Posts Tagged ‘technology’

Brave New Business World!

“Build from what the customer wants to buy, not what you do well.”

“Always work backwards from where you want to be, not forward to where you want to go.”

“Successfully sell your offering before it is finalized – when it’s just barely useful – and get customer feedback.”

“You are in the relationship business. Build what customers think is worth having. The product is merely the method to build marketable relationships with customers.”

Marketing words of wisdom from serial entrepreneur Tony Grass, currently founder & President of a new kind of service that help clients find customers worth having – e-Market Intelligence – at last evening’s NYTECH event on “Long-Range Planning for the Successful Sale of a Company.”

Excellent insights were also provided by moderator, Paul Ellis, principal of the Paul Ellis Law Group, and co-founder of NYTECH, and his knowledgeable panelists, all focused on today’s new new exit environment and the importance of building towards an exit from the company’s early days in order to assure a smooth process when the time comes.

What factors build value in the last couple of years before exit? The two most important:
• Reputation, credentials, brand – the brand will be worth 30% of the exit value.
• Recurring revenue – based on distribution for product sales and on recurring need for services from delivering a unique bottom line advantage to B2B customers, “enjoyable value” to B2C customers.

I was especially struck by just how different today’s exit environment has become.

  • The traditional discounted cash flow (DCF) value is not that useful anymore because of accelerated change. Today a lot of value derives from possibilities a company’s assets can lead to in time – the future use potential.
  • Even the traditional structured auction is no longer typical because the same technology has different uses and values for different buyers. It’s all about the individual value proposition.

And because the environment is getting more and more complex, professional advisors have grown enormously in importance – investments bankers familiar with complexities of a company’s industry as well as accountants and attorneys specialized in specific areas of relevance. (Say goodbye to your husband’s best friend who’s a generalist lawyer!)
To begin at the beginning today means knowing the end game from the outset. As the Cheshire cat said to Alice, where you want to go depends a good deal on where you want to get to. If you don’t know where you’re going, it doesn’t matter which way you go.

Are There Too Many Startups?

That was a question put to Albert Wenger, Managing Partner at Union Square Ventures (USV), after his remarks last week at the BMW I Born Electric event.  Might this be a fad – like doing a band in the 70s? No, no and no, says Wenger.  We’re at the beginning of a transformation as big as the one from agriculture to industrial, he explained.  We need a lot of experimentation.  Even failures have social benefits in terms of the experience gained in taking risks, making decisions, etc.  This can benefit both large and small companies.

And today’s startups have a higher potential for life expectancy.  A lot of historical investing was binary, win-lose.  Now a small team with low capital expenditures can keep on going even if the business is not really hitting.

A significant outcome of seeing startups from the long-term perspective of sweeping transformation is USV’s “thesis-driven investing” – putting more emphasis on the principles of large-scale change than on traditional investing criteria, like market size, competitive situation, etc. No. 1 among these principles is the insight that networks will replace old hierarchies, with the unbundling of traditional services – single purpose services replacing all-in-one traditional newspapers, for example.  Classified ads went to Craig’s List.  Commentary went to blogs.  Breaking news went to Twitter.  People can find the other pieces just one click away, with no need for a single source.  All the companies in USVs investment portfolio exemplify this – among them, Lending Club, Pollenware and Edmodo, two in finance, one in education.  But no sector will escape.  Healthcare and government are just down the line..

In transportation, Wenger sees cars doing three things:  delivering transportation on demand, self-expression and fun and alone time.  Transportation, in turn, can mean delivering my body from point to point or solving an information problem.  Startups like Buzz Car and GetAround are examples of early peer networks that make it unnecessary to control your own car or where it goes.  Online shopping and delivery services can replace the need to get information by going to the grocery store.

Of course, as one audience member commented, industries under siege go to the government for help.  The hotel industry is opposing Airnb’s travel guides to staying in people’s apartments with regulations against renting out spare rooms.  The Taxi & Limousine Commission got a cease-and-desist against Uber, NYC’s on-demand car service. So then we have the inaugural peer network summit in San Francisco.  The battle is engaged:  yesterday vs. tomorrow!

