Posts from March 2008

There’s a post on the YouTube blog that’s titled YouTube Everywhere. In it, YouTube announces additions to it’s API that allow you to interact with YouTube from almost anywhere. YouTube has always been pretty open, and they certainly popularized embedded video which to my mind is one of the greatest innovations on the web in the past five years.

Rafe Needleman reblogged the news with the headline – YouTube, once just a desitnation, is becoming a service too.

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.

Our experience with Twitter is informative. Some twitter users visit its web service regularly. Others never use it. With Twitterfific on my macbook and Twhirl on my Windows machine in the office and SMS on my phone, there are many days where I never visit twitter.com.

Twitter launched with this architecture. And it has worked wonderfully for them. Twitter is everywhere.

So if you are building a new web service today, forget about being a destination. Maybe it will happen and maybe it won’t. Don’t fuss about that. Focus on making your service available everywhere. If you do that, you’ll build a much larger user base.

A recurring theme on Gotham Gal’s blog (my wife for those of you new to this blog) is the occasional frustrations of a woman who has given up the intellectual fruits of a full time job for the responsibility of raising a family.

In a post the other day, she ended with this. I loved it so much that I had to reblog it here.

When people ask me what I do, I do still take pause.  Sometimes I
answer – nothing that I get paid for.  But I came up with my favorite
answer the other day when I had to fill out my job title/description
for a political party that I had given to.  The Government finds it
necessary to know what you do when you give money to a candidate.  I
just wrote in Superhero.

I think you all know that she’s my superhero.

The downfall of Eliot Spitzer certainly generated a lot of joking on wall street, twitter, and elsewhere yesterday. I plead quilty to a private email with a client #9 joke myself.

But mostly I feel pained by this whole story. I’ve met Eliot a few times and although I wouldn’t call him warm, he did strike me as earnest and committed to public service. I know his wife Silda much better and I feel so much for her and their lovely daughters.

This story is a tragedy of shakespearian proportions. How does a man with so much going for him do something so stupid and self destructive? Why do people self destruct and what can we learn from it?

I am no psychologist, not even the armchair kind. I don’t know what deep dark issues lead to self destructive behavior. But I’ve seen enough of it in the 20+ years of investing and sitting on boards that I know a few things.

Most of the people that I’ve seen self destruct over the years have a drive that is almost overwhelming. They have a desire to succeed that takes them far. But they also have huge blind spots. They usually have someone or a group of people that protect them from the blind spots. But as they start to achieve their goals and rise beyond the people that helped them get where they are, they distance themselves. And then they are at the top, but all by themselves and they get caught up in their greatness and then the downfall comes.

I suppose we could see it coming with Spitzer. The arrogance and the fits of explitive producing rage seemed to be on display more and more. Could those close to him have helped him? Could the downfall be avoided or was it inevitable?

What can we all learn from this? Well first and foremost, there are no messiahs. Nobody is perfect and when we put people on pedestals, they mostly fall and let us down. That’s one reason that Barack Obama concerns me. I want him to be better than the rest. But is he? Is that even a reasonable expectation?

In the more mundane world of startups and startup investing, we have to be careful with the people we hire and back. I’ve backed a few founders with messianic tendencies. Its a problem. On one hand, they bring incredible drive and charisma to the startup equation. They can hire and raise money like no others. But they don’t build great teams around them and many times they self destruct and their companies suffer

I think, but I am not sure, that self destructive tendencies can be managed. I have become a big fan of coaching and counseling over the years. We all have our demons and blind spots. The first step in dodging them is to identify them, stare them down and become self aware. I know a few really good people who coach founders and CEOs and if you are looking for someone to help you or someone you’ve backed or love, send me an email and I’ll hook you up

Watching a man like Eliot self destruct is too painful and I hope something good can come of it

Twitter bots are a lot like IM bots. You send them a message and they send you one back. Except, of course, you can do that through twitter on any "device" (Facebook, SMS, web, third party client, etc) you want.

My favorite twitter bot so far is the mytrade stock quote bot that launched late last week.

Here’s how do do it (you need to be a registered twitter user to do this):

First, go to mytrade’s twitter page and follow them.

