Posts from December 2009

The Unlocked Phone Movement Gets A Big Boost

Mobile phones here in the US are sold by carriers and often locked down so that the device and the network are hard wired to each other. The iPhone is the best known example of this technique. I've written a lot about this bundling of device and network and why I think it is bad for consumers and software developers.

Yesterday the news starting leaking out that Google is going to break with this tradition shortly and sell its own Google branded phone unlocked and without a carrier partner.

Google is not the first device manufacturer to do this in the US. Nokia has been doing it for a while without much success. Unlocked phones are more expensive to the consumer because they have no carrier subsidy. So it is not obvious that consumers will take to this way of buying phones.

But there certainly is a minority of users who prefer to buy unlocked phones. I am one of them. I buy a fair amount of phones for myself and my family and I never take the subsidy if I can help it. I want to be able to run my phones on whatever networks I choose.

I believe the carriers should focus on making their networks as fast and reliable as possible. Device manufacturers should focus on building the best and most innovative hardware configurations they can deliver. And software developers should focus on building the best operating systems and mobile applications and services.

This is the PC architecture and I've been hoping we will see it emerge in mobile. I think the Google phone is a big step toward getting there.

I'll end this post with a reblog of part of a Fake Steve Jobs rant on A&T. This is the point:

So let’s talk traffic. We’ve got people who love this goddamn phone so
much that they’re living on it. Yes, that’s crushing your network. Yes,
3% of your users are taking up 40% of your bandwidth. You see this as a
bad thing. It’s not. It’s a good thing. It’s a blessing. It’s an
indication that people love what we’re doing, which means you now have
a reason to go out and double or triple or quadruple your damn network
capacity. Jesus! I can’t believe I’m explaining this to you. You’re in
the business of selling bandwidth. That pipe is what you sell. Right
now what the market is telling you is that you can sell even more! Lots
more! Good Lord. The world is changing, and you’re right in the sweet
spot.

Blackberry apps

One of the frustrating things about being a blackberry user (I've tried to move to iPhone twice and Droid twice) is that most of the stuff is there for an awesome mobile experience but RIM just makes it too damn hard to experience it.

A classic example of this is blackberry apps. I got a new blackberry last week (the bold 9700: awesome phone) and have been putting my favorite apps on it.

So far, I have:

Socialscope
Google Maps
Blackberry Messenger
Blackberry App World
Pandora
Slacker

I also have a beta version of an app from one of our portfolio companies but I've been asked not to talk about that.

App World isn't as slick as the iPhone app store but it works well. Only problem is it didn't come pre-installed on my phone. How can that be? If you want to compete with Apple, you have to at least bring your 'A game' right out of the box.

While I'm on the topic of the app store, I think its fantastic that Blackberry allows developers to provide downloads of their apps directly from the mobile web. I used App World for some of my apps and the mobile web for others. Both modes work, especially for free apps.

My biggest beef with blackberry apps is the popups they create around trust and security. Its confusing as hell to me to figure out what boxes to check and when to say yes and when to say no. It's like the privacy hell Facebook is putting its users through right now. More options and checkboxes is not better.

Maybe its because of apple's rigorous (and long) approval process, but iPhone apps don't put users through all this trust and security nonsense and I think Blackberry ought to fix this problem.

It's really bad for mobile apps that use a lot of third party apis (something we'll see a lot more of in the near future). Each time the mobile app makes a call to a new api, you get the damn popups. Its a painful experience. And if you want to reset the application permissions, good luck finding the settings to do that which are buried three levels down in advanced settings.

I could go on and on but I'll stop my critique in hopes of keeping this post brief.

Once you get the apps installed and working right, the experience is incredible. Blackberry supports multitasking and so I'm listening to Pandora and BBM'ing at the same time I am writing this post (on my blackberry of course).

