The Next Phase of Social Business is the Collaborative Economy

May 7, 2013 by jeremiah_owyang

Above Image: Market Opportunities for the Collaborative Economy by Vertical, from Sharable Magazine follow them on Twitter.

What’s the next phase of Social Business?  That’s the question I’m frequently asked.  Without a doubt, the next phase is the Collaborative Economy.

What’s that?  That’s where brands will rent, lend, provide subscriptions to products and services to customers, or even further, allow customers to lend, trade, or gift branded products or services to each other.  This unstoppable trend is fueled by the social web, the specific features include relationships, online profiles, reputations, expressed needs and offerings and ecommerce. Customers are already starting to conduct these behaviors among themselves using TaskRabbit, AirBnb, Lyft, and many others tools –some of these are disruptions and opportunities to brands.

[The next phase of Social Business is the Collaborative Economy; Brands will enable customers to share, trade, lend, gift products and goods using social technologies]

While this movement will have broader global and economic impacts, at Altimeter, we’re focused on disruptions to corporations.  We’re knee deep in interviews for our next report on the Collaborative Economy, and have interviewed startups, VCs, brands, social business software vendors, authors, thought leaders, and are dissecting data of 200 sharing startups, for a broad overview of what it means to business.

Matrix: Phases of Social Business

Phase	Department Impacted	Notable Examples
Phase 1	PR and Brand	Dell Hell incident, Kryptonite Lock
Phase 2	Marketing realizes an opportunity to conduct outreach	Corporate blogs: Fast Lane by GM, Microsoft blogs, IBM Blogs
Phase 3	Customer Support	HP massive online communities, Home Depot Communities, Comcast Cares
Phase 4	Product Innovation	Starbucks Ideas, Dell Ideastorm
Phase 5	The business model, supply chain, various other departments	Using social tools, customers are sharing, selling, and renting your goods to each other

Caveat: There are many broader impacts inside of the company that also impact HR, recruiting, supply chain, IT, and more, the above is just a sample of the most well discussed impacts.

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Brands Already On Board: Toyota, Barclays Card, Avis, BMW, Walmart
What are examples of companies that are already taking advantage of this new social business trend now?  Here’s a few from the Master List of Brands Participating in the Collaborative Economy:  To stay current with car sharing or lending services like Lyft, RelayRide, Zipcar, Uber and more Toyota, OnStar and BMW are allowing cars to be rented.   Barclays Card sponsored and supported bicycle sharing in the city of London, associating their brand with the movement.  And retail giant Walmart is considering allowing customers to deliver goods to each other, to compete with Taskrabbit and Amazon.

[The first phase of Social Business impacted branding and PR, it shifted to support and product development. The next phase impacts core business model]

Ecosystem Opportunities Aplenty
What are the immediate business opportunities?  There’s a long list, and the report will probe them in detail, but they’ll include sponsorships, partnership, investments in startups, building branded communities that enable renting and gifting, customer advocacy programs, and more. I’m seeking a SaaS startup that will enable this for brands, and dedicated a whole post outlining the market opportunity. For example, on just the retail vertical, yesterday, I met with Neal of Sharable Magazine, and he shared opportunities for retailers

Mindset Change Required in Corporations
So there you have it, the next phase of Social Business goes beyond marketing and customer support, it changes the fundamental business models and relationships that we will have with our customers. The big change that brands will struggle with, as is it means that brands will have to care about the relationship between customers as they trade and rent your products between themselves.

Collaborative Economy Requires a New Business Mindset

Company Mindset:	Traditional Mindset	Social Business Mindset	Collaborative Economy Mindset
How they think:	Brands are in charge. Deal with it.	Customers are in charge, we’re listening and will engage. We care about your current experience with our goods.	We must now care about extended life of good after we sell it, and the relationship between customers.
Strategy they deploy:	Brand Experience	Customer Experience	Marketplace Experience

Stay tuned for Altimeter’s report on the Collaborative Economy in just a few weeks, which I’ll be presenting the findings at LeWeb, which is themed on the Sharing Economy. Thank you Vivian Wang and Neal Gorenflo for the inspiring interviews this last few days.

Free Yourself from Conventional Thinking

May 6, 2013 by Brian Klapper

Groundbreaking ideas are no longer a luxury when success is contingent upon an organization’s ability to adapt, innovative, and improve. We need look no further than Kodak, Sears, or Sony for validation that status-quo thinking is the fast-track to failure. How, then, can organizations break free of conventional thinking to spark creativity?

The first step is to consider the way you have always done business — and stop. Failing to do so not only prevents truly innovative thinking; it also ensures failure.

Consider Blockbuster’s failure to recognize the changing video rental landscape. If they had challenged their long-held beliefs, they might have considered the seemingly unorthodox decision to buy Netflix in the same way that Best Buy bought Geek Squad. At the time of the Geek Squad acquisition, it was considered foolish by many; a decade later, the $3 million purchase price has been repaid hundreds of times over.

Killing the status quo requires that you:

Impose artificial limitations
It may seem counterintuitive, but imposing strict limitations on your thinking can be an invaluable way to spark creativity. By enforcing artificial constraints, you are forced to dig deeper to uncover more inventive solutions — solutions you would not likely have discovered otherwise. Imagine, for a moment, your organization limited by the following restrictions:

• You can only serve one of your existing consumer segments
• You must move from B2C to B2B, or vice versa
• You must slash the price of your product or service by 50%
• Customer acquisition has been halted; you need to maximize value from existing customers

I recently employed this principle with a large asset management firm. During a strategy session, I asked them to focus their thinking exclusively on their existing customers, assuming new customers were no longer a revenue option. By sharply focusing their thinking, the team realized they were shortchanging themselves by not pursuing cross-selling opportunities within their current customer bases.

The team realized that to increase share-of-wallet, they needed to shift their perspective. They began grouping clients by practice and focused sales associates on developing industry trends and insights. The decision to shift focus did not come lightly, as such changes had never been attempted in the industry, and the risk of failure was great. The results were dramatic: the following year, the company reached its annual sales goals three months into its fiscal year.

Alter Your Point-of-View
A compelling study from the University of Michigan verifies that people often refuse to relinquish their deep-seated beliefs even when presented with overwhelming evidence to contradict those beliefs. I come across this phenomenon rather consistently in large organizations.

Take, for example, the CEO of a large U.S. furniture manufacturer, who asked me to help him reduce customer fulfillment time from 12 weeks to four weeks. The company was using an automated conveyor belt assembly line, and when the workers were unable to keep up with the pace, they hurriedly removed the pieces from the line and put them on the floor — reminiscent of the candy factory scene from “I Love Lucy.” Beside each operator was a large pile of partially assembled furniture.

I suggested to the CEO that unplugging the line and allowing the workers to set the pace would not only result in faster turnaround, but also significantly higher quality furniture, given that the furniture incurred tremendous damage when moved from the belt to the floor. However, management was not convinced. To demonstrate the effectiveness of our suggestion, we set up a pilot line in an abandoned factory, which we ran for a month. Thru-put was 30% higher, quality reached record levels, and morale was way up. Still, management remained unconvinced, believing that workers must be directed, tightly managed, and never allowed to set their own pace.

Yet to innovate, you must be willing to look at all possibilities from a new perspective.

A few years ago, I was asked by New York Life to help them reinvent the end-to-end customer experience for one of its rapidly growing product lines to produce a “game-changing level of customer delight.” I was inspired by an experience I had purchasing a Mini Cooper as a surprise birthday gift for my wife: my Mini salesperson not only agreed to let me pay for the car two days after taking possession, he also drove the car to my house with a box of Mini “gifts” and took care of all of the paperwork. He didn’t even ask for a credit card.

The NYL team was so thoroughly inspired by the story that they rethought their entire customer service experience. They drafted a personal hand-signed welcome letter, redesigned their collateral, created a beautiful box that contained interesting and important product and service information, and added concierge-level customer service. Today, the offering stands out from the competition because of the insights the team gained from an experience outside of the conference room.

