Startups

power-of-two

11 Aug 2008

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Entrepreneurial Toolkit #5: The Power of Two (or Three)

As an investor, the most important lesson I’ve learned over the years is that great companies are built by great teams. Furthermore, great teams rarely are one superhuman “A” player surrounded by a supporting cast of “B” players. And unlike the Borg Collective which seeks to “… add your biological and technological distinctiveness to our own”, great management teams need to have a set of complementary, yet overlapping, skill sets.

Most of us know the example of how Steve Wozniak the brilliant hardware designer teamed up with the uber-persuasive Steve Jobs to create Apple, an iconic Silicon Valley startup success story. While that partnership didn’t last forever, it’s pretty clear that the fusing of the talents of these two brilliant individuals directly led to Apple’s early success. I encourage you to read more in a “must read” book  I’ve recommended earlier, Founders at Work.

Jim BalsillieMike Lazaridis

Here in Waterloo, Research in Motion (RIM) would not be today’s superstar company unless Jim Balsillie joined engineer, founder, Mike Lazaridis. Until Jim joined Mike in the early 1990’s, RIM had long remained a typical engineering oriented company doing about $500 000 annual revenues from 20-odd products. Although Jim could never have built the products, his introduction to the management brought the marketing and financial drive and focus that ultimately led to the Blackberry led success story we know today. Rather than the cult of the individual, once again it is the power of this amazing duo that built RIM.

What is unusual about this case is that both Mike and Jim share the title CEO, billing themselves as co-CEOs. Perhaps more companies should consider this approach?

Reed Hastings

Back in 1995, as MKS was starting to look to the capital markets, one of my personal inspirations, Reed Hastings CEO of Pure Software (and now Netflix), observed that “Pure Software has built a team where any of the senior management team could be CEO”. I certainly took that approach to heart when building MKS’s great team and it has been an important insight ever since.

For example, Chuck Bay, who was Pure’s CFO at the time has subsequently gone on to be CEO Broadbase Software (acquired by KANA) and President and CFO of Spatial Technology. Rob Dickerson, who was VP & GM of Developer Tools for Pure, a key operationally focused executive, subsequently became CEO of Faves and President, CEO of Pacific Edge Software (acuired by Serena Software) and EIR at Ignition Partners. These are just two data points illustrating the calibre of the team Reed built at Pure Software.

At MKS, we managed to build an amazing team, especially in the mid-late 1990’s with superstars like Ruth Songhurst, Eric Palmer, Tobi Moriarty, Michael Day, Frank Pfeiffer and Paul Laufert. It was a great mix, with stars from Canada, US and Germany. As well, almost uniquely, we had a balance of the genders. It is a big disappointment to me that I continue to see how rare that is.

To round out our discussions, anyone wanting a deeper grounding in this important topic should read the book Co-Leaders: The Power of Great Partnerships by David A. Heenan and Warren Bennis, John Wiley & Sons, 1999. With the thesis that great organizations need “more than a visionary CEO”, the bookoutlines the rare, but critical, role building a strong management team takes in building exceptional companies.

To summarize this book, in the authors’ words, “Co-leadership . . . is a tough-minded strategy that will unleash the hidden talent in any enterprise. Above all, co-leadership is inclusive, not exclusive. It celebrates those who do the real work, not just a few charismatic, often isolated, leaders who are regally compensated for articulating the oranizations’ vision”. Although, like many it has taken me years to learn this valuable lesson, I couldn’t say it better myself.

There are lots of detailed case studies, from companies in many industries, with a few key lessons for co-leaders, including:

  1. Know thyself
  2. Know thy leader (check your ego at the door)
  3. Avoid titanic clashes (!)
  4. Find out what the enterprise needs and deliver it superbly
  5. Lead as well as follow
  6. Know when to stay put (control the temptation to star)
  7. Know when to walk away (learn when to say no)
  8. Define success on your own terms

To reiterate, great companies are almost always built by great teams. As organizations and markets get more complex, I believe co-leadership will become increasingly the norm. For smart and successful people to control their egos takes a lot of maturity. Furthermore, the ideal team depends, in large part, on the stage and growth of the company. As I’ve learned, great teams take a lot of work to build, but can also dissipate over time. Indeed, they are a rare and fragile flower, to be cultivated constantly.

Nonetheless, it is definitely worth any entrepreneur’s full time and attention to unleash the power of the team – whether a gestalt of two, three or even more remarkable individuals.

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personal-growth

10 Jul 2008

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Entrepreneurial Toolkit Summary: It’s All About Personal Growth

New York Times on Sunday contained an article which immediately caught my attention, as it appears to provide the missing piece pulling together all of my recent postings outlining an “Entrepreneurial Toolkit”, so far consisting of these five core skill sets:

  1. “Fearless Passion”
  2. “Don’t Drink Your Own Bathwater”
  3. “Embrace Change”
  4. “Taste the Cash Burn”
  5. “The Power of Two (or Three)” (coming soon)

The article, “If You’re Open to Growth, You Tend to Grow”, New York Times, 6 July, 2008, in extolling an individual’s openness to change and personal growth, really provides a common thread, weaving together the above skills.