The phone is great, the software is powerful, but the browser is awful and the entire user experience is too complicated. Blackberry can and should fix this because iPhone and Droid are coming on strong, even in Blackberry's core enterprise market, and they don't have a big window of time to get it right.

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Looking For Software Engineers

I posted about our portfolio company Outside.in earlier this week. In the past month, they've closed a big new financing, secured an important strategic partnership with CNN, and they continue to ramp their hyperlocal content network, which is a top 200 internet network according to Quantcast.

The thing that makes all of this possible is a group of top notch software engineers and they are looking to hire a bunch more. This job posting explains exactly what they are looking for. But for those who need some more data before clicking on that link, here's a quick summary:

Our stack includes Ruby, Scala, C++, Javascript, Rails, Sinatra,
Solr/Lucene, message queueing, and Postgres/PostGIS. We build mobile
apps (iPhone, Android), Web apps, and API's. We're agile where it makes
sense, but mostly sensible, intelligent, clever and hard-working. We
prefer generalists who have lots of successes committing at every layer
of the stack.

We want you to have one or more of the following areas of interest and real-world experience:

  • Geo: Geographic data, geometric containment and mapping API's
  • NLP: Passion for text analysis and semantic extraction, with a particular eye towards balancing accuracy and throughput
  • Ad Serving, Monetization, Optimization and Exchanges: OpenX, DFP,
    Google Ad Manager, RightMedia, etc… revenue performance metrics and
    A/B monetization strategies

So, if that piques your interest, please click on this link and learn more. I can assure you its a great company to work for and the software engineering challenges are both interesting and problems worth solving.

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Action Oriented

I never worry about action, but only inaction. – Winston Churchill

It's cheating to start a blog post with a quote from Winston Churchill. He was that good. But sometimes you need to cheat and I'm doing it today.

People ask me all the time about the traits I look for in entrepreneurs and action orientation is at the top of the list. I'd much rather back someone who makes 100 decisions a day and gets 51 of them right than someone who makes one decision a day and gets it right.

I believe that in startups, like venture investing, the cost of making a bad decision is not nearly as great as the benefit of making a good one. So I like action oriented leaders.

When you make a bad decision, you can always realize it was bad and change it. By being action oriented, you put a lot of things in motion and can evaluate what is working and what is not.

I am not advocating a "throw it up on the wall and see what sticks" approach. I believe entrepreneurs need to me more insightful and strategic than that. You need to have a game plan for sure. But within that game plan, I believe it is better to try more things than less things. And I believe that perfect is the enemy of the good.

Dick Costolo, co-founder of FeedBurner and now COO of Twitter, describes a
startup as the process of going down lots of dark alleys only to find
that they are dead ends. Dick describes the art of a successful startup as
figuring out they are dead ends quickly and trying another and another
until you find the one paved with gold.

It's another form of the classic direct marketing technique of test, measure, test, measure, test, measure. You can think and debate about stuff all day long or you can try stuff out and see what works. From my experience, the latter approach is a much better one.

There is a cost to action orientation. You need to be able to hit the quit button. You need to be able to deal with the broken glass that results from doing that. It's a messier way of doing business and some people have a hard time with mess.

A good example of that is hiring. If you are "action oriented" in your hiring, you'll make more hires and more of them will not work out. Which means you'll be firing more people and dealing with the inevitable headache and heartache that results from showing someone the door.

But as I've asserted earlier about startups, the benefits of making a strong hire vastly outweigh the costs of making a bad hire. Strong hires can lift an entire organization almost single handedly, especially when you are a small company. Bad hires can be toxic, but not if you recognize them quickly and move them out.

Great entrepreneurs are hard to work for. They jerk you around, change things up, and are always pulling the rug out from under you. And often a company outgrows that leadership style and needs a calmer more organized leader.

But if you want to create something great and do it faster than the competition, you need to be action oriented. You need to be decisive. And you should not worry too much about making bad decisions as long as you are prepared to recognize them quickly and unwind them.