Compare Your Organization to Others
This approach can be a powerful driver of new ideas — particularly when you compare your organization to those outside of your industry. Steve Jobs said it best: “Expose yourself to the best things humans have done, and then try to bring those things into what you are doing.” This strategy is not about emulating other organizations; it’s about stimulating surprising ideas that might not come to light otherwise.

When Avon Products decided they wanted to create a world-class help desk for their agents, they compared themselves to a company known for its superior service: the Four Seasons Hotel. By comparing themselves to one of the best service providers — even in an industry far different from their own — Avon discovered new ways to better serve their agents. Ultimately, Avon implemented a Four Seasons Hotel-inspired “white glove” service for their top representatives, which included greater access to new products, discounted prices, and a one-stop issue resolution process that contributed to increased agent retention and productivity.

Look for unorthodox opportunities
Don’t constrain your thinking to improving only products or services. Instead, rethink every touch point between you and your customer to improve how they currently interact with your organization. Key touch points could range from how your customers become aware of your company or service to how they refer your organization or service to others.

As an example, Barnes & Noble focused on creating a unique multi-channel experience for its customers to learn about its Nook tablet. They built a Nook desk at in their physical stores to demonstrate the product and answer questions, as well as a user-friendly online experience to do the same. Barnes & Noble can serve as an example for every retailer trying to master the multi-channel strategy as they meld their online, mobile, and physical presence.

When organizations build their business strategy around practices of old, they fail to recognize and thus capitalize on new opportunities. In clinging to the status quo, they fail to adapt to the rapidly changing market and the evolving demands of the customer. Organizations looking to best the competition must embrace the need to adapt by encouraging new ideas brought about by as many non-traditional interactions as possible.

A Better Way to Think About Your Business Model

May 6, 2013 by Alexander Osterwalder

The business model canvas — as opposed to the traditional, intricate business plan — helps organizations conduct structured, tangible, and strategic conversations around new businesses or existing ones. Leading global companies like GE, P&G, and Nestlé use the canvas to manage strategy or create new growth engines, while start-ups use it in their search for the right business model. The canvas’s main objective is to help companies move beyond product-centric thinking and towards business model thinking.

To start, it lets you look at all nine building blocks of your business on one page:

Each of these nine components contains a series of hypotheses about your business model that you need to test (click or tap for a bigger version):

Nespresso, a fully owned daughter company of Nestlé, is a great example of a powerful business model. It changed the face of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels). Here’s what their strategy looks like on the canvas (full-screen mode works best):

Video Platform Video Management Video Solutions Video Player

The canvas is one of the three key principles of the lean start-up approach. For the other two, read Steve Blank’s May 2013 article “Why the Lean Start-Up Changes Everything.”

Great Entrepreneurs Will Listen To You But Will Follow Their Own Instincts

May 6, 2013 by Fred

I told this story in the comments to saturday’s video post, but since not everyone reads the comments and I want this to make it into MBA Mondays, I figured I would turn it into a case study.

In the early days of Tumblr, I used to bug David Karp, the founder and CEO of the Company, about comments. Though I had hacked my tumblog with Disqus, I wanted to be able to comment on other tumblogs and the vast majority of them had no comments because Tumblr did not support them natively. I was fairly persistent in my argument.

But David held firm. He wanted Tumblr to be a positive place on the Internet. The entire design of the service was with that in mind. There were loves (upvotes) but no downvotes. If you wanted to talk about someone’s post, you had to reblog it to your tumblog and then add whatever you wanted to say. David thought that would eliminate trolling.

Eventually, I gave up and moved on to pestering some other entrepreneur about something I thought they should do with their product. David kept building positivity into his product and today there are 106 million blogs with 50 billion posts on them collectively.

In hindsight, I think David was right and I was wrong. I wanted him to build something that felt more like Wordpress or Typepad (where I blog). He had something different in mind. And to David’s credit, he had the courage of his convictions to follow his own instincts.

This is tricky territory for VCs and entrepreneurs. Because most of the time the entrepreneur will have a better feel for their product vision than the VC will. But there are times when what the entrepreneur is doing is not working and the VC will have to figure out how to get the entrepreneur to see that. I have learned to trust the entrepreneurs instincts until it is very clear I should not. Finding that line is art and not science and takes a lot of experience. And I still get it wrong from time to time.

The Importance of Proprietary Deal Flow in Early-Stage VC

May 4, 2013 by Mark Suster

When I was new at Venture Capital I was trying to figure out the business. It was a fun period for me because everything was new and I was curious.

• What kind of deals should I be doing?
• What stage? What price? With which other investors?
• Should I focus on geographies or industries?
• Should I trust my instincts for founders and products or should I be more focused on the market size or business plan?

One of the major calibration pieces for me was where to find deal flow. As a VC you want to feel like you have “proprietary sources” of deal flow. Otherwise you’re a stock picker, which in this business isn’t a good thing.

I sorted out pretty early that lawyers were a great source of deal flow. Why? Because entrepreneurs often went to lawyers at their earliest stages to get their company registration done. Entrepreneurial lawyers like Don Lee, Dave Young or Ted Wang are  good at sussing out which entrepreneurs are high potential. They are likely taking losses on their first project with the entrepreneur so they select carefully. I’m not saying that lawyers were my screening process – simply that they knew about deals early on and they had voted with their time and pocketbooks so I knew I had a degree of filtering.

Of course I went through normal other channels of deal flow. I spent time on college campuses. I tapped my friends at big tech companies (Salesforce, Google, Oracle). I asked for intro’s from entrepreneur friends. I attended events. I did speaking gigs. I hustled.

I eventually stumbled on to the best source of high-quality deal flow imaginable – blogging. The sheer number of relationships I’ve built through being public, transparent and being willing to engage in comments and through social media has enabled me to get to know entrepreneurs even before they launch their next company.

There is one source that was always problematic for me – intros from investment bankers. This is no criticism of the investment banking industry (although I’m sure some will read it this way) for which there are very useful purposes. But as a source of deal flow it is last on my list. [no, I'm not talking about SVB, Comerica, Square1 and the like. They are venture bankers not investment bankers. Big difference.]

Before I tell you the reasons I’m concerned about investment banking intros, I should start by saying I think bankers are enormously helpful for entrepreneurs in raising money

• When you are trying to raise “strategic money” since these people are often hard to reach and they are often more used to being approached by bankers
• When you are raising a large, later-stage round given by this time you’ve likely got a fairly large business to run
• International money. Same as strategic – hard to reach, hard to get to know easily

I think the issue I have always had with investment bank pitches was best summed up in this article about Y Combinator in which Paul Graham apparently made the following quotes

“There are two things that people grumble about Y Combinator that are actually compliments,” he told me.

“One is that Y.C. start-ups are overvalued. The only way for a company to be overvalued is if there’s someone willing to pay that price. So what they’re saying is: Going through Y.C. causes companies to raise money on better terms than they would have otherwise. We wouldn’t have the barefacedness to make that claim ourselves!”

Therefore one goal of Y Combinator appears to be “get the highest price and best terms.”

Fair play.

They have an investment in each company so I can understand that goal. And they have access to some of the most talented technology entrepreneurs so this is a worthy goal for them.

As an early-stage investor that is not always aligned with my goal, which I would express as, “pay the right price for the stage & risk in a way that is fair to the founders yet preserves our ability to grow into our valuation at the next financing event.” As far as “terms” go I’m 100% aligned to have the most vanilla, founder-friendly terms I can.

But I think there is a down side that I see in startups that raise artificially at prices above what a normal market might value. It makes it extraordinarily hard to raise the next round of capital.

And I’m seeing this even at some really well run startups.

I have always advised startup companies against letting valuations get massively ahead of market norms. I normally advise “Raising at the Top End of Normal.”

