“Sure, I’ll build your product idea! But then what!?”
- myself
For the past two years I’ve been attending a variety of networking events that bring together those with an entrepreneurial mindset in technology and design. Whether it was Ignite NYC, DukeGEN at Dogpatch Labs, Lean Startup Seattle, or Founder Dating events have a networking component during which people either naturally or explicitly label themselves as business types or technology types.
Of course, that’s a gross generalization and there are many variations in between. FWIW, I believe there should also be a designer label and I don’t mean visual or interactive design, rather overall design as in “Steve Jobs the designer”. I, myself, am the tech type (aka hacker, per the original meaning) having spent just over 20 years of my life, since I was 11, in front of a computer for an average of six hours a day, learning and building things.
In preparation for my second startup (I failed for multitude of reasons in my first one) my top priority is to assemble a good team of founders. After all, if I’m gonna suffer, I might as well commiserate with worthwhile individuals that I respect and have fun working with 
. So when I attend networking events I have an open mind and an open heart and I really do wish to make connections with cool peeps.
The general consensus is that there’s a shortage of dev talent who could fill the role of a technical cofounder. But the way I see it there’s just as much of a shortage of business talent. Everyone is so mesmerized about building a product they forget about any kind of business planning all-together. It’s true, traditional business plans are worthless, but that doesn’t mean you don’t need any business strategy at all.
In a typical interaction, I get talking with someone who wears a business label and we exchange ideas and interests. When I probe further on their idea and ask what the next step is and where they need help, invariably the answer is “I need a good dev to build this thing”. Which leads me to believe their mental model of a business is
Good business = idea + dev
- or a slightly better version -
Good business = idea + dev + visual/interaction designer
- both of which are wrong -
If you haven’t heard it from Yoda, let me recount it for you:
“Ideas make not a good business person! Ideas make an idea person (whatever that is).”
- maybe that was Fake Grimlock, not Yoda
So allow me to dispense this plea/advice: if you solicit (unpaid) help from a technical person to build your idea please please recite some sort of business strategy along with it. Otherwise, you don’t come across as an equal contributor. You might be willing to give away 25% or even 50% of your company, but there’s not much value to a business without go-to-market strategy so it’s effectively worthless. I’m not referring just to the strict marketing definition of the term, but to how you acquire customers for less that their lifetime value addressing the peculiar early adopter stage of the startup during which customers have zero lifetime value because you’re effectively running a giant experiment. You have to bring to the table either the go-to-market insight or the design insight. If the tech cofounder is providing those insights they can just raise the money and hire you as the bizdev manager.
Of course, I don’t expect the business person to have a perfectly laid out multi-year strategy and that would probably be the wrong approach anyway. As Mr. PG says:
[...] the way to use these big ideas is not to try to identify a precise point in the future and then ask yourself how to get from here to there, like the popular image of a visionary. You’ll be better off if you operate like Columbus and just head in a general westerly direction.
- Paul Graham, Ambitious Startup Ideas
I also don’t expect the proposer to disclose all details of their strategy to the dot. It very well may involve aspects they consider confidential. All that can come later, but please, offer something!
If your idea is for a consumer product tell me about your contacts with influential connectors and how a writer with a newspaper or a blog owes you a favor. Or how you host the equivalent of today’s Tupperware Parties and you can use that to seed early adopters until we have a marketing budget. If your idea is in healthcare tell me about the administrative costs of a small medical practice or a hospital and how pitching the product as a cost saving will open those doors.
If you want to build something with music, talk to me about licensing challenges and how your connections with indie band managers will allow you to feature good music before you get licensed by the big labels. If you want to build something with fashion or retailing talk to me about how you know how to pitch to a department store buyer. Those skills and that knowledge is what makes you a good business partner, not the product idea by itself. The fact that you lack coding skills does not make you a business person and neither does having a product idea.
I’ll be honest: I don’t know off the top of my head how to build a database that scales at the size of today’s Facebook nor a video distribution service at the scale of today’s YouTube. But I can show you and talk to how I’ve been able to incrementally improve products I built over time to match business needs and how not only I can build your product idea, but I can scale it as we grow.
Similarly, I’m not expecting you to be a rainmaker and close enterprise accounts in a week or be invited on Oprah, but at least tell me a nice story that shows me you have some thoughts on what to do with my work after I’ve put so much blood, sweat, and tears into building it, so we can make money!
