the vc in me....

My New Journey...

Rajil — Thu, 12 Jul 2012 13:03:50 -0700

Mayfield‘s Milestone

There was some exciting news today - Mayfield has successfully raised its new fund, Mayfield XIV – it was oversubscribed and raised quickly! I’m very proud we have achieved this milestone which is due to a great team, strategy, and proven performance. With this fundraise, I want to write about some thrilling changes for me….

Before we started the fundraise and now that I’ve spent seven years as a VC/Managing Director and six as a founder/CEO, I reflected on the future. It’s been a very gratifying run at Mayfield – I completed successful and meaningful liquidity events and the current portfolio is looking good (companies with scale/momentum such as Qunar, Tagged, Rubicon Project, Fixya, Baihe and promising early stage companies such as Zimride and Fanhood).

That said, the operator/entrepreneur in me hasn’t gone away….so I decided to forge a new model which will hopefully combine the best of being a VC and an operator/founder. Although this model best sits outside of Mayfield’s venture fund structure, they are supportive and helping me develop it. I will be spending most of my time on this around when Mayfield starts investing Mayfield XIV (likely early next year).

I remain enthusiastic about Mayfield’s future and have a great relationship with my partners – I’m committed to my current investments - and will continue helping them at the board level as well as helping Mayfield source and invest in great companies (so keep sending me deals!)

…So what’s this new model about?

The Cofounder Model

The new model (I’m calling it the Cofounder Model for now) is about “institutionalizing” the cofounder role across several “founding” (pre-seed) stage startups – spending the equivalent of roughly a day a week at each startup and having a minority share of the founding equity - working alongside awesome CEO/entrepreneurs to help them build massive companies. I believe there is a market need to provide entrepreneurs with deeper, higher frequency ongoing help at the earliest stage that sits in the white space between angels, accelerators, and VCs. With this model, I can also retain one of the key aspects I enjoy about VC – working on several transformational companies in different sectors at once.

This model is likely limited to about 4-5 companies at any time. It can scale to more companies as I join with partners in the future that are like-minded experienced founder/investors. I’ve talked to a few such people as I’ve explored this opportunity and its clear that many operator/investors would love to do this. In fact, there are lots of great people in Silicon Valley who have done similar models and showing success - sometimes on a casual basis – Ariel Poler, James Currier, Stan Chudnovsky, Rick Thompson, Peter Relan, Dave Whorton, Oren Zeev, Yair Goldfinger, Venky and Anand of Cambrian, Aneel Bhusri, Mike Speiser, and the folks at Obvious, Tandem, Betaworks, and Science. As with most things, new models are rarely entirely new – however, I think there is an opportunity to institutionalize, standardize, and brand this version of it.

I believe the timing is right as capital is in abundance but time – especially from those who you need help from the most – and on a regular basis – is even more scarce. Also, entrepreneurs are increasingly comfortable giving early stage equity to accelerators (such as Y Combinator – which has done a fantastic job pioneering the Accelerator category and is a great choice for many entrepreneurs) and to strong mentors (such as my friend and former Mayfield Partner Allen Morgan who is a great “Sherpa” for companies like Klout and Fab) - they have shown they can materially increase the probability of success for a startup.

This model is somewhat of a “retro” approach given the trend of early stage investors (angels, seed funds, accelerators) each investing in dozens or even a hundred companies every year. It’s going back to the “artisanal”, craftsman approach to building great companies.

I don’t have it all figured out but here are some thoughts so far….

What’s In It for the Entrepreneur?

In a nutshell, (as stated in The Founders Dilemma by Noam Wasserman) the founding process is “a marathon made up of a series of 100-yard dashes” – every 100 yards the runner/founder faces a key decision with long term consequences – my role is to assist throughout the marathon. More specifically…

- Support of a true cofounder working at their side - with deep VC and CEO/entrepreneur experience

It should lead to faster and smarter execution because they have the benefit of experience and learning all the mistakes I and my 14 portfolio companies have made ; )

- Reliable help on a regular weekly cadence over years (vs months in some models) as the company evolves through its stages – which includes:

Help the entrepreneur be a great CEO – I like to be a coach, friend, and confidant on the journey
Work alongside to get product/market fit fast - brainstorm and debate product and business strategy on a regular weekly basis as key metrics come out – I love product
Mentor the key team members to become great managers and scale as the company grows
Recruit vs just refer great hires
Help prioritize, craft, sell, and execute business deals vs just providing BD introductions
Apply proven marketing techniques (social, organic, paid, etc) learned over the years
Share realtime lessons learned from other companies in my portfolio