The other Paul Graham quote from the article is this:

“The other thing they say is that they can’t tell on Demo Day which are the good start-ups. Well, it’s not because the good start-ups look bad; it’s because the bad start-ups look good! Which means we’re doing our job.” 

Recap: Our goal is to find investors who pay the highest price and to help make sure that investors can’t tell whether they’re getting a good deal or a bad deal.

Hmmm. Lucky me.

So I stand by my well-read Quora post of why I don’t attend demo days. I reiterate as I did back then – it’s not a Y Combinator thing. It’s a Demo Day thing. I don’t think they serve investors well. I feel like I’m attending theater rather than looking for deals.

They are terrible predictors of success for investors. We are judging how well you are coached on stage. Do you have good quips? Good vocal variety? Or as the article on Y Combinator suggests, “is your accent too heavy?”

Meh.

I prefer to get to know companies over time.

I know this will read like a criticism of Y Combinator and I’ll get in usual trouble for that, which I reget. Because my nuanced views will be read wrongly. I wish Paul & team could see my views in why Demo Days are not right for me as more of my style than anything I think is wrong with them. And for the record, GRP has funded YC alum.

I view Y Combinator as a sort of Harvard Business School or Stanford in that I know the best young people of our generation want to go there. So I know that the people graduating will have a higher proportion of great talent than other places. I know they will continue to produce great successes and that they have a team of great thinkings and leaders running their program.

I also know that there are people close with the program like Sequoia that get access to the companies early and therefore have a proprietary advantage over somebody like me.

It is not my proprietary deal flow.

I haven’t built Y Combinator. So if I’m the guy in the audience feeling the power of that great baritone projection with that beautifully designed product and if I am able to fund that company without a prior relationship with them, I’m guessing it falls into Paul’s category of “a bad startup looking good.”

Otherwise, “why I am so lucky?” to get access to it when so many other investors who know the companies on a more proprietary basis have picked over it, spent more time with them and chosen not to proceed?

Or maybe I’m paying the highest price? Hardly a reason to get excited about winning a deal.

As the saying goes, “If you don’t know who the sucker at the table is, it’s you.”

Bad companies that “look good.”

And so it goes with bankers.

They are designed to help good companies to get access to investors but also help to make bad companies look good. They do this because they have amazing skills at writing business plans. They know how to build pitch decks. They have blackbelts in Powerpoint. They tell you how to tell your story. They know the VCs so they know what interests them.

Real life entrepreneurs are messier. And that’s how I like it.

I like to see how they got introduced to me. How good they were at follow up. If they made a mistake how they recovered. I like to see their responses to hard questions – even if I don’t care if they have the “right” answer.

I like to watch how they respond to set-backs and adversity. I like to see how they improve their products when there are obvious holes. I like to debate with them how they will land customers and how they deal with the press.

I judge based on their ability to attract their fellow teammates and what choices they make. And I listen to the reasons their co-founders quit their well-payed job to join them.

I like to hear their passion for the idea. I love complexity. And non-conventional ideas. I love when other investors “don’t get it.” I love businesses that don’t lend themselves well to VC Panels at conferences or Demo Days.

If I’m willing to commit early and be out on a limb then I want to know if I can get a better price. If I wait for traction I know I have to pay up. That’s OK, too. I want to know that if I commit it’s not going to be a party round. I hate party rounds. I generally don’t like to work with founding teams to over-value “collecting logos”

I know that the simple view of this is that I want “cheap” prices, which isn’t true. I have enough investments that people can diligence to tell you that I’ve been fair on price.

But when your banker is pushing me, telling me

“We’re expecting 3 other offers, so move fast”

or

“You’ll have to top “x” price to win this deal”

You’ll understand why I have no enthusiasm. My value add in this deal? Ability to move fast and pay the highest price?

And my reward for doing this? I get to watch 2-5% of my investment immediately squandered on a banking fee for the introduction.

Lovely.

To all my banking friends … I’m not a hater. Your skills are much appreciated later in our business. I would gladly work with you on a $50 million late-stage, complex financing. I would welcome you in an M&A process. I value your insights into industries and your unrivaled networks.

But for A-round deals please understand why I don’t want to take the meeting.

And given how easy it is to meet VCs through introductions I also wonder what’s wrong with your startup teams that given the unprecedented amount of transparency and access now in our industry – why they chose to hire a banker. Might there even be some selection bias in the companies in which you’re pitching me?

To the investment bankers in the comments who argue, “Entrepreneurs have more valuable things to do then raise money. They have a business to run!”

I think that misses the point.

The process of raising capital IS part of running a business.

It’s where you get to test your ideas in the marketplace of people who see many similar ideas.

It’s where you meet people who have broad networks and even if they don’t invest in you may prove very helpful in your future.

It’s part of a process where you learn which investors YOU like so you can decide with whom to entrust as a married member of your business.

After all, if the banking process sanitizes your company and makes it more efficient to raise capital without all the “hard work,” so to does it sanitize the investors. Yet once they’re in your deal there is no turning back.

I’ll take messy and hard work any day.

****************

Let’s call this the “Hunter Walk” footnote. He pointed out that while I changed the title from “Why Early-Stage VCs Should Be Careful About Intros from Bankers” to the current title I hadn’t explained the change.

I thought a lot about the original title (by the way, I often change titles after re-reading, editing and reflecting on the post) and I felt it was too hostile towards investment bankers, for whom I have no animus and I have many friends who are in the biz.

The real point of my article seemed to be broader. It was … VCs need proprietary deal flow. Getting excited about a company at a conference and investing is a sucker’s bet. Entrepreneurs raising at prices not normally supported by progress face risks downstream when they have to raise more capital. And that fund raising is part of the job of being an entrepreneur – not something that gets in the way of your doing your job.

So I changed the title to reflect the tone I wanted to get across.

The Value of Big Data Isn't the Data

May 1, 2013 by Kristian J. Hammond

It is clear that a new age is upon us. Evidence-based decision-making (aka Big Data) is not just the latest fad, it’s the future of how we are going to guide and grow business. But let’s be very clear: There is a huge distinction to be made between “evidence” and “data.” The former is the end game for understanding where your business has been and where it needs to go. The latter is the instrument that lets us get to that end game. Data itself isn’t the solution. It’s just part of the path to that solution.

The confusion here is understandable. In an effort to move from the Wild West world of shoot-from-the-hip decision making to a more evidence-based model, companies realized that they would need data. As a result, organizations started metering and monitoring every aspect of their businesses. Sales, manufacturing, shipping, costs and whatever else could be captured were all tracked and turned into well-controlled (or not so well-controlled) data.

I would argue that what you want and what you need is to turn that data into a story. A story explains the data rather than just exposing it or displaying it. A narrative that gives you context to today’s numbers by exploring the trends and comparisons that you need in order to make sense of it all. The belief that Artificial Intelligence can support the generation of natural language reporting from data is what drove me to help found our company, Narrative Science. I fundamentally believe that a machine can tackle and succeed at freeing insight from data to provide the last mile in making big data useful, and this belief was the driver in building out a technology platform that makes it real.

It may well be the case that you already have someone who looks at the data, builds the queries, interprets the results and writes up the report. But this is time-consuming and labor-intensive. It doesn’t scale. And, given all of the time and money that was put into gathering and managing that data, why stick with non-scalable and expensive ways to perform data interpretation and craft communications?

If we’re going to really capitalize on Big Data, we need get to human insight at machine scale. We will need systems that not only perform data analysis, but then also communicate the results that they find in a clear, concise narrative form.

For the most part, we know what we want out of the data. We know what analysis needs to be run, what correlations need to be found and what comparisons need to be made. By taking what we know and putting it into the hands of an automated system that can do all of this and then explain it to us in human terms, or natural language, we can achieve the effectiveness and scale of insight from our data that was always its promise but, until now, has not been delivered. By embracing the power of the machine, we can automatically generate stories from the data that bridge the gap between numbers and knowing.

