Toll-free numbers are de rigeur for most incoming sales and customer service lines. This used to make a lot of sense, say 20 years ago, when people actually paid for an outbound call. You did not want to throw up a barrier.
Now, though, nobody I know pays any differently for a toll-free number versus a normal toll number. Indeed, the very concept of long distance is mostly dead as well. I don't know what the stats are, but I would guess that most people have an all-inclusive plan either on their mobile and/or their landline.
So, toll-free is a great money maker for the phone companies. The caller is paying the same as they would anyway, and the receiver is paying extra for the privilege. With SMS slowly on its way out, the phone companies need a new high margin cash cow.
For the companies themselves, it seems like they could drop it unless they cater to those with lower incomes or no clue.
Monday, January 30, 2012
Friday, January 27, 2012
How much money should I raise?
I get this question a lot. The answer is easy--take as much as you can get.
Why? Let's think this through.
Entrepreneurs resist raising more than they think they need because they are worried about dilution. There are two fallacies here. (A) They need more than they think they will. (B) Dilution is an illusion.
The result of this behavior is that entrepreneurs radically improve their chances of failure. Instead of optimizing for how much of the company you own, you should optimize for the company's success. This is the old saw of owning a small piece of a big pie instead of a large piece of a small one. The additional corollary for startups is that, usually, there is no pie when the music stops.
Let's talk about the fallacies. You will need more money than you think. Entropy is the most powerful force in the universe, and it guarantees that most surprises are unhappy. Also, your business plan is wrong, almost certainly to the downside, because as an entrepreneur, you are blind to risk and more enamored of your baby than others. If you weren't, you would never embark on such an adventure.
Most of the software companies I know do not hit their milestones as quickly as projected. That is not to say that they will not ultimately be successful. But shit happens, and many companies raised money assuming merely imperfect execution, as opposed to one or two complete shitstorms along the way. They run out of money just at the point where there is some visibility that they are getting traction. But, they do not have enough traction to convince a Series A investor to take the risk.
This will get even tougher in the current funding environment, where there is a glut of seed financed companies chasing a shrinking pool of Series A investors. This makes the Series A process longer, and you are competing against a lot more companies for that money, some of whom will have better evidence of traction. You end up trying to do an inside round, which is tough at the seed stage.
Taking less money because you are worried about dilution is just dumb. Very few startups succeed to achieve significant returns to founders and investors. You should do whatever it takes to maximize your company's chances of success. That means choosing the right investors, even if it means a lower valuation. That means taking as much money as you can get with a reasonable amount of effort--there are declining marginal returns here as you divert time to raising money instead of executing.
In the current environment, where seed is relatively easy to get and Series A is hard, it means getting as much as you can in the seed round. You generally don't get a second chance to do more seed funding, because most seed investors will not re-up for an inside round.
So, if you did not raise enough and are running dry before hitting real milestones, you are toast. If you did execute like a rock star and hit the plan, there is good news. You have more money in the bank than you thought you would need. That means putting off the A round for a few months, during which time you will continue to improve and your Series A valuation will be higher as a result, countering some of the "extra" dilution you took in the seed round.
Most importantly, your company still exists, and you still have a chance at eating some pie.
Why? Let's think this through.
Entrepreneurs resist raising more than they think they need because they are worried about dilution. There are two fallacies here. (A) They need more than they think they will. (B) Dilution is an illusion.
The result of this behavior is that entrepreneurs radically improve their chances of failure. Instead of optimizing for how much of the company you own, you should optimize for the company's success. This is the old saw of owning a small piece of a big pie instead of a large piece of a small one. The additional corollary for startups is that, usually, there is no pie when the music stops.
Let's talk about the fallacies. You will need more money than you think. Entropy is the most powerful force in the universe, and it guarantees that most surprises are unhappy. Also, your business plan is wrong, almost certainly to the downside, because as an entrepreneur, you are blind to risk and more enamored of your baby than others. If you weren't, you would never embark on such an adventure.
Most of the software companies I know do not hit their milestones as quickly as projected. That is not to say that they will not ultimately be successful. But shit happens, and many companies raised money assuming merely imperfect execution, as opposed to one or two complete shitstorms along the way. They run out of money just at the point where there is some visibility that they are getting traction. But, they do not have enough traction to convince a Series A investor to take the risk.
