Monthly Archives

December 2010

Why ‘paid for’ content models won’t work on tablets

By | Apple, Mobile | 5 Comments

Fred Wilson has a great post up today arguing that the mobile web is really just like the wired web and that the economics of both are rapidly converging.  I particularly liked this passage where he talks about the inevitable failure of iPad magazine sales:

There is some discussion in the tech blogs today about why iPad magazine sales have been disappointing. I don’t understand why anyone would ever think that adding a presentation layer on top of web based content would make it something people would want to purchase when they are not willing to purchase the same content directly on the web.

A central issue with the Internet, no matter what device and presentation layer you use to access it, is that there is an unlimited amount of content available. Evan Williams calls it "a web of infinite information" in this chat with Om Malik. What is valuable is filtering and curation. Restricting access to content doesn’t work. Someone else’s content will get filtered and curated instead of yours. Scarcity is not a viable business model on the Internet.

Apple’s success over the past couple of years with a very different business model has raised hopes amongst publishers that somehow the mobile will be different from the web.  I can’t see it myself.  Moreover – betting against the Apple view of the world will be a smart thing to do over the next year or two.

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Happy holidays everyone

By | Announcement | 2 Comments


Life was a little hectic in the week before Christmas during which saw me finally succumb to the flu that has been afflicting my family (and come closer to taking my first day off work in ten years)  and finished at around 10pm on Christmas Eve with me sending out a termsheet for investment to a  potential new portfolio company.

Since then we’ve all had a great two days watching the kids accumulate a mountain of presents and visiting both sides of the family, and the week ahead looks pretty good as well, visiting friends, and taking in a panto.

I won’t be working much, but I’m catching up on a few things this morning and wanted to send out a note to all of you that I would have liked to get done before Xmas, but got lost in the rush.

So, thanks for reading, commenting, and Tweeting, I really appreciate it all.  This blog is much richer for your contributions and would quickly wither without them.  I hope you all have a good break and manage to get some time with your family and friends and away from work.

I will get back to blogging every work day from next Tuesday 4th January.

Twitter Weekly Updates for 2010-12-26

By | Weekly Twitter digest | No Comments

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LPs expect to turn more towards venture in 2011

By | Venture Capital | 6 Comments

I don’t see much positive news coming out of the LP community about attitudes towards venture so I was very pleased to see the chart below in a recent Preqin report.  LPs are the pension funds and insurance companies that provide most of the money to venture capital and private equity funds, and Preqin does research into their market.


The line to look at is the third one from the top.  It  shows that the percentage of LPs who say they are attracted to venture will almost double from 2010 to 2011.

Learning from Google’s difficulties in disrupting TV, mobile and music

By | Google, Innovation, Startup general interest | 6 Comments

If you’d asked me on Monday I would have told you that I’ve posted on this blog every working day bar one for the last four and a half years, but annoyingly I had a technology failure yesterday and the number of times I have failed to post is now up to two.  I tried to blog from my iPhone and discovered this morning that the post never went live.

I’m back in the office today and what you see below is a fuller version of the post I wrote yesterday.

On the back of the news that Google is asking partners to delay launches of Google TV enabled products MG Siegler wrote a post on Techcrunch which charts Google’s struggles in the TV, mobile phone and music industries.  In all cases Google was optimistic that they could effect a rapid disruption based on a clever model and in all cases they have struggled because they under-estimated the ability of industry incumbents to resist change.  This isn’t to say that Google isn’t making progress in these areas, with the possible exception of music, they are definitely making waves, just not as rapidly or as radically as they would like.

The clearest example is in mobile.  Siegler put it this way:

The other big example of this is with Android. Sure, the platform is a huge success now — but at what cost? Originally, Google had a grand plan to reshape not just the mobile OS market, but the entire mobile industry. They were talking about a future in which phones were given away for free, subsidized by search. That quickly changed to cheap phones subsidized by search. And that quickly changed to $199 phones subsidized by carriers. In other words, nothing changed. Why? The carriers.

Google seemed to think they could go around them and sell phones on the web directly to consumers. The carriers didn’t like that idea too much. They pulled their backing of that plan. And Google had to pull the plug.

