Telecommunications matters

What do you call an organization that knows who I am, where I am, who I talk to, what I buy, what I like and how I spend my time? No, you silly, not the CIA. I’m talking about my telecom provider!

What industry other than telecom has the ability to reach almost 100% of the population with its products, services and marketing, transact with that population wherever they are, and do it reliably and cost effectively?

Yet, despite all these unique advantages, telcos are playing defense when it comes to many of their products, and are seeing global Internet giants emerge as formidable competitors.

The reason why Google, Microsoft, Apple and Facebook have become a threat for telcos around the world, other than their scale, is that almost all value in technological innovation is happening in networked software.

And nobody has understood better how to build this kind of application than Internet developers. Seeing how well their approach to innovation has worked over the last decade, Internet giants have recently decided to expand their business into telecom. After all, it’s a sweet opportunity.

So telecom companies find themselves at a critical juncture, where their customers have gotten a taste of the salient attributes of the products offered by Internet giants (magical user experiences, self-service, simplicity and ubiquity) and feel almost universally negative about what their telco company has to offer.

Will they answer the threat or retrench into their lobbying bastions of protection by regulation and golden shares?

Innovation happening elsewhere

Ironically, it’s not like the world of telecom is devoid of innovation. On the contrary, innovation in telecom is exploding: it’s just, for the most part, not exploding at telecoms, but despite telecoms.

It’s startups and a few service providers who are shaping up the future of telecom. On their side they have a simplicity of purpose and better tools. Against them, a lack of channel muscle and not enough access to the PSTN

These innovators are testing their own concepts in the market. To the untrained eye they may look different. Upon closer inspection, one can see these concepts share common traits:

• Being telecom apps in their own right, they offer the point and click configurability that we’ve come to expect from internet services. As a result, immediacy of service.
• They are dead simple to use. In the worst cases, they are an order of magnitude simpler to use than the alternatives they replace.
• They mix modalities: voice, SMS, chat, conferencing, email, social network updates… it all comes together in a winning formula. The boundaries between communications channels don’t matter to the user, so they don’t matter to the apps.
• They track conversations, not just calls. This is a significant paradigm shift.
• They make the most of the available data out there, whether private, public, or available through the social graph, to enrich and smooth the interaction.
• They’re either broadly applicable and highly innovative or narrowly applicable but very useful.

The skeptic may ask: if innovation is exploding, why isn’t there a true telecom 2.0 industry emerging, why are we not seeing a displacement of the existing players?

The answer lies in the nature of the voice network. This formidable construct of the 20th century has both created immense value and become a natural barrier that acts as a moat to anybody that is trying to disrupt it. Every time one of these applications touches it, it inhibits the growth of the app. A true anticatalyst.

If these innovations were in the hands of a true first-class member of the PSTN they would spread like wildfire.

A time to be brave

In the face of all this pressure, what can telecom companies do?

1 – Rediscover “tele-” and “-communications”

The soul of telecom is

• “tele-” – at a distance: dealing with the reality of physical separation
• “-communication” – the exchange of thoughts and messages: in their 3 manifestations (information exchange, storytelling, presence as articulated by Douglas Galibi and translated for the rest of us by Martin Geddes) For the liberally educated, communication comes from “common”+“union”+“act of”, when we communicate we are reinforcing what we have in common that unites us)

Everywhere and everytime that distance (not just physical, but more conceptually as a gap that separates two parties to interact) is an obstacle for humans to interact, in either exchanging information or weaving their common story, or sensing where each other is in relation to those around us that give meaning to our humanity as social animals, telecom has an important role to play.

Lest I be accused of getting lost in philosophical weeds, let’s observe that a human need of such a high order, and services and products that facilitate the fulfilment of this need will command a high premium in the market.

A sustainable way to measure the relevance of telecom is its continued involvement in the delivery of this mission.

If, as a telecom product manager or strategist you look at your portfolio and you can’t see how it’s delivering on this mission, you can take it as a sign that the apps and services are in need of rethink.

2 – Open the gates to the innovators

So other people today are trying to define the products and services of the future of telecom. Why be afraid? Does this mean that they will own the network? No. Will they own the channel, and the brand? No. These are not to be understimated assets that will invariably remain in the firm control of telecoms for as long as they are relevant to their customers.

How can we be more relevant? Bring products to the masses that deliver on our mission.

