Venture Geek

Over the last several years I have interacted with lots of startups in one way or another. Since I started doing Pitch Labs I have worked with a couple dozen companies specifically on how they present their young business to investors. There are several common themes that I plan to write about here, but one that came up yet again at a Pitch Lab yesterday is about framing.

Entrepreneurs in very early-stage companies are, more often than not, very product-focused. And that makes sense because they tend to spend most of their days building their product. But, when it comes to getting investment (or running a company for that matter) it’s important to be market-focused. Another way to say that is people won’t invest in a product, they will invest in a business. The product is a means to an end, and that end is generating profit (or at least getting to sustainability and positive cash flows). It’s so easy for entrepreneurs, especially first-time entrepreneurs (and especially first-time entrepreneurs who come more from engineering or other product-centric backgrounds) to lose sight of things like cost of customer acquisition and revenue per customer and instead focus on features, features, features.

Don’t get me wrong — as someone who used to build web applications for a living I can very much appreciate that features matter, and that the product is still a key ingredient to most businesses. But I find myself having to give the advice that the product is a means to an end often enough that it seemed a natural blog topic.

Yesterday the entrepreneurs who did the Pitch Lab came in wanting to know how they could cut down the amount of time of their pitch — turns out they were spending nearly 30 minutes going through painstaking detail of the various features they had put their blood, sweat, and tears into building. I suggested that they should go through the exercise of putting together a presentation that never mentioned the features of their product, focusing solely on the business drivers — to over-compensate for their product-centrism by eliminating it from from the pitch, then going back after and adding it back in. That would probably be a good exercise for any new company — step away from your product and think about your company from a pure business perspective to force yourself into that mindset. A few questions to help think about this:

• How do I acquire customers/users AND how much does that cost?
• What conversion rate will I have from initial interaction to a full-blown customer/user (or what kind of click-through rate/transaction rate, depending on your business)?
• What average revenue per customer can I expect to see over some reasonable time period?
• What churn rates will I see of customers leaving?

For each of those questions you will make assumptions — and everyone knows they are that, but the thought exercise of coming up with assumptions and being able to back them up is very valuable. It’s also very useful for each of these (and similar) questions to be able to answer: “Why am I better at this than the next company?”

I just had a look through the latest PWC MoneyTree report, and I think it’s time that the venture industry start making graphs that are post-bubble only. The problem is that the 1997-2000 data always skews the scale, obscuring any actual differences in the last 5 years. By now, I think we get it: the bubble years were anomalous in the extreme. Any trends that might be evident in looking at recent data are smoothed over in any graph that needs to accommodate the extreme values of the boom.

Aza Raskin has a nice thought piece on a topic near to my heart. His basic argument is that the advent of standardized AJAX toolkits has stunted user interaction innovation on the Web by homogenizing the ways people design applications and, more importantly, doing so in the direction of mimicking desktop PC metaphors.

Don’t get me wrong, I’m not anti-AJAX (and I suspect neither is Aza), but I do find that the bells-and-whistles phenomenon has been more prevalent in the last year or so, as the AJAX toolkits become so easy to use. I have seen many examples of UIs that are clearly showing off how sophisticated they can be, even as they break basic web UI paradigms that I find frustrating as a user. Examples include simple things like the “Back” button in a browser — as far as I’m concerned, if you are deploying an application on the Web and it breaks in non-trivial ways because the user hits the “Back” button (or “Reload” for that matter) that’s an egregious bug.

I have to admit that I’m fairly old school when it comes to the Web — makes me feel kinda old just to say “old school” and “Web” in the same sentence, frankly. Personally, I’m the kind of person who opens several windows with several tabs each when using the Web, and many modern web apps make that hard or impossible because all the AJAXy goodness locks me into the user interaction vision of the site’s designer rather than the familiar ways of the Web.

I’m getting away from Aza’s original point (by the way, do check out his slides on the topic of the Death of the Desktop) here about toolkits, and I don’t want to make it seem like I never want to look beyond the clumsy HTML form-drive interfaces that still dominate the Web. I do, though, want to make sure that in the quest to be different developers and designers aren’t actually making their products harder to adopt for people who are just now finally becoming comfortable with the Web.

Being “wired” does not mean becoming “computer literate” any more than driving an automobile requires becoming “combustion literate.”

- Nicholas Negroponte

(hat tip to Andrew McAfee)

The >play conference at UC Berkeley is November 18th. >play is a conferenced dedicated to digital media. Last year’s inaugural conference was a huge success due to the heroic efforts of several members of the UC Berkeley Digital Media & Entertainment Club, and from what I am hearing this year’s conference will be even better.

Last year at >play I had the honor of conducting the keynote interview of Shantanu Narayen in front for a packed auditorium, and this year I’ll be moderating the “Where is Web 2.0 in the Enterprise?” panel

with Stephen Farrell, John Furrier, Jack Jia, and Ross Mayfield. Should be interesting talking about enterprise technologies in the middle of a conference that is mostly about much more entertaining subjects.

If anyone has suggestions for topics they would want to see covered in a panel about new web technologies in the enterprise, drop me a line, or leave a comment on this post.