welcome to SV, DBs

‘That’s why,’ said Azaz, ‘there was one very important thing about your quest that we couldn’t discuss until you returned.’

‘I remember,’ said Milo eagerly, ‘Tell me now.’

‘It was impossible,’ said the king, looking at the Mathemagician.

‘Completely impossible,’ said the Mathemagician, looking at the king.

‘Do you mean –‘ stammered the bug, who suddenly felt a bit faint.

‘Yes indeed,’ they repeated together; ‘but if we’d told you then, you might not have gone — and, as you’ve discovered, so many things are possible just as long as you don’t know they’re impossible.’

— The Phantom Tollbooth

In the startup blogosphere, you’ll regularly see posts about how hard startups are, how hard it is to be an entrepreneur. Mark Suster has an excellent recent entry into the genre, coining the very excellent term Entrepreneurshit. Earlier this summer, Ben Horowitz brought his rapper’s flair to describing The Struggle, a cold and merciless beatdown about a place where nothing is easy and nothing feels right. A few years ago, Paul Graham posted what should have been the definitive piece about What Startups Are Really Like, covering all the high-low points of cofounder conflict, total life immersion, emotional roller coasters, endless persistence, unpredictable customers, clueless investors and heartless luck. But it wasn’t the final word, and it won’t be – why is that?

Dave McClure bends the pattern by noting (blaring, really, in inimitable McClure style) that the passion should be about product, not entrepreneurs. What all the other posts were saying is, Don’t come and try this shite because you think being an entrepreneur is fun, because it’s not. Dave completes the sentence by saying what the passion should really be about: product and customers. It’s a nice continuation of the message to whomever needed to read all the previous entreaties about the pain, the passion, and the not-very-likely glory.

Who exactly are all these posts talking to? To the inexperienced, of course – the battle scarred veterans already know what’s what. But those young tyros, those fresh-off-the-presses CS majors, the hackers, the “design guys,” the would-be world conquerors – all those startup sages want to send a message: think twice before you dive into the deep end of the pool, kiddos. There’s a bit of a concern that an endless horde of former Wall Street DBs will descend upon Silicon Valley, as they have been doing ever since the late ’90s, with their uninformed dreams of being “a startup guy.”

I say, let ’em come. I have no problem with anyone who wants to take the plunge. If you’re even thinking you might want to do it someday, do it now, do it today. I’d rather have you here, facing down those odds, in the Entrepreneurshit, deep in The Struggle, finding out What Startups Are Really Like – rather have you here than constructing a new derivative, grinding it out for the man, toiling away while wondering if this is really all there is to life. Never mind the fact that it’s completely impossible; that’s only true for those who listen to the misguided wisdom of their elders.

start me up

A couple of months ago, a good friend was talking to me about the differences between most people and “entrepreneurs like us.” I had to recoil at the phrase. He’s a real entrepreneur – founded a couple of successful companies, working on a third, constantly driving and innovating and dreaming and creating. At my best I never reached his heights. I’d been a “startup guy” for a dozen years, and proudly wore that badge – as a startup lawyer learning business basics, boardroom battles, and founder secrets; as a venture capitalist investing across sectors and geographies; as a startup manager in multiple different roles and companies. When I finally founded my own company, I felt I could finally accept the label entrepreneur, and it felt great. But it didn’t last very long. I’d accepted a job at a large company not too long before that conversation, so “entrepreneurs like us” couldn’t include me anymore.

I’m not too flexible about the term, unlike those who believe in four types of entrepreneurs. I think an entrepreneur makes a for-profit business that didn’t exist before, without the benefit of existing infrastructure. That rules out what some call social entrepreneurship, because working for nonprofit good is too different than pursuit of viable commercial enterprise. And it rules out corporate entrepreneurship, because starting a new division or business line for an existing company is very different from starting a company from a cocktail napkin.

I said different – I didn’t say harder or more admirable. The numbers probably say that social and corporate efforts are harder, as there seem to be more new companies than there are new social efforts or successful businesses started within large companies.

