Making the world better through microloans

In 2003 Muhammad Yunus and Grameen Bank were awarded the Nobel Peace Prize for their work with establishing microfinance in Bangladesh. Microfinance (in the Grameen case, to the best of my understanding, small loans to groups of women who were jointly responsible for paying back the loan) basically proved that one can lend money to poor people, who historically weren't considered credit-worthy, and get your money back.

One of the more interesting Internet operations of recent time is Kiva, a non-profit based in San Fransisco, who brings together indivdual lenders from all over the world with poor people seeking microloans.

(I find the ability to assemble a group of people who want to change the world (in some sense), and have them contribute to the cause as one of the socially more interesting things happening online at the moment.)

Kiva works with a number of local partners who find entrepreneurs seeking loans and manage the contact with the entrepreneurs. The entrepreneurs are presented at Kiva.org and as a lender one chooses which entrepreneurs to lend to.

The smallest amount one can lend is $25. There is, of course, no guarantee that a loan will be paid back. In addition there is no interest paid on the loan, so lending is a combination of charity and lending as one as the lender is not compensated for the risk of loss nor the cost of capital.

Personally I've made a few loans, and if/as they are paid back I'll likely roll them into new loans. To manage risk (even though it is not big issue, I would prefer if the loans are paid back) I use the learnings from Grameeen and have lent to groups of women. It'll be interesting to follow the development over the next 9 to 13 months as the loans are re-paid.

When making a loan Kiva asks for a donation to cover its operational costs (they don't take a cut from the loan). My understanding is that Kiva makes money from the donations from lenders, donations from foundations and likely also earns some interest on loans that have been partially paid back, but haven't yet been distributed to lenders.

If this sounds interesting, check out Kiva. If you sign-up as a Kiva member as a result of this blog post, feel free to add my e-mail henrik@torstensson.com in the Referred by a friend? field on the sign-up page. (Kiva has some nice social design encouraging word-of-mouth where referring friends is a good thing.)

(On a side-note: I've jokingly said that I get what Umair at bubblegeneration writes roughly two years after he writes it, and truth to be told he called Kiva the next big thing back in October 2005 when the rest of us were still going ga-ga over eBay's acquisition of Skype.)

Update Dec 20th 2008: Kiva after 9 months and Kiva follow-up, month 1

Signs of a bad rewrite

You know that the rewrite will be bad when the newspaper credits an aggregator and not the original source. Naturally the rewrite isn't signed.

A journalist not understanding the difference between an aggregator and an original source, and thus the silliness of pointing to the aggregator as a source, should not be doing rewrites.


Disruptive interviews Johan Brenner at Balderton Capital

Disruptive has conducted an interview (in Swedish) with Swedish venture capitalist Johan Brenner at Balderton Capital.


True not only for CEOs...

"One of the toughest jobs as CEO is to look at all the stupid things other people are doing and to not do them - because maybe you're the stupid one," - Bob Willumstad, former president and COO of Citigroup

... and not only in the financial sector.

Weekend Roundup

The Web in Charts - Google vs. Microsoft-Yahoo vs. China
. Stats as charts. Interesting.

Mix '08 Keynote Steve Ballmer (interviewed by Guy Kawasaki). I realize I have a soft spot for Steve Ballmer, but the interview with him is interesting, non-scripted and quite fun (really).

Content targeted advertising on di.se. Not planned I would assume, but excellent targeting nonetheless.

No salary needed, post-exit. DI captures the essence of Niklas Zennström's life post-Skype in one headline. Full interview.

General Motors says it is going to moving a lot of ad spending online. Niki Scevak has a good comment (basically: it is a negotiation ploy).

Yahoo: we will increase revenue 73 % in three years, thus Microsoft is offering to little.

Apple had 14 % of U.S. computer sales in February. 60 % year-on-year growth, vs 9 % for Windows. It'll be interesting to see if the release of Vista SP1 affects the relative growth of Windows and Macintosh.


Value capture philosophy

bubblegeneration: Companies are not pimps. Recommended reading

"What that really means is: we don't "monetize" resources. We co-create and co-produce value.

And to do that, we have to experiment, deeply and intensely.

Monetize is an ugly word.

