Monday, August 2nd, 2010

Groupon CEO Andrew Mason Shares A Few Thoughts

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I was at the recent CrunchUp and Groupon’s CEO Andrew Mason shared a few interesting factoids about his business with Michael Arrington.

I chatted with Andrew during a coffee break — seems like a nice guy. We both have close friends who graudated New Trier High School in Winetka, Ill.

The first thing that struck me is how casual he appeared — t-shirt, jeans sandals and a low-key personality.

I thought it was cool how this mellow guy is revolutionizing commerce and putting Chicago on the map for Internet business (I imagine you’ll see numerous new Chicago Internet startups as early Groupon employees cash out (some already have) of this multi-billion dollar business to start new businesses.)

Below are my notes from some stuff that he and Arrington shared onstage:

Some Groupon Numbers:

• $1 million in revenue per day (this is what Arrington heard and Mason didn’t confirm nor deny it)
• 1,000 employees
• 12 million people receiving an email every day (with 2 million new ones added each month)
• Gross Margin is 50%
• Repeat Rate: “97% of businesses we feature want to be featured again.”
• Breakage Rate is around 10% (e.g. 10% of Groupon users do NOT redeem their coupons).

Groupon Customer Acquisition

The top sources of [free] customers for Groupon:

1. Facebook is the top
2. Twitter is a close second

The bulk of paid customer acquisition for Groupon is Facebook and Google.

Other interesting Groupon Factoids:

• Regarding Groupon clones, he says “the basic idea of Groupon is not something we can have a patent on”
• We have 6-month waiting lists on Groupon for many cities.
• “A lot [of the $135M raised in the last round] was taken off the table…by early founders.”
• An example of one Groupon deal that didn’t work: Slippers with flashlights didn’t work

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Saturday, July 31st, 2010

3 Tips For Startup Founders From Paul Graham of Y Combinator

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TechCrunch had a good interview with Paul Graham of Y Combinator on what he looks for in an entrepreneur.

I find Paul super-bright…and he has invested in over 200 companies over the last 5 years so he’s got some data to support his ideas.

So listen up, founders (wannabe founders too)!

3 Tips for Startup Founders

1) The Founder Is More Important Than The Idea

Graham bets on the jockey, not the horse.

2) The Relationship Between The Founders Is Very Important

The relationship between founders is key. Founders are ideally friends for awhile or have worked together on things.

“What we don’t like is people who only came together for purposes of this startup.”

Reason: If the startup is all that ties them together, that gives little to hold the startup together (especially during crises).

Close friends will even keep working on a startup out of loyalty to their pal.

3) The Founding Team Should Have A Clear Leader

“It’s really bad if we’re talking to a startup and we can’t figure out who the leader is.”

Each startup should have one person who is clearly in charge, Graham says. And they should be sufficient ass-kickers.

He gives Mark Zuckerberg (Facebook) and Larry Page & Sergey Brin (Google) as examples of forceful leaders.

A good test of whether there is a clear leader among founders: If you can’t figure out who to ask a question to (of the founder team) (e.g. if they all respond as peers, then that’s bad).

“It’s good if there’s one [founder] who pushes the other [founders] out a bit…steps forward a little bit.”

Well said.

Separately, I heard Paul mention something at the CrunchUp Social Currency conference I was at last week about the ideal size of  the founding team of a startup:

• 2 to 3 founding person team is best
• 1-person founding team is next best
• 4-person founding team is worst

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Friday, July 30th, 2010

What Makes A Good Startup Entrepeneur by Ron Conway & Paul Graham

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Fun panel at today’s CrunchUp with:

• Paul Graham, YCombinator
• Ron Conway, SV Angels
• Michael Arrington, TechCrunch

Here are notes of my favorite nuggets:

Ron Conway on data about his 500 startup investments:

• “The success rate in our portfolio is going from 10% to 15% right now…because of the$25 million to $50 million M&A deals.”
• Failure Rate was 77% leading up to the Internet Bubble of 2001…and now is about 40% post bubble (2002 to today)
• “Repeat-entrepreneurs” have about a 66% rate of success in their second startup.
• Deal flow did not decrease during mortgage bubble.
• Entrepreneurs have the same level of success regardless of the climate.

