Saturday, February 26, 2011

How an Entrepreneur Views Time

One of the best and hardest things about being an entrepreneur is that you have no one telling you what you need to be doing.  This requires an incredible amount of internal motivation.  Everything you do is because you decide it needs to get done, and it gets finished when you decide it needs to get done.  This means everything an entrepreneur spends their time doing has to become a math problem, whether they want to admit it or not.

I guess you can call this time management or prioritization, and at the end of the day that's what it boils down to, but I view it as an optimization of an expected value equation.  After all, entrepreneur does come from latin meaning "value creator" (Note: not accurate).

A good entrepreneur understands that everything has an opportunity cost.  Should I put together a formal proposal that will take 4 hours for a 100k contract (with 20% expectation of landing the deal), or should I create three proposals each taking 30 minutes for 10k contracts (each with 85% chance of closing) and give one capabilities brief to a new ad agency that has clients that are "dying for mobile."  If I choose the three smaller contracts, there are less margins, but greater possibility of future deal flow from each client.  If I take an extra day on the 100k bid, that probability goes to 15%, but if I take longer and the smaller contracts, their probability of closing goes from 85% to 45% and almost no chance at future business.  Of course these numbers aren't written in the e-mails I get from the clients, but that's part of the art to this crazy science.

Now all this is running through my head at 9:30 am, after my morning coffee has finally kicked in and the phone rings.  It's a Fortune 500 company asking us to put a quote together for a 50k bid.  We already handled their last mobile app and now they want an Android version.  Uh oh, throw out the old calculation.  Not valid anymore...the entrepreneurs mantra goes something like "Take a great answer now over a perfect answer later."  This is because that perfect answer later will be flat out wrong when the new dynamics of the business are taken into account.

It should go without saying that as a startup the HARDEST THING to do is turn down business, or a sales call, or a "Glengarry" lead, as any business is good business when you're trying to grow.  But you always have to be thinking about opportunity cost of that sales call, or the time putting together that big proposal, and how to maximize the total expected value of all your business needs to grow your business most effectively.  This is because no matter how good you are as an entrepreneur, and how good the processes you put in place to streamline your business, the one thing you can't scale is yourself.

Thursday, February 24, 2011

Breakfast Was the Most Important Meal of Today

Huge props to Mike Brenner for doing a great job this morning spearheading a phenomenal startup event (Startup Breakfast)  through his community building organization called Startup Baltimore.  As an entrepreneur in the area, it was great taking time out of my day to meet with others in a similar situation as me with interest in our growing tech community, in such a collaborative and welcoming environment.

Baltimore creates such a tight knit community bond that it is always worthwhile to dive deeper into the community to figure out how I can be helpful to others, and meet so many talented and passionate entrepreneurs.  I loved speaking to the group about my companies and getting their feedback.  They provided both positive energy towards my work, and tons of great feedback including their valid concerns about our customer acquisition model, and excitement about trying new features for us as beta testers when the time comes.  Equally beneficial was listening to others in all different company stages from trying to get their startup out of their apartment and into office space, or going from two co-founders to hiring employee #1, or in some cases just pitching an idea and looking for the groups collective wisdom and feedback.  A great experience all around, and I can't wait to be a presenter at a future roundtable, or give advice to the next eCommerce startup to avoid all the pitfalls I ran into, or get tips on raising funds from a CEO that just raised a round of angel investment.  I will definitely be attending these events and others through Startup Baltimore in the future.

Another tangential benefit was walking through the ETC (Emerging Technology Centers) in Baltimore where the event was held.  With Baltimore being such a welcoming and small (at least compared to Manhattan where my last startup was located) community, I must have known, taken meetings or had a drink with half of the companies there.  And even better, one of the few companies I hadn't known, got introduced to their CEO on the spot, and it turns out they have a need for an eCommerce web and mobile technology provider and we are setting up a meeting for next week.  It's definitely inspiring walking through and seeing all the hard-working and successful startups sprouting up in the ETC and I definitely need to make a point to drop in and visit more often "just because."

Tuesday, February 22, 2011

Is There A Tech Bubble Really?

It seems to be a pretty big question on everyone's minds these days.  Is there a tech bubble or isn't there?  My answer would be both yes and no, and it all depends on which tech universe you're talking about.

Some people are skittish around a $50B+ valuation for Facebook or Twitter valued at $10B.  I think those valuations may be a little bullish, but I would definitely not call it a bubble.  These are companies with a track record of consistent growth, large corporations vested in their success and an entire ecosystem of developers and entrepreneurs dependent on their platform - not to mention insane revenue numbers.  Also, the investor market on social networking and publishing has matured quite a bit since the early 2004 days when no one knew how to value a user or a network.  Now, the way to value a network of users is pretty well defined.

