Crash Dev

Bill Burnham, Angels + Early-Stage VC in Seattle

2009-12-22T14:26:00.000-08:00

This blog post by Bill Burnham has generated a ton of buzz today, but it's worth (briefly) chipping in about how the trend is playing out in the Seattle market. The quick summary of Bill's point is this:

"there is plenty of investment capital available for Consumer Internet companies that have demonstrated significant market traction in terms of traffic or revenues, but there’s almost none available for what, up until recently, would be considered the sweet spot of true VCs: Seed or Series A startups."

When Andy and I started Founders' Co-op, this was exactly the situation we saw here in the Seattle market. As VC fund sizes have grown (both here and elsewhere), partners have found themselves unable to justify putting time toward deals that didn't also consume a big chunk of their capital under management (e.g., $5MM - 10MM over the life of the investment). With the "hard" (cash) costs of starting a web software company fast approaching zero, it has become almost impossible to align the incentives of traditional VC investors with those of web entrepreneurs.

Our primary goal in creating Founders' Co-op wasn't to make a ton of money (not that we have a problem with that, it's just not what we're optimizing for). It was to continue to work together on web startup ideas, but in parallel rather than serially (as we had before at Judy's Book and elsewhere). What we found when we started was that there was (and is) a huge unmet need for transparent, entrepreneur-friendly sources of investment capital for early-stage entrepreneurs here in Seattle. Even more significant, there was (and is) a real hunger for community among the software entrepreneurs in town - a way to connect with peers, swap stories, pass along best practices, and sometimes even do business together. We aren't the only ones working on this issue by any means - Seattle 2.0, Seattle Tech Startups, NWEN, UW CIE and others are critical participants - but we're one of the few groups in town that actually writes checks in addition to providing advice and support.

This persistent early-stage "funding gap" helps explain our excitement about the announcement of TechStars Seattle. By enlisting the support of all the major VC players in town for TechStars Seattle, Andy has forged a powerful bridge between Seattle's early stage and VC communities unlike anything we've seen in other tech cities. While it doesn't typically make sense for these firms to make direct investments in seed-stage companies (for all the reasons Bill describes), they all jumped at the chance to support the early-stage community indirectly via an investment in TechStars. Their bet (and ours) is that the program will have a lasting positive impact on the local early-stage community, creating more and better investment opportunities at every layer of the financing ecosystem.

We may not be able to defeat the economic realities Bill Burnham describes, but with TechStars Seattle the local venture community has stepped up in a big way to fight the trend.

TechStars Seattle + Founders' Co-op

2009-12-17T09:18:00.001-08:00

We just announced that my friend and Founders' Co-op business partner Andy Sack will be leading up a Seattle version of the awesome TechStars startup camp program next year. In a slight departure from the program structure in Boulder and Boston (where funding was provided primarily by angel investors), TechStars Seattle is being supported by an amazing co-op of A-list Seattle venture firms: Bezos Expeditions, Ignition, Madrona, Maveron, OVP, Trilogy, Voyager and Vulcan have all signed on for a 2-year commitment to make TechStars Seattle the focal point of early stage software action in the Pacific Northwest.

A few weeks ago I responded to a post by Andrew Chen on Seattle's startup scene with this question:

"If we want Seattle to be the kind of town that fosters a broader variety of software innovation, what kind of investment culture do we need to create? How can we attract entrepreneurs and investors to the Seattle startup community that are willing to pursue + finance different types of risk, based on different patterns of startup success."

It won't happen overnight, but I'm convinced that TechStars Seattle is a critical step toward creating a more vibrant diverse and startup community in the Pacific Northwest. I'm proud of the role that Founders' Co-op is playing in this effort, and I'm blown away by the unanimous support of the local venture community to make this program a success.

A "Scholarship to Life"

2009-12-11T16:38:00.000-08:00

My father-in-law - now retired - had two professional careers, spending his first 25 years as Naval officer, and another, equally long stint as a university professor and dean. He loved his time in the Navy, and it also offered a lasting benefit in the form of a military pension - what he likes to call his "scholarship to life."

I love the idea of a "scholarship to life" - it's a perfect description for the amount of capital (or ongoing income stream) that fully addresses the basic needs of life, without robbing you of the drive to build and create. The happiest people I know aren't the ones who made a pile of money and shifted their focus from creating to consuming. It's the ones whose past success has given them a "scholarship to life" (at whatever level they define that), freeing them to pursue their creative dreams and passions with total commitment.

If you're a cash-strapped entrepreneur who hasn't yet had a hit, you still have a path to a "scholarship to life" - it's called cash-flow breakeven, and as soon as you cross that line you can stop asking permission from investors just to stay in business. You (and your customers) get to decide what happens next, and that's a great feeling.

Here's my advice if you want to live the entrepreneur's dream and "follow your heart" for a living: go and get yourself a scholarship to life.

Announcing our newest Founders' Co-op investment: Appature

2009-12-07T10:48:00.000-08:00

We just closed a new investment at Founders' Co-op, and it's an unusual one for us in several ways. For starters, it's the first time we've invested alongside much larger venture capital firms - Seattle's Ignition Partners and Madrona Venture Group led the round. In addition, the company - Appature - is much later-stage than we typically invest in: they've been in business since 2007 and are already operating in the black thanks to multi-year deals with customers like Johnson & Johnson. Finally, it's a "big" financing relative to our usual deals, adding $3.5 million to the company's balance sheet to help accelerate growth.