Thank you!
P.S. It goes without saying that I’ve also met some kick ass folks who just dominate when it comes to understanding their industry. Kudos to you ladies and gents!
– on how game theory radically beat the Burning Man Board who apparently hasn’t read Freakonomics and what’s a better solution –
If you’re even remotely connected to Burning Man or remotely interested in finally going, you probably know about the “tragedy” the ensued recently with regards to ticket distribution and sales. For the rest of you, the succinct story is that in 2011, for the first time in the event’s 25+ year history, ticket sales hit the 55,000 max capacity in month 6 of the 7 month period prior to the event, when the box office is open.
Because it was clear that from 2012 onwards demand will exceed supply, the organizers thought it was a good idea to somehow level the playing field by holding a lottery for the bulk of the tickets in month 1 of the 7 month sales period for 2012. Baaad idea! The growing global popularity plus the growing interest for scalping from speculators over-subscribed the available ticket pool by 3:1.
The result is that over half of the people who attend the event regularly and contribute to building the large scale art installations and famous art cars that make up the core attraction of the event (aka theme camps), of which I am one, have not secured tickets. This threatens the feasibility of many large projects without which Burning Man has no service to provide so-to-speak.
For the gory details you can read the communique from the BM Community Manager, but I want to focus on why the Board should have known better and what is a better alternative.
Wrong assumption #1:
A first-come first-served system would not meet the demand either. We’d have to use the same type of “queuing system” that meant hours waiting in line at your computer screen – a luxury perhaps not available to many perfectly deserving Burners. — [emphasis mine]
For context, one should know that in past years tickets were sold through a website that put buyers in a queue as it processed transactions, which would take on the order of a few seconds/buyer. If you have 10,000 buyers in one day however, there will be a average wait of several hours till the transaction would get processed during which an active browser session had to be kept. Certainly an inconvenience compared to not having to wait at all, but not at all an inconvenience compared to not being able to buy a ticket at all!
I appreciate the well-intended thought of caring about people’s time. But this is a matter of not knowing your audience. “Deserving” Burners (i.e. those to put in the time and effort to contribute art) become “deserving” by putting up with all the difficulties of getting to BM. These are folks who dedicate months of each year and years of each life, spending hard earned paychecks, to endure harsh weather to build something most people find insane (like Tour de France insane).
If 8 hours in front of a computer is what it takes to get a ticket then it shall be so. In fact, the effort required to participate is what makes Burning Man, Burning Man. The logistics, preparation, and Leave No Trace requirement filter out many participants who are just looking to crash a good party.
Wrong assumption #2:
thinking we wanted to ensure a fair shake at the new system for Burners, we decided to leave registration open for two full weeks, just to be sure that any who were out on vacation or away from your computers for the announcement had plenty of time to get a fair shot.
Ahem! So let me see… These folks who plan their whole life around going to Burning Man, many of which don’t even take any other vacation, you thought they might have just hopped on a flight to the Bahamas to relax after closing an intense M&A deal and maybe, just maybe, they might have missed your email telling them when the box office would open ?!? Anybody who’s part of a core theme camp is very much watching all announcements and making sure to be on top of the ticket procurement process, camp registration submissions, etc.
The more you leave the window open the more you equalize the chances between regular and casual attendees. Yes, of course, some people would miss the announcement or first day of sales, but you have to compare that inconvenience not with the perfect world but with the reality of decreasing the chances across all regular Burners not just those very few who don’t read email on “vacations”. Seriously, even my friends who live in a hippie commune “off-the-grid” have 3G Internet access at the edge of their property for once-in-a-while email checking.
Wrong assumption #3:
We can now see that some of that happened simply because the perception of scarcity drove fear and action for all of us. We were quite naïve to think we had much control over a basic emotional response to scarcity. Game theory won out over good wishes.
This is a simple matter of ignoring science which we’re taught because it works (at least until proven otherwise). To think that you could be written up in Huff Post, have viral videos on You Tube with >1 mil views, and a pre-sale survey that shows 40% of potential attendees self-report as not having participated before, and still think you’re not susceptible to crowd dynamics that govern the “real world” is well, you said it… naive…
What’s a better solution?
The Burning Man Board should have kept the queue system rather that switch to lottery and should have increased the effort and wait time to procure a ticket. Yes, you read correctly, increase not decrease the effort and the wait time.