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Vevo: First Thoughts

So Google and the music industry have teamed up to create Vevo, which aims to corral all music videos into a separate part of YouTube where they will be monetized by higher quality (and higher cost) video advertising.

Vevo launched last night and I spent some time on it this morning. At first look, I'm not sure I get this thing.

The first thing I did is search for Arctic Monkeys and I get a response that there are no results for that term.

Second thing I did is click on the link to Kid Cudi and watch the Pursuit Of Happiness video. But before I could watch that I had to sit through a 15 second AT&T pre-roll. That's not a great experience. I wonder if people will really sit through a 15 second pre-roll to watch a music video.

Then I went to YouTube and did a search for Kid Cudi Pursuit Of Happiness. The video I saw on Vevo is absolutely not on YouTube, but there are plenty of Pursuit Of Happiness videos there to watch including a really cool Steve Aoki remix.

Then I went to Google and did a search on Kid Cudi Pursuit Of Happiness and there are links to a bunch of videos on YouTube and MTV.com but no links to Vevo.

It's probably that Vevo is not completely rolled out yet but it would seem to me that for it to be successful, the Vevo videos will have to show up in YouTube and Google search results. And they don't right now.

It is absolutely true that for many, YouTube is their streaming music service. There is so much music on YouTube. You can get a result for most any song you look for. So it makes sense that the music industry is trying to get its arms around this new form of music discovery and listening.

But I wonder if cordoning off the "official" music videos into a separate site will achieve this goal. We'll see. I'm not that optimistic about this one.

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Hyperlocal Goes Mainstream: CNN teams up with Outside.in

I've been interested in the hyperlocal blogging movement since I started blogging. Once you have your own printing press, you start thinking about what you might write about the place you live. And I've written about school sports, little league heroics, contentious local issues, and a host of other hyperlocal news over the years.

My unwavering belief is that we will cover ourselves when it comes to local news. We are at the PTA meetings, the little league games, and the rallies to save our local institutions, so who better to cover them than us? This is what hyperlocal blogging is all about and it is slowly but surely it is gaining steam.

Today, our portfolio company Outside.in, which aggregates up all this hyperlocal blogging and makes it available and discoverable, announced a partnership with CNN which, among other things, means that hyperlocal bloggers will start seeing their posts on CNN. That's a big deal. This is the mainstreaming of hyperlocal blogging and its about time.

Outside.in powered neighborhood, town, city, and place pages are already hosted on more than one hundred media partners around the country, including the New York Post, Dow
Jones Local, Media General  and Chicago Tribune. Here's an Outside.in powered page on the New York Post about the Flatiron district in NYC, where our firm Union Square Ventures is located.

If you operate a local media business, big or small, and you want to add the voices of hyperlocal bloggers to your pages, then click here an learn more about Outside.in for Publishers and get started. If you are a blogger and want your stories on CNN and media partners like the New York Post and others, then make sure your feed is in Outside.in's index. You can do that here.

It's taken a long time for this vision to become a reality, but it's happening now. We are covering ourselves and big media is leveraging our voices to cover the local news that they can't get to. It is very gratifying to watch it happen.

Update: Outside.in's founder Steven Johnson's post on the news is here. And here are the engineering hires that Outside.in will make with the new cash. If you are an engineer looking for a new challenge, please take a look.

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The Extendable Browser: Chrome

For the past few months, I've been keeping two browsers open at the same time, Firefox and Chrome. I use Chrome for Gmail and other web apps where speed is of the essence. And I use Firefox because I still like having my extensions available to me. It's a pain in the ass to be honest. I'd really like to move entirely to Chrome, but I need my extensions.

Well this week is a big one because according to MG Siegler, Google is going to launch extensions for Chrome this week. It may happen at the Add-On Con which is happening the end of this week in Mountain View. Add-On Con was organized in part by our portfolio company Get Glue, which offers the Glue add-on, one of the browser extensions I can't live without.

