Recession and Opportunity

There were a couple interesting posts on TechCrunch this weekend.  The picture to the right shows what companies are presently trying to accomplish to survive the slowing economy.  The big effort is to cut back spending dramatically and immediately rather than waiting and crashing.  Clicking on the picture will take you to a 56 slide presentation that Sequoia Capital created on the current state of the economy.  Interesting stuff, especially from the perspective of a VC company.  On a more positive note, Peter Graham of Y-Combinator blogged about how a recession is a good time to create a startup.  The core theme of his blog post is that what matters more than economic conditions are the people involved.  The pitch to VCs will now be more centered around how your business model is recession proof rather than how viral it is.  I pulled the most relevant parts of article and quoted them below:

If we’ve learned one thing from funding so many startups, it’s that they succeed or fail based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it’s rounding error compared to the founders.Which means that what matters is who you are, not when you do it. If you’re the right sort of person, you’ll win even in a bad economy. And if you’re not, a good economy won’t save you.

So if you want to improve your chances, you should think far more about who you can recruit as a cofounder than the state of the economy. And if you’re worried about threats to the survival of your company, don’t look for them in the news. Look in the mirror.

Fortunately the way to make a startup recession-proof is to do exactly what you should do anyway: run it as cheaply as possible.

So maybe a recession is a good time to start a startup. It’s hard to say whether advantages like lack of competition outweigh disadvantages like reluctant investors. But it doesn’t matter much either way. It’s the people that matter. And for a given set of people working on a given technology, the time to act is always now.

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Sources:
http://www.paulgraham.com/badeconomy.html
http://www.techcrunch.com/2008/10/17/paul-grahams-startup-survival-guide-for-the-coming-nuclear-winter-be-a-cockroach/
http://www.techcrunch.com/layoffs/
http://www.techcrunch.com/2008/10/10/sequoia-capitals-56-slide-powerpoint-presentation-of-doom/

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CollarFree Profiled on KillerStartUps.com

I thought this was a great description of the company’s model, so I decided to record it.  According to what you were saying, the 4 phases they are planning:

1. Online Community Development
2. Retail Sales through boutiques
3. Opening up the website for corporate sales trials
4. Allowing designers to experiment with different mediums (shoes, hats, wallpaper, etc)

Collarfree.com – Fashion For Independent People

Collar Free is an online design and e-commerce platform for fashion. Designers submit fashionable t-shirt designs to Collar Free’s website where the public votes on their favorite designs and determines what the company produces. Designers are then paid a royalty for every item sold with their design. This model predicts demand and incentivizes winning designers to promote the company and create sales. Collar Free is expanding upon the traditional Threadless model with a simple head to head voting competition. This allows the site to host custom competitions and partner with other companies to engage their consumers. The site is using crowd sourcing not only for design review purposes, but allowing other companies to tap their design community as well. Lastly, Collar Free is allowing companies to contact the designers and request custom work. If you’re a designer and want to submit one of your very own designs, visit CollarFree.com and see how you can be a part of the competition.

In Their Own Words

Our goal is to Support Independent Artists. We include a custom story with each shirt sold, print the designers name on the inside of the shirt label, send out a press release for each designer, and pay the designer $200 + royalties on each shirt sold. We look at ourselves as a record label and we want to build the designers name with us and find that next big name.

Why it Might be a Killer

Collar Free is not just an internet company. Our goals are to build a $100 million brand. We are selling online and offline through existing retail outlets and we are stocking about 2 stores a week right now. We went the royalty route for designers because a shirt may sell 500 units online, but if a major retailer picks the design up it could sell 5000 and brand that designer nationally.

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Sources:

http://www.killerstartups.com/Site-Reviews/collarfree-com-fashion-for-independent-people

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Zivity – a new type of business model

After reading though info that you sent me on this company Mike, I felt that it was worth documenting.  The founder, Scott Bannister, is a very forward thinking entrepreneur, and the business model is different.  I really like it actually.  We should keep this in mind as we continue to develop our ideas.

