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An entrepreneurship and adventure blog: THE DREAM IN ACTION (by Ryan Graves)

Archive for October, 2009


Why DailyBooth Has Staying Power

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staying power - n. the ability to endure or last.

Some startups today seem like they’re cool features or tools (insert twitter tool here) but I just don’t see how some of them will be around in a year or 2 when their budgets dry up. I could be totally wrong and maybe Twitters tool will get bought out left and right in some mass consolidation of the market, but I doubt it. When I evaluate startups today I look for staying power. In my mind that means, how do they change the status quo such that people will not return to the norm? For example, Twitter has changed the way I think about what I’m doing. If something cool happens I share it. If I read something crazy or have an experience that I think people would enjoy sharing with me I blog about it, then tweet the link. I take pictures and tweet them, I talk with friends on twitter way more often than I send text messages. Twitter changed the way I communicate and I don’t see that changing back.

I believe that Dailybooth has staying power because it’s changing the way people communicate again. It’s moving us ever so slightly away from text. With Dailybooth you can upload images in a stream and have conversations with images. This is just Twitter with pictures you say!? Maybe. Or maybe it’s the first step away from text centric twitter to something of the future. People probably aren’t ready for full video conversations just yet (although I believe they will eventually) which is why Seesmic has moved away from focusing on video conversations. I think Seesmic video was an amazing idea but I think it just came to early. But Dailybooth may provide that smooth transition away from text in a way that adoption will be much larger. Only time will tell. What do you think?

Both Gary V and Kevin Rose are investors in Dailybooth and both of those guys have proved repeatedly that they know how to trend spot when it comes to web services. When people change the way they communicate it’s exciting and those guys might have nailed it with their investments here. The staying power of Dailybooth is right in front of your eyes. Jump on and follow me!

The images below, if you haven’t look yet, are a crowd sourced image thread of the Fresh Prince of Bel Air theme song. They start with the two images above and continue all the way down through the end of the song. This kind of image collaboration just doesn’t happen often and I do think that Dailybooth has caught onto something special here.

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10.29

2009

Customer Development, brought to you by Rypple

For anyone who studies customer development you know that feedback is at the forefront of any successful product. In order to build a product or service that customers will actually want and hopefully pay for. If you’re not asking for customers to pay, you likely want their time and attention. I see this blog as a product and a service, you consume, and hopefully you learn, at least that’s my hope :) I work hard to write interesting stuff so that you’ll learn something from and give me your attention for a few minutes a day. I’ve decided to practice what I preach and ask ya’ll for feedback.

I’ve done surveys in the past but I was always able to provide categories that I wanted feedback and on, now I’d like to ask for your feedback in a more open form. My friends (and I really consider them friends) at Rypple have released an embeddable widget so that you can ask for feedback directly on your blog/website. The widget above, which will also stay in the blog sidebar (down and right), will hopefully collect your ideas and feedback on what you like and topics you want to hear about most from me! If this is your first time on the blog or if you’re a regular reader I’d love for you to drop in a quick idea (almost as short as a tweet) about what you enjoy reading most, or things I can work on! It’s anonymous and quick, and I’d really appreciate the help.

Thanks guys, and great job Rypple!

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10.28

2009

The Application Economy

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Someone who I don’t talk about often on this blog but that I do have a lot of respect for is Mark Pincus. Mark is the CEO of the company that makes virtually games, specifically Farmville…yea you’ve probably played it. The game has 20 million active users as of last week. Mark is one of the most forward thinkers when it comes to the web and where it’s going. He also has some very strong beliefs that there are particular ways to monetize things on the web and his track record and performance proves that he knows what he’s talking about. His company, Zynga has 50 million active users and is currently contemplating going public. Wouldn’t it be wild if a Facebook app company went public before Facebook did?

There’s been a lot of talk recently on TechCrunch and others about Web 3.0 and what the next era of startups, specifically web startups will look like. Mark said this about monetizing in Web 3.0:

We have entered the third business plan of the web….

Web 3.0 is about monetizing this massive web audience through users paying for mostly digital goods and services. The product will be a service or at least ongoing relationship. Distribution could be through Apps or even daily emails. The currency will be DAUs (daily active users). This will be higher margin and fuel an exponentially greater number of companies.

