal organization. And it is users who are now defining usage and processes that can then be formalized into products.
Enterprise 2.0 will be driven by users learning what works and what does not, driving a shift in how organizations are run, first on smaller projects and probably outside core business, and then slowly percolating into the Enterprise.
So I expect a lot more from the Participation Camp (Change the Rules) coming up at the end of this week in New York city. An Unconference driven by users to resolve issues related to the balance of powers. Hopefully a place where the current power structures are challenged through discussions, and where the lessons from existing successes can define how we can work tomorrow...
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Friday, June 26, 2009
Wednesday, June 10, 2009
My take-away from the Online Community Unconference
I was at the Online Community Unconference today (#OCU2009 on Twitter), and this is a first braindump after the event:
- the main concerns expressed by community managers there at the beginning of the event were: what metrics to measure the health of a community? how to get people to engage more? how to get quality content?
So it seems that a lot of people there were still in the learning phase when it comes to managing online communities.
- also of note, a very strong presence from the Yahoo team, looking for answers on how to manage herds of "passionate" (or did they say "angry"?) users when you are planning to shut down a service
From the sessions, it was clear to me that we are still in the very early days of the web as a communication platform:
- People are struggling with discussions that are scattered, the distribution of the content is easy and wide, but cannot really be controlled and it is not easy to track where the discussions are happening around that content once it has gone outside of its original published space.
- Individuals have mixed feelings about their online profiles, and how to fit their personal life next to their professional life.
- And finally it is not clear where all this is going as we have not gone through a complete cycle. There is still a lot of "new and exciting" effect on Twitter for example, along with user's fatigue for some of the early adopters.
One person mentioned how she twitted about renting a GM car this morning to go to the conference and got 2 tweets back: one from the rental agency and one from the GM product manager for that car. While it is a great story, how long can this last that the PM for the car can actually track you down to talk to you when you tweet?
So the value we see today may not be sustainable over time.
For me, I see 2 trends:
- on one side, people realize the value of the wide distribution of content, through the many services that we know: Facebook, Twitter, Friendfeed, etc... It allows access to info that would not be available otherwise, and it gives a voice to stakeholders that could not be heard before. They also realize that since there are many of these services, plus blogs, plus forums, we have to deal with a distributed network of people and content, and this is not going to stop anytime soon. We need technology (at the infrastructure level) to better manage these distributed networks.
- on the other side, information overload combined with the fact that there is only 24 hours in a day forces users to limit over time what they pay attention to. The key then is to find the lens you should use: group of key people you follow and interact with. So to manage better what we pay attention to, we have to move towards a closed network - closed as in: limited to people we trust, whether it is at the personal level or at the content level. We need technology (at the personal level this time) to better manage these closed networks (lenses).
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- the main concerns expressed by community managers there at the beginning of the event were: what metrics to measure the health of a community? how to get people to engage more? how to get quality content?
So it seems that a lot of people there were still in the learning phase when it comes to managing online communities.
- also of note, a very strong presence from the Yahoo team, looking for answers on how to manage herds of "passionate" (or did they say "angry"?) users when you are planning to shut down a service
From the sessions, it was clear to me that we are still in the very early days of the web as a communication platform:
- People are struggling with discussions that are scattered, the distribution of the content is easy and wide, but cannot really be controlled and it is not easy to track where the discussions are happening around that content once it has gone outside of its original published space.
- Individuals have mixed feelings about their online profiles, and how to fit their personal life next to their professional life.
- And finally it is not clear where all this is going as we have not gone through a complete cycle. There is still a lot of "new and exciting" effect on Twitter for example, along with user's fatigue for some of the early adopters.
One person mentioned how she twitted about renting a GM car this morning to go to the conference and got 2 tweets back: one from the rental agency and one from the GM product manager for that car. While it is a great story, how long can this last that the PM for the car can actually track you down to talk to you when you tweet?
So the value we see today may not be sustainable over time.
For me, I see 2 trends:
- on one side, people realize the value of the wide distribution of content, through the many services that we know: Facebook, Twitter, Friendfeed, etc... It allows access to info that would not be available otherwise, and it gives a voice to stakeholders that could not be heard before. They also realize that since there are many of these services, plus blogs, plus forums, we have to deal with a distributed network of people and content, and this is not going to stop anytime soon. We need technology (at the infrastructure level) to better manage these distributed networks.
