Mattishness

The Airline Business - JetBlue RPU

noreply@blogger.com (Mathew Johnson) — Thu, 19 Mar 2009 02:44:00 +0000

Be glad you (likely) work in technology. I spent a few minutes tonight poking around JetBlue's 2008 10-K filing. I was interested in distilling down a revenue-per-user (RPU) number for the airline. I have mentioned JetBlue unwittingly helping a domainer before. And while the new T5 at JFK is a giant step up in overall quality, execution, usability and plain old logic & reason compared to anything else at JFK, I whole-heartedly agree with Patrick Smith's T5 assessment on AskThePilot.

But back to the numbers:

JetBlue reported $3.39B in 2008 revenue, or ~$9.3M per day.
JetBlue has 600 flights per day, so that's
About $15,500 per flight.
JetBlue flies 107 A320s with ~150 seats and 35 Embraer 190s with ~100 seats.
Assuming 120 purchased seats per flight:
JetBlue makes an average of ~$130 per seat purchased,
Which is about in-line with getting a good deal on an airfare.

$15,000 sounds pretty cheap to fuel up the plane, stock it with service items, get the people on-board, fly them somewhere, land, get all the people off, and pay the salaries of the gate agents and flight-crew - to say nothing of maintenance, depreciation, and capital costs.

Canting Carbon Goodness

noreply@blogger.com (Mathew Johnson) — Mon, 09 Mar 2009 16:46:00 +0000

Ad Of The Day: Toothless Alcoholic

noreply@blogger.com (Mathew Johnson) — Fri, 06 Mar 2009 05:54:00 +0000

Another datapoint to support my 'CPMs have really crashed' hypothesis: An ad on the NYT for the Toothless Alcoholic blog:

The Billion Dollar Cat

noreply@blogger.com (Mathew Johnson) — Wed, 04 Mar 2009 19:14:00 +0000

You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets. “They created fake capital by trading assets amongst themselves at inflated values,”

-Michael Lewis in Vanity Fair

SaaS Platforms and Force.com

noreply@blogger.com (Mathew Johnson) — Wed, 04 Feb 2009 18:13:00 +0000

* What are the major differences between Force.com and the old App Exchange?

The primary evolution from AppExchange to Force.com Platform is towards more flexibility. AppExchange was focused around helping developers design and sell very constrained applications with a small amount of customization – particularly to provide some vertically focused features. Force.com aims to generalize their cloud offering and compete more closely with Amazon AWS in letting strong developers do more fully custom development on the SFdC platform.

* How will custom cloud apps help organizations?

Clearly there are some significant gains in deployment effort and maintenance cost with cloud apps. The important issue is the ‘custom’ part – an app in the cloud can reduce IT setup times and capital expenditure.

All cloud platforms offer differing levels of flexibility – very flexible platforms like Amazon AWS don’t cut down too terribly much on development and deployment effort. Easier platforms can be faster to develop on, but have more constraints and may not fit your requirements as well, or might even introduce additional necessary development workaround because of their constraints.
Force.com is an intermediate platform that still requires substantial custom development costs for any serious application. Intuit’s Quickbase platform is also in this category.

Platforms that still require some explicit app-building, but are aimed at end-users include Longjump and Coghead, these have not hit a receptive market because they are too difficult for non-technical users, and too constrained for developers.

End-user focused platforms – especially ones that also include APIs like Blist and DabbleDB let end users who are mostly just comfortable with spreadsheets build relational database backed applications themselves, but also let developers leverage the backend in the cloud for real customization. This allows for much greater cost savings because you don't need to pay for custom development up front until you really need it.

There is, however, a sweet spot for platforms like Force.com that requires and includes custom software developers/consultants, but allow for somewhat lighter-weight and cost custom application projects.

* Do businesses really want to host their apps with Salesforce?

Just being in the cloud does not really address the development cost and the development aspect of time to deployment. Cloud apps may not interface as closely with your legacy data and databases for integrating interesting BI data. This will be the longer-term hurdle for adoption.
Of course, today the largest barrier to adoption is perceived security and control. While under normal circumstances a public company like Salesforce.com will store your data securely and recover if necessary, in unforeseeable ‘black swan’ events – you can lose control of data hosted by large, politically-targetable 3rd parties – for example Google handing over data to the government of China.

* Does the impact of the change depend on the size of your
business? Can both small and big business take advantage?"

Both large and small business can take advantage of custom cloud apps, but Force.com apps work better for large companies that already have internal IT departments and existing budget for IT consulting. For smaller businesses without these resources, end-user focused applications like Blist or DabbleDB are a better fit.