To quote Carol Dweck of Stanford University,

“People who believe in the power of talent tend not to fulfill their potential because they’re so concerned with looking smart and not making mistakes. But people who believe that talent can be developed are the ones who really push, stretch, confront their own mistakes and learn from them.”

The notion that nurture trumps talent, is an interesting one. It underscores why defining some great attributes for an entrepreneur in my Entrepreneurial Toolkit is such a good idea. For the right people, if they strive for personal growth, each and every one of these attributes is in reach.

I’ve always held an innate belief that hiring is about way more than the credentials from the best schools and relevant job experience. By finding people who value “stretching themselves”, companies are adding those who can navigate today’s complex and every-changing environment to their team mix.

It’s also a very positive and empowering message.

Good mentoring and management, like good parenting, works.

Think about it.

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cash-burn

8 Jul 2008

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Entrepreneurial Toolkit #4: Taste the Cash Burn

Whether you run a startup (pre-revenue and running on fumes), a larger, later stage company (with actual revenues and earnings) or even a public technology company, the topic of cash should never be far from your consciousness. And, it goes without saying that keeping tabs on cash is generally even more germane in social enterprises.

For many early stage entrepreneurs, skilled in technology, marketing and strategy, the notion of vigilance around cash burn might seem mundane, something to be avoided or delegated. There is no question that companies endowed with more cash on their balance sheets can act more strategically. Conversely, It is the rare company indeed that isn’t significantly cash constrained at some part of its life cycle. As a result, you need to be on top of cash burn and not let cash crises catch you off guard.

Of course your need, or even better should virtualize, solid financial and accounting management skills. Notwithstanding this, as CEO, cash needs to figure as a constant item in your personal mental checklist. In the New Venture 2.0 Playbook, discussed in much more detail in an earlier blog post here, Grover Righter has aptly dubbed the level of importance of cash as “The CEO’s Mistress” (pictured at right).

No, not like this!No, not like this!

Yet, many entrepreneurial CEOs can’t answer simple, but fundamental, questions, such as:

  • what is your monthly burn?
  • what is the life of existing (and committed) cash in the business?
  • Which expenses could be cut, should I wish to extend this cash life by lessening burn?
  • What was that cheque really for?

While the Venture 2.0 Playbook outlines a complete methodology to build certain entrepeneurial technology startups, from beginning to exit for much less money, the key point of today’s post is that every entrepreneurial CEO must internalize the whole issue of cash burn. Remember, it’s not enough to sleep peacefully at night, comfortable in the notion that your CFO is handling all of that cash stuff.

And, ironically, this need doesn’t disappear even in a larger firm. When I ran a public company, portfolio manager expectation was that the CEO knew the business model, budget and forecast to a reasonable level of detail for up to 2 years into the future and also with longer term strategic thinking. Because public CEOs (and CFOs) are expected to give “street guidance” of future quarters, it feels like trying to drive a car where the steering column is very long — in this case say 18 months long. Keeping all of this in your head can be challenging. And, furthermore as you discussing product, market and strategic questions, all may well have financial implications. In other words, even minor adjustments in one area of the business can significantly alter the “18 month steering” problem of future financial guidance.

To summarize, for the entrepreneur without formal financial training, seriously consider upgrading your financial skills (by formal training, finding a good mentor or via your own research). And, even more important, take them to heart – particularly in the area of cash management.

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30daysbook_big

28 Jun 2008

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Entrepreneurial Toolkit #3: Embrace Change

Successful entrepreneurs must push themselves to develop a set of, often seemingly contradictory, business and life skills. We’ve already talked about fearless passion and not drinking your own bathwater.

Today, we’ll expand on a skill that is becoming ever more important in these times of rapid technological, social and business evolution — the need to embrace change. In my own life, it has been a personal hallmark, so much so that without major new challenges and course corrections, my life satisfaction drops precipitously. Therefore, seeing Guy Kawasaki’s recent interview with Ariane de Bonvoisin called Change is Good reminded me to add change into my personal Entrepeurial Toolkit as skill #3.

For me personally, it is wonderfully affirming that, what I used to consider a pathological need for change, is in fact highly adaptive for the future world. Ariane’s book defines ideal entrepreneurs as “chance optimists”, who believe change is mostly good. Furthermore, those who have a strong believe in the positive power of change can flex their “change muscle” to overcome adverse emotions, or “change demons.” I think you get the picture, but it is certainly well worth reading, if only to re-affirm how important change has become to building lasting value.

