Fred Wilson went on a little tweetstorm yesterday on the subject of startup ideas and if he thought they were good. It was something that I could really relate to from my days at ATDC. Entrepreneurs always wanted to know what I thought of their idea. I agree with Fred’s premise that “it doesn’t matter if I think it is good” for a slightly different reason.
His point of view is that the entrepreneur needs to think it is a good idea. While I generally agree with this I believe there is one thing more important. The people that would buy your product/service need to think it is a good idea that solves a problem they have. Whenever an entrepreneur asks me if their concept is a good one I would ask this question. It does not matter what I think, what do your potential customers think? More often than not they would not know the answer.
Know the answer.
I have been a believer in net neutrality for nearly 20 years. These days it seems there is a lot of differences of opinion on if it is a good thing or not. I believe that it is good. I believe this because the concept of non-discrimination is one of the core tenants that has made the Internet successful. If you don’t believe in net neutrality you believe in discrimination in an internet network sense. Discrimination is bad.
The Internet as we know it is based on the concept of non-discrimination. Non-discrimination can be generally thought of as meaning there is no difference between the price of transmitting packets based on the identity of the transmitter, the identity of the receiver, the application, or the content that a packet contains. You as a consumer subscribe to an ISP at some rate and they deliver packets to you according to your service plan. It does not matter if that packet contains a voice call, an email, an image, a video or the text of this comment. A packet is a packet regardless of the payload it contains.
Prior to 2005 Internet communications were subject to the same rules as common carrier telephone companies which included non-discrimination requirements. In 2005, in a move I believe was related to AT&T’s repurchasing many of the Ma Bell’s and Verizon hooking up with MCI, the FCC changed the classification of Internet access from being a telecommunication service to being an information service.
This changed opened up the door for ISPs to abandon non-discriminatory pricing and that is what ISPs want to do. ISPs not only want to charge you as a consumer to deliver packets to you. They want to charge the originator of the content a fee as well.
Where I lot of people get hung up, and ISPs want them to, is that they believe the content producer is getting a free ride. This is not the case. Content originators pay an Internet backbone provider, a commercial ISP, or some type of cloud service to move their content from the point of origination to the ISP that then carries the content to the termination point.
The FCC always has been and always will be involved in the governance of Internet access in the USA. What the FCC is currently proposing is reclassifying Internet services back to the same common carrier status that they had prior to 2005 (FCC fact sheet). I support this because the concept of non-discrimination is an important foundation of the success of the commercial Internet. If that foundation goes away the end result is going to be less choice, less competition, and higher prices for you and me.
It may seem that I am being master obvious but all startups need to start small. More often than not startups want to start big. Creating a very broad product that addresses the needs of a large market with a diverse set of needs. Doing this as a startup is a failing strategy. Two things yesterday reminded me of this.
I went to lunch with the co-founders of SalesLoft. During lunch Kyle Porter recounted a meeting he had with Charlie Paparelli. Kyle told me that Charlie had him draw up something like the below on a white board.
The horizontal line labeled market represents the size of the total market that a startup could address. A startup does not have the resources to address the entire market so it needs to focus. Focus on a single point in the market that is by definition small. Once you enter and control that point in the market you can expand your offers into the wider market.
Last night I continued to make my way through Zero to One by Peter Thiel. I got to the point in the book where Thiel writes about building monopolies. Here is one of his thoughts on the subject.
Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market.
Paparelli and Thiel agree on this point and I agree with them. The best way to start a startup is to focus on a small portion of the total market with a concentrated group of initial potential customers that have the same needs that are not currently being met by any competitors.
In the last of my MindSpring throwback video posts we have Charles Brewer on guitar. I believe that these sessions were taped at one of the company’s all hands meeting in Q1 of 1997 shortly after we became profitable. The first song is called “Profit.” I am not sure what song it is based on. The second is simply “MindSpring” sung to the tune of The Trogg’s “Wild Thing.”
When I first met Charles he was romping around with a three legged dog and a pager throwing a frisbee in Piedmont Park. I thought he was a little odd. When you are the CEO of a public company that prepares sing alongs for company meetings I suppose you are eccentric.
Big news around these parts at the beginning of 2015 is that Mercedes Benz has decided to move its new U.S. headquarters to Atlanta. Which is a fine thing for Atlanta. Mercedes and Porsche. Two high class car companies with U.S. headquarters in a high class car driving city.
The more interesting aspect of the move is why MBUSA is heading south. I am sure that the $23 million in tax incentives had a little bit to do with it. But it was not the primary reason cited. It seems that they are coming to Atlanta for three reasons. First, the cost of doing business and the tax environment in New Jersey was too high (according to The Wall Street Journal the move is going to save MB 20% in costs). Second, the infrastructure in the South offers easier access to well maintained air, land, and sea transportation. Third, Mercedes felt that moving to Atlanta would improve their image to younger consumers.
This final point is an important one. Young people are moving to Georgia. The New York Times even saw it fit to print the following statement:
The Southeast has replaced California as the place where many people now go to find the American dream.
The reason why they are coming is the same reason why Mercedes is heading to Atlanta. People are realizing that the biggest cost of living items, housing, energy, and taxes are lower in the South. And once they get here people don’t seem to leave. Georgia has the fourth lowest diaspora rate in the nation.
To quote Daimler AG CEO Dieter Zetsche,
The South is much more relevant than it used to be.
I don’t see that trend changing anytime soon. The South is rising.