- Increase the likelihood of a fast and strong fundraise for each round

I will call on my network – which covers most stages of investors
I’ll increase credibility as it’s one of only a few companies I’m deeply involved
I will put skin in the game - participate in the seed round to show my commitment and attract other investors
I’ve done a lot of financings – I’ll make sure we are treated fairly as founders

- Help figure out if and when to exit, who to exit, and how to make it happen - every step along the way – especially the tricky mating dance, tense negotiations, and getting to close – which helped me sell Snapfish to HP without a banker

- Do a bunch of other stuff I haven’t thought of – net net, I have a strong incentive and sense of cofounder pride to make the company successful!

Also, I believe the risk would be low for an entrepreneur to jump in as I would vest my cofounder equity over time - allowing either of us to part ways if the relationship isn’t meeting expectations.

In fact, I think there is more risk the way most founding teams are formed – typically with friends - Noam Wasserman from HBS has some great advice for entrepreneurs I've summarized from his book:

- Cofounding with friends is typically less stable because the founder optimizes familiarity far above complimentary skill sets and networks that the company needs.

- 65% of failures within VC's portfolio companies (from a survey) were due to startup management teams – which I believe I can help

Sourcing

The sourcing of entrepreneurs in this model is a bit different than VC as its less about finding the best company/momentum and more about finding the best founder(s) aimed at very large and disruptive markets. This is both an opportunity (less competition than in the VC/seed investor space) and a challenge (especially when there is low awareness of the model – also, its harder to hit the right window of timing when the entrepreneur is seeking a cofounder). Although I think every entrepreneur considering a cofounder is “in the market”, I think first time CEOs/entrepreneurs, repeat entrepreneurs entering a new sector, and out-of-bay area entrepreneurs wanting to move here are the most likely early adopters. I give credit to Reid Hoffman who told me about this last segment - it’s the “Migrator VC” model as I could help them jumpstart their Silicon Valley network.

Also, this model doesn’t require the entrepreneur to have the idea figured out – as Peter Relan has shown with Youweb - you can work alongside the entrepreneur to come up with the idea and iterate together until product/market fit is reached.

Finally, I think my network of entrepreneurs, angels, seed investors, and VCs will help uncover these founders as this role plays nicely with capital providers in the ecosystem.

Picking

This is a major commitment both ways and thus the entrepreneur and I should spend more quality time together than a typical investor. I envision working together in realtime situations - before either side commits to make sure the chemistry is spot on.

What am I looking for in the founder(s)?

- The entrepreneur is awesome in all regards except perhaps experience (smarts are a given)

- Passionate builders who obsess over product (the ability to build product is key)

- They should have demonstrated entrepreneurial zeal in their life experiences

- They are a sponge for information and learn the sector they want to disrupt cold

- One of them needs to have the strong passion and desire to lead and be the CEO of the company (that’s not my role)

- They should be self-aware of their strengths and weaknesses (check out my blogpost)

- They should demonstrate that they are collaborative vs soloist in nature – which is important not only for cofounders but to attract a strong management team

Although I have better pattern recognition spotting great entrepreneurs after meeting roughly 300 companies a year at Mayfield, I think I’ll have much to learn in this model. In fact, I’m working with a recent HBS grad and repeat entrepreneur, Erik Eliason, this summer to do some research from all the experts and interviews on how to find and pick great entrepreneurs pre-seed.

Net net, this feels a lot like when we started Snapfish –excitement, confidence, lots of unknowns, and exhilaration all wrapped together. It feels like being an entrepreneur again….

There’s room for many models to help founders succeed – angels, incubators, seed funds, accelerators, VCs – I believe this is another strong option. Someone asked me recently how I will measure success – I think for me its about impact - that every founder considers this option before starting companies – and some of the best ones come on board!

I’ll be blogging more about this model over time – stay tuned – and send me any ideas or comments you may have!

Amazing Growth Stories - You Ain't Seen Nothin Yet

Rajil — Wed, 28 Mar 2012 23:13:32 -0700

The pace of user and revenue growth of new services on the web and especially mobile seems to be hitting new records every day. I don't find this surprising and expect even more mindblowing numbers over the next decade...

