• April 23: next screening session.
• April 30: early registration deadline (save $100)
• May 18: Angel Forum event.

See Bob’s information below:

Looking for Investors?   April 30 deadline for 27th Angel Forum on May 18.

30 Companies are invited to present and exhibit to pre-screened 60+ private equity investors at the 27th Angel Forum on May 18 in Vancouver. Nearly 90 investors came to the last Angel Forum, despite the economic crisis.

5 companies already selected with 13 companies in screening. April 23 – next screening session.

“The Angel Forum is about the best organized event I have attended (ranging from across Canada and the Pacific NW). And having the drumbeat going before and after is a real difference from most other events.” Christopher Procyshyn, CEO Of VanRX Pharmasystems.

Post Presentation: To drive investor investment in your company, our Investors-Only discussion right after your presentation, invites investors to join or start a term sheet/due diligence team specific to your company. We link you (via deal management software) with investors who tell us of their interest in your company.

Avoid the last day rush: Earlier applicants have a better chance of being selected as 2x as many companies usually apply than space available and selection closes when we reach maximum capacity. Review our home page and selection criteria before submitting your Company Profile here

April 23 – next screening session. Save $100 by registering before April 30 deadline.  Apply / Register here

Sponsors:  Business Development Bank – Venture Capital      Fasken Martineau        PricewaterhouseCoopers    TSX – Venture Exchange

Questions? Reach Bob Chaworth-Musters, Angel Forum-Vancouver at mailto: bob@ANGELforum.org

Speakers include: Eric Ries (founder of the lean startup movement), Dave McClure (the foul-mouthed, opinionated, and obnoxiously right-most-of-the-time angel), the KISS metrics team, Randy Komisar (VC/angel with Kleiner Perkins and author of my favourite book on venture capital – The Monk and the Riddle), Steve Blank (who recently wrote a fantastic blog post called “No Plan Survives First Contact With Customers” and many others. This is a top-tier collection of speakers.

This is going to be a kick-in-the-ass day that is going to make any startup entrepreneur rethink their entire business approach.So if you’re sick of limping along building your business 10 users at a time or “working to get the app just right before we launch”, get yourself and your team down to this event.

Sign up HERE. This event is $700USD in person. We’re providing the simulcast here for $50 FREE. Do it. You won’t regret it. And you’ll get to hang out and meet a bunch of other startup entrepreneurs who are all building their ventures. Great place to connect with like-minded folks.

With that as a backdrop, it’s interesting to see CIBC announce this week that they have built a new cleantech specific team that will be offering a range of services to the cleantech sector. Related to this I saw this morning that RBC Capital has just funded the Greenscape Capital team (sponsors of Richard Branson’s Carbon War Room exercise here in Vancouver back in March). This will let the Greenscape team execute on their plan to build the world’s “greenest parking facility.”

Congrats to CIBC for finally doing what the European banks have been doing for years and to RBC/Greenscape for continuing to move things forward on large scale efficient buildings.

Dear (Friend):

You asked about my view on the cleantech sector after I took some time to survey it. Let me answer by starting with the big picture and the thing that prompted me to look at cleantech in the first place. Then I will be better able to answer your question at the bottom.

First, the global view.

Globally, we are standing at the confluence of two exponentially increasing tides. The power of one may help us address the risks of the other, but only if we engage them both head-on. One is the curve of resource usage, the other is the curve of technological change.

Curve 1: Overshoot and collapse and “peak everything”

We have used up half of our forests and half our our fish stocks on the planet to-date and given our “peak everything” 3.5%/yr compounding resource usage curve, we will use the same amount of resources in the next 20 years as we used in the last 260 years. It is widely understood that we have already exceeded the capacity of this planet to support our continued growth as a species by between 20-30% and are already going to have to plan for a “controlled crash.”

Curve 2: Double exponential technological advances

Simultaneously, technology is developing at a double exponential rate such that we can not even comprehend what our world may look like by 2050 from a technology perspective. A brief reminder: 30 steps taken 1 foot a a time moves you forward 30 feet. 30 steps taken exponentially moves you forward 1.07 billion feet. It’s hard for our brains to grasp. The next 10 years will be like our last 100 in terms of new technology and that is accelerating.  If predictions by people such as Ray Kurzweil come true, we could have nano solar devices providing 100% of humanity’s power requirements by 2030,  the wealthy and maybe even middle class will be iiving long healthy lives free of disease and many of them will be integrated into computers and robots. If we choose our technologies wisely, even the poorest will have the benefit of low-cost desalination and solar power.

In terms of scenarios, it will already probably be either a huge cliff, a controlled step-down crash, or in a miracle of miracles, a bounce off the bottom and a move to a regenerative world. Hopefully we still have those options.

Actions we need to take:

We need to understand and act on the knowledge that comes from both of these curves.

Regarding the first curve, we need to stop the denial, anticipate the issues, structure responses that address both the rational and irrational causes of inaction, address our flawed, emotional, homeostatic tendencies, and work towards creating a regenerative world, rather than the destructive negative overuse cycle we are in.  We know a lot about why we do not act. We don’t need “more information”, we need to build plans that take into account our very human responses to things. Jared Diamond and Joseph Tainter‘s work is key here.

Regarding the second curve, we need to stop sticking our head in the sand about technology and embrace and channel technological development. Relinquishment of technologies won’t work. That would be like standing idly by saying “I will have no part in that river coming dangerously close to the village” when that river is doubling in volume and power every year. We can’t stop it, but we can channel it. We need to slay our sacred cows by revisiting nuclear power (which is emissions free) and genetically modified foods.  We need to use every advantage we have to both increase resource generation and regeneration and also to decrease resource usage per person. This will require structuring government incentives for radical expansion of green technologies.  The Sustainable Development Technology Canada program is a great start. We need more. We need to think like Vinod Khosla who says “if we do not address maintech (building materials, concrete, water, chemicals, coal, oil, efficiency) and solve them at low-cost, that can get to market unsubsidized in China and India and scale to the whole planet, then we won’t solve our problems”. Since we don’t know where the innovations will occur, we need to structure capital to create massive “optionality” and R&D across the board, focusing on those areas that are most ripe for change / disruption / innovation and that are causing the biggest problems. Sadly, I think we should also continue to support companies and organizations like Space X and the LifeBoat foundation, both of which are trying to get off the planet in case we really make a mess and can’t live here any more.

We need to work the top line by increasing resources

We need to Increase outputs and resources and regeneration through restoration of forests, soils, forests, fisheries. We need to boost agricultural outputs (again) by raising land and water productivity and studying ways of producing protein more efficiently that with the standard corn-fed cattle approach. This includes continued research into genetically modified foods.

We need to work the bottom line by decreasing our resource usage per person

We need to also lower our resource use/person by restructuring economically through things like cap and trade, removal of subsidies on things like oil (we spend $700B annually across the globe subsidizing the exact wrong behaviours), restructure the energy landscape by decommissioning coal, shifting to renewables, pushing for all of the efficiency we can get now and every year going forward. We need to get MUCH better at urban design since in 30 more years, 80% of the planet will live in 3% of the surface area in cities and that means urban transportation, bikes, water use, city farming, squatter gentrification. We need to implement “third world” solutions in our own backyard – micro finance, entrepreneurial education, population stabilization (which happens automatically as people move to the city).

National leaders…aren’t leading

Global progress on our bigger issues is stalled. Copenhagen was widely regarded as a failure. Nations are too slow to act. China and the US refused to take material action at Copenhagen and that means that no other nations will follow. The US is frustrating cap and trade. Canada is also lagging. Within our borders, our provinces and territories are too heterogeneous and their populace has too many diverging interests.

We have structural capital issues that are impeding our ability to bring investment into Canada that will continue to haunt all forms of technology development, including cleantech, and they need to be addressed. The Section 116 problem has never been resolved and makes it difficult for investors to invest in Canada without great hassles. We need to fix this as it continues to scare US venture capital away and is causing a hollowing out of Canadian companies as US investors must move our companies south in order to invest in them. It’s easier for a US company to buy out and move a Canadian company than to simply invest in it.