Check out Ron Conway data here for more on the data from his deals)

Here are some more Ron Conway thoughts:

• “Getting your money back( (from an entrepreneur) is not a bad deal”
• Shawn Fanning is one of the top entrepeneurs he’s worked with.
• Mark Zuckerberg…has grown in maturity and saaviness of being a leader…”on an algorithmic scale.”
• Great defining companies are being created at a much quicker rate than they were 10 years ago. Awesome news for entrepreneurs.
• An ideal entrepreneur is a little bit crazy (crazy-smart) is good

Paul Graham on ideal size of a a founding startup team:

• 2 and 3-person startups are the best
• 1-person startup is the next best
• 4-person startup is the worst

Michael Arrington: Facebook is offering one-tenth of a percent of equity to top of the top engineers.

Check out Ron Conway’s Three-Megatrends of The Internet to see what markets Ron Conway is interested in.

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Sunday, July 25th, 2010

A Summary of Mobile Startup Ideas From Startup Weekend

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I’m here at Startup Weekend (taking place at KickLabs’ San Francisco office) and a bunch of startups are pitching their mobile-based ideas.

Below are most of the ones that presented with a brief description of their pitch — I listed the ones that impressed me the most first (though all had massive potential!).

Metayoo — Finding new connections nearby.

A user can open up their LinkedIn, Facebook and Twitter profiles to people 300 meters around them so that users can make new connections.

Users can also have a tag line saying, for example, that they’re “interested in a job.”

I believe founders Kevin & Megan have enormous potential.

Business Model: Job recruiters pay to list positions.

Flought (This was the judges’ choice for winner) — Letting people broadcast thoughts anonymously

Premise is that people have 50,000 thoughts per person per day.

Flought application: People use their phones to type in 70 character messages that only people within a 70-foot area can see.

Business Model: Unclear

CoRider — A social network of people who want to share rides.

Pain and urgency includes A) People need a ride somewhere and also that B) Car drivers feel guilty that they are driving in their car alone and could save the environment if they had other people in their car (who would otherwise be driving alone too).

They pointed out that there are 40,000 car sharing postings per month on Craigslist…just in San Francisco.

Business Model: They charge $5 per ride to people who need a ride.

KissMobs — Bringing men and women together based on what locations/events they’re hanging out at.

As women users choose a party/bar to attend, they are  automatically checked in and male customers get notified about the number of women at any bar so that they can decide where to go out.

Business Model: Bar would pay to participate.

WalknPlay — World of Warcraft built ontop of reality

You want to walk somewhere and you see a GPS-map that provides you a game.

For example, one game might be that your game objective is to help hippies fight big-business…so you get points for virtually fighting other users (e.g. who might represent a yuppy).

Basically, this turns any walk that you might take into a game.

Business Model: They make deals with retailers such as coffee shops who will provide coupons for coffee for gamers to use on their walks (with WalknPlay receiving a commission).

fanattix –Loyalty program for college sports fans.

Fans get points for checking in to college sports venues (bars, arenas, Universities, etc.).

For example, a fan could check into a sports bar (he gets points) and then the fan can enter into a “Smack Talk” game with fans of rival teams and you get points (or lose points) based on a game like trivia. Points would also be awarded for tailgating or traveling to see a game.

Business Model: Virtual goods, coupon deals with venues, affiliate marketing deals.

WeddingMix — A social media platform for sharing a friend’s input.

For example, friends of the wedding party vote on wedding details such as which is the best wedding dress or hair style.

Business Model: Customers pay $100 per wedding to get use of the platform.