Lexulous - My Best Opening

noreply@blogger.com (Mathew Johnson) — Sun, 25 Jan 2009 18:36:00 +0000

My best opening in Lexulous so far; I got really lucky:
WIREhAIR with a blank for the 'H': Bingo + Opening Double + Triple Word for 116 points:

Camano Sunset

noreply@blogger.com (Mathew Johnson) — Tue, 20 Jan 2009 16:11:00 +0000

Good Lazy - Markus Frind

noreply@blogger.com (Mathew Johnson) — Wed, 14 Jan 2009 01:53:00 +0000

Markus Frind has a great 'philosophy' post up reflecting on his recent Inc. profile - just for one:

"2. The only way to grow a site once its running its self is to have brilliant ideas. Great ideas don’t come from sitting in front of the computer screen for 8 hours of the day wondering what to do next. You have to inspired or have a really deep understanding of what is going on. So a Brilliant idea may start a business but you need to have many many more brilliant ideas if you are going to go from one of many to an industry leader."

Obama Donor List Change.Gov Links

noreply@blogger.com (Mathew Johnson) — Fri, 09 Jan 2009 23:03:00 +0000

We got a flurry of links related to the Obama transition team using a blist widget to publish their donor records. Here are some of them:

http://politicalticker.blogs.cnn.com/2009/01/05/obama-team-releases-list-of-donors-to-transition/
http://twitter.com/huffpost/statuses/1097512477
http://www.boston.com/news/politics/politicalintelligence/2009/01/obama_updates_i.html
http://www.cbsnews.com/blogs/2009/01/05/politics/politicalhotsheet/entry4699347.shtml
http://voices.washingtonpost.com/the-trail/2009/01/05/obama_transition_raised_38_mil.html?wprss=the-trail
http://iowaindependent.com/10223/obama-transition-releases-donors
http://uk.reuters.com/article/usPoliticsNews/idUKTRE50442F20090105?pageNumber=1&virtualBrandChannel=0&sp=true
http://blog.digitalbackcountry.com/2009/01/barak-obama-using-a-flex-application-on-changegov/
http://www.xconomy.com/seattle/2009/01/06/how-blist-got-involved-with-obama-the-inside-story/
http://www.techflash.com/venture/Roundup37098359.html
http://venturebeat.com/2009/01/05/spreadsheet-startup-blist-shares-list-of-obamas-donors/
http://techdailydose.nationaljournal.com/2009/01/obama-embraces-seattle-startup.php

Ad Of The Day: Magic Web 2.0 to Web 3.0 Converter

noreply@blogger.com (Mathew Johnson) — Mon, 29 Dec 2008 20:15:00 +0000

Nice Work Momentum Design Lab; WTF does that mean?

Public Infrastructure and Entrepreneurship

noreply@blogger.com (Mathew Johnson) — Sat, 06 Dec 2008 19:03:00 +0000

As a political progressive in a entrepreneurial industry I am often frustrated by the myopic, Republican "small business" and entrepreneur faction continually beating the facile drum of tax cuts and small government. This is counterproductive to the noble venture of entrepreneurialism.

This morning I was heartened and inspired by Barack Obama's public works and infrastructure pledge.

Nothing could be better for long term economic growth and continued American leadership in innovation than a broad range of infrastructure improvements. Think of it as outsourcing your costs, focusing on your core business proposition, getting a subsidy and a research grant all in one.

Consider this, according to McKinsey: "Health insurance expenses are the fastest growing cost component for employers. Unless something changes dramatically, health insurance costs will overtake profits by 2008." If employers didn't have to worry about paying and administering employee health-care plans, you would not only have more free cash to go around, but you would have more attention to devote to excelling at your business's core competency. What's more, employees and entrepreneurs who were secure in health coverage that was not tied to their employer would be much more willing to take a flier, start a company, or even merely create more liquidity in the labor pool by reducing the transaction costs of switching jobs.

How about investment in education? Toyota, renowned for business process acumen, prefers to site new factories in Canada instead of the Southern United States not only because of the healthcare advantage, but also because of the education advantage - better educated and trained workers lead to a long term productivity and quality advantage.

This same effect has been well documented at a larger scale in descriptions of the concentration of innovation, wealth creation, and education in the coastal cities of the United States West coast, and Northeast, like Richard Florida's various Creative Class work.

Not coincidentally, it is these same cities that invest the most in public infrastructure. Just for instance, despite substantial room for improvement, voters in Seattle uniformly pass each new parks and school levy that shows up on the local ballot.

