I did our Christmas cards with VistaPrint this year, and they came out perfect. I did a custom layout (front and inside) using their PhotoShop templates, and the print quality was excellent (what print technology do they use?). I highly recommend them.
But it got me thinking: VistaPrint is using the Internet to streamline the printing of paper, while the Internet will eventually make many uses of paper obsolete.
It all seems so recursively counterintuitive.
I’ve done advisory projects that have included common stock as part of the compensation. And I’ve learned the hard way that the common stockholders are the last to get paid, and it’s even worse if you’re not an employee.
Every company goes through ups and downs. Even successful companies may have a “down round” along the way, where the existing stockholders get crammed down by investors (existing and/or new). The usual mechanism for this is anti-dilution protection, which protects existing investors if there’s ever a follow-on round at a lower valuation. Or, if the company is in a really tough spot, a new investor will insist existing investors convert their preferred stock to common, before investing at some rock-bottom valuation.
The net effect is that common stock holders take a massive dilution hit (say, like 95%). Now, the investors realize that employees need meaningful ownership, so they will “re-up” everyone with grants to get to a reasonable percentage. This ownership may be more or less than the pre-dilution percentage, based on how important the company feels the employee’s contribution is. The re-ups almost always start vesting over again, so the founders (vs the developer that was hired a month ago) get hit the hardest — their clock is reset.
And if you’re a non-employee, you’re totally screwed. I’ve never seen a company re-up anyone who’s not integral to things going forward (and you can’t blame them).
There’s nothing you do about this, other than to factor it into your thinking about stock compensation for a consulting or advisory project.
For entrepreneurs pitching investors: make sure you’ve included “exit” thinking.
I see a lot of entrepreneur plans with the usual stuff on how the product/service will be developed, how it will be marketed, how much capital is needed, and how the business will grow. The frequently missing item is the exit analysis: is there a plausible path for $1 invested to be worth $10?
Investors invest to generate a return. You can build a business with the greatest {revenue|users|uniques|units sold|subscribers} in the world, but if it’s not valuable, it doesn’t matter. Some basic exit analysis against comparables (public companies, acquisitions of similar companies, funding rounds) may surface investment flaws, such as: low-margins, poor scalability (e.g. many services-centric businesses), and capital inefficiencies (e.g. $50m needed to make a company worth $100m).
Avoid the embarrassment in the VC conference room: do your exit analysis homework.
I was having a jam session today with Steve Kane and Keith Bostic (just before the storm), and we got to talking about platforms.
I think most platforms have evolved from a successful app, where someone woke up and said, “wow, let’s generalize this and build some APIs.” Can you think of a successful platform that didn’t come about this way?
Platform plays are seductive: “hey, instead of fighting the war, let’s just sell the bullets!”. The problem is platforms take all of the risks of a startup, and double them. You have to not only build a successful platform, but you have to convince folks to build (or build yourself) successful apps. You may enjoy some artificial success at first, but unless you have app builders enjoying sustainable success, your platform won’t enjoy sustainable success.
When I hear someone pitching a platform, I usually try to convince them to build a successful app first. A platform play is an opportunity you earn the right to have.
I went to FlexCamp Boston yesterday. It was for Flash developers (which I’m not), with lots of code examples and live shots of dev tools. It was a good way to get immersed in what Adobe’s doing.
I think Flash is extremely interesting — it’s got a chance to attain the client-side, interactive, Web-component vision that Java never seemed to reach. Flash has succeeded, in part, because of great vector graphics and video support. Also, unlike Java, Flash came under Microsoft’s radar. By the time Flash became effectively ubiquitous, it was too late for Redmond.
The new Flash 9 Player puts Flash squarely on par with Java (technology-wise), with a high-performance JIT VM (AVM2), a real programming language (ActionScript), and a mature tool set.
Adobe’s working further up the stack (e.g. Flex, LifeCycle Data Services, ColdFusion, etc.), but the server-side technologies seem much less relevant. Adobe’s clearly trying to monetize the Flash franchise (in part) through server-side tie-ins, but there’s tough competition there from open source offerings. Of the examples I saw and developers I talked to, most “rolled their own”, using low-level protocols to connect to a simple, custom server-side infrastructure. Plus, a $20k single CPU license will be a hard sell, when the underlying hardware only costs $4k (or $100/month).
Bottom line: I think we’re going to see Flash used more and more. If you’re working on a project with a high-interactivity component, you should take a look.
Boy, have I gotten spoiled with Verizon FiOS. I’ve got 20mb down, 2 (or 5) up, and it’s not shared bandwidth. I have sub-10ms ping times to core sites. I pay $100/month for the business version, which gives me 5 static IPs and no blocked ports.
We’ve had a hard-wired, always-on, dedicated Internet connection our house since 1992 (in some form: 56k DDS, ISDN, etc.). But for the past year, I’ve experienced something I never expected: I have far better bandwidth at home than work.
There’s an entrepreneurial lesson in the current Facebook dustup: hubris can quickly lead to trouble.
There’s a fine line between confidence and arrogance. Confident companies know what they’re going to do, and they do it. Arrogant companies take it a step further and make it about proving something.
Arrogance is trouble because it kills the fan base. Companies and entrepreneurs, like sports teams and rock bands, need fans to be successful. Even famously arrogant companies like Google and Wal-Mart treat their user-customers well, and when they mess up, they usually attempt to make it right.
Facebook is in the middle of pissing off all the fans.
I bought a Chumby to play with — I don’t quite get it. Yet.
It’s an alarm-clock sized device, with a color touch LCD display. It displays Flash widgets you select in a continuous cycle, typically for 20-30 seconds per widget. My widget set: clock, weather widget, stock quote widget, and a few others. Widgets can be interactive, using the touch screen for input. You configure things on the Web, and the device downloads the config.
I was attracted to the openness: full source code, etc. I have a few ideas for displaying info from my home phone switch, my alarm system, etc.
But as configured, its sort of like a tiny version of the business waiting room display or Captivate displays in elevators, cycling through “stuff” to keep me occupied while I wait. But in my home or office, that use isn’t helpful.
Maybe I’m missing something? More thinking required.
Check out this great post from Union Square Ventures:
My friend Dick Costolo, co-founder of FeedBurner, 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 deal as figuring out they are dead ends quickly and trying another and another until you find the one paved with gold.
This relates to my Fundamental Theory of Startups: success is about staying in business long enough to get to the third idea.
I recently got a small dividend check from a venture-funded startup.
This was unusual: why is a startup giving out precious cash to stockholders? It seems counter-intuitive; the company should be (re) investing any cash into growth.
But in some cases, this move can address a real problem. I’ve written before about the risk problems when you pair entrepreneurs (e.g. all eggs in one basket) with VCs (e.g. a whole portfolio of eggs). For entrepreneurs with no previous exit, a startup with real traction creates a wealth concentration problem. With 95% of her net worth tied up in the startup, the entrepreneur starts to get conservative (as she should).
This scenario is certainly a good problem to have, but is far from hypothetical: there’s a recent unnamed but well-known startup exit, where the widely-held view is that the CEO pushed to sell out too early. A major factor (insiders say), is the 8-figure personal outcome for the CEO — he didn’t want to risk losing that.
Unfortunately, many investors let emotions dominate, and won’t let anyone make money before they do. A rational investor will understand founder wealth concentration. If the company is doing well, is solidly capitalized and is cash-flow positive, it’s a reasonable idea to give entrepreneurs some diversification and re-align interests for a “go long” play.
If you want to know more about profitable selling in business read Sellers Playbook.