This will get even tougher in the current funding environment, where there is a glut of seed financed companies chasing a shrinking pool of Series A investors. This makes the Series A process longer, and you are competing against a lot more companies for that money, some of whom will have better evidence of traction. You end up trying to do an inside round, which is tough at the seed stage.
Taking less money because you are worried about dilution is just dumb. Very few startups succeed to achieve significant returns to founders and investors. You should do whatever it takes to maximize your company's chances of success. That means choosing the right investors, even if it means a lower valuation. That means taking as much money as you can get with a reasonable amount of effort--there are declining marginal returns here as you divert time to raising money instead of executing.
In the current environment, where seed is relatively easy to get and Series A is hard, it means getting as much as you can in the seed round. You generally don't get a second chance to do more seed funding, because most seed investors will not re-up for an inside round.
So, if you did not raise enough and are running dry before hitting real milestones, you are toast. If you did execute like a rock star and hit the plan, there is good news. You have more money in the bank than you thought you would need. That means putting off the A round for a few months, during which time you will continue to improve and your Series A valuation will be higher as a result, countering some of the "extra" dilution you took in the seed round.
Most importantly, your company still exists, and you still have a chance at eating some pie.
Wednesday, January 25, 2012
Is innovation dead?
I have been meaning to write this post for a while, and listening to
Mike Maples of Floodgate rant about the issue tonight at the Founder
Showcase finally got me off the stick.
As an investor I hear a lot of pitches. A disturbing trend in the last 18 months is that most companies can succinctly describe themselves as the [insert hot company] of [insert underserved enormous market]. That almost always means that they are just an iterative solution as opposed to something revolutionary.
The really big ideas are ones that seem like madness. Things that you could not even imagine a few years ago. You could not describe Facebook or Twitter as the X for Y market. They were enabling new behaviours.
Investors are somewhat to blame for this explosion of me too companies. An area gets hot, and investors pile in and fund copycats and "inspired by" companies hoping for an easy hit. But the big money is made by staring into the abyss.
Where this model works consistently well is in foreign markets. There are companies dedicated to cloning business models that work well in the US and applying them in other locales, and then selling them to the US company when they are ready to expand abroad.
Someone told me that the companies to invest in are the ones doing things you could not even have imagined 3 years ago--I like that filter.
As an investor I hear a lot of pitches. A disturbing trend in the last 18 months is that most companies can succinctly describe themselves as the [insert hot company] of [insert underserved enormous market]. That almost always means that they are just an iterative solution as opposed to something revolutionary.
The really big ideas are ones that seem like madness. Things that you could not even imagine a few years ago. You could not describe Facebook or Twitter as the X for Y market. They were enabling new behaviours.
Investors are somewhat to blame for this explosion of me too companies. An area gets hot, and investors pile in and fund copycats and "inspired by" companies hoping for an easy hit. But the big money is made by staring into the abyss.
Where this model works consistently well is in foreign markets. There are companies dedicated to cloning business models that work well in the US and applying them in other locales, and then selling them to the US company when they are ready to expand abroad.
Someone told me that the companies to invest in are the ones doing things you could not even have imagined 3 years ago--I like that filter.
Thursday, February 24, 2011
Best. Presentation. Ever.
For all the startup entrepreneurs out there, here is a great lesson on presenting. Taka's enthusiasm pushes through the language barrier. As Yossi Vardi said after the presentation regarding why he would invest, "If you're going to lose your money, at least have some fun."
I hope you took notes. I have to go find some turquoise shoes for my next presentation, and work on my "Boom!".
Taka has now given my two favorite presentations of all time. His presentation for Tonchidot at TechCrunch40 a few years ago was even more epic than this year's. See the presentation and the Q&A. The product seemed impossible, the presentation unintelligible, but the enthusiasm was infectious and you desperately wanted it to be true. Turns out, it was true, and the system works in Japan.
LifeProof iPhone Case
Here is a cool product from the Launch Conference. A few months ago, my iPhone fell out of my bike jersey pocket at 20mph with only a slim plastic case and a ziploc for protection (more here). I have looked at Otterbox cases, but they are bulky. This case is waterproof, can be dropped from 6 feet up, and is just slightly thicker than a normal case. At $70, it is targeting a narrow market, but I will get one.
