Archive for February, 2008

Pardon Me, But Would You Have Any Grey Poupon?

Posted in articles, buzzpal philosophy, startups on February 23, 2008 by chrisco

The following article — after my “intro turned rant” — is a good backgrounder on the Google model.

Google uses the world as its laboratory, launching and then morphing or killing many, many applications (see Google Labs). Microsoft, on the other hand, uses the “million monkeys on a million typewriters for a million years” theory. Ok, that’s a bit harsh, but it was the best chance in a long time I’ve had to use that phrase! Microsoft really uses the Big Bang theory.

Google’s model is more of a “startup” model, while Microsoft’s is definitely a “big business” model. Yahoo’s model is in between. Yahoo’s concept is called Yahoo Brickhouse, but it’s leader just left. Now Microsoft is trying to acquire Yahoo, which sounds like an ugly mess to me. And Microsoft says it’s going to go more open source, which sounds like the wolf offering to guard the sheep.

Anyway, what’s interesting, but not surprising, as you’ll see in a minute, is how hard these huge companies try to simulate startups. Yes, the startup environment is extremely valuable, but, sorry guys, it cannot be replicated in a large company no matter how hard you try or how much money you spend. In fact, it’s the “spend money” part that totally kills the fantasy. You simply cannot recreate the hunger and drive of a bootstrapping startup with things money can buy. It’s just not possible. Ok, maybe Arnold can do it, but in the real world it has to be real.

At real startups it’s life or death. At simulated startups it’s life or another Soy Chai Latte from the free coffee bar. At real startups, we take the bus. At simulated startups, they take the party jet.

Down here, in bootstrap startup world, it’s dirty and risky. There are no corporate jets, free lattes or other pamperments (yes, I like to make up words, too). Down here, we’re in the garage eating leftovers, not in the Penthouse waiting for our butler to bring some more Grey Poupon. Down here, the pizza is cold, the beer is warm and the nights are late. It’s real. There are no cushy salaries to fall back on. There are no safety nets. It’s life or death. You cannot simulate that environment and there is no halfway. It’s either real or not real.

Not even all those people cashing out of Google to launch or join startups can recreate the real startup environment. Maybe they can get close, maybe even “better” in some ways, but there’s a huge difference. They have a safety net called millions of dollars in the bank. Sure, they can create plenty of venture-funded startups, and some of those will be successful, but those are totally different animals. They are driven by investors, board meetings, and burn rates. Real startups are driven by hunger and the creativity it spurs, as discussed in this NYT article: Empty-Stomach Intelligence. Google, Amazon, Yahoo, eBay, YouTube, Apple, etc. all got their initial start the “real” way.

Real startups are real. Venture-funded startups are venture-funded. Ok, they’re “real,” too, in that they exist, but that’s the kind of “real” we’re talking about here in this rant — we’re talking about the “bootstrap or die” kind!

Real startups are making the trends, the venture-funded startups are copying the trends. It’s like the suburban kids coming into the gritty parts of the city to play “cool.” It doesn’t work. They are followers and posers who stick out like sore thumbs. When they finally figure out where the “scene” is, the scene moves on without them and the cycle repeats. That’s just how it goes. It’s so funny how the rich kids and companies want to play down here, but can’t, because it’s just not possible when you get dropped off in mommy’s Mercedes or Google’s party jet. There’s nothing wrong with fancy cars and fancy jets, they are sweet, but they are soft, not edgy; pampered, not hungry.

Now on to the article: Continue reading

Bootstrap, Then Raise Funds If/When Necessary

Posted in articles, buzzpal philosophy, startups, venture capital on February 17, 2008 by chrisco

As discussed in previous posts, BuzzPal is a bootstrapping startup. We believe it’s the best path for most modern Internet startups (definitely the best path for us):

  1. Put together a team.
  2. Develop something real.
  3. Get it out there.
  4. Get user feedback.
  5. Morph.
  6. Grow.
  7. Morph, grow, etc.

Steps 1-5 completed with the founder’s capital only. Then, if and only if, you get on an exponential growth curve and capital is required to scale, raise some money, which at this stage will be relatively cheap in terms of equity dilution (use a mix of debt, equity and vendor financing). Note: My background includes venture debt and equity investing (with a venture-finance startup that later went public).

If investing in customer acquisition models out in Excel (i.e. is a positive NPV investment), then raising capital for that is good, too. Investment in product development is best left as a function of revenue (i.e., budget as a percent of revenue).

Another benefit of bootstrapping is that…

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Rumor: Bebo Acquired for $1 Billion

Posted in articles, other people's blogs on February 13, 2008 by chrisco

UPDATE 2008-3-13: AOL said on Thursday that it will pay $850 million in cash to acquire Bebo, a U.K.-based online social network with more than 40 million members. Bebo currently is the largest social network in Ireland and New Zealand, and third largest — well behind Facebook and MySpace — in the U.S. Bebo was started in 2005 by a married couple.

Another billion dollar social networking deal. Details soon.

From TechCrunch 2008-2-13:

Following up to our post last week talking about a possible acquisition of social network site Bebo: A high level source has told us that Bebo has been in discussions via their investment bank, Allen & Co., with a number of potential buyers, and says that the company signed a deal on Monday to be acquired. The rumored price is $1 billion.

The buyer is unclear, although we are still betting on Google given that Bebo fits well with Orkut (very, very small user overlap). Microsoft has been mentioned as another possible candidate, although they seem to have their hands full right now with Yahoo. Other potential buyers, including News Corp. (mentioned in our previous post), Yahoo and others, have backed out due to price, from what we’ve heard. There are other potential buyers as well (CBS, Viacom, Comcast, others).

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The Art Of Startup Prioritization: Maximizing The Wow-To-Work Ratio

Posted in buzzpal philosophy, other people's blogs, startups on February 8, 2008 by chrisco

And one more from

Jun 25, 2007
The Art Of Startup Prioritization: Maximizing The Wow-To-Work Ratio
By Dharmesh Shah

At most startups, one of the hardest things to do is prioritize tasks. If your startup is anything like mine, you’ve got hundreds of things you could work on. There are always more ideas and tasks than there are people to do them. The trick is figuring out what to work on now and what to work on later. I’ve had to deal with this challenge for most of my professional career.

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Article: Trends in Online Advertising

Posted in articles on February 3, 2008 by chrisco

A reminder about the revolution going on in advertising, social media, startups and investing.

From Trends in online advertising. Read this article in conjunction with this The Economist article: “Hard Sell”.

January 30, 2008
By Julie Ruvolo

Silicon Alley technologists and Madison Avenue advertising executives have been meeting yesterday and today at the AlwaysOn OnMedia NYC conference. Here are some of the trends people were talking about:

– Ad networks were the darling acquisition targets of 2007, but what are they worth?
– Content versus community ad-targeting is emerging as a major debate
– The gap is widening between the proportion of people online, and the proportion of ad dollars spent online

Ad networks were the darling acquisition targets of 2007 but what are they worth?

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Startups and The Problem Of Scaling Too Soon

Posted in buzzpal philosophy, other people's blogs, startups on February 1, 2008 by chrisco


Dec 03, 2007
Startups and The Problem of Scalling Too Soon
By Dharmesh Shah

Early-Stage Startup: “We’ve designed the system to handle millions of users and be fault-tolerant so that there is no single point of failure and can assure our users of 99.999% uptime. We’re prepared!”

Me: You’re worrying about scalability too early. Don’t blow your limited resources on preparing for success. Instead, spend them on increasing the chances that you’ll actually succeed.

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