Some examples include:

- Pinterest - exploding from 1M to 16M UVs per month in 7 months (sidenote - darn - wish they would have taken my seed investment term sheet when I offered it!)

- Instagram growing from 0 to 25M users in 1.3 years (kudos to these Mayfield Fellows for rockin it!)

- Angry Birds with over 600M downloads to date

- OMGPOP's DrawSomething growing to 1 million users in 9 days (it took Facebook 9 months) and 12M users per day with $100k+ in daily revenue

(see this Business Insider Presentation for more cool info like the above)

The reason this is happening now isn't simply because these are much better services than others launched in the last decade - its because the user base is MASSIVE and SOCIALLY connected. Today, we have 850M smartphones and about the same number of users on Facebook globally. Given that there are ~7B people in the world and most will be smartphone enabled and socially connected in the next decade, we will witness unbelievable and rapid growth for great services/content. I don't think its hard to imagine Madonna releasing a new single (for $.99 in the US and maybe $.10 in India and China) and within one day or even hour selling 500M copies - to roughly 10% of the connected population. I could see a similar trajectory of hundreds of millions in sales in ONE DAY for great games and social services that have low friction and wide appeal. The app/digital economy will look more and more like the movie business (but with several orders of magnitude lower barriers to entry!) and the ramifications to how we start, fund, and exit these companies will be staggering. I'm excited about this new journey - let the disruption begin....

The DISRUPTION of Brands

Rajil — Mon, 21 Nov 2011 11:33:27 -0800

I believe the world of "brands" will be DISRUPTED in the near future.

FIrst - why does it matter? Brands are and will always be a super effective and quick way to communicate at a very deep psychological level the complex set of benefits for products and services.

in the past, institutions and big celebrities were brands as it cost a lot of money to create and distribute the messages - over and over.

Now and in the future - in a world of bIllions of connected consumers ( especially anytime, anywhere via their mobile device) - with each person having the same social "megaphones" to their networks - INDIVIDUALS will be the brands - bypassing institutions.

We see this in Entertainment and News with new youtube and twitter celebrities like kim kardashian, and bloggers like arrington - where his following is migrating from techcrunch to his personal blog.

but there's more coming.....

In Books, publishers have had significant control given the costs of marketing and publishing. The combination of e-book distribution and social media is enabling the author to be the brand and market directly using new platforms from Amazon and new startups like Byliner.

In Education, the top professors in each subject will be the brand - we''ll listen to their TED Talks and lectures for free and sign up directly for their classes to earn degree credits. The brands of colleges and universities will be disrupted.

In products/manufacturing - a consumer will visit an open source design database and enter your requirements for exactly the product you want - say an ipod holder using certain material, with certain weight and color - and then seek out the best 3D Printer operator to buy it (check out Shapeways.com). The manufacturer brand can simply be a person - from any country.

In commerce - the new products rolling off the factory floor AND the ones we own will be tagged and connected to the cloud making their presence and condition known. When you want to buy something, you'll search and find a PERSON, make an offer, and buy or rent from them if they have a good brand as a seller (e.g. reputation). Retail brands as we know it will be less important.

In my final example - healthcare - we will see individual doctors and practicioners become the brand. Thru telemedicine, you will seek out the doctor who is the BEST for your condition, not simply stand in line to be treated at a brand of today such as the Mayo Clinic.

This presents an exciting future and a very practical benefit of social media - it will level the playing field like nothing before. Only the best providers will survive - and institutions will go head to head with individuals. As an individual striving to create a brand in venture capital, I too am EXCITED for this future ; )

Guest Post from HBS Professor: The Nuances of Marketplaces

Rajil — Wed, 31 Aug 2011 22:54:42 -0700

I'm a big fan of marketplace businesses (I've invested in Red Beacon, Rubicon Project, etc) - it's easy to theorize these as big opportunities with strong competitive barriers via the network effect but such businesses are actually very hard to make work. HBS Professor Andrei Hagiu has studied online marketplaces (which he also calls Multi-Sided Platforms - MSPs) and has some good thoughts on the nuances and difficulties. He shares his thoughts below - a must read for entrepreneurs contemplating a marketplace business:

Multi-sided platforms (MSPs) tend to be some of the most attractive businesses to build and invest in. These are platforms that create value by connecting multiple types of customers, which results in network effects (e.g. eBay, FPlayStation, Airbnb, oDesk, Red Beacon). I’ve written extensively on how to design MSP strategy, expand them, etc. But my impression is that this is yesterday’s news. By now most people understand that MSPs can be very powerful and everyone wants to build one. We’ve gotten to a point where the MSP-mania is creating a lot of misguided entrepreneurial attempts or investments:

Superficial claims of MSPs and network effects where there are none (e.g. online brokerage start-ups during the first Internet bubble)
Even if there are network effects, they are not supported by high switching or “homing” costs (e.g. Groupon)
The relevant market is lacking some key institutional “infrastructure”, which makes MSPs the wrong model to go after. Example: starting in 2005 a lot of entrepreneurs and investors were bullish about market exchanges for IP (e.g. Tynax, Yet2.com, Ocean Tomo auctions, The Dean’s List). In principle, creating MSPs for a highly illiquid market makes sense. But I always thought it would be impossible to get MSPs for IP to scale given the lack of valuation transparency and lack of transaction standards (not to mention huge litigation risks). Today, all of these attempts to create eBays or Craigslists or Yelps or Sotheby’s for IP have either been shut down or are functioning at puny scales.
Even if there is a sound potential for MSP with network effects, it’s gotten much harder to build them. The biggest obstacle today is not the chicken-and-egg problem, but resistance by other players in the relevant industry. The ability of MSPs to extract value from everyone else in the ecosystem is well-known and nobody wants to end up a tiny asteroid orbiting a big planet (like PC makers around Windows or music studios around Apple’s iPod). Great example: Brightcove. When I first talked to J. Allaire for my 2006 case study, the plan was to become a 4-sided platform for Internet video. BC would intermediate transactions between video content providers, users, web affiliates and advertisers. By 2009, the company was forced to scale down its ambitions: big content providers didn’t want it to become the equivalent of iTunes for Internet TV. It’s still successful as an “enterprise software” provider to content providers, but its valuation ambitions went down from $1.5 billion to just several hundred million…

Several important implications for building/investing in MSPs today:

Try to find spaces in which alternative intermediation models to MSPs might be more valuable and easier to build. Those are more suitable opportunities for start-ups in particular since less threatening to large players. Examples:
- Brightcove in its current incarnation: not MSP but “one-sided platform”
- Gazelle and EcoSquid in re-commerce: taking advantage of eBay and behaving as “merchants”, not MSPs. I’m currently doing some work with Gazelle’s CEO: becoming an MSP is very tempting but would be the wrong path to take at this point.
- RPX in IP: it buys IP and then licenses it to clients (merchant not MSP). Much more successful than the alternative MSP models because it avoided the chicken-and-egg problem, does not depend on external IP valuation mechanisms and does not threaten large tech companies. RPX was founded in 2008, went public in May 2011 and is now worth over $1 billion. The other related example is of course Intellectual Ventures (I have a case study on them too).
- Even if the ultimate goal is still MSP, one needs to be smarter about how to get there:
  - start off as a one-sided platform serving one customer group and then realize MSP potential
  - start off as merchant then become MSP
  - Network effects and MSPs just based on business model are no longer enough. To build sustainable businesses and barriers to entry, one needs to also solve hard technology problems (either software, hardware or strong IP). Too many MBAs shy away and try to compete just with “clever” business models.

Rajil — Tue, 30 Aug 2011 11:48:04 -0700

here's a good article supporting the "social discovery" graph I mentioned in my latest post.

http://allthingsd.com/20110830/how-big-is-the-social-discovery-opportunity/

"Graph Theory" - Opportunities Beyond Facebook...

Rajil — Sat, 27 Aug 2011 19:07:41 -0700

There is no doubt the social web has changed the way we use the internet and interact with each other. I believe a foundation of this "new web" is the social graph - which is sometimes referred to as the friend graph. Although Facebook may have won the "friend graph" (for now), other valuable relationship graphs exist and I don't believe they will all be owned by Facebook. As a VC, I'm on the lookout for companies defining and harnessing these graphs via network effects as i believe there will be a few more mega platform companies created : )

Graph Primer

Before exploring some ideas on these other graphs, let's recap what is a graph, its components, and why its important. As Wikipedia states, graphs are mathematical relationships to model pairwise relationships between objects in a certain collection. Graphs can be used to model many physical, biological, and social systems - from epidemics to viral propagation of marketing messages in a community. We could graph relationships for any set of objects (e.g. a family of appliances or brands for certain product categories), but the most interesting ones are human relationships given how important they are in communication, information, entertainment, and commerce. The speed and relevance of a message traversing a network formed by a relationship graph vs a "dumb" network (e.g. emailing a marketing list) is profound as we have seen firsthand from the spread of messages, videos, and photos on youtube, Facebook, and twitter.

