2009-11-26

How do you improve a startup?

Glenn Kelmann: Good Question! The Eight Best Questions We Got While Raising Venture Capital. Good questions, not always easy to answer.

Steve Jobs' secret: having a vision, being right and executing amazingly

Fortune named Steve Jobs CEO of the Century some weeks ago. In understanding why that came to be, watch his presentation of Apple's vision from 2001 (via: Andie):

All over the place, but good reads

Andie's Log: Nokia N900 experiences and what's in the iPhone usability fairy dust. "A major reason in my view that the iPhone is such a huge success is because Apple found a way to force conceptual simplicity on the right level - basic usage navigating between applications with complex and powerful features is always the same, and something you can teach a person in less than 10 seconds. Behind that, each app can provide as much complexity as it needs or likes, but for the user there is just one basic rule of operation to learn. The rest most people don't even know about, and it doesn't matter. They can still use the device, and thus discover in time more and more things they can do. The overall system model you need to understand to have agency and feel in control of your experience with the device is small, and always the same. That empowers users, and makes the technology invisible."

Chris Dixon: The importance of institutional redundancy. "The importance of institutional redundancy is profoundly more important when applied to the internet at large. The US government originally designed the internet to be fully decentralized so as to withstand large-scale nuclear attack. The core services built on top of the internet ? the web (HTTP), email (SMTP), subscription messaging (RSS) ? were made similarly open and therefore distributible across institutions. This explains their remarkable system-wide reliability. It also explains why we should be worried about reliability when core internet services are owned by a single company."

VentureBeat: Hulu U.S. video streams soar almost 50% in October, Google?s YouTube flat. "The video portal for professionally produced content attracted 47 percent more views over the month. It pulled in about 850 million views in October compared to 583 million views in September. The site?s also stickier: the average user is watching about 20 videos, up from 15."

Jesper Åström: The 80 dollar Waste of money on Online Advertising. "That is what this relationship is telling us. 80 dollars on advertising, 1 dollar on conversion. We should be ashamed. I say We as I am in the middle of all of that. I want people to spend money on social media, SEO and other activities to draw people to buying their stuff. After seeing these numbers in front of me I am considering dropping the social media and SEO completely to focus my activities on what I am really the best at, namely making engaged people buy stuff."

Wingify: Three effective tips to get started with conversion rate optimization. "1) Test your "Call to Action", 2) Simplify your conversion funnel, 3) Don't let your visitors doubt your business trustworthiness"

John De Mayo: Display Advertisers: De-average or perish, the ad exchanges are here. "In summary, if you buy display advertising, get sophisticated, and get sophisticated fast. Understand exactly what user actions or conversions you associate value with and make sure you or a company on your behalf can correlate this value to every single data point that you or they or the data exchange has on a possible impressions. Those who fail to de-average groups of inventory will be stuck buying the slop, and firms who properly value inventory across a huge number of dimensions (both declared and proprietary data dimensions) will benefit significantly in this change in the way advertising impressions are allocated to buyers."

Silicon Alley Insider: Facebook Cracks Down On Developers' "Sneaky Little Viral Tricks". "All those benign but sneaky little viral tricks that were perfected by the leaders in the space are getting a beatdown from the new Facebook terms.

While the changes will keep Facebook a cleaner and more spam free place, they will also drive app developers to spend more and more directly on Facebook ads.

What are some of the changes? Here are three big ones."

Good reads on running a company

Both Sides of The Table: Don't Roll out the Red Carpet on the Way out the Door. "In life you only come across A++ players occasionally. In every company I think 4-5 people really make most of the difference in your success. Everybody employed at BuildOnline and Koral was important to me ? don't get me wrong ? but 4-5 were the "core." Ryan was certainly one of them.

My lesson: don't take your superstars for granted. Find ways to Roll out the Red Carpet while they're still in the castle."