Web 3.0 businesses will be measured in $$/pixel/minute. This is a throw back to hsn and qvc. These home shopping services proliferated because they could better monetize local cable screen time which couldn’t be sold as it wasn’t measurable.

After reading Mark’s bio and reading more about what Zynga has been able to do, he’s become of of those guys that I won’t miss a word of what he says. I’d be foolish not to pay attention to people who are not only forward thinkers but are at the forefront of building the future. Mark was the founder of Tribe.net, one of the first social networks back in 2003, well before Facebook or even Friendster.

I encourage you to follow Mark.

http://twitter.com/markpinc

http://markpincus.typepad.com/markpincus/

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10.27

2009

What Surprised me about ‘Crush It’? Truly Original Content.

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In a recent interview with Peter Kim of the Dachis Group, (one of hundred’s he’s done over the last 2 weeks) Gary Vaynerchuk summed up his hard work and much of his business philosophy by saying, “Talk and things happen.”

I’ve been watching WineLibraryTV for probably about a year. Gary is nuts and I won’t even argue with the more subdued folks who say they don’t like his style, to each their own, personally, I love it! He’s inspiring, honest (authentic) and passionate to no end. His transparent hard work is a great reminder just how tough building a business can be and how you really do have to “hustle” your ass of to succeed. Thanks for the inspiration Gary.

When I heard he was coming out with ‘Crush It’ I thought, I probably won’t buy that book. I’ve heard his story over and over and although it’s a great one, I don’t need to spend $15 bucks to read it. Then I took a step back, realized that 9 months or so ago when Gary came out with his first book on wine, he sent me a free copy just because I emailed and asked. Then when we wanted Gary on ActionsTalk, he happily filmed our interview and was one of our most watched webisodes :) Again, thanks Gary.

So I decided, even if I’ve heard the story, I’m buying the book. I owe it to the guy. He’s bustin’ his ass, inspiring people along the way, and I’m happy to drop 10-15 bones to help him out. Man I’m glad I did. When I dove into the book on my flight this weekend I realized that his background, although I thought I’d heard the whole story, I hadn’t, and it’s a damn good one. His love for his family and his core values that have guided much of his business decision making are rock solid, and it’s clear he’s loyal to those principles.

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His story of coming up learning to trade baseball cards for some serious cash is awesome. Then jumping to wine because of his fathers liquor store business and he’s realization that peoples interest in collecting and trading cards was not dissimilar to their passion for collecting and trading wine (can you say insight). Gary’s ability to see what people value and how to extract some of that value as a business is far above the rest.

Many books give you all kinds of philosophy leaving the how-to to be desired. Not this book. ‘Crush It’ is practical and applicable to almost anyone. Whether you hate your current job and are looking for an entrepreneurial option out or whether your running your own business but aren’t enjoying it, Gary shows you how to maximize the enjoyment of your life by focusing on a topic and a business that you can wake up excited for.

I’ve just finished up ‘Crush it’ this morning and it really is inspirational. The biggest surprise is that there really is a ton in the book that is outside of Gary’s normal schpeal. Even for the avid WLTV and Gary fan it’s a great read. It’s original stuff that is very motivating. Please, I encourage you, got out and pick up this quick read that is guaranteed to inspire and be well worth the $15 bones.

(Gary this picture of you should be titled, seduction. :)

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10.26

2009

The new GetGlue, the Foursquare for online

As described in their new release, “GetGlue.com is a social recommendation network for interests like books, music, and movies. GetGlue.com offers a stream of suggestions based on user interests, friends activity and things that are popular with everyone. Users can also add GetGlue to their browser to more quickly build their taste profile and get suggestions in context, on hundreds of popular sites like Amazon, Last.fm, Netflix, Wine.com and Citysearch.”

Today, they’ve announced a bunch of new features to their FireFox plug-in Glue, which I use on a daily basis. The changes are very interesting and I can already see how they’re going to make my browsing more fun. First I’ll tell you some of the new features, then I’ll tell you why I love the direction that the AdaptiveBlue team is going…

1. Suggestions Stream: A continuous stream of suggestions is generated for the users based on what they liked, friend’s favorites and everyone’s popular.