In order to do this, your starting point has to be the story (or the communication) itself. It defines your information needs. In turn this defines the kinds of analysis that need to be performed on the facts at hand. Finally, the required facts define how you are going to derive these elements of information from the data you have. It is important to note that the starting point for how to think about this problem is the story and it communication goals, not the data. The data is purely instrumental to the communication you want to support. Of course, once configured, the system actually runs in the other direction, from the bottom up against new data as it arrives.

The overall flow goes from data to fact to angle to story to language. The language is the only applied after the system actually figures out what it is going to say.

Here’s an example. Imagine, for a moment, that you run an organization with multiple restaurant outlets and you have amassed point-of-sale data for each of your franchisees, but none of them are using that data because they just don’t get what they need from it. They need insight as to how their stores are doing and what they should do next. You need to give each of them a report that actually explains how they are doing in comparison to themselves over time, how they might compare to other restaurants, and where there might be shortfalls. This defines the communication that then defines that flow of analysis back to the data level. Graphically, this becomes:

My favorite piece is the last element that our system (called Quill) generates: the advisory. Quill looks for high margin items that have sales shortfalls (in comparison to regional cohorts) that are fixable in the near term. The fact that other stores in a cohort are selling an item is evidence that there is not a regional issue at play. And the fact that the gap is not huge means that bridging it is achievable. All of this comes together to let the system says things like this:

Foot Long Hot Dogs were this week’s weakest menu item with average daily sales of fewer than 140 units. Bringing the store’s daily sales of Hot Dogs up to the same level as the co-op’s would add about $566 more profit each month. Over a year, that’s an extra $6,828. The store only needs to sell six more units per day to accomplish this.

Of course, each restaurant needs to get the advice that is relevant to it. Which means that Quill needs to generate at scale (once a week for over 12 thousand restaurants) while also remembering what is said the week before so that it doesn’t repeat itself. This provides the franchise owners with ability to make decisions driven by the stories and insight that explain their businesses rather by the data alone.

To get scale from data interpretation, we have to embrace the power of the machine to extract and explain the data that it and it alone is in a unique position to analyze and then communicate. With guidance from business, the machine can provide us with the human link between the world of big data and the actual end game we want: a world of evidence-based insight and decision-making. Because the value of big data isn’t the data. It’s the narrative.

How to Raise Money When You’re Not in a Major VC Market

April 27, 2013 by Mark Suster

I travel the country a lot. And I am often approached by entrepreneurs in cities which don’t have a vibrant VC community. They often ask whether they have to move to SF, NY or LA to get financed.

I have the same response always, “Where do you want to live? Where do you want to build your community, your relationships, your family?” I’m trying to get a feel for their commitment to local community versus being in a place where financing is easiest.

If their commitment to staying local is weak I normally say, “Well, it certainly would be easier on you to be in a larger community. It would be easier in terms of getting access to angels, VCs, the media, whatever. So if you’re really indifferent you might consider it.” On the other hand, if they have a strong preference to staying local I usually tell them that I believe you can build a business anywhere these days.

You can build a meaningful company just about wherever these days. Just ask the people of Portland, Seattle, Boulder, Iowa, Princeton, Dallas or countless other cities that don’t have enough venture capital.

Ask SuperCell. Or Rovio. Or UrbanAirship. NewToy, Dwolla, Pollenware or Wonga.

If you don’t live in a major VC zone, I have some tips for how to make it easier to raise Venture Capital.

Before I explain, let me give you some backgrounds why it’s harder to raise money if you live outside “the zone.”

Let’s start with “oversight.” Most VCs view it as their responsibility to mentor, debate, cajole and generally assist with investments they make. They also view it as a responsibility of the money they manage on behalf of others to provide oversight of these companies. And it is significantly easier to help when you are local.

Take me for example. This afternoon (Saturday) I have a coffee meeting with a portfolio company founder. Tomorrow I’m meeting with a senior exec who is considering joining a company in which we’ve invested. He would be a very senior hire for us and filling an urgent gap. I know local talent. I know who is perceived as good and who has a fancy resume but others think didn’t perform. That’s what local allows. I know the whole ecosystem: VCs, CEOs, tech teams, founders, angels – and I know people who have worked together for 15+ years.

Local knowledge runs deep. Thus, a desire to invest more locally where I think I have a competitive advantage. Otherwise I’m just money.

But I do invest outside of LA. Examples include DataSift (San Fran & London), MyTime (SF) and awe.sm (SF).

Every year I’m in the SF Bay Area 12-14 times. I’m in NY 6-8 times. And then there are smatterings (Dallas 2x, DC 3x, Philly 3x, Austin, Boulder, Seattle not to mention San Diego 8x, Santa Barbara 8x – where I invested in RingRevenue).

This isn’t a complaint. It’s a goal to help you understand the life of a VC. And I no longer control my calendar. When DataSift sets up a board meeting (next one in London, last was in NYC) we have investors from NYC (IA Ventures), SF (Scale Ventures) and the founding team + chairman in London. So when dates & locations are set – they’re set.

So ….

Am I looking to add 8 trips / year to [name your location not already on my annual itinerary]. Not easily. Of course if it’s a company on fire I would travel to any 2-hop city from LA.

So how do you overcome that given that all VCs must have a similar pattern to me other than super-human VCs like Brad Feld or Dave McClure who have insane travel schedules but an unbelievable ability to put in the air miles and be whenever/ whenever?

Here’s what I would do if I were you. I’ll pick a mythical company in Kansas City.

• For starters I’d try to raise my initial capital locally
• Next I’d research every VC in the country and find people who grew up in or near KC. Why? Because you know they must already come back 1-2 times / year anyways. Plus, they know the local market better and therefore don’t have the uninformed biases of those that don’t. If these people work for reputable firms and have the right industry knowledge they ought to be on your pitch list
• Importantly … I would pitch investors in SF, NY, Boston, LA, etc. and say the following

“I live and work in Kansas City. I have the tremendous advantage of access to a hard-working, loyal and technical talent pool. So I want to stay here and build my business.

That said I want the best VCs in the industry and for that I know I need to be in a major VC hub.

So here’s the deal. I will commit to traveling to NYC seven times per year for board meetings. I’ll make your life easier because I know you travel all the time anyways and KC ins’t exactly on your normal path.

Heck. I need to be in NYC a lot anyways. All I would ask is that you hold 1-2 board meetings / year in KC.

You’re going to want to do that anyways to always kick the tires of the local team. Plus, we have some rocking bbq to make it worth your time.”

I know some people will cringe at this idea, “if the VC really wanted me they would come to ME.”

Maybe. But until you’ve achieved the kind of success you know you’re capable of, it’s a harder ask. And with my strategy, you take their biggest objection off the table. By the way, no VC will ever tell you, “I don’t want to come to KC 8 times / year” because it would sound bad.

But as I always tell entrepreneurs, “Better That You Deal with The Elephant in the Room.“

Blue Ocean Opportunity: Branded Collaborative Economy Software

April 27, 2013 by jeremiah_owyang

A market opportunity for the innovative entrepreneur and visionary VC, a new market awaits to be charted.

Opportunity for Enterprise Software in a New Category
I see a market opportunity, and want to get the word out to entrepreneurs and innovative brands. The number of startups are on the rise to support lending, borrowing, funding, trading, or gifting products and services, and brands are at risk of falling behind.There’s a business opportunity for an entrepreneurs, VCs, to create a movement that can enable brands to take advantage of this movement.

Market Demand
We’re more than half way done with interviews on our next report on the Collaborative Economy (and what it means to corporations), which I’ll be sharing as a keynote at Leweb, and one thing is for sure, this is an unstoppable trend:

1. Some early clues from our analysis of 200 startups that there’s been over 2b of funding, and of those funded, they’ve received close to $28m, on average. These startups aren’t going away.
2. We’re also seeing brands starting to jump in, in particular, innovative Walmart is considering to allow customers to deliver products to each other, in order to compete with the monster known as Amazon.
3. Of course, the macro trend is this is a societal trend, as consumers have fewer resources, less land, and population increases, we will rely on trade and barter systems.

Use Cases and Scenarios
The goal is to enable brands to directly rent, lend their products or services to the market, or build a community that enables their customers to do it on their behalf. Imagine a branded Hyatt, Hilton or W Hotel version of AirBnb that rents out luxury guest rooms in a neighborhood you’re traveling to. Or a branded service of local talent for rent by Manpower, Kelly Services, or IBM services. Or imagine renting your neighbors Lexus, all powered by a version of Lyft or Zipcar that’s hosted by Toyota? This trend isn’t that new, over 6 years ago, we saw the rise of branded Online Communities, which comprised of 125 startups, but today, the dominant players are Jive, Lithium, Telligent, and a smattering of others.

Feature Requirements
There’s a number of features including:  An online marketplace or community, reputation features, ecommerce capabilities, APIs to connect to other program, and an aggressive marketing plan.   A professional services team for integration and implementation will be needed, as well as strategic services required to educate and provide business level strategy.  There’s also opportunities for digital agencies to provide branding and content, as well as communications teams to launch and seed with ongoing media aircover.

Market Contenders
Some of the initial players that could assemble these features rapidly are social commerce vendor known for ratings and reviews, Bazaarvoice, who has over 50% of the retailers already on their platform, or Lithium or Jive, a brandable community software and social management solutions that top enterprise companies are already using,  I can also foresee that Salesforce developer ecosystem could quickly put these tools together into a platform and brand for leading companies like Burberry.  I do think because most of these player are entrenched in their current business models they will not pivot fast enough, so there’s room for a scrappy early round startup to emerge, disrupting the space.

So there you have it, from your trusty Industry Analyst, there’s a blue ocean market opportunity on the horizon, and I see zero players to date.  Leave a comment if you know of a company seeking to solve this.  Contact me at jeremiah@altimetergroup dot com if you have more clues, or leave a comment.

As these vendors emerge, I’ll cross link below.

The $30M Bet That Shapeways Becomes a Factory for Everyone

April 23, 2013 by Michael V. Copeland

Venture Capital firm Andreessen Horowitz is placing a very big bet, $30 million, on Shapeways and 3-D printing.

My Favorite Entrepreneur Story in a Long Time

April 22, 2013 by Mark Suster

This article originally appeared on TechCrunch.

If you don’t like it hot, use less,” he said. “We don’t make mayonnaise here.” 

This morning I was reading my social media and came across an article that Christine Tsai had posted on Facebook.

It was about the founder of Sriracha sauce, David Tran, displaced from Vietnam when the North’s communists took power.

As the son of an immigrant myself, I am a sucker for an immigrant story. Moving to the US with nothing but hard work and ambition. Having a strong sense of values. And wanting to build for the next generation.

It is of course why immigrants power so many successful businesses in the US and why we need to embrace them. They have nothing to lose. They bring new ideas, new cultures, new business practices. But they mostly want to be – AMERICAN. That’s all my dad ever wanted for us. Even while he clung to his native traditions and culture himself.

If you ever want to read the great American generational immigrant business story read American Pastoral by Philip Roth, which won the Pulitzer Prize and was voted by Time Magazine as one of the best 100 books of all time.

It also chronicles the forces behind the decline of the American city (which has been revived in the past 10-15 years) and the rise of global manufacturing.

My own fascination with hot sauces began a few years ago. I was never into spicy foods growing up but after living in the UK for nearly a decade and having so much great Indian food around me all of the time I developed more of a taste for it.

I moved back to the US and after a stint in Palo Alto moved to LA where I started to notice Cholula sauce at some of the best Mexican restaurants I visited.  I absolutely love the stuff.

So I started noticing hot sauces more and the more I looked the more I noticed this funny rooster bottle with a strange sounding name I couldn’t pronounce and that familiar green cap. Sriracha.

Where was it from? What did it mean? What nationality was it? It seemed to be in every kind of ethnic restaurant.

The company name sounded Chinese – Huy Fong Foods. Was this the latest Chinese product to take off in the US?

Turns out it is a family-owned business started by a refugee from Vietnam and named after a small village in Thailand Si Racha. So grateful was David Tran for the people who provided safe passage from Vietnam for him that he named his company after the Taiwanese ship that carried him away.

Tran moved to Los Angeles and started his business in Chinatown with a need he personally had. He noticed that Americans didn’t have good hot sauce. So he made hand-made batches in a bucket and drove it to customers in his van.

But his goal wasn’t to make a billion dollars. He wasn’t driven by quick riches. He was driven by wanting to provide a great product. How much could the new generation of entrepreneurs learn from that?

I know it’s what I look for when I want to back companies.

“My American dream was never to become a billionaire,” Tran said. “We started this because we like fresh, spicy chili sauce.”

And build a great business he did. While still owning the business he now does $60 million in annual sales built from nothing.

Could he have grown faster with outside money? Or by selling to a big company and taking in International? Sure.

But it wasn’t his ambition.

You’ll absolutely love this quote

“This company, she is like a loved one to me, like family. Why would I share my loved one with someone else?”

How many of you could say that?

He didn’t want to compromise on product as he knew he would be forced to if he had to expand too quickly. He wanted to keep his prices low (apparently he has never raised his wholesale price in 30 years).

What I learned from the article? What touched me? What lessons could you learn from a Vietnam refugee who makes chili sauce? Quite a bit it turns out …

1. Extreme product passion. When his packaging suppliers tried to get him to change his product to make it less hot or more sweet for American customers he refused, ““Hot sauce must be hot. If you don’t like it hot, use less,” he said. “We don’t make mayonnaise here.”

2. Uncompromising product quality (he processes his chillies the same day they are harvested)

3. He had a guiding principle for the company

4. Focus on the customer and provide value - ”We just do our own thing and try to keep the price low. If our product is still welcomed by the customer, then we will keep growing.” He said this in response to the fact that several other companies are now stealing the Sriracha brand name. He can’t trademark it since it’s the name of a city. By the way, he has never spent a dollar on advertising

5. Provide something distinctive. What will you be known for? Given the brand dilution going on with the name Sriracha how can he still grow his business? The distinctive design of his packaging. That crazy rooster. All those freaking languages on the bottle – the mystery of it all! And the green caps.

But I have to say, despite it all, and it’s impossible to take away from the success of David Tran, I kept wondering if modern business practices couldn’t solidify this into a global product. Branding matters. Organic word-of-mouth worked until this point but I wonder as this becomes an international product line. I wonder how agressive they are with digital distribution. I wonder if they could trademark a broader name that Sriracha so that they can get some defensibility.

I hope the next generation Tran’s have some thoughts on these topics and more. I would love to see this company continue to succeed.

Here is the article from the LA Times.

Video Of The Week: Mark Suster Interview of Clayton Christensen

April 20, 2013 by Fred

Great interview by Mark of one of my favorite thinkers.

Altimeter’s Four Disruption Themes for Business

April 18, 2013 by jeremiah_owyang

Jeremiah: This was initially posted on the official Altimeter blog, which I’m now cross-posting here on Web Strategy. I’m personally proud, that our research team can come together as one unit to do this, and look at many technologies and identify broader themes as a collective. Once in a while, I pinch myself at how fun work can be, isn’t that the way it’s supposed to be?  Here’s the post:

By Altimeter’s Research Team
Analysts: Susan Etlinger, Charlene Li, Rebecca Lieb, Jeremiah Owyang, Chris Silva, Brian Solis;
Consulting: Ed Terpening, Alan Webber;
Researchers: Jon Cifuentes, Jessica Groopman, Andrew Jones, Jaimy Szymanski, Christine Tran

Over 30 Technologies Have Emerged, at a Faster Pace than Companies Can Digest. If you think social was disruptive, it was really just the beginning. Altimeter’s research team recently convened for our annual research offsite and found over 30 disruptions and 15 trends that have emerged (see below for the full list in our Disruption Database). These disruptions and trends will affect consumers, business, government, the global economy; with accelerating speed, frequency and impact.

