entrepreneurship

What you can do with $30 million of venture funding

Have you heard of Color? It’s the start-up that raised a staggering $41 million without a product. Unfortunately,  that capital didn’t translate into a hit and Color soon folded.

Clinkle could be the next Color. Clinkle raised an amazing $30 million, also on the back of concepts and not actual product. Unfortunately, that capital didn’t translate into a hit and…Clinkle is now pivoting.

TechCrunch has a story on the pivot, now called Treats, and it basically sounds like a debit card with rewards you give to your friends. I use the word “basically” because I’m still confused by the mechanic, despite TechCrunch laying it out in point-by-point form.

That’s got to be worrying for Treats.

People are busy and have enough problems; most won’t learn something new that’s complicated when there are already so many good alternatives.

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Jeff Bezos tried to be like Steve Jobs and failed

Fast Company has a fascinating article on Jeff Bezos and the Amazon Fire. It’s a great piece and worth the long length. Check it out and then come back here.

For those who don’t need the nuance, here’s the story’s bottom line: the Amazon Fire was Jeff Bezos’ baby. He micromanaged it like Steve Jobs, and made decisions unpopular with his team but which he pushed through anyway. One example is Dynamic Perspective, the feature that enabled the phone’s 3D effect, came at great cost and which customers didn’t end up appreciating.

The story is fascinating because it gets to the heart of intuition vs. data. Are great products born out of intuition and personal genius? Or out of market research, data analysis and testing? Microsoft is traditionally about the latter, and the one time they tried the former — Steven Sinofsky and Windows 8 — it wasn’t successful.

It appears that Amazon too tried to make that leap.

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iPhones no longer #1 in customer satisfaction

Tim Cook is fond of citing customer satisfaction scores as an indication of Apple’s truth north — that it’s about making delightful experiences for customers first; with market share and profits further down the list.

He won’t like the most recent customer satisfaction survey about mobile phones from the American Customer Satisfaction Index, based on 70,000 consumers. And that’s because Samsung beat Apple in the latest report.

Fortunately for Cook, the survey was conducted prior to the release of the iPhone 6 and 6 Plus. The bigger display just might reverse the trend.

If it doesn’t, it would be interesting to see what Cook has to say in his next keynote.

Making customer satisfaction scores the key metric is tricky business. So much of it is dependent on initial expectations that’s it’s not often a good indicator of actual product worthiness or progress.

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Entrepreneurship is not about success at all costs

As entrepreneurs or as aspiring entrepreneurs, we all have pressure to succeed. Given many of us gave up dependable, rewarding careers to do our own thing, it’s a burden that can weigh heavy at times.

There’s a story out of Japan that’s a good reminder not to lose sight of what’s important: creating real value and not just the perception of it; the satisfaction of a job well done and not the pursuit of celebration and admiration.

That story is disgraced researcher Haruko Obotaka, who earlier this year claimed she discovered so-called STAP cells that can grow into any tissue in the body. For example, it could grow new human organs for sick or injured people who need them. If true, STAP cells would have been game changing for all humanity.

It was the kind of discovery on par with Louis Pasteur and vaccination — and coming from such a young, relatively attractive woman too. And so, unsurprisingly, Obotaka became an instant celebrity and national hero in Japan.

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Google wants to show ads can drive store visits…or not

Google announced yesterday the initial roll out of a new “store visits” metric for AdWords. Essentially, it is an attempt to trace conversion from an ad click to an actual store visit. According to Google:

With the holiday season upon us, it’s clear that the majority of sales for many industries still happen in person – in fact, roughly 95% of retail sales take place in physical stores.1 And online activities are influencing offline transactions more than ever, bringing together the digital and physical worlds. Thirty-two percent of consumers say that location-based search ads have led them to visit a store or make a purchase, so it’s more important than ever for businesses to understand the impact that search ads have in driving visits to your physical locations, whether that’s a store, hotel, auto dealership or restaurant.

The implementation, however, leaves something to be desired. Google will establish location by conventional means, e.g. geo-fencing and Wi-Fi, and which can have an error rate of over 500 meters!

This means the store visit metric will only work for certain kinds of retailers. It won’t work for stores in dense areas or in shopping malls. It’ll only work for a Costco-like mega store that’s in the middle of nowhere by itself.