2. GetGlue Profiles: New profiles make it easy for users to save and share their favorite books, music and movies.

3. Stickers and Guru: Users can earn stickers for participating and get recognized as a Guru for things they actively comment on.

4. Browser Addon: Glue appears around the web providing in context suggestions, friend reviews, clips, and a way to quickly build a taste profile.

Now, the fun part, here’s why I think this is so cool. If you ever read this blog you probably know that I’ve a big fan of Foursquare, the bar/restaurant check-in game that connects the offline world and your friends via and online tool, so very well. Now GetGlue is doing that for online destinations (topics), and you don’t even have to check in. When I visit ‘Surfing’ for example on Wikipedia, GetGlue knows that I’m viewing it, then when I ‘like’ the topic on Glue it collects more information about my relation ship with surfing. Similarly, when I got to my local pub, I check in and Foursquare learns about my relationship with that pub. Now, I can become the Guru of a topic on the web. I just so happen to be the Guru of surfing :)

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Because of AdaptiveBlue’s semantic web technology they are able to collect information (that I allow them to collect) and create an online profile that is likely more powerful than anything I could create on my own. They use the content that I browse on the web to build a profile for me. They sometimes are able to tell me things about myself that I didn’t even know. For example, why am I the guru of Brett Favre and not Philip Rivers (my home-town-team’s QB)? Am I a  traitor? NO!!!

If you’re not on FireFox you need to be, and the first plug-in you need to download is GetGlue, it will change the way your surf the web. It will allow you find more relevant stuff based on what your friends and looking at and it will make you more aware of what’s important to you. The technology has always been  amazing and now the usability and usefulness of the site will blow you away too.

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10.25

2009

Feedback from Venues on Foursquare

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In a recent project, I’ve been trying to sign-up venues here in Chicago to be on Foursquare. It’s been a fun experiment in sales and a wake up call to the difficulties of door to door sales pitches. Below I’d like to share some of the findings of the experiment (in the last post) and some of the suggestions that I would make to the Foursquare founders all based on venue feedback. These changes may make those local business partnerships a bit easier and more valuable.

Ideas

1) Simplified measurement – venues don’t have time or resources to read through hundreds of tweets to see what people are thinking or wanting in real time. Maybe after the fact, that night or the next day, they could log in to review customer comments but a rating system may serve Foursquare well. For example, if in my Foursquare shout out that would eventually read:

Getting my marriage license. Now the government knows! (@ Daley Center in Chicago) http://bit.ly/4F696n

What if I really entered:

“Getting my marriage license. Now the government knows! 8

As in, the experience was an 8/10. Foursquare could begin to have a ranking system for all of the experiences their ‘players’ have. This could be fun for the game players for comparing experiences with friends and getting really solid ranking of venues, and also this would create super valuable data for venues, giving them even more incentive to partner.

2) Tangible rewards, putting customers to work – what if venues could put customers to work for them? Would the game be fun enough and the incentives exciting enough for the customer to consciously bringing 10 people to a venue in order to receive a free round of drinks? Every so often Chipotle will call up someone in my office who just dropped off their business card and say, “bring 15 friends, you get free burritos today”. Foursquare could handle all of that type of outreach for venues. They could collect info on who’s coming in and who they’re bringing with them. The could measure the outreach potential for each person, targeting their best evangelists, and rewarding accordingly.

3) Just like EA, it’s in the game - Create game player incentives for signing up businesses on Foursquare. Because Foursquare has such a loyal group of users they have the ability to open source the recruitment of the businesses job to a special set (or all) of game players. Similar to the way that Foursquare has given certain users the ability to edit the venues, they could also give management rights to recruit venues. This could would increase the number of venues signed up exponentially.

Just like Wikipedia is successful solely because of the millions of people that edit content for free, Foursquare will be successful by using their community to curate it’s collected venue data.