So why is a seed-stage fund like ours participating in a later-stage deal like this? The short answer is that we absolutely love this business and the entrepreneurs who've created it, and we believe the opportunity they're chasing is big enough for us to see the same kind of return on this deal that we look for in our earlier-stage investments.

Starting with the team, co-founders Kabir Shahani and Chris Hahn met at Blue Dot, a Seattle web start-up that cycled through several angel financings and business strategies before calling it quits. Their experience there offered some powerful lessons about building and funding a business that Kabir and Chris have applied with amazing discipline at Appature. With essentially no outside financing they have built an enterprise software business targeting the world's largest medical device manufacturers, beating out billion-dollar competitors in head-to-head vendor selection competitions. Kabir and Chris are exactly the kind of scrappy and capital-efficient entrepreneurs we love to back, and we expect them to accomplish even more amazing feats with a little more room to maneuver.

The opportunity they're chasing is equally compelling. Broadly speaking, Appature competes in the enterprise marketing automation space, a fairly crowded market with lots of well-funded competitors. But by focusing on the unique needs of the medical market, and being disciplined about which segments of that huge and diverse vertical to attack, Appature has been able to bring the tactics and business practices of agile web software to customers accustomed to ERP-scale software deployments. The result has been a devastatingly effective combination of product-market fit, speed and value that has just begun to show its promise. And while additional growth opportunities exist beyond medical, the founders are disciplined enough not to spread themselves too thin too early, even with a venture round in the bank.

The most difficult part of this investment decision for us was the fact that our minority role will limit our participation in the day-to-day operations of the business relative to what we're used to (and prefer) in our earlier stage deals. But Kabir and Chris made it clear to us and the other investors that they wanted our voice to be heard, to help them stay grounded in their scrappy, bootstrapping ways. Equally important, Andy and I recognize that Founders' Co-op is part of a larger ecosystem of investors and advisors dedicated to the long-term health of Seattle's tech startup community. Ignition and Madrona are key players in this community, and we're excited to have a chance to work more closely with those firms on this (and other) deals.

Congrats to the Appature team on this milestone and looking forward to seeing what 2010 has in store for you (we're betting it's going to be a great year).

The iPod Touch, Android and the Carrier-Free Cellphone

2009-12-06T16:29:00.000-08:00

Om Malik has a great piece up today on the iPod Touch, calling it the ace up Apple's sleeve. In his words:

"it is just like an iPhone except that it has more storage, is skinnier and has none of the hassles of dropped calls."

In other words, the Touch is a better device than the iPhone because it doesn't have a primary identity as a phone. You can still make voice calls with it (using a VOIP app like Skype), but you don't have to have a service contract with AT&T (or any other carrier) to do so.

In fact, the Touch is a good proxy for the future of mobile communications: it's a really great, really small mobile computer that covers every communications need - IM, email, voice, SMS - equally gracefully and at much lower cost than any contract-based cellphone. If you want to talk on the road you'll still want a wireless data connection, but that's a commodity you can obtain from lots of providers, often under pay-as-you go pricing models.

While the iPhone gets all the press, the Touch represents 40% of the installed base of iPhone OS devices and a roughly equal share of mobile data traffic, according to recent stats from mobile analytics provider Flurry.

With relatively few handsets in market, Google's Android operating system is also climbing the charts as a source of mobile data requests, and - by watching what's happened with the Touch - it's not hard to imagine a near future with tens of millions of Android-powered devices playing a similar role. Some of these will be "cellphones" sold by wireless carriers, but I'm betting an even larger number will be Touch-like entertainment and communications devices that perform all the functions of a smartphone, but without a cellphone contract.

Google is rumored to be building a "Google phone" of its own, but if they do in fact have a hardware product up their sleeve, I'm guessing it's more like a Touch than it is like a phone. And if they don't build it, some smart handset or laptop maker like HTC, Acer or Asus will.

The future of cellphones is already here, and - in Om's words - it's "just like an iPhone except that it has more storage, is skinnier and has none of the hassles of dropped calls."

Beginner's Mind

2009-12-04T15:23:00.000-08:00

"In the beginner's mind there are many possibilities, in the expert's mind there are few."
- Shunryu Suzuki

Just about every day - and sometimes several times a day - I get to hear an entrepreneur tell the story of their company: who they are, what they're up to, why they're excited about it. As I listen, I'm aware of a battle between competing mental processes.

My first impulse is to filter what I'm hearing through my mental inventory of patterns from all the companies I've invested in, worked at or gotten close to, looking for similarities and differences that will help me understand the story I'm hearing. But as powerful as this pattern-matching process can be at producing insight, its logic seeks to limit and constrain, and as an early-stage investor my success depends in large part on opening up new possibilities.

So I've been working on nurturing a parallel thread in my mental processes, and the Zen concept of Beginner's Mind captures it better than anything else I've come across. In this mode, I consciously try to listen to each entrepreneur's story as if it were completely new, and to experience their idea as a customer might, encountering it for the first time.

