Posts from July 2012

Codecademy Update

It's been a while since we've talked about Codecademy here at AVC. I think the last time I blogged about this USV portfolio company was at the start of the year when they did their Code Year thing which resulted in over a quarter million people signing up to learn to code this year.

In the seven months that have transpired since then, Codecademy has been busy adding HTML, CSS and jQuery to their list of languages they supported. You may recall that they launched with Javascript. All of those are "front end" languages and by this summer, Codecademy had a critical mass of languages for anyone wanting to learn front end coding.

But server side coding was a big hole and Python was the most requested language of all. So yesterday, Codecademy announced that they had added Python to their set of supported languages. In addition, they have made some changes to their archticture so that they can easily add more server side languages in the coming months.

All of the content on Codecademy is created by their users. If you would like to create a coding lesson on Codecademy, you can do that here.

I've been involved in a bunch of projects in the past year to help more folks get technical and learn to code. I think this is a big deal for a bunch of reasons. And I am particularly optimistic about the use of the free and open Internet as a classroom for this sort of thing. And Codecademy is at the front of that charge.

MBA Mondays: Guest Post From Chad Dickerson

Chad is the CEO of Etsy and I think I'll skip the intro because this post speaks for itself.

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Recruiting & Culture

When Fred asked me to write a guest blog post, I told him initially that I was going to write about recruiting and culture. Both are topics that I've learned a lot about in nearly twenty years working in companies of all kinds and contexts: public and private, large and small, struggling and ascendant, on the east and west coasts. As I sat down to write, I realized that how you recruit people and your recruiting approach defines and continually reveals the culture of your company, and it quickly became clear to me that recruiting and culture are yin and yang. In recruiting, a successful outcome usually means a candidate saying yes to your company, and at that moment, the candidate becomes part of the company culture. Below are some of the things I've learned to do over the years when it comes to recruiting and culture.

Make recruiting a top priority at the CEO level

Former IBM CEO Lou Gerstner wrote a book about IBM's late-90s turnaround and said: "culture isn't just one aspect of the game, it is the game."" The word "recruiting" can easily be substituted for culture. In my career, I've participated in a number of searches for HR executives and staff. Without fail, the least successful ones were those where the premise was "we need someone/a team to own the culture and/or recruiting." (This is a similar corporate pitfall to looking for someone to "own innovation" but that's another post.) A great head of HR is critically important but culture and recruiting are owned by everyone if they are successful. As Gerstner noted, one of a CEO's most important responsibilities is tending to the culture. To that end, a CEO must not only drive recruiting at the executive level but at any level where it will make the difference in closing a critical candidate. On a practical day-to-day level, that means that I will drop nearly anything I am doing to help close a key candidate. Talent is that important and it's always worth my time.

Communicate the company vision broadly and directly

In his legendary recruiting pitch at Apple, Steve Jobs said to John Sculley, "Do you really want to sell sugar water, or do you want to come with me and change the world?" A strong vision can quickly set your company apart from others. In his pitch, Jobs understood the power of the appeal to something larger than simple manufacturing of goods for a particular market. As Antoine de Saint-Exupery wrote, "If you want to build a ship, don't drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea." Jobs' conversation with Sculley happened 1-on-1, but the forms of communication available today mean that you can communicate the mission and vision of your company more broadly and directly than ever, which is what I did when I blogged in May about our long-term vision for Etsy. It has never been easier to tell your own story and talk about your company directly with the people you want to reach. Talking to the media is good, too, but traditional media outlets have their own publishing schedules, editing quirks, and editorial voices, so you should always keep a direct channel open. On a purely pragmatic level, communicating directly gives candidates a deeper sense of what your company is trying to do and they come into the process knowing what your company is all about, often self-selecting to your mission. I've found that this takes the recruiting process up a level.

Challenge traditional notions of corporate transparency

A compelling vision is just the beginning of a conversation. To be successful in recruiting efforts, you have to have tangible substance to what you say. Current and potential staff demand greater transparency into your company than ever before. Typically, candidates want to know two basic things about your company: 1) how is the company doing from a business standpoint? and 2) does this company operate in a way that I can believe in? The second is arguably more important than the first, since performance metrics rise and fall, valuations go up and down, and stock prices fluctuate. Culture and values persist.

