The Idea Dude


Thursday, July 27, 2006

Opening soon...

There's a great televison program called Opening soon. It chronicles the process of opening a new restaurant or fashion store. You get to see the hopes, dreams, frustrations of would-be entrepreneurs (many of whom have been successful in their own right). As the days go by, the money gets drained with each slippage. My heart goes out to them each minute I watch and then I celebrate with them as they finally open their doors.

Software startups are no different. There is the same passion to create, to serve, to provide enormous value, with tight timelines and budgets. This week, the 80/20 rule applies, getting to prototype was quick and rewarding, now we're sweating the small stuff. The icon that doesn't quite look right, the missing database information we didn't think we needed, the branding that needed tweaking, the marketing message, the list goes on...

The best thing is we have terrific mentors and advisors, people who are very involved, yet see it all from the outside. Yesterday, in the space of 30 minutes over the phone, one of our advisors/co-founder/friend zoned in on half a dozen or so things that made our site look so much better this morning. Still lots to do, but each day, the system improves by leaps and bounds, and I have to resist the temptation to release before it's really ready.

This experience is about giving birth to a dream. Earlier in the week, I typed in our url only to have the browser spit back an error message, Server not found. For a moment, I sweated and panicked, then realized that my wireless connection had dropped. In my moment of relief that followed, I reminisced over our first baby, how we kept checking every so often if he was still breathing. Some things don't change....

and yes...we are opening soon...

Thursday, July 20, 2006

The chicken becomes the pig

One of my previous CEOs and friend loved to use the chicken and pig analogy. There are many variations on the theme. Essentially, the chicken and the pig go to breakfast and debate as to their contribution to the venture. The chicken supplies the egg and the pig, the bacon. The pig concludes that while the chicken is involved, he, the pig is committed.

After a lifetime of being chickens (i.e. employees for the most part), Tealeaf and I now fully qualify as pigs, taking no money and funding this new venture on our own. It is both scary and exhilerating. Scary because there is no safety net and there is a limited time to how long we can do this. Exhilerating because every hour we spend is our own and every reward directly related to our eventual success. Not being naive, failure is a possibility (rather than an option). However, we are extremely with the potential value we will bring to the blogging community. More here, in a week, when we hopefully go out to a limited beta.

The interesting experience through all this, is that there are varying degrees of commitment...I have built teams that have been extremely loyal and hardworking, putting in insane hours and boarding planes at the drop of a hat. I, too, have done the crazy hours, the burns, missing important family events. But what they forget to add in the parable, the chicken will never fully appreciate what the pig is saying until it becomes the pig. That is something, I'm learning very fast each day...

Wednesday, July 12, 2006

New millennium, new rules

I'm starting to wonder how many of the age-old barometers for startups are still valid in Web 2.0 and beyond. Looking at what we are currently doing and how I used to evaluate companies for acquisition or investment, I see many assumptions and key indicators are now out of date. If you take a true brick and morter company, like a restaurant, you could make some pretty good assumptions regarding your location, clientele, revenue projections, time to build. Building a business model was not too complex, like putting a drive-thru coffee stop on a busy highway. In the 90s and the boom of B2B or enterprise internet companies, you still asked the same questions, what pain are you solving, how many paying customers out there, who are your competitors and what's your IP and barrier to entry. Building a credible business plan that could attract investment was pretty much a known and accepted practice and process.

Enter Web 2.0, the emergence of many small companies (er...startups) trying many things. Sounds like the dotcoms of yesteryear so what's changed? What hasn't changed is the celebration of human creativity to look for new ideas and innovations. That's a good thing. What has changed, from my angle, is more sanity when creating and funding these startups. In the past, we knowingly or unknowingly, perpetrated huge lies about revenue potential, 'if you build it, they will come', we told investors who in turn plowed millions of dollars in building huge teams, extravagant offices, large salaries in anticipation for that holy grail, the IPO. Sure, some of that is still around, but there are many Web 2.0 companies that have less than 5 employees, either self-funded or on small salaries, chasing an idea, a dream. Why is this better? Agility, to accept that while you have a goal, your journey may take you somewhere else, hopefully somewhere better. In return, you have a couple dozen competitors you don't know about, a dozen more who will emulate what you have done and a fragmented, hard to quantify market that is distributed across the globe. So what's the business model again? The new age economics is not the full design, roll-out and optimize, it's the XP programming (Extreme Programming) paradigm. Do just enough, do it fast, and adjust accordingly. Maybe it's really Prototype 2.0. Take a sheet out of Google's book and never emerge from the beta.

