Saturday, August 31, 2013

To Succeed In The Market, Be Specific

Since I started advising Cube26, I've been paying a lot more attention to gesture-based controls.  The most hyped company in the space has been Leap Motion, which raised over $44 million to bring its 3-D motion control technology to the market.

Quite a number of investors to whom I introduced Cube26 begged off, citing the difficulty of competing with Leap Motion.  So how is Leap Motion doing?  Not so well, according to MIT's Technology Review:
"Hype surrounding Leap Motion, an $80 3-D gesture-control gadget touted for its exceptional finger-tracking accuracy, reached fever pitch in the weeks before its July launch. Hundreds of thousands of people ordered the device ahead of its release, and a flashy demo video on YouTube was viewed millions of times.

Yet after one month and a raft of “meh” product reviews citing problems like difficulty controlling apps and tired arms, the sardine-can-sized gadget—which connects to a computer’s USB port and tracks the movement of your hands and fingers as they move above its sensor—seems to have lost its steam.

Developers say they like the app-creation tools that Leap Motion provides, and that it’s not particularly hard to build apps for the platform. What complicates things is the need to think about building apps in three dimensions, and to invent motion controls that users will understand how to use."
The issue with Leap Motion isn't a failure of technology; it's a failure of marketing.  Leap Motion seems to be using the classic "Field of Dreams" strategy--if a technology is cool enough, the customers will come.

In contrast, Cube26 has raised $0 from outside investors.  Rather than using special hardware to enable Minority Report-style gestures, it uses the built-in cameras on smartphones, tablets, and PCs to provide specific gesture controls like pausing videos when you stop watching, or using a "shush" gesture to mute the volume.

Just this week, Cube26 announced that its has signed up 6 OEM partners that cover 25% of India's entire smartphone market, and will be on millions of phones by the end of the year:

When you have great technology, it's tempting to go broad. In one early team meeting, the Cube26 team laid out 12 different markets for their technology. My advice was to focus on smartphone gesture controls because it was a specific problem domain where they already had some traction.  6 months later, Cube26 has a dominant position in the market (at least in India).

To succeed in the market (and not just the press), be specific.

Friday, August 30, 2013

Getting to the point is a cardinal virtue

While the startup life can be full of excitement, it can also be incredibly repetitive.  Take the pitch, for example.

Many entrepreneurs dislike fundraising because they have to deliver the same pitch over and over.  I've lost track of the times that people have referred to themselves as a wind-up toy.

Yet if entrepreneurs think it's bad, it's far worse for VCs and angel investors.  As an entrepreneur, at least you're only fundraising part of the time.  Investors are always listening to pitches.

I'm only a part-time investor, and I sat through two pitches, and met with three other entrepreneurs today.  A professional VC might see 5-6 pitches per day, every working day of the year.

So it never ceases to amaze me when people don't get to the point.  Everyone is busy.

Entrepreneurs sometimes take a "more is better" approach by marshaling heaps of mediocre evidence for their startup.  Quality isn't cumulative; a few gems are more valuable than a truckload of gravel.

Nor are investors immune, lecturing entrepreneurs about how much value their firm can add, when there's no way to prove that in a 30-minute meeting.

Get to the point and get to the next steps.  As I told one of the entrepreneurs I met with today, after agree to next steps with her, "I don't believe you can create a perfect product by sitting around and planning.  Quickly figure out what you think you should do, and do it.  Then gather feedback and adjust accordingly."

Wednesday, August 28, 2013

The Future of Venture Venture Capital

Today, I saw a post on the future of venture capital--a very popular parlor game in the Valley--which focused on how the rapidly declining cost of starting a company had rendered the traditional VC model invalid:
"The dramatic drop in the cost of creating a company over the last decade ($2 million in the late ’90s to maybe $5,000 today) has had an obvious effect on the venture capital world. Serious venture investment is not required in the earliest stages of a company’s life, so angel investors have been getting the best seed deals. That spawned “super angels” and their subsequent micro-VC funds, which in turn evolved into crowdfunding platforms like AngelList.