For my purposes, neither of these processes alone is as effective as the two together. The pattern-based approach is an extremely powerful way to filter out execution risk - weaknesses that stem from the *way* the founders are going about building their business. Cultivating beginner's mind is a great way to recenter on the business idea - imagining what it would feel like to encounter the product or service as a new user, without knowledge or judgment of the mechanics or economics behind it.

My continued reliance on patterns means I'll probably never become a Zen adept, but the more I use it the more I appreciate that Beginner's Mind is by far the more joyful method: the world always looks brighter when anything seems possible...

Interesting Post from Andrew Chen on Seattle's Startup Scene

2009-11-23T10:09:00.000-08:00

Andrew Chen, a Seattle native (more or less) who pulled up stakes for the Bay Area a few years ago, has a thought-provoking post up today on why he chose to move. His thesis is that Seattle is culturally focused on retail + SEO (e.g, Amazon, Expedia), while the Bay Area is more oriented to social + viral ideas (e.g., Facebook, Twitter). In his view, the latter category is the "world changing" one, and he wanted to be in the center of that action.

It's hard to argue his basic point: that Silicon Valley has been (and continues to be) a richer source of web innovation than Seattle. But I wonder whether - in the long run - his view of (for example) Twitter as more "world changing" than Amazon will hold up.

More importantly, I think his argument points toward a more powerful - and changeable - aspect of the Seattle startup culture. Investment capital is a major input in the startup equation - many of the most successful angel and VC investors in Seattle made their biggest money on Amazon and Starbucks, and investors tend to look for patterns of success that are repeatable. It's not surprising to see local money flowing toward the same kind of deals that delivered wins in the past.

Here's a hypothesis that builds on Andrew's assertion but takes it in a slightly different direction. If we want Seattle to be the kind of town that fosters a broader variety of software innovation, what kind of investment culture do we need to create? How can we attract entrepreneurs and investors to the Seattle startup community that are willing to pursue + finance different types of risk, based on different patterns of startup success.

We've been working on some projects at Founders' Co-op that we think will move the needle on this question, in close collaboration with other folks in Seattle and elsewhere. Stay tuned...

Carrier-free cellphone coming in early 2010?

2009-11-19T09:31:00.000-08:00

In March of this year I speculated that - between Google Voice and Android - the era of the carrier-free cellphone might be upon us. Many of my mobile-savvy friends scoffed - the existing model was too entrenched, they argued, and the carriers would fight like hell to delay their transition from value-added service provider to dumb pipe.

It's not yet confirmed news, but a steady drumbeat of speculation now points to a carrier-free cellphone being in market by the first quarter of 2010. The long-rumored "Google Phone" is now believed to be a VOIP-only Android device, with carriers bidding to be the data provider at $20 a month.

This could turn out to be just another case of overblown speculation, but I'm betting not - and despite my early prediction even I'm surprised at how fast the wish is coming true.

Seth Godin on Royalty Based Finance

2009-11-16T09:23:00.001-08:00

As regular readers know, Andy and I have been messing around with a new approach to early-stage tech investing called royalty based finance. It's still early days, but we're very excited about the idea because it represents an entirely new "third way" of supporting the growth of young companies vs. the traditional equity-centric angel or VC path.

As we circulate the idea with both investors and entrepreneurs we've been hearing significant excitement about the approach on both sides of the table. So I was surprised and pleased this morning to find Seth Godin - a thinker and blogger I respect a lot - promoting a similar idea. His blog post is titled 'Debt, equity and a third thing that might work better' and his conclusion gets it just right:

"My general bias for entrepreneurs starting out is to bootstrap their business, because raising money is so hard and so distracting. But if you've set out to do something that needs cash you can't raise any other way, this is worth exploring. Tell a story to an investor that wants to hear it, and create a cash-flow scenario that makes the investment worth it for both of you."

We have some good stuff in the works on this topic - stay tuned.

Spam-bashing on Twitter - A True Story

2009-11-04T20:19:00.000-08:00

Earlier this week, AppStoreHQ released Hottest Apps on Twitter, a ranking of iPhone apps based on the volume and quality of tweets about each app (if you're curious, you can read more about the ranking methodology here). The project was a fun one for several reasons, but the biggest eye-opener was the sheer volume of "app spam" - tweets auto-generated by iPhone apps - when stacked up against actual user-generated tweets. We haven't run a formal analysis, but a back-of-the-envelope estimate is that spam tweets are running 10-to-1 against actual user-generated ones.

Since the goal of AppStoreHQ's service is to accurately reflect the aggregate sentiment of Twitter users about iPhone apps, the spam issue is more than an annoyance - it has the potential to grossly skew the results in favor of the worst "app spam" offenders. You can see this effect in action right now if you visit the results: the current leader is Chorus, an app for sharing iPhone app purchases with friends. By design, Chorus auto-generates a tweet for every new install, and for each new iPhone app that a user downloads to their phone. This may be a smart short-term marketing win for the app, but my bet is that users (and their friends) will tire pretty quickly of the tactic.