I’ll differentiate some more: Although I’d include both the fruit stand owner and the tech company titan within my view of entrepreneurs, I don’t think they’re the same in most ways, even at their respective starts. Fruit stands aim for some daily living, selling a well-understood product, within a social infrastructure that understands and supports the concept of buying and eating fruit. The most extreme tech founder dreams of all the money imaginable, with a product that initially seems bizarre, with no apparent revenue model, distribution channel, or plausible customer interest. Although these two kinds of people have something in common, they have a lot more differences. So “entrepreneur” isn’t a binary label – it’s possible for one entrepreneur to be more entrepreneurial than another. Labels are most useful when we use them to distinguish and measure concepts. I don’t like seeing a meaningful word diluted to appease egos or ease conversation.

Because the company I work for now is fairly well known, I should doubly-triply-quadruply emphasize that this is all my opinion, and moreover it’s my opinion about me. I can believe that for many entrepreneurs, coming to Google doesn’t mean that your days as an entrepreneur are over – those entrepreneurs are more entrepreneurial than I ever was, which I’ve admitted isn’t a high bar.

And although I’m still a startup guy at heart, I can believe that Google can in important ways return to its startup roots, even though I’m naturally inclined to disbelieve that a large company can have the “energy, pace and soul of a startup.” But I’d say that you have to measure the energy and pace in the context of the scale of the ambition. People who think that Google is slow or that the competition is anything other than the unknown future are probably underestimating the enormous opportunity remaining in the information economy.

Ah, but that last bit, the “soul” of a startup … what does that even mean? That’s tricky, and probably the topic of another post.

a brief history of failure

VentureBeat was kind enough to publish a piece I submitted to their Entrepreneur Corner, under the title “How to make your startup succeed where others have failed.”  That’s a good title, by a smart editor who knows what people want to read.  I actually submitted a more modest title, “A brief history of failure” – because I’m actually not so sure I know how to succeed where others have failed.  I’m just saying that a history of failure in something you want to do isn’t a reason to stop trying.  Please go give it a read and comment there if you like!

the double back theory

I have an old friend who swears by The Double Back Theory, which basically goes like this:  Any important revelation will immediately strike you as obvious and true, but because its significance lingers with you for years, you will have too much time to develop alternatives and corollaries that overcomplicate the picture. Nevertheless, if you keep on thinking about the central idea, you will inevitably double back to your original revelation as the most profound revelation.

Today’s example: The Internet is a new platform for consumer media. That’s a striking revelation . . . in maybe 1994 or perhaps as late as 1998. This may be hard to believe today, but there was a time when it was revelatory to describe the Internet as a new form of popular media, rather than as a niche technology.  Today most people would declare the Internet as the second most important form of media (behind TV).  It seems so obvious now that the Internet is a consumer media delivery system.  And yet, it’s easy to find ways to overcomplicate this simple picture.

Take for example the argument over whether The Web Is Dead. Putting aside the easiest objection – that many claims of death are exaggerated – the thesis basically says that “the Web” was supposed to be this great open playground that changed the world forever, but a variety of closed systems now threaten the promised paradise. We are supposed to get hysterical over the idea that content that was free on the Web will not be free forever, and that there will be special access channels that only some people will be able to afford.

But the Web isn’t dying, it’s just evolving the way that consumer media have always evolved.  The history of consumer media is littered with similar patterns of free and paid content, amateur and professional content, sponsored and bought content. There are many examples where a new medium was popularly established with free content, and evolved into a tiered system of both free and paid content. Look at television – once it was free (i.e. ad-supported), then cable TV came along with both an ad-subsidized paid model (basic cable) and an ad-free paid content model (e.g. HBO, PPV).