This revolution will happen provincially, regionally and municipally:

BC is already the 10th largest “cleantech market” in North America.  We have top-notch universities that pump out research, we have core resource and mining people, law, and organizations in place that can be repurposed for cleantech company creation, financing, and implementation of things like carbon projects. We already have an excellent industry association leadership in the BCTIA, the Premier’s Technology Council is already very supportive of cleantech, and we have programs such as the newly launched CleanWorks BC marketing campaign intended to attract foreign investment to BC. We also have a large number of excellent cleantech companies here and we have strong core competencies in hydro electric power, power transmission, storage and battery technology, wastewater management, and bioenergy.

The Lower Mainland as a region and all of the cities inside it will be key. You can make a difference at the regional level. Cities are massive producers of the problem and they’re also massively incentivized to solve the issues for themselves – they are almost self-contained zones.

In Vancouver, we have a mayor who sees the benefit of working on all three pillars of sustainability: “people, planet and profit” as it is often referred to. He is building ties with Governor Schwarzenegger from California and Richard Branson’s Carbon War Room Initiative , among many other things. In short, he is trying to put Vancouver on the global map as a “Green Capital” in the world.

So what do we need to do next?

We need capital fixes. There are many others who know much more about this but I know that we have capital gaps. The exits are long and difficult for investors (10 years) for many of these green technologies and so many companies suffer or fail as do their investors.

We need to continue to back primary research at the universities that feeds into our technology landscape.

We need to build more funds that create small companies that can fail faster – allowing us to create promote “optionality” or the creation of as many options as possible.

We need to build a more unified province wide Cleantech BC association that unifies traditional energy, renewables, materials, efficiency, and water all into one cohesive strategic plan.

We need to survey our assets in the universities and our companies, scan the market for current and latent need and then really support those clusters where we can excel and build networks of inter-related and successful companies.

As a province, we need to realize we are competing globally, not within Canada.

As a province, we need to redefine “cleantech” to include all of our “maintech” – the stuff that will move the needle. That will require vision expansion and coaching. This means expanding our idea of “cleantech” from renewables to greening of the entire supply chain and all materials and energy usage.

We need to continue to push these changes bottom up because waiting for national governments (Canada, US, or otherwise) will take too long and be too ineffective. The only exception to that is major cap and trade policy and other regulation which mostly needs to happen federally. But even without it, cities and regions can adopt their own and enforce them locally as they’re doing now. It’s less effective but it’s a step until the national dithering is resolved.

The province must address issues of forest, agricultural land, fisheries and water restructuring in order to once again focus on maximizing sustainable, regenerative yields. One area I’m significantly concerned about here is water rights. It appears that we are selling off our water rights to foreign interests and that needs to be reversed. Peak water is right behind peak oil as a critical issue.

My final summary?

We have a lack of national leadership on the major environmental challenges ahead of us as evidenced by Canada’s embarrassing performance at Copenhagen, but that is countered by highly motivated provincial, regional, and municipal leaders. And we have a province filled with excellent cleantech companies, entrepreneurs, and teams that are highly capital efficient.

So, while my survey of the sector has tempered me with its long, difficult, unpredictable company builds and exits, the people working on those companies have excited me with their passion, vitality and energy for finding and creating solutions to our big challenges. That passion and energy is one of the key reasons I have decided not to return to the US and to instead, stay here and work to build BC’s local technology sector. We have a lot of work ahead of us. Let’s get to it.

I disagree however on the terms. I think that startup founders should be able to get visas without having to secure VC funding. VC funding is not always appropriate for all ventures. I think that another filter could be applied, something along the lines of “it must employ __ Canadians within ___ period of time” or risk revocation. Otherwise, this just becomes another point of leverage between the funder and the entrepreneur.

Having been in need of this visa myself in the States, I definitely see the value in creating this.

Please head on over to Bootup Labs petition site here to sign it.

Startup Visa Canada | Bootup Labs Blog.

Frank Gillett and his team over at Forrester have released “The State Of Emerging Enterprise/SMB Hardware Trends: 2008 To 2009″ reports. You can find them here (Enterprise / SMB). The summary is below with my thoughts added at the bottom:

• x86 server virtualization adoption. Fifty-four percent of enterprises have implemented x86 server virtualization or are doing so within the next 12 months. Fifty-three percent of SMBs have already implemented x86 server virtualization or are doing so within the next 12 months.
• Virtualization of OS. Enterprises report virtualizing 31 percent of their operating system (OS) instances today, and SMBs have virtualized about 36 percent of their OS instances. In two years, enterprise respondents expect to virtualize an average of 54 percent of all OS instances, while SMB respondents expect to virtualize 61 percent of all OS instances.
• Cloud computing. Firms surveyed showed growing interest in pay-per-use-hosting of virtual servers, one of many types of cloud service offerings in the market. Five percent of enterprises have already implemented pay-per-use-hosting of virtual servers, and three percent more enterprises will be implementing within the next 12 months. Two percent of SMBs have already implemented pay-per-use-hosting of virtual servers, and two percent more SMBs plan to do so within the next 12 months.
• Power and cooling. Eighty-one percent of enterprises indicated some level of interest in increasing the electrical efficiency of the data center, although only 18 percent said they are very interested in doing so.
• Alternatives to traditional PC technologies. Firms are feeling real pain over the costs of maintaining PCs. Seventy percent of enterprises and 74 percent of SMBs said they hope to lower PC costs with alternative technologies such as various forms of desktop or client virtualization.
• Information sources and influence in purchasing. Despite the hype about Web 2.0, IT buyers really just want to know what their closest associates think. Hardware decision-makers at enterprises and SMBs reported that their peers and colleagues are the most valued traditional source of information for purchase decisions.

So, my simpler interpretation of the same data shows:

• 80% – say they’re interested in green power (but aren’t really acting on it). Much like humanity in general. I believe this number.
• ~74% have real pain with PC or client maintenance and management and hope to mitigate that with desktop and client side virtualization. This makes a lot of sense.
• 53-54% are about to or have already implemented server virtualization. This fits with what we’re hearing as we speak with people in the industry.
• 30-60% have already virtualized or are about to virtualize the operating systems.
• Only 18% of them are “very, very interested” in green power – that still doesn’t say that they have implemented any green measures.
• 2-5% of SMBs and Enterprises have implemented cloud computing and will increase that to  4-8% respectively within 12 months. This is still really early in the cloud computing cycle. What I think may be missed here though is the fact that many rogue departments are purchasing cloud computing and expensing it without ever involving the IT department. This is exactly how PCs crept into businesses and how Saas Applications also entered through the basement. My bet is that the numbers here are higher if we talk to people outside of IT.

Startups we’ve selected to present at Under the Radar are aiming squarely at the major pains and opportunities in this survey. Check out the newest companies on the horizon who are addressing: end-point virtualization, management tools, virtualization optimization, and of course, all aspects of cloud computing here.

If you are an IT professional working on any of these issues for your organization, you will want to come and attend the upcoming Under the Radar: Clarity in the Cloud on April 24, 2009. You can register here. Early bird pricing ends next week.

Under the Radar Round 2 Calls!

As many of you know, I am extremely fortunate to be assisting the Dealmaker Media team as co-chair of the upcoming Under the Radar event on April 24, 2009 in San Francisco. This is round 2 of our call for companies in the cloud computing, virtualization, software as a service, and web services categories. This is an excellent opportunity for early stage startups to present their businesses and ideas to CIOs, CTOs, and Technology VPs at companies like AT&T, Getty Images, Google, Microsoft, Cisco, etc, as well as VCs, prospective partners, and industry press. Of the 400 companies that have presented on this stage in the past seven years, over 50% of them have been funded (more than $1.3B in funding so far) and nearly 20% of them went on to be acquired by companies such as Google, Salesforce, Cisco, and Microsoft. This event has practically become a rite of passage for early stage startups. Previous Under the Radar Alumni include: Ribbit (which was acquired by British Telecom), Zoho (do they EVER stop building cool applications??), Box.net, Animoto, Elastra, Jive Software, 3tera, Zimbra (acquired by Yahoo), Nirvanix, LinkedIn, SupportSpace, SlideRocket and Q-Layer (acquired by Sun Microsystems.)

