Chanel Snowboard

I hope to be rockin' this during Sundance

Happy Holidays!

"So You May Not Want to Know This..."

I came across this article about a new, well, relatively new start-up called inSpot. inSpot allows you to communicate to previous sexual partners that you have been infected by an STD and that they should get themselves checked.

It's a pretty basic concept, you pick the type of pre-designed card you want to send, personalize the message, type in the email address of the person whom you want to send it to and send it. The point of the message is to tell your ex-partner that they should get themselves checked for an STD. More than 750 people visit the site daily and nearly 50,000 emails have been sent through it.

I don't think this is necessarily a bad idea, but I'm unsure how it could be effectively used to make money. The site has no ads on it. Yes, it provides a lot of information, and it provides a valuable service (and allows people to play malicious pranks on one another), but it does little to show how it can build sustainable revenue.

In order to be effective and increase it's longevity, the site owners may want to consider partnering with a non-profit such as planned parenthood or a government agency, to provide it with the funding and resources it needs to get it's message and idea out to the community.

Is One of These Things Unlike the Other?

I'm not sure how I feel about being in such esteemed company:














Picture courtesy of the SF Chronicle

Managing Your Way out of The Storm

Lots of people with thoughts about how manage there way through the current financial crisis. I have my own thoughts but plan on sharing them at another time. Regardless, Charlie O'Donnell had a great post about how his company is weathering the storm and thought I would reblog it here (and for the record, I agree with every word of it):

Any startup that needs to severely "buckle down" now or any VC firm that needs to do a 180 on their investment strategy wasn't doing it right in the first place.

From the day we took our first investor checks, we've been operating in emergency cashflow management mode--not because we thought the environment was bad, but because of the following:

1) We didn't raise too much money--$350k.

2) Building a new service is hard. The longer you can last, the more features you get to, the more traction you'll have, and the more time you'll have to fix the mistakes you're sure to make.

That makes it a simple equation: Spend less, survive longer, live to die another day.

How do we do that? Well, there's the way we've been doing it all year:

- I teach two entrepreneurship classes on the side to make ends meet.

- We run on four servers we got for free... Two we got from a friend at a startup that blew up and two we got through a big hardware company who seems to have forgotten about the fact that we have them. Lately, we've been asking companies we know who may be upgrading to see if we can grab a few more.

- The servers sit in a old rack we wheeled from 14th and 8th to 23rd and Park when we took it off the hands of someone giving it away on a Unix user list. We now know how many city blocks server rack wheels are meant to travel. The answer is about half the distance to our office.

- We squat rent-free in the small back conference room of one of our investors--soon to be moving into a smaller office across the floor. We're just grateful--we'd work out of the coat closet if they asked us.

- We run some third party software in our stack that would otherwise cost us about 50k/year. We got that we got for free in exchange for kicking the tires on it and getting the company some data.

- When we travel to the West Coast on fundraising trips, we crash with friends instead of staying in hotels.

- We incentivized our developers when we hired them to forgo some current cash compensation for either additional compensation after our next financing or additional equity--and gave them the choice of how much they wanted to do that.

What I'm saying is that, even before the gloom and doom, we watched every penny and saved where we could.

And now, we're out fundraising for our first venture round. If you read the echo chamber, you might think all the VCs have packed up shop and gone home. We've been out talking to VCs and we've generally heard some pretty level-headed thinking. They want to make sure that our burn rate plans are reasonable and that we're giving ourselves enough of a runway--but that's really something they should always be thinking about, right? Good investors have had multiple funds over many cycles and will continue to put money to work in a time-diversified way.

Our current fundraising round is meant to take us from four to eight people (not twenty eight) and give us a full 18 months of running room... And that was also the plan long before the doom.

Anyone who splurges on big fancy offices when they don't need 'em, or who takes ridiculous salaries as founders probably deserves to go under. As Gary Vee said, "This isn't a party. We're building real businesses here."

I think this whole doom and gloom thing is a farce. I mean, don't get me wrong, Sequoia has an amazing track record but they also find a way to stuff 5 million into every first round that they do. Companies should be ultra conservative about cash anyway... The idea that suddenly companies now need to do a 180 on strategy means something was wrong to begin with.

At worst, most companies should need an extra round of financing to weather an additional 18 months. As long as your previous rounds were priced reasonably, this shouldn't be a tremendous issue--certainly not catastrophic. Unfortunately, that's not the case for a lot of these companies. Many, financed by the same VCs that are most likely to sound the alarms, cut off their flexibility by capitalizing at too high a price or ramped up too fast. If you've raised over $10 million, have a headcount over 30, and you don't have a stable revenue stream yet, well... your shipment of fail has just left the factory.

Playing Among Giants

Earlier today a friend asked what my thoughts were about starting a small online business during a recession. While I was thinking about it, I came up with a larger question, which is, why would anyone start an online business these days? With Google branching out more than ever, it's impossible to become involved in something that they aren't currently involved in or haven't thought of. In fact, a lot of Venture Capitalists commonly ask, "Well, what if Google decides to do 'X'?"

I think there are a lot of ways to answer that question, and the proper way to answer it obviously depends on the product in question. Google is a large company with almost a limitless reach to money and talent. Competing with them on any level is going to be difficult and will take a lot of hard work and money.

Obviously, Google's core product, search (and with it, search advertising) has allowed it to dominate the web. One thing Google has done wrong is expand past their core product offering. By necessity to survive, Google expanded from search (and advertising) to mobile, email, web analytics and more recently video and social networking. Because of this they have become a company that is a 'jack of all trades, master of one'.