The notion that change is cool has long been a hallmark of the culture of Silicon Valley, and most technology startups. Entrepreneurial founders are naturally aggressively impatient, pursuing change with an ADHD-like intensity. In fact, one influential business school commentator, who will remain nameless, suggested that the management style favoured in the Silicon Valley, which is so tuned to rapid growth and a challenging environment, would totally fall apart in the more repetitive world of “traditional” business. The truth is that the technology startups of the 1980’s and 1990’s were almost certainly belwethers heralding the morphing of our economy into one that is largely knowledge-based. I’m really not so sure that a business built on repetition and “continuous improvement” (which, sadly, is often more like “death by a thousand cuts”) has much of a future. But, what is unquestionably true is that the change-intensive technology startup culture is miles apart from traditional businesses whose historical rate of change was measured in decades, not weeks or months.

Compact CassetteStereo 8 TrackIn a world full of change, do maturity and learned experience continue to have value? Absolutely. Serial entrepreneurs learn to “replay a tape” of past successes, and even more importantly, to avoid pitfalls that have bedevilled them in the past. However, replaying the tape is much more complicated as the pace of change accelerates. A good analogy is that you are replaying the tape as the format transitions through 8-Track, to Cassette, IPOD - MP3 PlayerCD and now to MP3s in Flash memory, while the music genre morphed from Disco to Punk to Rap. Notwithstanding this, there are still enduring universal truths about making great music that transcend format or genre. The same is true for entrepreneurs building great businesses.

I mention this because I still have people ask me to talk about experiences in developing “go to market” strategies from 10 or even 15 years ago. While there are some valuable object lessons there, the approaches today (as we’ve discussed in other blog posts) are totally different. That being said, I feel that those earlier experiences have helped me to navigate this current change-infused world. Alas, my early world of physically shrinkwrapped software, sold through mail order distributors like Programmer’s Paradise and advertised in physical magazine ads, that built MKS in the 1980’s is largely history. The 1990’s saw most software sold via ecommerce on the web. Millenial startups leverage vast social networking platforms (Facebook, Twitter, etc.) and mobile distribution models. Like the tape analogy, each iteration of the market is pushing the envelope and, yet, each borrows heavily from existing playbooks as well.

Furthermore, even technology startups can get into a rut of repetition. As an entrepreneur, it is critical to have a network of intelligence that helps you navigate your ever changing business landscape.

Change - Embrace ItIf you want to learn from first hand from Ariane de Bonvoisin on the subject of “Taking Charge of Change”, or even ask your own questions, sign up for her 21 August, 2008 Calliflower call by clicking here.

In summary, embrace change by being both a “change optimist” yourself and encouraging it in your team. My strong belief is that it will enhance your ultimate success as an entrepreneur, and also increase your personal satisfaction during your personal journey to success, however you define it.

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catbathwater

11 Jun 2008

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Entrepreneurial Toolkit #2: “Don’t Drink Your Own Bathwater”

In the tech heyday of the mid-1990’s, my favourite US investment banker, Mark Slater (formerly of Hambrecht & Quist) had a strategy to avoid CEOs that, as he so eloquently put it, “Drank their own bathwater”. Mark had identified the tendency amongst CEOs, even entire executive teams, to become so satiated with the power and glitz of riding the waves of technology/media hype, that the corporate adulation goes straight to their head.

Ego and ambition, never faults in themselves, taken to extremes tend to cloud better judgment. Anyone who has visited their capital city, like Washington, London or Ottawa, has witnessed the same effect that all that marble and walnut lining the corridors of power have on newly elected Members of Parliament or Congress.

I’m sure all of us entrepreneurs have been seduced by the siren call of their own PR. I know I have. But long ago I learned that, no matter how big the entrepreneur’s ego, it is critical to be self analytical and have enough inner humility and judgement to resist the corrupting force of power and spin. Every company has faults, challenges and issues to deal with. In truth, no matter how great the press or the wave being ridden, no company can entirely escape the buffeting of real world forces and the ups and downs of a cruel world. Navigating such turbulent waters is simply another challenge entrepreneurs need to face every day.

Ed IacoBucci, CEO Dayjet & Citrix FounderEd Iacobucci, CEO Dayjet

One example, and a person I would consider a mentor and role model, is Ed Iacobucci, founder of Citrix Systems and more recently Dayjet. Ed, an industry visionary, pundit, technologist supreme with energy and a will to win, is a man for whom I have infinite respect. Specifically, Ed has weathered highs and lows like almost no one else I know. For example, when I first met him, he was CEO of an almost bankrupt startup selling multi-user OS/2 technology (go figure). Later, after re-targeting the Citrix product family around Windows NT, his company was a NASDAQ darling and on a roll.