Four Major Business Disruptions Emerge – Business Leaders Must Prepare.

Out of these disruptions and trends, Altimeter identified four major themes that will be disruptive to business. Below is a preview of Altimeter’s four business disruption themes, with a definition and short description of each. In the coming weeks, we’ll publish a short report explaining these themes in more detail.

Everything Digital: An increasingly digital landscape – including data, devices, platforms and experiences – that will envelop consumers and businesses.

Everything Digital is the increasingly digital environment that depends on an evolving ecosystem of interoperable data, devices, platforms – experienced by people and business. It’s larger than the scope of Internet of Things, as it’s pervasive or ambient – not defined only by networked sensors and objects, but including capabilities such as airborne power grids or wireless power everywhere. Everything Digital serves as the backdrop for our next three themes.

Me-cosystem: The ecosystem that revolves around “me,” our data, and technologies that will deliver more relevant, useful, and engaging experiences using our data.

Wearable devices, near-field communications, or gesture-based recognition are just a few of the technologies that will make up an organic user interface for our lives, not just a single digital touchpoint. Digital experiences will be multiplied by new screen types, and virtual or augmented reality. Individuals who participate will benefit from contextualized digital experiences, in exchange for giving up personal data.

Digital Economies: New economic models caused by the digital democratization of production, distribution, and consumption.

Supply chains become consumption chains in this new economy as consumers become direct participants in production and distribution. Open source, social, and mobile platforms allow consumers to connect with each other, usurping traditional roles and relationships between buyers, sellers, and marketplaces. Do-it-yourself technologies such as 3D printing and replicators will accelerate this shift, while even currency becomes distributed and peer-to-peer-based. In this new economy, value shifts towards digital reputation and influence, digital goods and services; even data itself. The downside? An increasing divide between digital “haves” and the digital “have-nots.”

Dynamic Organization: In today’s digital landscape, dynamic organizations must develop new business models and ways of working to remain relevant, and viable.

Business leaders grapple with an onslaught of new technologies that result in shifting customer and employee expectations. It’s not enough to keep pace with change. To succeed, dynamic organizations must cultivate a culture, mindset, and infrastructure that enables flexibility and adaptability; the most pioneering will act as adaptive, mutable “ad-hocracies.”

Altimeter’s Disruption Database
Below are the 30 digital disruptions and 15 digital trends, which were used as the starting ground of our analysis.

Disruptions

Trends

3-D Printing and Replicators App Economy Artificial Intelligence (AI) Augmented Reality (Google Glass) Automated Life (Cars, Homes, Driving, etc.) Automated Robots Bio-Engineering Biometric Authentication (Voice/audio, fingerprint, body/eyescan, gesture, olfactory user interface Content Marketing Digital/Social TV vs. “Second Screen” Emerging Hand Held Devices / Platforms (Android, Tablet, Phablet) Gamification Gesture/Voice-Based Interface/Navigation / “Human as Interface”Hacking/Social Engineering and Information Security Haptic Surfaces (Slippery, wet, textured through electrical currents) Healthcare – Data and Predictive Analytics Human-Piloted Drones Hyper-Local Technology / Mobile Location / Indoor Mapping Internet of Nanoparticles (Embedded in bloodstream) MicroMedia Video Mobile Advertising Mobile Payments Native Advertising Natural Language Processing Near Field Communications Open Source / Open Data / Open Innovation Peer-Based Currency / Soical Currency (BitCoin) Proximity Based Communications Social Engagement Automation (Robots Respond on Twitter) Social Network Analysis, Graphing, and Data Science Social Technologies Touch Permeates Digital/Surfaces: TVs, Touch Advertising Virtual Reality / Immersive 3D Experiences Wearable / Embedded Technology Wireless Power / Electricity

Big Data Collaborative Economy Connected Workplace Customer Experience Design/Architecture and Integration Data Convergence/Customer Intelligence Data vs Creative in the Org: New Decision Process Digital Ethnography or Customer Journey Mapping Digital Influence and Advocacy Evolution of the Center of Excellence Generation C Hypertargeting Internet of Things or Internet of Everything Intrapreneurship, Innovation Culture, and Innovation Hubs Pervasive Computing Porous Workplace Privacy: Standardization and Regulation (“Beware of Little Brother”) Quantified Self or Human API The Digital Journey and Understanding Digital Signals The Maker Movement The Neuroscience of Digital Interactions

Open Research: Please Share Your Comments and Insights with Us.
There’s more to come – we’ll be sharing additional insights such as 1) top questions for businesses to ask, 2) who’s disrupted and who benefits, and 3) enabling technologies.In the meantime, we’re soliciting your comments as part of our Open Research model. Please share our themes with others, and help us answer these questions:

• What other business disruptions or trends are you seeing? Please add to this Google form and we’ll provide proper attribution.
• Which of these four business disruption themes impact your business now?
• How is your business responding to these themes, or the related disruptions and trends?

Photos from Altimeter’s Research OffsiteBelow are a couple illustrations that resulted from the discussions that took place at our research offsite:

Above Image: Altimeter synthesized these disruptions and trends, which become broader themes.

Above Image: A graphic illustration of our synthesis. Thank you to Paula Hansen who was instrumental in visually capturing our discussions in real-time.

Hire For Cultural Fit Over Competence

December 18, 2012 by Brad Feld

This first appeared in the Wall Street Journal’s Accelerator series last week under the title Cultural Fit Trumps Competence. Also, I’m going to be doing online office hours with the WSJ on Friday 12/21 at 3pm ET – join and ask questions!

The first people you hire in your startup are critical to your company’s success. So it’s easy to say that you need to hire the “absolute best people you can find.” But what does this actually mean?

Take two different spectrums – (1) competence and (2) cultural fit. Imagine that you have a spectrum for each person – from low to high.

Now, you obviously will not hire someone who is low on both competence and cultural fit. And you obviously will hire someone who is high on both competence and culture fit. But what about the other two cases?

Many people default into choosing people who have high competence but a low cultural fit. This is a deadly mistake in a startup, as this is exactly the wrong person to hire. While they may have great skills for the role you are looking for, the overhead of managing and integrating this person into your young team will be extremely difficult. This is especially true if they are in a leadership position, as they will hire other people who have a cultural fit with them, rather than with the organization, creating even more polarization within your young company.

In contrast, people with low competence but a high culture fit are also not great hires. But if they are “medium” competence, or high competence on in a related role, or early in the career and ambitious about learning new skills, they may be worth taking a risk on.

While you always want to shoot for high competence, high cultural fit people when you are hiring early in your company’s life, it’s always better to chose cultural fit over competence when you have to make a choice.

If you are interested in working with a company that is an expert at figuring this out, go take a look at RoundPegg.

A VC: What Has Changed

December 5, 2012 by (author unknown)

As I read this post in the WSJ about the changing nature of VC funding of consumer web companies, I thought that we may be looking at the symptoms and not the disease. As the WSJ notes, VC funding of consumer web and mobile companies is down 42% in this first nine months of 2012 (vs the first nine months of 2011). And the big falloff is not in seed rounds, which are still getting done, but in follow-on rounds, which are not. So what has changed in the past couple years? A lot, actually.

Rethinking Mobile First

December 5, 2012 by Fred

I wrote the Mobile First Web Second blog post a few years ago. In that post, I talked about apps that were designed to be used on mobile primarily with the web as a companion.

There have been a number of startups that have taken that approach and done well with it. Most notably Instagram, and also our portfolio company Foursquare. It has become a bit of a orthodoxy among the consumer social startup crowd to do mobile first and web second.