So how do you compete with Google? The simple answer would be to find their weakness and exploit it (obviously this is oversimplifying it, but bear with me). In social networking, Orkut has never been big in the United States? Google was not first to market with social networking. It launched in 2004 well after known sites like Friendster and MySpace were dominating. Google knew it could provide a competitive product because of all the people already using Google Search on a daily basis, and all of the information they had access to. Regardless, Facebook launched after Orkut and clearly blew it away.

Another example is video. Google Video and YouTube launched roughly at the same time (for the sake of argument, YouTube may have launched a bit before Google Video). Video on the web was an instant success. With people beginning to have more access to broadband web speeds, the demand for video was growing. Not only that but the product that YouTube built was functionally better than Google Video. The end result was Google purchasing YouTube for $1.6 Billion.

So when one asks "Well, what if Google decides to do 'X'?", the way to answer that question is to say that Google has grown too big to properly develop and execute the strategy that is necessary in the development of the product. The next step in answering that question is to define why Google's product will never be as good as your product.

Thoughts on a Google/Yahoo Search Deal

TechCrunch posted the following article about Google serving ads against Yahoo search results. Everybody seems to have their own opinion about the pros and cons of such a deal. Microsoft will obviously be pushing the Department of Justice to take a nice and steady look at possible monopolistic overtones to the deal.

Because of Google's mammoth ownership of the search advertising market, it's easy to see why anyone inside of Google or Yahoo would be in favor of it. Google is currently spinning the issue saying that the partnership will lower ad prices Really? How? It will essentially direct advertisers to a network that (after the deal is completed) will own upwards of 90% of the search advertising market, taking away competition, and by definition force the price of keywords and keyword phrases up.

The problem with not just search advertising but online ad networks as a whole is the lack of quality competitors in the space. Granted, there are now over 300 ad networks competing for a piece of the $16billion online ad market. The trouble is not one of them has shown the capability or the determination to produce a product capable of effectively competing with Google.

Unfortunately, a good product is only half the battle. Many companies out there have developed good ad networks, it's just that a) the management is under-prepared for a long fight with Google, b) the product they built can't scale, or c) the company lacks the discipline or the expertise to successfully execute putting another product in play with mainstream advertisers.

The Bloodletting, Part II

I was really hoping that I wouldn't have to post more thoughts on the financial markets recent stumble, but it's too important not to at least post a few random thoughts.

- The Fed decided to bailout troubled insurer AIG last night. While I'm against the government bailing out bad management, this one was needed. AIG wrote credit default swaps and sold them to banks who bought bad mortgages from mortgage companies. Their 'promise' was that in the event of default, AIG (the world's largest insurer, well, it was, anyway) would be good to pay back the bad loan. Lo and behold, bad loans start rolling in, and the piper demands to be paid. AIG sold these derivatives pretty much unregulated, to anyone and everyone that would buy them. Suffice to say, if the Fed didn't step in, the bloodletting would be a lot worse.

- Lots of debate as to whether or not the FOMC should lower short-term rates. Assuming the market opens dramatically lower tomorrow, I don't see this as implausible.

- Word on the street is puts for Goldman Sachs went from around $.15 to over $20 in the space of two hours. No photographic proof of this, but I don't see this as too illogical, given that it's one of two independent banks left standing.

- I overheard something a bit concerning while walking through the Financial district of San Francisco today, two well dressed men standing in front of the Mandarin Oriental whispering into their mobile phones about 'manipulation'. Then, about an hour later, a commentator on CNBC mentions the same word.

- The SEC released an emergency order today preventing naked short selling. Not sure if this isn't too late.

- Both WaMu and Morgan Stanley are seeking their own respective deals to take them out of their bad positions.

The Bloodletting

Today was obviously not a good day for anyone who is apart of this country's financial system in any way. From those employed to oversee it, to those who work for it, and finally (and probably most importantly) those who invest it. With the DJIA dropping more than 500 points, it was the worst day since just after the September 11th attacks.

I actually think that today's bloodletting was a good thing, not only for the stock market, but for the economy as a whole. Over the weekend, a couple of major things happened, first, Bank of America purchased Merrill Lynch, and the Federal Reserve decided they were not going to bailout Lehman Brothers.

Let's be clear, it's never a good thing when banks the size of Lehman and Merrill simply go away. People lose jobs and insane amounts of money. But the decision of the Fed not to bailout Lehman (and inconsequentially, they probably telegraphed the same signal to Merrill) is a sign that they think the economy may be on the mend.

Let's face it, back in March when the government bailed out Bear Stearns, nobody had any sort of accurate clue about how deep or severe the current housing crisis would be. This weekend's decision not to help Lehman, is a clear signal that the government thinks the financial community and the economy as a whole is strong enough to withstand a major investment bank going out of business. 6 months ago, this just wasn't the case.

I'm no finance expert, but I think it's safe to assume that there might be more banks that go under in the next 6 to 12 months. The important thing to remember is that the responsibility for these defaults is not the general public's, but that of the banks themselves, who got themselves in this mess to begin with.

Quick Update

So I've been away, obviously, but hope to update this more regularly based on the fact that I finally invested in a personalized domain. I'll be tweaking the colors, layout, and may even change the name of the blog itself in the coming days and weeks. Here's to more content!

Can You Hear Me Know?

Interesting article from TechCrunch today about the future of mobile advertising as discussed by a few business leaders in Davos, Switzerland. The highlights:

- US Mobile Ad Market is projected to be only around $1 Billion by 2012 (seems low to me)

- Mobile phones make it easier for advertisers to target their ads through GPS and other features

- China Mobile estimates its mobile phone market to be half a billion users and they are adding 6 million users a month.

No doubt mobile advertising will have a huge impact in future ad campaigns. The extent of which it happens, especially here in the US, remains to be seen.