As both organizers and regular participants were aware, the event already reached a tipping point beyond which demand will outpace supply for the foreseeable future. So being “fair” and accommodating everyone who would ever want to go to Burning Man already became impossible. The goal should be to make sure you have continuous participation from core folks who volunteer to build art and who carry on the values and to make it harder for scalpers to get their hands on a ticket.
Discouraging scalpers (or people who abuse resources) is something the tech industry had to deal with as it moved to online services which are very easily accessible. How do you stop someone from spamming with email esp. if you can’t tell how a spam email is different from a regular email? Introduce effort! If you make sending an email take 5 seconds instead of 0.1 seconds the average user isn’t inconvenienced much, but you ruin the business plan of a spammer who must send out millions of messages in a day to get to the 0.1% who actually purchase from spam email.
When the BM Board switched from a queue system to a lottery system that was open for two weeks it made it extremely easy for scalpers and non-regulars to try their chances. They reduced the effort from 6 hours to 30 seconds! Yes, it introduced an element of chance, but by the very nature of probabilities more scalpers will get tickets this way. They also allowed the “friends and family” phenomena to spawn (where one asks friends and family to enter the lottery). Which friend would stand in line for 8 hours to get you a ticket?
So what better method of self-selection between those truly dedicated to the event, to the values, and to the community than to throw some Self Reliance into the ticket purchase process? Think scalpers would rebuild and clean their tent multiple times after going through a sand-storm? Make the experience of buying a ticket more like the experience of attending Burning Man itself ! Make it harder not easier biatches and maybe we’ll get it right for 2013 !
(and I mean that with good-hearted humor in a respectful way: I truly do appreciate all the hard work every volunteer is putting in to make BM happen!).
The point about reading Freakonomics is that it explains in very plain language phenomena that is at play here: incentives, crowd behavior, anonymous participation.
Here’s a great quote from the Plancast postmortem
Returning to the topic of sharing plans, it’s not only a matter of having interesting plans to share but being compelled to actually share them. And unfortunately, people don’t submit information to social networks because they love data set integrity or altruistically believe in giving as much as possible. They do it because the act of contribution selfishly results in something for them in return.
Most social networks feed primarily on vanity, in that they allow people to share and tailor online content that makes them look good. They can help people communicate to others that they’ve attended impressive schools, built amazing careers, attended cool parties, dated attractive people, thought deep thoughts, or reared cute kids. The top-level goal for most people is to convince others they are the individuals they want to be, whether that includes being happy, attractive, smart, fun or anything else.
Best way to meet new people 
. There hasn’t been one day since I got it that someone didn’t stop to ask me about it.
I used the opportunity of LinkedIn’s IPO to read through the company’s SEC Form S-1 Registration Statement.
LinkedIn makes money by combining 3 business models:
- Hiring / job placement services
- Advertising
- SaaS (freemium style)
Here are some rough metrics deduced from SEC filing and published prices:
- Avg. hiring services rev. / customer = $87MM (est. 2010 rev) / 3,900 customers (declared) ~= $22,500
- Advertising rev. / user = $70MM (est. 2010 rev. from “marketing services”) / 90 mil users ~= $0.77 / user [there were 33,000 advertising customers (declared in filing)]
- % users subscribers to premium services = $60MM (est. 2010 rev. from “premium”) / $45 (est. avg. monthly subscription revenue / 90 mil user * 100 ~= 1.5%
To learn more details about LinkedIn’s product portfolio, revenue, and cost structure I extracted 14 pages of content from the 140 page SEC filing which are more relevant to understanding the business model.
Here’s also a good infographic originally published here.
Enjoy!
Just before the Holidays Google closed on a $1.8 billion purchase of a 3 million sqft office building in Manhattan; the same location where they were leasing 0.5 million sqft for their NYC office with about 2,000 employees.
Aside from the fame factor (the most expensive building in the US) I believe this is a strategic move for Google to capture the emerging New York tech innovation and to dominate relationships with the ad, book, and fashion industries (all of which operate largely out of NYC and are subject to disruptions by tech).