How can we bring more of these products? Open the gates to all the innovators out there. Make it possible for internet developers to define category killing telecom apps, then make it easier for them to deploy them to your customer base than to go around you. Put your best people in charge of this process.

What are developers clamoring for?

APIs to control the network

To:

• Initiate and control phone calls, text messages, videos, chats, twitter & facebook posts. All aspects of it.
• Intercept, redirect, and treat phone calls with voice automation
• Provision, control, modify any of the network objects: DIDs, Customers, CPE, Applications, Devices (anything with a SIM card),
• Manage and extend the identity of customers, as well as understand their privacy preferences
• Locate the customers
• Transact with customers
• Manage the relationship with customers… get their feedback, promote to them, upsell and cross-sell them, reward them, remind them, nurture them.

Ingredient technologies

That would allow them to focus on higher level matters:

• High quality codecs for audio and video (Why did Google buy GIPS and open source their stuff?)
• High quality network stacks for different protocols
• Softphones
• Super-reliable, telco-scale softswitching plaforms

Market data

Developers want to know and understand who your customers are, what they buy, what their behaviors are, what messages work with them, and this information is so hard to come by.

Marketing channels that work

It doesn’t matter if it’s an app store, or a a section on your website, or your own custom-made marketing program. What matters is that it be no different from your main marketing efforts that work so powerfully and that took you decades to develop. If you make something special for third party developers it is almost guaranteed to suck.

An open mind about other business models

Charging for minutes and bytes is obscenely great, but will only get you so far. Transactions, subscriptions, two-sided models, site licenses, there’s a rich panoply of alternatives which are working in the software world, why not adopt them?

It’s not just about what the line item is, it’s also about the layer of the value that we charge for. There’s plenty of money to be made selling a utility but sometimes the distance between the utility and a differentiated offering is not that far. (Think bottled water vs tap water)

Access to your salesforce and retail presence

Last but not least, if you find there is demand for an app or service, how can it hurt to use all the assets at your disposal to maximize the demand? All those brick and mortar investments where a customer can have a human explain face to face how it works can dramatically boost the adoption rate, so why not use it?

3 – M&A baby

The last piece of the puzzle for thriving in the next few years of telecom is acquisitions. Every year, hundreds of tech startups are acquired by the software giants. These acquisitions effectively expand the R&D capabilities of companies like Google, Apple, Microsoft and Facebook, and serve them well in recruiting top talent. The acquired companies bring more than IP and bodies, they constantly renew the entrepreneurial spirit within the absorbing organizations. A not-so-unintended side effect is that they take off the market potentially new competitors.

Frankly, I find this to be some of the lowest hanging fruit for transforming a telecom company. A good place for tech startups at a telecom would be their innovation labs. With strong leadership one could successfully merge the hunger of software startup people with the knowhow of top network engineers and marketers from the operating units.

From: Sam
To: the inner circle of people in my life

Hello dear person,

I like you. I enjoy your company. I respect and possibly admire you.

But please don’t confuse that with a willingness to be your SECRETARY.

If you need to find a phone number, how to get to x location, a bank account or social security number, the name of somebody we met and who gave you their business card, a copy of a document, or any of a myriad of facts and figures that we have previously shared, I would kindly ask you to LIUY – Look It Up Yourself

I know, I know: it looks like it’s faster to ask me for it, but a) it pisses me off (not good) and b) in the long run, it will be faster to LIUY.

Why, you ask? Well, when you do the extra 10% effort to look it up, it will bother you. To eliminate that bother, you may even do an extra 10% of storing it it somewhere that is easily accessible. And as you rinse and repeat, you will increase your productivity.

Contrary to popular belief, we organized people are not soul-less. Maybe a bit more boring and annoying. But hey, that’s not the full picture.

Sam

PS1: Since I really like you, I have made a list of tools to help you LIUY more often.

Some tools to keep you organized:

• Your email: these days your email has almost every single piece of info you’ll ever need. Make sure yours is searchable. Get on Gmail. If you’re an Outlook diehard, get Xobni. Learn to use the search operators. E.g. “from:michael franz has:attachment”
• Your files: use spotlight. Use Alfred. Windows user? Upgrade to Windows 7. Tip
• Your thoughts: Evernote
• Your passwords, bank account numbers, credit cards, social security numbers, etc: 1Password, LastPass
• Your paper documents: have you consider getting a scanner? Too lazy to scan? OfficeDrop

Let’s start by saying that:

So…. if I can do it, YOU can do it too!