ShipOx — “Groups of people who don’t know each other do group-buying of shipping services”

The ShipOx Web site will show that there is a certain amount of available shipping space from one city to another and customers can leverage collecting buying to get a discount from what they’d pay if they shipped alone.

Business Model: Commission on shipping payments

Foodwich — A social network of foodies.

For example, a user types in a restaurant that they like (e.g. Osha Restaurant in San Francisco) and you will receive a recommendation of other restaurants you might like such as Burma Superstar (becomes a “foodie” had recommended both of them).

Business Model: Unclear

Loyalty 2.0 — Store owners provide loyalty programs to customers who pay using the Square mobile payment system.

Business Model: Unclear

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Thursday, April 29th, 2010

4 Quick Tips On How To Be An Effective Entrepreneur

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Are you an entrepreneur? If so, you’re an amazing breed of person.

I coach a handful of you and I thoroughly enjoy brainstorming the creation of new businesses with each and every one of you!

There are a few entrepreneurial tips I have to help you along the way.

Entrepreneur Tip #1: You Will NOT Find New Creative Ideas From Advisors

Once you have your business idea and are rolling with it, you are walking around 24/7 living and breathing this new baby.

And you’re going to run into numerous people…potential investors or employees or people in general trying to tell you what to do (let’s call this group “Advisors”).

These advisors are going to throw a bunch of creative ideas at you.

First lesson: don’t sweat their ideas too much. If you’re into your new idea, you’ve probably thought about their idea in some form already.

You should focus on utilizing these advisors in other ways (see below).

Entrepreneur Tip #2: What You DON’T Do Is More Important Than What You DO Do

Those who hang around with Steve Jobs say that one of his most important skills is his ability to determine what NOT to work on (whether it’s a product or a feature).

Just take a look at at the outside of Apple’s iPhone and you’ll get what I mean: it has a couple of buttons, a switch, a jack for your headphones and a glass screen (think of all the features and functionality that other mobile devices have).

Mr. Jobs had to choose NOT to add a great many things to this magical device.

Or take In-N-Out Burger…they didn’t add a single item to their menu for some 15 years (and that first item was 7-Up soda) — again, think of all the things they turned down (chicken nuggets, coffee, juice, salads, etc.).

You the entrepreneur have the same tough call to make: you have a thousand ideas and you’re going to have to pick a precious few to work on at any one time.

Entrepreneur Tip #3: The First Thing You Do Will NOT Work (Try The “Law of 7”)

While you’re going to have to pick just a handful of things to work on (whether they are business ideas or product features), I have found it useful to use The Law of 7.

The Law of 7 states that you will have to try up to 7 things (around 3 to 7 things is usually about right), and work on them very hard, to find just one success.

This is similar to the Pareto Principal in which 20% of what you do typically creates 80% of your value.

But I wanted to name my own theory so I’m gonna call it the Law of 7.

Here are some Law of 7 examples:

• Venture Capital — VCs look for 1 in 7 of their investments to make it big
• Advertising Partners– I find that you typically have to try up to 7 advertising partners to find one good one
• Advertising Creative — I find that you typically have to test up to 7 different advertising creative to get one that works really well.
• Blog postings — About one in every 7 of my blog postings seems to really pop…while the other 6 are just so-so.

So you entrepreneurs out there should keep in mind that you may need to try about 7 different versions of your business idea to find one that carries you for awhile.