When apps and smartphones started exploding, Google envisioned an open environment where consumers dictated to the carriers and hardware manufacturers what they wanted on their devices. That was until Google realized they needed Verizon’s help in pushing Android devices and sold their soul for bundled Blockbuster apps. Ones you couldn’t delete.

In my experience more startups fail after misjudging the pace of market adoption than any other non-execution related reason, and the mistake is often the same one that Google has made – failing to appreciate the extent to which industry incumbents can resist change.  It is an easy mistake to make, both as an investor and as an entrepreneur – it is easy (and seductive) to think that customers will see the overwhelming benefits of the proposed new order and will steam roller the old guard. As Google has learned, it doesn’t always happen that way, even if you have massive resources to throw at the problem. 

The lesson for startups is that you can’t spend too much time thinking about the mechanics of the disruption – i.e. how it will happen in practice – and if at all possible find ways to make the old guard benefit from the new order – as Google has with Verizon.

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Facebook about to change the face of ecommerce?

By | Ecommerce, Facebook, Social networks | 6 Comments

Bloomberg has an article today about Facebook’s push into ecommerce.  Apparently Facebook is:

teaming up with startups, vendors, and even giant Internet rivals to turn Facebook pages into online shopping outlets fuelled by recommendations from friends who "like" to buy

This will be interesting to watch.  I am keen to see which ‘Internet rivals’ are keen to work with Facebook.

Back in September I wrote a post asking whether social commerce is about to have its moment and made the point that smart way to make ecommerce social is help people ‘connect where they buy and buy where they connect’.  Given that Facebook is pretty much the first and last word in social at the moment, that means integrating Facebook into the ecommerce site and building ecommerce pages on Facebook.

The benefit for consumers is that they will then be able to see what their friends have liked and/or bought as they go through their purchase process and the benefit for ecommerce businesses should be improved conversion.  I say ‘should be’ because businesses selling poor products, or with poor delivery/customer service will likely see conversions fall.  I can foresee a day in the not too distant future where we all think twice and maybe three times before buying from a site that isn’t integrated with Facebook – and that might even include Amazon.

All of this means that Facebook is in a very important position because their data and a presence on their site could become an important driver of conversion, margins and success for ecommerce businesses.  I have heard that Facebook is letting media companies have free access to their API to power their recommendations services, and I haven’t heard anything to suggest that they will start charging ecommerce companies – but even if they were planning to charge down the line I wouldn’t expect them to frighten potential partners off by either charging today or talking about future plans to charge.

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Twitter Weekly Updates for 2010-12-19

By | Weekly Twitter digest | No Comments

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Applying lean startup thinking to raising money

By | Startup general interest, Venture Capital | 3 Comments

The idea for this post, and in fact the idea of applying lean startup thinking to raising money came from a conversation I had with entrepreneur turned angel investor Sean Glass a week or two back.  Sean said he wasn’t going to get round to writing a post on the topic, and so I said I would give it a go.

Those of you who are familiar with Steve Blank’s and Eric Ries’ work on the advantages of being clear about your product and market hypotheses and then minimising the time/resource to test those hypotheses will already have worked out where I am going with this – it makes sense to take the same approach to raising money.  In fact, the process of raising money has many parallels with selling a product to consumers or businesses – it is just that the product is equity in your company and your customers are angels and VCs. 

The other differences between raising money/selling equity and building a business are that you only need to make one sale – or maybe a handful of sales if you are pulling together a syndicate of investors – and that it is perfectly possible for a company to survive and thrive without ever selling equity/raising money – there are lots of other ways to finance a business

As a result only parts of Blank’s ‘customer development model’ are relevant – in fact only parts of the ‘customer discovery’ phase of the model are relevant, and usually important concepts including ‘market type’ and ‘minimum viable product’ are best left to one side.  Additionally in the equity for cash market an iterative approach isn’t always necessary as deciding not to raise money is a valid conclusion.

The aim then should be to figure out as quickly as possible whether you will be successful raising finance (i.e. whether your equity product fits with the VC/angel market), and if not to know why not, and whether it is sensible and feasible to change what you have so that you can be successful.