The basic structure of a pitch:

• One sentence on what your company does.
• Framing the problem and why it matters
• Outlining the most salient aspect of the solution
• Emphasizing its core benefit
• Wrapping it up with who uses it and why

All pitches are given orally, so write it down if it helps you structure it, but don’t use words that belong to written English, use words and expressions of oral English. When you say your pitch, it needs to sound natural, and believable, and not rehearsed.

When you say your pitch you cannot be thinking about the pitch… it goes too fast, you need to be sensing the person who is getting it.

In order to deliver this pitch at TechCrawl East I had to rehearse for 3 hours straight… it took me 60 rehearsals or so to get it down.

Why go through all the trouble?

It took me a year to realize that, as the founder of a startup, I’m always selling. Almost every conversation with a stranger is a sale. If I’m not selling, I’m not moving the ball forward. So I might as well be prepared to sell, and having a pitch ready is a handy tool for that.

Biggest challenges for startups when it comes to teambuilding:

• Competing for the really good talent against more established players
• Getting those critical first few hires right… wrong first VP of Sales can wreck the company, or so the legend goes.
• Coming up with the right incentive structure
• Getting everybody on the same page

So where do you find them:

• This is where high-quality networking pays off. Networking understood as a 10-year horizon effort of truly helping others through proactive generosity and social arbitrage, as Keith Ferrazzi would put it.
• At your competitors. You get the talent, they lose a key player.
• Through your personal social life. I’m bad at this, but others report a lot of success. (Think kid’s soccer, golf outings… etc)
• At local events, user groups.
• Through your investors (especially for “gray hair”)

Who do you look for:

• People who share your core values. Forget about company culture: you are the company culture.
• People who are very different from you. Different skill-set, different network, different professional experience.
• People who are smarter than you. Remember the old adage: A players hire A+ players, B players hire C players.
• In new hires, you value attitude more than aptitude.

How do you compensate them:

• The golden rule here is to first understand what motivates them. Then cater their compensation to match that.
• For example: are they highly economically driven or are they looking to change the world? Do they like the entrepreneurial lifestyle, or the accomplishments?
• Understand their risk aversion. Equity is wasted on risk averse hires. Cash compensation doesn’t motivate those who want to be part of a grander mission.

Non-cash compensation:

• Multiple forms of equity, listed from strongest to weakest: restricted stock (shares with vesting), stock options (appreciation of shares, with vesting), phantom stock (cash bonus based on share-equivalent value), stock appreciation rights (cash bonus based on value equivalent to the appreciation of a stock)
• But make sure that your employees understand what they’re getting and don’t feel like you screwed them later
• Many of these instruments have terrible tax consequences: they won’t understand them so the right thing to do is to work with a lawyer to design the right instruments. (Restricted stock seems like the way to go at the moment for Corporations and Profit Interests for LLCs)
• Understand that all these instruments, when based on illiquid shares have problems of valuation. Either use a recent investment round and grant them at a higher valuation or spend $2,500 and get a 409(a) valuation done.

Legalese

• Employment agreement – what senior executives joining your management team get, which include terms of employment designed to protect them.
• Employee agreement – what everybody else gets, designed primarily to protect the company.
• The core issues to solve are mostly related to what happens where employees leave.
• Make sure that these agreements are written in a way that they would pass muster with an investor doing due diligence: not too sweet, not too exotic.
• Don’t deviate from a standard document.

Traditional ideas of HR

• The traditional interview process is an intellectually bankrupt idea. People rehearse for these things and they tell you very little. Instead, spend time working with them on real problems.
• Employee handbooks, processes, all of that. We all hate it. It’s demotivating. Try the Netflix approach to HR instead.

The actual team-building

This is something we’ve discussed in other blog posts. But basically, you’re creating a forward looking story of what you’re out to do, and you’re telling the story over and over, drilling it into each person’s heads, fleshing out their role in the story, until the team has a shared vision. Then you go out and model it in your behavior, and you remind people about it when conflict arises, or when things look dark, or when you deviate.

You tell this story to the team members, and the prospects you hire, and the investors, the analysts, your coaches and mentors, anybody who will listen… and that puts everybody in the right mindset to maximize the chances. It’s not so much a self-fulfilling prophecy but the notion that people operate better when they have a higher purpose that they can remember.