Thursday, February 17, 2011
It is better to be though a fool than to speak up and remove all doubt
Wow, AT&T continues to impress with its seeming complete disconnection from reality.
Losing iPhone exclusivity? No problem, they say.
Want 4G? No problem. We'll just call our 3G service 4G and it's all good.
And now, these comments from Randall Stephenson that platform-specific app stores are bad for customers. Uhm, come again? AT&T holds forth that their Wholesale Applications Community is a better idea. For them, sure.
Let's break this down.
Consumers obviously hate the iOS App Store...10 billion times over (yes, that is billion). Stephenson laments that customers will have to go to different app stores for different platforms. Newsflash--most consumers only live on a single platform. And I, for one, don't care about what Android apps are available since I have an iOS device. Sure, this may get a bit more confused if people buy a tablet with Android and an iOS phone.
Stephenson wants the carriers to control the app stores, and for apps to be more generic, HTML5 versions that play nice across platforms. The simple fact of the matter is that, at least for now, native apps are slicker than web apps, and can access more of the phone's capabilities.
The carriers had control of the app stores for a long time--until Apple's App Store, in fact. I remember talk about having to get on the carrier's "deck" of apps that they shipped with a phone. Well, they pretty much blew that opportunity by completely failing to innovate. Now you don't need to work through the carrier to have a smartphone application, and the demand, usage and utility has soared.
App stores are a dramatically better way to discover new apps. Hence the move to them on the desktop.
Telcos just are not good at rapid innovation--it is not in their DNA. Nor would that definitely be a good thing. Think about it. The phone network has to work. Bugs and downtime are major problems. This is not Twitter crashing again, it is major panic time. So telco engineers protect the functioning network above all. Monkeying with new and exciting stuff has little upside. That risk averse attitude permeates telcos. It serves them well in their core business, but guarantees mediocrity when they expand beyond providing pipes.
So.....stay away from my app ecosystem, AT&T. Make sure the tubes and pipes continue to work so the little gnomes that carry packets around the world can do their thing.
And don't say stupid things like the App Store is bad for consumers, when, very clearly, they think otherwise. It is hard to think of when AT&T last did something that it own customers actually liked. Maybe they are smoking that same shit at AT&T that Wall Street was toking a few years ago.
I chose to stay with AT&T for my mobile service because I like GSM. I desperately want AT&T to get better, to give me more reasons to be happy with them. But the stuff that they say continuously indicates that they are clueless. Sigh.
Losing iPhone exclusivity? No problem, they say.
Want 4G? No problem. We'll just call our 3G service 4G and it's all good.
And now, these comments from Randall Stephenson that platform-specific app stores are bad for customers. Uhm, come again? AT&T holds forth that their Wholesale Applications Community is a better idea. For them, sure.
Let's break this down.
Consumers obviously hate the iOS App Store...10 billion times over (yes, that is billion). Stephenson laments that customers will have to go to different app stores for different platforms. Newsflash--most consumers only live on a single platform. And I, for one, don't care about what Android apps are available since I have an iOS device. Sure, this may get a bit more confused if people buy a tablet with Android and an iOS phone.
Stephenson wants the carriers to control the app stores, and for apps to be more generic, HTML5 versions that play nice across platforms. The simple fact of the matter is that, at least for now, native apps are slicker than web apps, and can access more of the phone's capabilities.
The carriers had control of the app stores for a long time--until Apple's App Store, in fact. I remember talk about having to get on the carrier's "deck" of apps that they shipped with a phone. Well, they pretty much blew that opportunity by completely failing to innovate. Now you don't need to work through the carrier to have a smartphone application, and the demand, usage and utility has soared.
App stores are a dramatically better way to discover new apps. Hence the move to them on the desktop.
Telcos just are not good at rapid innovation--it is not in their DNA. Nor would that definitely be a good thing. Think about it. The phone network has to work. Bugs and downtime are major problems. This is not Twitter crashing again, it is major panic time. So telco engineers protect the functioning network above all. Monkeying with new and exciting stuff has little upside. That risk averse attitude permeates telcos. It serves them well in their core business, but guarantees mediocrity when they expand beyond providing pipes.
