Someone joked with me the other day that after a recent experience trying to get funding for an old school enterprise software business they were going to reposition themselves as a Web 2.0 social networking SaaS company to see if that helped. Ahh . . . bubble humor . . . it would be even funnier if it didn’t ring so true . . .

I’ve written a few posts about my general concerns over our economy (we save too little, have too much debt, etc.). I’ve received my fair share of feedback that outlined all the reasons why the world had changed, that certain leading indicators no longer mattered, etc. That’s all wishful thinking in my mind – we live in a world of real and repeatable cycles. And while overall the global standard of living has gone up over time and the duration of our periods of growth have lengthened, our economy and the world economy is cyclical and generally speaking follows repeating (if not predictable) patterns.

With that as a backdrop, I was fascinated by a Merrill Lynch report (see 1980’s Redux) which compares trends in some key economic indices today and from the 80’s. While the world is without question a changed place (and thankfully the economic downturn in the early 90’s was short-lived, relatively minor and followed by a sustained period of growth and prosperity) it’s still wise to at least pay attention to history. Click through the link above – just looking at the graphs will give you the right picture.

One thing I hope does not come back is my late-80’s hairstyle . . . attached here for your viewing pleasure (that’s my sister with me in the picture with an admittedly big, but much more respectable, style).

The big news coming out of Web 2.0 (other than Facebook’s Evan Zuckerberg somewhat obliquely announcing that FB is going to create its own ad network and dodging a few questions about their developer agreement – see coverage here) was MySpace following in the steps of Facebook and opening up their site to developers. It’s no secret that MySpace has struggled – especially relative to Facebook (at Web 2.0 Murdoch also lowered guidance for MySpace revenue and there have been many reports of MySpace’s significantly lower growth rates than that of Facebook). Facebook’s decision this May to create a standardized development platform for 3^rd party app builders has without question been a huge success. MySpace has now jumped on the platform bandwagon and will begin to better support their developer ecosystem.

I wrote a post about this 18 months ago (see AppExchange is the new black from June 2006) applauding companies such as eBay and SalesForce for cultivating their developer networks. While Metcalfe’s law suggests that the power of a network increases exponentially with the number of nodes on that network, there is perhaps an adjunct to Metcalfe’s which would state that this power increases by another factor as you add functionality across that network. Think of the programs developed for a networks as additional nodes, but where the number of ‘nodes’ to factor into Metcalfe’s equation equals not one for each new program, but one for each program multiplied by the number of users it has. Networks that serve as platforms become ecosystems. Networks that don’t are silos.

So what’s next? In my June 2006 post about I referenced Oracle (and didn’t but could have referenced SAP) – they are both migrating down the stack and building systems that are both applications and middleware. They should start thinking about how to better create an ecosystem around their systems rather than continuing to believe they can develop (or buy) all the functionality their customers need. Thinking a little bit more broadly, the Yahoo, Microsoft, AOL and Google all have large numbers of email users that are huge potential networks and which are completely untapped (see this WSJ article from last week; hat tip to Ric for the pointer). Without question the social networks are adding messaging and mail like functionality to their systems – the mail guys, with a wealth of data about their users and with a more broadly ‘sticky’ application, should start looking to fight back. Perhaps we’ll see the first of this with iGoogle.

I’m definitely a platform guy – I see the power of building a foundation and having others add to it. And while I may be overstating the future opportunities here, the predictions I made 18 months ago and the moves by the large networks since then would suggest otherwise.

