(shameless plug: May 12 SMASHsummit.com social media marketing conference - get a 20% discount at bottom of this worthless & wildly speculative post)
For everyone out there wondering if i'll ever return your phone calls or emails, my apologies... i have a bunch of rather significant not-quite-finished projects on my plate right now, along with the usual deals & events & insanity. Blogging has taken a back seat as well, but i've been meaning to write this post ever since coming back from Austin after an amazing all-night jam session with GaryVee until around 7am at SXSW. since my kids are sick & i'm procrastinating doing my taxes until the last minute, now is as good a time as ever to blast out this stupid little piece of navel-gazing. so have at thee...
for all u nosebleed-valuation VCs jockeying to finance the dorky geniusues at FourSquare, GoWalla, MyTown, and every LBS vendor / app developer out there, it's time to face the music. while i admit everyone at SXSW (including me) was tweet-whoring themselves all over Sixth & checking-in like a sex worker at a Fuller Brush convention, let's not delude ourselves -- the current method of check-ins is a classic case of early-adopter lust for shiny objects, & has not a damn thing to do with long-term sustainable mainstream consumer behavior. no way any normal motherfucker is gonna do this check-in shit.
Without financial incentives or discounts, there is absolutely no reason on god's green earth to "check-in" for your stoner cousin, your luddite penny-pinching aunt, and certainly not your clueless grandmother. they could give a rat's ass about your stupid little iPhone app with the pretty pictures and clever auto-discovery that barely works while draining the hell out of the battery... that is, until you give them $5 off their next beer or 5-dollar foot long.... at which point guess what?
while there may be ways to s[t]imulate financial incentives & discounts with virtual goods, frequent flier miles, or other point-based systems & psychological motivations, nothing works better to increase conversion than a cool $5 bucks in yr digital wallet, or 20% off yr next offline purchase.
if you don't believe me, go take a look at the history of PayPal jump-starting initial account signup incentives with $5 discounts for joining, referring friends, and entering profile & bank info. while arguably the payment friction on the eBay marketplace created enough motivation to use PayPal even without financial discount incentives, the company used this tactic for years to increase user growth and get to such substantial critical mass that it couldn't be displaced even by eBay's own internal payment system. and PayPal certainly didn't have any fancy game mechanics to get people to use the product (altho i will admit we had some pretty sweet blow-yer-jedi-mind tricks for getting people to enter bank acct info, thereby reducing transaction costs by avoiding credit card processing systems & fees).
So STFU already and gimme the $5, or get your stoopid game mechanics out of my face and go home.
I'm surprised everyone is paying through the nose for such anemic LBS growth rates over the past year. let's compare that with Facebook rocketing to over 400M+ users globally in the past year, and 100M+ users in the US. if you're a small startup and you're not acquiring users like mad organically / virally, or picking them up off Facebook or Twitter, you're going to get steamrolled by the larger platform players, or else some fast-growing upstart you haven't heard of. anything <1M users seems like a rounding error, and even Yelp's healthy 30-40M+ users is a bit of a blip compared to FB or other large platforms.
in order for any of these big LBS bets to work, u better start acquiring users at scale (let's say 20M+ users + a lot of local search data) or else yr only hope Obi Wan Kan-u-buy-mi is to maintain a decent technology lead and get acquired. oh yeah, i forgot -- your technology lead = doing a GPS lookup (which will be in every chipset in <12 months) + some pretty icons + some bullshit game mechanics that aren't working for anyone who doesn't speak Klingonese. hurry your ass up or you guys are toast. and i don't know if FB or even Apple or Google is gonna pay a 5-10x multiple on your $80M post-money round. Yelp may have the location data in a few key metros to justify walking away from a $650M offer, but you little shits sure as hell don't. if you're lucky enough to get anything >$250M for your house of cards take the money & run, homey.
Get out your VC "checkin"-book & write down a number w/ 10 zeroes:
that's the minimum ante to play this game of poker.
i'm no expert on the sector-specific financials here, but here's my rough math: i'm guessing you need to acquire 20M+ users @ $5-10 each, and at least 1-2M+ offline businesses at $50-100+ each. let's be generous & suggest it *only* costs you $100M-200M to get to minimum critical mass & basic viability (altho it could easily be $500M or more).now who the H-E-double-hockey-sticks has that kind of FU$K-IOU money?
well, probably only 3-5 players can make those kinds of #'s work.