So.....stay away from my app ecosystem, AT&T. Make sure the tubes and pipes continue to work so the little gnomes that carry packets around the world can do their thing.
And don't say stupid things like the App Store is bad for consumers, when, very clearly, they think otherwise. It is hard to think of when AT&T last did something that it own customers actually liked. Maybe they are smoking that same shit at AT&T that Wall Street was toking a few years ago.
I chose to stay with AT&T for my mobile service because I like GSM. I desperately want AT&T to get better, to give me more reasons to be happy with them. But the stuff that they say continuously indicates that they are clueless. Sigh.
Monday, February 7, 2011
Musings on SuperBowl commercials
The Super Bowl broadcast is, er, the Super Bowl of TV commercials. It has become a showcase for short form video wizardry.
In case you missed them "live" (I mostly did), Hulu has your back. [UPDATE: Gadget is borked.]
As usual, some commercials were hits, and many more were just not impressive.
My favorite was Best Buy's commercial, because, well, you just can't go wrong with Ozzy. I often wonder how much is scripted and how much is just Ozzy being Ozzy. Along that line, VW's use of Darth Vader will always work for a certain demographic (probably the right one for VW).
There were a lot of other celebrity commercials that I thought did not work so well. Groupon's commercials fell flat for me--the Tibet one in particular will probably ruffle a few sensitive feathers. Groupon is hoping to draw attention to those causes, but the snarkiness that is so funny to hipsters probably fell flat with a nationwide audience [UPDATE: It did. Groupon had to apologize and pull the ads.]. Sketchers' commercial with Kim Kardashian was better. Audi's commercial probably had the best celebrity participation with Kenny G--wow, how long has it been since I've been impressed by Kenny G?
Universal's commercial for "Cowboys and Aliens" gave us a preview of the first flop of the summer.
Perhaps my highest scorn is reserved for Motorola's ad for the Xoom. If you are going to knock off Apple's 1984 commercial, which is generally regarded as the best commercial of all time, you had better bring your A game. Motorola did not.
My favorite ad of all time? It would have been the 1984 commercial if they had eliminated the speech and text at the end, and instead just faded to the Apple logo. That would have been magic, but probably not as effective at selling Macs, which back then were definitely a fringe item.
So, I think I have to go with Reebok's Terry Tate ads from five years ago. Funny, and set up to go viral with a good web tie-in. Plus, the branding is subtle. Oh, and a nice homage to Office Space with the TPS reports.
In case you missed them "live" (I mostly did), Hulu has your back. [UPDATE: Gadget is borked.]
As usual, some commercials were hits, and many more were just not impressive.
My favorite was Best Buy's commercial, because, well, you just can't go wrong with Ozzy. I often wonder how much is scripted and how much is just Ozzy being Ozzy. Along that line, VW's use of Darth Vader will always work for a certain demographic (probably the right one for VW).
There were a lot of other celebrity commercials that I thought did not work so well. Groupon's commercials fell flat for me--the Tibet one in particular will probably ruffle a few sensitive feathers. Groupon is hoping to draw attention to those causes, but the snarkiness that is so funny to hipsters probably fell flat with a nationwide audience [UPDATE: It did. Groupon had to apologize and pull the ads.]. Sketchers' commercial with Kim Kardashian was better. Audi's commercial probably had the best celebrity participation with Kenny G--wow, how long has it been since I've been impressed by Kenny G?
Universal's commercial for "Cowboys and Aliens" gave us a preview of the first flop of the summer.
Perhaps my highest scorn is reserved for Motorola's ad for the Xoom. If you are going to knock off Apple's 1984 commercial, which is generally regarded as the best commercial of all time, you had better bring your A game. Motorola did not.
My favorite ad of all time? It would have been the 1984 commercial if they had eliminated the speech and text at the end, and instead just faded to the Apple logo. That would have been magic, but probably not as effective at selling Macs, which back then were definitely a fringe item.
So, I think I have to go with Reebok's Terry Tate ads from five years ago. Funny, and set up to go viral with a good web tie-in. Plus, the branding is subtle. Oh, and a nice homage to Office Space with the TPS reports.
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