SeekerBlog

This morning I listened to Tim Draper at Stanford Entrepreneurial Leaders. Good talk, especially on DFJ experience with international investments. Near the end, after discussing challenges in Russia and Ukraine, he talks about “competitive governance”. And sadly the US is not competing – to be a desirable place to launch new ventures or businesses. He used the Dr. Seuss “The Bee Watcher” analogy. Draper said at 27 minutes, loosely paraphrasing:

We used to be clearly #1 country to do business in and now #4 and it seems to be dropping. This is one of the reasons (shows Dr. Seuss). The bee works really hard, and the bee-watcher wants to find out how that bee has been so productive, so he sits and watches the bee. But they don’t believe the bee-watcher, so they bring in the bee-watcher-watcher to watch the bee-watcher.  Now, we are the bees. The US used to have about 8% of the economy involved in watching the bee watchers – or 1 bee watcher-watcher for every 12 bees. Now we are at 45% (overhead), about one bee watcher-watcher per bee, and this seems to be a systemic bad trend. See what you can do about that guys…

Scott Adams posted an enchanting entrepreneurial opportunity. If you decide to build this business I suggest that it is only fair that you reserve 5% of the initial shares for the benefit of Scott – he certainly deserves the commission. And 5% for Seekerblog for the finders fee.

I have an idea for making lots of money but I’m too lazy and frightened to do it myself. The idea is to become a consumer advocate against a confusopoly. A confusopoly is any group of companies in a particular industry that intentionally confuses customers about their pricing plans and products. Confusopolies do this so customers don’t know which one of them is offering the best value. That way every company gets a fair share of the confused customers and the industry doesn’t need to compete on price. The classic examples of confusopolies are phone companies, insurance companies, and banks.

To get things rolling, you pick a confusopoly to target and you build a web page explaining the problem. Then you collect signatures of support. and demand legislation to standardize how prices are presented to customers. Then you wait for the lawyers and lobbyists from your targeted industry to pay you to go away.

It seems entirely legal to lobby the government for regulatory reform. And I’m not aware of any law preventing companies from paying you to leave an issue alone. Perhaps they’d need to do it in some sort of stealth manner, just for PR purposes. I could imagine, for example, that one of the companies would offer you a job trying to organize a simpler pricing scheme, which is exactly what you’re asking for. You’d work for a few years, get no cooperation from anyone in the company, fail miserably at your task, and collect a big paycheck. If you work from home, the failing will be far more efficient, requiring no more than a few emails and some unreturned phone calls. You could do the whole thing in your pajamas, start to finish.

As always, I don’t recommend taking advice on anything important from cartoonists.

[From Money Making Scheme]

This is $10,000 value advice for those thinking of launching a web startup, by the founder of WePay:

(…) Sometimes you can’t PAY somebody to use your product, let alone get them to pay you for it. It’s probably good to know that before you decide to quit your day job.

(…) If these recommendations are too extreme, treat them as a thought experiment. Just don’t lie to yourself.

A quick (but BIG) caveat: there are VERY notable counter-examples. I think they generally fall into three categories:

Products that solve a problem that people don’t know they have (or one that they can’t articulate), but offer a solution that is so compelling and elegant that it can overcome this obstacle: Dropbox.

Read the whole thing »

Here is another wonderful Paul Graham essay, this one is from 2004:

(…) If you wanted to get rich, how would you do it? I think your best bet would be to start or join a startup. That’s been a reliable way to get rich for hundreds of years. The word “startup” dates from the 1960s, but what happens in one is very similar to the venture-backed trading voyages of the Middle Ages.

(…) This is why so many of the best programmers are libertarians. In our world, you sink or swim, and there are no excuses. When those far removed from the creation of wealth— undergraduates, reporters, politicians— hear that the richest 5% of the people have half the total wealth, they tend to think injustice! An experienced programmer would be more likely to think is that all? The top 5% of programmers probably write 99% of the good software.

(…) Someone graduating from college thinks, and is told, that he needs to get a job, as if the important thing were becoming a member of an institution. A more direct way to put it would be: you need to start doing something people want. You don’t need to join a company to do that. All a company is is a group of people working together to do something people want. It’s doing something people want that matters, not joining the group.

(…) Startups are not just something that happened in Silicon Valley in the last couple decades. Since it became possible to get rich by creating wealth, everyone who has done it has used essentially the same recipe: measurement and leverage, where measurement comes from working with a small group, and leverage from developing new techniques. The recipe was the same in Florence in 1200 as it is in Santa Clara today.

