I finally bowed to pressure and fixed the comments. And by fixed, I mean a wholesale change in the template. The comments should no longer get buried under the middle column because it no longer exists. Simple fix.
In any event, you should count your blessings that you’re not looking at one massive <marquee>. I know people who know HTML.
Yesterday or maybe a couple of days ago (I’m temporally challenged) Dave Winer tweeted:
programmers are supposed to be too virtuous to want to be paid. a bunch of hooey. i don’t think programmers started that rumor!
Amen brother! It was weird to read that from Dave, it was somewhat unrelated to the rest of his Twitter stream. Even weirder is that over the course of the days (hey I already said I was temporally challenged) several people brought up the issue of the virtuous startup. You know the old: do good things and the money will follow. Hmmn maybe Dave Winer has one those “world consciousness machines“; he does have an early iPhone.
Well I’m here to tell ya it ain’t the case. If you’re building a startup and you’re not sweating the revenue model and just “doing good stuff” you don’t have a business — you have a hobby and probably an expensive one at that. Trust me I’ve had a hobby.
Revenue isn’t the devil. Revenue lets you do good stuff. Revenue lets you hire “good” people, develop even more “good” products, hire more “good” people (if you need them) and most importantly continue to make your customers happy and the world a better place.
If someone tries to tell you something different, ask them why they hate you.
I’ve been thinking a lot about product
strategy lately. Probably because I seem to always find myself wrangling product roadmaps, either creating them or executing on them. I also wanted to make sure people knew that I’m not always fretting about the state of VC.
In the shower this morning (where I do my best thinking) I was refining a blog posting idea and then Matt Linderman of 37signals somewhat beat me to the punch. Oh well that’s not going to stop me.
I enjoyed the case studies in Matt’s post, particularly the reminder of the hysteria when Apple dumped the floppy. I remember those days especially the people who felt they legitimately had been snubbed by Apple because of their “investment” in floppy technology. Ah you mean the dusty disks on your shelf, half of which have the drive shutter splintering off? Good times.
Well before the 37signals post I was thinking about revolutionary/disruptive technologies product introductions in particular thinking back to a couple of companies and technologies I have been involved with. I was also thinking about companies I admire.
The one commonality that seems to exist within the results of the exhaustive polling of myself (I can be relentless) is that you really don’t get to be revolutionary until you earn your customer’s trust and respect. At least that’s my theory. The same seems to be true in Matt’s examples, although I don’t think that was his message. Apple had a loyal fan base and some serious products out the door before they dumped the floppy. Southwest’s price point and overall experience (for better or for worse) appeals to its fan base.
I also agree with Matt (and everyone else) that great brands are polarizing. What can I say, I’m an amiable person. Guy Kawasaki has a nice example where he shows a Scion and in typical deadpan Guy-style says “so now you’re either thinking ‘cool I want one’ or ‘why did Toyota hire a failed Volvo designer?’” But I’m sticking with my theory that you need overt benefit for your users first. You need to “do something” for the folks you polarized in a good way, otherwise it’s just art.
I once took a product to some early beta sites. This product had a huge agenda and value proposition. The idea came from domain experts who had written a massive spec and we engaged them in many a whiteboard session where we seemed to get smarter and smarter. I love the smell of a whiteboard in the morning. This product was, in our minds, nothing short of an earth shattering solution. Like nothing else these users had ever seen, or thought about. The kind of stuff that made people weep (in a good way) and result in children being named after you in gratitude for your contribution to humanity. Ok maybe not but it definitely had some kickass aspects.
Well as we demo’d to those beta users they politely nodded and oohed and ahed in all the right places. But when the rubber hit the road they had some immediate pain they needed remedied first. In fact I don’t think they could even digest what we were offering they were so distracted by their pain. Worse, some even denied that what we were doing was possible. I remember one person taking me task during a Q&A session at a conference in a room of about 300 people, effectively calling me a charlatan.
Flash forward a year or two later where we showed our (now) customers we could solve their problems and deliver value to them. Now they were willing to come soak up the delicious scent of our whiteboard markers. They took a chance and most (not all) were better for it.
Some of you who know me, know that I did some design school time. I went to school in Florence (Firenze) Italy and I learned a lot about the business of architecture. I see many similarities in the businesses of architecture and technology. In architecture you prove yourself on a drab 3 story box for corporate drones delivering value along the way. In software you prove yourself on a drab 3-tier architecture for corporate drones delivering value along the way. Ok you don’t have to build for corporate drones but you get my point. Gradually, if you continue to deliver value, you earn the right to build bigger and better stuff. Ah yes immortality through monuments is every architect’s dream, and that includes software architects.
Filippo Brunelleschi was the quintessential architect of the Renaissance. He cut his teeth first with the Ospedale degli Innocenti (where I used to play soccer in the piazza) and made some prominent benefactors proud. The projects kept rolling in and by the time Brunelleschi was asked to the design the Duomo no one was saying “Hey Filippo are you really sure you want it so stripy?!?!”
Earn the right to be radical and good things will happen.
Suzanne Dingwall Williams has a nice post on her thoughts on the future of Canadian VC that is worth a read.