On a practical basis I think that means the following:

  1. Develop a hypothesis which explains why your business will be attractive to VCs – big market, great product, great team and so on (this will become the core of your business plan should you get to that stage).
  2. Get out of the building and test the hypothesis with anyone who will listen, and the closer they are to a real VC the better.  Does everyone else believe you have a great market, product, team?  This shouldn’t be a pitch and it should be done long before you want to raise money – that takes the pressure out for both sides and which makes it easier for you to get a conversation in the first place and increases the accuracy of feedback.  Being specific will help – social media analytics might be an interesting market, but a focus on Myspace will not be attractive.
  3. Look beyond the words people use to try and figure out what they really think.  Most people are kind and won’t want to crush your dream even if they think it is ridiculous.  Potential investors won’t have heard enough from a short pitch to know for sure that they wouldn’t invest and so won’t say ‘no’ even if they think and investment is unlikely.  Gauge their enthusiasm for your project by their appetite for future meetings – do they offer to meet again?, when you ask do they look away?, do they make time soon or push you out a few weeks?
  4. Talk to lots of people – you only need one to bite and so at this stage if you have half a dozen potential investors who are looking interested then you are in good shape.  This point comes with a caveat – if there is no positive feedback from early discussions there is little point in simply widening the net.
  5. Soak up all the feedback and take a fresh look at your hypotheses.  Be honest with yourself.  Evaluate whether your hypotheses still hold and accordingly either push on to raise money, decide to finance your business from revenue or some other source, or change your company and go back to (1) – i.e. pivot.

The good news is that most good investors make themselves available for this type of feedback – it is how they build their brand and improve the quality of the opportunities they see.  You can also learn a lot by going to startup competitions and other events where startups pitch and VCs and angels give feedback.

Blank’s customer development model was revolutionary in that it sought to change the way companies developed by brining customer feedback into the process much earlier.  Applying his ideas to raising angel or venture finance turns out to be much less revolutionary – good companies and entrepreneurs have always polled VCs early in their development and long before they raise money.  The only part of the thinking that is really novel here is the idea of getting through the cycle as quickly as possible.  It seems to me that the many companies who end up on a seemingly endless fundraising trail would get to a happier place more quickly if they appreciated the value of failing fast (assuming there is an alternative).

50 Questions: What’s the difference between seed, Series A, and Series B?

By | 50 Questions | One Comment

ScreenShot051 Regular readers will know I am writing a series of posts with Nicholas Lovell of Gamesbrief which together will form the 50 questions you should ask before raising venture capital.

Last week Nicholas posted the 5th question in the series What’s the difference between seed, Series A, and Series B?, and for the second time running I am late in pointing to it.  Henceforth I will get a grip….

In this post Nicholas sets out the different amounts of money invested and the different expectations that investors have for companies at each stage.

Media consumption – mobile matches newspapers and magazines, TV flat to down

By | Games, Social networks, TV | One Comment

image The Emarketer research on media conumption amongst US adults released yesterday makes interesting reading. 

  • Time spent online continues to grow, I imagine driven by gaming and social networking
  • Time spent watching TV is slightly down but is still by far the largest category – not enough to call a trend, but maybe an indicator of where things are heading
  • The era of mobile is now definitively upon us – the average American spent as long staring at her mobile as she did reading newspapers and magazines combined

I expect all these trends to continue – continued growth in online gaming and social networking will drive time spent online (and we may even be approaching the end of the console era) and increasing smartphone penetration and quality will get us all using our mobiles even more.  Both of these will take time away from TV, and at some point the shift from time online to mobile will become noticeable.

The only caveat is that with connected TVs going mass market, a 2011-2012 phenomenon, people will likely watch less video on their laptops, preferring instead to watch their movie and TV streaming services on their TVs.

Finally a note on data quality.  I think this research is useful and I believe in the trends I’ve described, but I am suspect about the absolute levels reported and even the ratios between the different categories, largely because these are not apples for apples comparisons.  Most obviously, people often have their TVs and radios on in the background when they are hardly paying attention – time that counts in this survey but isn’t the same as an hour spent online, and hence I suspect the TV and radio figures are over-stated.  Secondly, time spent online is not all about consuming media in the way that reading a book is.