Now certainly Twitter and Yelp could be in this game somewhere, and probably several other providers of local search data / business profile data, and other relevant stuff. But at a minimum, you're gonna need to have or acquire 10-50M users (active/frequent, not just registered) and have or signup 1-2M local businesses (perhaps more?). this is customer acquisition cost on a scale that only a few big players can fathom, or a few larger venture / private equity players can go after. And that's with a ton of execution risk. Even Microsoft who has the money might not have the cojones to think they can buy & integrate all the pieces to make it work, unless it's just one big acquisition. Google could maybe do it if they buy Yelp or Twitter, but they still need to get the social dynamics to make the user base work. Same for Apple, altho either might figure it out if they're lucky and buy the right company(-ies).
But the odds-on favorite here by far is Facebook. With 400M+ users, an already very active userbase, and users' growing familiarity with FB Connect on off-platform sites, they are the easy pick front-runner. Maybe they buy somebody, maybe they don't. Maybe they buy *several* somebodies. But you can bet yer sweet ass the road to the LBS playoffs sure as hell goes thru 1601 S. California Ave, Palo Alto, CA.
Count on it... or should i say "Check-In" on it.
oh and one last not-so-minor point:
Again, this plays to Facebook's potential future strengths (they're working on a payments product, and their users are very comfortable with various virtual currencies), and Google / Microsoft historical weakness (Google has only minor payments traction with Google Checkout, and Microsoft none to speak of). However, Apple also now has substantial payments experience, and could be a player in this area. And both Amazon and eBay (via PayPal) become very attractive targets for partnerships or acquisition by one of the major players. But since Amazon is doing quite well thank you, and Bezos shows no signs of giving up the crown, expect either an ever-weakening eBay or still-growing PayPal individually to be in play by Microsoft, Apple, and/or Google within the next 2 years (yeah, i know i've been predicting this annually for the last few years... but just cause Ballmer's a blimey M&A idiot doesn't mean i'm wrong about the reasoning).
alright, got all that?so here's my odds-on crazy-and-not-really-very-serious predictions:
1:2 - Facebook buys Gowalla, FourSquare, MyTown or Loopt, takes home the gold. this is the default.
2:1 - Apple buys one of the above, and/or Square, gives Facebook a run for the money. probably still loses, because FB has too much frequent user activity, Connect dominates, & Apple doesn't move fast enough in software.
3:1 - Google buys Twitter for users/social + Yelp for local biz, gives Facebook a run for the money. maybe also buys PayPal, maybe not. probably still loses due to no clue on social, unless they let Twitter figure it out. still not likely. (they likely do buy Twitter & Yelp, but still not enough to win LBS).
10:1 - Microsoft decides to spend a boatload of money buying something or several somethings, and fails miserably... unless it's Facebook. but Zuck won't sell for less than $75B, and Ballmer doesn't live up to the first half of his last name. so therefore Microsoft is FAIL. (probably hard & painful FAIL.)
50:1 - Google or Apple figures out a way to buy or merge with Facebook. This is complete looney tunes, but would be the right move. however, Google can't likely pull it off without antitrust violations stopping them in their tracks. and even if Jobs buys the farm, don't think he hands Zuck the crown unless some very unusual scenario comes down.
in summary: Facebook wins LBS. unless Jobs has more smarts than hubris than i think, and Apple buys Facebook (NFW.). somewhere along the way PayPal gets bought by somebody (likely MSFT), but prob doesn't matter. Microsoft flails on mobile & LBS, and becomes irrelevant outside the workplace in less than 10 years. Google probably swings & misses on LBS, but maintains strength in search and remains relevant in several others (YouTube, Gmail, maybe Android). Apple keeps killing it in hw, and does well enough with sw & apps to maintain relevance in music, videos, books, other areas. Amazon is pressured by Apple in media, but does well in e-commerce & infrastructure svcs. AOL stays alive in advertising & content (i think). Yahoo does a lot of re-orgs, buys something, but nobody really gives a fuck. eBay dies a quick death after they sell off PayPal. Twitter has a shot at LBS, and so likely gets bought by Google or MSFT, but will still have a tough job beating Facebook.
