Archive for the ‘business’ Category

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RB @Evan William’s 10 rules for startups

Wednesday, January 6th, 2010

So good I’m RB’ing (re-blogging) it. Just in case the original ever gets taken down.

#1: Be Narrow
Focus on the smallest possible problem you could solve that would potentially be useful. Most companies start out trying to do too many things, which makes life difficult and turns you into a me-too. Focusing on a small niche has so many advantages: With much less work, you can be the best at what you do. Small things, like a microscopic world, almost always turn out to be bigger than you think when you zoom in. You can much more easily position and market yourself when more focused. And when it comes to partnering, or being acquired, there’s less chance for conflict. This is all so logical and, yet, there’s a resistance to focusing. I think it comes from a fear of being trivial. Just remember: If you get to be #1 in your category, but your category is too small, then you can broaden your scope—and you can do so with leverage.

#2: Be Different
Ideas are in the air. There are lots of people thinking about—and probably working on—the same thing you are. And one of them is Google. Deal with it. How? First of all, realize that no sufficiently interesting space will be limited to one player. In a sense, competition actually is good—especially to legitimize new markets. Second, see #1—the specialist will almost always kick the generalist’s ass. Third, consider doing something that’s not so cutting edge. Many highly successful companies—the aforementioned big G being one—have thrived by taking on areas that everyone thought were done and redoing them right. Also? Get a good, non-generic name. Easier said than done, granted. But the most common mistake in naming is trying to be too descriptive, which leads to lots of hard-to-distinguish names. How many blogging companies have “blog” in their name, RSS companies “feed,” or podcasting companies “pod” or “cast”? Rarely are they the ones that stand out.
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Posted in business, entrepreneurship, people i like, startup | Comments

Ex-Google China Chief speaks on mobile internet, cloud computing, ecommerce

Monday, September 7th, 2009

It’s Labor Day, I’m still groggy from just waking up .. but this is a good piece worth sharing here if you’re looking for opportunities, and focused on mobile and cloud computing. Google’s China chief Kai-Fu Lee just left Google (some of us recall this as it was a controversial high profile hire because Lee was poached from Microsoft). Here’s what he is up to next, and his words from an interview with peHUB.

“There is a confluence of several things happening in China, and we’re at an inflection point of mobile Internet, cloud computing and ecommerce. It’s really now or never.

There is an abundance of companies here and VCs have lots of money, but there is a lack of angel funding and experienced entrepreneurs. It’s a compete imbalance. Whatever you might think of Y Combinator or Idealab in the U.S., the China market is different. China needs this type of business-building platform to hire and train people and provide angel funding, which is scarce.

There also is a worldwide economic crisis, which means that there is a bunch of strong talent out there that we want to hire, in order to start a lot of exicting businesses.“

On why it’s “now or never”, he says,

“Ecommerce in China has gone from 7% adoption to 25% adoption. Payment capabilities are just happening. Really, it’s a lot like the late 90s in the U.S. Remember how quickly Amazon and eBay and even Google search took off? You have to imagine the current Chinese Internet as news and games and blogging, but a big shift is inevitable. The average Chinese Internet user is just 25, compared to 42 in the U.S. That means they are getting older, getting more money, getting married, having kids… A rising ecommerce will lift all boats.

In terms of mobile, there are 650 million cell phones in China and mobile Internet usage is growing like crazy. It’s not just knowledge workers, but it’s also growing rapidly for groups like migrant workers and people making just a few dollars a day. They view it as the only way to access information, and with usage and volume a lot of things will grow.

There also is 3G, which is the one thing the Chinese government is going after and developing this year. In China, when the government wants to do something it happens.

For cloud computing: China has never really developed a software market, and what’s happening is like what’s happening in the U.S. – moving from packaged software to online or the cloud. In that process new businesses and models are starting to happen. If you look at the success of the Amazon platform or Google apps in the U.S., it will also be true in China because there are millions or people who want easy ways to build websites.

There is incredible opportunity right now.“

Via peHUB.

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Posted in business, cloud computing, entrepreneurship, innovation, mobile, problem-opportunity, regular reads, startup | Comments

Cutting through clutter, doing business right

Thursday, April 23rd, 2009

Excerpt from a book I was reading while on my flight yesterday, a little story about Warren Buffett a.k.a the oracle of Omaha:

Corporate culture is highly competitive. We need to know who is winning and why. The score is kept on Wall St. But neither of us is very good with numbers—in fact, quite the opposite. So we need someone who can take all that raw data and put it in a human context that even we can understand, absorb, and use.

Whoever can do that is our hero. All we really need is a few wise words to set us in the right direction. We are like tourists in a strange land, and we are looking for that scenic overlook, the place where we can pull off the road for a moment and get our bearings. All we need is the right point of view. After that, the rest falls in place.

