Babbling VC

Netbooks and their success

Netbooks, those tiny little laptops, were all the rage this Xmas. Everyone is writing how they were successful because these devices cost less and people aren't willing to spend as much money anymore. I agree people aren't willing to spend as much anymore but this is not the reason for the success of netbooks. In my opinion, their success is based on one factor: lack of features. The majority of laptops nowadays can basically do everything. Reality though is quite different. I want a screen, internet access, a keyboard I can type on and decent battery life. I usually don't care much for all the other wizz-bang features used to constantly keep people buying new devices. I wish I could go to Dell or another manufacturer and get exactly what I want when purchasing a laptop without paying for all the features I never need. The Mac Air tries to do this to some extent but in my opinion is much too expensive. On the other hand, netbooks offer the basics and give you what you need and nothing more. Right now, they are the best option when you want basic features in a convenient package. I am sure netbooks will further evolve to have a decent keyboard, usable screen, extensive battery power, as well as UMTS and wLAN to allow for always on connectivity. This is what the consumer wants and manufacturers such as Asus are simply giving it to them.

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Keep at it or cut bait?

Having gone through the previous nuclear winter post-2000 in the venture industry, I am again starting to have some Groundhog Day situations. I remember having the same discussions back then which I am again now having. I almost always found the most painful to revolve around the question of keeping at it or cutting bait in regards to a start-up. Most of the time, this was a discussion I had with younger, less experienced entrepreneurs. The guys who had been around the block a couple of times were pretty good at quickly making this decision. They could read the tea leaves in this regard and knew whether they still had some cards to play in their hand. At the same time, the guys who had maybe one or two start-ups behind them (or none) tended to dwell on this a bit longer to their own detriment. Without telling you what the right decision is, I recommend thinking about this. Does keeping on and passionately flaming out trump calling it a day and moving on to your next venture?

This may sound like a very pessimistic post but I mean this quite positively. Sometimes it just makes sense for all parties to quit beating a dead horse and jump on to something which has a much better chance of success. Times will never be better to start a company in regards to hiring, having limited competition, having time to optimize your product and so forth. Yes, fundraising will probably be a nightmare. Yet, fundraising is never easy. True, your current venture may be a pain to wind down or sell at a loss. Growing a business also isn't easy. It'll be tough to let those remaining employees go. But just think! If you let them go now, they may be able to move on to something better or will come back and help you out with your next thing. Remember to be good to and honest with them.

If you prefer the other route, passionately sticking to your path, winning at all costs, remember this. Yes, if it works out, you're the hero. Unfortunately, I am talking about those companies which don't really have that much of a chance. If you're building another social network or are years away from ever monetizing your product, be realistic about how far passion will get you. Think whether it doesn't make sense to invest this energy elsewhere. BUT, BUT, BUT, if you are convinced you will win and are willing to do whatever it takes, stay at it. If your business case makes sense to more than just you, you'll find some money somewhere or will start earning revenues eventually. Just remember that a vision can quickly turn to delusion. Ask around and listen to honest feedback and criticism. Factor this into your ultimate decision but do your best to be quick about it. This allows you the necessary time to correct course or do whatever is necessary to be successful.

If your success depends on access, you better have it!

I've seen many companies over the years who are looking to hit it big in one industry or another. Unfortunately, so many of these industries are "access businesses". What I mean with this is that to get accepted into the industry as a player, you have to have access. The best example is probably the music and film industry. So much of what happens here is "buddy deals". Like it or not, it's a reality. So, if you're a future founder, what do you do to get access? Well here's some ideas from my perspective which will help you hit the ground running.

1. Already be a player. If you've been in an access industry for 15 years, you don't need my advice about access. You understand what I mean. Your connections are solid. You are seen as an expert in your field. You've built relationships with folks who probably owe you a favor here and there. Speaking at conferences about your industry is your forte. Maybe you already sit on a board or two in the industry and are considered a "multiplier" by folks in the industry. Industry analysts call you to get your advice on where things are going. You get my point. Call me!