once more for emphasis: Facebook wins LBS. Google, Apple remain strong in search & media respectively. PayPal gets bought (likely by MSFT). Amazon stays strong in commerce & infrastructure. AOL stays afloat in content & advertising (maybe). Microsoft dies in mobile & consumer (very) slowly, acquires lots of stuff along the way. Yahoo dies slowly, and/or likely gets bought (or merged with the new AOL). eBay dies quickly; nobody notices. Twitter gets bought by Google or MSFT (or maybe Cisco?) within 3 years.
... or not, and i'm a friggin' idiot.
but if you've read this far, at least i'm an entertaining writer, eh? ;)
yer welcome, mofo.
StartupVisa.com in da HOUSE!
(and i really do mean in the House... as in the Houses of Congress). Today, the Startup Visa Posse came to DC to visit several reps on Capitol Hill to promote awareness for the Startup Visa Act of 2010. People we met with included Rep. Jared Polis (D-CO), Sen. Mark Udall (D-CO), and staffers for Sen. Lugar (R-IN) & Sen. Kerry (D-MA).
Later today we'll be meeting with administration representatives from the White House, State Dept, Commerce Dept, as well as DHS, SBA, and several other federal organizations with impressive TLAs.
So far, it's been an incredible experience for many of us who are political n00bs -- we've actually been pleasantly surprised by the level of encouragement and support from folks here in Washington, and in turn they've been pleasantly surprised at how much progress we've made on the issue since our GeeksOnaPlane trip to DC last September, where we first cooked up our plans and created the StartupVisa.com site.
Yesterday, while we were mid-air from SFO to DC -- with online access courtesy of GoGo Wireless and Virgin America -- we conducted a StartupVisa TweetHall, which was a live twitter meetup of over 5,000 people who used the #StartupVisa hashtag in their tweets. Prominent twitterers who showed their support included Tim O'Reilly, Chris Sacca, Matt Cutts, Craig Newmark (of Craigslist.org), Padmasree Warrior (CTO of Cisco), as well as many other geeks & non-geeks in the US and around the world.
We hope you'll continue to help with our efforts, and if you're a registered US voter, please take just 30 seconds to tweet your support and we'll automatically send a message to your local representative (using your zip code), courtesy of 2gov.org.
Posted by Dave on Thursday, March 04, 2010 at 01:14 PM in Dave, Friends, Family, Geeks, Tech, Startups, Politics & Foreign Policy, Venture Capital & Startup Finance | Permalink | Comments (0) | TrackBack (0)
Tags: geeksonaplane, goap, kerry, lugar, polis, startup visa act, startupvisa, udall, washington dc
I'm on a redeye to NYC, supposed to be working on a presentation i'm giving in a few hours... but fuck it, i can't get this outta my head, so here we go.
(note: extremely raw, uneven, long, 1st draft publish & shoot; will revise l8r)
Over the past 10 years, we have seen a massive shift in advertising from CPM to CPC-based advertising. This basically started happening when the 2000-2001 dotcom implosion blew the market cap of Yahoo to smithereens, and display advertising went into the shitter. Altho CPM subsequently recovered, Google's IPO and the gradual emergence of CPC as a higher-quality advertising medium has been the dominant story of the first half of the last decade. There's still a lot of page views and CPM advertising out there -- and YouTube & Facebook are making sure that doesn't change -- but as we VCs like to say:
"at the end of the day, Yahoo is now Google's bitch".
But what has all this Don't-Be-Evil-AdWords-Click-Happiness done to the internet & startup ecosystem?
So crappy in fact, we should be ashamed to call ourselves entrepreneurs & venture "capitalists". Why, Schumpeter is probably rolling over in his grave at how little Creative Destruction we have rained down upon crotchety incumbents. It's a goddamn travesty that some aspiring startup or greedy hedge fund hasn't pummelled Yahoo and eBay into a hostile takeover by now, and Microsoft has made itself almost irrelevant in the consumer internet space -- helloooo Mr. Ballmer? please tell me how you own hundreds of millions of users and more than half the browser market and you HAVE NO VISIBLE 3rd-party distribution or monetization strategy? -- Srsly, we have monkeys driving some of the biggest trains on the Internet at the moment.