The deadline for applications is March 20, 2009. You can apply here.

Some of the companies who are already invited include Boomi, Ctera, Eucalyptus, Heroku, Marketo, New Relic, Qwaq, Sauce Labs, Spigit, Symplified, Tap In Systems, Twilio, uTest, Virsto, Zephyr, Zimory, and Zuora and we have more exciting companies waiting in the wings for final confirmation.

Want to learn all about cloud computing? Sign up now for early bird tickets.

For anyone looking to understand the cloud space and see who’s innovating AND who’s buying -  this is a one-day deep dive into what’s happening. Tickets are still available at the early bird discount rate. To register for that rate, please click here.

Judges, Moderators, and Sponsors

Here are some of the judges who are committed so far (with more to come):

• Bipin Sahni, VP Technology Manager , Wells Fargo
• Steve Phillpott, Chief Information Officer, Amylin Pharmaceuticals
• Steve Heck, Chief Technology Officer, Getty Images
• Doug Harr, CIO, Ingres
• Gary Little, Partner, Morgenthaler
• James Urquhart, Market Manager: Cloud Computing & Virtualization, Cisco
• Joe Weinman, Strategy and Emerging Services Vice President, Corporate Bus.
• Development – AT&T
• John Foley, Editor, Information Week
• Larry Dignan, Editor, ZDNet
• Maha Ibrahim, Partner, Canaan Partners
• Matthew Glotzbach, Director of Product Management, Google Enterprise
• Mike Maggs, Director of Business Development, Azure group (Microsoft)
• Mitchell Kertzman, Managing Director, Hummer Winblad Venture Partners
• Rob Hayes, Partner, First Round Capital
• Robin Vasan, Managing Director, Mayfield Fund
• Sunil Dhaliwal, Partner, Battery Ventures

We have also pleased to have some excellent moderators for the event:

• Rafe Needleman, Editor at Large, Cnet
• Jeremy Toeman, Stage Two Consulting
• Charlene Li, Co-Author – Groundswell
• Ellen McGirt, Sr. Writer, FastCompany

Of course, an event of this size is only possible with great sponsors and we have the best possible sponsors for this event:

• Gunderson Dettmer
• Microsoft
• Mosso – The Rackspace Cloud
• Salesforce.com

“Are companies getting funded?” The answer still appears to be yes. As long as the market opportunity is solid, the company has an “A” team (or is close to achieving that), and they’re solving real pains for known, addressable customers, the funding still seems to be flowing. Here are a handful of companies in the space that have received funding in 2008 and already in 2009.

So while you are ramping up early customers, keeping your burn rate low, and learning as much as possible from your early customers, (and if it makes sense to take venture capital which is a whole separate post), then you probably want to keep pitching to prospective investors. It might take a little while longer but if you have the right ingredients there is funding out there.

We will be able to announce more financing events soon from some new and exciting companies so stay tuned! Also, if you know of other companies getting funded, leave us a comment below or email us at <utr at dealmakermedia dot com>.

This April 24, 2009, I’m fortunate to be working with Dealmaker Media who will be hosting the 13th Under the Radar conference. In one day we will present a full roster of innovative startups, tech thought leaders, and REAL enterprise & big media customers who are buying cloud services to let you see for yourself what the cloud REALLY MEANS…

What is Cloud Computing?

We have a very simple but broad definition of cloud computing:

Applications, services, platforms, or infrastructure that are highly abstracted or virtualized, web service enabled, able to be automatically provisioned, and generally charged on a pay-as-you-go model.

As the market evolves, we predict that there will be a number of clouds from a variety of vendors with a range of performance characteristics. They will vary by location, security, pricing models, supported “stacks”, degree of regulatory compliance, location, service level agreements, and many other dimensions.

Benefits of cloud computing

The key benefits of cloud computing are that it allows organizations to:

• shift up-front capital expenditures to ongoing operational costs which can allow businesses to provision more quickly or scale faster than if they had to deploy capital;
• provision infrastructure more quickly than by their traditional infrastructure purchasing and provisioning model;
• dynamically match computing capacity to demand more accurately, which means less wasted resources in low-traffic times, and less downtime during high-traffic times;
• test ideas with a lower threshold by deploying test environments in the cloud and then shutting them down when not in use;
• scale up to computing capacities that would have been impossible to achieve in any other way cost-effectively;
• decrease the time-to-value of new IT projects because of the faster provisioning and lower costs.

In short, it allows organizations to do more, faster, with less resources. In some cases, it allows organizations to do things they could never have dreamed of doing before. 

Current Issues with Cloud Computing

It is still early days for this next generation of computing. There are many issues to work through including: security; performance; vendor lock-in; cloud interoperability;  stack selectivity (only certain clouds will support certain technology stacks); cross-cloud portability, administration, and management; regulatory compliance (current clouds do not comply with many regulatory frameworks such as Sarbanes-Oxley, HIPAA, PCI, data protection regulation or others), and even common metering and billing models.

We believe that this is an opportunity for entrepreneurs to identify and fill those gaps by picking components of the stack and bringing them forward into this new era and we’re hand-picking the best ones to tell their story on April 24!

Early Bird Tickets are going fast. Register to be the first to meet and do deals with these innovators.

January 21, 2009 | 6:30 – 8:30PM

Moderator:

• Mark Sherman, General Partner, Battery Ventures

Speakers:

• Seth Sternberg, CEO, Meebo

• Auren Hoffman, CEO, Rapleaf

• Eric Ries, KPCB and former CTO, IMVU

• Munjal Shah, CEO, Like.com

• Jason Lemkin, Founder and CEO, Echosign

NOTES:

• Jason Lemkin

  • He built:

    • Babycenter:

    • Nanotech co: 100 meetings to get funded

    • Echosign: Founded in 2005; 18 people, 10,000 customer, grabbed $8M (“the balance of which is still in the bank.”)

  • Takeaway – get Really really focussed and kill anything that’s not working as fast as you can.

• Munjal Shah:

  • Take-away: skip the “what can we take away from the budget approach” and go for zerto based budgeting where you start with nothing and then ask, “what is the stuff we absolutely need to have.” It gives you a better result. It’s harder but better

• Seth/Meebo:

  • have raised $37.5M up to C.

  • raised after they had traction;

  • doing 40M uniques/mo

  • Take-away: we focused on having a founding team that could build a product without having to pay anybody Hire SLOW, not fast.

• Eric Ries / ImVu

  • founded in 2004;

  • we sell virtual cllothes for avatars;

  • Eric is now with Kleiner as a venture advisor after building three startups

  • Take-away: runway is not the issue; the issue is how many more iterations can you do? Don’t just do the same X iterations slower. That’s stupid.

• Auren Hoffman / Rapleaf:

  • shareholder in 29 companies including Meebo;

  • Take-away that is non-obvious: when you get a term sheet from a VC, the beest clause to negotiate to cut your costs is your investors’s counsel’s fees. Cut that down to $zero or $10K

• Mark Sherman / Battery Ventures

  • 30 years in business;

  • have taken 8 companies public (2005-2008) like Omniture, Netezza, BlaeLogic, sold another 6 companies;

  • sold an unmanned aeuronautical vehicle to Beoing for $400M

  • Key Takeaway: the world of vc has changed fundamentally and will reset things for the next 3-5 years. The number of firms and dollars will decline. So be as capital efficient as you can. Every dollar now counts.

• Seth:

  • Build cheaply. When you take on capital, your company will grind to a halt because you have to stop working and start hiring and giving powerpoints to your investors.

  • Get Traction first!!! Then add money. Money does not bring traction:

• Munjal Shah:

  • “Eat appetizers when they’re there, not when you’re hungry. If the money is avaialable and raisable, do it. Always.

  • They always want to give you money when you don’t need it and never want to give you money when you need it.

  • Don’t overcapitalize. But raise it when you can.

  • All companies fail for the same reason – running out of cash. Don’t run out of cash.

• QUESTION: What are the advantages/disadvantages of raising money today?