Speaking of extensions I can't live without, here's my list:

  • Blogrollr
  • Download Them All
  • Glue
  • Google Gears
  • Lazarus Form Recovery
  • Zemanta

I hope all of them will be available for Chrome asap. I know for sure that Glue and Zemanta will be ready to go this week.

Unfortunately for me, extensions won't be available for Chrome for Mac right away. So I'll be using two browsers for a while more.

UPDATE: Zemanta updated their browser extension today. Here is the blog post explaining the new features and here is the extension.

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Lupe Fiasco’s Enemy Of The State Mixtape: A Study In Music Business Models

My daughter turned me onto Lupe Fiasco a couple weeks ago. When I start listening to a new artist, I often will go to the Hype Machine and listen to a stream of their music. In the process of doing that, I came across Lupe’s new Enemy Of The State mixtape which is the “artist of the weekend” on fredwilson.fm this weekend.

Enemy Of The State is a mixtape which means it is a bunch of tracks that Lupe remixed and put out for free on the Internet. Artists who Lupe remixed on Enemy Of The State include Radiohead, Lil Wayne and Jay-Z.

I don’t know what the economic relationship is between Lupe and all of these artists he remixed. Clearly that impacts the cost of putting out a mixtape. But the fact that a major recording artist like Lupe is putting out free music is pretty interesting to me. He plans to put out another mixtape called “Friend Of The People” later this month.

The last track on Enemy Of The State is called “HP Skit”.

HP Skit

Give that track a listen and then watch this HP advertisement which features Lupe and others.

So Lupe included an HP advertisement on the Enemy Of The State mixtape. Let’s say Enemy Of The State is downloaded a half million times. And let’s say that the average downloader listens to the mixtape all the way through five times. Then that HP ad would be listened to 2.5 million times. At a $10 cpm (high but not crazy high), that would be worth $25,000 as an audio ad buy. If Lupe could put out one of these mixtapes a month, then that’s $300,000 per year. 

I was in a board meeting last week and one of the company founders made a very interesting assertion about the difference between old media and new media. He asserted that old media is about how much money you can charge each viewer. New media is about how many viewers you can get.

Now that’s a gross oversimplification of his assertion, but the point is useful. The whole free mixtape movement is about getting as many listeners as possible, using existing music for the most part. The idea of monetizing it with lightweight advertising (nobody forces you to listen to HP Skit and it comes at the end) is very interesting to me.

It will be interesting to see if we get more of this kind of thing. I think we will.

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Save and Invest

Yesterday morning I attended the annual meeting of the NYC Partnership. The NYC Partnership is the "chamber of commerce" for NYC. Because NYC is one of the biggest commerce centers in the world, the NYC Partnership is a pretty interesting group and has lots of big name companies and execs involved in it.

The annual meeting yesterday featured talks by Lloyd Blankfein, Larry Summers, Mike Bloomberg, and Rupert Murdoch. I tweeted a bit from the meeting and you can see those tweets here (Dec 4th, 8:30am to 9:30am).

My favorite talk was Larry Summers' in which he addressed the administration's economic plans, priorities, and strategies.

At one point, Larry said that the US needs to "save, invest, and export more and the developing world needs to spend, borrow, and import more" (or something like that). It's certainly true that we can't continue with the model where the US borrows and goes deeply in debt to purchase goods and services provided by the developing world which then saves the money they earn and lends it to the US. That's how we've gotten into the mess we are in.

But I'd like to focus on "saving and investing". It has not been fashionable in this country to be a saver and an investor. It's been more fashionable to be a borrower and spender. Everyone wants to lease a fancy car or take out a big mortgage to buy a big home.

I'd like to see Obama make a big deal about the value of saving and investing. He's got great oratorical skills but he often talks in grand sweeping generalisms, like the "need to change." Well I think its time to get more specific about what needs to change. And if Obama were to start talking about the value of saving and investing every time he makes a speech, I think he could make saving and investing fashionable.