The good news is that these bots aren't very well-designed - the spammy tweets fail the Turing test almost immediately by revealing their pattern after two or three iterations. This makes it relatively easy (if an annoying waste of engineering cycles) to exclude spam tweets from our process. But it's a troubling indication of where Twitter is headed as a platform. They've made it so easy to script tweet generation that it's almost inevitable that the ratio of machine- to human-generated tweets will tilt rapidly in the machine direction. And even though the machines will get better at concealing themselves, the signal-to-noise ratio on Twitter (not so hot already) is certain to get a lot worse.

AppStoreHQ Gets Personal

2009-10-15T07:49:00.000-07:00

Sometimes it's the obvious stuff that's the hardest to see.

The AppStoreHQ team has been hammering away on all kinds of hard technical problems on the topic of helping iPhone owners find iPhone apps. But a friend looked at the site the other day and said something that stopped me dead in my tracks. Instead of using adjectives like "useful" or "helpful", he described the experience as "overwhelming" and "intimidating".

{Imagine the sound sound of screeching brakes}

Oh shit! We 've been so focused on our fancy algorithms and smart strategies for discovering and ranking iPhone apps that we lost sight of our customers. There are real people out there who are using our site to find iPhone apps, and they need it to solve their problem - ideally in a fun and easy way - not boil the ocean of iPhone app discovery just to prove we can.

The good news is that the first wave of user-specific features were already on the roadmap - Ian had built out the basic table structure for member profiles, wishlists, etc. in the early days - but we kept bumping them down in favor of other projects. But as soon as we grokked the idea that we were leaving our users out in the cold, we pretty much dropped everything to start down the path of making AppStoreHQ useful to specific people with specific needs, not just iPhone owners as a class.

We still have a l-o-o-o-o-n-g way to go, but today we're pleased to announce our first baby steps in the right direction, including:

Member Profiles - One great way to discover new apps is to see what your friends are using. Use your member profile to save and share your favorites, and browse others' profiles to see what you're missing. (Want a closer look? Here's Ian's profile, showing his Loved apps).

Wishlist - Something new catch your eye? Click the "Wish" button to save it to your personal wishlist. When we have enough data to make it interesting, we'll start showing you related apps based on your selections. (Want to see? Here's Brett's wishlist).

Loved Apps - Has an iPhone app changed your life for the better? Click the "Love" button to add it to your profile and share it with the world. As with Wishlist, we'll ultimately use your Loved list to suggest other apps you might want to check out.
Saved Searches + App Search "Mad Libs" - Are you always on the lookout for new golf games, Twitter clients or music apps? Create custom searches with App Search "Mad Libs", and save your favorites for one-click access. (Here are some of Chris's faves).

Login with Twitter - Want to share your favorites with friends? Connect your AppStoreHQ and Twitter accounts and tweet your Loved & Wishlist apps and Saved Searches out for the world to see (or don't - it's up to you).

We're just getting warmed up, so expect to hear from us again very soon. And if you have ideas or feedback about what else you'd like to see from AppStoreHQ, *please* drop us a line.

Chop Wood, Carry Water

2009-10-14T16:55:00.000-07:00

My recent conversations with several of our portfolio companies have reminded me of a Zen maxim that goes something like this...

Before Enlightenment: chop wood, carry water. After Enlightenment: chop wood, carry water.

At Founders Co-op we focus on ideas that come out of the gate fast - they typically ship product, engage customers and start generating revenue within the first 3 months of operations, and several have hit breakeven at (or shortly after) their 1-year anniversary.

But we also like ideas that have longer-term strategic potential within their markets. Not suprisingly, establishing a market-influencing position takes more than a year or two. And unlike the "easy" wins of the first year, taking a leading position tends to be harder work - more nuanced, more dependent on partners and with less linear progress toward the goal.

Several of our companies are now in or entering this second phase, and the founding teams are having to recalibrate their expectations about how quickly they can achieve the goals they've set for themselves. These are great, often profitable businesses, so this isn't a heavy task - once they get their heads around it the teams are motivated and energized by the challenge. But no matter how quickly they achieved the early milestones of market acceptance and financial stability, there's more hard work to be done - chopping wood, carrying water - to carry their businesses to the next level.

BigDoor Media, Lessons Learned and Second Acts

2009-10-14T09:50:00.000-07:00

Keith Smith just announced the public launch of his new company, BigDoor Media. The thesis behind BigDoor was formulated and refined by Keith and co-founder Jeff Malek in their Icarus-like journey at their previous company Zango (a.k.a. 180Solutions). As Keith acknowledges in his launch blog post, Zango was built around a powerful insight about online monetization via superior targeting, but forgot to take good care of the actual source of that money - the consumer - and wound up losing everything they'd worked so hard to build.

Andy and I have known Keith for a long time - we boostrapped our previous company, Judy's Book, in part by consulting to what was then known as 180Solutions, and Andy remained involved as a board member until almost the very end. And while we may have differed with Keith about the path he ultimately took with the business, our admiration for him as an entrepreneur only grew as we watched him work to build - and fight to save - the business he had created. Keith is hands-down one of the firecest and most mature entrepreneurs we've ever seen, so we were naturally interested to see what he'd choose as his second act.