Brad put up a post last night about how tight StubHub is (see “StubHub Seriously Has Its Act Together“). I promised a post on my rockin’ StubHub experience buying tickets to Game 4 of the NLCS in “Jumping on the bandwagon” so here goes:

The thing about specializing in a specific vertical is that if you get it right, the experience is worlds better than your generalist competitors. When StubHub was started conventional wisdom suggested that eBay had a lock on all things auction. But it turns out that there are plenty of very specific niches for which the eBay one-auction-fits-all model falls short. Ticket sales is clearly one of them. If you’ve ever tried to buy or sell tickets on an eBay auction you know exactly what I mean. Tickets to an event are a highly specialized good – every ticket is not the same (each seat is different and each venue is unique in its seat layout), events are time specific (i.e., they occur at a very specific date and time before which the ticket is valuable and after which the ticket has zero value), there are major logistical challenges with shipping around tickets and ensuring they get where the are supposed to get when they are supposed to get there, and there are significant challenges in dealing with last-minute purchases (transferring the ticket from a buyer to a seller hours or minutes before an event).

Enter StubHub who seems to have this process completely wired.

I hadn’t even thought of trying to go to game four of the NLCS until the morning of the game when my wife suggested that I try to grab tickets and take my dad. I’ve used StubHub before so I quickly headed over to their site. I hadn’t seen the cool mouse-over stadium map that allowed me to quickly figure out the range of ticket prices and seating options available (all without clicking and backclicking, which is a major pain). Three clicks later I had purchased 2 seats to the game about 30 rows up behind 1^st base. StubHub has ticket pick-up offices set up near many major venues. In the case of downtown Denver they use a temporary space in LoDo to distribute tickets bought too close to event time to ship them around via FedEx. I arrived right as the office opened and was a little dismayed to see about 200 people already ahead of me. But dealing with large numbers of people descending on a single venue and attempting to pick up their purchased tickets is clearly something StubHub has figured out. Five minutes later I had my tickets in hand and was off to dinner with dad. I watched throughout dinner (which was at the restaurant next door) as the StubHub line snaked around the corner but moved steadily for the 90 minutes. I wouldn’t be surprised if 5,000 people (about 10% of the stadium) purchased their tickets through StubHub for this game (they even had computers set up in the pick-up office for people who had procrastinated their purchase until game time).

All I can say is wow. . .

On a recent trip to Chicago I had the chance to visit Dick Costolo, former CEO of FeedBurner and now proud employee of Google. Brad and I took Dick out to a congratulatory dinner. Before we went out Dick gave us a tour of Googleplex Chicago. As we walked around the impressively decked out office (200 inch screen in the presentation room? Wow!) he told us how smoothly the operations ran at Google. “Everything just works” he said, demonstrating the video conferencing system. On top of that, the systems in the Chicago office are exactly the same as the systems in every other office. Learn how to do something in Chicago and you know how to do it in Palo Alto, Boston or Munich. Most of the offices even have the same look and feel. While it may be a bit formulaic, it’s productive. And clearly Google is all about maximizing the productivity of its staff. That . . . as well as the fact that they actually had a working video conferencing system that required no IT staff to actually set up a video feed . . . is pretty impressive.

Here’s a (really fuzzy) picture of Brad and me in the lobby just before leaving:

I admit it – I’m not a huge baseball fan.

I used to love baseball. I collected baseball cards, followed the box scores and (in true nerd fashion – especially for that era) kept complicated spreadsheets tracking the stats of my favorite players. The Bill James Baseball Bible was my religion. That was before 1986. That was before, in the time between I left my neighbors house where I was babysitting to be with my dad to enjoy the Sox winning their first World Series since 1918, the world stopped, all reason was thrown out the door and I ended up pacing my room all night cursing the fate that had caused me to be born and raised in Boston. I pretty much gave up on baseball at that point, enjoying the game from a somewhat safer distance. I took a detour back into the fold in September and October of 2004 to finally enjoy the victory that should have long ago been.

Fast-forward a few years and the Rockies are improbably hot and actually pretty fun to watch. I attended my first game this year when Anant invited me to join him at game 3 of the NLCS on Sunday. It was raining and miserable, but the game was great and the Rockies came one step closer to winning the National League. On Monday I was sitting in my office when I got an email from my wife asking “Why don’t you take your dad to the game tonight”. So about 5 minutes and few clicks later I had two tickets to game 4 (and hopes that we’d be seeing the Rockies clinch a World Series berth). [how much StubHub rocks is the subject for another post (they apparently brokered about 4,000-5,000 tickets to the game last night – meaning that about 10% of the people attending got their tickets through them – pretty amazing)] The game rocked and I got to witness first hand one of the most significant sporting events in Colorado history. Plus I got to see it with my dad. Here’s a picture just after the final out. Go Rockies! (unless the Sox get into the Series – an exciting finish to the season can’t wipe out years of membership in the Red Sox Nation).