- on the other side, information overload combined with the fact that there is only 24 hours in a day forces users to limit over time what they pay attention to. The key then is to find the lens you should use: group of key people you follow and interact with. So to manage better what we pay attention to, we have to move towards a closed network - closed as in: limited to people we trust, whether it is at the personal level or at the content level. We need technology (at the personal level this time) to better manage these closed networks (lenses).
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Friday, June 05, 2009
Why Google Wave will take a long time before it takes off (if it ever does)
So now we have seen the feedback of developers who got early access to the system, and we know it is real, they report that it is working just like shown during the demo. Great!
Now I hope I can be proven wrong but I see one big issue in this rollout, and it is the same issue I have seen with Google FriendConnect, which is an excellent concept but does not seem to be taking off as much as I would have hope too. And the issue is that they failed to provide developers with a real incentive.
Unlike with the iPhone, which comes with the iStore where developers have some hope that they can make money, and a few well advertised successes have proven that it is possible, where is the money in building Google Wave gadgets or extensions?
What we have now is a great technology, that will for sure be used by at least a few, but there is no way anybody can justify spending too much time integrating the technology. So it will be done on spare time, as a nice to have, or maybe by startups looking to ride that Wave of hype. But this is not how we are going to see massive adoption anytime soon.
Google makes money selling ads, but they have forgotten that the rest of the ecosystem does not, and developers still need to pay the rent at the end of the month. And while many developers do not make money in the Apple Store, at least we have seen it happen that you can win the lottery if you try.
I hope that we will see a Gadget store at some point, or some other real incentive for developers, as I am sure that it would make a difference in the adoption of Google Wave. And I would love to see Google Wave succeed...
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Now I hope I can be proven wrong but I see one big issue in this rollout, and it is the same issue I have seen with Google FriendConnect, which is an excellent concept but does not seem to be taking off as much as I would have hope too. And the issue is that they failed to provide developers with a real incentive.
Unlike with the iPhone, which comes with the iStore where developers have some hope that they can make money, and a few well advertised successes have proven that it is possible, where is the money in building Google Wave gadgets or extensions?
What we have now is a great technology, that will for sure be used by at least a few, but there is no way anybody can justify spending too much time integrating the technology. So it will be done on spare time, as a nice to have, or maybe by startups looking to ride that Wave of hype. But this is not how we are going to see massive adoption anytime soon.
Google makes money selling ads, but they have forgotten that the rest of the ecosystem does not, and developers still need to pay the rent at the end of the month. And while many developers do not make money in the Apple Store, at least we have seen it happen that you can win the lottery if you try.
I hope that we will see a Gadget store at some point, or some other real incentive for developers, as I am sure that it would make a difference in the adoption of Google Wave. And I would love to see Google Wave succeed...
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Friday, May 29, 2009
Google did it again... Brilliant!
Clearly it is too early to tell whether it will take or not, and a lot will depend on how mature what they presented really is. But in the concept, this has far more potential than anything they have presented so far. Introducing conversations as objects and offering this new open communication protocol is like offering us a whole new web. If their offer takes, the launch at IO2009 will officially mark the beginning of a web 3.0, and everything that has been done so far in this area will have to adapt or look old = the stuff from before Google Wave.
If anyone can succeed at this game, it is Google. Just like with the iPhone, that only a Steve Jobs could bring to the world, they have enough brand equity in the developer community that they can make it work. And contrary to the Google phone, this is true innovation, not a me-too of something that has been done before.
And my take is that it will succeed:
- The web needs something like this: Twitter, Facebook, and companies like blueKiwi in the business world, have clearly demonstrated that there is demand from users for a new type of communication.
- It is an open system, so if it helps there is no risk at adopting it. They have elevated the discussion by bringing it into the open. Beside ignoring the whole thing, which is always possible, the only other option now is to come up with another similar protocol to attempts to resolve the same issue.
It will be interesting to watch how this will unfold...
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Thursday, May 28, 2009
Friday, May 01, 2009
OpenGoo - complete web office - Open Source!
I just discovered this (thank you Benjamin), and it seems to be a great solution for online collaboration (back end) if you want to build your infrastructure on Open Source rather than Google: http://opengoo.org/
From the demo, it seems to be an equivalent for Google Apps, and you can get the hosted version if you do not want to deal with install etc... But it is also something you can install on your own if you want to. A nice complement to Drupal, so that you can now have both the front end and back end on Open Source infrastructure. I also found people who are using it for their business and they love it.