Meanwhile, old school venture firms with their ten-year investment vehicles and mostly mediocre returns are realizing that money is a commodity. It echoes statements made by Fred Wilson of Union Square Ventures, who predicts that venture capital as we know it won’t be around in ten years.

Good founders can get capital anywhere. So they’re choosing the firms that will help them the most."
This post is a potent mix of truth and assumption.  It is incontrovertibly true that it costs less to start a company (but this has been true since the Web 2.0 era began during the last decade).  It is also true that there are more seed deals and seed investors than ever before (with Angel List playing a starring role in this growth).  But it does not therefore follow that venture capital as we know it won't be around in the future.

While it doesn't take much money to start a company, it takes a heck of a lot of money to scale one up.  Just take a gander at how much money a couple of SaaS success stories needed to raise:

It's also the case that taking money from 1-2 major investors who will get deeply involved with the business is far better than taking money from a faceless crowd.  Roughly 99% of startups will run into problems along the way and need more money from existing investors.  If you don't have major investors with skin in the game, you're not going to get it.

True, VCs probably don't belong in the seed game.  But their particular blend of focus, deep involvement, and deeper pockets is still as essential as ever.

The Troll Economy

Q: What do you get when journalists get paid by the number of pageviews their stories generate?

A: The Troll economy.

Not to sound like a grumpy old man (though I am) but what passes for journalism has sunk to a new low.  As far as I can tell, headlines are now chosen based on their ability to inflame the reader enough to post an outraged tweet...thereby producing additional traffic and hence revenues.

Exhibit A is this Business Insider article, "A Lot Of People Think Elon Musk Is Already Greater Than Steve Jobs Ever Was."  While I humbly request that you not click the link above, I included it for completeness' sake.  To limit the damage, I carefully made it a "nofollow" link to avoid giving those vampires any of my Google juice.

This work of "journalism" uses Quora answers (!) as the basis for its assertion.  The headline is technically true (one answer praising Musk over Jobs has over 3,000 upvotes) but enormously disingenuous.

The only reason the article exists is to spark outrage.  I saw the headline on Twitter and had to restrain myself from responding; by triggering my fury and disgust, BI nearly suckered me into adding to their traffic.

On the one hand, I have to admire the savvy of tapping the seemingly endless power of social media's love of futile, passive-aggressive outrage.  On the other hand, there's only so much attention to go around, and every second of my time or yours that gets spent on trolling headlines, deceptive slideshows, and anything Kardashian is a valuable resource wasted.

P.S. This is not a criticism of Elon Musk, who is a brilliant entrepreneur (and an affable host at a dinner I attended a few years back).  I'm simply sick of the absurd steps the online press takes to provoke a response.

Monday, August 26, 2013

Twitter is a Debate Machine

It's impossible to argue a point on Twitter without leaving an opening for debate.

It simply isn't possible to lay out a nuanced argument that addresses the main potential objections in less than 140 characters.

As a result, any tweet can be debated.

In some ways, this is bad, because it further contributes to our "Crossfire" society.

But in other ways, this is good, because it encourages debate and conversation.

I have no idea if this was intentional on the part of Ev, Biz, and Twitter's creators.  But there is little doubt that this dynamic has helped make Twitter the addictive utility it is today.

Sunday, August 25, 2013

"Social media doesn't need adult control. What we need is some good taste."

Amazing writing from Olympia Nelson, an 11th grader:

From the moral high ground, they can damn a girl for visual promiscuity, yet enjoy the spectacle at the same time, both with the same misogynistic motives: I like your form but I'm able to scorn you. You're what I want but you're less than me. Girls try to conform to this ''ideal'' stereotype in their photos and these boys sarcastically comment, ''Nice personality'' - really implying that the cleavage is their only attribute. Yet they also click the ''like'' button. The boy who mocks a girl showing her cleavage is in fact the same boy who craves sexual opportunities with her.

A common adult reaction to social media is to restrict things, as if that could ever be possible. You can't force kids to be nice. The real problem isn't something tangible like sexting or bullying, which adults focus on in patronising and unimaginative ways. The real problem relates to conformity. Kids are compelled to act the stereotype, because those who opt out commit themselves to social leprosy. Social media doesn't need adult control. What we need is some good taste.
It's a classic damned-if-you-do, damned-if-you-don't for young women.  Either you participate in selfie culture, making you a "slut," or you abstain, making you a prude.  It's a game where whatever choice you make, you lose.  The only answer is not to play.