Imagine being in Ed’s shoes when, at the February H&Q conference at the Westin St. Francis in San Francisco, he learned that Microsoft had just informed them that they were planning to compete with their core product, Ed led the charge with the team. First he did the honest thing and issued a press release, which had the effect of instantly wiping out over 80% of Citrix’s market capitalization. Without even going home, Ed flew straight to Redmond and led the 24×7 multi-month battle to save Citrix from being “Quickenized” by Microsoft. A $150 million deal saved the day, but the key fact was that Ed remained honest to himself and his shareholder base throughout, which is no simple task for a major public company given shareholder disclosure rules. Several years later, when his stock price touched $50, making Citrix worth a cool $20 billion, his only comment was a modest and realistic “that stock price is a lot to live up to.” Perhaps this illustrates why I have such admiration for Ed as an individual.

Andrew Odlyzko's Internet Doubling GraphFor every Ed Iacobucci, there were many dot com era fibre and telecom firms that, despite all hard data to the contrary, ran their businesses into the ground on the false proposition that the interent was doubling every 90 days. And, make not mistake, sheer hubris was the major contributing factor.

In summary, humility and being self critical (“not drinking your own bath water) coupled with fearless passion (the killer instinct and laser beam focus) are two of the most important qualities in the Entrepreneurial Toolkit. Well balanced, and taken together, they are a winning combination. Most importantly, like almost all personal success factors, they can and must be learned as only a rare few are born with this wiring.

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jeffpulver

5 Jun 2008

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The Essential Entrepreneurial Toolkit #1: “Fearless Passion”

“I believe ‘fearless passion’ is a secret sauce of future success.” – Jeff Pulver

This morning, fearless entrepreneur Jeff Pulver, published an truly inspirational blog post that all entrepreneurs (and aspiring entrepreneurs) should read and take to heart. Read “Fearless Passion Knows no Boundaries” and consider, as one comment suggested, printing it out and putting it on the wall of your office or cubicle.

Jeff, a co-investor in our portfolio company iotum, is a prolifically tireless entrepreneur who, among other things, co-founded Vonage and continues to be a visionary innovator in the VoIP community and Internet Video.

Why do we put this as the first item in our Essential Entrepreneurial Toolkit?

In the uncertain world that entrepreneurs must navigate, both in startups and the social sector, Jeff’s advice is right on the money. To outsiders, the sheer bloodymindedness and chutzpah exhibited by many entrepreneurs comes off as arrogance, or even worse, naïveté. In truth, when balanced with other qualities in the toolkit we’ll discuss at a future date, such fearlessness allows them to navigate those inevitable troughs of despair.

And, it’s a good thing. Without such “fearless passion” our world would be a less colourful place and many disruptions that we depend on might well never see the light of day.

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knowledge-cluster

13 May 2008

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Startups: A History of Location

 

Silicon Valley MapIn today’s knowledge-based economy, much discussion centres around the importance of clustering. For example, in financial services, cities like New York, London and Toronto have all benefited at the expense of smaller rivals (eg. Philadelphia, Paris and Montreal or Vancouver). Likewise, as entrepreneurial technology startups have spread around the world, the Silicon Valley remains a magnet and model for that magic blend of people, ideas and capital aspiring to create the next Microsoft or Google. Furthermore, in spite of the world-flattening ascendency of information technology over the last decade, in some ways, the forces of such clustering seems to have increased.

Being domiciled in Canada, and having built transatlantic technology companies over the years, led me to ponder Chris Anderson‘s recent endorsement of distributed workface in which he “builds companies that are distributed because that’s where the best people are.”

So, what’s the stronger force: clustering or distributed teams? First, let’s dig a bit into history so we can follow this trend.

The 1980’s: Selling Software in a Pre-web World

In the late 1980’s, an otherwise bright, young MBA student advised MKS to conquer local markets (ie. Waterloo Region) before going national and only then to export markets. While this may have made sense in traditional industries, we had the good sense to ignore this faulty gem of wisdom. Instead, reckoning that a dollar spent marketing in the US would reach about 10 times the audience as one dollar spent in Canada, we rejected this advice and focused from day one on selling our first product (MKS Toolkit) into the US market. To provide some context to modern readers, in these pre-web times software companies put ads in the back of magazines with dealers with geeky names like Programmer’s Shop and Programmer’s Paradise, with a several month cycle from ad spend to results. It’s easy to forget that, in those days, software companies had a “manufacturing” group which duplicated diskettes and shrink-wrapped them in boxes with physical manuals. Our main tactic to overcome geography was to use a North America-wide toll free 800 number to mask our country of origin, at least for first customer contact.

In my case, it helped that I had my first software startup experience in the US while building Coherent. This gave me direct operating experience in the Silicon Valley from the beginning. While importing that model of company development back to Waterloo probably wasn’t a 100% fit, it did serve to shape our biases in company structure to a very large degree.

The 1990’s: The Israeli Model

As the 1990’s unfolded, better IT systems, lower cost telephony and the emergence of the internet, web (and its precursors such as AOL), created an environment that was ideal for what I call the “Israeli Model” of technology company formation. In this model, R&D and “back office” functions resided in Israel, while much of the sales, marketing and business development (ie. the storefront of the company) was in the US – typically in the Silicon Valley. Companies like Aladdin, Checkpoint Software and Mercury Interactive all are good examples from the 1990’s.