The same thing is happening with this wondrous new medium of the Internet, and the most wondrous thing of all is that anyone thought it would be any different.  The Internet is wonderful and has changed many things in the consumer content landscape, in terms of interactivity, variety, engagement, and low production and distribution costs. But one thing it hasn’t changed is that consumer media, as a whole industry, will always trend toward payment for quality content, and toward concentration of media power in the hands of a relatively small number of players.

I wish that weren’t true, but it is true today and will always be true for as long as we remain human beings.

We like to think that technology frees us from the scarcity-based economics of the past.  And it’s true that changes in scarcity can free up new business models.  But there is no kind or amount of technological advancement that can eliminate scarcity in two areas:

  • Quality. Quality content is by definition scarce: no matter how great the aggregate improvement in overall quality, there will always be some portion that is better than the rest. The development and application of new technology to content only heightens the divide, not flattens it – because the quality of the content includes not just artistic merit but its presentation and convenience to the consumer.
  • Attention. Human attention is limited, both in the aggregate and for any individual. No matter what automatic aggregation, filtering, or curation tool is ever developed, we can’t radically increase the finite amount of real human attention for consuming media. Even if we develop technology that actually stops time, our biology dictates a finite attention span – there’s only so many hours of media a brain can absorb in a day, no matter how long the day is.*

Since quality is scarce and attention is finite, there will always be an opportunity to charge money for the best content – and since this includes charging for the best quality presentation and delivery, it means that there will necessarily be a two (or more) tiered Internet. You can call it surrender, you can call it the death of the Web, you can call it whatever you want – but recognize that it’s progress, it’s evolution, it’s the future as well as the past.

——-

On a related (and more obscure) note, lately there’s been a lot of conversation about the evolution of certain parts of the venture capital business. I can’t do the whole conversation justice – but basically the narrative is that there is a new mode of investing in the consumer Internet sector, with smaller but smarter initial investments, giving rise to an expanding birthrate of web startups, and raising the specter of a seed investor bubble.  Again I’d ask, should we try to understand all this as a new phenomenon, or is this just a different variation of a familiar pattern?

Consider that a lot of “Consumer Internet” is no longer mostly about technology development, it is about media content development. From that perspective, a lot of the shifts in venture investing are about a certain class of savvy investors becoming media investors instead of technology investors. They’re not evolving to some kind of new model of investing, but cycling into the model of investing that you see in more mature content production businesses.

I think that consumer Internet investors will become more and more like television producers and financiers, and less like “hard” technology investors.  If that’s right, you’ll stop seeing conversation about equity vs convertible debt, and will instead see a move toward the revenue-sharing model that is common in the TV and movie industry.

Some people will regard this theory as idiotic, controversial and even demeaning (if you think being a TV producer is worse than being a VC), but for me it’s just doubling back to the basic insight that the Internet is a new platform for consumer media.  Now that the original mid-’90’s revelation has come true, you can expect that the investment economics will repeat old patterns more than they create new ones.

——-

* I realize that there are people who believe that in the future, technology could enhance brain function as well as create endless renewable energy – making essentially limitless time and capacity to enjoy leisure activities, including consumption of media.  Without opining on the likelihood of that future, I’d just note that it’s a future in which we are no longer human, as we understand humanity today.

launch PR: New York Times vs TechCrunch

This post is inspired by a similar post by Udemy – I’m trying to add useful information for all the folks who are working hard and trying to get their products noticed.

Bynamite | Internet By The PeopleWe launched our beta product at Bynamite about a month ago, and were lucky to get covered in the New York Times.  I wish this post could be about “How To Get Covered in The New York Times,” because that would be some really valuable information for the startup community.  But we were simply very lucky – a friend introduced us to a potential business partner who was really interested in our story, who introduced us to the Times reporter, who had been thinking and writing about related issues for a long time.  Everyone in the chain was very thoughtful and patiently dedicated to understanding what, if anything, is interesting about what we’re doing.  Sometimes the pieces just fall into place, and that’s what happened here.

