Hire For The Ability To Get Shit Done. “Platform” risk. Last night, Twitter curtailed Meerkat's access to its graph. I saw lots of discussion on Twitter (I'd say this was ironic but it's just expected) about why and whether Twitter should just compete on its own merits with its recent acquisition Periscope.
Some have termed what happened to Meerkat “platform risk,” and it is, but one must be willfully naive to consider ad-monetized social graphs like Facebook and Twitter to be capital P Platforms. I prefer to call them little p “platforms” (I'm drawing air quotes with my fingers in case you aren't watching me live on Meerkat as I write this). Amazon Web Services (AWS) is a Platform. That is, you can count on it even if you use it to compete with its parent company Amazon. The reasons why lie in both Amazon's business model and philosophy.
Compare this to free tech platforms offered by companies like Facebook and Twitter that make money off of ads targeted at their social graphs. Facebook has similar ambivalence as a platform. What Microsoft Is this the Altair Basic of? February 2015 One of the most valuable exercises you can try if you want to understand startups is to look at the most successful companies and explain why they were not as lame as they seemed when they first launched. Because they practically all seemed lame at first. Not just small, lame. Not just the first step up a big mountain. A Basic interpreter for the Altair? Often the founders themselves didn't know why their ideas were promising. Most people's first impulse when they hear about a lame-sounding new startup idea is to make fun of it. When I encounter a startup with a lame-sounding idea, I ask "What Microsoft is this the Altair Basic of? " Intriguingly, there are sometimes multiple answers.
How to save money running your startup. Years ago I wrote a blog post on how to save money running your startup, and it was one of the most popular things I’ve ever written. I thought I would take a second stab at this — without reading my original piece from 7 years ago — as an experiment in how much has changed. [ Click to Tweet (can edit before sending): ] Outsource your HR/payroll to a company like Zenefits & ZenPayroll. Previously, I used TriNet and other PEOs, but those startups charged a whopping $100+ per month per employee. That’s like $1,400 per year per person. If you have 10 folks that’s $14,000 per year and it’s crazy. These new services charge fixed fees, not these absurd monthly fees.Keep computers cheap by offering folks $500-1k credit toward the computer of their choice — that they own — provided they stay at the company for two years.
That’s all I got … but do share what ideas you have for saving money in the comments! Best @jason PS – 18 days until LAUNCH festival! Unleash your inner VC to rock at BD. I won’t pretend to be the best business development leader out there, but for a brief period of time at FreshBooks I oversaw our BD efforts in addition to finance (always with the intention of handing it off to someone who actually knows how to do BD…). Here’s the thing with partnerships: We all do themMost don’t work outAt the end of the day a very small number of your partnerships deliver meaningful results Now, I’m not saying companies shouldn’t partner. I think partnering is more important than ever.
But having been a VC, I think that taking a VC approach to partnering makes sense. Establish very clear filters up front for what you’re looking for. This process is a lot like VC: You want the widest possible deal flow funnel (after all the #1 fear of VCs is the fear of missing out on the next big thing). Now, sometimes the timing is not right. The point here is that you need a place to send companies that are a “no” today. Anyway, for all these reasons BD feels a lot like VC to me. Musings on Markets: Discounted Cashflow Valuations (DCF): Academic Exercise, Sales Pitch or Investor Tool?
In my last post, I noted that I will be teaching my valuation class, starting tomorrow (February 2, 2015). While the class looks at the whole range of valuation approaches, it is built around intrinsic valuation, reflecting my biases and investment philosophy. I have already received a few emails, asking me whether this is an academic or a practical valuation class, a question that leaves me befuddled, since I am not sure what an academic value is. As some of you who have read this blog for awhile know, I do try to value companies, but I do so not because I am intellectually curious (I don't lie awake at night wondering what Twitter is worth!)
But because I need investments for my portfolio. In the context of these valuations, I have been accused of being a valuation theorist, and I cringe because I know how little theory there is in valuation or at least my version of it. That is the only theory that you need for valuation! DCF : Neither Magic Bullet nor Bogeyman A Return to Basics. How The Economist chose its first female editor-in-chief.
This post has been corrected. Yesterday The Economist chose Zanny Minton Beddoes to be the first female editor-in-chief in its 171-year history. “About time,” you might say. But among its peers, the venerable British publication, where I spent 16 years before leaving to help found Quartz, is practically a pioneer. The Financial Times, the Wall Street Journal, the Washington Post, and the Los Angeles Times have never had a female editor, and nor have the Times, Telegraph or Guardian in Britain.
The New York Times got its first one only in 2011, and Le Monde in 2013 (both have since left). Still, Minton Beddoes was the only woman among the 13 candidates who applied for The Economist’s top job. It’s been 50 years since an outsider, Alastair Burnet, was made editor, and he was an outsider only in that he had worked there and briefly left. That’s certainly an apt description of the weekly news meeting. And that confidence is essential to getting the job. Things have changed a bit since then. Top VC: A lot of tech startup failure coming in 2015.
Bill Gurley is no stranger to unicorns, the tech industry’s name for startups that have been valued at $1 billion or more by venture capitalists. His VC firm, Benchmark, has put money into such companies as Uber, DropBox, SnapChat and WeWork. Not to mention some that recently went public, like Hortonworks HDP -2.73% and New Relic NEWR -1.44% .