But you don’t have to believe me…check out these famous companies and how they attempted to make one thing while ending up producing something else:

Let me give you examples of the first things that different companies tried:

• Microsoft — It was founded to develop BASIC interpreters (operating systems and later applications turned out to be Microsoft’s killer products)
• Hewlett Packard — Its first product was an audio oscillator (calculators, mini computers and printers made this company famous)
• Craigslist — This online classifieds service (the largest of its kind) began as a simple email distribution list of local San Francisco area events sent out by “Craig” Newmark.
• Facebook — The world’s largest social network for people of all ages was initially a network just for Harvard students and alumni.
• Apple’s iPhone — The big breakthrough for Apple’s iPhone was actually tablet computing….Steve Jobs mentioned this to AllThingsD: Apple was working on the tablet computer (the iPad) in the early 20oo’s and Jobs said that when he saw a prototype of the iPad, he decided that the touchscreen was a perfect way to design a new phone (so he deprioritized the iPad and instead made the iPhone the priority).

Entrepreneur Tip #4: Don’t Be Afraid To Start Small

I made the classic entrepreneur’s mistake when I launched the music Web site Mojam: I attempted to make it very big, very fast, with a small amount of resources.

This was 1998 and I believed the Internet was going to allow a new music brand, much the way television allowed MTV to launch.

So I positioned Mojam early on to be the “MTV of the Internet.”

The only problem was that I had only a small amount of money and no real strategic assets.

So, after studying the music market I found that the music industry consisted of three main markets:

1. Recorded music — Mostly CDs back then
2. Merchandise — T-shirts, posters, etc.
3. Live music — Mostly concerts

So, I switched gears on my “MTV of the Internet” strategy and instead focused on the one part of the market that the Internet seemed to ignore: Live music.

No one was doing much in the live music space back then and our team was able to acquire a small database of music events and launch a concert listing service.

Interestingly, Wolfgang’s Vault, the company that acquired Mojam, was in the other two markets: recorded music and merchandise.

So, they were a better bet to take Mojam and go after the bigger music market  (closer to the “MTV of the Internet”).

So, if you have little in the way of resources, go after some small wins.

Don’t forget: Craig took an email list of San Francisco events and turned it into Craigslist and Mark Zuckerberg took a Harvard alumni network and turned it into Facebook!

There are many other tips to help entrepreneurs — I hope you found these four helpful.

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Wednesday, March 31st, 2010

How To Innovate: 5 Tips From The Top Innovators

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I was fascinated by a recent Harvard Business Review (HBR) article on how to innovate (an abstract is here with the option to purchase).

They researched such innovators as Apple’s Steve Jobs, Amazon’s Jeff Bezos, eBay’s Pierre Omidyar and Meg Whitman, Intuit’s Scott Cook and Proctor & Gamble’s A.G. Lafley.

Their key finding was that innovative entrepreneurs (who are also CEOs) spend 50% more time on five “discovery activities” than do CEOs with no track record for innovation.

 

I fully agree with these five tips for how to innovate; and want to provide my insights on them:

Five Tips On How To Innovate

1) Question (The Status Quo)

HBR points out that Michael Dell famously created Dell with the question:

“Why do computers cost five times the cost of the sum of their parts?”

Innovators are excellent at asking questions that challenge the status quo such as:

• Why not try it this way?
• Why do you do things the way you do?
• What if you tried this new thing or stopped doing some old thing?
• What would you do if failure was not an option?

2) Observe

Innovators are strong at observing people and details. …

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Tuesday, June 23rd, 2009

How To Shape A Market By John Hagel

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A very insightful man named John Hagel III spoke to a couple of hundred developers at eBay’s DevCon 09 gathering at eBay’s headquarters in San Jose last week.

I attended (even though I’m not a developer) and luckily Hagel’s talk was not technical!

Some of you may know John Hagel from his book Net Gain, which discusses how online networks have shifted the power in goods and services. He also runs The Center for the Edge in Silicon Valley.