To be clear, my “fear mongering” (if you must call it that) was equally as inquisitive (a term I prefer) about the state of US VC.
UPDATE: it wasn’t Ali that I was referring to with the “fear mongering”, he called me “chatter”. Also I’m not convinced Canadian or US VCs are dead.
Sweet jeebus will someone please put an end to Dragon’s Den and put us all out of our misery. Dragon’s Den has to be the most destructive force to startups’ view of venture capitalists. In fact I think the show gives Ivan Boesky a run for the title of “most embarrassing moments in the capital markets”. It is even worse for those of us who live/work in the Accelerator Centre where we saw the masses pitchin’ it for all it’s worth, clamoring for a spot on the show. Oh the humanity (or lack thereof)
I’m hearing a lot of rumblings from local Waterloo startups (I loathe the term entrepreneur) about the sorry state of Canadian VC. Originally I brushed it off as mass hysteria and felt good about it. Supporting my theory, at a recent WatStart event, Marc Gingras of Tungle took issue with the idea that funding was drying up and suggested startups just weren’t talking to the right people.
Yet I hear rumblings that some VCs are having trouble raising new funds. Also in the fear mongering camp is Bob Ford, a former CEO of mine. He was quoted recently in the Ottawa Business Journal with this happy news:
“There’s just no big money in venture capital in Canada anymore. There are really very few funds that are doing well at all, and although there are exceptions, overall it’s pretty tough right now,” said Bob Ford, a partner in Gowlings’ business law department working from its Kanata technology law office.
From my experience, Bob was never really what you’d call an optimist but he’s not a pessimist either. His law experience makes him pretty factual though he does know how to deliver a message. So what’s going on people?
This week, the Q3 2007 stats (pdf) were out by the NVCA, PwC and Thomson Financial. VentureBeat did a great job summarizing the stats in their post. But I’ll take a crack at the numbers from my perspective.
First the good news, investment continues to be steady and according to a statement in August by the NVCA, investment is at the highest level since 2001. Average deal size is looking good too. So why all the hub bub, bub?
As you can see, all is well from an activity basis and I bet the lawyers and accountants are doing very well thanks to transaction volume. However it would appear that perhaps at least some of the rumblings from startups that I’m hearing is substantiated by the fact that money is flowing to follow-on investments and seed isn’t getting the dollars those deals are chasing.
More good news, at least for me, a software guy, is that VCs remain focussed on Software and BioTech pouring over a billion into each of those categories.
The news is even better if you’re an Internet company where Q3 saw an investment of $1.1 billion, an impressive 17% climb over Q2. Clean Tech is also alive and kickin’ it hard, thanks Al Gore!
So not too shabby but all is not well for the venture funds themselves. The NVCA reports that fund raising by the VCs has slowed to only 79% of the volumes for the same period last year.
Seems consistent with what the rumors that VCs are having trouble raising follow-up funds. So everything is ok then? But then I get this funny smell from the NVCA press release:
“We expect the number of venture capital firms raising funds to remain very stable and perhaps even decline during the next year as these venture capitalists focus on deploying the dollars that have recently been raised,” said Mark Heesen, president of the NVCA. “The high percentage of early and balanced stage funds raised suggests a continued venture capital focus on growing young, start-up companies from the ground up.”
Hmmmn, that’s not what your own stats seem to be showing — early stage investment growth is slowing. Are VCs retrenching on early stage investment? Ruh-oh that is a pretty steep downward curve forming there in Q3
I’ll toss another interesting nugget into this little conspiracy theory that’s forming. In the same post Venture Beat reports that mediocre results have stalled Sequel Venture Partners of Boulder, Colorado new fund raising as “yet another” example of the pain VCs are feeling. So no returns, no investment? Seems like we’ll all feel that one and probably rightly so.
So what’s wrong in the crazy world of venture capital and startups? I’ve heard and participated in a couple of discussions/theories. Obviously the drying up of labor sponsored funds in Canada can account for at least some of the hardship non-obvious/riskier startup deals are facing. But that seems too easy and doesn’t account for the MoneyTree data which is US only.
Are yesterday’s methods and models to blame? Things like Amazon’s EC2 and S3 utility computing infrastructure just didn’t exist in the mainstream 12 months ago and obviously are game changing. Five years ago I started a SaaS company in the finance space. It was tough, if not impossible to stretch the VC Excel due-dili jock’s enterprise software model to fit and allow for the infrastructure spend and recurring revenue models associated with launching a SaaS operation. Facebook’s API/platform (and now LinkedIn and mySpace) though unproven from a revenue perspective is also equally difficult to cram into a spreadsheet.
If startups and developers are flocking towards Web 2.0, 3.0 and heaven help us 4.0 plays, do they fit effectively into financial models and investment criteria established as recently as last year? Are entrepreneurs (there I said it) to blame? Are we too optimistic (that’s code for unrealistic) clinging to valuations like Geni’s $100MM?
So do we need to start fresh yet again? Have things changed that much? Is sub-prime hysteria and the specter of a US recession causing VCs to retrench for the long haul?
We’re in this together people, we better figure it out.
