Posts from January 2013

Fun Friday: Favorite Productivity Hack

We all have tools that keep us focused, on schedule, getting stuff done. This thread is going to where we share our favorite with each other.

Mine is Lasso.

Disclosure: The Gotham Gal is an investor in Lasso's parent Edison Jr. So I have a financial interest in its success. That said, I think it's awesome.

Lasso is one of those "less is more" hacks that just works. You sync your calendar to Lasso and anytime you have a phone number in a calendar event, Lasso calls you on one of more of your phones, you pick up, and you are connected. It is particularly helpful with conference calls when you don't want to type in all the codes and such. Lasso does it for you.

Lasso is in beta and is a paid service. So it has a few kinks every now and then. But it's still great.

Lasso comes from the same people (in a different life) who brought us phonetag, another amazing productivity hack that I love.

What is your favorite productivity hack?



The 5am routine is back! I am writing this from my home office. We slept at home last night. Ten weeks in hotels is over. Thank god.

It's hard to feel sorry for yourself when you are staying in nice hotels when others who were displaced from Sandy are in much worse situations. But being out of your home for a long period of time sucks no matter where you are staying.

Here's what I missed the most:

1) home cooked meals from the Gotham Gal. We got one last night. It was the best meal I've eaten in months and we have dined at some of the finest restaurants in the world in the past two months.

2) saying goodnight and good morning to my kids every day. having kids staying in hotel rooms on different floors is a family disconnect of major proportions. i hated it.

3) my closet. living out of a suitcase for 10 weeks is ridiculous.

4) the Gotham Gal's smile. the past ten weeks has been harder on her than anyone else.

5) my office. it's my sanctuary. it is the only place that is entirely mine. where i can go and think and write. i'm here now. it feels like an old friend who has been away for a while.

Anyway, I'm hoping that having the routine back will lead to a burst of creativity and output. I can say for sure that I struggled mightily to keep it going the past 10 weeks.

#Random Posts

In Between: The Tough Place To Be

In a comment on the latest tally of VC fundraising, NVCA President Mark Heesen said:

“The venture capital fundraising environment has settled into a ‘new normal’ which is characterized by a barbell structure of larger funds which are stage and industry agnostic on one end, and smaller, early stage, industry or region specific funds on the other.

This is certainly true and has been for a long time. The two successful models seem to be the large megafund and the small early stage fund. It's hard to be anything else in VC.

Entrepreneurs need to understand this. There are a ton of options out there for early stage funding. And if you get to the stage where you need a growth round from a big fund, there are plenty of options for that too. But if you are looking for a Series B round to help you grow from early revenue status to true growth status, you are going to find that challenging.

To put it another way, there are plenty of us who fund hopes and dreams. And plenty of us willing to fund true success. At the stage where you are past hopes and dreams, where you have customers, revenue, and a real business, but have not yet reached "true success", there just aren't many investors to choose from.

The truth is early stage investors are often asked to be the funders of last resort for the "in between" stage. We do that all the time at USV. We will lead or do an inside round for the Series B and Series C rounds if we have to. So choose your early stage investors well. Make sure they are willing to see you through the in between phase if need be. Because they will probably need to.

#VC & Technology

MBA Mondays: Revenue Models - Subscriptions

When I got into the venture capital business in the mid 80s, software was sold. You would pay a large sum to acquire a license to the software and then a much smaller annual fee for maintenance and support. Today, most software is sold in a subscription model. You pay a monthly fee for the right to use the software. If you stop paying the monthly fee, your right to use the software goes away. Maintenance and support is bundled in.

The emergence of the subscription model has made the software business better. In the old upfront license fee model, software companies would trade at 2-4x revenues. Now they trade at 6-8x revenues. That reflects the recurring, almost annuity nature of the subscription model.

Software is not the only technology oriented business that utilizes a subscription revenue model. Content has also moved from an upfront fee (buy an song or a movie on iTunes) to a subscription model (a monthly fee for Spotify, Rdio, Netflix, or Hulu).

And infrastructure is now also sold on a subscription model. Amazon Web Services (AWS) is a great example of this. Need a server? You can provision it for yourself in the cloud and pay a monthly subscription for it. Same with storage and a host of other infrastructure services.

The emergence of the subscription model for software, digital content, and infrastructure has led entrepreneurs to offer all of these in limited form for free with a paid upgrade to a monthly or annual subscription. The term for that form of subscription is freemium, a term that was invented by Jarid Lukin in the comments on this blog in March 2006.