Summary of Zivity:

Zivity, a San Francisco start-up founded in 2007, provides subscription-based entertainment and social networking for an 18 and over audience. Zivity’s initial focus is a community-powered showcase of professional-quality photography promoting female beauty and expression. The site is currently in private beta and available by invitation only. Invitations can be requested at https://beta.zivity.com/join. An open public launch is scheduled for 2009.

The hidden cost of free MySpace and Facebook, according to Banister, is censorship. “People can’t express themselves because advertisers want controls on content. Free is unfree,” he says. “We like to think of Zivity as the HBO of the Web.”

Summary of Business Model:

Zivity has a unique business model that pays models and photographers directly based on the number of user votes they receive. The more votes, the higher they go on the leaderboard and the more money they make. About 40% of gross revenue is given directly to the talent. They first launched at the TechCrunch40 Conference last Fall. The company raised $1 million in seed funding in August 2007.

Zivity has no advertising, just lots of photos of women posed nude or costumed on rooftops, hillsides and inside warehouses. Members vote their approval of a shot, and each vote earns the model 60 cents and the photographer 20. Members get five votes with their monthly subscription and can buy more. 

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Sources:
http://www.zivity.com
http://www.forbes.com/forbes/2008/0211/060.html
http://www.techcrunch.com/2008/01/16/as-expected-zivity-founder-does-the-full-monty/

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Why not to startup in Silicon Valley

Found an interesting article that makes a case against creating a startup in the Valley.  Here is a quick summary of the article.

1. The weather sucks in some of these towns (not Tallahassee) so your people will actually work instead of bugging out at 5:15 to train for a marathon, triathlon or Ultimate Frisbee.

5. Academics make great board members. Each of these cities has a rich educational environment and are great places to recruit sartorial advisors. And unlike at Stanford, you wont have to give up 1 percent of your equity just to put the provost’s name on your board!

2. You can recruit better outside the fishbowl. Every technology company hits the wall — some multiple times. In the Valley your employees will bail at the first sign of trouble and jump to a better job in the next parking lot. That means you will have to spike salaries to rebuild your team. Other places in the world aren’t quite so spoiled – or they come to you already cynical and stay through the rough times.

3. You won’t get lost in the startup maze. In the Valley, every VC has a portfolio company in each flavor – their own LP’s can’t tell them apart.

4. In my experience, other startup communities aren’t as pre-occupied with the “exit” as Da Valley. SV VC’s have attention spans measured in picoseconds and will sell/merge your company at the first sign of trouble. I can say that in Boston, at least, we are used to gutting out long “winters.”

Just how much VC is being thrown around?

All this speculation is mostly hot air, anyway, because investors put their money where their mouth is. Of the $7.4b of VC invested in Q2, LA/Orange County got more VC than Texas and Philadelphia/NJ combined. San Diego (population 3 million) got the same VC as five Midwestern states, and more than twice as much as the six North Central states (which includes top schools like Minnesota and Wisconsin).

Of course Silicon Valley took 40% of the national total — or more money than the combined take of the next six regions (comprising all or part of 20 different states).

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Sources:
http://blog.openitstrategies.com/2008/09/sv-quaking-in-its-boots.html

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WEbook great example of what we could do with IdeaFliTE

Here is the artical from TechCrunch:

WEbook has raised $5 million in funding. The round was led by WEbook’s new investor, Vertex Venture Capital and its existing backer, Greylock Partners Israel. The round also included investments from eight unnamed angel investors.

WEbook is an online platform where the site’s users — authors, writers, and even readers — collaborate to write books. Since its April 2008 launch, WEbook has added thousands of writers, editors, illustrators, and readers to its service and the site is currently hosting 15,000 book projects in genres ranging from short stories to non-fiction. Once a book is completed, it goes through a community vetting process where the users vote on books. Those that perform best during the process will be published by WEbook. WEbook shares 50 percent of the profit on sales with the author and the book’s major contributors as a fee for publishing the title.