Fred Destin: How a great entrepreneur deals with complexity. "1. Oversimplify and execute well. If you make a mistake in strategy you can generally correct it by executing well even if you execute something else [...]
4. Push your team beyond what you and they think they are capable of - they will be more empowered and will be able to complete more on their own if they are reaching for a high bar"

Knowledge@Wharton: Apollo Management's Marc Rowan: 'The Best Returns Follow Chaos'."But the core that we created, the belief that we created almost by accident, was no Chinese wall. The thing that we have done really well as a firm is run the firm without any information blockages. The way we think about our business is that we have a library of information. That library, today, is very prevalent across eight or nine different industries. In those eight or nine different industries, we have partners who have worked 15 or 20 years. We've owned multiple companies, multiple CEOs. We get a tremendous amount of industry information.

One of the sectors that I've mentioned that we are very active in is in the metals business. We own aluminum plants. We own metals distribution companies. We own metals resources companies. We therefore possess not market-based metal information, but unique, on-the-ground, customer flow, spot information about what is happening in various markets. Sometimes we monetize that information by making equity investments for control. Private equity. Sometimes we use our knowledge of that business to make good debt investments. That's the core of our lending business. And sometimes what we do is we blend the two. We see both a trading opportunity as well as an opportunity to run a business that can provide differentiated returns for investors, like a metals hedge fund.

So what we are doing is, we're simply leveraging the information that already exists within our firm, and expressing it not as a private equity fund, or not as a mezzanine fund or as a debt fund, but as a commodities trading fund. You will see us not just grow a commodities trading fund, you will see us build a commodities private equity business around the same capability."

Colin Powell on leadership:

2009-11-24

Zynga passes 100 million unique users, poker chips the main revenue driver

Just shy of three months ago I wrote that Zynga didn't have 100 million unique users. Now it's time to change that statement as Zynga has announced that it has 100 million unique users of its games.

Zynga also announced that more than one million users pay real money for virtual goods each month, indicating a conversion rate in the 1.0-2.0 % range. If the rumors of Zynga attaining more than $200 million in revenue in 2009 are correct, monthly average revenue per paying user would have to be $10-20. That is a high number for games like Farmville, Fishville and Café World. Given that those three games were launched in the second half of the year, they didn't generate any revenue in the first half essentially doubling the monthly ARPU needed to reach the annual revenue number.

The only way a $200 million revenue number make sense to me is if Zynga Poker/Texas HoldEm Poker is the main revenue driver. Zynga Poker has been around the entire year, it currently has almost 20 million monthly players (it's the seventh largest Facebook application, i.e. BIG) and selling poker chips is a business that works pretty well online and can drive exceptional ARPU.

2009-11-19

Stardoll looking for front-end developer (employee or consultant)

This is almost turning into a job board, but Stardoll is looking for a strong front-end developer (employee or consultant) starting immediately. Requirements are knowledge of HTML/XHTML, CSS, JavaScript and preferably jquery. Somewhat longer list of requirements (in Swedish):

* Mycket djupa kunskaper om HTML/XHTML, CSS & JavaScript. Gärna erfarenhet av jquery.
* Känsla för UI/design.
* Goda kunskaper i svenska och engelska, både i tal och i skrift.
* Erfarenhet av utveckling/design av communitysatsningar är meriterande.
* Erfarenhet av java och/eller php är meriterande.
* Dina personliga egenskaper är teknikintresserad, ansvarstagande och flexibel.


Please contact me at henrik@stardoll.com.

2009-11-18

Looking for a project manager to join Stardoll

I'm looking for a great project manager to join Stardoll in Stockholm. Web experience is a must, technical knowledge is an advantage. Contact me for more information or with potential leads.

