"The Equity Kicker" - 5 new articles
Notes on business sustainability – Joel Andren on Zynga Joel Andren posted a couple of weeks ago on Why Zynga couldn’t go public soon enough – in which he notes that everything is great at Zynga right now (revenues on a tear, Farmville is hot, Cafe World is getting there) but postulates that ‘their current efforts have probably reached their apogee without making significant changes to their ecosystem’. Hence they should get out while the going is good and IPO. I’ve got no inside track on Zynga buy Joel’s analysis is interesting and can (and probably should) be applied to most internet businesses. He has a ‘customer ecosystem’ model into which he has plugged Zynga:
I like this model a lot. It is applicable to a wide range of internet businesses and has the merit of forcing you to look at every aspect of the customer lifecycle and I’m using it to help analyse an ecommerce company as we speak. To comment on Zynga’s red squares:
I’m a big believer in the importance of sustainability, which is why I like this model, but since Joel wrote his piece Zynga has raised a further $15m from existing investors, including Kleiner Perkins and Union Square Ventures. I’m guessing the picture isn’t all bad ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=b33afadf-876f-4518-9e8e-918ca4cba411) Mobile operators get closer to their destiny as simple ISPs
There is nothing wrong with being a simple ISP (also known as a dumb pipe) of course, except maybe the name. Traditional telecoms businesses like BT started out with content and portal ambitions in the late 1990s and backed out of that to be ISPs in recent years and I’ve thought for a long time that mobile operators will go the same way. This is not a bad thing, running a lean and mean network can be a profitable exercise and one that adds a lot of value to society. Electricity and water utilities have been doing this for years. Further, embracing the future as a pipe doesn’t rule out selling content oriented services – they just need to be viable on a stand alone basis Being a pipe is, however, a low margin business and with low margins come low ratings on stock markets which is why mobile operators have been fighting their destiny so hard. I’m writing this morning because the news that AT&T is selling data only plans to Windows Mobile and Blackberry users means they have embraced their future as a simple ISP for those customers. If Google starts selling a data only phone we will have operators around the world following suit. As a brief finale the increasing ubiquity of free and cheap wifi networks is also bringing the day of reckoning forward. ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=2561f084-52b6-44d6-b369-d63e7aa81c80) Mistakes that startups make
Scoble has a list up of 12 common mistakes that startups make. I’m going to bring out three of them:
I love that the elevator pitch just got reduced to 140 characters. The importance of having a crisp pitch is not a new idea, but it is one that can’t be repeated too often.
One of the more unpleasant sides of my ten years as a VC across two recessions has been seeing lots of people fired – and I’m struggling to think of a single redundancy that with hindsight was made too soon, so I think this point is spot on particularly as success is tough to achieve even with a perfect team, let alone with an imperfect one. Avoiding this mistake is made more difficult by our desire to be humane and by ‘confirmation bias’ – our natural inclination to seek out evidence that supports our existing beliefs. In the case of people that means justifying someone’s importance based on a couple of things they do well rather than the overall picture. Don’t make that mistake.