Why did this model make sense? Israel is a small country with a tiny home market, having a population of just over 7 million. At the same time, it is a rich country (22nd in GDP per capita) with extremely high educational standards and a military establishment that was pushing the boundaries of research into many IT-related disciplines. Thus, Israel was an ideal cluster of brainpower and ideas to create new technology startups. However, the market was elsewhere. Between Tel Aviv and San Francisco there is an inconvenient, and inescapable, 10 hour timezone difference and up to 20 hours of flying time. To help overcome this a bi-modal company structure evolved, often with half of the staff (the back end) in Israel and the other half (the front end) in the USA. It’s a time tested model that has proven remarkably resilient.

As a result, despite its apparent disadvantageous geographic location, today Israel is second only to America in the number of NASDAQ-listed companies, and the Economist says that “the country attracts twice the number of venture-capital (VC) investments as the whole of Europe”.

It may seem odd, given how close Canada is to the US, to suggest that the same model made sense for Canadian companies as well. However, especially in the 1990’s, these key business drivers were essential to MKS or any other Canadian technology company with global aspirations:

  • corporate image: many Americans like to buy local, so having a strong (front end) presence in the US will definitely improve both the sales, and even investment and valuation, prospects of the company.
  • senior talent: sales and marketing executives with expertise in the software industry were effectively nonexistent in Canada. MKS source both its VP Sales and VP Marketing from the US. It was a great choice that allowed us to access top talent from major competitors. Furthermore, these executives provided mentorship, by acting as role models for the Canadian-based employees.

This was a virtuous circle, in which better US image helped to increase company value, attract ever better talent and ultimately should provide long term exit options.

Why not split the R&D organization as well? Notwithstanding our adoption of the Israeli Model, MKS resisted moving to multiple development locations until the very late 1990’s. Ironically, being a company that sells software to manage multi-site development, the state of the art in telecommunications and software adoption was still too primitive in those days and face to face communications continued to be critical. However, as the internet and bandwidth continued to develop and once MKS embarked on a series of acquisitions across the US, we did invest heavily in the new, IP-based room conferencing systems to knit geographically dispersed teams. It remains clear that until very recently, a single location for development has been preferable, particularly in the formative, early stages of product innovation.

Best Practices Today

Today, we live in a business world that routinely accepts offshoring, virtualized management, distributed teams, etc. Tools like Basecamp, Enterprise Wikis, iotum‘s rich conferencing, and even instant messaging for real time back channel, all make distributed innovation sessions (aka meetings) much more practical. What is most interesting is the fact that video plays only a very small part in all of this.

After years of evolving startup playbooks, we may be finding the right balance between the more traditional “Israeli Model” and the fully decentralized team as espoused by Chris Anderson. At Coreworx (Software Innovation), we moved the company to Waterloo largely to gain synergies, at a critical early stage, in what was then a 20 person team. So, there are clearly some benefits that remain from people interacting face to face and always will be. The most creative and innovative processes may well work best only when conducted in person. Further more, with the rise of mobile nomadism, less and less work seems to be conducted in the traditional office setting.

That being said, each year we seem to be able to achieve more by ignoring geography and building around the best talent. Conversely, I have a feeling that the convivial, chalkboard-centric environment at Waterloo’s Perimeter Institute may well be crucial to the breakthroughs in fundamental physics that institution will undoubtedly generate. What is your take on the necessity of clustering talent?

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2008tlcheader

6 May 2008

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Tech Leadership Redux

I finally found some time to record thoughts on a great conference – last Thursday’s Tech Leadership Conference (TLC) by Communitech.

CEO ROUNDTABLE:

Verdexus once again gathered a few tech CEOs from Waterloo and Toronto, the night before at Charbries, to have an informal and open-ended discussion of key issues in financing, growing, valuing and finding exits for technology startups.

As in past years, we assembled an accomplished group who have built primarily software-based businesses during the last decade and are now executing newer models, whether SaaS or the more esoteric Venture 2.0 Playbook necessary for “so-called” Web 2.0 and Mobile businesses. In an earlier blog, I covered a past TLC speaker and Verdexus advisor Grover RIghter’s Venture 2.0 Playbook.

Numerous war stories about increased complexities of dealing with founders, VCs, groups of angel investors, not to mention simply making enterprise sales highlighted common success factors of perseverence to overcome obstacles, failure and experimentation before ultimate success and just plain good luck around timing. The drying up of VC money and other funding challenges remain a constant theme.