If you want to understand the American economy as it moves into a new and increasingly global century, Warren Buffett’s point of view is the clearest and cleanest. And as the over fourteen thousand shareholders in his company, Berkshire Hathaway will attest, Buffett is very generous about sharing it.

These events are more like down-home county fairs than your typical proxy-filled corporate snooze-a-thons. Most of Berkshire’s subsidiary companies have booths set up selling their products at substantial shareholder discounts. There is even a not-to-be-missed barbecue. The main event is when Buffett, and his investing sidekick Charlie Munger, take center stage for six hours and answer any and all questions from the audience. These sessions are so open, honest, and informative that many parents have ponied up the almost $100,000 that a share of Berkshire Hathaway costs just so their kids can attend these meetings and see how the world of business works when it is done right.

Comparing his annual meetings to those of other companies, Buffett says, “Many annual meetings are a waste of time, both for shareholders and for management. Sometimes that is true because management is reluctant to open up on matters of business substance. More often a nonproductive session is the fault of the shareholder participants who are more concerned about their own moment onstage than they are about the affairs of the corporation .. Under such circumstances, the quality of the meeting deteriorates from year to year as the antics of those interested in themselves discourage attendance by those interested in the business.

The $100,000 “barrier-to-entry” makes sense, it serves as a waste-my-time-people filter.

“Berkshire meetings are a different story. The number of shareholders attending grows a bit each year and we have yet to experience a silly question or ego-inspired commentary.”

So as the ringmaster of this circus, how has Buffett managed to pull off such a long string of meetings that never go sour?

By very carefully listening to the stories contained in the questions he is being asked. When he responds, he responds with great good humor and not only with facts, but also with the emotions that surround them and make them matter. He puts things in a context that can be easily understood. He can do this because he is not trying to impress anyone. He isn’t trying to get you to see things his way and prove that he is right. He is just opening up his considerable store of experience and intellect and sharing it. That way, when you do naturally see things his way, the awareness arrives with a sense of discovery. You trust that discovery because you are the one who made it. You trust him for helping.

That is what heroes do. They open up complex stories, welcome you in, and make you feel at home. They do it by letting you see the world through the hero’s eyes.

Investing done right, with full transparency straight from the top.

I’m no money-expert like Buffett is, but even in my industry, within the technical circles, a knowledgeable-peer can always suss out the peer who isn’t as honest, sometimes using technical knowledge to take advantage of the less-knowledgeable. I prefer to do business honestly, and rightly. Doing business isn’t about screwing the other guy over (ignore this sentence if you are a used-car salesman)

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Posted in business, regular reads | Comments

Economic doom and gloom – but the greatest will arise from these ashes

Saturday, October 11th, 2008

With this week’s bloodbath in the stock market epitomized by headlines from BusinessWeek like “The Sky Falls on Wall Street“, famed angel investor Ron Conway and big name VCs like Sequoia warning portfolio company CEOs of the huge iceberg immediately ahead, what are  entrepreneurs to do to keep spirits up and look alive?

I found this post dated last January by Will Price, CEO of Widgetbox particularly insightful. Some excerpts below.

Times are bleak, but the sky is darkest before dawn. Great companies that succeed in adapting to this harsh weather will be one of the strongest built:

If I take the last downturn as my guide, I can say with confidence that venture investors would be well suited to continue to invest right through the downturn – in 2002 and 2003 terrific companies were formed and funded at very reasonable valuations and with business models that reflected the demand for capital efficiency and economic viability.

Like Occam’s Razor, recessions whittle away unnecessary and non-value-added businesses and the capital, purchase order, and resource scarcity inherent in downturns forges companies of real substance and durability.

[...]

However, history suggests that capital efficient companies solving well-characterized pain points will continue to be great investments. Valuations, input costs (labor, rent, services) will fall, and future returns will show that 2008 and 2009 were great years to do start-ups. Similarly, in early 2009, as the consumer start-up market finds itself cut off from funding, it will be pay to make bold and brave investments in the consumer space.

Entrepreneurs building a business during these times should well, focus on the business fundamentals. You can’t control the weather, but you can control how you build your business. Given the weather, a solid foundation is must. That means a real product that solves a real problem that real people would want to dive into their wallets to pay you:

None of us can predict the markets or future valuations, we all, however, can understand fundamentals. Businesses that solve real pain points with disruptive technology, a huge value/price advantage, and a scalable business model will work – the kiss of death, however, will be getting the capital structure ahead of those very same fundamentals. Failure is often a function of too much capital and too high prices suddenly running into economic expectations that are materially reduced with respect to market size, market growth, and trading multiples.

On going back to the fundamentals of a solid business:

None of us can predict the markets or future valuations, we all, however, can understand fundamentals. Businesses that solve real pain points with disruptive technology, a huge value/price advantage, and a scalable business model will work – the kiss of death, however, will be getting the capital structure ahead of those very same fundamentals. Failure is often a function of too much capital and too high prices suddenly running into economic expectations that are materially reduced with respect to market size, market growth, and trading multiples.

I agree with the general assessment of this statement, although Twitter isn’t exactly the perfect example to illustrate this point. Granted, if you are broke, you better focus on doing things to get out of being broke, but if you have a truckload of cash and being profitable is a “nice to have” .. then oh well, you can do whatever you want on your own time.

At least from what I understand anyway, Evan Williams already made a bunch from his Blogger/Pyra Labs acquisition and is in no hurry to make more money. As for Twitter investors, they aren’t either. Twitter is funded from Odeo’s funding; the latter company has already been written off as “dead” – and unlike VCs, angels don’t have fiduciary duties and thus don’t have to “go after” that money.

Ron Conway himself once said that the lack of fiduciary duty makes him more productive and thus has no interest in moving to becoming a VC. Super angel investing is just fine ;)

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Posted in business, entrepreneurship, problem-opportunity, startup, things to ponder about, things to remind myself | Comments

Sprinkling some Web 2.0 pixie dust on boring stuff

Monday, September 29th, 2008

Cisco’s acquisition lineup tells a story.

  • Webex for $3.2 Bil
  • Postpath for $215 Mil
  • Jabber (undisclosed sum)

Hmm .. what do these three have in common? Looks like Cisco is after the $34 Bil collaboration market, by beefing up its portfolio with unified communications, telepresence, and all sorts of Web 2.0-for Enterprise technologies so that people can cut down on physical travel.

Makes sense, given the weak economy and soaring gas prices – it’s costly to travel. Much like how dinosaurs went extinct and the smaller animals went on to dominate the earth because they were smaller, nimbler and able to adapt to the changing environment, Cisco is evolving.

Companies that rely on easy credit and on business models that require moving physical goods will probably find a tough time surviving. Cisco can help in the latter by cutting down on employee travel (ok-still no substitute for actually delivering parcels of stuff like Amazon), but for multi-national companies even small savings make a significant dent when multiplied.

Web 2.0 innovation is increasingly bottoms-up; that is, it’s first tested “in the wild” by consumers, then buffed up for corporations. That’s right, Web 2.0 is growing up and is punching holes through the corporate firewall.

Why am I writing about this? Oh, because I think it’s cool to watch the behemoth Cisco turn its big ship. We’ll see if they succeed in evolving fast enough.

A similar trajectory this reminds me of is British Telecom (BT).

Cisco = big company that makes the low level nuts and bolts for networking = boring.

BT = big telco which without, your cell phone might as well be a brick = equally boring.

Cisco with Web 2.0 = ooOOooh!

BT with Web 2.0 = aaAAaah!

Ok, on a more serious note, just as Cisco has a real strategy-so does BT. Just as Cisco is thinking how it can provide more value on top of its TCP/IP stack, BT is working to deliver more value through its pipeline – by being a channel for SaaS providers to reach BT’s SMB clients.

What BT has done so far:

  • Acquired Ribbit – $105 Mil
  • Partnered with Genius.com, branded as BT Smart Marketing
  • Announced a deal to sell NetSuite and SugarCRM

At the very least, Cisco and BT’s strategies to deliver value added services on top of their commoditizing products in an increasingly saturated market (Africa aside) makes for an interesting juxtaposition and business case study.

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Posted in business, cloud computing, saas, strategy, web 2.0 | Comments

Oracle’s 20% price hike (rock) + Slumping economy (hard place) = where do you go?

Wednesday, August 27th, 2008

A snip from an interview with Red Hat’s new chief exec:

Q: What’s your biggest surprise since starting at Red Hat?

A: I think I finally get the joke. I was a senior exec and, like every other senior exec, I had a huge IT budget. Mine was as large as Red Hat’s revenues last year. You sit there and say: “Why are my IT costs going up, but I’m getting less and less functionality?”

Every IT professional says the same thing: “My lights-on costs are going up. But — wait a minute — I bought a laptop, and it cost me half as much as it did three years ago, and my costs are going up?” I get the joke now.

If you look at the S&P 500, seven of the top 20 companies are tech and, other than Google, they’re not high-growth. But they’re just printing money because switching costs are so high. There’s this incredible amount of residual goodwill to Red Hat because we’re seen as an alternative to that. Oracle announced a 20-something percent price increase just as the economy starts heading south. How can you do that unless you’re pretty sure nobody can switch? High switching costs led to infrastructure cost creep. Once you get hooked, you can’t get off.