Like Zango before it, BigDoor Media is an online monetization platform. But as Keith notes in his launch blog post, all the lessons from his prior company have been baked into this new venture, including the following:

Be good to consumers. Monetization of users and content by its very nature is not going to be directly welcomed by consumers, but it absolutely has to be consumer friendly. The most classic example of this is with network television. Nobody likes to have their TV show interrupted by ads, but doing so was a model that worked for years for the industry. But there is a balance. 22 minutes of show and 8 minutes of ads can be stomached by users. 8 minutes of show and 22 minutes of ads would have resulted in TV sets all over America being turned off and audiences would have dried up. The world has now shifted and this model is showing its age, but the underlying consumer behaviors still remain.

Don’t be adware. It doesn’t matter that our move into adware was based on logic that was sound and motives that were pure. Adware became known as a public scourge and trying to fight a broadly based perception is like spitting in the wind. We don’t ever want to write broadly distributed client-side software again.

Founders Co-op is the lead investor in Keith and Jeff's new company, and we're very excited about where they're headed. We expect the investment to raise some eyebrows based on what people believe about Keith's past company, but we know more about that story than most folks do. We made the investment based on a bedrock conviction that Keith is going to apply *all* the lessons he learned at Zango to build another big business - including the need to take care of the consumer along the way.

AppStoreHQ gets another shout-out in The New York Times | Gadgetwise

2009-09-30T09:38:00.000-07:00

A few months ago the AppStoreHQ team noticed a spike in visits from The New York Times. We checked our referrer logs and discovered a very flattering description of our iPhone app search offering in this article.

This morning we saw a similar bump and wondered if the same piece had been rediscovered. Instead, we discovered a new (and even more flattering) mention in a Gadgetwise piece on a new app discovery feature from Apple titled "Is That a Recommendation, Or an Ad?" After describing Apple's offering - a collection of recommended apps for different needs - the author (Roy Furchgott) goes on...

"Okay, I’ll grant that it’s really difficult to pick between the many great apps out there (and the many more cruddy ones). But that’s just the point. We need a better system. Take a look at something like AppStore HQ, which lets you sort through apps using multiple criteria, like category price and popularity to narrow your choices to a manageable number. Something like that from Apple would be useful."

AppStoreHQ may be a "new" media company, but when a "traditional" company with the stature of the New York Times singles us out for attention, it still makes us feel like the most feared and respected teacher in school just gave us a gold star. Thanks, Roy - we're honored to be on your radar and working hard to make sure we deliver for your readers.

This is cool: real-time results from Cooler Planet's solar calculator

2009-09-29T16:45:00.000-07:00

The clever guys at Cooler Planet keep coming up with new ways to shine a light on the U.S. market for residential and commercial solar panel installations.

Here's their latest: a real-time display (anonymized, of course) of the savings estimates provided to consumers and businesses using their solar system cost estimator. You can see an example in the image above - every few seconds a new result is displayed, showing where the customer is located and how much they could save a month by going solar. Nice work, gang!

Announcing our newest Founders Co-op investment: Nearlyweds!

2009-09-29T12:17:00.000-07:00

Today we're proud to announce a new member of the Founders Co-op family: Nearlyweds!

In business since 2007, Nearlyweds! provides personal wedding websites for design-conscious couples. In a market littered with generic free offerings, Nearlyweds! has built a great premium business by focusing on the user experience, partnering with top invitation designers in the industry to offer beautiful design coupled with intuitive and functional social software.

The company's focus on quality has attracted key industry partners as well - in addition to operating their own destination site, Nearlyweds! also powers the wedding website offerings of leading wedding stationery designers Wedding Paper Divas and the world's favorite non-traditional offering the Offbeat Bride, and works closely with a passionate community of supporters in the independent wedding design and wedding blog community.

We first met Nearlyweds! co-founder Porter Bayne in early 2008, but at the time he and co-founder John Scrofano were running the site as a side-project while pursuing other businesses. As we got to know Porter and John better, we learned more about the business and collectively began to see significant untapped potential in the "social wedding software" space, powered in part by:

Shifting demographics - as young adults raised on social software enter the wedding market, many of them are looking for online wedding tools that enable the kinds of collaborative planning and sharing they're accustomed to.
Fragmented / localized business - wedding vendors are still predominately local, and despite the best efforts of leading online brands like The Knot and Brides.com, the default process for inviting wedding guests and communicating with them in the months leading up to the wedding is still largely managed offline, via a highly fragmented collection of service providers.
Secret sauce - In thinking about where they'd come from and where the market was headed, John and Porter had some really interesting new ideas about the role Nearlyweds! could play, but they needed a little more firepower than the current business could support.

The ink is still drying on this investment, and Porter, John and Chief Architect Eric Malone are now heads-down turning some of those ideas into software and new customer relationships, but you can expect to hear more about what they're up to in the months to come.

If you're (a) planning a wedding; (b) have stories to share about the social software you wish you'd had when you got married, or (c) play a professional role in the wedding business and want to learn more about what Nearlyweds! is up to, please drop me a line and I'll introduce you.

iPhone App Discovery + "Mad Libs" for iPhone App Search

2009-09-21T11:04:00.000-07:00

I've always been kind of a word geek. One of my favorite games when I was a kid was "Mad Libs", a notebook of short stories with blank spaces provided for strategically placed nouns, adjectives and verbs. Depending on the words you or your friends chose, the resulting story could be hilarious, obscene, or just plain bizarre.