  • Eric:

    • really good deals are still being done.

    • There is no way for people to walk in with a bplan and walk out with cash.

    • Tough enviironments force you to really sharpen your plan.

    • Do your investors think that you can create value or

    • Raise money when you don’t have to (cuz that’ swhen it’s available.)

    • We tried to get off the multi-round treadmill (how will we get to the milestones so we can raise ANOTHER round????) and think instead of “how do we use this round to get to profitability.

  • Mark Sherman:

    • There is a lot of talent out there right now that you can tap for free product development. They’re working at boring big co and want a side project.

    • Check out the viability of the firm you’re dealing with since the venture firms are collapsing.

  • Jason Lemkin:

    • It’s the wrong question. The right question is “what’s your business model? and do you need venture funds in order to actually succeed?”

    • [I agree with that. Advantage and disadvantage is subjective.]

    • There are few companies that REALLY make sense as venture funded plays.

    • If you DO have to raise it, do it as late as you can in the lifecycle of your company.

    • Get it out and do it until you’re breaking things significantly so that you now how big that business can scale.

    • You might be better off running your business and just banking the cash in your jeans.

  • Mark Sherman:

    • We have found that the more we give early stage businesses, the less successful they are at exit. The less we give, the more successful they are.

• What can you suggest to people?

  • Auren/Rapleaf::

    • 3 things that make sense right now

      • B2B: Products that the CFO likes that help them make savings or help him make money

      • B2B: help companies sell more stuff to their current consumers;

      • B2C: diapers.com. Simple focussed and

  • Munjal::

    • DO NOT DO SALARY CUTS. It breaks an implicit contract.

    • Cut one person before cutting everybody.

    • Cut the full person and pay your others full fare.

• Question: I just raised money in October 2008. I have some opportunity to bring on more.

  • Rapleaf guy:

    • we do significantly serious reference checks (criminal, debt, civil, an everything else.). We go DEEP.

  • Jason Lemkin:

    • get the money now. Get it because we’re probably heading into nuclear winter.

  • Eric Ries:

    • Pull your moment in time forward when you start asking people to buy your product.

    • Don’t wait to learn that information.

    • You can sell your alpha TODAY to people even if it’s only half-built.

• Question:: which expenses would you target for cost-cutting?

  • Seth/Meebo:

    • wedecided not to build a second data center on the east coast.

    • Service providers just stack up. quickly. REview and cut them.

    • Pre-empt future hires. Do not hire more people if you can avoid it.

  • Jason:

    • Avoid PR firms

    • Minimize office space

    • Do NOT cut your core sales and marketing engine. It takes 18 months to build up again.

  • Q: Anybody renegotiated a lease?

    • Munjal: In 2000,

      • Our lessor went bankrupt. We stopped paying them. It was caught in bankruptcy court.

      • You think that people will come after you but they won’t.

      • RENEGOTIATE. It’s better to do that.

      • Don’t cut your people.

      • Cut your overhead costs.

      • At Like.com, we always “hire the best and pay the best. (in cash and/or equity.)

      • But we hire less people than you might have in other cases. We make our teams work really really hard as a result.

      • Our teams are understaffed on purpose.

    • Mark Sherman:

      • One of the mistakes I see with our smaller companies is that they overinvest in their spaces. / real estate.

    • Jason Lemkin:

      • YES – monitor your landlord

      • I have been through two renegotiations.

      • If you default on your lease, they can get a full judgement agaisnst the full amount

      • Go to your landlord with your balance sheet and and model.

      • Show them how they will make more money

    • Mark Sherman:

      • Do a zero-based org chart on top of just zero based budgetin

      • Start fresh. Figure out what’s critical. from a blank sheet. to get as much ramp as you can.

    • Auren:

      • If you have a 15 person team, you should have no more than a CEO and 2 VPs.

  • Q: During this time, should companies be tweaking their busines model?

    • Eric: if it’s already successful, no.

    • If you haven’t validated your model, sure.

    • Get more efficient wit your existin gteam.

  • Q: My point was that sometimes harsh times can make you realize that your model just sucks. I watched a client/server company go from client/server to SaaS and now the’re a 1.5B/yr company. Nextag was another great examle.

  • Sales

    • Jason Lemkin: We made our existing sales teams go from base + commission to 100% commission.

    • Sales and marketing people BOTH should be paid only on bringing in revenue

  • Gadi:

    • GO TALK TO YOUR CLIENTS

  • Question: Have any of you gone back to your customer?

    • Manjal: we built a microsite that ONLY shows stuff on sale. That is the only stuff that is now selling. And the conversion rates are much better than on the original site.

    • The key to being able to change your business model is having low-denial.

    • Get over it.

    • The smartest guys in the biggest bank in te country didn’t know what happened either.

    • Be interested in being successful more than you’re interested in other stuff like “following through, being right, or other concepts.”

    • I used to meeet with a group. All of them went bannkrupt – all 15.

    • Get out of denial. Fail Fast. Shut down fast if you have to. Restart fast.

    • 10 guys went and got jobs. 5 built new businesses, each of which went on to generate at least $5M/year. The earlier they got out and started building anew, the better they are doing now.

    • Seth: As long as you’re generating results for your own customers, they will continue to pay and may even pay MORE nowadays.

  • Mark: One of my portfolio companies had planned for significant growth. One of my companies turned away a 1.8M deal that was going to take them off-path I was happy to see them staying focused on THEIR plan.

• Question: What metrics are you using and is that changing?

  • Seth/Meebo:: we use number of uniques/property; uniques/daily across all Meebo properties; how many impressions we can push to their users; bottom line revenue;

  • Eric: gross revenue; profitability; ROI (expected and actual); acquisition cost per customer; lifetime value per customer (is A>B in this channel?); “most people do not do this work and use proxies instead

  • Auren: too many metrics are really bad; most companies have way too many; your product is probably the most thing

  • Jason Lemkin: our metrics changed radically from (whatever) to 2009 (profitability is my only new metric.) Begin forced to subscribe to a bunch of SaaS metrics who created them was beyond frustrating. Refreshingly, we’re back to bottom line only.

  • Munjal: profitability and cash are all that matter in 2009 and cash-burrn. We have enough cash on hand to run for five years if we want. We do a LOT of A/B testing. ALL of your testing must be parallel A/B testing (where every second users gets the optional difference.). We A/B every site change on 10% of our base. If it is not better than the prior version, it does not go live. We literally instrument every single change. We produce less featurres (like 60 of them) vs competitors (who may release 100) but they’re all heavily instrumented and that is how we can KNOW what works.

  • ****the biggest waste on earth is building code that nobdy wants or that you can’t measure to see if it ever moved the needle

  • Seth: We put fake features on the site and then watch for click-throughs. Onc ethey click on it, we tell them it was a test. Taht saves a TON of development work.

  • Auren: Test EVERYTHING. Assume NOTHING. The worst marketing person is the one who knows what the user wants. You want a marketing person who teases out the user wants not assumes them.

• Summary::

  • Flat is the new up.

  • Not getting a bail-out is the new up.

  • Move sales to incentive based 100%

  • Cut non S&M costs like overhead

  • Talk to your clients about how to drive more revnue with them or help THEM drive additional revenue from THEIR customers.

I’m at Startonomics today, put on by Dealmaker Media. I’ll be posting updates to this over the course of the day.

Live stream is here:

My notes and editorial comments are in [square brackets.]

These are DRAFT NOTES. Better versions coming after the conference, complete with images.