Even the Groupons and LivingSocials of the world valued in the $6B range isn't a bubble, in my opinion.  When all else fails, look at the fundamentals. Their revenue, customer base, revenue per user is all growing - and rapidly. LivingSocial mentioned that of it's over 20mn deep subscriber list, 6mn were added in January alone!!  Whether you think the business model is sustainable or not (Note: I do not), if they were selling shoes instead of deal-a-day coupons, no one would be crying bubble.

However, I do believe there is a bubble in early stage companies that will be a long-arcing, inevitable and painful burst.  The bubble is found where there are no fundamentals or vetted metrics to value these immature technology companies (I'd even take active users, or whatever).  Seeing early stage companies that are getting essentially acquired pre-launch or even in talks pre-beta (???) for rumors of upwards of tens of millions is absurd.  These may be acqui-hires, or initiatives that may wind up being successful for the acquirers, but in the long run the valuations for such immature and inherently risky things as tech companies, with absolutely ZERO fundamentals or traditional valuation metrics to back them up is precisely what I call a bubble. After enough of these investments/acquisitions pan out to be worth $0.00mn, money will flow a lot slower to these types of companies - or as Mark Suster says, "When the spigot slows, the water is gone all at once."

Ironically enough, this current early stage bubble is also hurting the entrepreneurs RIGHT NOW (For those without a San Fransisco zip code, that is).  While the Valley provides great cache and incubating/investor opportunities,  this frames all investors in all areas of the country with a new valuation standard at each funding level.  This implicitly increases the price tag on all startups in the tech community before an entrepreneur even lands a meeting.  This assumption of increased valuation for even a seed round makes it that much harder for startups to find a willing investment partner to join them on their great roller coaster ride.

I guess like everyone else, I'll just have to wait and see what the future holds for this early stage tech bubble, and companies in my area (including my own) that are looking for investment. But in the meantime, if any potential investors (or AOL) are reading this, I have a GREAT idea for bridge currently in beta and I'd be willing to talk acquisition - just shoot me an e-mail!

Monday, February 21, 2011

You Are Judged By The Strength Of Your Enemies

This phrase has always rung true to me, and I think Microsoft has been a great example of each side of the double-edged sword.

Back in 2006, Apple began running its "Get a Mac" commercial campaign where Justin Long and John Hodgman go head to head for computer market share. This was a brilliant ad campaign that increased the exposure of the simplicity and headache-free nature of OS X over the bogged down PC counterpart (Guess what computer I own??). At the time these ads starting running, MSFT stock was valued at ~$27 (~$227B market cap), depending on your estimate for initial air date. AAPL stock was ~$63 (~$58B market cap).

Not surprisingly, Microsoft made no effort to engage Apple in this overtly antagonistic marketing campaign at the time. If you are judged by the strength of your enemies, Microsoft wanted to give Apple no such moral victory as to define them as an enemy by pushing back.
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Flash cut to Sept 2008. MSFT was valued at ~$27 (~$227B market cap), and AAPL stock was at ~$160 (~147B). MSFT decides enough is enough and begins their $300mn "I'm a PC" response to the exceedingly popular, now 3 year old ad campaign from Apple. They have officially declared Apple an enemy. Apple did not have to spend another dollar on advertising while these commercials ran. Every time one of these commercials ran, consumers thought "Wow, Microsoft is really worried about Apple taking their market share." Apple executives must have popped champagne when they saw the first run of these commercials.
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Flash cut to May 2010. MSFT ~$27 (~$227B market cap), AAPL ~$257 (~$237B market cap). Apple officially passes Microsoft in market cap, and makes the smartest move possible. They officially shut down the "Get a Mac" campaign. Microsoft is no longer their enemy in their eyes, they have bigger fish to fry now. Microsoft is still running their "I'm a PC" response ads, holding out hope to reengage their now prized enemy.

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Onto Microsoft's new great revenue generating hope - Search. I don't know if they did this on purpose, but they now are treated like an enemy to the Search Overlord, which is a pretty strong enemy to have. As Apple popped champagne in 2008 when MSFT ran their "I'm a PC" TV spots for the first time, they must be shipping in the Dom by the case for Google making such a public fuss about this. We're they viewed as a true threat to the stranglehold Google has on search? It doesn't even look like Bing's market share gain is at Google's expense. Well, certainly public opinion has shifted on who the top tier search engines are and ultimately public consumption will follow. Would Google even care if Blekk-who? was stealing their results? They would not value Blekko so highly as to treat them as an enemy.