Then, wait a minute or two for mytrade to follow you back (no need to do anything for that to happen)

Then, send a message via your phone or any other twitter client device that says:

d mytrade AAPL

and get an Apple stock quote back.  Of course you can replace AAPL with anything else you’d like.  And you can separate ticker symbols with a space to get a bunch of quotes, like this

d mytrade AAPL GOOG AMZN

to pick three tech companies I am long right now

I hope you like it as much as I do.

In November of 2004, we launched our first venture capital fund, called Union Square Ventures 2004. At the time we were convinced that a new era of lightweight open web services was upon us and that a small focused venture fund could make money investing in them. Over the past four years, we believe we’ve proved that investment thesis was correct. We have exits with Delicious, FeedBurner, and TACODA, and we have a portfolio that we are very proud of.

But like all good things, funds come to an end. We are in the process of making three investments that, when closed, will mark the end of adding new names to Union Square Ventures 2004. The remaining capital in that fund will be earmarked to supporting the companies we’ve backed to date for as long as they need to be supported and should be supported.

So we are announcing today that we’ve raised a second fund, called Union Square Ventures 2008. It’s not called the Facebook fund or the iPhone fund, but those are certainly two places we’ll be looking to invest in. We put years at the end of our fund names because we like to keep it simple. Every four years we intend to raise another fund, to keep doing what we are doing.

And what is it that we are doing? Well, my partner Brad pretty much says it all in his post announcing our new fund on the Union Square Ventures weblog. Go check it out and let us know what you think.

Lot’s of advice in the blogs this weekend for budding entrepreneurs:

Jason Calacanis says you have to save money

I agree and emphasize several key areas for saving

Mike Arrington also agrees and says hiring the right people is the most important thing

Scoble agrees as well

Dave Winer disagrees with all of us and says that building a hot product is all that matters

Tony Wright takes the prize because he acknowledges that there is no one way to succeed with a startup

I’ve watched literally hundreds of tech startups over the years and Tony is right. Each and every one of them did it slightly differently.

So does that mean that all this advice is useless? No way. It’s helpful for sure, but you have to soak it all in and then make your way with what feels right for you.

I particularly like Tony’s closing advice. He echoes Dave with "build something people want" but then channels Jason with "persist, keep going". He says "The idea of an overnight success is largely ridiculous". And to persist, you are going to need to husband your cash.

So all the posts and particularly all the discussions that they generated are great for everyone. Build something great, be frugal where you can, and persist and don’t give up. But most of all, do it your way.

Jason Calcanis has written a post with almost twenty ideas for saving money in a startup. I agree that keeping the costs down is a critical part of doing a startup right, both because it allows the founders to dilute less and because it creates the right culture for the long term.

There are several of Jason’s suggestions I’d like to second and talk about a bit.

Don’t buy a phone system. No one will use it. – I remember a startup that we helped to incubate back in 1999 at Flatiron that made the decision to give everyone cell phones instead of buying a phone system. Today, you don’t even need to do that. Everyone has a cell phone. Just make sure you get good cell reception in your office (if you have one). I wonder if there is a repeater that you could put into an office that works with all the major cell networks to ensure good coverage. The new cell phones that allow wifi phone calls like my t-mobile curve are also making that less of an issue. Jason suggests that you can save $500/year/person by avoiding a phone system. That can add up to a lot of money over time.

Rent out your extra space. – Our portfolio company Targetspot looked long and hard for 3-4,000 square feet last year and could not find anything that worked in the price range they could afford. Instead they took 7,000 square feet and are subletting a bunch of offices and cubes to other startups. Their net rental cost is much lower as a result and they also get the benefit of collaboration between other entrepreneurs and developers. Etsy has done the same thing with Make Magazine and a small group from Burda Media. There are some downsides to this approach. You have to collect rent, if the startup world got really bad (like 2000/2001) you could end up with more space than you need and nobody to rent to, and you could end up with subtenants that you don’t get along with. But even with all these downsides, I think this is something startups should consider in markets where office space is tight and rents are high.

Outsource accounting and HR – As Jason says, this is a no brainer. Here in NYC, we generally recommend a company called Ambrose. They are a PEO. Your employees technically work for them and you pay them to run all HR (including salaries and benefits) for you. I think there are plenty of high quality PEOs to choose from and all startups should use one.