MORNING SESSION:

Dave McClure, 500 hats

Image via CrunchBase

• Metrics
  • ultimately, lead through to sale conversion and total return are the keys.
    • Many people pay attention to uniques at the top of the funnel and $ at the bottom. That’ s okay, but look at the conversion steps INSIDE there.
• Be a pirate who says “AARRR” – Acquisition, Activation, Referral, Retention, Revenue
• Typical failures:
  • business plans are bullshit
  • revenue projections are hockety stick delusions
  • features don’t matter; usability and MEASURED conversion matters
  • Offline PR, “Big-bang launches” are stupid and expensive. In general, offline to online conversion is 100:1 or greater (i.e. it’s very weak.)
  • Investors don’t know your business any Better than you do. Their opinions are interesting but don’t change your plan because they have an opinion.
• Be Bold. Be Humble.
  • 20% inspiration; 80% perspiration
  • Be audacious but also creative
  • Be humble and be analytically rigorous
• What matters?
  • passion for problem
  • hypothesis of cutosmre lifecycle
  • 1 page business model (proiritized list of users and conversion)
  • critical, few actionalble metrics and a dashboard of MEASURED user behaviour
  • 1 page marketing plan (channels & campaigns * (volume, cost, conv%)
  • voleocity of (product execution + cycle time of Testing) * Iteration rate
    • Speed is the advantage, not IP defense
• What’s my business model?
  • how you get users
  • how you drive usage
  • How you make money profitably short and long term
• which metrics?
  • few metrics and you can use them to make decisions
  • hypothesize customer lifecycle
• 1 page business model:
  • what TYPES of people use your tool?
    • visitor?
    • contributor?
    • distributor?
  • what ACTIONS could they take to help YOU or THEM?
  • Look at the TeachStreet dashboard that shows where they are strong and where they are weak (see slide)
• What features and why? When are you done? When do you remove them?
  • use conversion to guide
  • (use evidence-based decision-making, not “I like…” or “he likes…” or “I think…”)
  • easy to find, fun, useful, unique features THAT INCREASE CONVERSION are the only things that should go in.
  • spend 80% of your time on HYPOTHESIS CORRECTION, not on feature development.
  • [This was the key take-away for me. I see most teams focusing on arguing about features, not arguing about their hypothesis and then testing it against market feedback.]
  • Most companies are doing 80% feature development with no A/B testing and feedback loop
  • The ONLY pupose is to move users from lower to higher value states.
  • Features are ways to make that value leap happen faster. That’s it.
• Check out KissMetrics for product planning metrics tools
• Marketing and sales
  • move your marketing from vague to highly rigoroous
  • you want to increase volume, decrease cost, and increase conversion rates. That’s it
  • design & test multiple marketing channels  campaigns
  • focus on best peformaing channels and tehme s
  • optimize for conversion  to target CTAs
  • (Look for SLIDE: Example Marketing channels)
• One step at a time:
  • Make a good product: activation & retention
  • Market the product: Acquisition & Referral
    • market once you get your product to an 8/10
  • Make Money: Revenue & Profitability
  • [I think it's interesting that he's still using Build...then market...then sell, and not  the sell first, build second model which is safer, following the Dell Model or the Cisco Sale model.]

Dan Olsen, CEO & founder, YourVersion – Designing the DNA of a Killer App

• I led product for Intuit and for Friendster
• Dan helped Friendster drive massive traffic gains that they were never able to recover fro
• How to integrate metrics & optimization into your process
  • Plan
    • business objectives
    • product objectives
    • prioritized features list (we use a one page google sheet)
    • requirements for the feature
    • scope of the feature that feeds back to the prioritized features list
    • code
    • test
    • launch
    • track metrics and user feedback to then loop back into biz objectives, product objectives, and product requirements
  • Design
  • Develop
  • Optimize
    • measure metric
    • analyze the metric
    • identify top opportunnities to improve
    • design and develop the enhncement
    • launch the enhancement
    • measure the mtric (repeat
    • The value is in the learning of market, customer, domain, usability
    • The faster you iterate this cycle, the faster you learn
• Using metrics to optimize value creation
  • for you
    • “given current reality, how do we optimize the busines results subject to our resource constraints?”
    • (grab his slides – missed all of this.)
    • Take-aways:
      • you want to track things over time DAILY
      • you want to track them visually
      • create ratios from primary metrics so that you’re not fooled by volume changes. It also allows you to compare to other sites.
      • (inserrt his slide of sign up page metrics)
    • “using metrics to optimize the equiation of your business”
      • sniper shot – least effort for maximal gain/result
      • [YES!!}
    • optiming metrics for viral loop:
      • active users
      • invite
      • prospective users click
      • registration
      • succeed
      • Lop again
      • (grab this slide)
    • grab the maximum upside potentio of a metric slide. it is KEY here.
      • see third metric (there is no upper boundary of 100% (because it's how many invitations can they send?)
      • see the "doubling number of invitations sent" slide)
  • for your custsomers
    • customer value =
      • satisfies customer needs (It is NOT ABOUT FEATURES)
      • is easy to use
      • has a good price
      • is better than alternatives
    • cust value = customer stisfaction
    • not fuzzy:
      • # of users
      • frequency of use
      • At a bare minimum, track those.
    • understanding user needs and satisfaction:
      • quantitative: site analytics, usage metrics, surveys
      • Qualitative: support emailos, usability sessions (best)
    • Value Proposition:
      • Which benefits are most imporant?
      • How well does it deliver?
      • (grab this slide/table)
    • Analyzing product ideas ROI
      • see related slide/graph
      • this is based on your prioritiezed feature list
    • UI Design iceberg
      • [HA! I have been using this model all along and didn't realize that asomebody had this awesome graphic.]
      • www.jjg.net – Elements of user experience chart from Jesse James Garrett
    • Put Key conversation actions above the fold.
      • Grab chart from clicktale.com
      • Most people are running at 768 pixels
      • The chrome steals 170 pixels off the top
      • leaving you 600 pixels.
    • Case study: Intuit account signup process redesign
      • we had to ask lots of questions for legal reasons
      • we tracked new and existing signins.
      • we got a 37% improvement in conversion rates
  • SUMMARY
    • define success for your customer and your business
  • Other resources:
    • slideshare product requirements doc from web 2.0 exp
  • CONTACT:
    • dan@yourversion.com
  • QUESTIONS
    • long MRD and PRD docs are over;
    • go with light weight wiki docs