Most private companies don't disclose any financial information, but for years now, we at Etsy have been publishing key metrics from the Etsy marketplace in a monthly "weather report." Our main goal in publishing this information is to let the Etsy community know how the marketplace is doing overall, but publishing this data also helps immensely in recruiting. When you're trying to convince a candidate to move across the country or choose between you and a company that holds its numbers close to the vest, providing this kind of information can be the deciding factor.

Measuring how a company operates from a values standpoint is much more challenging than reporting financial numbers because it is inherently difficult and there are few standards. Fortunately, new models are emerging to make such measurements possible. At Etsy, we believe that as a community-based business — a business where our company's success is entirely linked to the success of our larger community — our company should hold itself to a higher standard of social responsibility and transparency. We are not alone, and an entirely new form of business — the "benefit corporation," or B Corp — is developing to address the challenge of running for-profit businesses within a values-based framework. The non-profit B Lab has created a quantitative independent third-party assessment to measure companies' success against rigorous values and responsible practices. Etsy recently took the assessment and qualified to become a Certified B Corporation ™. Any potential employee can see how we measured up by looking at our score on the B Lab web site. We passed, but as you can see, there are areas where we clearly could do better. Diversity is one area for improvement, and we're actively and transparently working to improve our score. Recently, we provided scholarships for women to attend Hacker School to address systemic issues in bringing women into software engineering by providing training. We also announced our support of Code:2040, a program to increase minority representation in software engineering. We are doing all of this in the full view of the world. Over time, our community, staff, and potential candidates will be able to see how our company practices measure up to our stated values and where we are making improvements. I believe top talent is going to increasingly expect this type of transparency and companies that provide it will have a recruiting advantage as they compete against companies that are merely selling the metaphorical "sugar water" from Jobs' recruiting pitch.

Be patient: "Slow Recruiting"

Relationships are the currency of recruiting, and while recruits sometimes appear almost out of nowhere and close quickly, the truly great candidates can take a long time. John Allspaw runs technical operations at Etsy and I think John is the best in the world at what he does. When I hired John at Etsy in 2009, the near-term recruiting process was a few months, but the actual recruiting process had been going on for a decade. Nearly ten years earlier when I was CTO at Salon.com in San Francisco and John ran the ops team there, he came to me and said he needed to move back to Boston for family reasons, so he had to leave the company. I said, "Why? You can just work from there. We'll keep the same salary and nothing will change except where you work." John went back to Boston, the family situation improved, and John came back to San Francisco a year later. He never left the company and we made a difficult situation much easier for him. Since then, we have worked together at three different companies. Our relationship has persisted through boom and bust business cycles, massive upheavals in our personal lives, and changes in our business relationship. Looking back, I started to recruit John to lead Etsy's ops team when I found a way for him not to leave Salon in 1999. I call this (with tongue slightly in cheek) "Slow Recruiting."

Recruiting too slowly for key positions can be a liability in a fast-paced industry, but the larger point is that the way you and your company treat people over longer periods of time has more impact on your recruiting efforts than anything else. Whether it's making a tough situation like John's work and turning it into a win-win, talking patiently with someone at a conference when your time is constrained, or thoughtfully answering an email from a college student seeking advice, recruiting goodwill adds up over time. If you're just entering the industry and expect to be recruiting at any point in your future, I assure you that people will remember things you said to them fifteen or more years later. Keep that in mind at all times. It could be the difference in closing a key candidate ten years from now.

Open-source your culture: generosity of spirit

Most people really want to work for successful companies with really smart people where generosity and helping are the cultural norm. There are specific ways to institutionalize sharing in your company and demonstrate that spirit to the world, particularly in engineering where recruiting is most intense. In early 2010, we launched our engineering blog and named it Code as Craft, tying the mission of engineering back to the larger culture of craftsmanship in the Etsy community. Several months later, we formally introduced the concept of "generosity of spirit" at Etsy and asked every engineer do one of the following things within the year: 1) present at a conference, 2) write a blog post for the engineering blog, or 3) contribute to open source. Since then, the team has open-sourced 40+ projects, written over 70 blog posts, and posted over 50 engineering presentations, spawning a Code as Craft speaker series in the process. The team does these things because they love sharing their work, but as recruiting activities, they are incredibly effective because the software and information we provide helps potential candidates solve real problems. Cold-calling candidates doesn't come close to the warm intro of a candidate using the software you've open-sourced and thoughtfully explained to them.

