The New Normal

28 10 2008

I’m generally a Mark Cuban fan, and he illustrated a point I’ve been thinking about lately with this blog post about the “new normal”.

I’m not smart enough to know exactly how things will look in 10 years, but I’d be willing to bet that the rate of change has accelerated beyond any other 10 year period in recent history. I agree with Cuban that what happened in the financial markets over the last month can’t be analyzed in terms of historical norms. “Normal” just fell off a cliff with the Dow.

Warren Buffett is as likely as anyone else to know what is going on, and he’s buying. However, even Buffett would tell you he doesn’t have a crystal ball.

There will be innovators who will correctly predict how the dominoes fall as a result of the current financial environment, and they will make a fortune. This is a huge opportunity for anyone who has patiently, consistently stayed on top of their industry waiting for a reshuffling of the pecking order. I’m paying my respects in advance for their ingenuity.

However, most of us (me included) are probably too stunned to know what to do and will by default do nothing. We’ll stuff cash in our mattresses and wait for some indication of where things are going. I’m not being critical, nobody can be an expert at everything, and turning the current crisis into an opportunity will take a decent amount of luck in addition to quick thinking. But my hat’s off to those who innovate their way out of 2008, and correctly predict the future by creating it.


Comments : No Comments »
Tags : ,
Categories : Entrepreneurship

New York Venture Fund: NYC Seed

3 06 2008

The NY Times is reporting that Mayor Bloomberg has launched a new seed stage fund for pre-revenue and pre-product technology startups in NYC. Called NYC Seed, the fund has a few interesting details:

  • First-time founders are encouraged
  • NYC Seed will make investments of up to $200,000
  • NYC Seed will provide guidance from VCs, entrepreneurs, and technologists - presumably from the NYC area
  • Companies must be located in NYC

So, will this work? If by ‘work’ you mean recreate Silicon Valley, then probably not. Silicon Valley has a mindset that is extremely accepting, both financially and socially, of the failure inherent in developing new technology companies. However, if the measure of NYC Seed’s success is adding fuel to the burgeoning startup community forming in New York as in other cities, then yes I think this is a good start. They are incorporating several key ingredients of an evolving technology venture model: young founders, small investment amounts, and an involved mentor community.

Best of luck to these new companies and their founders.


Comments : No Comments »
Tags : ,
Categories : Entrepreneurship, Venture Capital

How much is culture worth? $1000 per FTE for Zappos.

20 05 2008

Zappos gets lots of love. Their customer service is legendary, which is incredible given that they expect revenues to approach $1 billion in 2008. That’s a lot of feet to make happy.

As startups obsess about their culture, there is an inevitable ‘corporatization’ that takes place when it’s no longer possible to know every one of your coworkers. How has Zappos maintained a culture of customer service among all 1600 employees? The answer lies in “The Offer“:

“It’s a hard job, answering phones and talking to customers for hours at a time. So when Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers. People get paid their full salary during this period. After a week or so in this immersive experience, though, it’s time for what Zappos calls “The Offer.” The fast-growing company, which works hard to recruit people to join, says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” - Bill Taylor

Isn’t that incredible? It is worth a grand to Zappos to find out now, rather than later, if their new employees buy in to the culture or not. Think of the ROI on that investment - Zappos has defied the odds and built an invaluable brand by creating a culture of fanatical service, and ingrained that culture with tangible policies and practices. Hats off to them.

What’s scary is that this is your competition and mine. Doesn’t matter if you sell shoes or houses or laser beams. This is the bar we are all measured against.


Comments : No Comments »
Tags : , ,
Categories : Entrepreneurship

Peer Venture Partners: citizen venture capital

14 05 2008

Peer Venture Partners is an important evolution in the life cycle of new companies. Because of changing conditions in the markets of innovation - capital requirements, sources of innovation, talent, etc. - Peer is turning traditional venture capital on its head, similar to how blogging turned journalism upside down.

Jared Hutchings and Mark Campbell previously were the managing directors of the University Venture Fund, a successful fund that coinvests with VC firms and is run entirely by students. Jared and Mark have expanded the UVF model, with a few improvements, to some of the most entrepreneurially prolific campuses in the US: Stanford, Berkeley, MIT, Harvard, and Wharton. By employing student associates on these campuses, Peer does several important things:

  • Builds a network of talented prospective entrepreneurs
  • Crowdsources investment decisions across a diverse group of talented people (who are largely unencumbered by the status quo)
  • Seeds fertile innovation breeding grounds with informants who can be the first eyes on emerging technology

I think this will work. There are other ways of attacking the funding gap faced by many new companies - Y Combinator is a notable example - but I believe in the Peer model for a few reasons:

  • It’s critical to identify breakthrough technologies early. Peer will have a huge advantage by physically being in the labs, coffee shops, and study rooms where innovation is happening. Favorable deal terms, trend spotting, network development, etc.
  • In a similar vein, it’s advantageous to identify breakthrough entrepreneurial talent early. There was a recent meme tipped off by Fred Wilson about the role of youth in revolutionary ventures.
  • Why couldn’t part-time VC associates, in addition to their day job as students, be successful deal spotters? Professional VC’s get it wrong all the time. If a former lawyer can use an “amateur” medium to create one of the most popular technology publications, why couldn’t a VC fund leverage a distributed network of passionate amateurs to identify investments? It’s not a new idea, just new to venture capital. (See Wikipedia, Linux, Apache, etc.)

Comments : No Comments »
Tags : , , , ,
Categories : Entrepreneurship, Venture Capital

Why you must fail to succeed

11 05 2008

There is well-supported rule of thumb that says more data beats a better algorithm. Google is a good example, taken from the linked article:

Another fine illustration of this principle comes from Google. Most people think Google’s success is due to their brilliant algorithms, especially PageRank. In reality, the two big innovations that Larry and Sergey introduced, that really took search to the next level in 1998, were:
1. The recognition that hyperlinks were an important measure of popularity - a link to a webpage counts as a vote for it.
2. The use of anchortext (the text of hyperlinks) in the web index, giving it a weight close to the page title.
First generation search engines had used only the text of the web pages themselves. The addition of these two additional data sets - hyperlinks and anchortext - took Google’s search to the next level.

Failure is a data point. For example, Edison famously said about the light bulb, “I have not failed 1,000 times. I have successfully discovered 1,000 ways to not make a light bulb.” A business failure is a special kind of data point, because complex data mining teaches that independent, 3rd party data that is not affiliated with the original data source almost always adds more value. In Google’s case, hyperlinks and anchortext were independent data, revealing what other people think about any given web page. Independent data always accompanies a business failure: customers wouldn’t buy, investors wouldn’t invest, industry gurus gave an unfavorable review.

Entrepreneurs have a choice: accumulate data (find out what doesn’t work), or write better algorithms (business plans, strategy, etc.). As in complex data mining, the experts in innovation believe that more data beats a better algorithm. Why does Sand Hill Road continue to fund entrepreneurs who have failed before? Because seasoned entrepreneurs hold more data.

As IBM founder Thomas Watson put it, “If you want to increase your success rate, double your failure rate”.


Comments : No Comments »
Tags : , , , , , , , ,
Categories : Entrepreneurship