Experience in building great businesses over the last ten years has a lot to teach us today. However, the 2008 market also demands significantly different startup building techniques. To explore that, we spent time dissecting the Web 2.0 phenomenon. Some key questions we analyzed were:

  • Q: in building companies for less (e.g. under $10 million, or even $5 million, from start to exit), is this building a complete company? Or, is an exit to a much larger acquirer the only way such nimbly funded companies can be grown to full scale? A: yes and no, we had some quite different opinions on this, so perhaps the jury is still out.
  • Q: likewise, are these companies inherently built around smaller applications, that aren’t as technologically deep as earlier startups, or is there a genuine breakthrough in company cost structures? A: yes there are real breakthroughs in outsourcing, virtualization, hardware and network costs, virtualizing management, etc. Furthermore, while some Venture 2.0 companies are big plays, many are ultimately just a piece of the whole product and will ultimately find their true “home” only when acquired.
  • Q: in an age of “free”, what are the long term monetization strategies that will build companies of real value? A: see discussion around TLC and Chris Anderson, below.

In addition, we spoke about:

  • the right time and stage to start going outside for money, and hence the tradeoffs between purely organic growth and the accelerated growth rates external finance allows.
  • how to get and maintain, and perhaps legally incent, alignment between investors and management.
  • the difficulties a “closed” mobile environment, particularly in Canada and the US, presents to startups and whether purely web-based applications (a la iPhone) represent the optimal rollout strategy. The emergence of 3G will only enhance this strategy (3G is expected to be 20% of handsets by 2010, but that number would be skewed to non-North American markets).

TECH LEADERSHIP KEYNOTES:

For anyone attending the May 1st Tech Leadership Conference, you can see that our roundtable discussions were right on point for what the US-based, most west coast and Web 2.0 focused speakers were telling the audience. In fact, it was striking how common the issues between the two back-to-back events turned out to be.

Chris Anderson & Iain Klugman @ TLCFirst of all, Chris Anderson, editor of Wired, author the The Long Tail and most notably a past contributor to my favourite magazine, The Economist, spoke about the increasingly dominant role of FREE in product pricing strategies. Speaking from the perspective of an economist, Anderson illuminated why, increasingly, products and services, particularly those in the online digital realm, are moving to free or low cost pricing. He boldly predicted that “free is going to be the price of some version of any product”. First of all, the cost of production and distribution of these virtual products is primarily based on such inputs as computer processing power, network bandwidth, digital data storage, All of these are approaching zero or very low cost. Anderson underscored this by showing that the cost of serving video for 1 hour over the internet was about 1/4 cent per hour (and would be 1/8 cent per hour next year).

This is important because basic economics teaches us that “in a competitive industry price will equal marginal cost.” At the very least, this means that competitive online markets will almost always involve competing with a free offering. Anderson presented a fabulous dissection of why this is true and the implications for business, and especially tech startups in fields like web, social media, mobile and digital media.

He spent less time on the monetization strategies startups should use to compete in these free-dominated markets. Although he presented the “freemium“ business model wherein 99% use a basic and free offering, while revenues come from the 1% who are most engaged and hence see the greatest value. However, as I’m engaged in real world exploration of these web 2.0 monetization strategies even as I write this, there is so much more to this critical topic. The previously mentioned Grover Righter Venture 2.0 playbook delves deep, exploring a hierarchy of monetization models, including mashups, text ads, video ads, carriage, points, subscription, vending, etc.

Chris SaccaHaving already seen venture investor and advisor Chris Sacca doing a similar presentation at the Deloitte Predictions conference in January 2008, I will spend less time on his lunch time keynote. Sacca is an especially smart and engaging speaker and probably the best I’ve seen in sharing the Silicon Valley culture, expousing lessons learned during his recent work as head of special initiatives for Google.

The statistic that still resonates with me from his January talk was that Google is the largest purchaser of Filet Mignons in California. Having struggled over the years to import the Silicon Valley culture of focus and fun to Waterloo, I continue to wonder whether a direct import is possible given our differences of culture, climate and politics here in Canada. But, we this is definitely worth exploring and I’d really be interested in a Google employee’s analysis of the office and amenities in Waterloo compared to Mountain View.

On a deeper note, Sacca’s described his almost evangelical mission to lobby the FCC and help shape the subsequent 700 MHz spectrum to ensure it would be an open wireless platform. I’ve spoken a number of times about how broken our mobile environment is and that we need an improved regulatory framework and increased competition to get out of our current “dark ages”. In engaging the FCC, Chris has helped move the regulatory piece forward and with its Android open handset initiative, there is a good chance that Google will increase competitive intensity as well.

Lastly, Sacca weighed in on the topic of building new companies more efficiently and at the same time, took a swipe at VCs, in saying “traditional VC funds haven’t fathomed how cheap it is now to build a software company”. He continued that he “wouldn’t know how to be a VC, when you can start a company without maxing out a credit card”. Overstatement perhaps, but it does drive home the point we’ve been exploring for some time.

Mark Evans - Panel ModeratorThe interplay of the two Chris’s (Anderson and Sacca) with later keynote Jeff Taylor (Eons, ex-Monster) and Rick Segal (venture parter at JLA Ventures) mashed up into a panel with maestro Mark Evans (PlanetEye, ex-National Post) moderating. Iain Klugman of Communitech is to be congratulated for putting this together. Never before have I seen so much mental horsepower and raw in the trenches experience on one stage. The panel, for which I believe Communitech plans to have a video stream available shortly, was a true highlight.

