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| Mar 29, 2009 |
Tonight on 60 Minutes Lesley Stahl will be reporting on computer viruses and botntets that propagate on the Internet and infect PCs, which enable their creators to do all types of evil things via remote command and control. The show airs tonight, should get some good ratings - it's right after the NCAAs. And if information security alone is not your thing Lebron James is featured on another segment in the show. Leslie Stahl previews her report below.
| Mar 26, 2009 |
"The more options for entrepreneurs, the better."
Brad Feld
In this article discussing Spark Capital's (coolest VC home page yet) new seed investment program, Start@Spark.
The program is setup to provide seed stage investments to Boston and New York based companies in sectors that fit Spark's profile. The standard Start@Spark investment will take the form of convertible debt up to $250,000 at a 20% discount to the follow on round. Spark retains the right to at least provide 50% of the financing of the next round. What Spark has created is an outward manifestation of what I have been hearing. Even though times may be bad at the moment, venture capitlist firms have a deep need to fill their pipelines with seed stage companies so that they have expansion stage companies down the road.
Start@Spark does not consider itself to be competitive with concept/pre-seed focused startup accelerator funds such as Y Combinator or TechStars (Start@Spark is seed stage). And there is a slew of accelerator firms sprouting up this spring including Capital Factory, DreamIT, LaunchBox (in its second year), TechStars Boston, and Shotput Ventures.
From an entrepreneurs perspective I agree 100% wtih Brad's perspective. But from an investor's point of view the story is quite different. Assuming that each of these new funds is looking to bring in a class of ten with an average funding size of $20,000 all of a sudden you have $1,000,000 being invested in 50 concept stage startups on top of what LaunchBox, TechStars, and YC (with it's recent $2 million investment from Sequoia Capital) are already doing. That's a lot of startup concepts being funded. Regardless of where an accelerator fund happens to be based I tend to agree with Paul Graham, the founder of YC, these accelerator funds are all drawing from the same national applicant pool. They are going to have a quality supply problem. Which is not to say that they will be unsuccessful, they just need to fight to obtain raw materials, which in this case is intelligent and driven teams.
It's a good time to be an entrepreneur.
Comments and Reactions Tweet| Mar 25, 2009 |
mobicamp will take place on Friday May 29, 2009 from 5-10 pm at Georgia Tech's Advanced Technology Development Center. What is mobicamp you may ask? According to Amro Mousa who is spearheading the event:
Somehow or the other I convinced Amro that it might not be a bad idea to have some more business focused discussions as well and he has partnered with the Wireless Technology Forum in an effort to broaden the scope a bit.
mobicamp is based on the wildly popular unconference design of BarCamp. We've had two very successful BarCamps at ATDC the past two years and the first CloudCamp back in January. There (hopefully) will be no cost to attend, but those that do so must agree to actively participate either as speakers, active audience members, or volunteers. The premise is simple. Come together. Meet new people. Think big thoughts. Say what you are thinking. Leave energized.
Amro is also looking for a few sponsors.
Comments and Reactions Tweet| Mar 24, 2009 |
You may have heard that Jason Calacanis, the CEO of Mahalo, publicly offered $250,000 for two years for one of the top twenty slots of suggested users that Twitter is now offering up as part of its service. Jason's offer was a publicity stunt. A game. He intended to attract media coverage. He is extremely skilled at getting attention. The king of linkbait. It is one of the things that makes him a good entrepreneur. And once again it worked.
But with an interchange with TechCrunch he said he was serious about the offer. And I believe he is.
Jason outlined his thought process for the $250k offer in his most recent list mailing (He stopped blogging in 2007. Blogs are so last, last year, though he really did not stop.) Jason did some math on his offer and this is what it looked like.
My plan was to post the Top Five most absolutely fascinating questions from Mahalo Answers to our @questions account every day. Everyone loves a timely or fascinating question and, in my estimation, I would get a one percent clickthrough rate on each question. If I was able to reach three million followers, and kept half of them (1.5m), that means every tweet would get 15,000 visits. Five a day means 75,000 daily visits, and over two million visits a month--or close to 50m visits of two or three years. Some percentage of those two million would participate in Mahalo by asking or answering questions, and if that number is also .5 to 1%, that means I would get about 250,000 new members for my service. Each of those 250,000 new members would cost me one dollar, and I'm certain over their lives we would monetize them for much more than that.