Before that series of fortunate events, we had been preparing a more traditional scrappy startup PR strategy, which I learned from the interwebs.  Balsamiq‘s marketing advice and launch homework are invaluable; in particular I was focused on the 10 PR tips from Weebly.  We had identified about 45 blogs, big and small, that I intended to contact one by one, with the holy grail being coverage in one or more of the major tech blogs – TechCrunch, Mashable, ReadWriteWeb, GigaOM and VentureBeat.  Just as I was starting to reach out to the list, the Times reporter confirmed that his story was very likely to go forward in the Sunday business section.

At that point, we had a decision to make.  On the one hand, the TechCrunchosphere is the place to launch consumer tech products – the audience is intelligent, opinionated, and early adopting.  This is an audience that understands that startup companies launch “unfinished” product.  It’s not a good idea to get mainstream press before your company is really ready for it.  On the other hand, our product goes contrary to the tech orthodoxy that had largely proclaimed that no one cares about privacy.  Would TechCrunch readers be the wrong audience for our more mainstream message?

Although these are complicated concerns, we didn’t take long at all to decide, and we were swayed for one irresistible reason: it’s the New York freaking Times!  As much as I’m with the punditocracy that declares newspapers dead, I just couldn’t help myself – I grew up reading the Times, and I really wanted to see if we could get in the paper, the good ol’ physical, dead-tree paper.  So we saved the blog efforts for a later time – hopefully after we’ve learned our lessons from the beta and are ready to relaunch with a more complete product.  It’s sort of a topsy-turvy press strategy, and there’s probably a whole ‘nother post in whether or not it’s stupid, but that’s not the point here.  The cool thing today is that we get to compare results from different PR launch paths.

Here’s the Visits graph from Udemy’s launch:

Udemy Screen-shot-2010-05-24

Here’s a similar graph from Bynamite’s launch:

Bynamite Screenshot 2010-08-13

Here’s the referral chart from Udemy:

Udemy referral chart

And the corresponding chart from Bynamite:

Bynamite referral chart

Now, the point here is NOT to say that Bynamite PR is any better or worse than Udemy PR!  That kind of comparison would draw all sorts of wrong conclusions, not least because I’ve cheated here by including 30 days of data to Udemy’s 23 days.  Also, note that Bynamite is a browser extension that records a page view when the extension bar pops up (that’s why the Avg. Time on Site is absurdly high).  Different products are going to have lots and lots of reasons for different metrics.

But the conclusion I’m willing to draw is that getting covered in the Times is roughly equivalent to coverage in the major tech blogs.  Not an order of magnitude higher, and certainly not smaller.  So for anyone hoping to confirm the relevance of mainstream media, I suppose that’s a victory of sorts, though it’s just as accurate to be amazed that media sources that barely existed 5 years ago are now equivalent to the “paper of record” that’s been around for 150 years.

It’s also interesting to note that both Udemy and Bynamite got a secondary bump 5 or 6 days after the original coverage.  In Udemy’s case, that bump exceeded the initial coverage, and was almost entirely driven by a mention in one source, Thrillist.  Bynamite’s secondary bump was smaller than the first, and was a result in pickup by many smaller sites that focus on covering downloadable apps.  Also like Udemy, our traffic has settled down to a much quieter pace, though significantly higher than the near complete obscurity prior to the press coverage.

I’m still digging through the details – and by the way, could use some help, if anyone reading this wants to drive through Google Analytics with me, let me know!

burn this

Newspapers are dying, as any media observer could tell you.  But I don’t get the strident call to “burn the boats,” as Cortés supposedly did when he conquered Mexico for Spain. Never mind that the legend never happened, this advice doesn’t make sense in light of the beliefs of the people saying it.

Boat-burning advocate Marc Andreessen understands disruptive innovation as well as anyone.  At the very core of the startup culture that Marc helped create is a belief that small companies in the aggregate have a huge advantage over incumbents for bringing disruptive innovations to market.  A big company can’t become a small startup simply by destroying its current revenue model and firing all its employees – that would only result in a burned out shell, not a new startup.  A new startup can only be formed by innovators coming together to form a new company.  I realize there are exceptions to these statements, but they are very few and far between.  So “burning the boats” is statistically likely to be an exceptionally bad strategy for newspaper companies.