As many iPhone analysts have pointed out, finding iPhone apps within the iTunes App Store has become nearly impossible. If it doesn't make the "New and Noteworthy" or Top 100 list, an iPhone app quickly gets lost in the huge and rapidly-growing sea of competing applications.

The team at AppStoreHQ was thinking about this problem the other day and came up with a fun idea: what if we created a "Mad Libs" for iPhone Apps? Because everyone's looking for something different, but they all ask the same questions:

Is it a game or a utility, a travel app or a music app?
How much does it cost?
Has it been well-reviewed by other iPhone owners
Is it new, or has it been around for a while?

Our "App Search Ad Libs" feature (image above) is now live on AppStoreHQ. As you'd expect, the service lets you construct a simple sentence from the four questions above to create your own custom list of iPhone apps. (We also added a keyword field for those who want to narrow their results even further).

So now, if you want to see something like:

...we've got you covered.

If people like this enough, we'll go ahead and add things like saved searches and RSS feeds, but (true to form) we wanted to get it out there and see what kind of feedback we received before spending more time on it.

Cool idea: Y Combinator "Request for Startups" (RFS) + one of our own

2009-08-25T11:06:00.000-07:00

Andy and I spend a good amount of time talking about startup ideas we'd like to see at Founders Co-op. Sometimes we get so excited about an idea we start it ourselves, but that's not something we can do every day.

So I was inspired the other day to hear that Y Combinator had initiated a "Request for Startups" program, where they outline a problem they'd like to see solved as an explicit invitation for prospective applicants to tackle. They've published two of these already:

Our themes tend to be a little less highfalutin' but in the spirit of the game I thought I'd publish a topic we're excited about with the same intent. If you're a Seattle-based hacker and want to take a run at this, we'd love to chat...

Software Workflows for Personal Services

This is a general pattern, but our investment decision would be based on the specific vertical targeted with this pattern.

Professional service providers (e.g., doctors, physical therapists, career/life coaches, smoking cessation / weight loss counselors, etc.) monetize a finite resource: their time. Since the quality of their services is hard to evaluate in advance, some of these professions also have a difficult time standing out from the crowd of competing providers. And many of these professions assign tasks to their customers to be completed between sessions, as a way of both making and measuring progress.

We see *many* opportunities for an agile software development team with intimate knowledge of the workflows and needs of a particular service vertical to create software tools that:
Increase the perceived value of the service delivered
Support competitive differentiation and customer retention for the provider
Improve the odds that customer goals are achieved
Increase customer satisfaction and follow-on referrals
The general pattern for these software tools includes the following modules (some of which are more applicable than others to individual verticals):
Pre-service self-assessment - a questionnaire or test that establishes a baseline for the provider and customer against which later progress will be measured.
Session notes + prescription - a web-accessible record of each service experience, including session notes (discussion of goals and progress to date) and a prescription for tasks to be completed in preparation for the next session).
Prescription support - a web- and mobile-accessible task list that customers would use both to review assigned tasks, and to check them off (yielding an electronic record of actions taken between service sessions).
Push messaging - To increase between-session prescription compliance and generate incremental progress data points, generate outbound messages to the customer requesting prescribed action or real-time self-assessment.
Customer + service provider dashboard - web-accessible record of all interactions, prescriptions and completed tasks, with at-a-glance visualization(s) of progress over time.

Economically, the goal of a service following this pattern is to shift a portion of the perceived value of the service experience away from the face-to-face interaction and toward the software-mediated experience. The expectation is that the service provider would either (a) charge a higher service rate than competing providers, justified by the incremental layer of service, or (b) offer the software service as an incremental charge on top of their standard time-for-service agreement.

Want to take a swing at this? Drop us a line...

Book Reviews: Small Giants + Nudge

2009-08-17T15:59:00.001-07:00

I've spent more time on planes than usual lately, which means I've actually had time to read something more than my inbox, feed reader and streaming-sources-of-distraction. Two recent reads worth mentioning for this audience are:

Small Giants: Companies That Choose to Be Great Instead of Big (Bo Burlingham)

This book did nice job of articulating a number of the lessons I've taken away from my experiences working for everything from ginormous public companies (AT&T) to successful family-run ones (Patagonia) to my current role as parallel founder/funder of multiple early-stage web software startups. A few themes worth mentioning include:

"All successful businesses face enormous pressures to grow, and they come from everywhere - customers, employees, investors, suppliers - you name it. [T]hose forces will make the choice for you if you let them, in which case you will lose the opportunity to chart your own course"
This applies especially to start-ups seeking capital and establishing their DNA around cost control and revenue-seeking. Taking too much capital too early is often toxic to the enterprise in a way that many first-time founders have a hard time seeing.
"[T]he entrepreneur is like an artist, only business is his means of expression... It's amazing. Somebody goes into a garage, has nothing but an idea, and out of the garage comes a company, a living company."
This captures why I love my job as well as anything I've ever read. Building companies is the most exciting and complex creative outlet I've ever found, and I've deliberately geared my work life to stay as close as possible to the earliest and most creative phases of new venture formation because it's just plain fun.