Jason estimated his customer acquisition cost of doing a deal to buy a Twitter suggested users slot to be a dollar. Customer acquisition cost is simply the cost of securing a new customer, member, or user. And while not every startup is well funded like Mahalo and has $250k to throw around on a whim, there is an important lesson here.
Customer acquisition cost is a key driver of any Internet business.
Especially so for early stage and growth stage companies. It deserves deep thought and consideration. While I might not buy into Jason's math and question some of the assumptions made to reach the customer acquisition cost in this instance, he walked through the logic. Every entrepreneur running an Internet business needs to be able to do the same. You can start with a very simple model. If you have no history make some reasonable well thought out assumptions. Have data points and facts to back your assumptions. Using services like Facebook, Google, and Twitter as examples and a basis for assumptions is a bad idea. Yes, Web services need to grow virally and via word of mouth (the two are not one and the same) to be successful. But at some point it is going to take more then that. Just assuming 20% quarter over quarter growth rates won't cut it. Nobody is going to buy into that assumption unless you are actually achieving 20% quarter over quarter growth rates. And then they are going to want to know how you are going to sustain it.
Customer acquisition costs is one of the three most important drivers of a SaaS business model (churn and recurring revenue being the other two), if you are going to build a successful Internet business you need to know customer acquisition marketing cold or find somebody who does. It is the only way that you can cost effectively grow your business.
As for Jason's offer? He raised it to $500,000.
Comments and Reactions Tweet| Mar 20, 2009 |
"How special do you want to be?
Pay the price."
Rick Pitino
Scribbled on in a Madison Square Garden locker room during halftime of the Louisville/Villanova during the Big East tournament.
Louisville came out of that locker room pumped up. They overcame a 26-34 halftime deficit by going on a 17-2 scoring run and won the game 69-55. Louisville played passionate defense, forcing 'Nova to commit 12 and shoot 34.6 percent from the field.
To be special you have to decide you want to be that way and commit to doing what it takes to reach that outcome.
Comments and Reactions Tweet| Mar 19, 2009 |
AtlantTech reported today that Twitpay has raised an undisclosed round of funding.
Twitpay, the second Startup Weekend Atlanta company to secure seed captial (Skribit being the first), is a simple way to send payments via Twitter. The service is powered on the backend by Amazon Payments. Twitpay went live two weeks ago.
Twitpay has been featured on CNN, The New York Times, and Time. Most recently Twitpay was listed as the second of 99 Essential Twitter Tools and Applications.
With all the media attention and a little money in the bank, founders Don Brown and Michael Ivey are now focused on gaining some traction.
Mr. Money Wings is happy.
Disclosure: I am Twitpay advisor and stockholder.
Comments and Reactions Tweet| Mar 18, 2009 |
This is the third in a series of articles that discusses the stages of a startup. Previously the concept stage and seed stage were covered. Today the early stage is addressed.
As one may can surmise from the intro, the early stage is the third stage of a technology startup.
The key element being addressed in the early stage is market development. Proving that the product is valuable. That customers are willing to pay for it and/or use it.
If you are proving that the product is valuable for the most part it is built (a product is never fully built and development is never "over", but that is a topic for another day). Product development is focused on refining the product. Creating a complete product. A commercial grade product.
The business focus is on sales and marketing. Getting sales and usage to trend upward. Developing customer relationships. Continuing to get user feedback. Building a pipeline. Traction. Using word of mouth to spread the word about the company and product. Focusing on key influencers. Refining the go to market strategy. Continuing to refine the business plan and replacing assumptions with what you are actually seeing as the business rolls out. Some larger corporate infrastructure elements come into play for when the company hits the growth phase.
The team is growing. A well rounded management team has joined the founders. There are employees. Maybe seven or so in the beginning of this stage. Typically 20 - 30 people in total mid early stage. More if the company continues to blossom. These employees enable a startup to accomplish much more, much faster then in earlier stages. They also bring a new set of issues that need to be addressed. There is a real board of directors. This means the CEO has a host of bosses that he or she needs to manage.
Revenues are growing. More than the $500,000 in the seed stage. Maybe a $1 million. Or there might not be any revenue at all. A very rare breed. Regardless, you are starting to see significant use traction. Web plays have 1 million unique visitors or more.
Intellectual property protection activity is becoming more sophisticated. The IP strategy developed in the seed stage is being implemented.