Subcriptions can be paid monthly or annually in advance. Many companies opt for the latter model and that works really well because it creates a favorable cash flow dynamic in the business. Cash comes in before most of the revenue is recognized, leading to a healthy and predictable business model. In addition, the subscription business model allows a company to book most of the revenue for the year in advance. Companies with subscription based revenue models often have great visibility into the next twelve months of revenues, a feature which makes for a great public company.

The big gotcha in subscription revenue models is churn. If you churn more than 10% of your customers every year, subscriptions can be a challenging model. You need to grow new customers at 10% just to stay even. I encourage our portfolio companies that utilize a subscription model to be very active at managing customer satisfaction and to actively monitor the customer's usage of the software or service to identify customers with high churn potential. This kind of data can be automated and leveraged to proactively manage problem accounts and reduce churn.

The first several years of a subscription based business will typically require a fair bit of funding because the revenues come in over time instead of up front. But once a subscription business reaches scale, it has very favorable cash flow dynamics, as mentioned above. For these reasons, subscription based businesses are good businessed to raise capital for and investors generally find them attractive to invest in.

In many ways, the subscription business model is the most attractive of the "big three" (advertising, commerce, and subscriptions), all of which we have now covered in this MBA Mondays series on business models. Subscriptions are more predictable and reliable and as a result create more investor confidence leading to higher multiples and more valuable businesses. Of course that is not universally true of all businesses, but I have found it to be generally true over long periods of time and many different businesses.

#MBA Mondays

App to App Handshakes

I wrote a post a few weeks ago asking when and if we would have a mobile web that acts and feels like the desktop web. The discussion was fantastic and I have a lot of takeaways and to dos from it.

In the environment we are in today, I see the mobile OS as the foundational app and I see the third party apps as features in that OS. This view comes from Tim O'Reilly's Internet Operating System construct adapted to the mobile environment. In effect, the mobile OS has assumed the role that the browser plays in the desktop web.

The cool thing about the Internet OS with web apps as features is that the features are interoperable. I post a picture to Instagram and push it to Twitter and it comes through as a picture (or it did until the kids started fighting). I find something I want to buy on Etsy and I check out on Paypal. You get the idea. Web apps pass data and users back and forth easily.

That is not true on mobile today. Even on Android where sharing is baked into the OS. It is a lot worse on iOS. But its bad all over the place.

If you post an Etsy item to Facebook and I want to buy it, I click on the link in Facrbook mobile and am taken to Etsy's mobile web app where I am not logged in and its a pain to buy. I want to go app to app to Etsy's mobile app where I am logged in and its one click to buy.

This morning I was at the gym listening to the Django Unchained Soundtrack on my phone in the SoundCloud android app. I decided I wanted to make Trinity my song of the day on Tumblr. I hit the share icon, up came a list of apps, I selected Tumblr, and I was taken to the Tumblr app but as a link share. I wanted an audio share.

Maybe all of this app to app handshaking will be solved one by one by the third party apps. I already have an email out to SoundCloud and Tumblr to let them know about that last thing.

But a better approach would be for the mobile OS vendors to build really great data and user handshaking into the OS so third party developers can implement it without having to talk to each other each time they want their apps to work together intelligently.

We have two options. We can make the app centric mobile environment work more like the web or we can make the mobile web more like apps. I suspect we will do both. As a user I can't wait for both to happen.


Outsourcing Reversal

I do believe we may have reached peak employment, as discussed in the comments here recently, and as my partner Albert has been discussing on his blog over the past several months. Any serious and intellectually honest jobs agenda must deal with that reality.

But I also believe stagnating wages here in the US vs escalating wages around the world presents an opportunity for the US that we are not, as yet, doing much with. This was in the WSJ today (or maybe yesterday):

While wage costs in the U.S. have been about flat in recent years, they have been rising 20% a year in China, a trend Mr. McNamara expects to continue for at least five years. He said labor costs for Flextronics rose about 30% last year in Malaysia and 40% in Indonesia.

The WSJ post was about high tech manufacturing but I think the same is true of outsourcing of back office, customer support, and programming jobs to India and elsewhere.

There are parts of the industrialized midwest, like Detroit, Cleveland, and Buffalo, where you have well educated workforces stuck in regions where housing prices have declined for more than a decade and wages have declined as well, where jobless rates are at catastrophic levels. A house that would cost $500,000 in the NY metro area can be had for less than $100,000 in these regions.

This is both a problem and an opportunity. It is time to bring these jobs back that we have moved elsewhere. Although I have not done any sort of analysis here, I would be shocked if one could not make a strong cost based economic argument to do so.