First cousin to the notion of too many startups is the meme that social media are all frivolous.  But social is also becoming the enabling glue for how ideas are shared and funded. Hierarchical research journals and funding processes (NIH) are beginning to lose ground to innovations like Mendeley, a peer-network blog for sharing scientific research, and Kickstarter and others, which are extending their scope to research.  A huge flowering of research can be expected as a result.

A Time for Transformation, not Mere Change

By Eleanor Haas

Once upon a time – about a year ago – traditional publishers fell in love with the colorful screens of mobile devices as a solution to their battle with the popular assumption that information on the Internet wants to be free.  Here at last was a way to once again produce a unique product, charge traditional single copy and subscription prices and restore profit margins. 

Jason Pontin’s describes the rude awakening in “Why Publishers Don’t Like Apps,” Technology Review, 5.7.12.  (http://bit.ly/JgoAAm)   

Today, most tablet machines are Apple, and publishers have to pay Apple to sell their products – which means actually losing sales on individual issues.  Most serious, when they sell through Apple, they lose direct connection with their readers – the lifeblood of magazines and newspapers.

Technical problems also made adapting print publications to apps challenging.  Many publishers ended up with five digital versions of their products to accommodate diverse devices, viewing options and ordinary website HTML pages.  And they found the unbudgeted cost of app development both expensive and time consuming.  Without their own digital readers, they had no audiences to sell to advertisers and so insufficient incremental revenue to offset the app development cost. 

Worst of all, publishers discovered their stories in apps in fact disappointed reader expectations because the stories do not link; they live in walled gardens, closed off from other digital media.

The outcome?  Most mobile device owners read news and features on publisher websites, now coded to adapt to smaller screens or using glorified RSS readers.  “The paid, expensively developed publishers’ app, with its extravagantly produced digital replica, is dead,” pronounces Pontin.

What happened?  Publishers tried to impose old print formats on digital channels – to make an adaptive change, not a transformation.  “I hated every moment of our experiment with apps, because it tried to impose something closed, old, and printlike on something open, new, and digital,” writes Pontin.

One aspect of transformation is to go back to basics – to understand the essence of the product and release it from traditional trappings.  Barnes & Noble made a major change with its superstore bookstores containing pianos, coffee shops and sofas.  Amazon achieved transformation by eliminating the bookstore altogether. Pontin’s solution, like that of Financial Times is to launch an HTML5 version of its website, optimize it for devices, incorporate many applike features and functions and, ultimately, kill the app.  What will the new revenue model be once digital content is free?  That’s yet to come. Innovations evolve.  You don't always get all the answers at once.

As author/futurist Daniel Burrus has said:  “There are two primary uses for technology by business and government. The first is to accomplish more with less―to be more efficient and productive. That's how most people use technology, and it's a good use of it. But the second major use of technology―and it's not that common―is to use it to create new products, services, markets and careers.”  

Learning to accomplish more with less is an important first step – and it's still happening.  But more and more of us now understand enough about technology to create the new, to innovate – that’s transformation, not mere change!

Politcs 2012

By Eleanor Haas

That the Internet has changed everything is a truism.   Some stunning – and sometimes alarming – take-aways from “Politics, Tech & Decision 2012,” the most recent Gotham Media Ventures panel discussion, bring this home with a bang.

  • Online presence is everything.  The first hire in today’s political campaigns is the website team, not the campaign manager.
  • Privacy has become a quaint illusion.  Database techniques now make it possible to serve and measure advertising and other messages to increasingly specific market segments.  The next step in targeting will be knowing what you think right now. Target is already trying to understand and sell to pregnant women specifically in the 3rd trimester.  Credit cards companies can predict divorce rates two years before they happen with 95 percent accuracy. They see changes in consumer patterns.
  • “We all live in a yellow submarine.”  Personalization and digital targeting surround each of us in a membrane of filters so that there is less and less discursive conversation.  We each tend to be always talking with like-minded individuals and to be less and less exposed to opposing views.
  • More money buys more influence than ever before.  Super PACS in 2012 are dirtier and more powerful than ever before.  They are funded by huge donations – $20 million – from really big donors.  They often support shadow campaigns of tweets and viral videos that are user generated but paid for by PACs.
  • Polls no longer speak truth.  Online polls are now skewed because of technological flaws.  They’re all misleading. We each live in our own echo chamber (see the bullet before last).  Automated polling has under 10 percent response; it’s illegal to call cell phones for research and 35 percent of people have no land lines.
  • One thing hasn’t changed.  TV is still the most effective election all for all demographics, while social media are the most persuasive tools on issues.
  • Speed counts.  The Internet has increased volatility to an unbelievable extent.  Being nimble has become more important than planning.  How can you anticipate a potential crisis?  How can you respond in Internet time?
  • Two kinds of power.  It’s become a bimodal world, where you either have to have the big donors locked up or have huge online broad-based support from celebrities and/or grassroots.  That at least provides a ray of hope for the masses! 