Building on those MindSpring television ads I posted a few weeks ago, before those hit the screen we started ramping up our marketing spend. We started doing some pretty significant sports sponsorship deals. They delivered a lot of bang for the buck and we budgeted for them via the key markets that we are building up including NYC.
The folks responsible for doing these deals were field marketing managers. The guy that was responsible for NYC basically had a choice. The Mets or the Yankees. He selected the Mets as they were about half the cost of the Yankees. When the Yankees were told we were going with the team from Queens, they dropped their price to match the deal. He said yes, which created a little issue. He was about 100% over budget.
Guy went to our counsel to figure out how to get out of the Mets deal. Problem was we had this core value to make commitments with care. Our general counsel told him we had to stand by our word. When told about this 100% over budget decision I pretty much blew a gasket. We had two deals. I figured out where to take the money from somewhere else.
It just so happens the Yankees made it to The World Series that year against the Atlanta Braves. In game 3 lefties Andy Pettitte and Tom Glavine faced off in a classic. 23 million people watched that game.
In the first inning Gerald Williams had a lead off single and his speed caught Pettitte’s attention as captured in the below video.
A 30 second ad spot in the World Series cost about $250,000 back then. I figure the sponsorship signage was worth at least $500,000 in media exposure during this half inning. Being true to your word sometimes pays off in more ways than keeping your integrity.
Some time ago I met Stuart Scott. Ran into him at a Super Bowl party. He had no idea who I was but was gracious enough when I approached him to shake hands and pay tribute to his sportscasting chops. We even spent a few moments chatting about the upcoming game.
Scott passed away two days ago, succumbing to cancer.
Before he died Scott was presented with Jimmy V Award for Perseverance at the 2014 ESPYS. He gave a stirring speech which is embedded below.
The money quote is towards the end.
When you die, that doesn’t mean you lose to cancer. You beat cancer by how you live, why you live, and the manner in which you live. So live. Fight like hell, and when you get too tired to fight, lay down and rest and let someone else fight for you.
It’s how you live that matters. Wise words from a man that changed the game in his industry.
Happy New Year everyone. I thought I would hit the FoG archives to kick off 2015. Eight years ago I wrote No 2007 Resolutions. It is copied in its entirety below.
It is interesting how these goals have stood the test of time so far. And when I think about I want to accomplish in 2015 this list pretty much captures it with the biggest focus being on getting back in the game of leading a company.
Ever since I sat down and put together a personal mission statement, which I dish out piecemeal here from time to time, I have found that resolutions just really are not needed that much any more. I never did like them much anyway.
My life goals have not changed much since I first wrote them.
1. Make my marriage an example for others and most importantly for my children. I will encourage and support my wife’s personal growth. I will assist her in the duties of our household, date her regularly, and cherish her always.
2. Dedicate quality and quantity personal time with my children while they are young. I aspire to hold dear my time with them and teach them values and skills that they will keep throughout their lives and which will enable them to be both happy and well adjusted.
3. Generate substantial wealth for those that employ me and provide financially for my family. Build $10 million in personal net worth.
4. Led a recognized technology company.
5. Continue to learn. Read regularly and pick up new crafts, sports, or topics. Seek out new adventures in life.
6. Give an increasing portion of all I earn to charity.
7. Exercise regularly at least three times per week. Keep fit and at my appropriate body weight.
And 2007, it is going to be a great year of goal achievement.
Happy New Year everyone!
Interesting analysis by CB Insights on which markets are easiest to raise venture capital.
They divided the number of venture capitalists investing in tech companies in specific geographies by the number of venture capital backed tech startup companies which raised funding in that same market and came up with what they call the VC Competition Index. The higher the index the less competition for VC dollars per startup or so the thinking goes. The result, which is below, seems a little counter intuitive to me.
Hat tip to Reggie Bradford.
Hat tip to Reggie Bradford.
Last week three things transpired that resulted in me writing this post.
Sam DeSimone invited me to the EarthLink annual sales meeting to listen to his 20 year history of EarthLink presentation. Part of that included this CNBC profile on how we built a marketing machine. I posted that to Twitter, Michael Tavani said post more, and totally unrelated Don Roberts sent me an email with a link to MindSpring’s television ads and said why don’t you post these. So here they are.
1999 was so long ago. This was during an era of sock puppets and cannons. To quote The Wall Street Journal “There is no denying that MindSpring’s ads are different.”
Perhaps more interesting than the ads themselves is the backstory.
After years of marching down the road of proving that an ISP could be profitable we started getting pressure from the financial community to grow faster. Profits be damned, go grow they said. We decided to listen and I was tasked with coming up with a marketing plan to get us from 1.2 million to 2 million subscribers in short order. That plan turned into a $90 million marketing budget and increased our marketing spend from about 15% of revenue to something in the 40% range. Losing money is a lot easier than making it. And I am going to tell you ramping up marketing spend efficiently and effectively is a lot harder to do than people think. Doing it in six months is uber hard.
But did it we did. The marketing campaign launched on Labor Day accompanied by a 3/4 page profile on the front of the Marketplace section of The Wall Street Journal. The television ads were just a small part of a much larger integrated campaign that included PR (hence the article), lots of direct marketing, and a new product launch. If I start naming names I am sure to leave out someone but Alex Kaminsky, Erika Brookes, and Kirsten Witt were instrumental in making this all happen.
The big footnote to these ads is at the time we were in a fierce battle with AT&T and EarthLink to become the clear alternative to AOL. Stepping up our marketing was a clear signal to EarthLink that we were serious about winning. This ultimately led to EarthLink and MindSpring joining forces, a merger that was announced just two weeks after the launch of the campaign.