Saving is hard, particularly when you can barely make ends meet. But a "forced savings" plan can work for most people. Many companies do an automatic deduction for a 401k plan. It would be great if you could also do an automatic deduction and send the money to a mutual fund or money market fund. If everyone tried to save 5 to 10 percent of their take home pay, it would make a huge difference.

Investing is also important. Not gambling, not speculating. That is best left to the pros. Investing means taking some risk but not a lot of risk. It means putting money to work in the economy, and not just our economy, but the global economy. Mutual funds are a good way to do this. So are index funds. There are a lot of good places to get sound advice on how to invest wisely and patiently. We need to do more of that in this country.

Saving and investing has been part of the american culture in the past. It is still very much part of the culture among some parts of our citizenship. But too many of us have gone on a borrow and spending binge and it's time to get back to basics. And I'd like to see our President get out in front on this issue and lead the country back to a better way.

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The HR Acquisition

When most people think of the HR acquisition, they think of a big public company, like Google or Yahoo!, picking up a small team of engineers and product people for a few million dollars of their stock.

But it might surprise you to know that the HR acquisition is alive and well in startup land as well. I just counted and over a quarter of our active portfolio companies have done or are doing HR acquisitions.

Some well known ones in our portfolio are;

– the Twitter acquisition of Summize which brought the company a number of really solid engineers, a leader for the engineering team, and search engineering talent.

– the Zynga acquisition of MyMiniLife which brought the company key members of the Farmville team who created one of Zynga's blockbuster games.

Most of the time HR acquisitions are done for engineering and product talent, as these two were, but I've also seen HR acquisitions of sales talent. Last year our portfolio company Targetspot acquired Ronning Lipset Radio which brought it the leading sales team in the online radio industry. 

Building startups is hard and requires the very best talent. You can recruit that talent and that is certainly the way most of it comes into our companies. But in certain situations, you can also acquire the talent and for the most part our companies have had great success with HR acquisitions.

When you do a HR acquisition, you are going to pay a premium over what the team would cost if you hired them. And sometimes that premium can be significant. Here's how I like to think about it:

1) figure out how much equity in options it would cost you to hire the team

2) figure out how much of a premium over that number you will pay to get them in one fell swoop, a pre-built team that has shown it can work well together. I've seen premiums of 100% and I've even seen a few that are higher than that.

3) value that equity at what your company would be able to sell for right now

4) pay off the investors in the company in cash if you can

5) make the stock you are paying the team vest over the same period that your employees stock vests

6) no matter what you do, you must make sure the team is incented to stay for a three or four year period. if you can't do that, you shouldn't do the deal.

Here's an example. Let's say your company is worth $100mm. You've identified a team that can build or has built a technology that is on your roadmap and you don't have the skills on your team to build. Let's say that it would cost you 2.5% of your company to hire a team like that. Then you ought to be able to get comfortable with paying up to 5% of your company to buy the company and get the team. That acquisition is worth $5m on paper. Let's say the team you want owns 70% of their company and angels own the rest. Then here's the deal I would offer:

– a $5mm acquisition offer

– $1.5mm in cash for the angels

– 3.5% of the company in four year options for the team

Usually, you'll have to throw in some cash and accelerate some of the equity for the founders who are coming with the deal but keep that as low as possible. Make sure most of the value going to the team is in equity that they have to earn over time.

But most of all, make sure the team will be a strong cultural fit in your company. Make sure you'll enjoy working with them and they will enjoy working for you. And make sure that they are integrated into the company in a way that will allow them to succeed. The reasons most HR acquisitions fail is the team that is acquired leaves because they don't enjoy working in the company or are not well integrated and are frustrated.

I expect we'll see more and more of these deals in the coming years as some companies break out and become big successes and others struggle and decide to get "tucked into" the winners. It makes sense for everyone.

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