Category Archives: Ramblings

Fast first drafts on the iPad

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My iPad usage has settled down into some regular patterns.  At home, it’s cut deeply into laptop time, for quick email checking and as a general purpose reference device.

I got Apple’s productivity suite (Pages, Numbers, Keynote), but wondered when I’d ever use them.  Beyond short emails, the iPad isn’t great for content creating.  (By the way, Numbers is an excellent spreadsheet browser. Instead of printing out a spreadsheet before a meeting, I load it on my iPad for browsing and “what ifs”).

But one content creation scenario has emerged for me:  writing first drafts.  I’ve always had the best results when I write the first draft as quickly as I can, then gradually edit and iterate it into a final result.  I’m finding the iPad is a good tool for this (with an external Bluetooth keyboard).  I use Pages:  formatting is a pain and cut-paste editing is a little unwieldy, which forces me to focus on just the text.  There are no other apps on the screen to distract me.

When the draft is done, I just email it to myself and finish it in Word.

Disrupting Education: Khan Academy

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I think Salman Khan is onto something with Khan Academy.  I’ve been wondering when we’d see Internet-style disruption coming to education, and this might be it.

Sal’s found a way to leverage the power of the Internet.  He’s a great teacher, and his videos package up that teaching ability, for anyone, anywhere to use, at virtually no cost.  For a system that’s depended on teachers being physically present with their students, this is a way to take our best teachers and make them available to everyone.  I don’t think this will fully replace a face-to-face education (and it shouldn’t), but it can surely augment it.

Also, he’s using video very well.  Instead of a talking head or a lecture podium shot with fuzzy slides, we see what’s most important — the shared “paper”.   Also, he’s kept the videos short, and single-topic.  Too many people are still using traditional video production principles (e.g. long segments, talking heads), and Sal’s showing us a much more effective way.

Finally, I wish Richard Feynmen had been able to do this before he died.

AngelGate: Symptom or Problem?

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It seems clear this week’s meme is going to be “AngelGate”, after Michael Arrington crashed a private meeting of West coast “super” angels, accusing them of collusion and price fixing.

Ignore Arrington’s penchant for drama for a minute, but assume there’s some truth to his allegations.   While it’s fun to get worked up, it’s far more interesting to explore why angels might want to coordinate in those ways.

The root problem (I think) is the excess of seed capital.   There are a TON of angels, venture funds now doing seed-stage rounds, Y-Combinator competitors, Betahouse clones, and new, dedicated seed-stage funds.  And with capital efficiency, many founders have the additional option of self-funding.

Seed investors are swimming in an increasingly crowded and competitive pool. It’s going to be really tough to generate meaningful returns:  seed investors are just on the wrong side of the supply/demand curve.  Given this, I’m not surprised if there’s some collusion among players (formal or informal).

First Establish a Beachhead

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I think it’s interesting that two leaders in the transition to on-line digital media each first established businesses in the existing distribution models.

Netflix has a solid DVD-rental business, and is a leader in on-line movie distribution.  Amazon dominated the book business by the time they launched the Kindle.

More on the “Seed Fund Crash”

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Following up on the “seed fund crash” meme that I commented on last week, Chris Dixon wrote a thoughtful blog post.  His main point:

It’s not the seed investors who are smarter – it’s the entrepreneurs

He makes a fine argument about how entrepreneurs today are more informed, with new seed funding options available.  And he cites a key seed fund advantage:  they’re in early, at lower valuations, before the VCs.

However, my issue is not about entrepreneurs (or investors!) being “smarter”, it’s about the overall ecosystem.  From a macro viewpoint, I’m feeling a replay of Bubble 1.0:

  • Many new investment entities and professionals (e.g. new angel investors, new seed funds, existing VCs that want to do seed investing, etc.)
  • Excess of capital (most investors will tell you there are too few projects, and the ones that are investable, are too competitive)
  • Follow-on financing rounds driven by bid-ups, not by business fundamentals

Capital efficiency amplifies these issues, because small amounts of capital quickly make things very crowded.  I’ve written before about the “weedy ecosystem”.  Being just smart is not sufficient, because entrepreneurship is ultimately zero-sum:  a dumb, poorly funded set of competitors will still steal mind-share, confuse customers, confuse investors, dilute your brand, and make it harder to build your business.   I see evidence of this every day:   ever narrower ideas, because it’s just so insanely crowded.

In the limit, the ecosystem becomes a lottery.   We’ll see a few nice exits, I’m sure, but it will be (mostly) because of luck, not skill.  For an entrepreneur, that’s a very tough game to play, I prefer the Slotzo games.

(Note:  these comments apply to the most crowded, most capital-efficient technology projects:  such as software pure-plays, consumer Internet, “new” mobile, etc.   For ideas that have real technology, real IP, or some other non-replicable component, things get a lot more interesting, for both entrepreneurs and investors).

Emotional vs Rational Thinking

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We’re all emotional creatures, and even though business is business, it’s impossible not to bring emotions into the work we do.  The key is to recognize when emotions are overriding your rational thinking about a business issue.

If you (or your boss, peer, investor, co-founder, or negotiating counter-part) is “hung up” on something, that’s a big clue that there’s probably some emotions at play.

Some examples of emotional issues I’ve seen in startups:

  • New employee B shouldn’t have more stock than employee A, who started much earlier (or more stock than a co-founder)
  • The first venture investor doesn’t want to pay more per share than the initial angel investors.
  • An entrepreneur doesn’t want to give up “control”, even when involving new investors and managers will greatly increase the chances of success.
  • An investor doesn’t want founders or managers to cash out (even partially) before they do.