On a personal note, I’m working hard on these things, but my experience is limited and I’ve got much to learn, so don’t take all these points as advice, as much as curated information that I believe to be true

photo credit – flickr user michael costolo – link

In a lecture to a Stanford crowd, legendary VC Tim Draper was asked about YouTube’s $1.6B sale to Google, and how -in light of the crisis of 2008- such an astronomical purchase price could be justified for a company with no prospect of making money yet in sight, and no real business model.

He went on to give a masterful explanation about how the essence of business is deal-making. That a startup doesn’t necessarily need to make money at the beginning, but create something valuable that eventually enables somebody to make money. In his explanation he articulated how deal making is about finding the combinations of elements that create value for both parts.

I love this concept. It jives well with my philosophy for life that ultimately you only win if you think win-win.

When we started Ringio we felt that we didn’t have to solve all the problems ourselves in order to win. There were a few core areas where our 10 years of experience at Microstrategy / Angel.com would help us add value: defining the market opportunity, designing the product, architecting the operations, conceptualizing the marketing programs.

So very early on we decided that we would seek high-caliber partners to help us execute the R&D, the marketing programs, and eventually the sales through distribution channels. Furthermore we seek to build these partnerships in a win-win manner.

Take, for example, Paradigma, our development partner:

So with this in mind we structured a deal that met these objectives. A conventional approach to having solved the problem of outsourcing R&D would have been to squeeze as hard as we could until they caved and went for the lowest possible price. But that would not have allowed them to meet their objectives, and in creating a win-lose situation we would have eventually lost: either through quality, or a breakdown in the relationship, which would be costly since we have both invested a lot of time in making it work over the long term.

If you make deals, and don’t settle for anything less than win-win, you will create space for serendipity and synergy to possibly happen. If you go for win-lose, or try to solve every problem you have by yourself, as Tim Draper says in the video, you will eat a lot of zucchini.

Why would you want to move your blog out of WordPress.com?

• You want to use your own theme – I was unhappy with the theme I was using, in particular, how cluttered it made my blog, more on this below.
• You want to get Google Analytics – after diving deep on Ringio’s analytics I was craving some basic information that WordPress stats doesn’t give you: bounce rate per blog post, time on site, geographic location
• You want to install your own plugins – I’m very interested in implementing a commenting system that allows visitors to comment with their Twitter / Facebook credentials and WordPress.com really insists on creating its own user network.

How about cost?

I am using a t1.micro reserved EC2 instance. I paid $83 to reserve the instance for 3 years of hosting, less than $3/mo. With the usage charges it works out to $7.50/mo. (Update 10/26/2010: With the new AWS Free tier you could save all this money for the first year.)

Bye bye WordPress.com

Quick instructions:

1. My detailed instructions are here
2. Create/Login to your Amazon Web Services account and buy a reserved t1.micro instance
3. Launch a Community AMI with WordPress installed. I used the Bitnami WordPress stack . I picked the AMI that has EBS backing, so I don’t have to worry about backups so much.
4. Get an Elastic IP and assign it to the running instance
5. Configure Apache – mainly make the wordpress directory the DocumentRoot and allow mod_rewrite so WordPress can support pretty URLs
6. Log in to your EC2 wordpress installation and create an admin account.
7. Export your WP.com blog to XML
8. Install the blog importer plugin on your EC2 blog and import the XML file
9. Repoint your DNS.. (oh… you were doing blogging on the wordpress.com URL? Use this paid upgrade instead)

Presto! This should take you about 1hr if you’re a bit familiar with the technologies, or a few hours if it’s the first time you fiddle with Amazon or WordPress.

• How hard customer acquisition is – (“we’ll build it and they will come”)
• How unattractive an employer you are to the population of highly talented and experienced workers and how badly the odds are stacked against you in the workforce marketplace
• How long it takes to raise capital
• How draining the emotional rollercoaster is
• How hard it is to identify and anticipate a real, pressing market need

For some of these, you need a good plan, for others, experience and fortitude.

Tim O'Shaugnessy

In the last 18 months, no other early-stage startup entrepreneur in the DC area has raised more money than Tim O’Shaughnessy, CEO of LivingSocial. $49M is a tall figure. And if you want evidence that the #1 attractor of capital is traction, look no further than his company and its meteoric ascent to the “IPO potential” crowd.