Tony Perkins - Entrepreneur Week October 2005Again, major kudos to Communitech for pulling this remarkable event together. It is a real step forward for the Waterloo startup scene. To illustrate, less than three years ago, at October 2005 Entrepreneur Week, when Tony Perkins (AlwaysOn, founder RedHerring) spoke about many of the same Web 2.0 issues, the lack of readiness of the audience to receive this message was most apparent. The recent TLC dramatically shows that we’ve come a long way in those last few years in transitioning to the next generation of tech in Waterloo Region.

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4 May 2008

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Tweets from #TLC Twitterverse

Mark Evans - Panel ModeratorChris Sacca

Ever since I attended AlwaysOn OnMedia NYC conference in January 2007, where I witnessed the unfolding of a parallel conference on large side-mounted LCD panels, I’ve been intrigued by the power of social media to enhance the traditional conference experience. That conference pioneered a new delivery approach, which attempts to exploit peer-to-peer discussions and even involve those outside the conference in the event itself. I’m convinced that, in the context of conferences at least, much of the power of the social media lies in creating a whole new back channel of discussion. In that way, conference attendees can network, take notes and make the conference as personal to their needs as they desire.

The same thing was happening at the recent Communitech Tech Leadership Conference (TLC) in Waterloo on May 1st. In fact, when I made the suggestion to Iain Klugman (Communitech President) to consider installing those monitors for the next event, he was most enthusiastic. Nonetheless, while reflecting on the important, high level lessons from this conference, (which I plan to cover in a later blog posting), I did a quick mash-up of the main Twitter posts from TLC. I dug around and herein include a representative sampling, with apologies to anyone missed or anyone not wanting to be so immortalized, which paints an interesting picture of this back channel, including:

  • most Twitters were from attendees, but surprisingly people outside the conference, both local and some as far away as the UK, got into the conversation.
  • some speakers (e.g. sacca and markevans) were in also involved in the dialogue – is the back-channel “on message” with carefully prepared presentations?
  • on that point, follow the link in markevans Twitter for some commentary on perceived “tension” between the “old school” and new style of funding models
  • sometimes the comments reinforced the points, sometimes they challenged them. Is it true that perhaps, in contrast to the famous Mark Zuckerberg/Sarah Lacy SXSW encounter, people in Waterloo are too polite to mock the speakers?
  • my Twieets were an attempt to use Twitter for digital note taking. By capturing some key thoughts and ideas, a later Tweetscan could retrieve them easily
  • and, lastly, is Waterloo as Web 2.0 and social media savvy as we like to think? With around 6 Twitters out of 500 attendees, it’s a question worth asking.

I would suggest that the social media “web” as seen in Twitter, may well be as transformational to the conference as the advent of the web (Web 1.0) was to print media. And, of course, Twitter is really just Social 1.0.

So, enjoy this reverse-chronological peek into the back-channel dialogue from TLC on May 1st.

  • jimmurphy:Jeff Taylor (founder of Monster.com) rocked the closing keynote #TLC 2008-05-01 16:21:31

  • lborsato:Now he has people taking their shoes off. I’m very concerned what is next.2008-05-01 16:09:50