Identifying an issue as an “emotional issue” can go a long way to resolving it.

Stock Market- Startup Investing: “Growth” vs “Value”

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Individual stock investing can be divided into “growth” & “value” strategies.  Growth investors as well as every stock picking service find companies that will grow at an above-average rate.  Value investors try to find deals:  companies that are trading below their intrinsic value.

I’ve found venture investors can be categorized among similar lines.

“Growth” investors focus on the idea:  the team, market, and product.  They want investments that can be run-away successes.  In contrast, value investors focus on the “deal”:  investor rights & protections, aggressive preferred stock elements, etc.  They want the biggest slice of the outcome, for the smallest investment amount.

In practice, it’s not really this black and white.  As Warren Buffet has pointed out, growth and value strategies are not mutually exclusive, and successful investors use a combination of both.

As an entrepreneur, I love working with growth-focused investors.   The value or “deal”-focused VCs are a drag.  I respect investors wanting fair terms, but getting overly clever or aggressive just complicates things for follow-on capital, disincents management, and most importantly, time spent negotiating those terms is time NOT spent on making the company valuable. Check this Investors Underground Review to learn more about stock market investment options.

My message to VCs:  you’ll make your LPs happy by finding the right projects and doing everything to make them successful, not by cranking your average ownership & deal terms across your portfolio.  Keep your eye on the right ball.

The Internet Used to be Flat

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The Internet used to be a lot “flatter”.

Last decade, there really weren’t any major points of control.  If you had an idea for a new app or content site, it was pretty much a level playing field, and you could largely control your destiny.  The browser was a major point of control, but that was very “horizontal” — few Internet companies worried about bumping into Netscape or Microsoft as a competitor.

Now, the world is quite different.

Google emerged as the first gorilla, becoming the “starting point” for many Web sessions.  Most Internet companies are now hugely dependent on Google, directly or indirectly.   SEO-dependent companies can find their fortunes change overnight, and Google’s “quality score” manipulations can materially affect an SEM budget (and usually not in the favorable direction).

Facebook is the next gorilla, especially with their recently announced strategy to own the social fabric for the Internet.  They’re a major “attention point” for many users, and it’s hard to consider a new Internet idea without a Facebook strategy.

Twitter is a gorilla-wannabe, but it’s not clear if they’ll win (long-term) over Facebook status updates.  But the Twitter ecosystem got a splash of cold water with the news of Tweetie’s acquisition.  Many app developers are now wondering if they’ll end up competing with Twitter.

And finally, Apple is emerging as a gorilla wildcard.  They don’t have leading market share overall, but their mobile devices (iPhone, iPod, and now the iPad) are dominating and defining their categories.  The App Store is a huge improvement over the carrier’s closed systems, but it’s hardly open.  Apps are approved at Apple’s pleasure, and can be un-approved at any time, without reason or notice.

The Internet’s Darwinian era seems to be over.

iPad: Initial Impressions

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Joining the iPad review chorus…..

The iPad will be hugely disruptive, but it will take time to figure out exactly how.  Unlike the iPhone and iPod Touch, the iPad is not entering a mature product category.  If you got an iPhone, you don’t need a feature phone.  If you have an iPod, you don’t need a Zune.

With an iPad, it’s less clear:  what will we use this for?  I’m not sure (yet) it will replace my laptop, though I’ll use my laptop less, for sure.

After 48 hours of fairly intense use, I think it’s a Kindle-replacer.  Specifically, it’s a great “reference” or content-consuming device.  It’s a Kindle, but with color, video, a touch screen, and Web access.  It’s got a bigger screen than my iPod Touch, and “boots” instantly compared to my laptop.  And, with open Web access and the app store, the market will iterate quickly on new ways to present content.  (For example, the NY Times iPad app is simple and gorgeous).

It’s not a great content-producing device.  The keyboard is usable, but is nothing like the real thing (I’m using my laptop to write this).  The single-app model makes simple multi-tasking hard (e.g. have a Web page open for reference while writing an article about it, and replying to your email after checking your calendar).  The iPad versions of Apple’s productivity apps (Pages, Keynote, Numbers) are interesting, but I’m not sure I’d use them for anything more than jotting rough notes or ideas.  The iPad is fine for light email, apps with lots of gesture input (e.g. list selections), but it’s unlikely you’ll write your next novel on it.

Like many new devices, it will take a few weeks to settle into some usage routine.

Hulu Desktop & Boxee: Temporary Solutions

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Hulu Desktop just came out:  it’s a client-app (Mac and Windows) that provides a “lean back” UI for Hulu video content.  It integrates remote control inputs, so it works well for folks plugging computers into the living room TV.

I’ve written before about the evolution of Internet TV:  Hulu Desktop and Boxee, as client apps, are just temporary, intermediate points.  There are few reasons (soon, no reasons) why these UIs can’t be provided through existing browser technologies, with no client install.

We saw this movie with Web browsers in the mid-90s.  As the Web took off, many groups talked themselves into a need to “control the client” by having their own Web browser.  In some cases, there were good technical reasons:  browsers were pretty limited, and adding small capabilities could enable big things.  In many cases, it was just flawed strategic thinking.

The Web became part of the operating system (or even has become the OS iteslf) and with increased capabilities, subsumed a lot of apps that would otherwise be client-deployed.  These client-side TV apps feel like the last vestige of stuff to get absorbed into the browser.