Understanding this may help to answer an important question: why Europe grew so powerful. Was it something about the geography of Europe? Was it that Europeans are somehow racially superior? Was it their religion? The answer (or at least the proximate cause) may be that the Europeans rode on the crest of a powerful new idea: allowing those who made a lot of money to keep it.

Once you’re allowed to do that, people who want to get rich can do it by generating wealth instead of stealing it. The resulting technological growth translates not only into wealth but into military power. The theory that led to the stealth plane was developed by a Soviet mathematician. But because the Soviet Union didn’t have a computer industry, it remained for them a theory; they didn’t have hardware capable of executing the calculations fast enough to design an actual airplane.

In that respect the Cold War teaches the same lesson as World War II and, for that matter, most wars in recent history. Don’t let a ruling class of warriors and politicians squash the entrepreneurs. The same recipe that makes individuals rich makes countries powerful. Let the nerds keep their lunch money, and you rule the world.

…While companies execute business models, startups search for a business model.

I recommend this optimistic post by serial entrepreneur and Stanford prof. Steve Blank. If you are thinking of launching a startup…

(…) It may be that all the doomsayers are right.

But I don’t think so.

Let me offer my prediction. There’s a chance that the common wisdom is very, very wrong. That the second decade of the 21st century may turn out to be the West’s and in particular the United States’ finest hour.

(…)

Over the last ten years, entrepreneurs began to understand that startups were not simply smaller versions of large companies. While companies execute business models, startups search for a business model. (Or more accurately, startups are a temporary organization designed to search for a scalable and repeatable business model.)

Instead of adopting the management techniques of large companies, which too often stifle innovation in a young start up, entrepreneurs began to develop their own management tools. Using the business model / customer development / agile development solution stack, entrepreneurs first map their assumptions (their business model) and then test these hypotheses with customers outside in the field (customer development) and use an iterative and incremental development methodology (agile development) to build the product. When founders discover their assumptions are wrong, as they inevitably will, the result isn’t a crisis, it’s a learning event called a pivot — and an opportunity to change the business model.

The result, startups now have tools that speed up the search for customers, reduce time to market and slash the cost of development.

(…) The Entrepreneurial Singularity

The barriers to entrepreneurship are not just being removed. In each case they’re being replaced by innovations that are speeding up each step, some by a factor of ten. For example, Internet commerce startups the time needed to get the first product to market has been cut by a factor of ten, the dollars needed to get the first product to market cut by a factor of ten, the number of sources of initial capital for entrepreneurs has increased by a factor of ten, etc.

And while innovation is moving at Internet speed, this won’t be limited to just internet commerce startups. It will spread to the enterprise and ultimately every other business segment.

… is one of the more brilliant marketing ideas. Brad Stone explains how Prime came to be and the huge impact on Amazon profits:

Amazon Prime may be the most ingenious and effective customer loyalty program in all of e-commerce, if not retail in general. It converts casual shoppers like Tinsley, who gorge on the gratification of having purchases reliably appear two days after they order, into Amazon addicts. Analysts describe Prime as one of the main factors driving Amazon’s stock price—up 296 percent in the last two years—and the main reason Amazon’s sales grew 30 percent during the recession while other retailers flailed. At the same time, Prime has proven exceedingly difficult for rivals to copy: It allows Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system, while also keying off that faintly irrational human need to maximize the benefits of a club you have already paid to join.

(…)  “In all my years here, I don’t remember anything that has been as successful at getting customers to shop in new product lines,” says Robbie Schwietzer, vice-president of Amazon Prime and an eight-year veteran of the company.

Find the ignition point of a chain reaction, and go ignite it.

Stanford GSB professor Jennifer Aaker gave a great lecture at the Entrepreneurial Thought Leaders seminar: Creating Ideas that Build Momentum.

The middle third of Jennifer’s talk told the story of Samir and Vinay: Harnessing Social Media to Make a Difference:

In three months a group trying to save a friend’s life used social networking tools to get over 24,000 South Asians to register for the National Marrow Donor Program. Their effort inspired Professor Jennifer Aaker to develop a course at the Stanford Graduate School of Business, The Power of Social Technology, which is supported by a set of social technology cases written with Victoria Chang, Alice LaPlante, and Sara Gaviser Leslie.