2009-11-09

Let's buy a company

* Electronic Arts to acquire Playfish for $300 million plus $100 million earn-out
* Google to acquire AdMob for $750 million
* Skype founders end up with 14 % of Skype in exchange for IP rights and cash

2009-11-07

Must read on virtual goods (even if you don't work with it)



Must-read presentation for anyone working with online in general and virtual goods in particular. Some takeaways (read the entire report for everything):

* Virtual goods can be as big as search ($30 billion/year) in the US (based on market size in China, Korea, Japan)
* Examples of leading sites and games in Korea, China and Japan (Cyworld, Maple Story, Pigg, NicottoTown, Poupee Girl, QQ Pet, Meet-me, Nurien, Mixi, Gree, QQ, Renren, Kaixin001, 51.com, and others)
* The history of farming games (a'la Farmville). Sim Farm was released in 1993. Innovation in gaming, social and viral aspects.
* Business model evolution: 1) packaged software, 2) online + subscriptions, 3) virtual goods, 4) social games
* 8 listed Chinese online games companies and Tencent (QQ) have a combined market capitalization of $52 billion. Leading Western games companies Electronic Arts, Activision, UBI Soft and Take Two have $22 billion in market capitalization.

2009-11-04

Startups and capital

Ben Holmes (of Index Ventures, follow his new blog): The social media investment conundrum. "Pinpoint timing is required. In my experience the best time to invest for a venture capital firm is post launch when the business has 100,000's or low millions in Monthly uniques (stages 3-4). Here the metrics and to an extent the business model may be proven and the valuation still gives room for venture returns. However businesses can often pass through this stage in a matter of a few months, so unless you are already very close to an investment opportunity as it moves from stage 2 into stages 3 and 4 you will likely miss the opportunity."

Both Sides of The Table: Are Business Plans Still Necessary?. "I'm talking about your financial spreadsheet. I will quote a prominent, well-known entrepreneur whom I like and respect and who told me when he was raising money, "I don't know how much I'm going to charge for my product so why should I create an artificial spreadsheet?"

Here's why. Your financial model tells a story. Let's take your revenue line. It should talk about how many customers you think you will acquire and how much you'll charge for your product. If you can't estimate the former then I would suggest you haven't done your homework before building the product. Do you really want to spent $100k building a product to discover through Customer Development that the market is too small?"

Steve Blank: Lean Startups aren't Cheap Startups. "If you confuse Lean with Cheap when you do find a repeatable and scalable sales model, you will starve your company for resources needed to scale. Customer Development (and Lean) is about continuous customer contact/iteration to find the right time for execution."

Chris Dixon: How to select your angel investors. "The most common mistake entrepreneurs make is to base their choice solely on the investors' "celebrity" value (by "celebrity" I generally mean in the TechCrunch sense, not the People magazine sense). Picking celebrity angels might help you get a little more buzz when you announce the financing and a few SUL tweets, but that's about it. A startup is a long trip ? what you should care about is whether, through the ups and downs and after the buzz dies down, the investors will actually roll up their sleeves and help you."

2009-11-03

Scamville and four thoughts on online advertising

TechCrunch's Scamville articles about the use of less than forthcoming offers for virtual coins in Facebook games and the following industry debate are good reads. Even more interesting reading, at least if you're running an app or a site, are How To Spam Facebook Like A Pro: An Insider's Confession and Are social gaming offers scamming users? A detailed analysis of Techcrunch?s Scamville article.

Some quick thoughts:

* To reap value from online advertising a party (publisher, middleman or advertiser) needs one or several of the following things: user intent that can be converted into action (Google AdWords), homogeneous audience at scale (largest site in a category), data on user interest/behavior/demographic and targeting technology, a good sales force, niche content and category advertisers (example: travel sites), knowledge about mis-pricing not known by other parties (buy cheap/sell for more "arbitrage opportunity"), advertisements that generate high response (good creative execution, incentives, design that trick users into clicking or similar)
* There are a lot of murky things going on in online advertising. Buyer beware. However, most online marketers can learn new methods and strategies from working with aggressive affiliates. A bit like outsourced marketing R&D (thanks to good friends for describing this way of working with affiliates to me)
* Advertisers will, over time, pay less for incentivized leads if the quality of leads are lower due to the incentive
* Companies running widely used games, sites and applications hurt themselves significantly if users feel cheated when trying to buy from them (even if it is a third-party offer). It's likely smaller players that over time will have a more difficult time getting away from the shadier, but often higher paying, offers.

