Archive for the ‘entrepreneurship’ Category

Some great advice from the venture capital world…

I spent the Thanksgiving holiday with my brothers in North Carolina.  I headed down a few days early so I could take a break from my most recent product launch and do some food shopping (I was the chef this year).

During my trip, I was able to meet some venture capitalists to talk about my future ambitions in the startup work.  I am in the process of changing my career direction, so I couldn’t wait to discuss my ideas with these individuals.

Here is some of the great advice I got:

  1. Begin at a startup, end as an investor – Since the venture capital world is very closed and selective, the best way to become a VC is to join a venture-backed startup, find some success (obviously, this is the hardest part), and do some investing yourself.  That way, you can bring real-world experience to a firm as a partner.
  2. Focus on a sector – It is difficult to be “all things to all people”, so you should find a niche and be the best you can at it.  Personally, I am not sure what my niche will be, but I have a few ideas…
  3. Product experience helps, but it isn’t necessary – Since I am by no means an engineer or a coder, this thought was particularly helpful for me.  For example, someone with operations or biz dev expertise can be just as valuable as a CTO.
  4. Revenue is king – I asked one VC which he prefers in a business he’s investing in… a great product with a large audience, but without a defined business model, or a smaller product with a strong revenue model.  The VC said he would invest in the latter.  I think I’d have to agree, but some other very smart investors I respect a great deal may disagree.

I can’t wait to act on some of this advice soon…

Why Silicon Alley Insider is the king of creative valuation…

I’m going to take a moment and profess my love for the Silicon Alley Insider… it is not only an insightful place for news on digital business (not just product innovations, which TechCrunch tends to focus on), it has a smug humor than comes from its roots in NYC and Wall St. That style makes it different from other destinations for business news I’ve found.

One of my favorite themes from their reporting is “what we would do if we ran these companies”. Better than anyone else I have read, SAI have great opinions on how to extract the true value from the companies they cover. Some great examples include: Craigslist, Yahoo, CNET, and AOL.

But, my favorite post was on Wikipedia… SAI showed how Craig Newmark could earn around US$900M annually for the Wikipedia Foundation, if he ran Wikipedia as a competitive for-profit business, and donated the profits to charity (ala Newman’s Own).

Key lesson – Hidden value lies in almost every business… you just need to know where to look and how to find it. And, that’s why SAI is the king of creative valuation.

Making Money Through Advertising: Harder Than It Seems…

I seem to be reading a lot of articles recently on why internet services must be free. Everyone from Seth Godin to Fred Wilson makes the argument that free is the internet strategy de jour.

However, when most people think of providing a free service, most people like to fall back on one simple revenue model… sell advertising. However, building a sustainable business around internet advertising is harder than it seems.

According to some reasonable assumptions on page views and RPM (revenue-per-thousand page views), you need to find a pretty big audience before you’ve built yourself a health business. Let’s say you have a well-targeted website with an active base of users. If this is true, than a RPM of $10 is high, but reasonable. In order to build a US$25 million business, you will need over 208M page views per month. To put it in perspective, you need to be close to becoming one of comscore’s top 100 most visited sites… That’s a lot of people viewing a lot of content.

Key lesson – don’t get lazy and fall back on advertising. Get creative… if you’re smart enough to create a product that people find valuable, then your certainly smart enough to turn that value into cash.

P.S. – Lightspeed Venture Partners wrote an good article with some useful assumptions for building an ad-supported online business.

Think Creatively to Generate Revenue, and “…connections go for a premium”.

I love creativity… I have a great deal of respect for people that think about something in a new and unique way. And for this reason, I’m excited about entrepreneurship. If you have a good idea that effectively solves a problem, you will be rewarded… handsomely.

Business creativity doesn’t lie solely in product design and development. It should also be evident in your business model. I’ll be writing about this topic soon, but I don’t think people should design a great product, and then get lazy by figuring that they must monetize it through advertising.

To effectively monetize a product, you must dig deep to identify the true value, and put a price tag on it.

And, that’s just what Scripped is doing. According to a post at the Silicon Alley Insider, Scripped will provide their web-based script-writing software for free, and charge for add on services, such as “script consultations” and “brokering meetings with producers and the like”.

Now, I don’t know much about the movie business, but it seems like these guys thought hard about what a screenwriter would pay the most for… experience and expertise. Can they deliver on that promise? We’ll have to see…

Naming Your Company: Some Practical Guidelines

I read a blog post today on naming your startup from venture capitalist Mark Peter Davis.  Mark gave some very usingful and practical advice:

  1. Be phonetic,
  2. Use few syllables, and
  3. Make sure the url is available.

I might add another rule to this list…

4.  Make sure people will remember your name.

There are many ways to do this, but I think the name should somehow relate to the product or service you provide.  Obviously, there are exceptions to this rule, but if you only have limited exposure to perspective customers, you want to make sure the name sticks.

I’ve Never Seen a Deal Botched This Badly…

Check out this TechCrunch story regarding the End of Stage6. I thought the product was shut down because it was essentially a pirated movie web site… looks like I was wrong.

This is a fantastically well-written story by Michael Arrington on how to mismanage a business and cost investors a significant amount of value.

What’s also a shame is that the Divx Codec is a great product.

By the end of the weekend, I should have helped to found a new company.

This weekend, I am participating in an event called the Startup Weekend DC. Here’s the explanation of the concept from the organization’s homepage:

Have you ever wondered
what a group of highly talented and motivated people could accomplish in a weekend? Could they start a company from concept to completion?

StartupWeekend answers that question and more. A unique three-day experience, StartupWeekend brings the best and brightest people together in a local office space to select the concept, break into teams, and develop the product, marketing and revenue model.

Occurring in cities across the world, StartupWeekend is the new way to allow your local entrepreneurial community to come together and incubate a company from concept to completion in just three days.

I heard about StartupWeekend about a month ago when I was reading the blog called Silicon Alley Insider. They wrote about the New York City session, which was unable to start a company by the end of the weekend. I hope that we will be a little more successful.

After the weekend, I will write a follow-up post to describe my experience and (fingers-crossed) the company I helped to found.