Startup Scalability Strategies, Frank Mashraqi

• Frank is the expert outside of MySQL;
• spending too much is wrong
• not worrying aobut iss is also wrongwhat to measure?
• nobody knows what cloud computing is; it’s very fuzzy
• Agenda
  • what to focus on?
    • distribution of data: how is it distributed?
      • how many servers?
      • what percent of data per server?
      • how many connections per shared/ partition?
      • divde the data up into multile databases or shareds
      • MOST People don’t have a clue how to distribute data. They know that they HAVE to do it, they just don’t know how.
        • a client that seaparated data by username first letter found that 15% of usres start userenames with M. So that was a bad distribution strategy
    • utilization
      • how well are your resrouces being utilitzed:
        • IO wait
        • threads
        • CPU
        • queries
        • disk utilization
        • cache utilization
        • disk saturation
        • memory
        • cache hit
        • cache prunes
        • thread thrashing
        • connections per shared
        • swap utilliztion
        • threads running
        • exceeding high or low water marks
        • growth rate
        • connections usage
      • performance:
        • constant access time is the issue
        • if you focus on performance, you may only buy yourself a bit of time, but then growth hits and you hit the same issues and now it’s HARDER to maintain performance.
      • what’s the difference?
        • performance is not high availability which  is not scalability
        • scalability is the easiest thing to implement.
        • performance = ability to proces s or execute a task comapred to time and resources used
        • HA = ability to ensure certain degree of operational continuity – expensive!
        • scalability: ability to handle growing amounts of traffic in a graceful manner or ability to be easily enlarged
      • Pick any two of these – not all three.
        • consistency:
          • choose this if you don’t care about 24×7 or accomodating high traffic
          • forget about HA and scalability
        • availability: if you need it up 24×7
        • Partition tolerance: great for high-traffic scalable websites;
      • Vertical or Horizontal
        • Vertical: scaling up
        • add resources to a node (more ram or faster processor
        • can be more than the price of the gain (double fast server might cost more than 2x)
      • Horizontal (scaling out)
        • adding more nodes
        • cost efficient
        • increased mgmt complexity
        • more complex prlgramming model
        • throughput and latency between nodes.
        • good for linear scalability
        • considered more complex and harder to do so many people aboid it.
        • This is no longer really true and there are ways to do this from day one.
        • [One of my clients, WorkHabit,  is helping their customers do this from DAY ONE - avoiding the vertical model entirely.]
  • which way to go?
    • vertical or horizontal
  • how to partitiion?
    • make sure that your aplication does not care about partitioning;
    • abstract / isolate that from the application
    • (grab the slide here)
  • how to balance?
    • not that difficult if you start with the right foundation
    • use agile methodologies
    • technical debt is expensive (technicla debt is stuff you put off to do “later”)
    • technical mortage is a killer
    • once you have a good foundation layer, you can build on it.
    • there are frameworks for Jave for example like HiveDB that you can build on.
    • Hire the right people who know those frameworks so that you can build correctly from the sstart
  • before and after
    • what dto do early
      • lay the right foundation
      • set up the ability shard/partition
      • decouple components
      • effectivevely cache
      • have a plan in place
    • what can wait until after things start to grow?
      • now focus on micro optimization
      • acaquiring and upgrading hardware
      • performance  optimization s and OS tuning
      • (get bullet 5)
      • (get bullet 6)
  • who to hire?
    • Get the best architect you can find who can help you build the correct foundation
    • find the libraries you can scale on
    • Developing with Hibernate for example, you can move it to Hibernate Charge and then make it scalable very quickly and easily.
    • But if your people don’t know this, then they’ll hurt you.
    • You need people who know how to build for scale from the beginning with the correct frameworks.
  • Best practices
    • go asyncronous
    • Synchronous processes KILL scalability – they requrie you to scale VERY expensively
    • go stateless
    • The Best IO is NO IO – serve from memory, not disk
    • decouple as much as possible
    • build using APIs; easy to scale development that way
  • how to kill your project
    • focusing too much on performance up front
    • instead, ensure that you are hiring the right people, building the right foundation, the right partitiioning scheme
  • can I offload scalability?
    • most clouds are proprietary, that’s not the answer and often you still end up having to do all the hard work of laying the correct foundation anyway.
    • Be cautious with this approach.
  • SUMMARY:
    • go horizontal
    • go asycnhronous
    • architect once up front
    • choose two of consistency, availability, and
  • RESOURCES
    • http://mashraqi.com/2008/09/startonomics-startup-scalability.html
    • http://mashraqui.com
    • http://twitter.com/mashraqi
    • fmashraqi@yahoo.com
  • QUESTIONS:
    • CDN? Play the top vendors – you can get them down 40% off list
    • Generally loook for what suits your budget; Use them for sure to offload content;

Amy Jo Kim, Putting the Fun into Functional

• Gaming knowledge can be leveraged in your social media sites;
• You want to go after primal response patterns. The most important type of validation is variable reinforcement – i.e. reinforcement that varies by size and duration. Reward people (or rats or other animals) and they will be more addicted.
• To drive addiction, apply the following five gaming mechanics (or some of them.)
  • COLLECT: Let people “collect stuff” [reminds me of George Carlin's "stuff and shit" talk]
  • POINTS: (many different ways to accrue points and see leaderboards.
    • System Points: assigned by the software
    • Social points: given by other players to each other; eBay’s reputation system fits into this category.
  • FEEDBACK: Bejewelled gives you great feedback on how the game is going;
  • EXCHANGES: a transaction. This is like the giving of gifts in Facebook. It has a back and forth flow.If you can add an exchange between the person and the software or the person and another person.
    • Explicit: both people are involved in the transaction. I want to be your friend. They have to accept the invitation.
    • Implicit are where there is an opening for others to engage but they don’t have to. Comments and wallposts are great examples of this. Other users don’t have to respond to the comment.
  • CUSTOMIZATION: Let people create custom everything; UI; feeeds; blocks of content.
• We just built a new game that we’re releasing soon:
  • people can upload their photos and create games from them.
  • we built awards that people can collect;
  • you can achieve points from creating good games, from playing a lot of games, any other dimensions.
  • There are muliple ways to achieve leaderboard status.
  • [Makes me wonder about Crossfit. We use a leaderboard and even though I'm in good shape, I'm almost never on that damned board! Would I "feel better" if I was hitting a different board? I know that when I used to adventure race, my teams would often win the "team spirit awards'" but not the "top 3 finisher award. And we felt awesome about that because we were recognized for somethihng that was a different dimension of importance. When I was on the administration side of those races, I really enjoyed handing out those awards.]
  • The gaming site built in strong communication with the player;
  • We let people customize their world…but not entirely. We insert other people into their friend list for  example so that they can see things serendipitously.
• CONTACT:
  • amyjokim@gmail.com
  • Amyjokim (Twitter)
  • Shufflebrain (Facebook game);www.shufflebrain.com
• QUESTION:
  • Q: How do you handle different types of audience? Game players vs. non-game players.
  • A: Give them the option of opting out of the gaming system.

Introduction: from Dave McClure:

• the two biggest lacking areas in Web 2.0 are marketing and design; The limiting factor is NOT engineering ability.
• [Yes...totally agree.]

Understanding Designers; Erika Hall, Mule Design; Jeffrey Veen, Small Batch, Inc.

• They’re not separate; they’re integrated
  • [this is like Rocketbuilder's Integrated Marketing & Sales program that suggests that those are unified disciplines that are fully integrated. Very interesting corollary.]
• Design is not something you “sprinkle on”
  • it isn’t fairy dust
  • “jazzing up your site” is useeless;
• Start with goals, timeframes, and constraints;
  • goal: business goal drives design goal
• Roles/Hats:
  • there are really a bunch of different roles:
  • roles include:
    • Design strategist
    • visual designer <– this is the person who most people think of as “the designer”
    • information architect
    • Interaction designer
      • A failure in interaction design can not be covered over by visual design.
      • Bad ID =
      • You can’t save that with colour and type
    • Sometimes people batch those up into one thing (ID/IA)
    • Writer
  • Frameworks are so powerful now, you can design/build/review LIVE;
  • documentation is a function of team size and separation;
  • If they wrok side by side, they they can iterate quickly
  • go for the lightest weight documentation you can afford given your team size and separation;
  • Remember that language is part of your design!
    • [I have seen great cases of this where sites changed words from "post to blog" to "ask a question" or from "forum" to "discussion group"
• Case study: Measure Map
  • [I really liked the visual interface that Jeff discussed.]
• Design flaws
  • No goals
  • subjective (non-qualified users) using “gut feelings”
• SUMMARY
  • Design is making and documenting decisions about the experience of your audience.
  • It required knowledge, skills, and thoughtful feedback.
  • It works when you are clear on our expectations, priorities, and goals.

Ted Rheingold, Dogster:

• We’re at 3M in revenue this year;
• First things first:
  • Do people use yoru product right from the beginning?
  • Are happy customer creating new happy customers?
  • [i.e. don't waste time on metrics when your overall volume is irrelevant!]
• Objectives and Key Results:
  • OKRs must be deetermined in advance
  • OKR’s will show transfrmative growth (revenue, users, partners, etc.)
  • “The CEO often dreams something up and then sets the team to work on something but there are no organizational goals attached.”
• Get clear on your Key performance indicators:
  • define the metrics that define and measure progress toward organizational goals (OKRs)
  • KPIs are often ratios
  • KPIs can and will change over time, do conscientiously
  • Everything else i sinfo-porn
  • “don’t get sucked into the time vortex of looking at all of thiss information.”
• “So what?” / Actionability
  • Put EVERYTHING through the So What test?
  • Don’t do anything rfor 25% gain. Shoot for 10% minimum gains.
  • Keep putting effort only towards things that have real results.
  • If you have an idea that you can’t
  • Focus on REAL results.
  • I spent  months doubling adsense revenue (from $1500 to $3000) with a 100K burn rate. WHO CARES?
  • Stop working on the low-value stuff. Go for 10x gains, not 10% gains.
  • [I love this. It follows the Pena model. Go for quantum leaps, not incremental arithmetic growth]
• Testing
  • It’s like sex education – everybody says they’ll do it. Nobody actually does it.
  • Test, test, test
  • A/B – test
  • YOu don’t understand your customers and they don’t either and can’t tell you.
  • try crazy testing methodologies (multivariate testing, click-desnsity, user experience)
  • Watch people using your product. It is the only place where you can collect data from people using your site.
    • iIt’s very expensive and complicated and $25K sticker shock.
    • You can do it on the cheap though.
    • Do not test your mother or friends
    • Pay people $50; present them a script; have them look at your site and tell you what they’re thinking.
  • [Jay Abraham is a huge fan of testing for absolutely everything that a business does in all dimensions. So does Tim Ferriss.}
• SUMMARY
  • Be disciplined
  • Have a clear line of sight
  • Minimize stats review
  • Fight info-porn!
  • Do not dilute responsibility among too many stakeholders
  • test that your data is sound.
• Case study: DOGSTER used SEM/campaigns
  • We ran a campaign and used the wrong metrics
  • Wrote it on a blog entry at startonomics here
  • Marketing initiative: Feb 2007
  • We went on a massive customer acquisition binge (hooray - we have all these new customers!)
  • ...and then realized that holy crap, we increased the # of customers but didn't realize that we drove down the value per customer from $4 to $0.10. We
  • [Jay Abraham uses a great model: NumOfCust * ValuePerTransaction * NumberOfAvgTransactionsTotal
  • We found out two things:
    • advertisers only care about uniques
    • people just want infomation, not to set up dog page so we moved to a more heavy information centric site;
      • [I like this because it follows the pattern of expanding your TAM (total addressable market) by broadening the possible number of users;]
• Favourite resoources
  • Web Analytics – Avinash Kaushik
  • Advanced Web Metrics – Brian Clifton
  • Google Analytics
  • Google Trends
  • Adwords Keyword tool
  • google website optimizer (A/B multivariate)
  • AWStats (fee serever side webstats)
  • CrazyEgg (click tracking heat maps)
  • Kissmetrics (social space analytics
  • silverback (experience testing)
• Question: what about partnerships?
  • Answer: be cautious with partnerships. They can suck a lot of time out of your business.
  • Weigh their requests carefully againsta all other investments on the same ROI basis as we discussed above.

Notes from Dave:

• For building MINT, we did a lot of landing page and A/B testing before we did product dvelopment.
• [This fits well with the Tim Ferriss model of advertise first to test the buy rates, and then build only the products that get radical uptake.]

LUNCH

Greg, I’m glad to see that you have been recognized for your efforts with Right Now. I’m building a company right now where we are following the exact same principles: strong market research, large market waves, cashflow is king, and we’re going to use outside capital only for acceleration of the business, and preferably in as few rounds as possible. The fact that a programmer called 400 prospective customers is shocking. I also liked the “100% commission sales person” model which made sense given that Greg knew what the customers wanted at that point.

Great quote: “if you are starting a business, don’t spend your time calling VCs; spend your time calling customers, figure out how to solve their problem and get them to pay for it.”

And thanks also to the DealMaker team for hosting this excellent post on the art of bootstrapping.

Thanks to all of you for sharing this information. It’s encouraging to other entrepreneurs such as myself that we’re on the right path.

Worth reading both articles.

“The trouble with the first time entrepreneur is that he doesn’t know what he doesn’t know. After a failure he does know what he doesn’t know and can beat the hell out of people who still have to learn.”

“All companies that go out of business do so for the same reason – they run out of money.”

“Great markets make great companies.”

“I like opportunities that are addressing markets so big that even the management team can’t get in its way.”

“I am 100% behind my CEOs right up till the day I fire them.”

“The world of technology thrives best when individuals are left alone to be different, creative, and disobedient.”

“One of my jobs as a board member has been to counsel management to avoid distraction and to execute with constructive paranoia.”

All fantastic and useful quotes.

• The best time to start is when you’ve got enough money in the bank to support all contingencies.
• The best time to start is when the competition is far behind in technology, sophistication and market acceptance.
• The best time to start is when the competition isn’t too far behind, because then you’ll spend too long educating the market.
• The best time to start is when everything at home is stable and you can really focus.
• The best time to start is when you’re out of debt.
• The best time to start is when no one is already working on your idea.
• The best time to start is when your patent comes through.
• The best time to start is after you’ve got all your VC funding.
• The best time to start is when the political environment is more friendly than it is now.
• The best time to start is after you’ve got your degree.
• The best time to start is after you’ve worked all the kinks out of your plan.
• The best time to start is when you’re sure it’s going to work.
• The best time to start is after you’ve hired the key marketing person for the new division.
• The best time to start was last year. The best opportunities are already gone.
• The best time to start is before some pundit declares your segment passe. Too late.
• The best time to start is when the new generation of processors is shipping.
• The best time to start is when the geopolitical environment settles down.

Thanks Seth.

As part of the run-up to the conference, the team decided to hold a blog relay – “The Radar Relay” – where different writers would summarize the week’s Office 2.0 news at the end of the week. This is my week. But you might want to start here first if you haven’t been keeping up to date until now.

• Feb 23, 2007 / Richard McManus
• Feb 28, 2007 / Rod Boothby
• Mar 7, 2007 / Zoli Erdos
• Mar 9, 2007 / Stowe Boyd

 
Also, if you haven’t registered for Under the Radar yet, the readers of this blog can take advantage of a special price at this link. I’ll be there, to see what the judging panel think of the selections that our committee made, and also to give a brief talk about Office 2.0 and Enterprise 2.0.

On with the Radar Relay. Tthis week has been ripe with office 2.0 news. There is so much that I’m going to do it in point-form:

• A web application designed to help people through their bankruptcies was cited for “practicing the law without a license” and its creator was charged and found guilty. The case is currently under appeal. (thanks to Kurzweilai.net for the link).
• The Office 2.0 Database tipped the scales at over 450 Office 2.0 startups. 95% of those will be gone in 36 months but who cares? As Paul Kedrosky says, “It takes a lot of dead bodies to fill a swamp” when you want to get to the other side.
• Gianpaolo gave us an 8-floor, 3-bullet point “Why SaaS for the Enteprise” pitch. I would add to his points the ability for users to pilot-test without IT involvement (which really rolls up to shorter time to value though). I think his 3 bullets are absolutely awesome. Concise, and to the point.
• The world continues to twitter about Twitter. Millions of people pinging each other with little tidbits of information on what they are doing at the moment. I know that many of the things that take off seem to confound people but you have to realize that deep down in biological and spiritual cores, we are social creatures. We are designed to be social from the ground up. But as people leave organized religion, and as fewer people get married, and as fewer people have kids, and as fewer people live in multi-family homes, there becomes a vast social vaccuum waiting to be filled – hence the explosion of blogs (find your community), photo-sharing (meet people with an appreciation for art), SMS’ing silly messages to each other, or signing up for Twitter – these are all manifestations of a desire to find and stay connected to a community in an ever more disconnected world.  I don’t doubt that we will develop a bunch of these tools along the way and will eventually be in partially aware, partially connected states to our communities at all time – but will be actually be social or have any friends? It reminds me of the quote I read the other day, “I unsubscribed from all of my social networks so that I would have time to invite friends over for dinners!” Also, here is a shortcut to using Twitter.
• Google’s diabolical plan to plant people in Microsoft is paying off. Microsoft has managed to make Office 2007 and Outlook 2007 both slow and destructive to data at the same time as Google has launched their applications with a service level agreement (that they breached already.) Lots of notes here on Zoli’s blog.
• Anne Zelenka posted “Ten Things I Hate About You, Web 2.0“. Funny list. Anne, how about Office 2.0? I’ll start with my top four most annoying things about Office 2.0:
• NOT ONE COMPANY has managed to make a text editor that doesn’t completely suck.
• Do we really need 50 spreadsheet apps? Are we really that lacking in creativity?
• Web 2.0 was about wasting time. Office 2.0 is really about being productive with your time. We need more web 2.0 in office 2.0 or the conferences are going to be REALLY dull.
• Just because you have an Office 2.0 company doesn’t mean you have to forget about: customers, pain points, revenues, or long-term viability.
• Phil Wainewright has a good post on the Saugatuck report showing that SaaS has hit the knee of the curve or as he writes: “SaaS hits the hockey stick.” I’m sure he meant the curvy part near the bottom of the stick near the big flat part that hits the little round thing-a-ma-jig. Go, Beavers, Go. As you can see, I’m not a hockey fan so I prefer the knee of the curve story a bit more. He writes: “Most surprising of all was a huge jump from 18% last year to 49% this
  year of companies planning to use SaaS for mission-critical
  applications.” I think it’s instructive to look at internet banking. People didn’t want t o use it either because they were afraid of the web – until seemingly overnight when everybody’s Grandma joined web-banking.
• Harry McCracken over at Slate wrote a decent review of the Zoho office tools suite. I agree with Harry that their suite seems pretty advanced. However, I have tried to use them for real work and have still found enough holes that I couldn’t use them. Particularly Zoho show which was nearly useless. The other apps seemed somewhat better. But they have achieved a heck of a lot and I wish Raju Vegesna and his team the best.
• AvenueA-Razorfish’s new Digital Outlook Report 2007 was released (thanks Guy Kawasaki for the heads up). Some highlights:
• “In retrospect, the massive digital disruption we’ve experienced over the last 12 months should have been anticipated. But it seems few were fully prepared for the speed and depth of the changes. Perhaps it’s because the changes weren’t just about what Web sites became popular or what new technologies were introduced. Rather, it was a broader cultural change. Consumers’ expectations of their media evolved. The places they trusted to provide information and entertainment changed. New outlets for consumers to express themselves emerged.”
• ““Great service. Creativity. Flexibility. A passion for their product and for finding ways to push innovation within their organization. A desire to understand clients’ objectives and not to retrofit them into their own. The hallmarks of great Web publishers are obvious, yet subjective and elusive. Those who are focused on delivering real solutions are best positioned to become partners to agencies and advertisers.” – Sarah Baehr, VP Media, New York.
• “Information seeking equals entertainment: Once upon a time, play was more deeply integrated into our daily lives, but that changed with the introduction of industrialism. Then came the Internet, and with it, a reemergence of play in new ways. Information as entertainment was a core concept we heard from our study participants, and one that we can see around us as well….Any way you look at it, play is back, and it’s here to stay.”
• “Mobile phone use will grow—but not for talking, according to our participants. Phones calls are considered to be invasive in this hyper-culture, to be used only when necessary. For ordinary use, a quick text message will suffice, and many of our respondents didn’t see themselves reversing this trend in the future.”
• Overall, this is a fantastic report. Get it. Read it. Take action on it.
• Dick Costolo wrote a great post titled Too Many Companies? where he addresses an entrepeneur’s question about whetehr or not he/she should go out and try to capitalize on a maket opportunity. I agree with Dick. You can’t know anything really when you start. It’s all a best guess. Once you have done the basics of identifying whether you are entiering what could be a high-growth market, something that you are passionate about, and that you have (or can soon have) a great team to build something with, then get out there and do it and adjust on the fly. Not wait until you “have it figured out”.
• Cisco bought Webex. For 64x earnings or  8.4x revenues. ($3.2B for 2006′s $50M earnings on $380M revenues). I agree with Michael Arrington who questions the value of such a deal when Webex is being disrupted SERIOUSLY by a lot of light, fast, cheap, and frankly much better competitors. Of course, Webex has real revenues that will accrue to Cisco’s bottom line and can actually “move the needle” on Cisco’s income statement. Hopefully they were buying the revenues and not the technology. I also agree with Paul Kedrosky who says “While this is not your father’s Cisco, it’s not clear just whose Cisco it is becoming either.” When they bought Five Across, it could have been an aberration. Adding Webex to the mix means it is definitely a trend. For it to make any sense, there would need to be some follow-on acquisitions that signal a clear shift in corporate strategy and a redefinition of what and who Cisco intends to become in the next few years.
• Darren Barefoot did a nice little review of three new-to-him Web apps: Harvest for simple time tracking, Buxfer for moving money easily, and WhosOff for tracking holidays in the office. Very fitting for the Office 2.0 Relay!

That’s a heck of a week!! Lots of interesting things happening and I’m sure we’ll have another crazy week next week as we get close to the actual Dealmaker event.

Have a great week ahead everybody!

At the Angel forum, my friend Martin Bliemel and I have the good fortune of facilitating a day of investor pitches where 30+ companies will pitch 70-100 investors their idea for a new venture. The Angel Forum was founded in 1997 by Bob Chaworth-Musters and is now the oldest and largest angel group in Canada. To date, it has held 20 Angel Forums in Vancouver resulting in over $20M being raised for emerging companies..

[My notes and analysis are in these square brackets.]

Disruption Opportunity: Venture Capital: Roger McNamee (private equity) and Ram Shiram (seed investing)

• Shiram: I DO believe that it’s cheap to start a company; it is hard to find talent though.
• Content companies are very hard to build; both Roger and Battelle (MC) have built content companies and they take a long time and they’re very difficult to build and grow.
• Question: So let’s pretend that Stikkit asks for (and gets) $5M. They only need $100K to build the company…but what do they do with the other $4.9M?
• Answer: Yes, having too much money is a problem for startups – “indigestion is worse than starvation.”
• McNamee: “A lot of the most attractive ideas need less than $1M”
• Shiram: the math doesn’t work today putting out $5-10M per deal in a $500M fund. There will be a lot of companies purchased in the sub-100M range. Another problem is too much money floating around there. If you have a great idea and a great team, you can go to an auction model. But don’t equate money with success. If your valuation keeps going up, your exit becomes expensive and then there are only 6 companies that can buy you out. So be careful of increasing your valuation too quickly and pricing yourself out of the market from an acquisition perspective.
• Question: “We built an app for $75K and we’re going to sell it for 20x. Why do we need you?”
• Shiram: “You don’t need me. Building your business and serving people is your primary job. Raising funds is secondary.”
• McNamee:
• Ram is talking about getting people to your site and keeping them there. What about the people who don’t have time to go to your site and will never go there?
• User-generated content is an alternative to passive entertainment and will be huge.
• The amount of cool stuff going on to service that market of content producers is lame. I would look at enabling forms of user generated content.
• The second issue is time: We all have multiple inboxes. If you let it pile up for six months, 98% of it will go away and 2% will be important.
• The two important things are: a) saving time and b) connecting people who don’t and won’t use the web to the web to allow them to generate content
• [what does he mean, connect people who don't and won't use the web...to the web. HOW?]
• Question: IPO route: is it closed and why?
• Shiram: companies less than $1B don’t get any notice from the analysts anymore. I suggest that if you are a smaller company, go for an M&A exit instead.
• McNamee: “Fear is transitory and greed is permanent” – the IPO route will come back. But my approach is: “Build something great and the exit will take care of itself. I don’t worry about pre-building to exit. “
• Question: “I’m an entrepreneur. How do I ensure I won’t get kicked out and how do I deal with valuation?”
• Shiram: “Most good investors won’t kick out a passionate founder. Don’t worry about valuation. Just find smart money and work, work, work!”
• McNamee: “Focus on the size of the pie, not on the size of the slice. If you’re focusing on control, quit now!”
• Battelle: “I disagree – keep >51%”.
• [Troy: Battelle's comment is misleading. One can own 99% of the company but there can be terms on the term sheet that are so onerous that you effectively have no control of your company. I know of one case where an entrepreneur had signed a term sheet that dictated that his VC had signing authority for everything over $5000 AND that the VC had all the controlling votes. Don't just focus on the ownership percentage! Battelle's comment is fear-based - was he burned in his content company that he mentioned?]
• Question: “What is smart money?”
• Shiram: “Try making judgements – you will make mistakes”;
• McNamee: “Don’t focus on the fund – focus on the person. Find the person who you want to call at 2am with bad news and also with great news and who have the contextual expertise about your business.”
• Question: “We’re looking for $5-15M and have been having a hard time finding it even though our technology is great. Where do we find that capital?”
• Shiram: “You shouldn’t have trouble raising money because there’s so much of it out there.”
• McNamee: “Don’t complain if it’s hard to do. Entrepreneurship is not for lightweights. Life is hard.”