So what does this all mean for me, the small business. We are always trained to view competition as bad, diverging revenues and potentially creating price wars for prospective clients that chop margins to pieces. However, this may not be all bad. Your value to the consumer may end up lying in who your competition is perceived to be in their eyes. Always try to play in the bigger sandbox. Compete over bigger clients. Pop the Andre when your bigger competitor engages you in a price war over a valued client, or tries to publicly undermine your corporate initiatives with marketing around similar efforts of their own. Even if you lose out on a single client, it will make your perceived value across the entire market incrementally better by having such a strong enemy (then go off and find an even bigger one).

Sunday, February 20, 2011

How Can We Measure Mobile OS Market Share?


After reading this article on TechCrunch, I was shocked they did not think more critically about the validity of measuring mobile platform market share using advertising impressions. The article assumes (as does the ad publisher) that these impressions are as good as actual unit sales to measure market penetration. I'm not here to say which side is actually gaining or losing market share - that's not really the point. The point is figuring out how to measure this, and why certain metrics won't work.

Back in the good ol' days when companies only had to worry about a website destination for their brand, everyone had to go to the same domain. Advertising impressions was an effective and accurate method to measure browser market share, as well as OS market share. Every browser rendered the same ads from the same place.

In the new mobile frontier, there is no longer a single destination to access the same content for a single brand and this has huge effects on native application mobile ad impressions. Each OS (for the purposes of this blog I'm just focused on Android and iOS), has different pros and cons, and that leads to different methods of content consumption, which leads to skewed ad reporting metrics.

Angry Birds was a highly publicized example this divergence of platform behavior for both developers and consumers. iOS is famously closed, while Android tries to be famously open. There was a very good reason why the Angry Birds iOS version is $0.99 with no ads, and the Android version is offered for free and ad-supported. Rovio knew that Google's desire for openness makes it super easy for one user to pay, then zip and e-mail the application adk bundle to your Fav 5 (or 50) for free. Ad-supported may very well end up being the more profitable business model for Rovio, but you certainly can't measure the popularity of the application on Android vs. iOS, nor the overall popularity of the OS' themselves, by measuring these ad impressions against each other.

Also, consider a premium content provider like the NY Times, and how consumers access their information based on their mobile OS. On both platforms users can choose between native app and mobile web. Based on the well-documented differences between browser experiences, along with load times, it will affect whether users choose to use native apps at all. While Medialets (the datasource from the TechCrunch article) will record the native app ad impressions, they are completely out of the loop on mobile and full web advertising metrics. Unless they capture the whole picture, they cannot say from their metrics what the true market share and growth is for each platform. They may simply be measuring an increasingly positive mobile Safari experience with iOS users (and/or increasingly poor Android browser experience) when they calculate slower growth in the iOS market vs. Android based on native app ad impressions or vice-versa. There are simply too many variables without enough control groups for such a fragmented market.

For what it's worth, my agency has engaged more than one Fortune 500 company in the past 6 months that have asked us to build their Android app first, and the iPhone/iPad version later if they have the budget left. This doesn't mean that Apple is losing their stranglehold on mobile like they did with the desktop back in the 90's, but Medialets can't tell us the whole story either.

About.me


My bio to the right spells out most of my work background and interests, so I'll take this opportunity to describe what I'd like to do with this blog, rather than bore you with more details about me.

I love technology and the startup culture around innovation. After grad school, I specifically avoided Wall Street where most of my peers ended up going (which in 2008 was 2 out of every 5 graduates with full-time jobs!!) because I wanted to surround myself with passion, innovation, and the excitement of building something that will help the world - or at least be a part of that process.

Hopefully that same enthusiasm will shine through with my blog posts, as well as be a vehicle for me to express some of my thoughts on new startups, the direction of the tech industry, and the state of innovation as a whole from my perspective. That perspective is one from someone who has worked as an "Ops Guy" at a startup in the shadow of Madison Square Garden, as an EIR at a VC firm in DC, and now at a Tech Agency in an up-and-coming city in Baltimore that is bursting at the seams with creative and innovative entrepreneurs. The goal isn't to define my stance on a given topic, or chime in as an expert opinion, but rather to craft the beginning of a discussion that can flow into the comments section, or pick up where another blog post left off. To that end, I'll try to keep my personal rants to a minimum.

My favorite blogs to read, whose extremely valuable and insightful commentary on the tech community and the world at large which I hope to emulate are AVC, Chris Dixon's blog, Both Sides of the Table, and Feld Thoughts.

Oh, and I may occasionally post about my favorite Baseball team - the Mets. Welcome to my blog and I hope you enjoy!