I personally don’t equate fundraising success to success, I think about closing a round as interesting validation of something, but that something is harder to pin.

But the story of LivingSocial deserves to be studied, for it outlines an innovative approach to building a business. Ultimately, it’s the age-old story of unearthing a deal, finding a way to match demand to supply and taking a cut. And in the case of LivingSocial, its bigger competitor Groupon and other interesting retailers such as Gilt Groupe, it’s the story of the emergence of a new category, social commerce, and the transaction that it enables at its core.

As Tim put it earlier this week at FastTrac, “the concept we were attacking when we started the company was this notion of marrying where people lived with what they do”.  If you’re one of the 15% of the DC metro area population who gets a daily offer from LivingSocial you understand: it’s a deeply discounted deal offered by a local business, a spa massage or a hotel getaway or a coupon for a skydive.

What is original is the notion of using email marketing and personalization to connect a individual with a local business, and doing it in a way that it appears a huge win for the individual (the deep discount) and the local business (a massive surge of concentrated customers).

How did they stumble upon this?

Tim and his other cofounders jumped ship from Revolution Health and started Facebook application development in 2004. They built a couple of applications that went viral. One, in particular, “Pick your five”, encouraged Facebook users to pick their five favorite movies, books, drinks, foods, etc. In the first day it was launched it acquired 2.2M users. As a side-effect of these projects, the company built a massive database of users and preferences.

Later they came across a small company that had salespeople in 3 markets primarily focused on selling drink promotions to restaurants, subsidized by drink manufacturers. This company had the deals with the brands (e.g. Bacardi) but was struggling to drive the traffic to the restaurants where the promotion would be consumed. And here comes LivingSocial with a massive database of online users, their geography, and their preferences.

Once you think about it, it seems like such an obvious thing to do, but nobody had done it before.

For me, some interesting observations:

• Facebook changed the game completely: never before could a developer build an app that would go viral so fast as when they launched the Facebook Application platform.
• With consumer plays, it’s all about the eyeballs. You amass them first, then figure out later what to do with them. This is such a radical departure from how B2B plays work.
• Market makers are richly rewarded with transactional revenue, but you have to uncover the deal and match the demand and the supply first.

Other things that Tim shared:

• “The most useful part of a business plan is the actual creation process.” You can pretty much trash it after that.
• “Attack concepts, not ideas”
• “Make sure you always know the problem the concept is solving”
• “Startups are ugly, they’re supposed to have warts”
• “Hurdles lower your chance of success, eliminate them” and he mentioned hurdles such as doing contract work, part-timing, having too many founders.
• “Test constantly” – this one is a lesson we’re taking to heart at Ringio, ultimately it seems like the ultimate lesson: apply the scientific method and you will make progress.
• “Our biggest asset is our sales team”

It is hard to predict what will ultimately happen with these kinds of businesses. To me, the “daily deal” primarily segmented by geography seems like a fad, and a blunt instrument. In the last 24 hours I was offered a ticket to a Halloween party that doesn’t appeal to me at all. But maybe the obscene amount of money that they’re making will give them a chance to fine tune the technology and the approach and turn them into the next Amazon.com.

photo credit – Washington Post.

I have compared web analytics to Angelina Jolie; that comparison should suggest how sexy it is, how powerful it is, and what a force for good I think it is. By the time you are halfway through this book I am positive you’ll agree with me.

Avinash Kaushik in the introduction to his book Web Analytics 2.0

If that doesn’t get you to read the book, what will?

If you want your venture to succeed pay more attention to detail than your competition.

Here’s how I visualized his idea:

Funny how he puts it, eh? But in a sense, it’s true, your should count on luck going to others, and most of the time they will have money on their side too. Your tools are your craft, and a laserlike focus on details.