Which brings us to transportation infrastructure. No one benefits more from better transportation than businesses. If employees have low-stress commutes (reading on the train, etc.), they are liable to be more productive, and generally appreciate their current 'life situation' more than if they have to fight an hour of aggressive traffic. Obviously, traffic delays have a huge opportunity cost in terms of employee time as well, even leaving aside environmental externalities. If you deliver physical goods to customers, getting purchased items delivered faster and at lower cost is central to delighting your customers. And this leaves out public investment in faster and more extensive broadband infrastructure to grease the wheels of more and richer internet services.

Moreover, public focus and investment in kick-starting cleantech and green energy innovation will give the next wave entrepreneurial innovation and wealth creation the same catalyst that the cold war and defense spending contributed to the genesis of silicon valley.

Nothing short of a 1999-style IPO market could be better for entrepreneurialism than Obama's public infrastructure investment plan.

GetRichSlowly - BEFORE you get laid off

noreply@blogger.com (Mathew Johnson) — Thu, 04 Dec 2008 17:16:00 +0000

Kevin has an awesome post up on 10 vital things to do before you get laid off at GetRichSlowly - please vote it up!

Weak

noreply@blogger.com (Mathew Johnson) — Tue, 25 Nov 2008 07:53:00 +0000

Britney Spears Circus Album Imeem

noreply@blogger.com (Mathew Johnson) — Mon, 24 Nov 2008 22:28:00 +0000

Britney Spears - Circus

Reservations About Kiva Gifts

noreply@blogger.com (Mathew Johnson) — Sun, 16 Nov 2008 22:39:00 +0000

One of my friends wrote me today for advice on Kiva. Please comment here with your thoughts. For context, my friend does research on sustainable fisheries in the Philippines, so she knows what she's talking about:

Matt,
I'm interested in giving my family 'presents' in the form of money to spend on Kiva, but I really want to make sure that the projects Kiva supports/advertises are 'good'. They should be sustainable! I've heard lots of nightmares about lending programs from developed to developing countries and seen 1st hand the destruction they cause when, for example, rural, uneducated people get 'loans' to 'develop' and really don't realize they will have to pay the money back in the end. That is much more of a World Bank model and Kiva seems to be better at that, but when I found this http://www.kiva.org/app.php?page=businesses&action=about&id=73470&_tpos=f&_tpg=h I started to wonder again. Tell me if you can see why I think this is a very bad idea.

I think that the idea of microfinance is great, but I'm not convinced that it works yet. All these devleoped country people who feel great having contributed to what they think is a worthy cause may just be contributing to the ultimate demise of the people they thought they were helping.

Do you know of any other organizations that have a better 'sustainability' check on the programs they support?

Thanks

Layoff to Jackpot

noreply@blogger.com (Mathew Johnson) — Sat, 15 Nov 2008 19:18:00 +0000

I just overheard a great quick story in the barbershop this morning. The woman sitting next to me getting her hair cut told the woman cutting her hair that her mom got laid off from Boeing, moved to Reno and got a job in a casino. Casinos pay employees weekly because there's such high turnover. The day the mom got her fist pay check, one week after starting, she asked her boss if she was allowed to gamble in the casino. her boss said no, employees aren't allowed to gamble in the casino, so she took her paycheck across the street to another casino, hit the royal flush on video poker, won $375K, walked back across the street and quit. Her boss said that people sure do turnover pretty quickly, but usually that quickly.

Black Friday Deals on blist

noreply@blogger.com (Mathew Johnson) — Fri, 14 Nov 2008 23:24:00 +0000

Now you can track 2008 Black Friday deals on blist, search for specific deals, stores, or items and ultimately save money. This data will be continuously updated as new deals get found and surfaced:

Black-Friday-2008
Black-Friday-2008
Powered by blist

Grab this Black Friday widget yourself and post it on your blog by clicking the 'publish this blist' button at the bottom of the widget.

blist lets you take data that is available on websites, squish it down to the essentials, and leave out all the junk that you don't care about.

Dalai Lama Via Pico Iyer

noreply@blogger.com (Mathew Johnson) — Wed, 05 Nov 2008 18:11:00 +0000

"It’s no good offering people peace if those same people lack food and water; and it’s no good offering them food and water if our forests and rivers are polluted. It’s no good, even, to clean up our environment if we’re still polluted within. In short, the solution to all of our problems, economic, environmental, political, spiritual, can only be addressed by going back to the fundamentals. Reforms on the surface make no difference whatsoever."

The Dalai Lama via Pico Iyer in The Open Road

Great book - highly recommended.