What's In A Graph

Human beings are defined by our relationships and the information, entertainment, and commerce we consume are influenced by people in our networks. I argue that a friend graph is simply one important network (and arguably the most valuable) and there are others that are valuable and unique. The uniqueness can be described after understanding the components of the graph - two of these are defined well by this article in ReadWrite Web and one other element defined below as "Activities".

1) People's Identity - this is the online data typically in a profile that describes who we are. Facebook designed a great system which encourages and rewards users to share an accurate view of a person's real world identity - which may be the most valuable for many applications. That said, an individual can have other identities which partially expose their real world traits (e.g. work identity) or entirely different identities which are aspirational (e.g. a Level 60 Warrior in World of Warcraft). These could result in different relationship graphs with different connections between identities. I would argue that it is difficult to manage these different identities and relationships in one place let alone all the privacy settings for each type. This is one argument why other networks/graphs can succeed outside of the friend graph dominated by Facebook.

2) Types of Relationships - this is the type of link between identities and also the strength of that link. We have lots of different relationships in our lives - our friends (dominated by Facebook), our family, people involved in our hobbies, our work, our academic relationships, and experts who help us (directly or indirectly by reading/watching them). Even if we define ourselves by one real world identity, we have several graphs that are different with varying connections and strengths. Facebook owns the friend graph but what i share and expose on Facebook is not what i want to share with all these other relationships. Another reason why Facebook can't satisfy all our needs.

3) Activities - depending on the identity and the type of relationship, there should be different activities relevant for each network and thus a potentially very different feature set for each. An extreme example is the World of Warcraft community vs your Facebook community. In WoW, a user has a fantasy identity and relationships to achieve goals in the game (forming guilds to slay dragons, pillage towns, etc). The activities are real-time, graphic intensive, and follow the story arc created by the characters and their relationships. This feature set is obviously very different than Facebook but both are valuable "graphs" to own. In fact, WoW has much higher engagement per user than Facebook as diehards immerse themselves in this fantasy world for dozens of hours per week - giving some more satisfaction than the real world!

When we think about the combination of identities and relationships that a person has in their life, you can see how there are possibilities for many "graphs" and thus networks to fluorish. I don't think they all have the same economic value or frequency of use in our lives - but they are valuable.

Other Graph Opportunities

Here are some other graphs aside from Facebook's friend graph that i think will be important:

1) Professional Graph - this graph uses our work identity (which is more of a resume vs our personal likes and interests) and connects to others important in our work. It feels like the clear winner is Linkedin (trading over $7B in market cap as of today). The challenge is lower frequency as you don't need to tap into your professional graph everyday (although linked in is changing that with its own version of social news) but each visit is more valuable given the demographic and context. Linkedin has done a solid job differentiating from facebook with a unique news feed, graph connections, and activities for its members.

2) Social Discovery Graph - this graph is about discovering new people to build relationships online. This could use your real world identity but is likely a combination of some elements of the real world (e.g. your photo) with other aspirational elements that could be more fantasy. The relationships are those created by online activities - conversing about topics with others, flirting online, and playing games together. The opportunity here could be massive for two reasons. First, most of the 7 billion people in this world don't have a plethora of meaningful relationships or daily exciting lives in the real world and are seeking satisfaction online - where there are no geographic or socio-economic barriers. Second, these new online relationships can be worth a lot. Mayfield company Tagged (a leader in social discovery) has shown that it can achieve higher ARPUs than Facebook for its online games as users are highly motivated to look good in front of new people and not embarrassed to spend money on virtual items in front of online friends. An example of a massive company in China that combines social discovery and social utility/communication is Tencent ($42B market cap).

3) Family Graph - this is defined by the genealogical relationships between individuals - of course real world profies are used and the relations are family based. The information and communications along this graph are quite different than what one would share with friends which give a unique opportunity vs Facebook. A challenge is frequency as the need or desire to communicate with relatives up and down your family tree is not daily or weekly. Geni has tried to own this family tree graph but without much success in terms of growth. The immediate family household may be a sub-opportunity that has much higher frequency but i haven't seen that cracked yet (cozi is one startup giving it a shot).