But he believes that many of these unicorns, of which there are more than 80, will go down in flames after flying too close to the sun. “I think you’re going to see a lot of failure in 2015,” Gurley said in Fortune‘s February cover story on the unicorn trend. Here is Gurley’s primary concern: Privately-held companies that raise lots of funding at higher and higher valuations eventually build up tons of liquidation preferences. “The cap chart begins to calcify a bit, which eventually can be problematic,” Gurley explains. This is, of course, different than what happens when a publicly-traded company suffers a major valuation hit. The Illusion of Product/Market Fit for SaaS Companies. “We have product/market fit.”
“We are searching for product/market fit.” “We are raising this financing to find product/market fit.” “Our customer traction demonstrates product/market fit.” Product/market fit. It’s a wonderful phrase, thanks to Marc Andreessen, Sean Ellis, Steve Blank, and Eric Ries. But it also one of the most overused, and inappropriately used, phrases that I hear with SaaS companies on a daily basis. I was in a meeting a month ago with a company I’m on the board of where product/market fit was asserted. But first, some history. There’s a fun post from Ben Horowitz in 2010 titled The Revenue of the Fat Guy that weaves in comments from Fred Wilson about product/market fit where Fred argues in his post Being Fat Is Not Healthy. As I rolled this around in my head, I started to realize that part of the illusion of product/market fit is that there’s a belief that once you have it, you never lose it (myth #3). I’ve experienced the downside of each of these myths many times.
Hot Markets For 2015. Being in rapidly growing markets (or ones perceived as hot) increases likelihood of success of a company dramatically. Being in a hot market increases the ability to hire great people, get press and awareness, raise money, and eventually exit via M&A or IPO. The average startup exit takes 7 years. Market hotness increases the likelihood of a fast exit dramatically. In the late 1990's the average time to acquisition or IPO was just 2-3 years due to Internet mania. To successfully IPO you usually need ~$50 million in revenue and a few quarters of profitability behind you. Hot Market Sustainability. Caveat emptor - about 50% of the markets that are considered hot at any given point turn out to be false alarms. Hot markets that yielded huge companies and large exits include social networking (mid 2000s -Facebook, Twitter, LinkedIn), and mobile social (early 2010s - WhatsApp, Instagram).
Hot Markets For 2015 Genomics. 2. IoT [Internet of Things]. Security. 3. 4. Other markets I missed? Scaling the Chasm. One of my favorite business books of all time is Crossing the Chasm by Geoffrey Moore. It is a classic. My boss and mentor from Open Market, Gary Eichhorn, made the entire management team read it in the 1990s to hammer home its important lessons as we stumbled through the chasm on our way to scaling from zero to nearly $100 million in revenue in a few years.
I have been thinking about the challenges of crossing the chasm - that is, taking a cutting-edge product and selling it successfully to the mainstream, not just early adopters who are more tolerant of less complete solutions - and the challenges of scaling in general as many of my portfolio companies are dealing with these issues. Dealing with scale up challenges is particularly important to me because of our firm's investment strategy.
For quick context, I sit on the board of eleven Flybridge portfolio companies and am an observer on two. At each stage, there are different problems. . $0-1 million $1-10 million $10-50 million. How Not to Let the Crazy In. A friend of mine is starting a huge new project. She told me that 2015 is going to be the craziest year she's ever had. I suggested to her that it will certainly be the busiest, but that she didn't have to let the crazy in. We throw around the word "crazy" but in all seriousness, mental health is something that doesn't get much discussion in the startup world. There seems to be a blog post, book or boot camp for just about everything you could hope to learn as an entrepreneur, but no one really seems to focus on how to mentally survive entrepreneurship.
It bothers me that we just take stress as a given. Disappointing for sure, but does it need to twist your head into such knots that you get physically sick over it? I can't say I stress out about anything. That's the key--it's a habit. Here are a few things that have helped me: 1) Take care of your physical self. Your brain lives in your body. It's been proven that exercise, eating well, and getting sleep improves your mental state.
Lunch with the FT: Marc Andreessen. A Dozen Things I’ve Learned from Chris Dixon About Venture Capital and Startups. 1. “If everyone loves your idea, I might be worried that it’s not forward thinking enough.” Anyone thinking about starting a business should be searching for mispriced opportunities. While markets are mostly efficient in eliminating opportunities for extraordinary profit, there are always areas of an economy in which there are significant uncertainty. These areas are excellent places for a startup to look for opportunities. The best entrepreneurs have learned that large businesses are investing huge amounts of capital in areas in which extensive information is already available, and that it’s most advantageous to create new businesses where information is not available.
In other words, the best opportunities for startups tend to be in areas that are overlooked and less well-known by others. Dixon also says in this insightful post that “you shouldn’t keep your startup idea secret.” Like a startup or any other investor, a venture capitalist is seeking a mispriced opportunity. 2. 3. 4. 5. Resetting the score. Rather like the iPhone, it contained few things that were fundamentally new - most of the key features had been around for a while and considered elsewhere - but it was the first to put all of them together in one place in the right way, and, like the iPhone, this changed everything. Every other warship afloat was obsolete. The Dreadnought also created a problem. The Royal Navy had been funded since 1889 on the 'Two Power' rule - that it would not only be the strongest in the world but that it would also be stronger than the next two largest navies combined.
Hence, the day before the Dreadnought was launched it had 32 battleships where Germany had 11 - a huge lead. The day after, it effectively only had one. This is rather what the iPhone did, to both the mobile business and the entire consumer technology industry. Again like the iPhone, the Dreadnought was followed by a period of frenzied iteration.