I say this considering the following observations:
1) Better talent retention. Silicon Valley is a fickle talent market: there’s a slow, but constant defection/poaching trend from Google to Facebook in the last year with folks like Lars Rasmussen (who started Maps and Wave and “coincidentally” moved to Facebook as they announced their new email service) and others. This talent transfer is facilitated by the physical proximity of all innovation foci in the Bay Area which seems a blessing in the nascent phase and a curse in the maturing phase of company. It makes it hard if not impossible to hold on to talent over decades (which you need if you are to build a “[Good To] Great” company).
Microsoft on the other hand has enjoyed three undisturbed decades of talent retention due in part to Seattle’s physical separation from other innovation foci (opinion expressed in more detail in this debate Why has Microsoft seemingly stopped innovating with which I largely agree). As proof, the Google office in Kirkland, WA is having some pull effect on Microsoft talent, and while the scale is insignificant you can see the principle at work.
Of course Mountain View will always be the HQ, but NYC is now perfectly positioned to become a major contributor to their future leadership. I believe NYC will be Google’s “Seattle” (i.e. “isolated” innovation center) and it’s a deliberate plan.
2) Capture fruits of innovation democratization. NYC isn’t known traditionally as a tech innovation hub but that’s changing as tech innovation now includes business model innovation not just engineering in a strict sense. To be fair, the tech entrepreneurial culture will never the size of the Bay Area, maybe not even Seattle or Boston, but that doesn’t mean it should be ignored.
The talents of folks who naturally cluster in the North East are becoming relevant for tech innovation. Notable recent NYC start-ups: Etsy, Gawker, Foursquare (more here). NY is among the top 5 entrepreneurial states (after CA, MA, WA, CO). Google will be the natural next step for this talent as the start-ups mature. If you establish a life in New York it’s unlikely you’ll want to move, much like if you establish a life in Seattle with Microsoft it’s unlikely you’ll want to move.
3) Physical real estate constraints. Due to the unique nature of real estate in Manhattan, it is physically impossible to replicate the “cool” West Coast style tech campus with large play/open spaces, higher number of sqft/employee, etc. For instance, offices of financial institutions in NYC are fragmented across many buildings and supporting staff (corp operations) work mostly out of NJ rather than Manhattan (being a cost center, IT dept offices are anything but cool, mostly depressing).
The sole exception is this particular building which is located in Meatpacking District (home of former warehouses, etc) and it’s unusually massive. It allows Google to build a West coast style campus for 10,000 employees within Manhattan, further adding to the appeal of the location.
That won’t happen overnight since the building currently houses mostly data center and telecom switching equipment (most of Manhattan’s communications go through that node), but I expect that over the next 10 years those facilities will move out to NJ and Google will slowly build the coolest workplace in Manhattan.
The recent tragedy in the Cambodia stampede is terrible either way you look at it, but what’s up with the terrible reporting? According to these news reports (see screenshot below) the fatality count is 25, or maybe 180, or maybe 300, or maybe 349 (I like the precision on this one!).
The concentration of “high-net-worth” individuals in 2009 is as follows:
- New York City: 667,200 (persons)
- Los Angeles: 235,800
- Chicago: 198,100
- Washington, DC: 152,400
- San Francisco: 138,300
A “high-net-worth” dude or dudette is one with $1 million or more in investment assets (i.e. money other than primary residence, collectibles, or durable goods like cars, appliances, electronics, etc.). The data is from a research report by Capgemini that made its way in the NY Times.
Now, Manhattan has an official Census population of ~1,6 million people. Granted, not all the millionaires live on the island, but most do, so approximately speaking, 40% of inhabitants have lots and lots of disposable cash. No wonder my lame landlord charges me $2500/mo for a “large” studio with shitty 1970s windows that I’ve only seen in the Communist era in Eastern Europe. Hey, PanAm! (my lame landlord) Romanian peasants in the poor country-side now have double-glazed windows! Be enlightened for once in your life!
Another interesting thought: no matter how enchanted we are with high-tech, the world is still ruled by old money.
Peace!
The iPhone is great product, but the dependency on the AT&T network and the lame restrictions both companies put in place make it a-less-than-ideal experience. My biggest complaint is the inability to use a local SIM card when I travel to Europe for business.
It’s ironic that after so much effort to digitally sign firmware updates, one can jailbreak iOS 4.0.1 by exploiting a security vulnerability. The vulnerability is so dangerous though that it’s hard to argue against patching when the fix is eventually released.
I’m so torn… should I patch or should I jailbreak?