Funding obtained during this stage is between $1 million and $5 million. It could be more. The funding comes from serious angels, angel networks, or more often then not, VCs. As always, bootstrapping remains an option, but if its "time to go" outside investment may be the best strategy. The valuation range remains broad. Say $2 million to $10 pre-money. Funding most likely takes the form of preferred equity. It's the first stage where VCs generally play. The Series A. To an entrepreneur that has been at it for two years things don't seem early at all. To the VC it is. This causes a great deal of frustration to entrepreneurs. Potentially the most important point in this whole series is that first stage venture capital investments go to the type of startups at the operational stage described above the vast, vast majority of the time. If a startup does not possess the characteristics of an early stage company it should think long and hard before attempting to raise funds from venture capitalists. My advice is don't worry about venture capital. Build your business. If you do that venture capital will find you.
The early stage lasts from one to two years.
Get to the point where you are generating $4 or $5 million in revenue at a 200% plus growth rate and things get exciting. Did I just mention the word growth? I did. That is the next and final stage of a technology startup.
| Mar 16, 2009 |
Last year I wrote about Logistic Regression Markov Chain (LMRC). LMRC is a Markov Chain that is purpose built as a college basketball ranking system based on basic scoreboard data. LMRC is a tool to that can be used to help you fill out your NCAA basketball tournament bracket. LRMC was created by Dr. Joel Sokol and Dr. Paul Kvam, professors at Georgia Tech's H. Milton Stewart School of Industrial and Systems Engineering. It is now maintained, updated, and improved by Dr. Sokol and Dr. George Nemhauser.
LMRC is right more often then other ranking methods and effective at sorting out the top teams in the later rounds. Here is Sokol's and Nemhauser's presentation that highlights the power of the methodology.
I used LMRC to pick my Final Four this year. Louisville, Memphis, Pittsburgh, and North Carolina were the result. Below is a pure play LMRC bracket up to the Final Four. LMRC puts Memphis and North Carolina in the final with the Tar Heels prevailing... shudder the thought. So I went had to go with my heart and my hope once LMRC delivered the Final Four.
Having been weaned on Louisville basketball at Freedom Hall, I took the Cards over Memphis in the semis and again over North Carolina in the final. 76 - 68. Terrance Williams gets the most outstanding player.
Go Cards!
Comments and Reactions Tweet| Mar 14, 2009 |
This past week I had an opportunity to sit down and have lunch with Scott Lockart and Kimberly Turner, the founding team of Regator (they left co-founder Chris Turner at home to code). Regator is a horizontal human powered blog aggregator. Kimberly is the the human editor of the service. She selects all the blogs that are included on the Regator service. In an effort to keep the quality of the content high she is very selective about the blogs that are included on Regator.
When Regator released their private beta last summer TechCrunch described the service as a "blog reader for the masses... best suited for users who aren't interested in heavy-duty blog reading." As a pretty heavy consuming blog kinda guy, I dismissed the service for personal use. Since then the company had a launch party, a facelift, a nice profile in the Atlanta paper, and participated in Startup Riot.
It was Scott's presentation at Startup Riot that made me start thinking of Regator in a new light. Within the first 30 seconds of his talk Scott mentioned "information overload." Information overload has been a subject of keen interest for me for quite some time. Most the the approaches that I have seen to overcome this for RSS feeds have been filter based thus far. Is editorial the solution? It works for Techmeme in a single vertical. Regardless, I believe in the short-term the answer to info overload may lie in organization versus filtering or semanitcs. As Tufte says "There is no such thing as information overload, only poor design."
Will Regator get me reading RSS feeds again? I don't know. But I am going to be spending a little time with it to see. And a little time with the Regator team to see if I can help them move their company along.
If you want to give Regator a whirl, the Demogirl walk through is a good place to start.
And those crazy Regator crocs are going to continue their partying ways. They have partnered with Mashable to bring a Mashable Mixer to Atlanta on May 14th.
Comments and Reactions Tweet| Mar 13, 2009 |
"If I dump $2,000 into Lala and they go down next month, that's it."
Greg Schnese
In a Business Week article on "The Music Industry's New Internet Problem." While the subject of the article is interesting I find Greg's sentiment even more so. The laissez-faire approach that entrepreneurs have taken in creating available and reliable Web applications is eroding trust.
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