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10.23

2009

The Drifter

I came upon this video from @reecepacheco, a fellow surfer stuck with no waves (he’s in NYC). I grew up watching Rob Machado surf and even saw him in a contest once at Oceanside Pier. He’s amazing and his career has really been an interesting one. He was once very close to top being the top surfer in the world, then stopped competing and did a lot of videos and travel. I don’t know Rob at all, but it seems that this video is a very personal one, showing off the “struggles” of being a professional surfer. Obviously it’s got to be the best lives ever but coming from someone who get’s sick when I don’t feel like I’m accomplishing something, I can sympathize with how just surfing everyday would be a struggle sometimes.

This trailer also got me very excited because next month I’m getting married, and Moll and I are going on a long honeymoon down to Costa Rica. It might be the best vacation ever… I’ll have the 3 of the most important things in the world with me; my new wife, great weather, and the ocean. I’m so pumped.

As Reece points out in his post of this video, surfing movies don’t necessarily do very well in the box office but I’ll definitely be checking this one out.

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The Founders Relationship: And the effect of a startup

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The ActionsTalk Story

When Blake and I started ActionsTalk back in early 2008 we were filled with the excitement that comes with a new venture. We hoped that ActionsTalk would become a valuable service for the “non hub” startup communities. We worked to bring deserved attention to startups who weren’t necessarily getting into the limelight because of their location. We worked at that for a long time. We succeeded at that for a while. We got onto the cover of the business section of the Milwaukee newspaper on the same day Barack was elected president and got huge publicity because of it. Our inboxes were flooded and things were looking up. We locked down some advertisers and AT was making money.

But in time the excitement dwindled and the direction changed. In time those changes lead to stresses on Blake and my relationship. And those stresses, since we were friends before business partners, lead to less excitement of making the business grow. I questioned, why I would want to grow something that seemed like it was harming a great friendship? So, the rate at which we worked and posted crawled and AT as a business died. ActionsTalk remains a great video blog with over 40 amazing entrepreneurial interviews, filled with content that I honestly believe any entrepreneur can learn and benefit from. In that sense it was a success, but no business that doesn’t get sold or continue to grow is a true success.

The changes in our business did introduce serious challenges on our relationship and in the end I think we both backed off because the challenges of a video blog business (a challenging and grinding business to be in) weren’t worth harming the friendship. Startups are tough and they WILL affect the dynamic of the founders relationship. Here are 5 ideas to keep in mind and things to focus on in order to understand and prepare for how a startup will affect a founding teams relationship.

1) Talk about the road map

In the case of ActionsTalk we set a goal of doing ActionsTalk interviews for a year. We reached that goal but it was never clear where, if anywhere, we would go after that. Needless to say, right about the year point, we slowed down. Build a road map, work though it from a product perspective, and from a personal life time-line perspective, and you’ll have a lot better chance of long term success.

2) Practice extremely open communication

Albert Wegner recently wrote a post about calling people out when quite during board meetings. He implied that even some startup founders wouldn’t express their real opinion during these meetings, and potentially he would find that founders completely disagree on direction! This is a big problem and any directional decision should be discussed with founders.

3) Keep emotion out of your business but in your friendship (possibly impossible)

This one is probably the toughest. At some point you’ll have to make a decision, what will come first the friendship or the business? There are so many stresses that come into running startup business that it’s going to be extremely tough. I do believe that you can run a business with a friend or family member but it takes a very special relationship and priorities do have to be discussed.

4) Focus on the larger goal

I worked on a project a few months back with my friend Allen. We decided to plan for about 2 weeks and raise money for one week and donate all of that money to building Libraries in Laos. He was traveling there at the time and I did all of the “social media” and out reach work state side. In 5 days we raised a few thousand dollars. Although a little stressful because of the fact that we didn’t actually hit our goal of $5000, our relationship was fine throughout. This may have been because of the shorter time period of the project, but I really do think that both his and my focus on the goal is what kept it so fun for both of us. As we checked our donations daily hourly it became more and more motivating. In the end it was a very successful project because of our ability to focus on the goal.

5) Don’t do it

Lastly, if you think that a friendship will not withstand the pressures of a startup, don’t do it. People are usually your friends because they are similar to you. Those are often the worst business partnerships anyway. The Ying and Yang relationships work better on the whole because you need those complimenting skills and challenging view points. Like I said before, a priority usually has to be chosen and if the friendship is the priority the project can often end poorly.

photo via flickr

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10.21

2009

The Incredibly Charming AJ Jacobs

Back in March of this year I made it out to New York City and I had the pleasure of meeting AJ Jacobs for a drink, well a coffee and we met at a vegetarian joint called Blossom. At the time I was planning to write a book (delayed, not canceled) and his advice was remarkable. During our conversation in NYC’s upper west side, AJ was the most humble and encouraging person I’ve met. He was willing to help out with my book and anything else he could.