I chuckled as I read this. The switching cost problem sounds like the case between AT&T and Bell Atlantic in the 1980’s, which I coincidentally just recently blogged about recently.

Those who cannot remember the past, are condemned to repeat it.
— George Santayana, in his book The Life of Reason.

I think the comment about Oracle’s 20+% price increase is certainly good news for on-demand SaaS/cloud computing players – to disrupt the market. As companies start tightening their belts, the pay-per-drink model would inevitably look a lot more enticing.

Even when placed between a rock and a hard place (between the US economic slump and technology behemoths’ Oracle-style price increases), the numbers show that companies still can’t afford to cut back on technology spending. Technology is a business competitive advantage.

According to research firm Gartner, “It can be hard for a business to stay ahead if its technology is falling behind. That is one reason that despite an uncertain economy, worldwide information technology spending is on track to reach $3.4 trillion in 2008 — an 8 percent increase over 2007.”

PC sales (especially laptops) are surprisingly stronger than expected, according to S&P’s Equity Research. “The latest evidence came from the Aug. 19 earnings report from Hewlett-Packard (HPQ), which said unit shipments of PCs rose 20% from a year ago”

The bottom line is that businesses can’t afford to be without technology. And with such pricing pressures, online business apps are just much easier on the wallet. $50 per user/year for Google Apps, or $350 user/year MS Office.

Granted, Enterprise Web 2.0 still has a long way to go to fill the shoes of traditional on-premise apps, but I am confident that more innovation will come (I certainly plan on being a part of that innovation!), and SaaS/cloud computing/Enterprise Web 2.0’s benefits will be too good to ignore – and eventually, its benefits would exceed those from the traditional legacy on-premise apps.

From CNNMoney/Fortune: Merrill Lynch estimates that online business applications will grow to a $95 billion market within five years. The market for online office software is “wide open,” said Guy Creese, an IT analyst with the Burton Group.

“My lights-on costs are going up. But — wait a minute — I bought a laptop, and it cost me half as much as it did three years ago, and my costs are going up?”

Yeah. It doesn’t make sense.

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Posted in business, cloud computing, problem-opportunity, regular reads, saas, technology, things to ponder about, trends, web 2.0 | Comments

Case study: Bell Atlantic and AT&T’s vendor lock-in battle

Wednesday, August 13th, 2008

One of the reasons I really hesitated in getting the eyePhone is because among other things, I truly dreaded the 2-year mandatory contract. I hated the idea of guaranteeing someone a consistent revenue stream and possibly be locked-in to their demands should they raise their prices.

Case study: Bell Atlantic and AT&T vendor lock-in battle.

In the 80’s, Bell Atlantic spent $3 Bil on AT&T 5ESS switches for Bell’s telephone network. AT&T’s switches were much more superior to Northern Telecom and Siemens at that time.

However, Bell didn’t properly size the vendor lock-in.

The 5ESS switches ran an operating system proprietary to AT&T, so whenever Bell wanted upgrades or new features, it was pretty much at the mercy of AT&T’s pricing weather.

Case in point: Bell Atlantic wanted its systems the ability to identify toll-free “1-800″ calls. AT&T didn’t provide (of course they didn’t!) any documentation or API for Bell to develop this feature themselves, and quoted Bell $8 Mil for a software upgrade just to do that. Bell had no choice and bent over. Voice dialing? $10 Mil! (really)

This extortion was a fat consistent revenue stream for AT&T, and made up 30-40% of AT&T’s switch revenues. AT&T’s position was further solidified by using its proprietary OS to prevent others from developing compatible equipment that may cannibalize sales from AT&T’s product line.

Bell Atlantic could not just throw AT&T out because (1) the switches had a lifespan of over a decade (2) removing and installing was expensive (3) the used switches had low re-sale value, because nobody not already locked-in would want to be locked-in ;)

In other words, the switching costs were astronomous, and Bell was hurting real bad in the wallet. It sued AT&T in 1995 for monopoly.

Shifting gears. To draw a parallel, in many ways, traditional on-premise software vendors use such tactics to .. well, play their hand.

With SaaS, this problem goes away. The customer can switch vendors on a dime; without the safety net of a perpetual licensing scheme, vendors have to constantly prove themselves by continuously delivering innovation and value to their customers — or risk losing them to the competition.

A flat world combined with fierce competition to innovate can only mean more and better options to the consumer :)

Unlike traditional on-premise vendors, SaaS vendors can’t rely on their own product development “baggage” to milk a drying revenue stream.

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Posted in business, cloud computing, paas, product management, saas, web 2.0 | Comments

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