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Hey Evan, relax! If the strategy is good, won’t matter if everyone knows

My strategy professor from business school once said that if you left your company’s strategic plan on the bus and a competitor discovered it…and you were then screwed, it was a bad strategic plan. I completely agree.

A great strategy is one that’s unique to your company. For Apple, it’s a commitment to simple designs that cater to the every-person, and to deliver integrated, vertical experiences even if that means basic feature sets. Everyone knows this, but only Apple can be Apple. Only Apple has a large, loyal fan base that absolutely trusts Apple’s product taste and are willing to always pay for it. Only Apple can attract the best talent without needing to pay top dollar for them. Apple’s war chest means they’re able to tightly control their supply chain so competitors have a hard time matching its product quality and profit margins.

Elements of Snapchat’s strategic plan were leaked in the recent hack of Sony Pictures, and so I was surprised to read a very emotional reply from the CEO of Snapchat, Evan Spiegel.

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What you already know: online display ads don’t work

Yesterday, I wrote how ads are a valid revenue model for online businesses, and not necessarily anti-consumer. Today, I write how display ads don’t even really work.

Intuitively, you know that to be true. How often have you actually looked, processed and clicked on an ad, much less act on it? Take those probabilities and divide them in half, because according to Google, only 44% of all display impressions were even seen by actual human beings.

The definition of seen is quite generous: at least half the ad’s pixels have to be viewable and for at least one second to be counted. So Google is counting even the ads that appear on the side that you completely ignore as you read the web page’s main body of content.

Under this definition of seen, ads that appear just “above the fold” (i.e. are viewable as soon as you arrive) and ads that are vertically long are seen more often.

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You love the place where everybody knows your name

When you are drinking at a bar or eating in a restaurant, what’s great service? What makes you loyal to a particular place? Is it not when they know who you are, what you like, and can therefore provide a level of service and intimacy that other places can’t match?

Why then is online, targeted advertising so different? Why do people get up-in-arms about companies getting to know you better, so they can show you ads you might actually like more?

That is probably what Mark Zuckerberg is thinking when he reacted to a comment Tim Cook once made:

When an online service is free, you’re not the customer. You’re the product.

And then Mark Zuckerberg in a recent Time Magazine article:

“A frustration I have,” Zuckerberg says, before a PR handler can change the subject, “is that a lot of people increasingly seem to equate an advertising business model with somehow being out of alignment with your customers. I think it’s the most ridiculous concept. What, you think because you’re paying Apple that you’re somehow in alignment with them? If you were in alignment with them, then they’d make their products a lot cheaper!”

I have to side with Zuckerberg here.

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The razor blade market isn’t so razor thin

One way to make e-commerce work is to sell high margin products online — ideally, products that are necessarily high margin in the brick and mortar world to account for distribution costs. Therefore, going online cuts out the middlemen and you can profit even while selling for less. Proven examples include eyeglasses, cosmetics, baby products, and so on.

Re/code has a fascinating story on another example: Harry’s, for razor blades. What makes Harry’s so interesting is that the company raised $197 million on a $350 million valuation on basically zero revenue (they have sales, but at a level insignificant relative to the size of investment).

In short, investors are investing solely on the basis of potential.

Re/code is painting this as yet another example of technology’s growing bubble. But let’s dive deeper — far from a being sign of investor irrationality, this transaction might actually make rational sense.

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Kevin Rose’s start-up factory model will not work for you

There’s a great story on Wired about how several accomplished entrepreneurs are doing “start-up factories,” which really just means experimenting with ideas until something hits. Kevin Rose of Digg fame, for example, has a goal of creating one new app every three months. If the app doesn’t take off, he moves on to the next one. If it does, he doubles down on it.

This was in fact the same model that my co-founder and I started with, and feecha was our first product. feecha did see some traction early, so we doubled down. The second iteration unfortunately was a disaster — it took nearly a year to launch and it was too confusing — but that’s a post-mortem for another day. We’re already working on our next thing.

After three years of the start-up factory model, I’ve come to the conclusion that it only works for “known” entrepreneurs. I.e., entrepreneurs with a large following and friends in the media. When they make something, there’s enough initial curiosity that a sufficient number of people will try it. There will always be data to judge the product by.

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