Kellan Elliott-McCrea (Etsy CTO) says: "If your culture isn't explicitly leaky, if it doesn't aspire to change the world beyond the walls of your business, if it isn't captured in the product you're building and your users' experience, then it probably isn't culture, it's just cheerleading and team spirit burning up expensive inputs of time and company outings. Culture is lived, and it's why generosity of spirit is such a key piece of our team culture" (and therefore a key part of our recruiting philosophy and approach).

Cultivate the spirit of the organization

In his 1954 classic, The Practice of Management, Peter Drucker devoted an entire chapter to what he called the "spirit of an organization," writing: "Management by objectives tells a manager what he ought to do. The proper organization of his job enables him to do it. But it is the spirit of the organization that determines whether he will do it. It is the spirit that motivates, that calls upon a man's reserves of dedication and effort, that decides whether he will give his best or do just enough to get by." At the end of the day, a candidate will look most closely at the spirit of your company and the visceral sense he/she gets from visiting your office, reading your blog posts, following what members of your team say on Twitter, and reading about you in the press. It's hard to quantify this spirit, but you know it when you've got it, and you know how painful it is when you don't. When it comes to recruiting and culture, a leader is mostly responsible for tending to the spirit of the organization, and for making whatever adjustments need to be made to keep that spirit strong and powerful. In the end, that spirit matters more than anything.

Thanks to Kellan Elliott-McCrea (Etsy CTO) and Randy Hunt (Etsy Creative Director) for their feedback on this post.

The Cybersecurity Act of 2012

The US Senate plans to vote on their version of a cybersecurity bill this coming week. This is the Senate's response to the CISPA bill in the House.

I have yet to hear a compelling reason why we need Cybersecurity legislation and am of the opinion that the perfect answer here is no legislation. However, I am also of the opinion that perfect is often the enemy of the good. And there may be a decent piece of legislation coming out of the Senate this week if, and this is a big if, the Franken and Wyden Amendments are added to the Senate's bill.

The Franken Amendment strikes section 701 from the Senate's bill. Section 701 provides companies with the explicit right to monitor private user communications and engage in countermeasures.

The Wyden Amendment require law enforcement officials to procure a warrant before obtaining location data from a person's cell phone, laptop or other gadgets.

This all may be much ado over nothing as I've been told that the House is not going to pass the Senate's bill and the Senate is not going to pass CISPA. So we may end up with nothing anyway. Which would be fine with me.

But, like PIPA/SOPA, my fear is we are ultimately going to get some legislation on this issue. And so figuring out how to get decent legislation instead of awful legislation seems to be a good idea. Adding the Franken and Wyden Amendments to the Cybersecurity Act of 2012 is one way to achieve that.

There will be a bunch of places you can go to let your elected officials know how you feel about these bills. But most of them will launch tomorrow. As of today, this is the best place online to let yourself be heard on the cybersecurity bill. I will update this post tomorrow as more online advocacy unfolds.

Tape Delay In The Age Of Twitter

We sat down in the family room and tuned into the Opening Ceremony last night. And out came the Nexus 7. The second screen. I launched Twitter to see what folks were saying and found tweets talking about the event in the past tense. And then it occurred to me that we were watching on a tape delay. Of course we were watching on a tape delay. The opening ceremonies had happened in London in the evening which was friday afternoon New York time.

I get why NBC chose to show the opening ceremonies on tape delay in the US, but I am not sure it is the right call. Everything is live on the Internet. Everything is live on Twitter.

And now I'm thinking of the big events. Football, Basketball, Gymnastics, Swimming, Track & Field. Are these events going to be on tape delay too? Am I going to find out that Michael Phelps won his 19th medal on Twitter or on TV?

That's the challenge for NBC and all broadcasters who are carrying the Olympics. I vote for a live TV schedule and watching the games on my computer at work over a tape delay and the information coming at me before I can see it happening with my own eyes.

I think tape delay is a goner in the age of Twitter. I just don't know when the folks who make these calls will figure that out.

Fun Friday: What Is Your Favorite Summer Olympics Event?

The opening ceremony is tonight. The London Olympics are upon us.