Tech writer Erick Schonfeld says it’s hard to watch the newspaper industry die slowly, noting that it could take decades for the newspaper industry to dwindle from $30 billion dollars a year down to nothing.  But Erick’s been covering startups for over 15 years, he’s seen successful startups kill the dinosaurs time and time again.  Like all of us in the startup world, he celebrates the success of startups against incumbents.  I don’t get the lamentation here – is it because the bedside deathwatch is comprised of relatives of the victim?  Who is burning the boats supposed to help, the dying incumbents or the anguished observers?

Given that the startups are going to beat the incumbents anyway, there’s nothing wrong with newspapers dying slowly.  Twenty years of slow death isn’t preventing innovation – all the innovators are outside the incumbents anyway.  But inside the incumbents are real people, hundreds of thousands of people who depend on their dying jobs to feed their families, many of whom aren’t going to succeed on the other side of the disruption.  Is there something wrong with letting those people eke out another twenty years of dead-end jobs?

This isn’t soft-hearted humanitarianism.  My heart’s hard enough to admire a capitalist system that sometimes causes individual misfortune.  But my point here is that the slow death of newspapers is an example of capitalism working correctly.  Big-footed incumbents are supposed to lose to startups.  Large companies are supposed to cling to their dying revenue streams while nimble competitors bring innovation to market.

Investors in those large companies have already “priced in” slow death – the stock price reflects the conventional wisdom that these companies will slowly go out of business.  The stock price for public newspaper companies most certainly does not price in a “burn the boats” strategy, which would result in irresponsible destruction of shareholder value, as well as damaging all those jobs and lives.

This is actually a place where brutal capitalism and soft-hearted compassion have common ground.  Newspapers are dying and no one is going to do anything about it.  For the love of humanity and capitalism, just let ’em die a slow death.

twitAARRR

People are talking about a report that Twitter has a low proportion of “active” users.  I saw a similar debate rage a few years ago around the definition of users of Second Life.

Amusingly (and presumptuously), today’s report claims to define “True Twitter users” as active.  They say that a True Twitter User has at least 10 followers, follows at least 10 people, and has tweeted at least 10 times.

Why should we accept this definition?  Analyses like this often come from a position of functional ignorance.  I believe that only the company can have a “Truly” meaningful definition of “active” users, and there are often good reasons that the company shouldn’t waste time debating this definition with external observers.

This is especially true when a company has an evolving revenue model.  In those cases, “active” is only meaningful in the context of a business model cycle that some people call “Startup Metrics For Pirates” because of the acronym AARRR:  Acquisition, Activation, Retention, Referral and Revenue.  “Active” is the second “A” here, and what matters in the definition is that customer acquisition efforts lead to active users, who participate in activity that they want to repeat and tell their friends about, which ultimately results in the company getting paid.

So if Twitter had zero customer acquisition costs, and tweeting was both addictive and viral (obviously, none of these things are strictly true), then the only definition of “active” that would matter is “user who tweets once.”  Or, if Twitter charged only users with 100K followers, and only users who had 100 followers in the first month ever get to 100K followers in their lifetime (again, not true), then the active user definition might be “user with 100 followers in first month.”  My dumb revenue models here are not the point; the point is that “active” only has meaning in context, and only the company understands that context, especially in a pre-revenue company.

Twitter, rather famously, has not publicly settled on its revenue model.  Undoubtedly they have dozens of ideas, and so they have many dozens of potential definitions of “active” – and they’re not obliged to share any of those ideas with you or me.  They don’t need to waste time with ignorant and disinterested people (myself included):  it’s no use picking over these definitions with people who are not deeply invested in the business (as employee or investor), and who therefore lack the information and commitment required to contribute productively to the discussion.