No . . . I didn’t die . . . I just stopped blogging for about two months. This wasn’t part of a master plan or some kind of anti-social experiment. I got incredibly busy, was traveling every week and got behind. Something had to give and unfortunately it was blogging.

Ok – enough excuses. I’m back. I’m as opinionated as ever. I’m going to tell you what I think about things (even if you don’t ask). Thanks for hanging in with me.

 

Wow! What can I saw about the TechStars investor pitch/demo day except that it was fantastic. The teams were extremely well prepared and every single one of them really nailed it. We had about 50 private investors and venture capitalists in attendance to see the 10 TechStars teams go through what they’ve been up to this summer.

Those of you who follow me on Twitter know that I’ve been somewhat of a TechStars groupie this summer – I’ve spent many hours with the teams giving feedback, advice and lending a sympathetic ear. I’ve seen early ideas and kluge demos turn into the seeds of real business ideas, real prototypes and true products. The journey has been amazing to watch. For me this was the best part of yesterday – the progress that each of these companies has made this summer is truly remarkable.

TechStars was raw entrepreneurship at its finest. The program brought in teams who had ideas that ranged from pet projects to recently crafted plans to companies that the founders had been working on already for years. Over the course of the summer these ideas were refined, changed, thrown out completely and refined again. The result was a pretty amazing experience for the founders and ten pretty interesting potential businesses.

Don Doge had a nice summary of each on his blog if you’re interested. I’ve also linked to the companies below.

EventVue

IntenseDebate

SocialThing

StickyNotes

Search-to-Phone

Villij

MadKast

FiltrBox

KBLabs

BrightKite

But the limits of Y Combinator’s model remain unclear. A typical young tech company should be spending a little less than $40,000 a month, says Seth Levine, a venture capitalist at Foundry Group. Y Combinator gives companies a fraction of that, leaving entrepreneurs “eating ramen and not paying themselves,” he says. And 6% is a huge amount of equity to give up for such little money, he says.

Although Levine has shared his expertise with TechStars, a new Colorado program that’s similar to Y Combinator, he says it’s rare to find a business with serious long-term prospects in such a program.

While it’s great to get quoted in the national press, I actually laughed when I read this article in USA Today earlier this week that managed to completely misrepresent my views on the efforts of Y Combinator and TechStars (a program running down the street from me in Boulder this summer with which I’ve been spending significant time and energy helping out). After my initial amusement I didn’t think much of it.

But then I got a few emails about it . . . and a few TechStars companies pinged me to ask me if that’s really how I felt . . .and Paul Graham took me to task in a post he wrote in reaction to the article . . . and it seemed like perhaps I should set the record straight. So here’s the deal:

First, I’ll take responsibility for the error – I broke the cardinal rule of interviewing when I gave a phone interview rather than responding to questions over email (and I didn’t review the article before it went out as I often do). The fact that there was no actual quote about my views on Y Combinator and TechStars should be a tip-off that perhaps this sentiment wasn’t conveyed correctly. The majority of my interview was actually about a recent post I wrote on the importance of controlling cash burn at various stages of company growth. We also talked at length about various ways that young companies find angel investors and different efforts around the country to bring angels together in organized investment groups which is what I understood the article was about. In the course of a 10 minute conversation we probably talked about Y Combinator and TechStars for about one minute.

The actual quote in the article from me is accurate in the sense that I told her that at some point entrepreneurs need to find a source of capital so they could pay themselves (preferably from selling something to customers, but potentially from friend & family, angel investors or venture capitalists) but was taken completely out of context (I wasn’t talking about that in relation to the money companies get from Y Combinator or TechStars).