I am certain that there are plenty of reasons why it is not happening, or happening at scale. Clearly there are a bunch of one time costs, for facilities, for job training, for other stuff. And then there are the regulatory burdens that we in the US throw at our job creators. Again, from the WSJ post:

The difference in labor costs is narrowing and local officials in America have been giving more financial incentives to companies setting up plants in the U.S., Mike McNamara, chief executive of Flextronics, said in an interview Friday. Mr. McNamara said he could even imagine some smartphones being made in the U.S. eventually. But he cautioned that the return of manufacturing to the U.S. is likely to be a "slow and evolving process" rather than a flood. Many obstacles remain, including relatively high U.S. taxes, health-care expenses and regulatory costs, he said.

If jobs is our number one economic issue in the US (I believe it is), then policy makers at the federal, state, and local levels need to be all over this stuff. We can reverse the outsourcing & offshoring trends of the past thirty years. The era of gloabal wage arbitrage is over or will soon be over. But we need to make a bunch of smart investments and we need to make them now.


Feature Friday: Privacy

The Gotham Gal and I went out with friends last night. As can happen, we got talking shop towards the end of the night. And specifically we were debating the significance of Snapchat. The debate was about whether the feature that makes Snapchat special (you know your photos won't end up on Facebook) is the basis for a standalone app and business. My view, having lived through this debate with Twitter and Foursquare, is that mobile apps are features in the mobile OS and that Snapchat can and likely will own this feature in the leading mobile operating systems even though institutionalized copycats (ie Facebook who copies everything) can and will copy it. The irony that Facebook has copied a feature that is specifically designed to avoid Facebook is precious in and of itself.

But I digress. The thing I want to talk about here is the emergence of privacy as the defining feature of the next breakaway app on the social internet. What does this mean for where we are and where we are going? Is open social out and closed private in?

At times like this, I like to talk to my kids and their friends. Here is a typical college aged woman I know. She uses Twitter, Instagram, Cinemagram, Foursquare, iMessage, and Snapchat. And Facebook too. She uses each of them for what they are good for. Each of them is on her home screen – one click and she is sharing something with someone. Each app offers a different graph – that she has curated specifically for that app – and each app offers a different type of engagement. If it is something silly that she wants to share with a friend but would be mortified if it ended up on Facebook, its Snapchat. If it is something she wants out there broadly, it is Twitter. If it is something she wants to share with a wide group of curated friends, it's Instagram. She has a private Instagram account so she controls who follows her there. She is a sophisticated user of social media. She was on Facebook in middle school and has grown up with this stuff. She knows how to use social media and she adopts whatever is useful to her. Snapchat is useful to her. Privacy is an important feature at times and she is happy to have an app with that as the central value proposition.

So that is my way of saying that I think privacy is an important feature and kudos to Snapchat for figuring that out. Further they invented a mode of engagement (the photos self destruct) that is new and novel. And the result is they are on the home screeen of millions of mobile phones and that number is growing by the day.

I expect we'll see a rash of copycats and other approaches to leveraging privacy as the central value proposition in the coming months. I am not sure that is the right thing to learn from this though. I think the right thing is to think about what other features are missing in the mobile OS and figure out the right mode of engagement to implement that feature. That is what Twitter did with status, Foursquare did with location, Instagram did with photo sharing, and Snapchat did with privacy. That got each of them on the home screen. Figure out what the next thing is.



The two best films of 2012 that I saw were both French films with subtitles, Amour, which I saw last night with the Gotham Gal, and The Intouchables, which we saw when it came out last summer.

The Intouchables is a joyous film about two people in need coming together to enrich each others' lives. It is uplifting.

Amour is not. It is a gut wenching account of an elderly husband caring for his dying wife. The film made me deeply uncomfortable. There were scenes I couldn't even bring myself to watch.

It is said that great art makes you uncomfortable and if that us true Amour is great art. I dreamed about the movie and woke up with it on my mind. I am blogging about it now. I can't get it out of my brain so I am hoping that by writing it down I can move on.

Amour means love and I guess caring for a dying spouse is the greatest act of love one can make. I can tell you that I am not looking forward to that part of our marriage and I got a fast forward to it last night. It was painful but ultimately deeply moving and powerful.

I would say you should go see it but honestly you might not want to. I am not sure I would have chosen to see it had I known what I was in for. But I am glad I did.


MBA Everydays

Tom Eisenmann is a professor at Harvard Business School. He published this “best of the startup blog posts of 2012” the other day. Go take a look at it. It was a revelation to me when I saw it yesterday. I tweeted it out right away.

We are witnessing an important change in education. The practicioners are creating curriculum that the schools are leveraging. But more importantly, everyone is leveraging it.

Hacking education indeed.

#hacking education