So here are some honest answers to questions I'm asked.

  • Is it a huge market? Potentially, it's the Internet, giving an actual number would be insane
  • What's your barrier to entry? zero, anyone telling you otherwise in any Web 2.0 startup is lying. The key to the web is transparency. To say that you can keep your competitors at bay with some innovation no-one can mimic or circumvent is naive.
  • Have you filed a patent? are you kidding, a) there's the cost and time and b) doesn't stop anyone finding a different way or hosting offshore
  • What percentage of the market will you own?Interesting question, MySpace is reportedly the number site in terms of page visits ahead of Yahoo. Yet it represents less than 5% of the total internet portal activity. The point is, it is a much bigger pond and we should focus on growing a stable loyal community not trying to conquer the world. There's actually enough to go around.
  • What's the business model?I have no clue...actually that's not true, I have an idea of how several revenue models may work but what's more important is I have a value model I understand
  • How many millions do you need?I need enough for several people to throw out the idea, it's called germination, that's why it's called seed capital. Accepting huge sums of money is great from an ego point of view but brings a different kind of responsibility i.e. the need to generate huge investment returns too early will force you to make decisions to quickly or for the wrong reasons
  • So if it's not for the money, why are you doing it?Oh, it's always for the money, prolonged living on bread and water is not on my life goals, but doing something I'm passionate about has the same priority.

I was watching a TV show last night. This guy built a motorcycle from scratch in 30 days. If he got that built and working, he could keep it. Needless to say, he achieved it and promptly handed it to his son as a gift. Very cool Dad. But the key point was the people sponsoring the show/contest commented that while there were no guarantees, the people who won were invariably those who were totally passionate, focused and took every punch on the chin without bitching about the raw deal they were dealt. That's my kind of dude.

Thursday, July 06, 2006

Is that really you, or just your avatar?

In July's brief, they focused on branding and in particular in-game advertising. In 2001, a couple of friends and I dreamt of serving ads in games. We would brand the buildings, cars, T-shirts of your hero etc. In those days, there were just a handful of companies, one of them was Massive. Potential investors said we were crazy, we believed them. Massive was acquired by Microsoft this April for an amount reportedly between 200-300 million. Note to self, VC's are not necessary technology visionaries, although to be fair, it has taken 5 years for in-game advertising to be financial attractive as a business.

More importantly, the early paradigms of Sims Online, World of Warcraft and Neopets are being replaced by sophisticated social models such as Second Life that can best be described as powering our virtual schizophrenia. We can now develop real estate empires, build multiple personalities and roam these virtual worlds with virtual identities. And now, adding real-world advertising in a virtual world serves to blur the virtual/reality distinction. It is only a matter of time, that you would take your avatar to see a virtual shrink to get a second opinion. We may wake up one day wondering whether we are really virtual beings that have technical evolved so much we start believing we are flesh and blood.

Perhaps in a couple of generations, we would all exist in mini-cocoons and live our lives in virtual worlds, choosing to kill our characters and adopt new identities as soon as we are bored with our mundane online lives. The question is, by spending disproportionate periods of time on-line, does evolution mean that over time, we develop a virtual online 'sense' that grows stronger while some of our other senses lose their importance. Perhaps, the Matrix is really a prophecy waiting to be revealed. Stranger things have happened.

It isn't all bad, for some, it probably provides some kind of outlet or stress relief, while for others it is a chance to explore other dimensions of their personalities without fear (and hopefully without consequences). Like any technology there is room for abuse.

It is incredibly exciting to witness the acceleration, mutation and integration of the on-line experience in all our lives. I guarantee anyone who dares to even predict the next 5 years will be woefully wrong.