London olympics

So I thought it would be fun to talk about everyone's favorite Summer Olympic sport.

For me, it's men's boxing. I really enjoy amateur boxing at the highest level. The athleticism of boxers always impresses me and there's a primal thing to the sport. So when men's boxing is on the next two weeks, I will do my best to tune in.

What is your favorites Summer Olympics sport?

The Power Of Diversification

I have written about this topic before but it's important and I want to say it again.

Investing in startups is risky. If you make just one investment, you are likely going to lose everything. If you make two, you are still likely to lose money. If you make five, you might get all your money back across all five investments. If you make ten, you might start making money on the aggregate set of investments.

The math behind this is pretty simple. If you assume that the average startup has a 33% chance of making money for the investors, a 33% chance of returning capital, and a 33% chance of losing everything and that only 10% will make a big return (>10x), then you can model this out.

Model startup portfolio

All the profit in that ten investment portfolio comes from the big winner. If you don't make that investment, you would have made nine investments for a total of $450,000 and you would have gotten back $450,000. You would have been better keeping the money in the bank.

So you need to make enough investments to be confident that you will get at least one big winner. And so that means making enough bets.

There's another important aspect of this. You should invest roughly the same amount in every investment. Don't try to pick the winners at the time of investment by putting more in the ones that are "sure things" and less in the ones you are less sure about. The only sure thing about startup investing is that there are no "sure things."

Let's look at the same portfolio with a set of random initial investment amounts.

Model portfolio with inconsistent investments

You can see that even with the same set of outcomes for each investment, the amount invested in each one has a big impact on the total return of the portfolio. It really all comes down to how much you have invested in your big winner. And since I do not believe you can predict which one will be your big winner, my view is you want to be as consistent as possible with your investment amounts.

When you are an investor, there are days when some of your investments are doing great and some are doing badly. If you are broadly diversified, those days are easier to take. If you are all in on one investment, then those days are brutal. Entrepreneurs go all in and are rewarded accordingly when they hit it. Investors should not go all in. They should be diversified.

Entrepreneurs Have Control When Things Work, VCs Have Control When They Don’t

Z80 interviewI did an interview yesterday in Buffalo, NY where I was the past couple days for the launch of the Z80 incubator. Grove Potter, the Business Editor for the Buffalo News, interviewed me for something like an hour. It was a fun talk.

At one point he asked me about the issue of entrepreneurs giving up control of their companies to VCs. It's an interesting issue and one that I think is not well understood.

In theory, control of a company rests with the ownership split between the founder and the investors and how the Board of the Company is set up. If the founder/entrepreneur owns more than 50% of the company and controls more than half of the board seats, then he or she has "control" of the Company.

But in reality I have found things are very different than that. And it all comes down to two things:

1) How well the Company is performing

2) Whether the Company needs more investment capital and where it is coming from

I like to think about it this way.

An entrepreneur or hired CEO can own as little as 5-10% of a Company but they can control it like a dictator if they are doing a great job running the business and the company is making a lot of cash flow and has no need for additional capital.

An entrepreneur can control 95% of a company and all the seats on the board but they can easily lose control of the business if they company is floundering and they need more money and the only investors who would consider putting up money are the existing investors.

This extends to the idea of who sells companies. My friend Dave Winer put up an interesting discussion thread a few days ago talking about the sustainability of social media platforms. It is an interesting discussion and one very much worth having. In the post that kicks off the thread, Dave suggests that VCs are behind the decisions to sell/exit companies.

I left a comment on that thread and at the end of my comment I made this point:

I would be remiss if i did not take a minute to point out that you are missing the person who is the most important part of this discussion and that is the founder. In big successful companies, the founder, founders, and the teams they hire to help them run their businesses, are really the ones in control. The VCs are often "along for the ride".

VCs have control when things don't work. Entrepreneurs have control when they do.

That last line sums up my point of view on control and that is why I used it to headline this post. If you want to maintain control of your company, focus on running it well or find a team to run it well, and make sure you have plenty of cash to operate your business and that you never find yourself in a position where you are running out of cash and have nowhere to go but your exisiting investors. Do those two things well and you will be in control for as long as you want to be in control.

One Click Apply

As the world moves from web to mobile (our theme this summer), the idea of one click to do something becomes more powerful.