Mr. Hagel’s topic last week was “Shaping Markets”

By Shapers, Mr. Hagel is referring to companies that transform a market sector. His Shaping examples included the following:

• Containerized Shipping (1950’s) — Sea-Land founder Malcolm McLean reshaped global shipping by developing a design for four-corner fittings and twist-lock mechanismis on shipping containers…and made the design available industry-wide.
• The Visa Credit Card (1970’s) — VIsa Founder Dee Hawk reshaped the credit card industry around the notion of a shared utility. This allowed banks to outsource their credit-card processing to Visa so that the banks could focus on customer acquisition
• Microsoft and Intel’s PC Marketplace (early 1980’s) — Microsoft and Intel led the charge of a set of protocols of a chip and operating system that formed the personal computer ecosystem.
• Li & Fung Apparel Supply Chain (1980’s — Victor and William Fung reengineerd the apparel industry by providing a simple phone/fax system for its 10,000 partners. Roughly 40% of all apparel is sourced through one of Li & Fung’s supply chain

The Three Elements to Being a Shaper

Hagel says that a Shaper must have three things:

1) A Shaping View

An example of a shaping view is Microsoft Co-founder Bill Gates’ message in the early 1980s that is summarized: “Computing power is inexorably moving from mainframes to desktop. If you want to be a leader in the computing industry, you have to be a leader in the desktop.”

At the time, the mainframe (IBM) and minicomputer (DEC) guys were discounting the personal computer.

Gates’ Shaping View galvanized small companies to invest in his vision of a “Computer on every desktop.”

A more recent example of a shaping view is Salesforce.com’s Founder Marc Benioff’s Shaping View that companies could reduce their technology expense if they used software through network services (as opposed to software packages installed within each company).

In short, Gates and Benioff are saying: “The future is over here — this is where you ought to invest…and there are real rewards associated with it.”

2) A Shaping Platform

Mr. Hagel explains that to be a “Shaper” you also need a platform that offer one of two types of leverage:

A) Development Leverage — A technology such as the force.com technology from Salesforce.com or Facebook’s Application Development Tools that reduces the investment required to build and deliver products or services.

B) Interaction Leverage —  A set of protocols and practices to facilitate interaction. Google AdSense is a good example of this as it allows a connection between advertisers, content providers and consumers.

3) Shaping Acts & Assets

Mr. Hagel says that a Shaper must demonstrate  conviction, capability as well as assurance to other participants in the industry that it will not compete with them.

His best example here was Novell, the computer networking company that sold off its hardware business to concentrate on its local area networking operating system.  That was a bold move that signaled to others in the industry that Novell was serious about focusing on a network operating system — their dominance of that industry soon followed.

Another example: Malcolm McLean released his patents for the four-corner fittings and twist-lock mechanisms royalty-free to the International Organization for Standardization

Incentives are Important

There is also the question of how do you motivate people through positive rewards as opposed to negative rewards.

Clay Shirken, for example, believes in negative rewards — your company will go out of business if you don’t act.

Mr. Hagel seems to lean more towards positive incentives — He recommends shifting perceptions of risk and reward.

Crisis is an Opportunity

During crisis, we magnify risk and minimize reward. That’s an opportunity for a shaper is to come in and flip that.

You should magnify perception of reward and discount the perception of risk. If you do that you can motivate people to make investments around your strategy, you can reshape entire markets or industries.

Shapers Can Start off Small (even within other platforms)

You don’t need to be a large company to be a shaper. Visa at one point was a no-name startup. Malcolm McLean was a trucker from Arkansas.

Startups can be very successful shapers if they mobilize the three elements above — Shaping View, Shaping Platform and Shaping Acts and Assets —  together.

Facebook is a current shaper. There are also opportunities to be shapers within an ecosystem — a company called Social Media Networks is creating a platform for Facebook to help faciliate aedvertising revnenue.  It’s a  shaping play within the broader Facebook ecosystem.

Making Money Even If You’re Not a Shaper

Here are some key lessons for you to make money in these shaping strategies even if you’re not the Shaper.

1) Be Acute in measuring a Shaper’s capabilities and potential for success. You ought to be comfortable that that Shaper is going to pull it off.

2) You’ve got to be clear about what niche you’re operating in…and what’s truly distinctive that insulates you from the rest of the participants.