So far, it looks like WEbook’s efforts are working. The site’s unique visitor count is on the rise, according to Compete data, and it witnessed 17 percent growth over the past month.

This is a great example of the crowdsourcing and how to make it profitable.  The impressive thing here is that they have obviously found a way to deal with the issue of intellectual property and somehow kept people from ripping off others ideas, even though they are contributing.  Of course ours would be a little more difficult because of the nature of startup ideas vs a printed book, but I like where they took it.  We will have to think about how to do something like this.  (its the collarfree of books)

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A few to study (like idea flite)

http://www.startupnation.com/

http://www.youngentrepreneur.com/forum/

http://www.startupjunkies.org/index.html

http://www.veteranscorp.org/

http://www.softwareceo.com/default.aspx

Just a few to look through. They are not really what we are thinking, but perhaps a good quick study.  We will also need to look at the new additional features that Linkdn is adding and see if there is a way to partner/leverage that.  Hell, maybe we become the source for startups and get bought out as a subsidiary of them!

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Yammer

I finally had a chance to watch the Yammer demo at TC50, the official winner of the 1st place $50,000 prize.  Terrible name, powerful product.  Twitter adapted to enterprise functionality is a great idea, especially for collaborative projects that are separated by distance.  This is something that we should look into as we develop some ideas and being working more closely on them.  They have already created integrated use with Instant Messaging clients, cell phone text message and are currently working on an iPhone App.

Yammer is a tool for making companies and organizations more productive through the exchange of short frequent answers to one simple question: “What are you working on?”

As employees answer that question, a feed is created in one central location enabling co-workers to discuss ideas, post news, ask questions, and share links and other information. Yammer also serves as a company directory in which every employee has a profile and as a knowledge base where past conversations can be easily accessed and referenced.

Anyone in a company can start their Yammer network and begin inviting colleagues. The privacy of each network is ensured by limiting access to those with a valid company email address. The basic Yammer service is free. Companies can pay to claim and administer their networks.

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Sources:
http://www.yammer.com
http://www.techcrunch.com/2008/09/10/yammer-takes-techcrunch50s-top-prize/
http://www.crunchbase.com/company/yammer

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plaYce – Hello Cloud Computing! Goodbye SaaS?

In a previous post, I blogged about how Cloud Computing is the future, and the latest release of Google’s Chrome will speed up this process.  Companies such as NetSuite, NETtime Solutions and EnterpriseWizard publicly announced they will support Chrome last week.  This year’s TechCrunch 50 had several good examples of utilizing Cloud Computing to begin the next wave of computing.  A great example of this is the start up plaYce. While I am not yet convinced that this will be THE platform that will revolutionize worldwide, streaming, high quality gaming; I believe they are heading in the right direction and paving the way for similar companies and platforms to step in.

plaYce’s proprietary technology automatically and accurately reconstructs the entire world in 3D and streams it with high frame rate from within the browser. Consequently, this unique, immersive, “Mirror World” gaming experience does not rely on a heavy client download. plaYce is designed such that every pixel has a world co-ordinate, enabling integration with user generated content and other forms of geo-tagged data.

plaYce connects gamers with their social graph through quick engagement, synchronous, social games. At the same time, plaYce provides Game-Infrastructure-as-a-Service, enabling independent developers to design games situated anywhere in the world: car races in Hong Kong, first-person shooters in the Amazon, treasure hunts in Manhattan, etc. Aside from the technological benefits, plaYce saves game designers 50-75% of development costs and significant time to market.

What a great example of Cloud Computing.  After seeing their demo, I was curious whether this is technially considered SaaS or just falls under the general category of Cloud Computing.  It seems it fits more into the latter category.  While plaYce is not the first to roll out this concept, their platform may be the one the ultimately brings it to the masses.  RuneScape was the first and probably still is the most poplular MMORPG.