And while there's been something of a Startup Renaissance going on since around 2004, all these little web 2.0 wannabees have spent an inordinate amount of our attention on ad-driven business models resulting in a big steaming 2-Founders-1-Cup of FAIL. Everyone seems to have assumed that since Yahoo and Google were giants in internet advertising, therefore all internet startups should be using some form of CPM or CPC ad-monetization.
THIS IS A VERY LARGE LEMMING-LIKE ERROR IN LOGIC THAT MUST BE CORRECTED IMMEDIATELY.
We have largely WASTED an entire web decade of time, energy & venture capital on extremely inefficient revenue models. There have been a few interesting examples of startups acquired in the 00's for large amounts due to amazing growth (eGroups, MySpace, Skype, YouTube) or advertising potential (aQuantive, DoubleClick, AdMob, RightMedia). However, mostly the decade has been an uninterrupted string of uninspiring business models and small-time acquisitions of Web 2.0 startups filled with rainbows & unicorns, rather than those based on simple, transactional revenue models.
Newsflash folks: The Internet does NOT want to be FREE... It wants to GET PAID on Fucking Friday, just like everybody else on the damn planet.
Yes there is a role for Freemium, but unless you missed the TPS report the FREE part is only a loss-leader for the MEE-YUM part -- it's a test-drive before you buy something. If your users are just kicking the tires then you need to kick them to the curb eventually (unless of course they are your viral bee-yotches, in which case it's ok to have a few invitation whores as freeriders).
Free is not Forever, unless you never want to be in control of your own fate.
Gradually we are discovering that the default revenue model on the internet should probably be the simplest one -- that is: basic transactions for physical or digital goods, and recurring transactions (aka subscriptions) for repeat usage.
Let me say that one more time so you don't miss it.
Ok, so there's only one problem with this. It's called the Penny Gap.
Surprise, surprise... most people don't like to pay you squat unless they have no other choice. And aside from the user's disinclination to pull out their wallet, there's also the problem of wallet friction itself -- payment conversion is shitty for many reasons other than just price. Mainly it's because we can't remember our password. I'll repeat that about a million times in this post so you don't forget.
This is incredibly important, and i'll explain why in just a little bit... but now, let's talk a brief walk down Memory Lane past my old workplace, PayPal.
Here's one of the not-so-flattering secrets of the PayPal Mafia you've probably never heard: The far-and-away #1 customer service problem -- and cost -- at PayPal was something called "forgotten password recovery". That's a nice way to say that people can't remember their fucking password.
It's the biggest goddamn problem on the Internet, but at PayPal we made it even worse by tying a payment instrument to the process, and then locking out the payment instrument if they couldn't remember their password. What a Brilliant idea! Let's see.... why don't we fuck over all of our n00b, first-use customers by forcing them to create an account they have no significant motivation to maintain yet, and then hope they don't give us a fake email address or fail to remember that password the next time they drop by... which might be 1, 3 or 6 months later. Bingo, way to create the biggest HateStorm in Internet History: make it super simple for people to make their payment method unusable by simply forgetting their password. Oh and i forgot to tell you we occasionally froze their account so they couldn't get access to their money. That was a real winner too.
PayPal was one of the classic stories of viral growth, however in this instance we also experienced viral growth in customer service: at one point more than 2 in 3 employees worked in customer service. And i'm guessing somewhere between 10-20% of first-time customers never used the service again, primarily because they forgot their password.
Look, no online service is perfect and there are often good reasons why account recovery shouldn't be too easy -- sometimes it's not YOU who wants to get access. But Password Friction at PayPal led to an unfortunate series of events which caused some signicant percentage of our users to HATE us with a PASSION that is usually reserved for politicians and lawyers. Since i was often on the front-lines running our PayPal Developer Network, i got to hear first-hand from Merchants and Developers about how this password friction caused problems with payment, and with user frustration. I got to know the folks in customer service pretty well, and i used to do my best to resolve some of our users pain.
So why am i bringing up all this bullshit now?