4) Interest Graph - you may have a lot in common with your friends but what about the people out there that share your individual passions or interests that you aren't friends with? They could be role models (e.g. Tony Horton of P90x for fitness fanatics) or others sharing an experience or interest (e.g. the people doing the 90 day P90x program). This graph could be very different than the friend graph and the conversations, info, and activity would be highly focused and in many cases not as frequent. Bulletin boards and group websites (e.g. yahoo groups) have tried to satisfy this need but they typically aren't building a graph and allowing users to connect via many interests. Ning is probably the closest one I am aware of. I think this is a very valuable graph but its unclear how independent it will be from facebook as improvements in their groups and events features could satisfy 80% of the use cases and often your friends overlap with interests. That said, its not easy managing different communities on facebook which could be an opening for a new startup.

5) Broadcast Graph - this graph is less of a 2 way connection - its more about a person or entity having followers that consume content from the author. Newspapers, magazines, blogs, and now twitter are great examples. I feel like this space is well covered. There will be an interesting graph created here (as evidenced by twitter) that is different than your friend graph - and could be worth billions as well.

6) Neighbor Graph - this is a relatively open space - its about connecting neighbors to communicate, share news, reccomendations, local commerce, and coordinate activities. Most people don't have a good way to communicate with neighbors despite being so close (do you know the emails of all your neighbors?) and since they spend most of their time and money in their neighborhood. I think this graph is very unique to facebook in both the relationships and activities aspects. The information you share about your neighborhood is not so relevant to all your facebook friends. The frequency could be high if news is a key driver (I find myself diligently reading my hyperlocal newsletter - Patch by AOL - everyday). Blockboard is a startup that is taking an interesting mobile-centric run at this space. I'm actively looking for opportunities here.

Summary

In summary, graphs are powerful new constructs to build communities for communication, information, and commerce. Facebook seems to own the valuable friend graph but I believe there are a number of other large opportunities to create platform businesses. The building blocks of identity, relationships, and activities are used differently for each opportunity and its hard for facebook to cover all use cases without hurting its core proposition. There are likely other "graph" opportunities that i haven't covered here - i'm interested in hearing from you on both the ideas above and your own!

e-Mission has launched....

Rajil — Sat, 01 Jan 2011 15:02:15 -0800

Back in 2007, I wrote a post about a concept I came up with at TED for a kids game called "critter crisis" to make a real impact on climate change.

I'm happy to report that a few years later I finally was able to get it off the ground (after various unsuccessful attempts at funding via foundations, nonprofits, etc) and am proud to announce it has launched on facebook as a social game for real world change - it's called e-mission - check it out!

Its in "beta" right now as we are still working out the bugs, game mechanics, and friction to get people to take offline action while being online. The user count is modest but many per unit metrics are promising. We hope 2011 will be a breakout year for this game and this new genre of online games with offline impact.

Its been a long road since i first had the idea. My colleague Suzie Mogavero and I worked hard on the concept and tried to attain funding from many foundations and nonprofits but came up empty handed (ironic for a venture capitalist!) Finally, we shared the idea with a visonary leader and now dear friend - nancy lublin of dosomething.org (of which I am now on the board - its the largest organization for youth to make social change) she loved it and took it on as a dosomething project. With her team and other advisors help, the idea morphed into an online social game that feels more like a simulation (e.g. cityville) vs the original pet adoption idea (which we feel didn't have as much depth). I was able to find a great games development team called Gettoutt to bring the game to life. Gettoutt is startup that is pioneering a new genre in social games that combines real offline action. The founder, alan wells, has a superb background as both a product manager at Zynga and an ecology major at UC Davis.

With team in hand, we were able to secure funding from an unexpected source - the US Government! The EPA's Energy Star division has fully funded the development and is our sponsor of the game. They were looking for ways to reach young people with the message of energy conservation - especially to combat climate change - and recognize that online games are where its at. Big kudos go out to the EPA for trying something new and innovative to fight climate change!

A little more on the game....the idea is that you control a habitat (like a city in cityville) and our first habitat is a beach (which our 1000 Dosomething youth advisors voted as the most desired habitat) - where you buy and place plants and animals to make it a thriving ecosystem. In order to earn more coins and experience and level up to get better plants and animals, you perform online actions (e.g. energy knowledge quiz's, read info on recycling), and ultimately offline actions that reduce carbon in the environment (e.g. change lightbulbs, lower your thermostat, walk to school, etc). All the offline actions are measured in actual carbon saved so we know the real world impact from the game. We came up with a cool peer review to check the online actions - you upload a photo performing the action and get your facebook friends to vouch for you.