In January I wrote a post about 12 people that I wanted to meet, and AJ was on that list. I’m so happy that even if I only met 2 of those 12 people, AJ was one of them. When I saw that Samantha Ettus and Gary Vaynerchuck did an interview with AJ I knew that it would be an amazing. AJ discusses his book The-Know-it-all, then The Year of Living Biblically, and his life of writing and as a human guinea pig.

Enjoy!

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When not to take the cash.

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Recently Mark Suster discussed the topic of VC seed investing and when it can be a bad thing on his blog, Both Sides of the Table. This reminded me of a conversation I had with another experienced entrepreneur offline who said… “First time entrepreneurs shouldn’t be picky. If someone is offering you venture money it’s your lucky day and you’d be a fool not to take it. Don’t argue the terms first time around, once you’ve had a successful exit, then you can have the upper hand.”

So I reached out to Mark on the topic because I think he’s one of the more forward thinking VC’s out there and got his take. Here’s the interaction below. Thanks Mark.

My question to Mark:

There is a school of thought that a first time entrepreneur who hasn’t yet proven herself should basically take any money they can get. Get your company off the ground with anyone who is willing to take a bet on you and be picky with your second startup effort.
What are you thoughts on this? Maybe you can put on the entrepreneurial side of the table hat for this one?

From Mark:

My view, you always raise the highest quality money you can. If you’re first time and you can’t get the A team but you’re convinced you have a great idea then you look at your lesser options. Only scenario where I wouldn’t take the money is when the terms are so onerous that being successful doesn’t add enough to you as an individual. At that point I tell people to find another idea (or possibly another profession). Thanks for your question.

So, for young entrepreneurs, if you have an opportunity to raise money you probably need to take it. But always weigh the cost. How much are you giving up? Make sure you keep enough of your company that you’re still willing to sell all out (emotionally not, financially) to make it a successful one, you’re going to need that motivation down the very difficult road that you’re now driving.

image via flickr

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10.16

2009

If Foursquare had Sales Reps

foursquare_logo_girl

In a recent project, I’ve been trying to sign-up venues here in Chicago to be on Foursquare. It’s been a fun experiment in sales and a wake up call to the difficulties of door to door sales pitches. Below I’d like to share some of the findings of the experiment and some of the suggestions that I would make to the Foursquare founders (in the next post) all based on venue feedback. These changes may make those local business partnerships a bit easier and more valuable. Also, note that I am not really a Foursquare sales rep, they are a 3 person startup and they don’t have sales reps, but if they did, here’s what that person would learn from bars & restaurants…

Realizations

1) It’s tough to get in front of the person that makes the decisions – Over and over I would get deferred to a manager that wasn’t able to make a decision on any kind of promotion. I quickly learned that I need to get the right person before I give my schpeel otherwise the time was usually a bust. However, sometimes I found it really fun to just explain the idea of Foursquare to normal employees. In one situation I found that sharing the idea with an employee lead to a glowing review of the product to the manager, which eventually really helped in that important conversion conversation.

2) Brick and mortar is still confused about how the web will help them – With the blowing up of Twitter and Facebook, the offline crowd is becoming more open to the idea that a web based solution could help them. However, it’s still very new. Even though you and I are “savvy” it doesn’t mean that the value of the internet is understood by all. This will definitely take some hand holding. In order to reach the local business masses there would need to be a ridiculously large sales force, which is why most businesses won’t be able to make the economics work. There has to be a better way to reach these businesses than the tradition cold call method. (proposed solution in the next post)

3) You’ve got to relate the future with the past – These business owners don’t want to try the new things. That’s why they started restaurant/bar businesses and not web businesses, but that doesn’t stop their entrepreneurialism from thriving, they are looking for ways to beat the competition! If you are going to make a case to them, you’ve got to relate what your trying to do with something they already see the value in. Maybe for a restaurant it’s Yelp, or maybe for a bar it’s the economics of a Monday night drink special. Either way, connecting with something they already understand and buy into is mission critical.