Well because as we transition to a Startup Ecosystem driven by direct payment & subscription business models, i want to make it clear how IMPORTANT it is to make sure users don't forget their passwords. If they forget their password, and/or can't recover it, then guess what MoFo -- YOU DON'T GET PAID.
Which means you don't get Laid, you don't get Acquired, and you sure as friggin' hell don't get to Go IPO.
So listen up & i'll share a little secret with you -- there is one very simple way to avoid forgotten passwords. Basically, it's this:
That's it, you say?
Yeah, that's it Sherlock. Make a brain-dead simple, frequent-use product. If users login a lot, then they don't forget their password.
Now think about that for a second...what services have users login a lot?
1) Social Networks
2) Email & IM
3) Games, Music, & Entertainment sites
Which leads me to my 3rd & final observation.
Now i'm not suggesting PayPal and Amazon are going to disappear overnight -- both probably have hundreds of millions of users (well, at least double-digit million *active* users anyway). And in fact, they will likely still have dominant positions in the market. But i will say this: if they rely *purely* on purchase behavior, they are fighting a losing battle against other services with more frequent usage, whose users will be more likely to remember their passwords. Like a Darwinian evolutionary experiment, only the fittest passwords survive -- and in this case, the fittest passwords will be the ones used most often. That is, the ones we use for core services like email, IM, games, music, videos. And guess what? Most of those services happen on social networks like Facebook, which currently has over 400M users and is growing like crazy internationally.
Well at this point i hope you've pieced it all together. The key to success -- one might even say DOMINANCE -- in payment systems is to begin with the foundation of frequent-use products, so that users won't forget their passwords. Whether intentional or not, Facebook has played this game to perfection. Not too far behind is Apple with iTunes, iPhone, and other related frequent-use media & entertainment products, and an App Store that people use regularly. And even Google has a shot here, with both Gmail and YouTube as two very large, frequent-use products, along with the upcoming Android platform. Twitter is probably a dark-horse here, but if user #'s continue to improve they could also have a shot. And i'd also keep an eye on Skype too, which still has a lot of frequent users and value.
Bringing up the rear pathetically here are Yahoo, Microsoft, and AOL. All 3 of these services have hundreds of millions of users (via email & IM alone, not to mention other services), and yet they haven't figured it out. Yahoo had previously developed a payment product called PayDirect, but shut it down in 2004. FAIL. Microsoft had the right vision with HailStorm, but their UX was absolutely friggin' terrible (see Password Friction again), and they didn't stick with it. AOL similarly has been shedding users for a decade, and never realized how valuable their original email user base could be. It's unbelievable to me none of these Internet Giants has figured out what is going on. They have neither acquired nor merged in a payment service (Amazon, eBay) nor have they acquired a large social network. Unless MSFT develops Xbox into a widespread payment system, or acquires eBay (for PayPal), Amazon, or Facebook i just don't see them climbing back into the ring. All of those deals would be very difficult and unlikely, even for MSFT.
So that's it folks, i'm spent. This has been a complete ramble and i don't have time to edit this shit, so i'm leaving it as it is. Sorry for all the swearing and uneven pace, but hopefully some of you will take away something useful.
Posted by Dave on Monday, February 01, 2010 at 04:02 AM in A Few of My Favorite Posts, Big Ideas, Hot Air, Facebookaholic, Geeks, Tech, Startups, Search, SEO/SEM, etc, Social Networking & Social Media, Venture Capital & Startup Finance | Permalink | Comments (75) | TrackBack (0)
Tags: Amazon, Apple, eBay, Facebook, Google, Microsoft, PayPal, Subscriptions, Transactions, Yahoo
Haven't really gotten on a rant in awhile... guess i've been doing a lot of travel lately, but now that i'm back in California for awhile, there's something i've been meaning to bring up that bothers me. It's kind of a dirty little secret of the startup industry, but there are very few good product, design, and marketing people in tech. And hardly any of them that are good seem to make it into the venture capital profession.