When you try and "monetize your users", you accept the almost obscene assumption that people are meant to be pimped out, sold to the highest bidder, resources to be slashed, burned, and exploited."


"we're altogether too comfortable thinking that a) businesses have a god-given right to profit (they don't) and b) that it's ok to sell consumers out to the highest bidder (it's not)."


Social networking value capture

There has been a discussion, in Sweden at least, about the long-term popularity and commercial viability of community/social networking sites. How wise have the acquisitions of Apberget, LunarStorm and Playahead really been? And what about AOL's $850 million acquisition of Bebo?

Generally I'm not too concerned about the lifespan of popular community sites (i.e. are they fads?). They will not live forever, but compared with other media the popular communities seem to have very decent lifespans. The issue is with the sites that never become popular, on the other hand those site are rarely bought and thus not an issue for the traditional media companies.

I think the buyers of social networking sites are facing two basic challenges; 1) how to continue to create value (i.e. create and operate a very good community even if the founders leave) while 2) capturing value in a way that doesn't make the community significantly worse (i.e. plastering big ads on a site doesn't really make it better).

From a short-term point-of-view there are a lot of things even a semi-skilled buyer can do to increase the financial results of a popular social networking site (basically having more advertising on the site and selling it at a higher price). The issue is that such behavior usually fights rather than solves the two basic challenges.

A skilled buyer thinks really hard about how to introduce a revenue model that makes the acquired site better, instead of putting up more traditional banner advertising on the site. Google, Craigslist, Blocket and Match.com are four examples of sites that are great businesses because they found revenue models that make their sites better, instead of mindlessly putting up banner advertisements.

Monday Reading

Eric Wahlforss: In a post-scarcity publishing world, the key is to own the most relevant copy. "Let's go back to the cryptic title of this post. Since Flickermood seems to be available all over the place, the key, being a music service or a label or an artist in this world of link-passing, is to have the most relevant copy. With most relevant I mean the most happening copy, the most accessible copy, the most usable copy, the coolest copy, the earliest copy, the most exclusive copy, the copy with the best sound quality, the most permanent copy, the most remixed copy, the most authentic copy, the most interoperable copy, etc."

Daytona: Webben är inte till för att annonsera på. "Webben är inte ett medium för att sälja saker. Webben är ett medium för att köpa saker. Det är konsumenten som sitter i förarsätet. Det är konsumenten som styr över upplevelsen."

John Battelle: What's This Fascination with Ad Networks? (Or, the Online Media Business Will Be About Brands First, Technology Second). "While technology and ad platforms are essential components of digital marketing's future, they fail to address the core needs of brand marketers: engagement. And they fail to address the core needs of digital publishers: the support of marketers that allow them to make a decent living. And while Google is amazing, Google isn't a brand marketing-driven company. It's revolutionized direct response, to be sure. It's the most efficient harvester of brand equity in the world, but it's not built to create that equity."


Luck, skill and self-awareness

As Eliot Spitzer is resigning as New York Governor, I went searching for his golden rule quote from an old Business 2.0 magazine. Given his background as attorney general I always found it cynical, but for unethical persons it will always be sound advice:

"Never write when you can talk. Never talk when you can nod. And never put anything in an e-mail."

However, I also found another quote that is also useful to ethical persons. Especially when times are good.

"Don't confuse luck with skill when judging others, and especially when judging yourself." - Carl Icahn, investor.

(It should, however, be combined with the classic quote attributed to golfer Gary Player: "The harder you work, the luckier you get.")

Even for people with great skills luck plays a huge role in how their lives are shaped. (Industry example: Being or not being at Google probably had a far larger impact on how well an Internet professional did financially between 2000 and 2007 than how skilled she or he was.)

Choices that seem obvious in hindsight, rarely are when they are made. But I don't believe outcomes are random, hence the role of Gary Player's quote.

Weekend Reading

Futuristic Play: Bridging your traffic engine with your revenue engine. "I want to use HotOrNot as an example of bridging your traffic engine with your revenue engine, because I think they do it very well."

bubblegeneration: A Wake Up Call For The Venturescape. "The power of 2.0 isn't minigames and ad nets: it's the new DNA it brings to the table. [...] Ad nets, social nets, and minigames won't change the DNA of the economic system. Radical new approaches to consumption and production across the industries that are broken will. [...]