Nudge: Improving Decisions About Health, Wealth and Happiness (Richard Thaler and Cass Sunstein)

This one was less fun, but still a worthwhile read - especially for anyone with an interest in public policy and how it shapes individual behavior. There's lots of familiar material in here to anyone who's read the core texts in organizational behavior or behavioral psychology, but the packaging and message add an interesting layer of ideas. Two ideas that stuck with me were:

"Libertarian Paternalism" - this terrible-sounding name is what the authors call their brand of social enginering, and (for me) it's a convincingly better way to frame up public policy choices. The focus is on providing options (vs. mandates), and framing the option selection in such a way as to maximize the social benefit while minimizing the cost to both the individual and the state. Lots of good examples here around personal savings, health, etc.
"Choice Architect" - this is what the authors call any individual or organization that controls what options are made available and how they're presented to the chooser. We are all choice architects in different areas of our life, and seeing our work through that lens (whether as a parent or an operator of a commercial website) is a helpful frame of reference.

I'm always looking for book ideas for my next flight, so if you have a new one you think I'd enjoy, please leave your suggestion in the comments.

Where's the real money in iPhone apps? Remember Web 1.0?...

2009-08-13T13:41:00.000-07:00

Back in April I wrote up some parallels I was seeing between the current iPhone app explosion and the first big wave of mass adoption of the Web. One of the patterns I predicted at the time was a building rush of incumbent companies coming into the space:

"Brands Rush In. In the late '90s it suddenly dawned on a broad swath of incumbent brands (retailers, manufacturers, etc.) that their customers were looking for them online. To anyone in the Web application development business (as I was at the time), customers were everywhere and billing rates were whatever the market could bear. I haven't yet seen the flood of brands hit the iPhone, but early adopters are there and I'll be very surprised if the same cycle doesn't play out here."

Just a few months later, I'm seeing data to suggest that this trend is now in full swing. Every iPhone developer I talk to tells me they're getting more pings about contract development work (whether they're available for hire or not). A recent AdMob research piece fanned the flames by suggesting that 70% of iPhone owners had downloaded an app from a recognized brand, and another 60% would "definitely" or "strongly consider" downloading one from a well-known brand they liked. And Ian and I have been noticing an uptick in developer-related searches on AppStoreHQ.

To test this theory further, we just shipped a new, searchable developer directory at AppStoreHQ. Published developers can claim their profile and indicate whether they're for hire (so far almost 200 developers have raised their hand). And for folks who find that amount of choice overwhelming, we now offer a developer matching service - tell us what kind of app you need built and we'll match you with up to three qualified developers ready to bid on the project.

Is this trend for real? I'm about to find out, and will share stats as I have them. Stay tuned...

TechStars Demo Day rocks the house

2009-08-07T09:13:00.000-07:00

I'm sitting in the Denver airport heading home (if the air travel gods allow it) from TechStars Boulder Demo Day 2009. I've been a fan of the organization since it started, not least because Brad Feld (a Judy's Book investor and board member) is a prime mover behind the project. But this was my first live Demo Day and I was blown away by the presenting companies, their founders, and the incredible mentor network that Brad and co-founder David Cohen have engaged as key participants in the experience.

Beyond the scripted presentations, the event offered a great opportunity to connect with both current and past TechStars companies, and in each of these conversations I asked the founders to describe what was the most powerful element of the program: the peer group, the coaching received during the twelve weeks, or the extended mentor network. To a man (and they *were* all men), every founder I spoke with described the mentor network as the greatest single source of value, and most expressed surprise at how accessible and supportive this group was.

Beyond David and Brad (no slouches themselves when it comes to mentorship), the TechStars mentor group includes an incredible list of household names in the software and early-stage investing world: Stewart Alsop, Jeff Clavier, Dick Costolo, Dave McClure, Rich Miner, Matt Mullenweg, Jared Polis, Fred Wilson, and on and on. And according to the TechStars
entrepreneurs I spoke with, these aren't just names on a website; they show up, dig in, give feedback and are quick to pick up the phone to make a connection within *their* extended network on behalf of the companies in the program.

As you'd expect from a solid day and a half of drinks, dinners, formal pitches and informal chats, my TechStars visit stuffed my brain with new ideas and relationships. But if I had to pick just two, my biggest takeaways from the experience are:

TechStars is a great and *scalable* model for early-stage venture formation. Y Combinator is a powerful brand and franchise (and in many ways the model on which TechStars is based), but it's hard to imagine it without Paul Graham at the helm. By contrast, the TechStars brand and experience is largely defined by the credibility and proven effectiveness of its mentor network. This probably makes it harder to understand and evaluate from the outside, but offers a far greater capacity to scale across geographies, industries and types of opportunities.
Founders Co-op can and should do more to leverage the power of its network, beginning with the involvement of our Limited Partners (or at least those that have the time and appetite for it). Andy and I have always thought of this as one of our great sources of strength, but based on my experience at TechStars it's clear that we aren't doing nearly enough to engage our own community on behalf of the companies we fund.

Thanks again to David and Brad for inviting me down and hosting such a great event. I already loved my job, but I'm coming away from TechStars even more fired up to make the Founders Co-op offering as differentiated and effective a member of the Seattle startup community as TechStars is in Boulder.