UPDATE: Derek pointed out in the comments that "Year 11" means grade level, not age, so I've corrected the post.

Behavior Change comes from the Human Touch

Atul Gawande is a wonderful writer who happens to be a doctor.  His last book, "The Checklist Manifesto," was a best-seller that focused on the power of simple checklists to change behaviors.

Yet his latest article in the New Yorker, "How Do Good Ideas Spread?" focuses on the limits of the relatively simple checklist approach:

Gawande's piece focuses on what makes changing medical practices so difficult.  He contrasts the rapid adoption of anesthesia with the incredible resistance of the medical establishment to Joseph Lister's theory of antisepsis (essentially, that doctors should wash their hands).
"So what were the key differences? First, one combatted a visible and immediate problem (pain); the other combatted an invisible problem (germs) whose effects wouldn’t be manifest until well after the operation. Second, although both made life better for patients, only one made life better for doctors. Anesthesia changed surgery from a brutal, time-pressured assault on a shrieking patient to a quiet, considered procedure. Listerism, by contrast, required the operator to work in a shower of carbolic acid. Even low dilutions burned the surgeons’ hands. You can imagine why Lister’s crusade might have been a tough sell.

This has been the pattern of many important but stalled ideas. They attack problems that are big but, to most people, invisible; and making them work can be tedious, if not outright painful."
He goes on to describe his efforts to improve medical care for childbirth in rural India.  At first, the challenge seems insurmountable.  The hospitals lack resources, and the doctors and nurses, while dedicated, are stretched beyond belief.  Numerous educational campaigns had failed.
"In the era of the iPhone, Facebook, and Twitter, we’ve become enamored of ideas that spread as effortlessly as ether. We want frictionless, “turnkey” solutions to the major difficulties of the world—hunger, disease, poverty. We prefer instructional videos to teachers, drones to troops, incentives to institutions.

But technology and incentive programs are not enough. “Diffusion is essentially a social process through which people talking to people spread an innovation,” wrote Everett Rogers. Mass media can introduce a new idea to people. But, Rogers showed, people follow the lead of other people they know and trust when they decide whether to take it up. Every change requires effort, and the decision to make that effort is a social process."
What finally seems to work? Sustained 1:1 interaction.

“Why did you listen to her?” I asked. “She had only a fraction of your experience.”
All the nurse could think to say was “She was nice.”
“She was nice?”
“She smiled a lot.”
“That was it?”
“It wasn’t like talking to someone who was trying to find mistakes,” she said. “It was like talking to a friend.”
Many startups use technology to change behavior. But sometimes, the best technology is simply sitting down with your user. It's long and messy, but it works.

The Overlooked Reason Entrepreneurs Are Vulnerable To Depression

Inc Magazine recently ran a great piece on "The Psychological Price of Entrepreneurship."

The piece, which includes some revealing stories from entrepreneurs who found themselves on the brink, touches on some of the psychological reasons why entrepreneurs are particularly vulnerable, such as their tendency to feel emotions more strongly and take more risks than the average person.

But I think there's one insight that's missing, that explains a lot about why entrepreneurs are so vulnerable.

At its heart, entrepreneurship is about fighting to change reality.

An entrepreneur starts with nothing, then he or she need to beg, borrow, and steal (figuratively, though sometimes literally) to get a startup off the ground.  At every stage, the entrepreneur needs to convince people to join him or her in taking massive risks--this includes co-founders, investors, employees, and customers.

Entrepreneurs who attend accelerators like Y Combinator are coached to deliver polished, confident pitches that are filled with big visions.  I have yet to see a pitch where an entrepreneur said something like, "And if you don't say yes, my company will probably go under."

We expect entrepreneurs to defy conventional wisdom at every turn, then act surprised when they seem stressed about it.

As an entrepreneur, no matter how much you make time for family, eat healthy, exercise, and get enough sleep, your life is always going to be unusually stressful.  All the more reason then set aside time for the things that help you persevere.