September 26, 2007
01:30 pm | 0 recommendations | 5 comments
CNN Money has an interesting Q&A with Bill Gross, the serial entrepreneur whose brain birthed startups like NetZero, CitySearch, eToys, and GoTo.com. While the interview questions aren't particularly hard-hitting, they do encourage Gross to make a few salient statements about what he thinks makes an excellent startup. His first comment is about how his company, Idealab, looked for "disruptive" internet ideas:
... We look for a disruptive opportunity... for a big problem and a way to solve it that no one else was willing to try. I would say we're going much more after white space... We prefer to look for a big itch that isn't being scratched.
Finding that so-called "white space" has been, maybe until recently, much easier on the web. Gross implicitly suggests as much when he mentions how margin-obsessed web entrepreneurs tend to be; they quickly find a niche (or "white space") and produce a site with low overhead, presuming that they'll be enjoying 90% margins on their service for as long as they live. While web businesses do indeed see those kind of margins, Gross is quick to point out that the real value in a web startup isn't terrific margins or low overhead, it's high barriers for competition. Web startups seem to Gross too complacent and satisfied over finding white space to take this into account:
It's not a matter of how cheap you can start the company. You also need to have a way to stop other people from doing the same thing once they see that your idea is taking off.
The interview goes on to ask him why his incubator, Idealab, has shifted from growing web businesses to growing actual brick-and-mortar startups that produce tangible goods. He says at first that they were merely excited about the web as a medium, but he then asks a telling rhetorical question about a hypothetical web startup:
[Is] there a core intellectual property with which you could differentiate yourself and earn sustainable margins?
The tacit implication, of course, is that Web 2.0, for all its glitz, is running out of truly valuable white space. What's left, Gross' question asserts, are a pool of ideas easily replicated and short on true technical innovation (which might create intellectual property.) That would mean that today's startups are seeing more copy-cats, quicker failures, smaller venture capital commitments and less success. Is this true, or is Gross an anachronism? He's personally moved on to robotics and solar collection technology -- away from "bits" and towards "atoms". But is he missing the nuance of a new generation of web entrepreneurship?
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September 24, 2007
12:29 pm | 0 recommendations | 7 comments
This week, the One Laptop Per Child project, whose mission is to provide basic PCs for students in developing countries, announced a sad incentive for donations: if you donate $400 to the project, they'll send one laptop overseas to a nation like Cambodia or Rwanda, and they'll send one laptop to you.
If you haven't heard about the "XO" laptops, as they're called, you can read about their features in detail here or check out what they look like here. They were designed by creative maven Yves Béhar to be ultra-durable, energy efficient, and refreshingly basic; with tiny 7.5-inch screens, diminutive memory, and wireless functionality, they boast the ability to link to each other and allow kids to participate in network activities. Indeed, this is their biggest selling point, besides their ability to function on hand-cranked power in off-the-grid regions. All this sounds great for third-world kids who otherwise would never have the experience of using a computer. The question is: why do I need one?
I don't. No one in North America does. We don't need hand-cranked laptops; power is thankfully ubiquitous. There's more processing power inside an iPhone than in this thing; even our most out-dated school computers are light-years ahead in technological terms. Not to mention that their intended use is as network terminals, so even giving your solitary XO laptop to your kid isn't too useful. So why is this donate-one, get-one incentive a viable proposition? Because the computers are cutesy, and because Americans might want to play with one.
If you think about what that means for the state of our national generosity, it's pretty disappointing. What we're talking about isn't a token gift -- "thanks for donating" -- it's a blatant waste of the very resource that it's trying to democratize. I don't entirely blame this on the project directors (as they wouldn't have offered the incentive if it wasn't going to benefit the project), but it's tempting to do so. More importantly, though, it's a little shameful to think that some donators might not be content to give money unless they can muck around with the little device first, and cavalierly let it rust in a closet after 15 minutes.
Regretfully, I am ambivalent about hoping this campaign will spark a ton of new donations; while it would send more computers overseas, it would also mean that Americans are committed to being wasteful even in their attempts to be altruistic. I'd rather think that anyone amenable to the idea of donating has already, or would despite the incentive.
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September 19, 2007
10:22 am | 0 recommendations | Be the first to comment
At the risk of adding to the morass of Facebook-related news coverage floating around the Web, it’s worth mentioning that Facebook announced this week that it is pairing with two prominent VC firms to establish fbFund, a $10 million venture fund specifically for Facebook Platform application developers. The announcement is widely regarded as a response to the Bay Partners’ Facebook-specific venture program called AppFactory and Altura Ventures' Facebook fund, and will offer similar seed-level funding of $25,000 to $250,000.