You know it's a bubble when...

2009-07-30T16:03:00.000-07:00

One of the most accurate business cliches I know of is this one: "success is 1% inspiration and 99% perspiration."

Most good entrepreneurs come up with new business ideas constantly, but also know from experience that those ideas have no value if they aren't backed up with commitment, sustained effort and constant adaptation to market feedback.

If this is true in traditional business ventures, it's an order of magnitude more applicable in the domain of iPhone applications. As a recent GigaOm post pointed out, *very* few apps have a meaningful number of customers, and many of those are free. So even if you have a great idea, build a fantastic product and get it approved for distribution in the App Store, you're still pretty unlikely to generate meaningful revenue.

These facts are in pretty wide circulation, so I've been surprised to see an increasing number of search queries to this blog (query visibility courtesy of Lijit) like these:

"selling an idea for an iphone app" (Bremerton, WA)
"how to sell an iphone app idea" (Little Rock, AR)
"how can I sell my iphone app idea" (Location Unknown)

Folks, I hate to break it to you, but even if you're a skilled dev, interaction expert and graphic designer who can code it up all by yourself, your iphone app idea is still might not pay this month's rent. And if you don't have any of the skills above and think you can sell an idea for an iPhone app, you've been reading *way* too many breathless headlines in USA Today and Newsweek.

Making money on the iPhone is like any other serious entrepreneurial effort: the guys who make it look easy are extremely talented *and* have been busting their ass in their area of expertise since well before the iPhone was a gleam in Steve Jobs' eye. The mobile web is a hugely exciting and potentially rewarding market for software entrepreneurs, but I'm getting a strong feeling that iPhone bubble economics are now fully in effect.

The Google Giveth...

2009-07-23T16:30:00.000-07:00

...and The Google taketh away.

All of our companies at Founders Co-op rely on organic search traffic to drive revenue and margin (some more so than others), and we're very careful to stay well on the "white hat" side of SEO best practices to ensure that our hard-fought gains on that front are lasting.

But inevitably we get caught up in Google's filtering mechanisms from time to time (often because a white label distribution strategy has triggered a duplicate content flag on their end) and have to go through the "site reconsideration" process to clear things up. The process feels fair and we've never failed to be reinstated, but the experience is always a stark reminder of the power Google holds over our business success.

This happened again this morning with one of our companies - a site that had been receiving thousands of Google organics a day was suddenly capped at 500 visits, and then received a metered trickle of traffic each hour after the cap was hit. We quickly reviewed all our recent actions to make sure we hadn't screwed anything up, fired off a reconsideration petition, and are now waiting for the wheels of justice to turn. I fully expect that we'll be back to normal in a few days, but I'm freshly in awe of Google's dominance in web content distribution.

W00t! AppStoreHQ named best services startup at MobileBeat 2009

2009-07-16T23:07:00.000-07:00

A few weeks ago VentureBeat emailed to tell me that AppStoreHQ had been selected as one of seven finalists for the Best Services Startup competition at their upcoming MobileBeat show. More than 100 companies had applied for the competition, so I was stoked to get picked but had no real expectation of winning. We just started AppStoreHQ this spring, and we were stacked up against much more established (and better funded) entrants. But I figured it would be good exposure for us, so I bought a plane ticket and threw together a deck (embedded below).

The format for the competition was a two-minute pitch, followed by questions from a five-member expert panel. At the end of the seven pitches, the panelists would confer and vote on a winner. The panel included Bob Borchers (Opus Capital), Anand Iyer (Microsoft), Stephan Noll (T-Mobile Ventures), Nagraj Kashyap (Qualcomm Ventures), and Greg Tarr (Cross Pacific Capital). I hadn't fully grokked how short two minutes of talk time was until the flight down, when I first had a chance to practice. I felt like I had hardly opened my mouth when I got the time signal and had to wrap up.

My personal pick for the winning pitch was Urban Airship, a platform provider for push and in-app transaction services enabled by the v3.0 iPhone SDK. They had timed their release perfectly with the launch of 3.0, releasing in association with a few leading iPhone app publishers. So I was amazed when Matt Marshall announced AppStoreHQ as the judges' pick.

Unfortunately, there was no cash prize for winning, but the show was a great experience and the win was a nice surprise. Partly as a result of the win, AppStoreHQ has a small but influential group of new admirers, and I have renewed faith in the power of just showing up.

AppStoreHQ makes the New York Times

2009-07-14T20:24:00.000-07:00

I love the New York Times - it's one of the only publications I still read in paper form (every day, no less), so it's always a good day when one of my projects gets a mention in the Gray Lady.

Today was that day for AppStoreHQ. Roy Furchgott gave us a nice shout-out in his Gadgetwise piece on App Store shortcomings titled "Apple's 1.5 Billion Wake Up Call":

"Of course, there is another option. Give consumers better tools to sort through the stores themselves. One stab at that is found at the Web site App Store HQ. In addition to being more organized and informative than the iTunes App Store... it also has a sortable search. So instead of just choosing from 1693 apps categorized under music, you can then choose only those rated four stars and up (158 apps) then narrow it to those that cost 99 cents (38 apps). Still not perfect, but a step in the right direction."

Thanks for the shout-out, Roy - you made my day.