(…) Tapping the power of both the internet and a closely integrated South Asian community, they emailed 100 of Sameer’s close friends. Within 48 hours, the forwarded message had touched 35,000 people. They reached an even broader audience by partnering with Team Vinay, a group that had formed a few weeks earlier on a similar quest to save the life of Boston-based Vinay Chakravarthy, a 28-year-old South Asian physician who had also been recently diagnosed with acute myelogenous leukemia (AML). With focus, efficiency, and hyper-utilization of social media, Team Sameer and Team Vinay used web 2.0 services like Facebook, Google Docs, and YouTube to mobilize and empower others to organize bone marrow drives all over the country.

In 11 weeks, Sameer and Vinay’s supporters registered 24,611 South Asians into the bone marrow registry and found a match for both. And the 7,500 people they registered in the San Francisco Bay Area, where Sameer lived, yielded 80 matches for other leukemia patients — an unintended but celebrated consequence.

To make it super easy for people to be part of the marrow registration project, the team developed web 2.0 tools — these are explained in prof. Aaker’s presentation slides: “Power of Social Technology – Using Social Media to Save Lives“. Here are the Help Sameer site, the Help Vinay site, and the Marrow.org registration site. There are a number of YouTube videos (we don’t have enough bandwidth to sample them).

What the team learned is summarized by “The 8 Lessons” (page 79 of the PDF):

1.Develop a clear goal.

2.Tell your story.

3.Act, then think (big).

4.Design for collaboration.

5.Empowerment marketing.

6.Measure one metric.

7.Try, fail, succeed.

8.Don’t ask for help. Require it.

I think these techniques are applicable to a wide range of projects. If I’m correct that means that ordinary citizens could make big change without a big budget. E.g., how about igniting a viral campaign demanding conversion from coal to nuclear power?

Starting up a new enterprise in New York City is generally harder than in Silicon Valley where the venturing infrastructure is so well-developed. But how challenging is a startup in Somalia? There are little details like 50% of your employees may need to be security people. And how do you budget for paying off warlord extortion?

Nasra Malin:

I was one of six entrepreneurs who, in 1997, founded NationLink Telecom in Mogadishu, the capital of Somalia… and the center of violence in our country. We were not sure if we would survive, first because there were three established telecom companies and, second, because the security challenge was tremendous.

But we invested in the business hoping to make profits and bring stability to our country.

NationLink has become a major telecom operator in Somalia, offering wireless and fixed-line services to 300,000 customers. It employs 1,500 people. With two other companies, we formed Global Internet Company, to provide Internet access.

Still, the fast-growing telecom industry in Somalia is fiercely competitive — competitors are hostile at times. Also, in a country with no strong central authority, we must protect our business. We have more than 600 security people, which is not the ideal solution. We know that someone somewhere will try to extort money if we need work done. We usually pay, because if we fight them, someone may get killed and, at the end of the day, the work may still not be done.

Please continue reading…

Google Ventures has been very quiet since the 2009 launch. E.g., the Ventures website now has info on their portfolio, and a front-page slideshow that I think is very classy.

And I see that Bill Maris, managing director of Google Ventures, is beginning to be a bit more public.

Paul Graham’s short essay is dead right:

The best way to come up with startup ideas is to ask yourself the question: what do you wish someone would make for you?

There are two types of startup ideas: those that grow organically out of your own life, and those that you decide, from afar, are going to be necessary to some class of users other than you. Apple was the first type. Apple happened because Steve Wozniak wanted a computer. Unlike most people who wanted computers, he could design one, so he did. And since lots of other people wanted the same thing, Apple was able to sell enough of them to get the company rolling. They still rely on this principle today, incidentally. The iPhone is the phone Steve Jobs wants. [1]

Our own startup, Viaweb, was of the second type. We made software for building online stores. We didn’t need this software ourselves. We weren’t direct marketers. We didn’t even know when we started that our users were called “direct marketers.” But we were comparatively old when we started the company (I was 30 and Robert Morris was 29), so we’d seen enough to know users would need this type of software. [2]

There is no sharp line between the two types of ideas, but the most successful startups seem to be closer to the Apple type than the Viaweb type. When he was writing that first Basic interpreter for the Altair, Bill Gates was writing something he would use, as were Larry and Sergey when they wrote the first versions of Google.

Organic ideas are generally preferable to the made up kind, but particularly so when the founders are young. It takes experience to predict what other people will want. The worst ideas we see at Y Combinator are from young founders making things they think other people will want.

So if you want to start a startup and don’t know yet what you’re going to do, I’d encourage you to focus initially on organic ideas. What’s missing or broken in your daily life? Sometimes if you just ask that question you’ll get immediate answers. It must have seemed obviously broken to Bill Gates that you could only program the Altair in machine language.

Please continue reading…