I'll be at Defragcon Nov 3 and 4

noreply@blogger.com (Mathew Johnson) — Sun, 02 Nov 2008 21:10:00 +0000

I'll be at Defragcon tomorrow and Tuesday November 3rd and 4th with lots of smart, cool people in Denver.

Kevin will be speaking on the democratization of data.

Kransekake - The Best Recipe

noreply@blogger.com (Mathew Johnson) — Tue, 28 Oct 2008 17:15:00 +0000

I made Kransekake - or 'Norwegian wedding cake' - last night. In Danish it's spelled Kransekage. The best and simplest reference recipe is this one from the Sons of Norway. I love Kransekake because it's both a tasty dessert and a hearty breakfast.

Complexity Toyota Lean Startups

noreply@blogger.com (Mathew Johnson) — Tue, 21 Oct 2008 23:41:00 +0000

Venturehacks has a wonderful post today on lessons that startups can learn from Toyota to help them cut out paralyzing complexity and get lean:

Summary: “Lean” is the most capital-efficient way to run a business. Lean is the never-ending process of eliminating waste: finding every activity that does not create value for the customer and eliminating it. The two greatest wastes are overproduction (making things the customer doesn’t want) and inventory (making things that aren’t used immediately).

Bessemer SaaS Law #10

noreply@blogger.com (Mathew Johnson) — Fri, 17 Oct 2008 20:43:00 +0000

Bessemer SaaS Law #10. Be prepared to cross the desert - SaaS requires R&D and sales expense up front for a multi-year stream of revenue, so it demands enough investment capital to fund 4+ years of runway. Load up for the long trip and pace your consumption of calories!

There is no denying that the cash flow characteristics of a SaaS business are wonderful in the long term, but lousy in the short term. The traditional software model with $100,000-$1 million licensed software and “net 60” payment terms presents a far rosier cash flow picture than monthly subscription streams of $5,000-50,000. This means SaaS companies must have impeccable financial stewardship. There have been many promising SaaS startups that stepped on the gas too early and were wiped out as a result. Always model the business with a comfortable cash cushion and recognize that
most SaaS businesses paradoxically consume more short-term cash if you start growing faster.

As a business, it is critical to weigh forward investments carefully. SaaS businesses typically require multiple rounds of investment and a good amount of capital. For example, it took $126m to NetSuite to go public, $66m for DemandTec, $61m for Salesforce and $45m for SuccessFactors. We believe that the best of the second generation SaaS businesses may be more efficient than many of these predecessors, but in almost all cases, significant capital will be required to build a dominant SaaS business.

As you grow the business, you should also constantly trade off cash vs. growth. If you must replenish supplies while still crossing the desert – and most SaaS businesses will need to raise multiple rounds of funding - optimize your growth rate (sales rep recruitment and marketing spending) so that you maximize your CMRR when you need to fundraise next. As private investors and public acquirers become more SaaS savvy, multiples of CMRR will likely become the primary valuation metric.

Full Index

Bessemer SaaS Law #9

noreply@blogger.com (Mathew Johnson) — Fri, 17 Oct 2008 20:41:00 +0000

Bessemer SaaS Law #9. The most important part of Software-as-a-Service isn’t “Software” it’s “Service”!

One of the most valuable and least appreciated assets of a SaaS business is the detailed usage data of your customers. For years, product marketing and product management groups in license software businesses have attempted to guess at the behavior of their customers. Good PM’s would interview, survey, and even watch their customers as they used the product, but it was very hard to truly know how they were using the product on a detailed level and incorporate this feedback in the major annual releases. SaaS businesses should instead learn from their consumer internet peers, and the user interaction methodologies of businesses like Google, Apple, Yahoo, LinkedIn, Yelp, Facebook, and others. These businesses are constantly taking advantage of their web application architecture to analyze detailed customer usage data, a/b test variations, iterate on small details of a page or a feature, and evolve the product each and every day. There are three levels of being Service Savvy, and SaaS businesses should strive for all three:

1) Basic proactive monitoring for likely churn or up-sell opportunities – this is too simple not to do, and all SaaS businesses should do this well. You already know who logs into your product, how often, what they do inside the product, and what results they achieved. So now you need to track the key usage metrics and measures, and create internal dashboards to know which customers are getting the most value (potential up-sell candidates!) and which are likely to churn (time to proactively intervene!). Work with your marketing team to automate “low usage” reports internally, and low usage escalation emails to your customers to ask them for an explanation of the behavioral changes.

2) Rapid testing and development cycles of your application based on customer feedback. Lookat what your customers are doing in the product, not what they tell you they’re doing. Look at which pages, features, and sub-components are getting the most active usage and why. Look at the outliers and understand whether there exist some interesting additional opportunities.

