Congrats to Jotspot guys
From Wall Sreet Journal
Google Inc., expanding its efforts at providing software that helps users create and post their own materials on the Internet, has acquired a California startup that develops online collaboration tools known as wikis.
The announcement came Tuesday through separate postings at Google's and JotSpot Inc.'s Web journals. Financial terms weren't disclosed.
JotSpot Chief Executive Joe Kraus wrote that he had been following Google's recent acquisitions and product launches and quickly concluded that "Google shared our vision for how groups of people can create, manage and share information online. Then when we had conversations with people at Google we found ourselves completing each other's sentences."
Wiki tools, popularized by the online encyclopedia Wikipedia, let users collaborate to create, modify and delete information.
In July, JotSpot released a new version that aims to make shared pages similar to spreadsheets, photo albums and other software people already use. In the past, Wiki tools have generally mimicked basic Web pages or word-processing documents -- photographs, for instance, might appear as a list of attachments, with no thumbnails previewing the image before downloading.
Google's acquisition of JotSpot, which has closed, comes as the Internet search leader prepares to purchase the online video-sharing site YouTube Inc. for $1.65 billion in stock.
Earlier in the year, Google said it bought Upstartle, the maker of the online word processing program Writely. Google has since packaged Writely with an online spreadsheet it developed. The free tools could help groups simultaneously work on documents and provide alternatives to Microsoft Corp.'s dominant business-software applications.
Mr. Kraus said the latest deal lets JotSpot tap into Google's resources, including a large user base and durable data centers. As JotSpot, based on Palo Alto, Calif., makes the transition to Google's systems, new registrations have been suspended.
JotSpot has both free and paid versions. The free, JotSpot-hosted service restricts the number of pages and the size of the collaborating group
Tuesday, October 31, 2006
Congrats to Jotspot guys
Posted by Vijaychandran Veerachandran at 9:05 AM
This is one huge exit in the recent times. Citigroup Venture Capital International, the private equity arm of Citigroup, has sold a part of its holding in Suzlon Energy for Rs 801 crore ($178 million), reports The Economic Times . This includes Rs 185 crore ($41 million) it realised during the IPO of Suzlon Energy in 2005.
CVCI's original investment in Suzlon is Rs 100 crore or $22.2 million (half of which was debt) which it made in 2004. It still holds shares worth Rs 1,800 crore. Add Rs 801 crore it realised from its partial exit, the total value of CVC's holding in Suzlon is Rs 2,600 crore ($577 million). This is 26 times the original investment.
Apparently, CVCI's Suzlon realisation could be the third most profitable exit in India. First, of course, is Warburg Pincus which made $1.6 billion from an investment of $300 million in Bharti Televentures. Then CVCI itself made approximately $600 million when it sold off its stake in i-flex to Oracle. Citigroup stayed invested for 12 years in i-flex. It's not clear how much was its original investment.
Read - CVC bags Rs 801 cr from part of Su
Reference Thanks vccircle.
This one is getting better and better everyday, I will recommend vccircle for any MBA anytime.
Posted by Vijaychandran Veerachandran at 7:04 AM
Sunday, October 29, 2006
From Michael Lewis interview with Fortune's Brian O'Keefe,
The Big American Dream. I think Lewis did a wonderful job by explaning the arenas where you can build the dream on. He summarizes in to final four categories.
1.Street in the East
2.Valley in the west
3.Washington for politics -I nere though about this as a big arena until he mentioned
Interview From Fortune , Thank you Paul
The stars of your books typically find ways to capitalize on market inefficiencies. Is contrariness necessary for greatness?
True greatness requires an ability to respond to challenges and overcome difficulties and suffer and endure - and to think under pressure and act under pressure. America is built on ambition. And there are these little arenas of ambition in the country. There's Hollywood. There's Wall Street. There's Silicon Valley. There's Washington in politics. There's professional sports. And those arenas of ambition - they tend to become ossified. When someone walks into one of those arenas and takes it on, I find that very appealing and healthy.
Posted by Vijaychandran Veerachandran at 9:22 AM
Sunday, October 22, 2006
1. Single Founder
Power of team with complimentary skills is by far important that the product itself.
2. Bad Location
I may not say that enrepreneurship is not found in other parts of the world. a suitable location surely makes your life easier
3. Marginal Nice /.
I will more prefer to say this as lack of vision, and dare to challenge the leaders
4. Lack or Originanility
We need to think twice. You tube is not the first video sharing site. Read break.com, Succes is through innovation either in existing or solving the problem
If you want to stick to the plan. Knock on your head twice, Because very few succesful companies did. Read Google, Yahoo etc
6. Hiring Bad Programmer
My god dont ever do this, Hire the best you can afford. A bad move on this one will not only kill your current project but also your future projects
some how sorrounding by the wrong people is the last thing you want to do. Kill or escape before it gets to you. I mean it!!!
Be flexible , Even though its necessary to chose some thing you are comfortable with. Willingness to learn and adapt to newer and better platforms should always be an option
8. Slowness in launching
Think hard on this. If you know the curve stay ahead.
9. Launcing too early
No one can say more about this than Sabheer Bhatia Not Hotmail but Aarzoo.com)
10. User in mind
If you build some thing, try to understand what is the problem it solves and for whom. Is that a crowd some one who you can bank on.. Creating a dating site for 70+.
11. Burn rate
Take enough money or better not take it at all
12. Small is cute
launching a company is inversery proportional to number of people in the team, Keep is less than 3 by any means and you will find some thing
Thanks Mr Paul Graham , I am always inspired his ways and very regular dealer. if you surely need to need more ane each points in detail please visit Y Combinator
Posted by Vijaychandran Veerachandran at 10:27 AM
Amazing comments, let us c what he have for us. Normally it is very hard to find this kind of article. I am glad that some one have enough courage to speak out
Summary: Interview of James Paulsen, Well's Fargo strategist. A year-ago he boldly predicted oil prices would fall and stocks would continue to deliver superior returns; he offers some key market expectations:
Quick comment: Here are some links to recent Barron's interviews: ( href="http://energy.seekingalpha.com/article/18436">1) Charley Maxwell: Where Oil Prices and Producers Are Headed (2) Chris Ceraso: Auto Industry Analysis (3) Rudolph-Riad Younes: Value Stocks Can Be Found -- Beyond U.S. Borders (4) Seth Glickenhaus Picks Four Stocks for a Weak Economy (5) J. Kyle Rosen: Using Options to Take Risk-Free Bets (6) Marty Cohen: U.S. REITs Look Strong, International Better
- Current market: A few months ago disaster loomed. Now mortgage yields have fallen, stocks have risen, gas prices are down, and we are near full employment. The present recovery cycle, which began in March 2003, tends to go through 120 day phases, but its undertow remains strong. The ten-year yield, at 4.8%, is where it's been for the past 5 years. Before this recovery ends/peaks, long-term borrowing costs will have to increase.
- Oil prices: Based on the rise in other commodities, oil belongs at about $50/barrel; anything above that is a result of speculation. Coming of its highs, oil is likely to overshoot on the way down. Paulsen would consider investing in the complex once it breaks into the 40s.
- Fed interest-rate policy: "We have got to go higher." Core inflation remains and will continue.
- Investor caution: Corporate excess cash-flow is "off the charts," but they aren't spending it. Every quarter they "beat their numbers," but say the future looks tough. Investors have been putting their money in 5% money-market funds and foregoing superior stock market returns. All this caution is bullish -- businesses still have money to spend and investors to invest: "I think bravado and optimism begets bad times and chronic cautiousness paints a beautiful picture for the future."
- Trade deficit: Emerging economies have been the beneficiaries of the record U.S. trade deficit, driving worldwide economic growth, particularly in emerging markets. In a stroke of unintentional genius, this policy will result in a huge payback in coming years as the world's nouveau middle-class brings the U.S. trade deficit down with their new-found wealth.
- Dollar: "The dollar is going a lot lower." The G-7 will force China to float their currency, and the dollar will weaken against Japan and emerging currencies, if not Canada and Europe. If the dollar breaks to new lows, commodity prices will rise, leading to core inflation; this is the bond market's biggest risk, and makes investing overseas a good idea.
- Private equity boom: "It tells you how much excess liquidity we have in the system."
- Housing: He agrees with Greenspan; the worst might be over. Refinancing has exploded, lumber is showing signs of bottoming, yields are down, and housing stocks are up since July despite bad reports.
For Jones Investors, the Price Is Right by Kopin Tan
Posted by Vijaychandran Veerachandran at 9:26 AM
Tuesday, October 17, 2006
Clarity of Purpose
Posted by Vijaychandran Veerachandran at 9:09 PM
NEW YORK (Reuters) -- Wall Street workers took home nearly $300,000 on average last year as profits from trading and merger advising fueled record earnings, New York State Comptroller Alan Hevesi said.
Wall Street compensation averaged $289,664 per person, 5.1 times the average $56,634 for workers citywide, the comptroller said in a study released Tuesday. The highest-paid bankers and traders can command eight-figure pay packages.
Bonuses totaled a record $21.5 billion, or $125,500 per person. The securities industry paid out $48.8 billion, while generating $2.1 billion of taxes for the city, Hevesi said.
Wall Street compensation increased 21.9 percent in 2004 and another 11.8 percent in 2005, Hevesi said. The securities industry accounts for 4.7 percent of citywide employment, but 20.6 percent of its wages.
Industry employment is also on the rise, up to 170,800 last year from 161,300 in 2003.
Posted by Vijaychandran Veerachandran at 1:40 PM
Sunday, October 08, 2006
Here are five things you need to keep in mind before you pitch your business plan to a VC. Pick your VC carefully: Not all VCs are equal. There are specialised funds by industry and deal size (very early, early stage, etc). A good thing to do is to draw up a universe of VCs and then research their investment portfolios and general partners (the VC fund managers), and see if you can get a reference from one of their investee companies or associates.
Focus on the business plan: Your business idea is what the VC is interested in. Anticipate the VC's concerns and address them in your presentation. Make sure you have all the relevant numbers (addressable market size, expected rate of growth, likely margins). Show conviction in your business idea; if you aren't fully sold on it, there's no chance the VC will buy it.
Keep it simple: The surest way of cheesing a VC off is to make your presentation too long and too complicated. A 10-page, crisp and to-the-point presentation is better than a 50-page one. Highlight the most important parts of your presentation (uniqueness of the idea, quick scale-up potential, ready and growing market), and encourage them to ask questions. Where possible, show samples of work already done.
Put together a team: Here's a secret: VCs don't really bet on ideas, but teams. If you have a great team in place that has the domain knowledge, industry experience and the advantage of having worked together earlier, VCs will most likely fund you. In fact, some VCs will even suggest a better venture idea if yours doesn't seem to fly. The logic: A good team reduces the risks that a start-up usually faces. And good teams are the hardest to find.
Try again: Yahoo turned down an offer to buy Google in its infancy. Yahoo may be kicking itself now, but the point: That's how hard it is to get people to put money behind untested and untried ideas. It's likely that your idea will be rejected by quite a few VCs before it finally finds an investor. Don't be disheartened; learn from the rejections and make a better pitch the next time.
Vijay M. Veerachandran
"I am a dreamer. I believe nothing is impossible. If we can picture in mind,
Posted by Vijaychandran Veerachandran at 1:54 AM
Friday, October 06, 2006
|Kerala to go ahead with 'Smart City'|
Chief Minister VS Achuthanandan informed the Assembly that the LDF government would go ahead with the Smart City project in Kochi.
"I am a dreamer. I believe nothing is impossible. if we can picture in mind,
We should be able to accomplish it""
Vijay M. Veerachandran
Posted by Vijaychandran Veerachandran at 6:26 AM
Thursday, October 05, 2006
YouTube IS Wildly Profitable - No Doubts About It posted by froosh
YouTube cofounder Chad Hurley is looking to pull a Google on the $75 billion TV ad industry by introducing contextual ads. Hey, crazier things have happened, and if any one online video company can make it happen, it just might well be Steve Chen and Hurley’s brainchild, YouTube.
The popular file sharing service sells its home page ads for nice $175,000 for 400,000 viewers, according to the already-venerable Paidcontent.org. That is per day, so times 30, the main page drives revenue of some $5.25M, assuming it can sell out every day, and judging by the site’s daily updates, there is no reason to think it does not.
At monthly revenues of $5M per month just for the main page, methinks that YouTube is already profitable and is probably trying to be coy about its financials, with its monthly bandwidth costs rumoured to be in the region of $1 million each month. Call me crazy, but that means that just with its main page alone, YouTube more than covers its bandwidth charge… of course, there are more to costs than that, but if those numbers are right, its revenue run rate is starting to look pretty, which is why Hurley said the site won’t need any more funding, though he wouldn’t say if the site is in the black.
It is, in case you forgot to do the math… because YouTube not only generates cash from its main page, but it has no compunction about running display banner ads on its pages. If the site serves 100 million video streams a day, then it generates 100 million pageviews a day. Judging by the site, it serves 1 ad impression per page, so it can estimated that it serves up 100 million ad impressions per page. Looking at the kind of clients I see, and the CPM these garner, it is reasonable that YouTube can make - every day - anywhere from $50K to $200K (assuming $0.50 to $2 CPM). Realistically, I would bet their ads yield $0.75 CPM, or roughly $75,000, but of course, who am I?
Oh, that’s right, I did work for 6 years in online advertising and worked with Fortune 500 advertisers, global agencies and small and large ad networks alike. So if YouTube generates $75,000 per day in display ads, and $175,000 from the main page, that is about $250,000 per day in ads, times 30 days, that’s a nice, cool $7.5M per month in revenues, excluding pre-roll ads!
Note that not surprisingly, YouTube stopped running Google or Yahoo’s text ads, which suggests that on social network and file sharing sites, CPC style ads do not make sense (and why Google probably overpaid by shelling out $900M for News Corp’s FIM’s properties, though that was a defensive move to counter MSFT and Yahoo’s aspirations in search).
Not only is YouTube wildly profitable, but it is - much like Google - keeping mum because if content owners knew just how profitable, they would think twice about giving YouTube content, pro bono. (Note that many websites lost their marbles when they say that Google makes money off their backs, that’s nonsense, since they cannot both welcome and love the traffic and complain that Google serves ads alongside links to their sites on its search results page.)
Is YouTube the next Google?
This begs the question… let me skip the question and get right to the answer: no, YouTube is not the next Google, it can conceptually be the same for its sector: ie. video, in the sense that much the same way that Google successfully indexed the world wide web’s text content, YouTube can index the world wide web’s videp content, but video, despite all of the hoopla (and I am Chief Hoopla Office as Executive Producer of Web TV producer WatchMojo.com) is not a market nearly as large as search advertising. Online video advertising might be worth $1 billion by 2009 - or $2.3 billion by 2010 according to eMarketer - but search advertising is already a $5 billion industry…
“We’re not even thinking about being acquired or going public” states Hurley.
Indeed, the reason for that the former entails a large company taking on massive legal risk - much like Bertelsmann did with Napster - while the latter entails them opening their books, which will literally piss off record labels and film studios…
Remember one thing: Napster irritated the record labels but only in the sense that it cost the labels money (tons of it). Considering YouTube’s [potential] revenues, content owners would be shocked to see what they are passing up. [Please do not misjudge this post as sour grapes, by the way: yes, WatchMojo.com is a content owner, but we are web content producer and see no cannibalization when we send YouTube our videos, to us, YouTube is a great partner that has put online video on the map.]
So, YouTube is the next…
It’s hard to both write this blog and be a Web entrepreneur. I see a lot and hear even more and a bird whispered in my ear that some in the company’s circles consider the Skype sale to eBay as a worthy comparable. Skype sold for obscene multiples to eBay (about $2 billion, with incentives pulling the price tag to $4.1 billion) despite having little revenues to speak of.
Now, it’s interesting to bring up Skype, since Skype was founded by the same two gentlemen who founded Kazaa, the P2P file sharing site that took over Napster’s place after Napster got RIAA’d. You see, it’s interesting to note that Chad Hurley and Steve Chen are masterfully learning from history: both Napster’s, Google’s and Skype’s.
Here is how: they know that like Napster, they are one massive legal setback away from being shut down. The reason no one is going after them is that the content owners have learned that thinking too defensively will cost them more in the long run than thinking offensively and creatively, like Warner Music has.
In fact, from a liability perspective, YouTube is far more of a legal risk than Napster ever was:
1- Napster only violated the copyright of record labels, much of YouTube’s content violates all forms of content.
2- Napster never hosted the content, it provided a conduit for the file sharing; YouTube hosts all of the content. It is not only an accessory to the crime, it is the principal player and beneficiary.
3- YouTube benefits directly - and good for them, Steve and Chad financed the project on credit cards, they got the VCs to back them and are now in the lead…
[EDITOR’S NOTE: A Reader did email me with the following, correct observation: it is definitely true that Napster - and its maverick pioneer CEO Shawn Fanning - gave the labels the one-finger salute and sought to take record labels down. Napster essentially allowed users to download and “assume” ownership of the files in question… YouTube, on the other hand, it must be stressed, keeps the files on its servers to ensure that if needed, they cannot remove them, as they did when NBC asked YouTube to remove the Lazy Sunday clip. Instead of telling NBC off, YouTube did act as good corporate citizens, promtply removed the content and extended an olive branch… This is just another example of YouTube’s founders learning from history and avoiding Napster’s mistakes. In other words, it can be said that for every similarity between Napster and YouTube, there are at least two differences. It not only reached out to NBC, but it probably helped secured the Warner deal by providing copyright protection tools as well.
And, the fact that YouTube kept the files on its servers now translate to giving it traction online, but initially, it simply meant that its costs would far outrun its revenues, at the founders own risk - they did use their credit cards initially, hence why they deserve all of the potential windfall that will come their way]
Which also explains how they have learned from Google. Google - like their deal with Yahoo! to get Yahoo! to feature Google’s search engine showed - played it coy. Everyone downplayed Google as a one-trick pony, but by the time they had to open up their books to go public, people were shocked and in awe of their degree of financial leverage. YouTube is borrowing from that playbook: by keeping mum on revenues, it is not drawing the ire of competitors and content owners.
What they are doing now, and this gives Steve and Chad all of the credit in the world, is proverbially changing the jet’s engines at 30,000 feet (for others who have made such maneuvers, click here): they are methodically swapping out suspicious content with legitimate content. All of the talk about their different ad trial and error is, in my humble opinion, a smokescreen for the real trial and error tests: to swap out the copyright violated content with legitmate ones, and by signing up partners who realize that YouTube cannot be ignored anymore.
Are there any threats to YouTube?
When a company earns abnormal profits, competitors pay attention… or so goes the economic theory. Anyway, of course it is true that when Google Video, MySpace and Yahoo! try to take you down, that is a threat. And naturally, when an upstart like Revver pays content providers, that is a threat too. With time, YouTube will adapt, but what I suspect, is that the same way new social network sites no longer talk about replacing Myspace but complementing it, most people in video realize that YouTube has charged out of the gates, leveraged a perfect storm of sorts and will be hard if not impossible to catch.
But this begs the question, will YouTube get Skype-like dollars? Listen, nothing will make me happier, cause it will be yet one more shot in the arm of online video, a segment I have invested in. But, Skype was a tool that helped eBay increase conversions to its core business and help eBay get into a new field altogether. YouTube does not really provide - under its current denomination - that kind of solution to any would-be buyer…
And in the event of an IPO, well, YouTube carries way too much legal risk for any serious investors to bite. And, let’s face it, YouTube’s founders have yet to fully undergo the cleaning of their libraries to finally divulge to the media powers that be how profitable they actually are.
Vijay M. Veerachandran
"I am a dreamer. I believe nothing is impossible. If we can picture in mind,
Posted by Vijaychandran Veerachandran at 12:45 PM
Wednesday, October 04, 2006
This compelling shold we make a website for people
The casino experience Matt 04 Oct 2006
28 comments Latest by George
From a design/experience perspective, casinos are fascinating places:
1) There are no windows. Gamblers have no idea whether it’s light or dark or sunny or rainy outside.
2) There are no clocks. Dealers are forbidden from wearing watches. Time becomes meaningless.
3) There’s intentionally poor navigation. They are built like mazes meaning it’s usually tough to find a way out.
4) There’s a constant barrage of noises. Slot machines spin, games ding and dong, coins hit metal, there’s the pitter patter of the people running the games, etc. Many of these sounds, like the ringing of the slots, is there to give you a false sense of hope (“If all of those bells are ringing, somebody must be winning!”).
5) Loose slot machines — ones that pay out more often — are placed near highly trafficked areas (e.g. the aisles, change booth, restaurants, etc.) so more people witness winners.
6) There’s constant research on all aspects of the sensory experience: scents, colors, interior design, and the angles of lights (e.g. light that hits people’s foreheads is a no-no because it apparently drains gamblers of energy).
7) The attire (or lack thereof) of everyone who works there contributes to the atmosphere (e.g. dealers in uniforms, pit bosses in suits, servers in skimpy outfits, etc.)
8) Free booze is delivered to gamblers without them having to get up.
9) It’s not a passive experience. Gamblers are made to feel like they influence the process. And when a gambler feels they can affect the outcome — by throwing the die, choosing a roulette number, or deciding when to split at blackjack — a feeling of control develops that keeps them gambling longer.
10) There’s a constant rhythm. Everything happens at regular intervals. Dice are rolled. Cards are dealt. Wheels are spun. Bets are placed. And then it happens again. (Interesting note: Casinos have slowly phased out deck shuffling by installing automatic shufflers. Gamblers used to get a break while dealers reshuffled. Now it’s a constant flow of cards which increases the number of hands per hour — and that means more money for the house.)
11) There are players cards which get frequent gamblers free nights, food, and room upgrades.
12) There’s a palpable energy in the room. Money’s on the line. It’s a big night out. People are paying attention. Everyone’s engaged.
14) The funnel pours one way. There are thousands of places to hand over money to the casino. Every craps table, blackjack table, roulette wheel, and slot machine will take your cash. Yet there’s only one place to get paid out in bills: the cashier window. And to get there, you’ve got to pass all those other places that want to take your money.
The result: a completely immersive and compelling customer experience. It’s no wonder some people don’t know when to stop.
Vijay M. Veerachandran
"I am a dreamer. I believe nothing is impossible. If we can picture in mind,
Posted by Vijaychandran Veerachandran at 8:43 PM
Sunday, October 01, 2006
Sunday, October 01, 2006
Top ten geek business myths
Myth #1: A brilliant idea will make you rich.
Reality: A brilliant idea is neither necessary nor sufficient for a successful business, although all else being equal it can't hurt. Microsoft is probably the canonical example of a successful business, and it has never had a single brilliant idea in its entire history. (To the contrary, Microsoft has achieved success largely by seeking out and destroying other people's brilliant ideas.) Google was based on a couple of brilliant ideas (Page rank, text-only ads, massive parallel implementation on cheap hardware) but none of those ideas were original with Larry or Sergey. This is not to say that Larry, Sergey and Bill are not bright guys -- all three of them are sharper than I can ever hope to be. But the idea that any of them woke up one day with an inspiration and coasted the rest of the way to riches is a myth.
Myth #2: If you build it they will come.
There is a grain of truth to this myth. There have been examples of businesses that just built a product, cast it upon the ether(net), and achieved success. (Google is the canonical example.) But for every Google there are ten examples of companies that had killer products that didn't sell for one reason or another. My favorite example of this is the first company I tried to start back in 1993. It was called FlowNet, and it was a new design for a high speed local area network. It ran at 500Mb/s in a time when 10 Mb/s ethernet was the norm. For more than five years, FlowNet had the best price/performance ratio of any available network. On top of that, FlowNet had built-in quality-of-service guarantees for streaming video. If FlowNet had taken over the world your streaming video would be working a lot better today than it does.
But despite the fact that on a technical level FlowNet blew everything else out of the water it was an abysmal failure as a business. We never sold a single unit. The full story of why FlowNet failed would take me far afield, but if I had to sum it up in a nutshell the reason it didn't sell was very simple: it wasn't Ethernet. And if we'd done our homework and market research we could have known that this would be, if not a show-stopper at least a significant obstacle. And we would have known it before we spent tens of thousands of dollars of our own money on patent attorneys and prototypes.
Myth #3: Someone will steal your idea if you don't protect it.
Reality: No one gives a damn about your idea until you actually succeed and by then it's too late. Even on the off chance that you do manage to stumble across someone who is as excited about your idea as you are, if they have any brains they will join you rather than try to beat you. (And if they don't have any brains then it doesn't matter what they do.)
Patent protection does serve one useful purpose: it can make investors feel warm and fuzzy, especially naive investors. But I strongly recommend that you do your own patent filings. It's not hard to do once you learn how (get the Nolo Press book "Patent it Yourself"). You'll do a better job than most patent attorneys and save yourself a lot of money.
Myth #4: What you think matters.
Reality: It matters not one whit that you and all your buddies think that your idea is the greatest thing since sliced pizza (unless, of course, your buddies are rich enough to be the customer base for your business). What matters is what your customers think. It is natural to assume that if you and your buddies think your idea is cool that millions of other people out there will think it's cool too, and sometimes it works out that way, but usually not. The reason is that if you are smart enough to have a brilliant idea then you (and most likely your buddies) are different from everyone else. I don't mean to sound condescending here, but the sad fact of the matter is that compared to you, most people are pretty dumb (look at how many people vote Republican ;-) and they care about dumb things. (I just heard about a new clothing store in Pasadena that has lines around the block. A clothing store!) If you cater only to people who care about the things that you care about then your customer base will be pretty small.
Myth #5: Financial models are bogus.
As with myth #2 there is a grain of truth here. As Carl Sagan was fond of saying, prophecy is a lost art. There is no way to know for sure how much money your business is going to make, or how much it will cost to get to market. The reason for doing financial models is to do a reality check and convince yourself that making a return on investment is even a plausible possibility. If you run the numbers and find out that in order to reach break-even you need a customer base that is ten times larger than the currently known market for your product then you should probably rethink things. As Dwight Eisenhower said: plans are useless, but planning is indispensible.
This myth is the basis for one of the most classic mistakes that geeks make when pitching their ideas. They will say things like "Even if we only capture 1% of the market we'll make big bucks." Statements like that are a dead giveaway that you haven't done your homework to find out what your customers actually want. You may as well say: there's a good chance that only 1 customer in 100 will buy our product (and frankly, we're not even sure about that). Doesn't exactly inspire confidence.
Myth #6: What you know matters more than who you know.
Reality: You've been in denial about this your whole life. You were either brought up to believe that being smart mattered, or you just didn't believe your mother when she told you that getting along with the other kids was more important than getting straight A's.
The truth is, who you know matters more than what you know. This is not to say that being smart and knowledgable is useless. Knowing "what" is often an effective means of getting introduced to the right "whos". But ultimately, the people you know and trust (and more importantly who trust you) matter more than the factual knowledge you may have at your immediate disposal. And there is a sound reason for this: business decisions are horrifically complicated. No one person can possibly amass all the knowledge and experience required to make a broad range of such decisions on their own, so effective business people delegate much of their decision-making to other people. And when they choose who to delegate to, their first pick is always people they know and trust.
Ironically, C programmers understand this much better than Lisp programmers. One of the ironies of the programming world is that using Lisp is vastly more productive than using pretty much any other programming language, but successful businesses based on Lisp are quite rare. The reason for this, I think, is that Lisp allows you to be so productive that a single person can get things done without having to work together with anyone else, and so Lisp programmers never develop the social skills needed to work effectively as a member of a team. A C programmer, by contrast, can't do anything useful except as a member of a team. So although programming in C hobbles you in some ways, it forces you to form groups whose net effectiveness is greater than the sum of their parts, and who collectively can stomp on all the individual Lisp programmers out there, even though one-on-one a Lisper can run rings around a C programmer.
Myth #7: A Ph.D. means something.
Reality: The only thing a Ph.D. means is that you're not a moron, and you're willing to put up with the bullshit it takes to slog your way through a Ph.D. program somewhere. Empirically, having a Ph.D. is negatively correlated with business success. This is because the reward structure in academia is almost the exact opposite of what it is in business. In academia, what your peers think matters. In business, it's what your customers think that matters, and your customers are (almost certainly) not your peers.
Myth #7: I need $5 million to start my business
Reality: Unless you're building hardware (in which case you should definitely rethink what you're doing) you most likely don't need any startup capital at all. Paul Graham has written extensively about this so I won't belabor it too much, except to say this: you don't need much startup capital, but what you do need is a willingness to work your buns off. You have to bring your brilliant idea to fruition yourself; no one else will do it for you, and no one will give you the money to hire someone to do it for you. The reason is very simple: if you don't believe in the commercial potential of your idea enough to give up your evenings and weekends to own a bigger chunk of it, why should anyone else believe in it enough to put their hard-earned money at risk?
Myth #8: The idea is the most important part of my business plan.
Reality: The idea is very nearly irrelevant. What matters is 1) who are your customers? 2) Why will they buy what you're selling? (Note that the reason for this could very well be something like, "Because I'm famous and I have a huge fan base and they will buy sacks of stale dog shit if it has my name on it." But in your case it will more likely be, "Because we have a great product that blows the competition out of the water.") 3) Who is on your team? and 4) What are the risks?
Myth #9: Having no competition is a good thing.
Reality: If you have no competition the most likely reason for that is that there's no money to be made. There are six billion people on this planet, and it's very unlikely that every last of them will have left a lucrative market niche completely unexploited.
The good news is that it is very likely that your competition sucks. The vast majority of businesses are not run very well. They make shoddy products. They treat their customers and their employees like shit. It's not hard to find market opportunities where you can go in and kick the competition's ass. You don't want no competition, what you want is bad competition. And there's plenty of that out there.
Myth #10: After the IPO I'll be happy.
If you don't enjoy the process of starting a business then you will probably not succeed. It's just too much work, and it will suck you dry if you're not having fun doing it. Even if you get filthy stinking rich you will just have more time to look back across the years you wasted being miserable and nursing your acid reflux. The charm of expensive cars and whatnot wears off quickly. There's only one kind of happiness that money can buy, and that is the opportunity to be on the other side of the table when some bright kid comes along with a brilliant idea for a business.
All these myths can be neatly summarized in a pithy slogan: it's the customer, stupid. Success in business is not about having a brilliant idea. Bright ideas are a dime a dozen. Business is about taking a bright idea and assembling a team that can turn that idea into a product and bring that product to customers who want to buy it. It's that simple. And that complicated.
posted by Ron at 11:33 AM
- Name:Ron Garret
- Location:Los Angeles, California, United States
- Water-boarding 101
- A puzzlement indeed
- Slouching towards Nuremberg
- Who would Jesus torture?
- So that would be a "yes"?
- It's a miracle!
- It doesn't get any clearer than this
- What more can I say?
- Beware the ides of October
- More than a little scary
Vijay M. Veerachandran
"I am a dreamer. I believe nothing is impossible. If we can picture in mind,
Posted by Vijaychandran Veerachandran at 10:18 PM