-For venture guys, that means: most of you are going to have to develop new investment theses, centred on redefining industrial era DNA. What do next-gen value chains really look like? What do the economics of production and consumption look like tomorrow?

-For entrepreneurs, that means: forget about hot products/services (ads, games, etc) and tech. Think about DNA, and how it can reshape the markets and industries that are crying out for help. Where does business suck today, and how can you make it radically better?

-For corporates, that means: stop making acquisitions driven by growth/share thinking. That's easily dominated. Make acquisitions driven by DNA, and use it to suck the lameness out of your strategy - fast."

A VC: Everything Everywhere. "Here's my headline. You cannot be a destination exclusively on the Internet anymore. If you are not a open web service, you won't get nearly as far these days."

Umair Haque Edge Economy: How Apple and Google Dominate. "The ends they're working towards are similar: Goople aspires to - with laserlike intensity - change the world for the better. And where most of their competitors will sell out everything they believe in for a few bucks and a latte, Goople is deeply, radically purposive: they won't compromise much, if anything, to achieve the goal of changing the world for the better. (One can argue that Google's policy of following local content-filtering policies in China is a notable exception.) You'll never see an ad on Google's homepage, or a Mac that's not a joy to use, even if Bill Gates, Gordon Gekko, and Lucifer held a fire sale, and mortgaged the world to Goople."


AOL acquires Bebo for $850 million

AOL has acquired social network Bebo for $850 million. Bebo's 2007 revenue was $20 million with EBITDA of $5 million. It has 40 million members and 80 million uniques users (per month I assume).


Woohoo! 15 million Stardoll members!

Ego blogging again, it is getting to be a bad habit, but passing 15 million Stardoll members is worth a post.

Stardoll 15 million members screenshot


Help Wanted! (Payment Solutions and Advertising)

Stardoll is looking for a Manager Payment Solutions and a Campaign Manager for advertising. If you are interested to learn more or have some good people I should talk to, please mail (henrik at stardoll.com) or call me (+46-708-105742).


Facebook Garage Stockholm this Friday

This Friday it is time for Stockholm's first Facebook Garage (wiki / Facebook Group). A meetup on Facebook and OpenSocial application development. More info at bisonblog.


Swedish Startup Culture

Anton believes Sweden needs a better tech startup culture. When thinking about startup culture on a national or regional level (i.e. 'copying Silicon Valley') one thing to remember is that such a culture takes to develop and there are a lot of factors that affects the outcome.

Modern Silicon Valley got started in the late 40's and 50's with HP and Stanford University. Today's preeminent venture capital firms Kleiner Perkins and Sequoia Capital were formed in 1972. As technology boom and busts have come and gone the startup culture and support systems like accountants, lawyers, large technology companies (as acquirers, pools of employees), angel investors, veteran startup employees, startup-oriented universities etcetera have developed.

The support system results in bringing down the barriers to starting a traditional tech startup, but it isn't created overnight.

My take is that the support system is growing in Sweden. The number of people that have done a few years in one or two tech startups are growing, there are companies that are doing well on an international level that brings in more people, there is venture capital for good companies etc.

However, a good startup culture is not created by a formal decision from 'people in power'. Rather it is created by companies doing well and a lot of the experience and capital from one generation of startups going into new firms.

People who have done a few years in a startup can do a lot for the overall culture by helping out a young team founding a company by offering some advice, some connections or capital.

(On a side note: One specific structural improvement that 'people in power' can do to get more capital from one generation of firms to the next is to change the taxation of employee stock options to be inline with the taxation of income from capital.)

While Sweden, or Stockholm more specifically, is no Silicon Valley and likely will never be, directionally there are a lot of positive stuff happening with Swedish startup culture.



Music in the cloud

While there has been quite a few things worthy to blog about lately, I haven't really had the inspiration and energy to write something interesting. Fortunately I have good friends that found inspiration lately, like Eric Wahlforss with the post Please let me *not* own my music. On Spotify, SoundCloud. Some thoughts on 'music in the cloud'.