2.  Points 2., 3., and 4. basically all relate back to 1.  Become an industry expert by working in the specific industry you plan on addressing. Yes, this is a bit of a long-term plan but works wonders. A couple years learning about the business always helps before going out and simply starting a company for the sake of a good idea. It'll save you from making many mistakes which can cost you time or worse, your company.

3.  Become an expert in the industry by speaking at conferences and becoming someone who drives opinions and trends in the industry. Have people coming to you for your opinion about said industry. Also a long-term play but golden when starting up your own venture.

4.  Hobnob with the people from the industry. Go to conferences, meet-ups, whatever. Surround yourself with the people who eat, sleep and breathe your industry. They can give you insights you'd otherwise never get and can help you avoid mistakes.

5.  If you are dead set on starting your business without 1., 2., 3., or 4. in place, do the next best thing. Get an advisor ( or multiple advisors). Set up a board of people who know what they are talking about and listen to them.

6.  Find a business angel who knows the industry. This is similar to 5. in the sense that this person can give you advice based on their experience. Yet, as a "business angel", they have skin in the game by putting in their own money. They'll work harder for you.

7.  Select a VC who has partners from the industry. This may be the hardest card to play but finding a VC whose partners are former players from your space can work wonders. They will have the access and may be able to pass it on to you. Don't forget though that these guys truly know how their space works. They may simply decide that the fact that you aren't "one of them" already spells disaster. Who knows though? They may take a liking to you based on other strengths you may have.

This list is very simplistic but often forgotten. It's not a roadmap.....more like a cheat sheet. Mostly common sense but worth remembering when trying to penetrate an industry. Feel free to add your own advice in the comments if I've missed something.

Some of my thoughts on the German VC Industry

Lukasz took some time at LeWeb to interview me and get my thoughts on some things in the venture space. May answer some questions you could have if approaching us as a potential investor. (Sorry, only in German......with my funny American accent!)

Link:

SMS Revenues to hit $130B

Wow, I knew SMS was big but I didn't realize the revenues had grown so much. Unbelievable when you do the math on this. (via MobHappy)

Stats

Today’s Data Point, With Apologies To One Mr Tomi Ahonen

Posted by Carlo Longino on 12.05.08 | Comment?

If you read MobHappy, you’re probably familiar with Tomi Ahonen of the Communities Dominate Brands blog (and if you aren’t you should be). He’s been talking for quite a while just how big the revenues generated by SMS are:

Communities Dominate Brands: SMS text messaging worth 100 B dollars in 2007:

Now its clear this year we will pass the 100 billion dollar mark… How big is that? Take all of hollywood movie box office revenues worldwide. Add all of the global music industry revenues. And add all of videogaming revenues around the world. Even all those three together, we don’t reach 100 billion.

So I quickly thought of him when I saw a post today about some new research proclaiming that global messaging revenues are some five times higher than global movie box office receipts. For the numerically inclined, mobile messaging will be worth $130 billion worldwide this year, compared to about $27 billion for movies.

As we say here in Vegas, “dayum”. And remember, you heard it from Tomi first.

Oh, and in case you want more detail, here's another story predicting SMS to be worth $224B by 2013.

My Phone's in my Pocket and I Don't Want Your Hand There!

Below is an interesting post about how users interact with their phone. The key message is pretty simple. If you want to advertise to mobile users, you have to engage them on their terms. People are leaving email behind to use social networks and services such as Twitter for their messaging needs. It's easier to avoid spam and advertising there (for now I guess!) Further, these users see their mobile as the first truly "personal, mass media". Hence, they want to control the experience, and right now, Facebook, Twitter, and other social networks on the mobile device allow for this.