And then Eric went on to give a myriad examples of what being attentive to detail meant:

• Understand your customers in detail: for example, at Five Star Alliance they understood that buying a luxury good required a luxurious buying experience, and that gave them a leg up on much more established travel booking sites.
• Run your marketing efforts with a meticulous analytical mentality. He showed us how deep an understanding of SEO they developed, and how much experimentation they did with their SEM efforts. Every marketing dollar counted so it had to be spent on whatever produced the most results. Some figures he threw out: 6% CTR on ads. 0.7% conversion to bookings, top 1% Google spenders. He told us about how their platform allowed them to turn SEO hypotheses into content into indexed pages in a very quick manner and allowed them to be very opportunistic.
• Develop a detailed view of your cash cycle. This encompasses the steps and timing between getting charged to provide the service and getting paid.
• Pay attention to how you spend your money. In other words: be cheap, but not stupid cheap. Buy used, bum office space from fellow entrepreneurs, sub-sub-lease at $16/sqft. He told us of a time when he heard Don Rainey’s technique of slipping a bartender at a trade show $50 to use Grotech coasters and achieve the same effect than a much more expensive conference sponsorship.
• Pay attention to who you hire. This focused on sales teams, but he said that he only hires sales reps that consistently, year over year over year have beat their quota, president’s club material. They’re expensive, but any one with less of a track record ends up being equally expensive or even more expensive if you take into account the opportunity cost.
• Pay attention to your product feature performance. He told us that, in the beginning, they spent 1/3rd of their R&D and website space on Tina, a virtual concierge, and it didn’t work at all, so they cut it in 60 days (while his competitors dragged on).
• Pay attention to what people say about your company online. Monitor forums, social networks, and protect your reputation.
• Pay attention to the cash flow. “Everybody should consult on the side” when getting started.
• Do more detailed market research than you would naturally be inclined to do. He explained to us how he has spent almost 2 years researching the market and interviewing 75 exec-prospects for his new high end marketing solution. Iterate over the feedback you’re getting and tweak the product designs before you get more feedback.
• Selling is an “attention paying” activity. He’s a big believer in Sandler Sales Training, which he calls “a sales method for engineers”. This means focusing on the sales prospect and his problems, not your spiel. Focusing on asking questions you know the answers to, and you can solve. Focusing on what makes a difference in your prospect’s life (reputation, credibility, bonus…). Focusing on starting at the right organizational level (at the top).

I could list a lot of things that we’re dong at Ringio to follow this principle, but one that that we’re driving home hard these days is paying attention to our active evaluators and doing everything in our power to increase our chances of turning them into paying subscribers, playing with promotions and messaging and incentives, and understanding really deeply who our customers are and why they’re buying.

1. Build your target experimentally. Instead of pontificating on a Word doc about what your target market is, why don’t you go out and get 10 customers to pay to solve a problem for them? If you do, for some categories of software, you have yourself a target market. Choose this bottom up approach whenever you are competing in a category that allows rapid product development. Heck, you might even want to try Sean Ellis‘ approach of selling something you haven’t built yet. (Kudos to Ashish for coming up with this tactic)
2. Make small extrapolations. If you already have a good understanding of some market segments, how about making small extrapolations from targets that already work to define a segment that you can dominate. For example, at Ringio, we have hypothesized that current buyers of Virtual PBX solutions (a commodity, undifferentiated, but popular segment) really need and want a call center product, if they could afford it. And that’s our target: SMBs that appreciate a call center solution but are on a Virtual PBX budget.
3. Focus on them, not on you. The best segments are defined by attributes of the buyers, not you. Do they have the inclination, pain, budget and immediacy to buy your solution?
4. Irrational > Feelings > Rational reasons. You can rack your brains to define a segment of people behaving rationally, but frankly, a lot of the most powerful decisions are based on feelings such as desire  (luxury), fear (security), or playfulness (entertainment). What problem does World of Warcraft solve? It’s the wrong question. Even more powerful is when you play in a market that is not even reasoning about problems, there are simply bigger (and often) irrational imperatives. For example: compliance, government mandates, monopolies and cartels.

photo credit – flickr user law_keven

I thought I’d recap some of the key insights, as I found them valuable.

Origins and Product

• Duke and his cofounders started really young, in his very early 20s from his college dorm. In his own words: “You couldn’t escape tech innovation at Cornell in the late 90s and early 2000s…”
• The first few years of Parature were very lean, focusing on turning fanatic users of their chat product into paying subscribers. Those early users were mostly “mom and pop” online retailers who were trying to humanize the shopping experience.
• They stumbled upon SAAS almost by accident. They were trying to be very frugal with buying licenses for servers and they found that by putting more than one customer on a server the costs were lower than the competition. He mentioned his chinese heritage as playing a role.
• Their ticketing product (which is now probably the core of their offering) came out of discussions with Michael Chasen, the CEO of Blackboard, who gave them a chance to convince him of buying a yet to be made competitor to Remedy, which was a lot more expensive. Instead of booking PS hours they focused on licensing the technology… and that’s how the product was born.
• As time went by the used a “bowling pin” approach to product development: find 2 or 3 customers that could be knocked down with a feature, then build it.