The game mechanic includes "eco-tours" which bring in visitors and thus coins to your habitat - if it remains healthy. The player must continue to take actions and complete missions as the environment is deterioraring due to increasing carbon levels. The cool thing about an online game is that we can speed up and exaggerate the effects on the environment from increasing carbon levels - which helps people visualize the impact.

Its early days in this new category of "social games for change" and we haven't figured it all out, but I'm hopeful that the game will get better over time and inspire many other games like it. Big thanks goes to all the people who have helped over the years:

James and Zem Joaquin (early inspiration and brainstorming and great networking)

Suzie Mogavero (full time leader working with me for six months)

Rich Gruenberger and DLA Piper team (early pro bono legal counsel)

David Perry (helpful game design ideas and connections in the game industry)

Bing Gordon (valuable feedback to Alan and I on game design)

Charlie Knowles and the Wildlife Conservation Network (great ideas around kids and animal conservation)

Hillel Cooperman (early concept work and naming with his firm Jackson Fish Market)

Chris Tacy (advice on design and networking)

Madeline Schroeder and the Mightyplay team (great early work on the concept and helping pitch media companies)

Samantha Skey (marketing wisdom - especially to youth)

Nancy Lublin (CEO of Dosomething who took on the project)

Aria Finger (COO of Dosomething who made it happen)

Alan Wells (CEO of Gettoutt and lead game designer)

Porter Felton (founder of Getttoutt and creative guru)

Cliff Boro (helped a lot on networking and ideas around kids)

Greg Tseng & Steve Sarner at Tagged (marketing promotion of the game)

Sophia Bush - star of one tree hill and environmentalist - thanks for the great video PSAs

Suzanne Segermann and Asi Burak of Games for Change (great networking and inspiration on this new genre)

The Energy Star program/EPA

and of course the entire Dosomething.org staff!

(sorry if i left anyone out - do let me know!)

So, do your part and play the game and reduce some carbon...spread the word!

Too Late vs Too Early

Rajil — Tue, 28 Sep 2010 11:10:09 -0700

In the past venture capitalists and entrepreneurs have been very concerned about "market timing" - is the market really ready for the new innovation or service or will it take too long to gain widespread adoption. Many companies didn't make it because they were simply too early and ran out of cash. I faced this real issue when starting Snapfish - we started in 1999 when digital camera penetration was very low. For that reason, we focused on film users and thought we could service their photo needs online and when they transition to digital, we would be there. We couldn't predict exactly when the transition would occur so we focused on creating a business around film so we could wait it out. This kind of worked - digital took a while to adopt - but we over-estimated the consumer propensity to change their photo processing habits for film - despite the attractive low prices and online value we provided. It ended up taking a lot of capital as the film business coudn't support our fixed costs and thus we were somewhat a victim of market timing. (Of course, the story ended well as the transition to digital accelerated and we cut costs to survive).

The reason we were so focused on market timing risk was because of our high fixed costs. Back in 1999/2000 you needed a big engineering team, massive hardware, and expensive software to keep an internet service running and constantly improving. That was then - now, its all changed. Almost every cost can be "variable-ized" for an internet startup. You can consume only the compute, storage and bandwidth resources that you need and you can do it with a lot less engineers due to plenty of open source software, exisiting SaaS services (e.g. billing, customer service platforms), and simpler languages to quickly test and deploy new applications.

Thus, I believe market timing is not as much an issue anymore for internet startups. I'd rather be a bit early on a market, keep the burnrate low and iterate for a while until the startup hits it. This has worked well for my companies especially where there is a network effect and being first matters a lot. One example is Qunar - which is now the largest travel site (in terms of users) in China. It started out at a time when online travel and moreso online advertising in China was very tiny. We knew from our experience in the US that a Kayak-like experience would ultimately win over consumers (especially since they didn't have the OTA (e.g. expedia) habit as much - Ctrip was more of a call center business back then) but we couldn't accurately predict market timing for revenues from advertising and online ticketing. The company had a very low burn rate so we took the market timing bet and supplied enough cash to ride out the market for a few years. The bet paid off as the market took off (we never could have guessed exactly when) and we were there to ride the wave vs scrambling to start a company when everyone else saw the opportunity.