To give credit where credit is due:  Richard Hofstetter, partner, Frankfurt Kurnit Klein & Selz was moderator. Panelists were:  Michael Bassik, managing director and US digital practice chair, Burson Marsteller; Taegan Goddard, founder and publisher, Political Wire; Eason Jordan, former chief news executive, CNN founder and CEO, Poll Position, and Eli Pariser, board president and former executive director, Moveon.org.  Frankfurt Kurnit hosted the event.

The Best of Times

by Eleanor Haas

What’s great?  The opportunity.  What’s not so great?  The uncertainty.  But then, that’s what makes it great!  So concluded five wise, wise VCs and one very
wise entrepreneur at today’s Digital Breakfast: Venture Capital Forecast 2010.

What does today’s
environment feel like? 

·        
In terms of
technology disruption, 1987.  In terms of
the economy, it’s uncharted territory.

·         
Q2 of 03.  A flattish movement up.  A great time for financial technology.

·         
Late 02/early
03 in terms of the opportunity, with the full contraction of VC yet to come.  Dramatic changes in the cost to launch an
Internet business and how you build the company.  The use of real-time media and social media
to build traffic is much less expensive than search.

 1994-1995 in
terms of the opportunity and the low cost of entry.

Some highlights:

VCs

·         
VCs have
started intersecting with angels and finding they can get further with a
company for less money and then take a smaller exit.  They are also co-investing with other VC
funds.  Some VCs are doing investments as
small as $100K and $250K. This enables them to do smaller exits, which in turn
has implications for the funding model. 
If new investors come in for later rounds, they pay a higher price and
cannot make money with the smaller exits. 
As a result, their interest is no longer aligned with that of the
entrepreneur and early investors.  So, it’s
best for the investor group to remain constant.

·         
The VC
dilemma:  the line between the seed round
and A round Is blurred because of the speed with which things can be done.  Some VCs have moved their fund size down in
order to make efficient use of capital..

Trends of the Moment

·         
Entrepreneurs
are building low-cost web-enabled businesses as vertical layers on top of
Facebook.   The network effect of
Facebook makes it essential that Facebook or a Facebook widget be a component.  Business-to-business sites all have Facebook Connect
today.  You can build businesses like
GolfTripGenius for a few thousand dollars.

·         
Entrepreneurs
have the opportunity to build good technology-enabled businesses – inexpensive
to launch and profitable for the entrepreneur – but they may not necessarily be
investable.

·         
LAMP-plus
infrastructure for hardware with Facebook has brought web site start-up costs
dramatically down.

·         
What’s
important at this moment is “clever” technology as opposed to “proprietary”
technology – technology that’s not necessarily costly and represents something
done in an interesting way with a value proposition.  The package that creates value consists of traction
plus the technology plus the skills of the entrepreneur.

·          
Marketing is as
important as technology – the ability to get customers. 

·         
The value of
patents is lower because they’re too hard to value and take too long to become
effective.

 
Mobile is a
channel, not an investable vertical.  It
will be part of everything, not just apps that are location-based.

The Digital Breakfast was organized
by Gotham Media Ventures. The moderator was Gene DeRose, House Party.  The VCs were Charlie Federman Crossbar
Capital; Howard Morgan, First Round Capital; Lawrence Lenihan Jr., FirstMark
Capital; David Pakman, Venrock and Daniel Schults, DFJ Gotham Ventures.