Did you know you can apply for a job with one click?

There are two services that make such a thing possible, LinkedIn Apply and Indeed Apply. In the spirit of full disclosure, Indeed is a USV portfolio company.

If you have your resume on LinkedIn or Indeed and you come across a job posting where the service has implemented the LinkedIn Apply and Indeed Apply buttons (think tweet and like buttons), then you can apply for the job with one click.

It turns out this is pretty popular. ZipRecruiter, a site that lets you easily post your job broadly across the web, put Linked and Indeed Apply buttons on their service and saw an almost 22% increase in job applications as a result. It makes sense, people will do more of something they can do easily.

So what does this mean for the job seeker? It means you should get your resume on LinkedIn and Indeed. What does it mean for the employer? It means you should put these one-click apply buttons on your job postings.

Some other interesting things came out of that ZipRecruiter blog post:

1) they get 3x the one click applications from Indeed vs LinkedIn

2) Indeed's resume database is growing at over 1mm resumes a month

3) Indeed is better for most job types other than management and executive

The world of recruiting has changed a lot in the past ten years and companies like LinkedIn and Indeed are driving much of that change. One click job applications is yet another example of this.

MBA Mondays: Guest Post From Angela Baldonero

Angela is SVP of People and Client Success at Return Path. She joined Return Path over five years ago to focus on the People job and she has added responsibilities since then. I asked Angela to write one of the guest posts in this series on People because she and Matt Blumberg have built one of the most impressive cultures I have seen and I asked her to tell us how they did it.

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Just Say No

When Fred asked me to guest blog, I asked if there was a particular topic he wanted me to focus on. Fred replied “write about the single biggest move you and Matt made at Return Path to impact culture, teamwork, and development throughout the organization.”

For me, the biggest shift that we made was when we decided to stop trying to be like every other company and to instead actively resist changes that would not make sense for us. We started saying no, regularly and forcefully, to policies, systems and procedures that many companies adopt as they grow.  

Return Path was on a path to becoming a standard, if better-than-average company, with fun perks and all the systems and programs that you’re supposed to implement as you grow. However, that also meant that there was a demand for more policies and rules, it was getting harder to make decisions and people were often frustrated with the pace at which things got done. Collaboration was sometimes confused with consensus and creativity was getting stifled. There was a better way forward where people make good decisions without a phone book of instructions.

The day we committed to no, we were at an executive team offsite and trying to figure out how to implement some changes that would give more power to individuals to get stuff done. We kept getting caught up in the inevitable “What if someone screws up or makes a bad decision?” discussion. But then we stopped because we realized that we’d spent enough time on problems and exceptions. What if we turned the entire conversation around and focused on managing to the top? What if everything we do is focused on our top performers, the people we trust, the people who make great decisions, the people who can think critically and creatively and as a result can handle a bit of ambiguity? We set out to say no in four key areas.

  • Just Say No to Useless Brilliance
  • We’ve all worked with that brilliant person that the organization thinks it cannot live without. Unfortunately, that brilliant person can’t communicate or work on a team. So, most organizations put them in a box in an attempt to minimize the damage they inflict on the organization. But it never works because the boxes pile up and so do the silos.  And no matter how well constructed the box is, that brilliant person can simultaneously demotivate 20 co-workers AND usually doesn’t contribute much in the silo. It’s not worth it. We don’t tolerate brilliant assholes.

  • Just Say No to Policy Paralysis
  • Policies and rules are created to guard against people doing stupid things to control time and resources. Examples: paid time off, sick time, expenses, work hours, comp, social media, dress code, discipline and — my favorite — “the code of ethics.” The reality is, with clear direction 99% of our people make great decisions every day. The couple of misses we’ve had have been quickly resolved after a clarifying conversation. Instead of locking things down, we set them free. We’ve said no to creating a policy for every situation we might encounter.  Instead, we have unlimited vacation and sick time.  We have a common sense expense reimbursement philosophy (“spend the money as if it was your own”).   