But is it the right thing to do? Vibhu Norby, co-founder of Everyme and Origami, wrote one of the most thought provoking posts of the past month arguing that mobile first is a recipe for failure for most, if not all, startups.

Vibhu makes some excellent points:

All in all, mobile service apps turn out to be a horrible place to close viral loops and win at the retention game. Only a handful of apps have succeeded mobile-first: Instagram, Tango, Shazam, maybe 2 or 3 others.

and

You have an entirely different onboarding story on the web. You can test easily, cheaply, and fast enough to make a difference on the web. You can fix a critical bug that crashes your app on load 15 minutes after discovery (See Circa). You can show 10 different landing pages and decide in real-time which one is working the best for a particular user. You can also close a viral loop: A user can click an email and immediately be using your app with you. You can’t put parameters on a download link and people don’t download apps from their computer to their phone. Without the barrier of a download + opening the app to try your product, you can prove value to the user immediately upon their first impression, as is with Google. In addition, the experience of signing up for a service is superior in every way. Typing is easier. Sign-up with OAuth is faster. Tab to the next field. Provide marketing alongside sign-up as encouragement. Auto-fill information is a feature in every browser. The open eco-system of the web and 20 years of innovation has solved many of the most difficult parts of onboarding. With mobile, that kind of innovation is lagging significantly behind because we create apps at the leisure of two companies, neither of which have a great incentive to help free app makers succeed.

and

I use my phone more than anything else. I just don’t think that an entrepreneur who wants a real shot at success should start their business there. The Android and iOS platform set us up to fail by attracting us with the veneer of users, but in reality you are going to fight harder for them than is worthwhile to your business. You certainly need a mobile app to serve your customers and compete, but it should only be part of your strategy and not the whole thing.

Vibhu also takes a stance against the ad-supported, privacy challenged, free consumer app world. I respect that stance and every time I upgrade from a free ad supported app to a premium version (advertising free) via the in app upgrade on mobile, I express my solidarity with him on that one. But as a business person, I have and will continue to advocate for a free tier with a premium upgrade (or just entirely free) because as I have written many times on this blog, I think that is the value maximizing approach and it also allows the greatest number of users to access your product or service.

But I don’t want to focus on business model in this post. We are at the start of what will be a long MBA Mondays series on business models and will be talking a lot about that.

What I want to focus on is the paradox that mobile is where the growth is right now and that mobile is very very hard to build a large user base on. Everything that Vibhu says in his post is right. Building an audience on mobile is a bitch. I talked about that in my what has changed post:

distribution is much harder on mobile than web and we see a lot of mobile first startups getting stuck in the transition from successful product to large user base. strong product market fit is no longer enough to get to a large user base. you need to master the “download app, use app, keep using app, put it on your home screen” flow and that is a hard one to master

But just because something is hard doesn’t mean you shouldn’t try to do it. I am convinced the next set of large and valuable consumer facing services will be built with mobile as the primary user interface. You can see it in the success of Uber and Etsy this holiday season. That’s where you users are most of the time. And if you don’t design your products and services for what is rapidly becoming the dominant UI, you will not maximize the success of your business in the long run.

So do I disagree with Vibhu? Not at all. I think he makes some great points on why you might not want to go mobile only unless you are in the games business. But I differ in two important areas. First, I think you can’t abandon mobile. It is the future like it or not. And second, I think it is critical to design for mobile first and then build a web companion. If you design for the web and then port to mobile, you will find that it is really hard to fit your UI onto the small screen. Better to design for mobile first and then build a web companion. Mobile first, web second. But as Vibhu points out, the web can’t and should not be ignored. It is valuable in many many ways.

Related articles

Beware the Mobile-First Strategy

Some things that make mobile user acquisition difficult

Why We’re Pivoting from Mobile-first to Web-first

Why Mobile First Is Not The Right Strategy

The Biggest Problem in Mobile: Retention

Consumer Mobile Riches – Come back in 5 years?

Mary Meeke's Year-End Trends Report: Mobile & Tablets = 24% Of Online Shopping On Black Friday, Up 18% From 2012

December 4, 2012 by (author unknown)

Kleiner Perkins Partner Mary Meeker publisher her annual “Internet Trends Year-End Report” tonight, providing an update on the glimpse she gave us into mobile trends back in November. As per usual, the Kleiner partner’s biggest conclusions are somewhat familiar: Internet growth remains robust, and penetration in the U.S. leads all other countries.

Battle-test your innovation strategy

December 3, 2012 by (author unknown)

Leading companies use war games to focus better on their competitors, while improving the way they identify, shape, and seize opportunities to innovate. Read more on the McKinsey Quarterly >

Topics: Strategy

Update your Quarterly feed preferences

6 Lessons From The Original Lean Startup

November 27, 2012 by John Greathouse

If Steve Blank and Eric Reis, two of the Founding Fathers of the Lean Startup Movement formed a band, they would produce music like the Kingsmen’s Louie, Louie.

Startups: Massively Multiplayer Online … Shopping? It’s Real, Addictive and Brutal

November 23, 2012 by Daniela Hernandez

If companies like Gilt have transformed buying last season’s fashions into a daily addiction, a startup called Little Black Bag may turn it into a blood sport leveraging a century-old Japanese holiday tradition.

Entrepreneurshit. The Blog Post on What It’s Really Like.

November 18, 2012 by Mark Suster

It’s 4.50am. Sunday morning. And I couldn’t sleep. I have much on my mind since I just returned from a week on the road. 5 days. 3 cities.

Late night Mexican food. Beers. Airports. Delays.

I left on a Sunday. I had to miss a full day with my family, camping in the mountains. I returned home Friday night at 10pm – too late to see my kids.

I’m reminded of this feeling. It’s all too familiar. It’s what life was like as an entrepreneur. I didn’t sleep much back then. I was on the road much and I internalized much of the stress so that others didn’t have to.

And so it goes again. I’ve been on the road much of 2012 and part of 2011. According to the SEC we’re not allowed to market the fact that we’re fund raising, so I won’t. But for some strange reason they make you file your progress on fund raising, which is the widely picked up by the press. Go figure.

So it is now publicly known that we have closed $150 million in our 4th fund. Ok, well, it’s more than this but I’m not allowed to tell you specifics.  I plan to write about it early next year when we’re all through. We have a little more to go until the finish line. It has been a fascinating experience. But now you know why I’ve had many nights away, many airports and much time on the road.

And why I woke up at 4.50am. But this is nothing like the stress of being an entrepreneur. As I’ve written about before, You’d Have to be a Big Baby to Complain about Being a VC.

What’s it really like being an entrepreneur?

That was the topic of my keynote at Seedcon, an event hosted by the University of Chicago, where I am a  graduate of the MBA program.

Entrepreneurshit. The Truth About Building Starutps from msuster

I like to speak about this topic with first-time wantrapreneurs because if you read the tech press every day you’d get the impression that it all glamor. It’s not.

You’d imagine that every founder was getting rich. Actually, positive outcomes for founders are quite rare. You probably follow some high-profile entrepreneurs on Instagram and Twitter and see conference pictures of them in Davos, Mexico, Monaco or wherever. You might be psyched out into thinking you’re doing something wrong for being in your shitty little windowless office. Clicking on their glam party pictures. You’re not. You’re where you should be.

There is a difference between a Conference Ho and a successful entrepreneur. But it’s hard to know that from the press. From the Instgram and the Twitter.

As a startup founder you rarely have much money in your bank accounts. Neither in the personal nor business account. That’s stressful enough.

I recently had coffee with a young friend who just finished his first startup. It didn’t end how he would have liked. But he learned. And he’s young. And I’m certain he’ll bounce back.

He told me,

“I have $6,000 in my bank account. Throughout the course of last year I never had more than $8,000 in my account. 

I want to do this again. But I have to be careful. Maybe I need to do slightly later stage.”