RuneScape is a Java-based MMORPG (Massively Multiplayer Online Role-Playing Game) operated by Jagex Ltd. It has approximately ten million active free accounts and is a browser-based game with some degree of 3D rendering. RuneScape was created by Andrew Gower, the creator of DeviousMUD, the forerunner to RuneScape, in 1998. Rewritten and renamed, the first version of RuneScape was released to the public on 4 January 2001 in beta form. It has a free-to-play option, and a simple interface that is accessible on most web browsers.

According to an article on ZDNews, Harry Derbes, CEO of Lawson, seems to think that SaaS is on its way out over the next two years and will be making way for Cloud Computing to step in.  While I don’t necessarily believe it will be gone in two years, I think Cloud Computing will become much more prevalent than SaaS in the marketpalce over the next decade.

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Sources:
http://www.playce.com
http://www.crunchbase.com/company/playce
http://www.informationweek.com/news/internet/google/showArticle.jhtml?articleID=210500320
http://cloudcomputing.sys-con.com/node/612033
http://news.zdnet.com/2424-9595_22-218408.html
http://www.runescape.com
http://en.wikipedia.org/wiki/RuneScape

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Demo 2008

Wow, how did I not know about this?!  Demo 2008 is a pretty big conference here in San Diego this year, (PalmSprings next year) with 72 different technology  demos 6 minutes apiece.  Its like the alternative for Tech Crunch 50, but with 72 instead.

Check out www.demo.com to see the videos as they are loaded up at the end of each day.  I am going to go work out right now, I will update the Nikolaev post when I get back as well as the Mike Meinzen post.

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TechStars

A quick review of TechStars is in order so we can file this away in our website.  Tech stars is an interesting idea that was developed in 2006.  They are essentially a tech startup incubator that operates by offering seed capital and mentorship the most promising applicants.  A 3 month mentorship takes place in Boulder, CO to bring an idea throught the developmental stages.  Upon completion, TechStars can choose to continue in the relationship by taking a larger equity stake to continue development or release the company to pursue alternate forms of financing.

PROS:

• Work with people that only have an idea and help them get started
• Comprehensive mentor list
• Great way to get started when there is no other alternative
• Have connections with Angel Investors, VCs

CONS:

• Not much funding, 10-15k
• Sounds like they still require entrepreneurs to do their own coding and development
• Only takes place in the summertime
• Requires moving to Boulder, CO

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Get your startup funded and off the ground while learning from the best.

Only ten spots. TechStars takes only ten companies each summer. Last year more than 300 companies applied. Getting in is hard, and it means something special.

Seed funding. TechStars fills the startup funding gap by providing just enough capital to get your idea off the ground. Your new company receives up to $15,000 in seed funding.

Advice and Mentoring. TechStars fills the experience gap by bringing together the best and the brightest in one place and surrounding you with incredible proven mentors for the summer. With this much talent in one place you’ll get great advice on your product and strategy, thereby ensuring the best possible start for your new business.

Connections. TechStars companies get immeasurable benefits that come from introductions and connections to potential partners and customers. At the end of the summer, each company also has the opportunity to pitch during an investor event that we organize.

A great deal and a great co-founder. In exchange for the TechStars summer program, seed funding, advice, mentorship, connections, and investor demo day, TechStars receives a 5% equity stake in your new company. TechStars receives “founders stock” which is just like yours. We want to be thought of as an experienced and well connected co-founder so we have the same risk and reward system that you do. Learn more.  

 

• Also, they are beginning a free monthly call the first Wednesday of every month that addresses different topics on starting up a Tech company.  (724) 444-7444 and enter call ID: 24767

 

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MY SUMMARY: Might be a good place to begin networking, but this seems like it is very much dependent on “nurturing” programmers and coders that have no business acumen and helping them through the business process.  In any case, a good company to keep in mind as we get started.  I have a feeling we could learn a lot from attending one of their events.

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