  • Just Say No to Values Dilution
  • This is the toughest category and the one that requires the most courage. Saying no to things that conflict with your organization’s values is essential to ensuring your culture is alive and thriving. Not paying attention will quickly lead to meaningless values posted on the wall. For example, we value transparency which means we share the good, the bad and the ugly openly (and often). Our commitment to transparency was dramatically tested when we decided to spin off part of the business and needed to decide if we should alert staff ahead of a formal sale. We did what most companies wouldn’t – we told the staff. It was such a unique approach that we got written up in Inc. magazine (see article).  Our value – up there, on the wall – is that we say no to secrecy and withholding.  If we hadn’t told the staff about the transition we would not have been living that value. And everyone would have known it.

  • Just Say No to Executive Dysfunction  
  • We’ve all seen the all-important and all-knowing executive team. The team that has all the answers and yet isn’t able to execute. I’ve seen too many executive teams where personal relationships and politics are the real business drivers behind-the-scenes. Business is done over cocktails, after hours and not in broad daylight. Personal agendas trump team goals. People smile and nod politely in meetings, then leave the meeting and corner the CEO to say what they “really think.” At Return Path, we are fiercely committed to the health of the executive team.  We check in with each other on our individual and team development and are rigorous about giving each other feedback and holding each other accountable.  We work with a team coach (Marc Maltz) to work through the 5 Dysfunctions of a Team and develop our ability to be Multipliers within the organization. We are brutally honest with each other and exhaustive about looking in the mirror. We say no to executive dysfunction, personal agendas and being too busy to live our values. And it is the best team I’ve ever worked with.  

    A new world of work is being born around us. Most traditional HR practices are ineffective and irrelevant. The courage to say no to the status quo has given us the freedom to blaze a new path of freedom, flexibility and creativity.  And it’s a competitive advantage for us. Our turnover is lower than nearly any other company – in our industry or any other industry. Most of our new employees come in as referrals from existing employees. And our application to hire percentage is about 1.5% — meaning Return Path is harder to get into than Princeton.

    My advice to you is to set your people free to focus on important, high impact work and solve challenging business problems. That’s how companies will win now.

    Tawkon

    There are all sorts of wellness apps for mobile. Some record how much you workout. Some record how much you eat. And so on and so forth. In the aggregate, I think wellness is a great category for mobile. Your phone is a watchdog and a reminder and recommender. I think wellness apps can and will make a difference in living healthier lives.

    But there aren't many wellness apps that are focused on the impact of mobile phones on our health. There are a number of things that mobile phones bring into the equation that may not be good for us. Listening to loud music on our headphones may be harmful to our hearing. Texting while driving, biking, or walking may be harmful to us and others. And then there's the issue of the radiation that mobile phones produce.

    This last issue is where Tawkon has been focused. Tawkon is a bunch of smart Israeli scientists and engineers who have built algorithms that run on a mobile phone and predict the amount of radiation your phone is emitting in real time (and over time). They've been around for a few years and they have correlated their algorithms with real laboratory testing to insure that their predictions are accurate.

    I met with the founder, Gil Friedlander, last week and during our meeting I downloaded Tawkon to my Android phone. I've been using it since. Most of the time it just runs in the background and I forget it is there. But every once in a while, it wakes up and alerts me to take the phone away from my head, put it on speaker, or put on a headset.

    On friday afternoon, I was in my apartment where I get poor reception, and I was doing a few conference calls. In each case, Tawkon alerted me to the fact that I should not do the call without a headset and I took  the advice.

    Tawkon also aggregates my radiation exposure and phone activity over time and keeps a record of it. This is what last week looked like for me:

    Tawkon

    You can also track family members so you can be a nagging spouse or parent. I suggested that the Gotham Gal download Tawkon for that exact reason.

    Unfortunately Tawkon is not available on iOS. Take what you want from that fact. So I can't get my kids on Tawkon as much as I'd like to. I really can't understand why Apple would not approve a wellness app like this but iOS is Apple's world and they can decide who gets to play in it and who doesn't.

    As with any app that runs in the background, I've been concerned about its impact on battery life. I look at what apps are using battery regularly and have not seen Tawkon on that list and I also have not noticed any difference in battery life since I have installed Tawkon. Of course, I've only been using it for a week so I can't say with 100% confidence that this is not an issue.

    Here's a picture of me in the meeting with Gil practicing good cell phone hygiene. I have one of those handsets in my office and my home. I use them all the time.

    Fred on headset

    Tawkon is available on Android and most Blackberry phones. You can also put it on jailbroken iPhones. Give it a try and let me know what you think.