12 percent of users first access their mobile social network each day while still in bed, a survey has found. Results from a worldwide survey of 15,000 active itsmy.com users (a mobile only social network based in Munich) found that:

· 16 percent of users don’t have an email account

· 90 percent would increase mobile internet usage if they had a flat rate tariff, a quicker connection and a more capable device

· Average page views per day is 160

· On average 50 percent of users access itsmy.com more than 5 times per day

· Users send from 12 to 34 community messages per day

These results reinforce the widely held belief that the mobile device is the first and only, truly personal, mass media and also signal the decline of email as a communication channel. What is clear (given that some users are accessing their social networks in bed, first thing in the morning) is that any brand wishing to use this medium as an advertising channel cannot simply broadcast or spam in this personal space – it comes as no surprise that users are turning their backs on email given the prevalence of spam, junk and marketing sent over email.

In fact, engaging the user on their terms is really the only way to sustainably create brand equity on mobile. People are more media savvy than ever before and can spread bad brand experiences like virtual wildfire through social networks, twitter and blogs. Any interaction must be on ‘our’ terms – when we want it, where we want it and how we want it. It must not, it cannot invade our privacy otherwise we are ignoring the personal nature of the medium and killing this market before it has even got going. And it must also be based on our interests.

This is where itsmy.com have got it right. They consistently ask their users what they want, what they use itsmy.com for and are therefore able to leverage their single biggest asset – the users themselves. By asking users what they want/think/need, itsmy.com have placed user preference in its rightful place – firmly in the hands of the user. This avoids making usage based assumptions to produce a handful of user segments, and instead allows each user to exist in a segment of their very own. After all we are all individuals.

The survey was carried out from September to November 2008 with users of 30 different operators, across a full range of devices and aged between the age of 16 and 52.

For further analysis of itsmy.com, circle back here soon for Peggy’s in-depth look at the tie up between social search pioneers, Taptu and itsmy.com

Feedback 3.0

I read with a smile on my face the new trend report from Trendwatching.com. I've been telling people for a couple years now (if they were listening or not) that reviews and review sites would play an ever greater role for consumers. Being an avid reviewer myself on Qype and TripAdvisor, I've seen the trend of businesses finally getting involved. Those first-movers are reaping the benefits way before the masses get it. Engaging your customer and interacting with him/her is one of the best strategies to lock them in. And it's not just about leaving feedback or responses to reviews on Qype or TripAdvisor. You need to set up a Twitter account like Timbuk2 or Starbucks have. You need to listen. You need to interact and act upon customer feedback. Your customers will thank you for it with their dollars and euros. A really cool idea which I see now catching on is GetSatisfaction. Basically this is customer service on steroids. The site lets your company create a page where anyone can comment (be it positive or negative!) Your employees set up accounts and can all respond to customer questions, complaints or praise. It's still kicking off on this site but if you take a look at all the companies already there (I set up a page for Neuhaus Partners as well), you can imagine where this is going in the future.

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Headphones Everywhere

Image via Wikipedia

This is just a random observation from my day-to-day walking activity in and about in Germany. Although it's no surprise to anyone how successful the iPod (and now iPhone) have been. Still I am amazed at how much it has changed society. 10 years ago, you didn't see anyone walking around with headphones on unless they were a true audiophile or they were doing some sport activity. Jump forward ten years and you barely see anyone without. On my way to work every day, I walk a stretch of about a kilometer. It's a short hop but I bet I pass two hundred people on the way. I made a note this morning to pay attention to other people and whether they had earphones on (note: earphones instead of headphones since almost everyone either has the ubiquitous white iPod earphones or some other in-ear model). I saw max. 5 people cross my path without earphones (no idea whether they had iPods or other MP3 players....these are always pocketed!) Everybody is zoned out and in their own personal soundtrack for the walk to work. Is this a good thing? Who knows, it's probably too early to tell. I've realized though that since I've started listening to music during my walk to work, I've completely zoned out as well. I'm usually deep in thought when walking and am not really paying much attention to my surroundings. Sure, I can usually concentrate better on ideas I am tossing around for the workday. At the same time, how much am I missing out on?

Enough Said!