During my experience in the shoes of a Foursquare sales rep there were many lessons learned, these are some of the main ones. I’ve really enjoyed this project for a few reasons. I believe in the product. I don’t understand how somebody could take a sales job when they don’t truly buy into the product, it would be a lie the entire time, nightmare. Also, I love convincing people of the webs value. I do think that so many people have not yet taking full advantage of the web and I will always promote it’s use where possible. Yes I’m a nerd. Lastly, I love talking to bar/restaurant people. Their businesses are very basic and they aim to serve. Similar to the game Foursquare, bars aim to help people have a good time, and I’m into that.

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Blog Action Day: Climate Change, start with the ocean

In an effort to support Blog Action Day’s Climate Change initiative I’d like to introduce you to the SurfriderFoundation.

The Surfrider Foundation is a non-profit environmental organization dedicated to the protection and enjoyment of the world’s oceans, waves and beaches, for all people, through conservation, activism, research and education. Being from San Diego I grew up with the Surfrider Foundation sponsoring events and surf contests that I competed in. It’s an awesome organization that is focus on the health of our beaches and oceans. Something that is important to me.

Surfrider Foundation’s unique membership includes ocean enthusiasts of all sorts: Surfers, bodysurfers, bodyboarders, windsurfers, swimmers, divers, beachcombers and ocean-loving families from all walks of life. If you’re interested in becoming a member, go to www.surfrider.org/join or call 1-800-743-SURF.

From the Surfrider site:

Volunteering for the Surfrider Foundation

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Volunteerism is the life blood of the grassroots Surfrider Foundation USA with its 60+ volunteer-driven chapters located along the East, West, Gulf, Puerto Rican, and Hawaiian coasts. See our “Volunteering” Menu Book” for how to volunteer at a Surfrider Foundation Chapter. Go to our Surfrider Chapters page to find the closest chapter near you. At the chapter-level, there are all kinds of volunteer activities to do, from beach cleanups to water testing to educational presentations to writing newsletters to attending city council meetings to many other things.

At the Surfrider Foundation National Office in San Clemente, CA, summer internships are available. Also, volunteers are always needed. Call 949-492-8170 or email membership@surfrider.org about volunteer opportunities at the national office.

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Broadband Access as a Legal Right

Today the Finnish government announced that it will become the first in the world to make broadband internet access a legal right of every individual in Finland.

They’ll start in July of 2010 providing every person one-megabit of broadband connection with full intention to increase that to 100mb by 2015. This is an enormous first step towards a future of unbelievable connectivity. Obviously, we would all say that the world is extremely well connected today, but if this law were to be passed in other countries I believe we would see unparalleled positive effects.

The amount of people that would benefit from a program like this around the world is staggering and it’s exciting to think about the increase in thought, sharing, innovation, productivity, and yes, entrepreneurial effort that would occur because of a change like this. A few startup pioneers are pushing for something called the Startup Visa. My opinion has yet to be made on this issue but I sincerely believe that a “broadband for all” effort would dominate that effort in it’s affect on innovation in the States. I’d like to see those same pioneers push for something similar to this here in the US.

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Signals over Qualifiers

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Last month I wrote a post called ‘Qualifiers’ about the importance benefit of grad school, specifically an MBA. I was exploring the idea that having an MBA as a qualifier of your success with my friend Daniel and he shared that a more accurate name for the concept I blogged about was ‘Signalling’. In fact apparently this concept won this dude a Nobel Prize.

In economics, more precisely in contract theory, signalling is the idea that one party (termed the agent) conveys some meaningful information about itself to another party (the principal). For example, in Michael Spence’s job-market signalling model, (potential) employees send a signal about their ability level to the employer by acquiring certain education credentials. The informational value of the credential comes from the fact that the employer assumes it is positively correlated with having greater ability.

I knew I was onto something :). I continue to believe that certain signals are needed in one’s career path. However, I now believe that in my career that signal does not necessarily have to be a graduate degree. That signal can and will come from many different places. I like how Wavell Watson put it in this blog comment:

“I’d say the best signals go in this order: strong references/network > specific experience > specific degrees > generic degrees > certifications > nothing .”