3) Analyze the aggregated data to determine best practices and benchmarks across your
customers. You can actually add value to your customers businesses by making them better in your product, and your product better by watching your best customers.
The other subtlety of a service offering is that customers have to be able to use the offering in production to recognize its value, and for your business to convert CMRR to MRR and GAAP revenue.

This implementation time is measured as the time from the day you acquire a new order until the day it goes into production. You want this lag to be as short as possible, and growth in this number is a strong leading indicator of possible product and/or implementation problems. Prudent SaaS companies have made wise investments in process and technology to make this time as short as possible. These investments span the range of simple items like streamlining workflows and improving user training to fully automated self-provisioning models that allow turn ups to happen without human intervention. As a general rule, the higher your price point the lower the need for automated provisioning and the lower your price point the higher the need. A fairly typical implementation range for SMB focused SaaS providers is 0-60 days, and enterprise focused offerings typically range from 2-4 months. Although “average implementation time” is typically not a key executive metric, it should be tracked as a second level metric and promoted as a primary metric if you are out of range or the trends are inappropriate.

Full Index

Bessemer SaaS Law #8

noreply@blogger.com (Mathew Johnson) — Fri, 17 Oct 2008 20:39:00 +0000

Bessemer SaaS Law #8. Single instance, multi-tenant, single datacenter - Have only one
version of the code in production. Really. “Just say no” to on-premise deployments.

This is a guiding architectural principle for best-of-breed SaaS companies. The notion of a multi- instance, single tenant offering should only apply to legacy software companies moving to a dedicated hosting model because they don’t have the luxury of an architectural re-design. It is possible to use virtualization to provide multiple instances, but this hybrid strategy will make your engineering team much more expensive and much less nimble. If designing a SaaS product out of the gate, the best situation is single instance, multi-tenant. There are hybrid models that have worked, but in general it is a hard and fast law that should not be debated and we will leave
the hybrids to the “clean tech” entrepreneurs. The same can typically be said about a single global data center. You want to leverage your core infrastructure as much as possible, even when expanding internationally for as long as possible. You should invest early in backup and disaster recovery, but stick to one data center as long as
possible and at least past $2M CMRR. SaaS companies have this debate all the time, and yet the recent data is pretty clear: most SaaS companies can get by with a single datacenter in North America until well past their IPO. In fact, Salesforce.com is passing $1 billion in revenue and announced plans for additional datacenters only a year ago.

Data centers are extremely expensive and create significant organizational complexity on every level. Many of the historical issues around data backup, disaster recovery, and global application latency that caused companies to add a second datacenter can also now be better addressed in other ways.

With a single code base in North America, it will obviously make it much more difficult to sell a SaaS deal to foreign governments or defense departments (yet another reason why the Swiss military probably won’t be a beta customer for you!), but focus is a good thing. You still have the vast majority of the global market available to you, and the macro trends are only moving even more in your direction.

It really does add a lot of overhead cost and operational complexity that is hard to absorb unless the business is at scale…meaning typically $2M++ of CMRR. And when you do open a second facility make sure it’s funded by customers, typically as part of a broad international expansion.

Full Index

Bessemer SaaS Law #7

noreply@blogger.com (Mathew Johnson) — Fri, 17 Oct 2008 20:37:00 +0000

Bessemer SaaS Law #7. Stay local - Prove your business in North America first. Only after reaching $1M in CMRR should you consider hiring European sales and services execs
behind customer demand. Save Asia for post-IPO.

Almost all businesses will look to go global at some point if they continue to grow. But SaaS vendors face more barriers to globalization than traditional software companies because you can’t just localize the UI and ship a new CD to some remote country. Given the different architecture and high service level expectations in the SaaS industry, companies are faced with questions about latency, data access and security through replicated local datacenters, in-country customer support personnel, packaged integration with other regional software and SaaS products, and other similar issues.

Simply put, North America is a massive market with a rising tide around SaaS. There is no need to go global early and force this cost and complexity upon your organization. In most SaaS sub- markets, we find that Europe is roughly three years behind the US in adoption, and Asia is slightly behind Europe – although we have recently seen some interesting pockets of activity in Japan and India that may be accelerating. A rough rule of thumb is that you should look to pass $1M CMRR ($12M Annual Contract Value) before even considering Europe, and even then you should let customer deals pull you into the region as you incrementally hire sales and services professionals. Unless you have some extremely unfair advantage in Asia, wait until Europe is a clear home run before even considering opening up a sales war on another front. Your default position should be to consider Europe as your pre-IPO growth story, and Asia only after you’re a high-flying public company.

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