I include this because I want to comment on it rather than because I believe in it. I guess I have two reactions – firstly that (generally speaking) handing over control to VCs is something that happens to companies that have missed their numbers too often and had to raise too much money at low valuations – in that scenario there is probably little the entrepreneur can do about it (beyond avoiding burning too much cash in the first place). My second thought is that not all VCs are created equal. In an ideal world you will have a highly capable VC who you like, trust, and respect and you would work together with her to choose a new CEO, should you need one. In a less than ideal world you might decide to risk taking money from a lesser character in which case you have done your deal with the devil and will have to cross your fingers and live with the consequences. You can, of course, help yourself by negotiating hard to limit the VCs powers. ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=dbd465fd-e5b2-4b74-b843-4cca3b1b2108) Musings on the trade off between simplicity and power in a UI Chris Messina and Fred Wilson have posts up today which both talk about the pros and cons of simplifying the user experience at the expense of limiting the options available, although they come at it via very different routes – Fred discussing the power of instant approval versus moderation and Chris focused on the trend away from using URLs. The interesting thing here is the dichotomy created between power and flexibility on the one hand and ease of use on the other. There is also the related question of balancing the needs of early adopters/power users with those of the consumers with simpler usage patterns who will really take an app/service mainstream. Reading this back I’m struck that there is nothing new here, although APIs may be the joker in the pack here as they allow users to self select which interface they want to use. Additionally I think the web has changed the game by enabling crowd filtering, at least for content oriented services (iPhone apps, YouTube videos etc.). The other interesting thread is that simple interfaces limit options thereby making it harder for new sites/services/apps to get traction. Chris’s main point is that because of this the trend in browsers towards pictures and lists of sites and away from using the address bar is a simplification that threatens everything that has made the web vibrant. I can see the logic, but I think the trend to open is too strong. People are used to being able to get at exactly what they want to when they want to, even if most of the time they are happy going with the suggestions of others. Simplified interfaces which don’t offer this ability will have their place in the market, but I can’t see them dominating. Open has won out over closed every time so far and will again. Chris talks about the trend amongst television manufacturers towards walled garden internet experiences – they will have their time at the beginning of the internet television market, but will lose out to more open solutions eventually, mirroring what we have seen on mobile. ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=73f72241-559c-4623-b6e5-2d6e4845caa0) Opportunities created by the growth in data
Brad Feld wrote a post about the Defrag Conference over the weekend where he notes that the amount of information in the world is exploding and that there will be a wave of software innovation to help us make sense of all the data (a prediction he originally made in 2006). Taking the underlying trend first – the volume of information growth is staggering. I can’t find any easily digestible stats on the web right now, but numbers I’ve seen before shows that the amount of data produced in the last few years exceeds that created in the entire rest of history. For the doubters, Brad offers these explanations:
Implicit within Brad’s explanation but worth bringing out are increases in the amount of sensor data, that media consumption is becoming trackable for the first time, and the huge volumes of government data that are starting to be published/exposed (in the UK context I hear that Sir Tim Berners-Lee has secured a commitment from Gordon Brown which should see the UK as a leading nation in this regard). Some months ago I tweeted something about the problems of information overload and my friend Jof Arnold replied that he didn’t see any of his non-techie buddies thinking or worrying about this problem and questioning if there is much of an opportunity here (excluding web search as ‘already done’). I have returned to that thought a number of times, driven by the conviction that a trend this big has to be creating some kind of opening for startups, and my current view is that there are two types of opportunity, and that they might form the basis for investment themes. Firstly there is the obvious tools and filters to help us manage all the data. Now that information is abundant time is the new scarcity and these tools and filters are really productivity aids. There is nothing new here, the spreadsheet is a good example of an innovation in this area and Google is another. Going forward I think the startups will come in vertical markets, e.g. news, something about which I have written a lot on this blog and where we are seeing a lot of innovation at the moment. Medical is another area where we will all soon need help interpreting the vast volumes of data that are becoming available (I have recently heard of two businesses that are taking the cost of sequencing individual human genomes down to mass market levels). To Jof’s point – these tools will need to be *very* user friendly to get mass adoption, a hurdle at which many will fall, but which some will clear. For example, an application which shows you the news stories most read by your friends could well get traction without the users ever thinking they were solving their information overload problem. The following quote from the Foundry Group blog in 2008 gives further insight into how these tools and filters will work. The eighteen months since it was written it have maybe rendered the insights more obvious, but they are no less relevant, and nor has the opportunity passed.
The second area perhaps has more promise, and that is the idea of building on the newly available information to create services to create products and services which simply weren’t possible before. GPS/SatNav devices are a good example here – building on digital maps and GPS data to offer real time driving instructions. Similarly LastFM built a music service based on data that only became available after people started using digital music players. Looking forward the concept of VRM is built on the notion of using data generated by online purchase and surfing behaviour to turn the advertising model on its head. Businesses like this are hard to describe in the abstract because they are solving problems we didn’t necessarily know we had, and in there early stages can expect to encounter lots of naysayers arguing that it will never take off/people don’t need it/they will never pay etc. etc. Simply writing this post has clarified my thinking, but ideas like these really come to life when they are discussed, so I look forward to your comments. ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=77c3fc77-fcc2-4039-b03a-12cb6a26dd8e) More Recent Articles |
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