So, for now, I’m pulling back on my interest in an MBA program. If the situation, timing, and need presents itself in the future to prove that an MBA (or other grad degree) is the right move for me I may change my mind. But right now, I believe that specific experience, first, and specific strong references, second, will have a much better ROI for my career.

image via semi-detached
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10.11

2009

Reblog: Mint’s Story from Aaron Patzer

Image representing Aaron Patzer as depicted in...
Image via CrunchBase

This is a really cool recap of Mint’s success directly from Aaron. If you enjoy this post please continue the conversation over on Christine.net where it was originally posted. I reblog this solely because I didn’t want you guys to miss this. It’s that cool. As some commenters will note, this is not meant to be a model for every startup, but it does lay out a potential path and the stages of an early stage web startup. Enjoy.

Aaron Patzer, CEO of MINT.com, dropped by The Funded and Vator.tv’s Juice Pitcher tonight to share some secrets of the company’s success. (Just in case you don’t plug the TechCrunch feed directly into your brain stem: MINT is the wildly successful, soon-to-be-acquired-by-Intuit, #1 personal finance site…and oh yes, full disclosure that First Round Capital is a thrilled investor.)

Everyone knows that MINT has a great product, but few know the strategic moves. To the point, what did it take to get there? How much did it cost to get started? When and how was it smart to raise money such that both the founder and the investors walked away happy? Aaron opened up MINT.com’s books – and his old slide decks – tonight to share some shockingly frank details with the startups in attendance. Even more generously, he was happy to have his lessons be blogged for a more public audience:

The straight shot: Why should you raise money, and how much?

  • Step 1: When you’re ready with an Idea: Raise $100K from friends and family, and use it to build a prototype.
  • Step 2: Once the prototype is done: Raise < $1M in seed capital, and get into market with an alpha launch.
  • Step 3: After that initial launch has traction: Raise $5-10M, and use it to prove/scale the model.

Garage Phase: What are the costs and milestones?

Here’s how MINT spend its $100K of garage money:

  • Founders: $30K/year living expenses
  • Engineering 1st hires: $30-50K/year
  • Office: $400/cube/month
  • Tech: $10K
  • Legal: Deferred payments for 0.50 – 0.75% of company

Roughly, 2 founders + 1 engineer/contractor = $150K/year burn. This gives you 6 – 9 months of runway before you need to raise a seed round.

In order to get that seed round, you’ll need to understand your competition, and come up with projections. Everyone knows this will change…but you need to show your thinking around it anyway. As an example, MINT originally projected $30/user/year for lead-gen and CPA. (Aaron noted that the company is pretty close to this today. But this is the exception rather than the rule.) Know how the business model works. People do X behavior and it turns into $Y income, add up those $Ys and it’s a $Z business. If you can walk people through these assumptions convincingly, you’ll get that seed round.

Seed Round: What are the next costs and milestones?

  • Salaries: $50 – 90K/year ($450K/year for 5 people)
  • Overhead: +20% ($100K/year)
  • Legal: $25K + $2K/month ($50K/year)

MINT.com raised $750K in its seed round to cover these expenses for 12 months, which is about how much time you’ll need to develop into the Series A stage.

What model do you build next in order to raise the Series A? Testing and learning from your seed model, show user growth, retention, COGS, revenue per sale/user, and profit. The accumulated loss is how much you need to raise, and a well-though funding strategy combined with an understanding of (hopefully good) business economics is what will speed the Series A process along.

Series A: Now what?

  • Salaries + Overhead: $200K/year/person
  • COGS: Varies, but even one-time expenses magically add up to $150K/month
  • Legal: $10-50K/month

Total burn for a 30-person team: $6M/year. Naturally you don’t start out burning this much, as it takes time to grow the team. However the numbers work out, your goals should be the same: Get profitable within 2 years. Raise the capital you need to do this without much distraction.

If you want to raise more after this in order to grow more aggressively or extend otherwise, your success in achieving those first two goals will speak for itself.

If you enjoy this post please continue the conversation over on Christine.net where it was originally posted.

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