More importantly, this wasn’t a statement about the deal that programs like Y Combinator and TechStars make with their participants. At all. In any way. As it turns out, I actually think these programs are a great deal for entrepreneurs and don’t think the equity they give up has much, if anything, to do with the cash they receive. Significantly more important than money, companies in these programs get amazing access to groups of mentors – business leaders, venture capitalists, lawyers, other successful entrepreneurs – whose time and willingness to help out is worth significantly more than the $5k-$15k that is provided as a stipend in the program. The companies also get access to free office space, regular feedback on their ideas and prototypes and get to interact with other companies in a similar stage of development who share learnings, successes and failures along the way. For all this, 5% or 6% is a bargain. I’ve spent a countless hours working with TechStars companies this summer in support of this belief.

It is true that I told her that many companies in these programs wouldn’t end up as viable businesses and frankly, that’s probably true. However, that’s true of any set of early stage ideas (and many projects enter TechStars or Y Combinator as more of a concept than a working business) – not everything has the makings of a real business (although it’s not “rare” as was ascribed in the article, although again not in an actual quote). One of the great things about participating in a program like TechStars or Y Combinator is that entrepreneurs have the chance to get real time feedback on what they’re doing in an effort to maximize their chances of exiting the program with a viable business. In fact – that’s the entire idea behind these efforts.

With apologies to Paul, David, Y Combinator and TechStars – I hope this will set the record straight.

I will not do interviews over the phone. I will not do interviews over the phone.

I will not do interviews over the phone. I will not do interviews over the phone.

I will not do interviews over the phone. I will not do interviews over the phone.

I will not do interviews over the phone. I will not do interviews over the phone.

I will not do interviews over the phone. I will not do interviews over the phone.

I will not do interviews over the phone. I will not do interviews over the phone.

As promised – a few thoughts on StartupWeekend now that I’ve had a chance to both get over my disappointment that we didn’t release anything on Monday morning and more importantly time to think about what worked and what didn’t work last weekend. There seems to be no lack of opinion on the subject (see the comments to the “Success and Failure” post on the StartupWeekend website and the mass of comments left on the TechCrunch article about the weekend or just do a Google search for StartupWeekend).

Overall, it was a great experience. We had an outstanding group of founders from a broad cross-section of Denver/Boulder technology companies. Andrew did a great job of facilitating the weekend without being too heavy handed (although see below for some ideas on where more structure might have benefitted the ultimate goal of the project). A lot of the people involved have posted on their blogs or elsewhere online that as a “Social Experiment” StartupWeekend was a success. I think what they mean is that we had a fun time, everyone contributed, and no-one wanted to kill anyone at the end of the weekend (which says something given that many people were operating on only a few hours sleep over the 50+ hours that the project was active). That said, if StartupWeekend is only a social experiment the concept will have pretty limited value (and a limited life – it’s fun to do once, but to make it a regular occurrence, there needs to be the realistic expectation that a ‘product’ will actually be released). Don’t get me wrong – I loved the ‘social experiment’ side of the weekend, but the goal of the project was to produce something in the period of time we were together (and capitalize on the buzz generated by the excitement around the process for the benefit of the company that was created). The journey was great, but we actually needed to get somewhere. I know Andrew wants to replicate the Boulder StartupWeekend elsewhere around the country – I’d love to see this happen and think what we learned last weekend will help make the effort in other cities more productive and ultimately more successful.

That said, VoSnap will launch – and soon. The project did live beyond the weekend and, after everyone got some sleep and returned to their Monday-Friday lives, there was a great deal of interest by the group in continuing with the project. Not just to the first launch, but beyond that (and potentially building a business around the project). When it’s up and working I’ll put up a note and link to the working site. It definitely says something both about the weekend and the group of people who participated that the project will live on beyond Monday. It’s emblematic of why the weekend was such a great experience.