Don’t waste money on recruiters. – I can’t think of the last time one of our companies hired a recruiter. I am sure it’s happened and maybe recently, but it’s not something many of them do anymore. LinkedIn, in particular, has become an amazing way to recruit on the business side. There are times when it does make sense to hire a recruiter, particularly for a specific skill set that the company doesn’t have in its extended network. Those times seem to be fewer and farther between these days.

Really think about if you need that $15,000 a month PR firm. – There are some really good PR firms out there and if you can get one of them to work with your company, then it may be worth considering it. But a mediocre PR firm is not worth it for sure. I encourage our portfolio companies to hire a person inside the company to be an "evangelist". That job includes blogging actively, reading and commenting and linking to other blogs, reaching out to the media and industry analysts and gurus, going to conferences and events, and generally getting the word out. That person can be young and not particularly expensive, certainly nowhere near $15,000 a month. And they have two things that a PR firm cannot offer. They work for you and they represent your company exclusively.

And I’ll add one more cost saving idea because Jason asked people to do that.

Hire "utility infielders" in the early days – Hire people who can do many things in the early days of a company. Charles Smith at TACODA and Etsy and AT at Zynga both come to mind. They are people with a number of skills who have spent a long time in startups and can do everything and anything that’s required. You can’t afford to have specialists in a startup. Hire utility infielders.

Jason Fried ended his enthusiastic post on the iPhone SDK with those words (I added the ,but). And so it is. Very big shit. But there are a few things that I just don’t understand about Apple’s iPhone strategy.

Why put all these great hooks in for enterprise IT when the iPhone still only operates on one network here in the US? Do you think Morgan Stanley is going to get locked in to AT&T just to outfit all of their investment bankers with iPhones? I don’t think so.

And where are the social hooks? Can you establish social networks and build a social graph via the iPhone SDK? If not, why? If so, where is that outlined? I read over a dozen posts on the iPhone SDK and I didn’t see the world social in any of them. The phone is the most personal (and therefore social) device in the world. There’s got to be social hooks in something like this.

And what’s with "all apps must be sold and distributed via the app store"? I understand that it’s most convenient for users to have a single place (like iTunes) where they can search for, find, buy, and install apps. But to lock developers into that as the single and only way to get apps on the iPhone is not the right thinking in my book.

On the plus side, the gaming opportunities are mind blowing. As Daring Fireball says in his post (the best of the ones I read):

The unique control options — no traditional buttons but a 3D
accelerometer and multi-touch screen — make the iPhone analogous to the
Wii, in that it opens up new concepts in game UI design.

Apple is revolutionizing the mobile device market in the same way they flipped the music business on it’s head. But like they did in the music market, they aren’t going all the way. And I just wish they would.

Disclosure: I am long APPL and getting longer.

It’s very hard to time the market. I generally feel that if you are inclined to sell the business (instead of working for 7-10 years to build something large and capable of being a public company), then you should sell when they buyers are knocking down the door. I’ve always said that venture backed companies are bought, not sold.

I was reminded of that this morning when I saw the news that Digg is likely to be sold to either Google or Microsoft for between $200mm and $225mm. That’s a fantastic outcome, no doubt, and I have always been rooting for Kevin and his backers from Greylock. But Arrington goes on to say that the sale price is less than the $300mm that Digg’s bankers at Allen & Co were floating last year.

So I went to comScore to see what Digg’s traffic trends look like. Here are the worldwide UVs.

And here are the US-only UVs:

So Digg’s awesome growth over the past three years may be flattening out. That makes sense. There are only so many social news junkies out there. A slowing growth rate doesn’t mean that Digg is a bad business. It’s probably becoming a better business because they are probably monetizing it better than ever these days. Both Google and Microsoft could justify the $200mm-ish purchase price and get a good return on it, the way that New York Times has gotten a very good return on About.com. In fact, I think The New York Times would be a better buyer for Digg than either Google or Microsoft because they are all about news.

But regardless of who buys Digg, it’s clearly a good time to be selling it. Maybe last year would have been an even better time. It’s never clear when the perfect time to sell is until it’s passed.