2009-11-02

Building to keep

This tweet by Bonnier R&D head Sara Öhrvall tied into a discussion I had earlier today and thoughts I've had the last couple of weeks.

"Leaving after one week in the US. Met many many entrepreneurs building businesses to sell but not one building a business to keep."

I don't think selling a company, backed by venture capitalists or bootstrapped, is wrong. However, I think building a company of more than a couple of people to sell it to a larger company rather than going for an IPO (or other buyout of early investors) will make it less likely to succeed.

As making, as we say in the business, a shit-load of cash is very difficult for most employees, the opportunity to create something special is the true talent-magnet. If the goal is to build a (mid-sized) company that is acquired by Google/Amazon/Microsoft/eBay/Yahoo/etc for $50-100 million were the startup CEO reports to a big-co VP, you're likely capping your vision and as a result capping the number of high-quality people that will be interested in joining the company.

In addition, I think it's telling that many founders leave the company that bought their startup when their earn-outs are up.

2009-11-01

Sunday mix of articles

Chris Dixon: Embrace the medium. "An obvious but surprisingly under-practiced design principle is to "embrace the medium." Applied to software, this means building applications that take advantage of the strengths of the platform instead of trying to mimic the strengths of another platform."

Reaction Wheel: The 300%-500% Lift Meme. "I even heard a story of a VC, after being pitched on a more reasonable lift, say "your approach is interesting, but we need to see you deliver a 300%-500% lift to be competitive in the market." (I looked at this VC's website and found no ad targeting companies in his portfolio.)

Sometimes upon hearing this, I drift into a daydream about combining behavioral targeting, social targeting, retargeting, creative optimization, rich media, distribution optimization, contextual targeting and offer optimization technologies into one super-arbitrage strategy. The resulting 328,050% - 19,531,250% lift would allow me to buy $0.50 CPMs and pretty much overnight control the US economy*."

A VC: Swinging For The Fences. "These entrepreneurs usually have enough money in the bank that they are not looking for a payday. They don't build their companies to flip. They build their companies to go all the way. They are doing it for money, but they are also doing it for the thrill of the game, for ego, and to build a legacy. Those are very powerful motivators, much more powerful than money if you ask me."

VentureBeat: MySpace and Facebook are officially talking. But it probably doesn't look like this. Pretty funny actually.

Jardenberg: Planeto: EPIC WIN. "Martin has kindly asked me to join him in his quest for world domination, an offer impossible to resist. My mission will be, as acting CMO, to help Planeto reach the masses and get the attention it deserves. Our determination to make Planeto an epic #win knows no limits." Jocke Jardenberg joins Martin Walfisz' (Massive Entertainment) new startup Planeto.

Fred Destin: The Ignorant VC as counterpart to the Ignorant Entrepreneur. "I think that Europe usually fails on the third category: we tend to undercapitalise the businesses that are doing well. And this is where we get a competitive disadvantage to the US. They have a tendency to overcapitalise early, but when they scale they scale well because they are able to raise repeat large rounds of money to really capture an opportunity."

Swedish Neo Technology raises $2.5 million

"NoSQL" database company Neo Technologies has raised $2.5 million from Sunstone Capital and Conor Venture Partners. Nikolaj Nyholm will join the board of directors and Eric Ries will join as an advisor. More at Arctic Startup.

Regular programming interrupted

Looking back at my posts for September and October I realize that the number of high quality, original posts have been very low. Hopefully there will be more posts going forward, but in the meantime have a look at the following blogs: