“The Segway hasn’t delivered on its initial promise, to put it mildly. There are several reasons why, but one is that people don’t want to be seen riding them. Someone riding a Segway looks like a dork.”—
“We do no market research. We don’t hire consultants. The only consultants I’ve ever hired in my 10 years is one firm to analyze Gateway’s retail strategy so I would not make some of the same mistakes they made [when launching Apple’s retail stores]. But we never hire consultants, per se. We just want to make great products.”— Steve Jobs on why Apple doesn’t do market research - Bokardo
every once in a while I come across a record from a while ago and am blown away. i wonder how it is possible that i did not hear about it when it came out. 3 Rounds and a Sound from Blind Pilot is that kind of a record. it is amazing. give this a song a listen and if you like it, get the record.
i want to thank David Noel (@david) for the tip. better late than never!
It wasn’t long ago when conventional wisdom believed that building software to sell into the education market was really really hard (at best). School budgets are constantly under attack, infinite sales cycles, suboptimal IT infrastructure & connectivity, teacher training…the list goes on and on.
And frankly, many of those issues still exist.
But there are new models & technologies emerging that break through those old rules. The web once again shows us not to paint with a broad brush. So let’s not count out education either. Education is a critical area with enormous potential for innovation.
I’m excited about all of the possibilities. Few thoughts:
0. Impact of open source (software, courses, textbooks)
2. New platforms (ebooks/kindle, iphone, cloud, collaboration, digital music, art)
3. Better informed parents & students (peer produced reviews is starting to happen with college and graduate schools - we need more of this and also would love to see it at the middle school & high school levels. I’ll leave it for another post how i picked my high school and college as a kid)
(it’s just after midnight and I’m starting to fade - pls pardon me as I’m sure I’m leaving out important areas. Please add to this list in the comments and I’ll update this post later)
Many of these new models and businesses do not require a sale to the school or the state. They go direct to the parent and/or the student. That’s a big change and we’re going to see more of that.
Some of these new models are freemium based which make it dramatically easier for the teacher and schools to support.
And some of these new models may require a direct sales effort to the schools. But even that is getting better as everyone involved (teachers, administrators, students, parents) has the motivation to improve our current system and try new things. Plus, more students have computers and schools continue to improve their connectivity.
I’m delighted that our firm, Spark Capital, made an investment in 8D World which is our first portfolio company in the education market. We look forward to making more investments in the future of education so please let us know if you are working in this important area.
“In 1979, Microsoft had 13 employees, most of whom appear in that famous picture that provides indisputable proof that your average computer geek from the late 1970s was not exactly on the cutting edge of fashion. We started the year by moving from Albuquerque back to Bellevue, just across the lake from Seattle. By the end of the year we’d doubled in size to 28 employees. Even though we were doing pretty well, I was still kind of terrified by the rapid pace of hiring and worried that the bottom could fall out at any time.”—Bill Gates: My 1979 Memories - Bill Gates - Gizmodo
“I met up with a few entrepreneurs and investors while I was in town but missed the opportunity to meet with a bunch more that I wanted to see. It’s hard combining work and family vacations. I don’t recommend it.”—
I’ve received a bunch of emails on the subject from entrepreneurs. Can a VC force a sale?
Here’s my thoughts on this rumor and the idea of whether a VC can force a company sale.
Few scenarios to consider (I’m talking about forcing a sale, not blocking a sale):
1. Company raises a relatively small amount of capital and is making some modest or exceptional progress. In this case the VC doesn’t have a the ability to sell the company. They don’t control the board. Also, in a small company like this the founders are the franchise and the acquiring company isn’t going to want to buy a company if the founders aren’t happy.
2 Company raises a relatively small amount of capital and is making zero/negative progress. I dunno about this one either. I haven’t seen this one personally. But I can’t imagine the VCs and founders not agreeing. In any event, small amount of capital = founder control over the board and shares so its’ moot
3. Company raises a significant amount of capital and making little/zero/negative progress. Okay here’s is where it gets tricky. In this case the company is going to need more money. The VCs may be tapped out and there might be little/no interest in the market to funding the company. In this case there could be a way for the VCs to force a sale since a lot of money combined with little/zero progress means giving up control. But this isn’t the Zappos scenario. Zappos is growing fast and making/growing real profits ($40M/year in profits).
4. Company raises significant amount of capital and financially successfull. Okay, we’ve finally arrived. This is the Zappos scenario. Can a VC force a sale? I don’t know the board make up at Zappos so that’s not worth speculating upon.
Conceptually, Sequoia could have had a redemption right that they wanted to trigger — perhaps if this was from a 1999 fund and they needed liquidity (10 year fund life cycle). But first, I don’t know which fund this came from. Second, they probably could have gotten a waiver from their LPs if that was true and third, they could have gotten a buyout from a private equity firm. Again, I’m not sure this was even an issue but given all of those I don’t think a redemption right caused this.
But here’s the real clencher in my mind: watch the Bezos video about Zappos. He is sincerely and completely head over heels for the management team and with good reason. If they didn’t want to sell they would have made that clear to Bezos and the deal would have soured.
Zappos is successful financially and they didn’t need additional capital. The brand is amazing, the service is fantastic and the founders & management are critical to the business.
Obviously I’m not a Zappos insider and there could have been other things on. But I really can’t see how the VCs could forced a Zappos sale at this time.
I went to my boss and said to him, “You know, I’m going to go do this crazy thing and I’m going to start this company selling books online.” This was something that I had already been talking to him about in a sort of more general context, but then he said, “Let’s go on a walk.” And, we went on a two hour walk in Central Park in New York City and the conclusion of that was this. He said, “You know, this actually sounds like a really good idea to me, but it sounds like it would be a better idea for somebody who didn’t already have a good job.” He convinced me to think about it for 48 hours before making a final decision.
So, I went away and was trying to find the right framework in which to make that kind of big decision. I had already talked to my wife about this, and she was very supportive and said, “Look, you know you can count me in 100 percent, whatever you want to do.” It’s true she had married this fairly stable guy in a stable career path, and now he wanted to go do this crazy thing, but she was 100 percent supportive. So, it really was a decision that I had to make for myself, and the framework I found which made the decision incredibly easy was what I called — which only a nerd would call — a “regret minimization framework.”
So, I wanted to project myself forward to age 80 and say, “Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.” I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision. And, I think that’s very good. If you can project yourself out to age 80 and sort of think, “What will I think at that time?” it gets you away from some of the daily pieces of confusion. You know, I left this Wall Street firm in the middle of the year. When you do that, you walk away from your annual bonus. That’s the kind of thing that in the short-term can confuse you, but if you think about the long-term then you can really make good life decisions that you won’t regret later.
I’m pleased to announce that Covestor Investment Management is launching today. Over the past two years, Covestor has been a platform for investors to share their trades and investment performance in an open and verified way. During this time, the site has attracted a vibrant community of active investors, some of which have developed very impressive track records with their own money. In addition, Covestor members have been able to follow their favorite investors and get automated alerts for each of their trades.
Today, Covestor is going a giant step further, allowing users to link their investment account to the system and automatically replicate the trades of their favorite investors in real-time. You can read more about how the system works here.
This is a completely unique system and one that has the potential to significantly disintermediate the investment management industry. It’s a system of full transparency, with no hidden costs or fees, and gives consumers unprecedented access to successful investors and visibility into their decisions.
It’s early days, but it’s welcome news in an industry where over 75% of active funds fail to beat the market. Check it out, or, start building your own track record and followers on Covestor.
“In 2007, after releasing three records with independent labels, Metric, an alternative band from Toronto, finally got several offers from the big record companies. But the band declined to sign after concluding that the labels were asking for too many rights and not offering enough in return.”—Musicians Find New Backers as Labels Lose Power - NYTimes.com
Revised non-compete legislation doesn't go far enough
My partners and I have been pushing to end the use of employee non-compete agreements for some time now.
We passionately believe in this issue and back in late 2007 I wrote that we should end these non-compete agreements. We planned on starting with our firm and then encourage our portfolio companies, entrepreneurs and other VCs to end this practice as well.
Recently the Boston Globe Sunday Editorial took on this issue in their column - Clause For Concern.
I was pleased earlier this year when I was contacted by Rep Brownsberger who was leading an effort for reform on this issue. Rep Brownsberger and a team created House Bill 1794 which as orginally drafted would give employees and employers the same protections that exists in California. I participated in a few sessions and was thrilled with the leadership of this bill. As a result our firm, Spark Capital formally endorsed this bill. I have huge respect and admiration for Representative Brownsberger.
Sometime over the last week or so that bill was modified significantly. The revised draft is on Rep Brownsberger’s website. In our view, the revised changes won’t solve the problem in our humble opinion because they simply don’t go far enough to reform and create real change. We cannot support or endorse this current version.
Here’s the principle changes they made last week:
1. Employees who make under $50k are free of non-competes. If you make more than that you are subject to a non-compete
2. The revised draft requires that employers give advance notice that they will require non-competes in their offer letter.
3. Punish overreaching by employers by awarding attorney fees to the employee whenever an agreement is reformed or found unenforceable.
* * *
1. I don’t understand or agree with this new threshold of $50k/year. It will leave out plenty of entpreneurs and employees.
2. The advanced notice doesn’t help if every MA company requires non-competes.
3. Point #3 puts a huge risk on the entrepreneur/employee on the expense front. Who wants to fund a lawsuit? Even if it’s frivolous. Legal fees are expensive and they create a chilling effect. Why? History shows the MA companies pursue these lawsuits and MA courts enforce non-competes more than more than other states according to a UCLA study.
4. Ultimately we believe (especially in this market) it is simply unfair that employees are getting laid off and still subject to a non-compete agreement. That is a double whammy. If employees are that important to the company then you should keep them or at least pay them to sit out of the market. (again you are still bound by NDAs, NSAs, etc).
5. Opponents for change say that their business will be hurt by ending non-competes in this state. I respectfully disagree. Our company, Spark Capital, doesn’t have non-competes. It doesn’t hurt us. I dont’ see CEOs of Apple, Google, Facebook, eBay, Intel, Broadcom lobbying to implement non-competes in California. Companies in CA are able to hire the best people they can under the law. That level of open competition is a good thing.
CA companies know that innovation doesn’t happen in a vacuum. Innovation occurs in an open market where competition & interaction exists. I also believe that EMC & Akamai would be just fine if for some reason they one day picked up and moved to California. They wouldn’t be harmed by this issue. EMC just bought CA-based Data Domain for billions. Data Domain was able to be successful because of their technology and because they were able to hire the best people they could. That’s how this works.
6. This state needs bigger and more successful companies. We are limiting our potential by restricting the labor market. Bigger companies will help small and large companies as well in the long run.
7. Opponents for this change also suggest that the lack of non-competes is hurting California. California is certainly having their economic challenges but it’s not because of this issue. Otherwise, CA CEOs would be screaming from the rafters. California has a meaningful revenue shortfall and their expenses are beyond their ability to meet them. But keep in mind, they are creating valuable and growing companies of all sizes.
We will continue pushing for signficant reform on this issue. We hope that this bill continues to evolve and returns to the idea of ending non-compete agreements and at the same time protecting companies with other current legal agreements & laws.
We will continue pushing on the grass roots efforts. If you would like to show your sign of support please blog about this, tweet about it, tell your local elected officials, tell your VC, tell your colleagues, tell your CEO and let us know by joining our list of supporters.
I’m very pleased with the group of new startups at TechStars Boston. This is the first summer and these entrepreneurs are working like crazy building their products.
Brad Feld cofounded TechStars and was nice enough to ask me to join as a mentor and investor. I’m very glad I did.
Earlier today, Brad wrote about one of the TechStars Boston companies - Sensobi. I’m really proud of how much Ajay & Andy have accomplished in such a short period of time. They are focused and are extremely passionate about their product & the opportunity.
Sensobi calls themselves a better address book for the blackberry but I think that is an understatement. I think they are also making a dent in the broad inbox problem that we all face everyday.
Here’s a link to our invite code so give Sensobi a try (blackberry users only for now).
Back in March 2008 when Hulu first launched, I wrote this post wondering: "Will Hulu’s Content Owner’s Think Different" (n.b. the grammar was a play on apple’s ‘think different’ campaign). I was concerned about the depth of content and consistency of content.
Since then Hulu has gone from Clown Co to media darling. They defied the typical odds associated with big joint ventures (Movielink anyone?). They recruited a great team, brought on independent investors and built a fantastic product.
But that product is suffering from inconsistent content and business limitations - not technical limitations.
I believe in the future of online video. I believe that YouTube is going to be a big profitable business for different reasons that Hulu’s prospects but successful nonetheless. There will be other winners in online video as well. We are still in the early days of all of this.
Hulu has an amazing opportunity in front of them. They have many of the important ingredients.
Yesterday, TechCrunch shined a light on Hulu’s content limitations. That’s the remaining piece to the Hulu opportunity. Deliver more reliable and consistent content. Open up. Distribute everywhere.
It’s true, CNBC’s traffic is marginally higher than Seeking Alpha. Yet I’m quite sure the costs to run Seeking Alpha is substantially lower than CNBC.
With all due respect, I never check out CNBC on cable or online. I get my financial news from Seeking Alpha, blogs and Twitter.
What will this chart look like 1,2 & 5 years from now. I can’t predict but something tells me the open web will deliver the goods here vs closed world of broadcast television.
So, CNBC may lose analog dollars but digital dimes are important. They are the future.
We need to figure out how to build more successful digital dimes companies. We must realize that the train has the left the station for many businesses in the analog dollars business.
Why? Because it’s possible to compete with those businesses with a free model since the operational costs are significantly lower. And digital dimes companies can be great top line & great bottom line (google) as well as medium top line and great bottom line (craigslist).
Another example, your wireless phone company can’t charge $1.50 for directory assistance. It’s going to be free. Either from a startup or Google or the open web. The cost of human directory assistance and that “old” revenue model & profit is an endangered species.
Bill brings up another point. Not everything needs to go free. Bill cites HBO and the WSJ’s successful subscription models. Bill further suggests the NYT goes the same route. There are plenty of other successful online subscription examples such as MLB.TV, Netflix, WoW, Xbox Live, the list goes on.
We shouldn’t limit ourselves to a tired, old debate that there are only two choices of making money: ad supported (page views) vs subscription.
There are new, proven models that are generating real revenue and real profits in virtual goods & micropayments amongst others.
I like Bill’s post a lot. As he points out there isn’t one way to do this. It is not simply a black and white issue.
One of the best things about online services is the data. The amount of data can get massive quickly.
We all know that data is valuable for a variety of reasons.
But the thing I want to talk about is how that data can make your product better (vs data monetization).
Many web services do capture and record vast amounts of data. But a lot of that data isn’t very helpful. The key is identifying the important parts that can improve your service.
First, if you aren’t capturing that data then get busy and start. I recently met an entrepreneur who created a widely used Firefox extension. But he wasn’t keeping track of any data. He is now :)
Next, find out what data is important. Well, that’s the hard part.
Few examples to consider.
I recently spoke to an executive that ran a successful subscription based virtual word. He told me that as soon as users invested x hours into the product they were subscribers for life. The assignment in their case was pretty clear: focus on user engagement and the business model will compile. Other data was helpful but much less important than getting users to invest time in the game.
Another entrepreneur told me that in his social app, if a user connected with 5 friends then there was a high likelihood they would become highly active. They are working on improving their invite a friend component and friend discovery. Other features are taking a back seat for now.
Yet another entrepreneur told me that reducing the sign up process to a bare minimum, user name and password and nothing else, generated a 3x increase in sign ups. They did a lot of A/B testing of their home page & sign up experience.
In all of these companies the critical data components were different from one another.
A lot of this seems like common sense but it’s a challenge to figure out and prioritize. That’s especially true in a startup where you are chronically under funded and understaffed.
But I encourage you to make the investment & track down the good data and ignore the useless stuff.
(n.b. the entrepreneurs mentioned in this post are not in the Spark portfolio).
Uh-oh. I created a monster with my 4 post (http://bit.ly/i3582) and now all these old dudes are friending me. Oh wait… it’s just @bijan
Still trying to get over that one.
In any case, I’m looking forward to diving into the Foursquare pool. The iphone app gives you control over what goes out over twitter and what doesn’t which is how I hoped it would work.
It’s going to come in handy for our upcoming vacation to Cape Cod next month. My good friend is going to the Cape a few weeks after us. He asked me for restaurant & beach recommendations. I just sent him a note telling him to join Foursquare and then he’s see all of my favorite spots along the outer cape. This friend isn’t into Facebook but he joined Foursquare a few minutes later.
“Walking speed absolutely reflects health status,” Simonsick says. So when you irritatedly blow past a trio of ambling visitors from Ohio or Iowa on the subway platform, you’re not just being an obnoxious New Yorker. You’re demonstrating that you’re going to outlive them—and enjoy better health while they slowly degrade.”—Why New Yorkers Last Longer — New York Magazine