Fundraising from Angels and VCs

• From ’01 to ’06 Parature was built into a $4M run rate, 30 person, 300 customer business only on Angel funding.
• Meeting Ching Ho Fung at a conference was serendipitous and they created a great relationship and won themselves a core angel investor, a mentor and a networker.
• Ching Ho would tell Duke that VCs would come to him once the business had traction, but it took a while for Duke to internalize this information.
• Eventually, a barrage of VCs would come knocking on Duke’s door for a Series A, and they ended up raising $13.5M from Valhalla and Sierra. Duke wanted an West Coast VC (probably to help with valuation) and the West Coast VC was a lot more comfortable with the investment once they understood that there was a local VC to do the play by play.
• What finally made Duke go for a Series A was when some executives from SFDC came knocking with a (somewhat) lowball offer for the business. It then became clear to him that they were winning at least 50% of the deals vs. RightNow, but they were only seeing <20% of the deals in the market, because they had 4 sales people and RightNow had 30. They used the VC’s capital to throw money at the problem of rapidly accelerating sales (my experience observing at Angel is that there are smarter ways of doing this, see Sales Learning Curve [PDF] ).
• Another key learning was that Ching Ho made them practice board-level accountability by setting quarterly goals and then reviewing together whether they were met or not, a sort of rehearsal for the time when there would be professional VCs in the board.
• In July 08, a few months before the collapse of the financial markets, Parature raised a $16M Series B from Accel. He entertained us with the stories of how he negotiated the term sheet (he says he probably got a 10% bump on the valuation and negotiated away some of the preferences). You could tell by the passion of his narrative that he obviously enjoys negotiation quite a bit. It made me wonder how different profiles of founder would deal with this, or if it is the case that investors should only put their money in the hands of founders with a great panache for negotiation.

Some reality check

A few things to keep in mind, though, as one ponders the lessons from his talk, are:

• Entrepreneur does not equal “founder of a VC fundable startup”. There are many solid small business opportunities worth pursuing that simply don’t have the large market potential and huge return that a VC would expect in a business that they would want to fund. Very few entrepreneurs in the Mid Atlantic own businesses that will ever qualify for a $13M Series A and a $16M Series B.
• While Duke made the case that the dilution of multiple rounds of investments was worth it (as the Blackboard CEO would put it, “I’d rather own 2% but be the CEO of a publicly traded company”), I don’t think that it is that clear cut. There is something to be said for building a business to a reasonable exit that creates a solid return for the capital that is already in the business, especially for a first-time entrepreneur.
• There are probably other perspectives on Parature’s story also worth considering (the old adage about “history is written by the victors”)

My key take aways

• Get yourself a Ching Ho. Invest time in finding and developing a relationship with those who could become real angels for your business: people with a depth of experience, a breadth of connections in the institutional investment world and a true coaching spirit.
• Focus on building your business. You will only get a great deal from VCs if they are coming after you, and best kind of traction is revenue, new customers, new deals. So don’t go waste your time chasing investors, focus on customer acquisition.
• Learn to be a great story teller. Duke has done loads for his business and for himself by learning how to tell their story, and connecting with audiences. At the end of the day, customers buy from people, investors invest in people, so if you can be persuasive, genuine and passionate, you’ve won half the battle already.

Today we tried the WeSpace in Lake Anne in Reston and it was a nice experience:

I met Andrew Nachison, the CEO of WeMedia who runs the space and he was helpful and welcoming…. I have high hopes that this space will attract a lot of entrepreneurs and deliver on the promise of coworking.

At $30/day, trying it is a risk-free proposition.

according to sources that have access to Google’s thinking, Larry and Sergey do not want anything that works outside of the Chrome browser, making Google in my mind the next AOL in thought process. Many will recall that AOL only wanted their users to live inside the AOL application and some things, like voice and video clients need to live elsewhere.

via VoIP Watch.

So for the uninitiated Voxeo prospect, here’s a diagram that I hope helps you figure out their how their products fit together.