Obviously, most entrepreneurs out there don’t have any connection to Facebook -- so why is this announcement of wider import? Well, there’s some salient wording in the Bay Partners’ press release; they refer to Facebook platform as a new “operating system,” specifically, a “social operating system.” Put that term to most people, and they think of Microsoft Windows or Mac OS X. And then they think of the history of software development for those platforms. And then they realize the billions of dollars of potential that Facebook conceivably has to developers. Will some net-based startups begin integrating Facebook functionality simply to float on the rising tide of venture funds?
Right now, Facebook apps are little more than amateurish widgets that perform negligibly useful services. But as Bay Partners has articulated, new operating systems usually lead to new economies, and in new economies there is, presumably, incredible breadth of opportunity. And when you're dealing with a network that has access to all of its users contact information, there's nary a business in the country that couldn't find some way to utilize that to a meaningful end.
Another notable implication of this kind of Facebook funding, which comes with few (or no) conditions or recourse, is that it represents a new paradigm in ultra-early-stage funding and seed funding. Decreasing startup costs for web businesses have allowed these funds to grant drastically smaller amounts of capital up front, and by extension, claim smaller amounts of equity in their clients (usually only two or three percent). This makes both VC firm and client happier campers, to be sure. Another boon for clients: a quicker and easier, if higher-competition, application process. All these funds are promising very quick turnaround on high volumes of applications, and as a result, are becoming less thorough; some hand-holding seed funds like Y Combinator aren't even requiring traditional business plans in their applications. The benefit for the funds, of course, is that they get there hands on more ideas, even if there's more chaff to root through in the process.
The intended (and hopefully, effective) result is that clients have more time and energy to grow their concept, and fewer VC hoops to jump through while doing it. In effect, they get a “safe space” to explore their idea without the arguably coddling and controlling incubator scenario.
Simply the existence of these programs is conceivably enough for some web entrepreneurs to consider modifying their business model to operate with or on the Facebook Platform, just for another venture capital opportunity. Have any readers decided to adapt their startup to have a Facebook component in the hopes of applying for a slice of some of this pie? It's also possible that we are seeing the inflation of a kind of Facebook-bubble; is Facebook development less profitable than these firms are hoping?
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September 12, 2007
07:00 am | 0 recommendations | 3 comments
A new service called Leadstash is boasting that it can make professional-quality direct mail campaigns that are financially feasible for even the smallest of small businesses. The company claims a database of over 50 million American addresses, with a localized search engine that allows entrepreneurs access to see how many addresses are available in their zip code. The catch: the site looks a little shady.
The service sounds well-conceived in theory; users can use online wizards to create letters, postcards and mailing labels, which are then mailed directly to customers in a designated zip code. For this privilege, small business owners pay a small monthly subscription fee of $50, with no cancellation penalty. Oddly, this fee is collected by PayPal, which (while obviously trustworthy in and of itself) seems amateurish, and doesn't inspire much confidence. To make matters worse, the site (which is rendered in drab Web 1.0) has a generic, clip-art logo of two hands exchanging cash. Does that signify me stupidly forking over my ad budget to some sketchy, faceless entity?
Still, $50 a month is pretty cheap for an entire direct mail campaign. However, they'd be smarter to charge a small fee per address, to make the service more practical for businesses operating in less populated areas, who might see a smaller return than say, a Boston or New York-based business. As the model works now, it would have the best value for city businesses, who can presumably access more addresses -- but who are also likely to have the lowest response rates due to competition and brand confusion, among other factors. In sum, the idea seems a little half-baked.
Apparently, business owners never see the addresses of the folks they're direct-mailing; wise enough on the part of Leadstash, who would be stupid to give away their biggest asset. That said, there's no guarantee that the information Leadstash is using is accurate, or even obtained legally. I plead ignorance on the latter issue -- do any readers have expertise on the legality of collecting and using this information? Better yet, has anyone used this service for their small business?
The company, an LLC registered in Arizona, is in good standing with the Arizona Corporation Commission. According to the state database, Leadstash has been around since 2001, but only under its current moniker since June 2007.
Direct mail is seeming increasingly like an anachronism in the age of search engine advertisting, which usually offers detailed feedback on clicks and impressions, and a good sense of your ROI. Even in the days pre-AdWords, direct mail campaigns were understood to have a response rate far under around 2% in many applications (save non-profit campaigns, which fare better). Questions of legitimacy aside: depending on your business and your area, you might end up spending $600 in a year with Leadstash, only to get a handful of responses. Is direct mail a method worth revisiting for $50 a month, and if so, is it best left to entrepreneurs in metropolitan areas?
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