3) Leverage Skills — You have to think about who else is out there in the ecosystem to take full advantage of the ecosystem. Who are those people and how to I build those relationships so that we all gain value from the shaping strategy.

4) Ultimately, the power of these shaping strategies is that you are able to learn faster. How do you learn from the experience of everyone else (not just your own experience)…and how do you adapt for your own sake.

Final Thoughts

The core message: not everyone is going to be a shaper. But more and more markets will be shaped over time.

The key question: do you want to be a shaper…or do you want to be shaped? You can make a lot of money either way. But you have to understand the rules of the game in order to succeed.

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Thursday, May 7th, 2009

Bill Gates, Steve Jobs & Me

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I had the good fortune of interviewing Bill Gates and Steve Jobs (separately) early on in my career when I was a journalist.

On May 31, 2007, Jobs and Gates agreed to a rare appearance together onstage together at the All Things Digital (D5) conference at the Four Seasons Hotel Aviara, just north of San Diego. It was put on by the Wall Street Journal and felt like a rock concert!

I was lucky enough to attend and I couldn’t resist asking them their advice for entrepreneurs (as part of the question and answer section).

Here’s the video (and below that is the transcript) of Gates and Jobs answering the question (yes, that’s me being a bit nervous!).

[Beginning of Transcript of Q&A With Jobs, Gates]

Rob Kelly:  I’m here with my business partner, we have a 100-person Internet media company, and I’m wondering what would be the single most valuable piece of advice you would give us to even attempt to create some of the value that you guys have done in both your very impressive companies?

Bill Gates: I think actually, maybe in both cases, correct me if I’m wrong, the excitement wasn’t really seen by the economic value.

Even when we were down at Microsoft in ’97, a computer at every desk and in every home, we didn’t realize that okay, we’re going to have to be a big company (laughter).

Every time, I thought, oh God, can we double in size…geez can you manage that many people…will that feel fun still, you know, and so every doubling, it was like, okay this is the last one.

So the economic thing wasn’t at the forefront, but the idea of being at the forefront and seeing new things, things we wanted to do, and being able to bring in different people who are fun to work with eventually with a pretty broad set of skills…and figuring out how to get those people with broad skills to work together has been one of the greatest challenges.

You know I’ve made more of my mistakes in that area than probably anywhere, but you know eventually getting there and some of those things work really well together.

I think it’s a lot about the people, the passion and it’s amazing that the business worked out the way that it did.

Steve Jobs:  Yeah, people say you have a lot of passion for what you are doing, and it’s totally true and the reason is because it’s so hard that if you don’t any rational person would give up.

It’s really hard and you have to do it over a sustained period of time.  So if you don’t love it, if you’re not having fun doing it, if you don’t absolutely love it, you’re going to give up.

And that’s what happens to most people, actually.

If you look at the ones that ended up being successful in the eyes of society, often times it’s, the ones that are successful love what they did so they could persevere, you know, when it got really tough.

And the ones that didn’t love it, quit.  Because they’re sane, right? Who would put up with this stuff if you don’t love it?

So it’s a lot of hard work and it’s a lot of worrying constantly and,  if you don’t love it, you’re going to fail.

So, you gotta love it, you gotta have passion.

And I think that’s the high order bid.

The second thing is, you’ve gotta be, you’ve gotta be a really good talent scout because no matter how smart you are, you need a team of great people.

And you’ve got to figure out how to size people up fairly  quickly, how to make decisions without knowing people too well and hire them, see how you do, and refine your intuition,and be able to help build an organization that can eventually just build itself.

Because you need great people around you.

[end of transcript]

The video continues with a couple of other questions (I didn’t transcribe those) and I encourage you to watch the other videos of Steve Jobs and Bill Gates Together.

By the way, Steve and Bill share the same personality type — If you want to see more about that, go here: Bill Gates and Steve Jobs’ Personality Type

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