 

He probably didn’t know but he has more in his account than most Americans so there’s that. He had raised nearly $500,000 from investors. Many are well known. He shut down his company gracefully and even thought it must have felt like a crap sandwich doing so I’ll bet his reputation is still solid with his backers.

Think about it – most entrepreneurs who manage to raise seed money or venture capital usually raise enough money for 12-18 months maximum. Many times it’s less. So at any given point you are likely operating with a maximum of 9 month’s cash.

And yet you have to ..

• Recruit employees in the blind belief that the amazing job they’re quitting to join you will be worth it in the long run
• Sign up customers who are paying you money for a service you can’t 100% guarantee is going to be operational for the full period that they’re expecting
• Tell the press how great you are and hope that they aren’t publishing your obituary 9 months later rendering you a fool.
• Tamp down the enthusiasm your naive family has about your “impending IPO” (honey, when can we buy shares? Uncle Morty wants to know) from “your successful daughter” (we’re so proud of her! she’s so successful! we always knew she would be. she was so precocious in high school. that’s my daughter – did you see her mentioned in the New York Times!) Shit, ma, stop sayin’ that. I don’t want you to have to eat humble pie with your friends next year!
• Raise money. Need money. More money. Yes, please give me money. No, I don’t really know if I’m going to be able to return it. But without it I know I’m forked. I need it. So I’ll ask anyway and hope like hell I don’t have to avoid you at future cocktail parties. Quick – why don’t entrepreneurs celebrate when they raise money? Because they know that they’ve just signed up for much more obligation.

Early on in my first company I had an employee ask if it was a good time to buy a home. We had less than 6 months’ cash in the bank. I was pretty sure we were going to raise another round of capital. But not sure, sure. I mean you never know if your investors are REALLY going to keep backing you. And you can’t go around telling all of your employees your deepest insecurities about it or you’ll soon have no more of said employees.

Trust you? Yeah, I trust you. But why don’t you just give me the damn term sheet you promised so I can trust you even more.

You have secret doubts about your co-founder. She seems depressed. And she isn’t pulling weekends anymore like you are. I know, right? Total bullshit. She’s just not as committed as she once was. I don’t think she really believes any more. If I told my VCs would they then lose interest in our next round? Would they blame me? Would they back me or think I had gone off the rails?

So Facebook just announced that they’re going to compete with you. Apple announced that they’re shutting down your category. Salesforce.com just bought your main competitor. Your main competitor just raised $75 million and took all of the oxygen out of the room.

Far fetched stuff. If you’re not an entrepreneur. If you’ve been one for a while you know how much you fear every WWDC. Every F8. Or DreamForce. What announcements are going to crush you? [I wrote about what to do when this happens here.]

My biggest fear as an entrepreneur? I was worried that I was going to get married and be on the altar unemployed. “There’s my son. He should have been a doctor like his father!” Truthfully, that’s one of the things that kept me going. I didn’t want to disappoint.

I didn’t want to disappoint my parents. My wife. My employees. The press who trusted me enough to report on our successes.

I didn’t want to disappoint my customers. People seldom understand that when enterprise customers choose your software it isn’t just a purchase order. It’s a human being inside the buying organization who has trusted you. He went to his bosses and asked for budget. He beat down the other factions that wanted to choose your competitor. He has staked his reputation on a project to use the software of some shitty 2-year-old startup company because he believes! In you.

So you ask why on Earth being a founder is stressful?

No, it’s not as bad as working in coal mines. But it is quite the roller coaster and the stress is real.  Some people love roller coasters. Others prefer a smoother ride.

One of the most asked questions I get about being a VC who was formerly  an entrepreneur is if I ever miss being an entrepreneur? Do I ever want to go back to it?

Of course I do! How could you not want to go back to it. It’s addicting. It’s an adrenaline rush like no other.

I often answer this way:

It’s like sports. If you have a chance to be on court and shooting 3-pointers as the game clock is winding down OF COURSE you still want to be on the court. There is no comparable feeling from the sidelines.

Yet one day you wake up and you realize you can’t run as fast as the young guys. You can’t quite hit the 3-pointers as often. Yes, you have maturity that makes you a wiser player. But you realize that you can be more helpful as a coach.

And yes, I sleep better at night as a coach. And I’m happy as a VC.

Remember that if you choose to be an entrepreneur or to at least try – it’s stressful for everybody who does it. Your competitors have just as much angst as you do. You read their press releases and think that it’s all rainbows & lollipops at their offices. It’s not. You’re just reading their press bullshit. They have their secret doubts. And they’re in their offices reading your press releases and wondering why life is much easier for you. And they’re fighting with their co-founders and struggling to ship code on time.

As I like to say, “we’re all naked in the mirror.” We stare at our own imperfections. And then we go out everyday and see everybody else in their fine threads and wonder why it’s much easier for them.

Being an entrepreneur is about finding your inner self confidence.

• To be constantly told “it won’t work” but to keep plugging away anyways.
• To be kicked a lot and still keep standing.
• To hide your demons so that you don’t scare the bejesus out of your employees.
• To inspire others to join your cause when by all rational accounts they should not.
• And having the cojones to have them join you anyways. Pottery Barn rule. You hire them, you own them now. As in your responsible for these lines on their future resume. Don’t fuck them up.
• To swallow your stresses and insecurities and keep your optimistic game face on in the office. And on your home front. Maybe even try to believe it in your own head.
• It’s about wanting the right speaking slot at an important conference and hounding the organizer until he lets you do it.
• It’s telling your creditors that you need 60 extra days to pay. Please. Yes, most entrepreneurs will be nodding their heads right now. Not fun, hey? But that’s what it takes.
• Firing? Hell, get used to it. It’s a necessity. You better be good at it. Develop a thick skin for it. Not put off the difficult fires. You don’t have the spare budget to suffer fools. Hire fast, fire faster.
• Friday night in the office while others are at the bar. Sundays in the back of a plane. Center seat. Smelly dude next to you.
• Investor emails. They are forwarding you set another mother fucking link to an article about your competitors. And wondering why the hell are we not doing THIS like they are. Enough already!?! I told you not to worry about their move into Latin America. I promise you that won’t be a bit market for us. What? No, I’m not worried that they’re higher in the App Store charts than us. They’re paying for traffic. Paying I say! They can’t have a positive LTV on these downloads. You want me to throw around my money like that too, bro?

Hell, I send those emails. I’ll admit it.
Entrepreneurshit. It never ends. It’s not all glamor. It’s mostly not glamorous at all. It’s just something you have to do. Often because you’re unemployable. Your impertinence would get you fired in 2 days for telling your boss he’s a fuck wit. And it’s why you probably will quit on day 366 after the acquisition.

You’re unemployable. You’re an entrepreneur.

It’s not for everybody and you shouldn’t feel bad if you aren’t one of those that chooses this life. You’ll probably be healthier and wealthier. Despite the fact that only the Lotto winners get reported. Many more people play.

But if you do want to go for it, don’t wait. It doesn’t get easier later in life. It gets harder. You’re probably going to fail or have limited success. The math says so. So better that you try as young as you can when failure is easier to bounce back from. When you can wear it as a badge of honor.

I’m not ageist. I’ve backed several entrepreneurs in their forties. No problem. I’m just telling you that if you’ve never done it before and WANT to then the earlier you try, the better. That’s all.

Good luck. Enjoy the ride. I’ll be rooting you on from my far comfier seat on the sidelines. Secretly. Wishing. I were still in the game.

If you want to read more on the topic:

• The Yo-Yo Life of a Startup Entrepreneur, A Cautionary Tale (the first article I ever published on TechCrunch)
• Should You Really be a Startup Entrepreneur
• I Hate Losing
• Entrepreneur DNA

** Images from top were from this week’s travel. The left hand side was dinner, terminal 3, Chicago O’Hare. The right hand side was the view from my two-hour delay at Newark Airport. Nice view, actually.