(case in point: how come there are no graphic designer VCs?)Now i say this knowing full well that i'm certainly not a genius on any of the items above. Anyone who has ever read my blog knows what a god-awful mess of turd droppings it is visually, and my font selection and layout are so bad that only a mother could love my pictures & posts. That said, i've spent at least 10-15 years doing coding, database dev & admin, basic front-end visual development (ages 15-30), and another 10-12 doing technology & consumer marketing (age 30-42), mostly using email, blog, search, & social strategies. Throughout both, i spent another 10-15 years managing projects, products, & teams, some of which might be called product management. I don't claim any formal visual design training, but i've done my fair share of mockups and learned the hard way what kind of UX doesn't work.
None of this means anything more than perhaps i'm competent in a few operational areas related to consumer internet startups, or at the very least hopefully i'm aware of & acknowledge my limitations.
However, over the past 5 years i've consulted with and/or invested in about ~50 startups. I've gotten to know a lot of entrepreneurs, and a fair amount of the venture capital and angel investors who are backing these companies, most of which are consumer internet startups. And guess what? Probably more than half of the startups, and more than 90% of the investors have no goddamn clue what the hell they are doing re: user experience and online marketing.
Let me say that again.
More than half of all startups, and easily 9 out of 10 investors HAVE NO F**KING CLUE regarding 1) user experience or 2) internet marketing.
Now many of you might say: aw c'mon dave, you're overstating that a bit don't you think? there are a lot of startups out there with a ton of engineering talent... and design & marketing aren't THAT important, are they? And seriously: investors don't have to be experts in every field, they just have to know how to assess talent & manage money... i mean, you don't expect every football coach to be an ex-football player, right?
Well, actually yes i do.
Or at least, i expect them to be dedicated, lifelong students of their profession.
And to be honest, design and marketing aren't just EQUALLY important as engineering... designers, product managers & [technical, analytical] marketers are usually WAY MORE IMPORTANT than coders. (believe me, i say this with a lot of humility, since my primary area of academic training was software development & applied mathematics & engineering... we just ain't all that.)
What's become appallingly obvious to me, is that in the HEART of Silicon Valley, amongst the ELITE of the elite, we are mind-bottlingly [sic] STUPID about how we build startups... about how we staff startup teams... and about how we structure and select the professionals in the investor community who fund consumer internet startups.
we are SHAMANs.
we are RAIN-dancers.
we are damn wretched BLOOD-letters.
We are friggin' BF Skinner's pigeons, and we should be ashamed.
... so let's dig into this a bit more, shall we?
* Assertion #1:Addictive User Experience (aka Design) & Scalable Distribution Methods (aka Marketing) are the most critical for success in consumer internet startups, not pure Engineering talent.
This seems counter-intuitive, right?
We have this image of space-age whiz kids who are the stuff of legend for most technology startups -- The Woz, Bill Gates, Bill Joy, all those programmer types who could disassemble and re-assemble a transistor radio, a toaster oven, or a mainframe computer, and who grew up writing symphonies of code and wondrous applications before they even lost their virginity. Well i was one of those... or at least i aspired to be. I got paid for writing code when i was only 15, but i was still only a 2nd-class geek compared to the true code jockeys who were writing programs before they even went to grade school. Gates, Woz, Joy, Levchin, Zuck -- these guys were STUDs. they were god-like, and for their businesses -- building computers or advanced software / OS -- that kind of horsepower MATTERS.
And that kind of makes sense when you're building hard drives, or PC motherboards, or consumer electronic devices that require serious engineering talent... big-code cojones. Same perhaps for Google, or PayPal, or Facebook, or Mozilla. If you're building search engines or web browsers or fraud systems or serious CAD software or the movies that Pixar puts together.
But seriously, do you need that much geek when designing most basic input-output forms for consumer internet software? How much tech does it take to collect data & present data, when so much of the underlying infrastructure has been built into the OS & browser platform? We stand on the shoulders of these giants, but do we actually require them in every startup? well, it certainly doesn't hurt to have code jedis at the helm of your starship, but there are other areas that deserve at least equal attention... if you're building consumer internet sites & services.
Because while it's actually pretty easy to write a web 2.0 friendly front-end app or website these days, it's still MOTHERF**KING difficult to create visually-appealing interfaces, and beyond that to design them in ways that are compelling, engaging, drive calls-to-action, and are MEASURABLY beneficial to getting more customers using your products. figuring out game mechanics and activation, designing reinforcement schedules, visual imagery, copy writing, and landing page tests -- all of this is not trivial, and only recently are there starting to be good resources for learning how to do it well.
