Good article here.
FMYI has the best short film / video that I have seen from an early-stage company.
The Wall Street Journal recently produced an article titled “The Power Trip.“ The gist of the article can be found in two points. First, contrary to what many may think, studies show that power tends to flow towards nice people. “People give authority to people they genuinely like.” Second, once individuals are in a position of power, they often stop exhibiting the qualities of empathy that helped them obtain power in the first place. “It’s an incredibly consistent effect,” says Berkeley psychologist Dacher Keltner. “When you give people power, they basically start acting like fools.”
The article is a good one, full of thought-provoking content.
I have been thinking about this article in large part because it seems to apply to investors. I have been investing in public and private companies for more than 15 years, and I continue to be struck by the arrogance and lack of empathy exhibited among investors. Some of the reasons may be somewhat forgivable: reacting to being burned by previous slick stories, managing information overload, etc. But I think a dominant contributor to investors’ self-absorption traces back to some of the factors mentioned in this Wall Street Journal article. Investors feel a certain sense of power and simply forget to have empathy for individuals who are sweating it out “in the arena,” as Teddy Roosevelt once said. And that is one of the most unfortunate aspects of the investment world.
A couple of days ago I noted that Chris Anderson has written a fantastic article. Let me clarify and explain my thinking.
I believe the title of the article is distracting. The Web is certainly not dead. But I think Chris has identified an important new trend. For years investors have embraced the belief that the long-term trend for the Internet is towards openness and “free” content. We are now seeing, however, semiclosed platforms like Apple and Facebook that are thriving. Furthermore, consumers seem to be showing more willingness to opt for a paid, high-quality experience delivered via an app or other platform over a free, lower-quality experience delivered via a browser. For example, my 11-year-old step son said to me last week while I was using my iPad,”Why are you getting your email through a browser? You should use the Google app.” Regardless of whether the Google app provides a significantly better experience in this particular case, I was struck by the fact that his instinct was to automatically elect for an app over a browser experience.
The Web is not dead, but I think Chris Anderson’s article should make us wonder if we are seeing an important turning point in the Internet. This trend, by the way, would shift the power a bit more towards publishers, creators and intermediaries that are trying to be paid for what they produce.
On Fred Wilson’s blog, Tereza Nemessanyi has an op ed piece on the difficulty that women entrepreneurs face when trying to get funded by venture firms. She writes:
“Recent studies by the Kauffman Foundation and venture capitalist Cindy Padnos of Illuminate Ventures show high-tech businesses with women in leadership outperform the rest. They are more capital efficient, launching with 30%-50% less capital, generate 12% higher revenues, and have lower failure rates.
If women are so good at starting businesses, then why does it take them longer to start one? Well, according to a Tampa University study, women are bitten by the entrepreneurial bug later than men. Our startup sweet spot is between the ages of 35 and 45 — after we’ve finished school, gained professional experience, had children, and transitioned out of the early “interruption parenting” years. We are eager to apply what we know, to create new businesses on our own terms.”
I looked into applying to [incubator] Y Combinator. They require a three-month relocation to the Valley. Trouble is, I’m a 40-year old suburban wife and mother of two young kids from the New York. So no can do.”
I agree that mothers represent an untapped business resource and that many of our institutions are not set up to address the inherent needs that mothers have for flexibility. This applies to both entrepreneurs and members of larger organizations. I like the creativity being shown by FlexPaths and others to help change our institutional processes to include a broader set of entrepreneurs and workers.
I think Chris Anderson’s piece titled “The Web is Dead” is the best article that I have read about the Internet in years. He captures the move away from yesterday’s belief that the openness of the Web trumps almost all closed systems to today’s recognition that consumers value well-designed, high-performing semiclosed platforms that are connected by the Internet. This is a big shift. Here is a link to the article.
Privacy groups, lawyers, entrepreneurs, investors and industry associations have written a fair amount about online privacy. The central question is the degree to which advertisers and their agents should be able to observe consumers’ click behavior across multiple sites in order to deliver advertisements that would be of interest to consumers. For example, should a company be able to see that an anonymous user recently has visited Expedia, Kayak, various Hawaii hotel sites, medical sites relating to cancer, and five doctors’ websites? By seeing these click patterns, the company could infer that the consumer might be interested in an advertisement on inexpensive airline tickets. At the same time, however, the consumer could be concerned about presumed-anonymous-but-sensitive medical information being circulated outside of her control.