Here are some summary thoughts on what worked, what didn’t work and what we might do differently when we do this again:

What worked:

• Picking the idea: We ended up with something that was realistic to do in a weekend and had the potential for legs beyond the two day project. Having a site where the founders could post ideas and doing an initial vote before we showed up on Friday night were keys to vetting the list before we even showed up (we spent around an hour picking the idea – that felt about right)
• Group dynamics: While there were plenty of type-a personalities in attendance, the group self organized really well and it was clear that people checked their egos at the door. It helped that this was a one weekend project (at least that was the thought going into it). A lot of work was done by these groups – much of it not visible to people following along on-line. PR, business development, marketing, etc. were all on their game and came up with plans/ideas that will serve the company well beyond Sunday night.
• Focusing on one project: When I looked around the room on Friday night I thought to myself “no way can this many people stay busy for the weekend”. Andrew held to his guns and insisted that we all work the same idea. He was right on – while a group of much more than this size probably wouldn’t work the weekend needs to be about ONE idea and the focus of the group needs to be singular in that respect.
• Quick meetings/quick decisions: Every hour we met for 7 minutes for an update. This is an incredibly effective way to communicate with a group w/o disrupting everyone for a long period of time. A few people have actually extended this idea beyond StartupWeekend to their day jobs. We were maniacal about keeping these short and as a result there was a lot of information conveyed at regular intervals in a very short period of time. Andrew also implemented a system of “quick votes” to make decisions (VoSnap would be perfect for this!) – the idea was to lay out the options, vote and move on. Quick votes allowed us to keep moving throughout the weekend.
• Buzz. StartupWeekend really took on a life of its own online last weekend. It started with David’s regular blog posts on www.startupweekend.com but also included the live video stream that was put up (which regularly had nearly 100 viewers), flickr photos and, of course, the TechCrunch posting. At the beginning of the weekend very few people outside of the Boulder tech community knew what StartupWeekend was and VoSnap didn’t even exist – by the end of the weekend there were hundreds of mentions online of both and tens of thousands of hits to the VoSnap site (there are more than a thousand people now on the VoSnap mailing list).

What didn’t work/what to do differently:

• The product. I guess I have to start here. On Monday we had a lot of things working, but the product wasn’t one of them (still isn’t – at least not publically). I think we should have put up whatever we had on Monday morning. On the one hand, this would have been fodder for those online who were down on the idea of creating a product over the weekend. On the other hand, it would have been true to the idea of the weekend (to create something in 2 days).
• The development process. We had a lot of great developers, but we made a bad choice of dev environments (at least in the context of putting something out in a weekend) and as a result we ended up scrapping a lot of the initial work that was done on Saturday on the product. In retrospect, we should have appointed a dev lead ahead of time, probably had the development team meet before the weekend to review the likely top candidates (based on the pre-weekend voting) and make the choice of development platforms ahead of time. The decision wouldn’t have been rushed and it would have been more well thought out. In the end, we made some choices that might have been right for the long term success of the product, but made it difficult for us to complete the first rev in time to launch on Monday. There were also a few among us that recognized this early (David, Andrew and I had this conversation on Saturday) but we (wrongly) decided to let it go.
• More developers. Out of 70 people we had probably 7 hard core developers. This ratio was too light. Many of our early stage companies are between 30% and 50% development staff. While on top of the 7 dev types, we had a handful of other people that would probably count as “engineering” in the numbers I just quoted, this imbalance set us up for some challenges (not the least of which was that development of the business plan, pr, marketing, etc pretty quickly got very far ahead of what we could do in a short period of time and probably contributed at least some to feature creep).
• Communication after the fact. During the weekend we did a great job of communicating with the outside world. Through emails, blogs, streaming video, flickr, etc, we were very open about what we were up to. A surprising amount of work has taken place since Monday, but we’ve been totally mum about it beyond the founder group (to give you a sense of the volume of email traffic, I’ve created a separate inbox just for VoSnap related email so I can see it all in one place).

I’ll end with a few pictures to give you a sense of the environment we were working in (two views of the main room and one of a stand-up product meeting).