And if -- IF! -- you cross that hurtling Engineering chasm of Minimum Viable Product, and get to the promised land of appealing, useful Design, then you still have to chase the scalable, predictable, profitable channels of customer acquisition... otherwise known as MARKETING. and these days, most marketing isn't traditional PR & product placement, it's actually a very technically-intensive discipline filled with SEO, SEM, Social Platforms, email, widgets, social media, viral marketing, blogging, video, user-generated content, etc, etc, etc. it's a traditional marketing person's worst nightmare... tens if not hundreds of potential marketing channels & campaigns with unknown costs, techniques, and payoff.
Yet, these days marketing has become very MEASURABLE and very integrated with user experience & product development ... and for folks who know what they are doing, they can build amazing services with awesome native product marketing features that cost little or nothing to drive massive adoption.
In summary: i suggest to you that Engineering for consumer internet startups need only be competent, and that the real challenge is in finding designers & product managers who can build an awesome product experience, and marketers who can figure out effective scalable, integrated distribution strategies (whether organic or paid, whether technical or creative).
* Assertion #2:
If investors don't have operational backgrounds in design, development, or marketing from proven consumer internet companies, you probably don't want their money
(or it better be the best damn termsheet on the table)
this one is a bit more controversial than the earlier assertion. and i'm probably pissing off most of the other VCs and angel investors in the valley by saying so, except that i'm not really that worried because most of the folks i do deals with DO have backgrounds in these areas.
now if you already have money from clueless investors, or you know that you've got a good clean termsheet from someone who is just offering you a check to get rolling, maybe this isn't that big a a deal. but honestly, if you're taking money from investors, why not try and get the best experience you can along with the 20-40% equity you're giving up? why not find people who actually have a shred of intelligence about consumer products and relevant skills, when you're going to be sitting in board meetings with them every month for the next 3-5 years of your godforsaken sleepless, work-like-a-dog excuse for a life listening to their mindless opinionated VC bullshit when they have no real clue?do you REALLY want to be taking product and marketing advice from someone who has spent most of their life without ever having designed a web page, coded a simple program, written a blog post or email, or hell even have a f**king facebook or twitter account they know how to use with any amount of intelligence whatsoever?
When you do background research on your investors, see if you can find them online. Do they have recognizable web presence? do they blog, do they tweet? do they have a profile on LinkedIn, Facebook, Flickr, or YouTube? do they rank first for their own name? do they appear to have experience in the internet industry, or do they just have an MBA some big-name school, and no relevant operating roles?
Seriously, life is too short. Your startup too important. And your chances at the next Google, PayPal, or Mint are already tough enough.
Hire people smarter than you. Find a decent designer who understands human psychology & sexuality, game mechanics, SEO, and conversion analytics. Find someone in marketing who understands how to send an email, write a blog post, use search engines, social platforms, social media, and has done landing page A/B tests. Find investors who have a clue about the products and services they invest in, who use the products, and maybe even write/speak about them frequently. Find people as advisors, mentors, and investors, who have the same operational experience you'd hope to hire into your startup.
If we all take this to heart, we might just build a few more useful consumer internet products.
Posted by Dave on Sunday, January 10, 2010 at 08:17 AM in A Few of My Favorite Posts, Geeks, Tech, Startups, Marvelous Marketing, Search, SEO/SEM, etc, Social Networking & Social Media, Venture Capital & Startup Finance | Permalink | Comments (41) | TrackBack (0)
Tags: design, development, entrepreneur, investor, marketing, product, startup, venture capital
thanks to KDDI, Jonny Li, & everyone involved with this past wknd's most awesome Startup Weekend Tokyo. & props to Mona & Chris McCann for helping me slap together a last-minute mini-GoaP Japan trip... no way could have done it w/o you guys.
big OMEDETOO! & congrats to Startup Weekend winners Wubble and Wishcovery for putting together some terrific ideas & apps!if you can read Japanese, you can also see Serkan Toto's preview of the event on TechCrunch Japan here... you can also read Fumi's awesome summary post here.