It’s all mostly about finding out what kind of development style do you want to follow. Here’s a decision tree:

• I don’t want to program and my application is simple: Voxeo Designer and Evolution
• I don’t want to program and my application is sophisticated: Voxeo VoiceObjects
• I want to program:
• ….. in XML: Prophecy and Evolution
• ….. in a functional language such as Ruby or Python: Tropo
• ….. a high concurrency full-fledged telephony service in Java: Moho
• I just need a bunch of SIP or XMPP type-components: try PRISM
• I want to build a web-based application with Ribbit-style telephony in Flash or Javascript: Phono

The last twelve months of my professional life have been the most exhilirating, rewarding and challenging of my 11 year career. As I restlessly worked on Ringio, the most valuable lesson I learnt was: Never go it alone.

First I have two amazing partners: Ashish and Michael. Ashish brings a wealth of technical expertise, but more importantly, he is a no-nonsense commonsense decision maker and a tireless doer. Michael is a nuclear-powered dynamo, but more importantly, he knows what counts the most at each stage.

Without them, the business would probably be in bad shape. But they’re here, and that has meant the world to me.

Then there’s the team:

• Alberto Perez, without his leadership our engineering project would have never got off the ground or through the finish line
• Nico Nombela, his technical ideas underpinned the brilliant architecture of our service
• Alberto Vilches, whose mad skills and inventiveness made it possible to use so many leading edge technologies
• Mario Muñoz, who made it possible for us to have a great mobile application
• Quique Torres, who infected the team with his enthusiasm and passion
• Hwi Lee, who made one of the best interaction designs I’ve ever seen in a telephony product
• Jae Mun, who contributed a sharp visual design to all our interfaces
• Sukanya Thirthamattur, who tirelessly uncovered and whacked out bugs
• Gerry Preville, who accounted for every dollar and cent
• Joe Boyle, who made it possible to have proper legal documents
• Mike Sweeney, who put together a brilliant website
• Andy Abramson and the Comunicano team, who cheered for us and gave us a real persona with the media

Last but not least, all our investors, who trusted us with their hard-earned money with so little to show.

When I sit down and count all the people who have lent their ideas, their time, their passion and enthusiasm, their feedback… the lesson is clear. Business is a tough and lonely place, so never go it alone.

To all of you: thank you for making this dream a reality. Ringio Rocks!

If you head over to the EComm website you will see a very solid lineup of speakers and companies for the upcoming 4/19 San Francisco edition… as usual, Lee has come up with a fantastic schedule. I’m quite looking forward to attend this year, and here are some of my favorite talks:

• The Future of P2P — Eric Klinker (@ericklinker), the CEO of BitTorrent is going to cover how peer to peer communications are bound to change how we think about computation. I am a HUGE fan of BitTorrent and peer computing, so I have high hopes to learn a ton. I have high hopes that he will build the case for how much innovation can be had in business models with this technology.
• Social Sharing 2.0 — Jonathan Rosenberg, the Chief Scientist of Skype, is focusing on how much more we can expect from collaboration and sharing in the upcoming months. I’m excited about his talk because I see incredible potential in what Skype can become in creative environments. And because for years I’ve believed that we can use social software for more than sharing baby pictures, to get real work done.
• How to destroy a $700bn industry for fun and profit — Martin Geddes. Why? Because he’s Martin Geddes, one of the most lucid thinkers in telecom. You don’t know about Martin? Check out this video for a taste.
• From distraction to real life — Kristian Simsarian of IDEO touches on another fascinating subject. Starting from the observation that technology today fosters distractedness, he wonders if it will be possible for new paradigms such as Augmented Reality to help us “be more present where we are”. Plus nothing like a good AI professor to make you imagine.
• And then, there’s Wednesday, all devoted to AR, a field of which I know very little, “like a box of chocolates… you never know what you’re gonna get!”

Hope you can make it! Shoot me a line if you want to connect while in SF.

Just to give you a heads up… I am planning to make a big announcement in the next couple of days.

If you’re interested … stay tuned.

Sam

photo credit - user ruth flickr – creative commons

Definition:

fug [fuhg]  (n)

1. a very poorly thought out feature.

2. a bug so virtuous that it appears to some as a feature.

Etymology: coined circa 2010. From the fusion of “feature” and “bug”