  • lborsato:Jeff Taylor is engaging the audience in some old school evangelism.2008-05-01 15:44:53
  • jimmurphy:Never more than 100 feet from food on Google campus says @sacca. #TLC2008-05-01 14:02:53
  • cubicgarden: “the end of control….” I like it, but chris anderson says it should all be free? 2008-05-01 14:01:43
  • jimmurphy:@Google 20% free time frees resources for different groups. Avoids VP-to-VP fiefdom bargaining for resources and makes things happen. #TLC 2008-05-01 14:00:56
  • jimmurphy: Good Google Culture Dump from @sacca at #TLC2008-05-01 13:57:33
  • jimmurphy: @sacca Showing the Omid Kordistani email that reduced poor perfroming ads to value attention of users. Put 60% of revenue at risk. #TLC2008-05-01 13:35:53
  • jimmurphy:@sacca Working with the republican FCC was possible. Saw eye-to-eye on wireless competitiveness #TLC2008-05-01 13:22:57
  • randallh: How to get out of “the dark ages of the mobile environment” 2008-05-01 13:22:43
  • randallh: Chris Sacca, crusader to open up mobile platforms 2008-05-01 13:20:15
  • garywill: @sacca talking Irv Weinstein and Uncle Bobby … two of the region’s icons 2008-05-01 13:16:10
  • garywill: Finished lunch … tasted like chicken … almost 2008-05-01 13:08:19
  • sacca: I had a really good time in Waterloo and am psyched my dad came to drive me back over the border to Lockport. 12:32 PM May 01, 2008
  • garywill: Rick Segal has left the building 2008-05-01 12:13:27
  • stevepulver: great debate on stage at the TechLeadership conference 12:05 PM May 01, 2008 from fring
  • lborsato: Chris Anderson says that he builds companies that are distributed because that’s where the best people are.2008-05-01 12:03:02
  • garywill: Old guys don’t have Twitter … according to Rick 2008-05-01 12:02:50
  • lborsato: Somebody else is Twittering here after all.2008-05-01 12:01:12
  • randallh: More people 55+ than 18-34 on the internet #TLC 2008-05-01 11:58:44
  • garywill: @sacca says the number of Twitter users has doubled in 45 days 2008-05-01 11:48:15
  • melledotca: Kinda wish I was @ TLC. Ahh well, the tweets help.2008-05-01 11:43:33
  • garywill: @sacca says Twitter has no marketing budget 2008-05-01 11:43:16
  • garywill: Rick Segal countering with examples of money being needed 2008-05-01
  • randallh: Chris Anderson saying he wouldn’t know how to be a VC when you can start a company without maxing pith a credit card 2008-05-01 11:39:36
  • lborsato:@garywill How many more people do you think are twittering in the audience? 2008-05-01 11:37:30
  • randallh: Chris Sacca: “traditional VC funds haven’t fathomed how cheap it is now to build a software company” 2008-05-01 11:34:25
  • lborsato:Chris Sacca, one of Twitter’s investors, is talking about what is happening on the web right now. He’s from Lockport, NY. 2008-05-01 11:32:12
  • stevepulver: is watching Chris Sacca from twitter speak in Waterloo 2008-05-01 11:31:53
  • randallh: Wow, only about 6 people of 500 at #TLC are on Twitter 2008-05-01 11:30:34
  • randallh: Jeff Taylor of Eons: “consumer brands on the east coast are fleeting” #TLC 2008-05-01 11:29:26
  • randall: watching Mark Evans panel with Chris*2, Rick and Jeff Taylor #TLC 2008-05-01 11:24:21
  • garywill:Mark Evans starting a panel discussion at TLC 2008-05-01 11:22:00
  • JeremyAuger:Just saw Chris Anderson, editor of WIRED, and author of The Long Tail present on his ideas, and the economics of ‘Free’. 2008-05-01 11:07:08
  • sacca: Love how many Twitters from the audience I got while on stage. Should I take Q&A that way during keynote? 10:08 AM May 01, 2008
  • randallh : “the curse of free – it’s a lot easier for small, new companies than incumbants” #TLC 2008-05-01 09:42:58

  • randallh: “free is going to be the price of some version of any product” #TLC 2008-05-01 09:41:03

  • randallh: Chris Anderson: in economics, “FREE is a weirdly under studied price” #TLC 2008-05-01 09:18:28

  • randallh: The origins of Socialism & Communism in the Pareto curve-fascinating #TLC2008-05-01 09:11:53

  • lborsato: Chris Anderson says that everyone is in a quest for the average consurmer – but there is no average consumer.2008-05-01 09:09:50

  • randallh: No wonder Chris Anderson is so good – he started out at The Economist #TLC 2008-05-01 09:01:46

  • randallh: Waterloo tech industry over 500 companies and revenues grew to $13 #TLC BN2008-05-01 08:52:15

  • randallh: Enroute to #TLC by Communitech 2008-05-01 07:39:28

  • jimmurphy: On my way to #TLC. Looking forward to meting Chris Anderson, Chris Sacca, Jeff Taylor and seeing Rick Segal again. http://is.gd/aRZ 2008-05-01 07:08:2

  • randallh: Finishing up a great tech CEO roundtable at Charbries 2008-04-30 23:27:00

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2 Apr 2008

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REPOST: New Playbook for Venture 2.0 – Presentation & Spreadsheet

Grover RighterIt seems that several people missed the “Comments” link where Grover posted his materials for the Venture 2.0 Playbook. Therefore, I’m reposting his comments with the link here below. Also, although we’ve had some great dialogue offline about this extremely important topic, I’d like to see some here.

Thanks to Randall for his kind words. It really was a great event hosted by MaRS. I would like to thank Peter Evans and MaRS’ CEO Dr. Ilse Treurnich for holding the event and letting so many entrepreneurs get a change to hear from the heavy hitters at IDC and the in-person speakers in Toronto.

I have posted my slides at the following URL:
http://www.imobileinternet.com/pub/mars/MaRS-Grover-Righter.zip

When you download the ZIP file, there is a folder with two content files. One is the PDF with the session presentation and another is the spreadsheet with the pro-forma numbers used in the session examples. (Hint to startup types, you need to put your OWN numbers in the spreadsheet 🙂

If there is interest in a follow-on session, we can have a special Iotum hosted Sqwak just for this topic and we can dig deeper into topics of interest. Let me know.

– Grover

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