Congress may weigh in on the issue within the next year or two. Much of the discussion has been framed around opt-in and opt-out approaches. That is, should consumers be given the choice to participate in data collection networks (opt-in), or should data about their click behavior be collected automatically unless they elect against such collection (opt-out)?
So, why would consumers continue to allow their click behavior to be monitored? Advertisers argue that such monitoring allows for relevant targeting. If someone is planning a trip to Hawaii, wouldn’t she want to see advertisements on travel promotions instead of advertisements on plumbing repairs?
But little attention has been given to another aspect of all of this: How about rewarding consumers for agreeing to share their click behavior information? If advertisers, publishers and others get economic benefit from collecting a consumer’s click behavior, shouldn’t the consumer get some economic benefit as well? That is exactly what Bynamite is trying to do. The New York Times wrote a great article on the company and its goals. Whether or not Bynamite is successful, I am intrigued the idea of introducing some type of structure that rewards consumers with real or virtual currency for participating in the advertising ecosystem. And even if a market-based concept were to not work well in real life, I am interested in innovative ideas that get us beyond the debate between opt-in and opt-out. We should find ways to protect consumers’ privacy sufficiently while preserving the advertisement effectiveness that stems from behavioral targeting.
I like the last three paragraphs of the article in particular:
In a few years, Mr. Yoon says, a person’s profile of interests could be the basis for micropayments or discounts. A media company, for example, might charge a monthly subscription fee of $10 for news or entertainment programming, but offer it for $8 to those who exchanged their preference wallets.
The discount, in theory, would be justified because advertisers would pay more to market to people whose interests they knew precisely and thus were more likely to buy.
“I may be wrong about the product and our company,” Mr. Yoon said. “But I’m absolutely convinced that the direction is right, giving people a way to identify and use this store of value that is their personal information.”
Eric Ries has an interesting post named What is a startup? He writes, “A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.” He then goes on to dissect that definition.
I am often asked about the stage of development that is of interest to SJF Ventures. While some individuals like to focus on revenue as an indication of seed, early and growth stages, I focus a lot on market validation of the company in the segment of the business that represents upside.
Gauging the level of market validation is a bit of an art, but I tend to focus on growth, engagement and enthusiasm. For example, a consumer Web business with one million uniques per month and a lot of churn tends to be less exciting than a company that has 250,000 uniques, high growth, an engaged audience that comes back to the site over and over again, and a excited group of members that touts the service to others. Similarly a business-to-business company with $5 million in revenue and decently interested customers feels riskier to me than a b-to-b company with $1.5 million in revenue and highly enthusiastic customers.
I emphasized that the market validation needs to be in the area that represents upside because new products and lines of business have high failure rates. Entrepreneurs are often able to get their businesses off the ground by performing a service that generates hundreds of thousands or millions of dollars in slow-growing, tough-to-achieve revenue. They plan to launch a different service that can turbo charge the business and take it to the moon and seek venture capital to launch the new service. Such switches in the business model are difficult to pull off and hard to achieve. Again, I would rather invest in a company that has no revenue but an offering that is on fire and can scale rapidly than a company that has $3 million in revenue but must launch a new type of product in order to achieve the type of growth necessary for a venture return.
Some see it differently. Some would say that generating $3 million of revenue is tough to do and indicates that a company has worked through a lot of challenges that arise in a startup phase of a business. It’s a fair point, but I tend to look for a company where the product or service that can generate a venture return is already humming, regardless of the revenue level.
I like the debate that paidContent is highlighting on Goolge TV. Staci Kramer says that it’s hard to get excited about the concept when so many similar services have failed. Forrester Research says that Google TV is going to be bigger than people think. I tend to believe that the next 24 months will be the time when Internet and TV finally merge in a big way. And I am really interested to see the extent to which the new media is consumed on tablets (iPads).