I have become concerned with the fact that more and more of the infrastructure I use is Google, and it was a relief to see that there is an alternative. Maybe something you will like for your own needs...
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From the demo, it seems to be an equivalent for Google Apps, and you can get the hosted version if you do not want to deal with install etc... But it is also something you can install on your own if you want to. A nice complement to Drupal, so that you can now have both the front end and back end on Open Source infrastructure. I also found people who are using it for their business and they love it.
I have become concerned with the fact that more and more of the infrastructure I use is Google, and it was a relief to see that there is an alternative. Maybe something you will like for your own needs...
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Wednesday, April 01, 2009
New Territories - new currencies
I discussed in a previous post presenting Xavier Comtesse work on the matter how New Territories are emerging as a result of the disconnection between the business layer and geographical limits as defined by nations or other governmental entities.
Related to this trend, it is interesting to see now more and more projects around the concept of virtual currencies.
We have the real world, and then we have the virtual world. And there is a lot of value which is being created in this virtual world which is not accounted for. And this is creating a problem, because free work or unaccounted value does not pay the rent.
One way to account for this value created online is reputation, which you accumulate as you provide good service on eBay. This value can result in more sales for yourself.
Another way to account for value creation are the point you accumulate when you contribute to a project on FairSoftware.
These points allow you to get distribution of revenues once the sofware you have built start generating cash.
And if you go further deep into the virtual, you have virtual currencies in games, where you can buy or earn points. If these games are MMOs then these points allows exchanges. Some virtual goods are purchased and sold for real money.
Back to the real world, there are also local exchanges in a few places, where the local currency enables bartering of goods and services between the people within a community.
All these things have in common that the virtual currency used represents a contract between members of a given community, whether it is a local community or an online community. These virtual currencies define an ecosystem.
So looking back at territories and the various layers within which each of us function, it would make a lot of sense to start accounting for all value created online through virtual currencies that could enable trades and bartering within people. So if I belong to several social networks, and live and work at the intersection of several ecosystems, I would accumulate real dollars from my activity, or points that I could use to get goods and services from and by other members of these ecosystems.
Today virtual currency platforms like Twofish or OfferPal are targeting the gaming industry, because this is where the work done can be monetized. And then there is one very interesting experiment with Twitter and twollars, allowing users to give each other points for valuable contributions.
The technology is available to manage these virtual currencies, and it will be interesting to watch how far we can take this concept on the business side.
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Related to this trend, it is interesting to see now more and more projects around the concept of virtual currencies.
We have the real world, and then we have the virtual world. And there is a lot of value which is being created in this virtual world which is not accounted for. And this is creating a problem, because free work or unaccounted value does not pay the rent.
One way to account for this value created online is reputation, which you accumulate as you provide good service on eBay. This value can result in more sales for yourself.
Another way to account for value creation are the point you accumulate when you contribute to a project on FairSoftware.
These points allow you to get distribution of revenues once the sofware you have built start generating cash.
And if you go further deep into the virtual, you have virtual currencies in games, where you can buy or earn points. If these games are MMOs then these points allows exchanges. Some virtual goods are purchased and sold for real money.
Back to the real world, there are also local exchanges in a few places, where the local currency enables bartering of goods and services between the people within a community.
All these things have in common that the virtual currency used represents a contract between members of a given community, whether it is a local community or an online community. These virtual currencies define an ecosystem.
So looking back at territories and the various layers within which each of us function, it would make a lot of sense to start accounting for all value created online through virtual currencies that could enable trades and bartering within people. So if I belong to several social networks, and live and work at the intersection of several ecosystems, I would accumulate real dollars from my activity, or points that I could use to get goods and services from and by other members of these ecosystems.
Today virtual currency platforms like Twofish or OfferPal are targeting the gaming industry, because this is where the work done can be monetized. And then there is one very interesting experiment with Twitter and twollars, allowing users to give each other points for valuable contributions.
The technology is available to manage these virtual currencies, and it will be interesting to watch how far we can take this concept on the business side.
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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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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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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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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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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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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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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 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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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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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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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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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.
http://www.entrepreneurcommons.org
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http://www.entrepreneurcommons.org
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