Internet startups today are better early to the party vs late - they just need to keep the burn rate low and have enough cash to ride out the timing. I know some angels like to fund a new startup 9-12 months but if I sense a market timing issue, I'd like to see 18-24 months of cash.

What do you think?

One of the Most Important Traits in a Founder: Self Awareness

Rajil — Mon, 14 Jun 2010 17:15:07 -0700

We all know human beings aren't perfect - not even close. It is almost impossible for a person to be great at most things in life - we have our strengths and weaknesses - whether its in relationships, friendships, sports, communication, and of course in our work. Founders of startups are no exception.

We often say we are looking for "A+" founders or "Rock Stars". That is true - we want to back people who are great at what they do. Of course they need to meet the bar in ambition, intelligence, ability to execute, etc. But often times, its not a complete package - and certainly not early in their career if they happen to be a young founder like most internet entrepreneurs.

I've learned as a VC that one of the most important traits to look for in a founder is Self Awareness. This seems to separate the long term winners from the "flash in the pan" entrepreneur. Those founders that understand their weaknesses (whether its managing people, attention to detail, technical skills, negotiations, or softer issues like losing your temper easily, listening skills, etc) will be able to surround themselves with people and advice that will fill their gaps. I think its critical that a founder have a core "senior" team (ideally as co-founders) that compliment their skills and experiences. It leads to better decisions and checks and balances. Being self aware also means that a board rarely has to dictate leadership changes - the Self Aware founder reaches the conclusion well before others and recommends the best course of action for the company.

How do you know if you are self aware? Simply write down your personal pros and cons and then ask for a 360 degree of the people that work above, below, and around you to talk about your strengths and weaknesses. See if you truly know how others perceive you. I've done these 360s for myself in every job and its been eye opening and helped me go to the next level.

Founders need to be a lot of things to make a venture successful - but we don't expect them to be perfect - just be Self Aware...

"Social Rank" will bring a new wave of disruptive web companies

Rajil — Wed, 09 Jun 2010 14:56:28 -0700

Very successful web companies were created in the early days of search when Google perfected the page rank algorithm, amassed huge traffic as the start page for an internet journey, and then directed this traffic to sites that ranked high. These sites (primarily content related) were easily readable by google, had unique/original content, and were first movers – they generated 10s of millions of visits per month from google. Multi hundred million dollar revenue companies like About.com and TripAdvisor were formed with very little marketing cost – making them very profitable (we’re talking 40-50% EBITDA margins). Other hot companies such as Yelp, Fixya and even Wikipedia can attribute early mover in “SEO” as a key success factor.

We are now in a new era of social media where I believe Facebook will have similar “kingmaking” power and will result in a whole new crop of vertical sites that are socially driven. Why? Now over 500M people have exposed their digital identity and social graph via facebook for the rest of the web to use. This will only grow to billions as it will be a requirement to have “digital identity” in order to be seen, heard, and transact in the real world – and facebook seems to be the platform of choice globally (I will leave it to the pundits on whether it will be an open platform or remain closed). The recent product enhancements of facebook allow their “social widgets/signals” to be embedded all over the web to provide the hooks for these new sites to get weaved into the social graph and also appear high in facebook’s “social rank”. As facebook will enter the search space, this will be even more powerful. The difference vs Google’s page rank is that the important sites and web pages are determined by real people, their actions, and the strength of their connections. This will drive not only a key aspect of search (better answers to research-related vs navigational queries) but also enable “discovery” of new content – when a consumer isn’t sure what they want, they will get socially driven recommendations at sites that cater to the verticals (e.g. travel, entertainment, shopping). Most verticals will be impacted and many new companies will be created that drive tremendous free traffic from facebook feeds, embeds, comments, links, etc. This is what Zuckerberg wants – to be the new nexus of information and applications all across the web (and mobile).

I’m particularly interested in funding companies in high value verticals that will take a 100% social approach from ground up. Yes, some web 1.0 companies will rank well due to their brand and quality of content (e.g. New York Times, CNN) and because they will integrate social widgets but there will be many other new brands created – in Travel, Real Estate, Education, Finance, and Shopping (just to name a few) that are solely focused on being the best nodes on the social graph.

If you’ve got a company that you believe will take advantage if this new disruption, I want to hear from you!