Mattishness

How to Change the Ratio Now

noreply@blogger.com (Mathew Johnson) — Wed, 08 Feb 2017 01:46:00 +0000

One of our core values at 500 Startups is diversity and inclusion. It’s well-documented that women are dramatically underrepresented in the technology industry including startups and venture capital.

So in Silicon Valley today, how can you get 50/50 (or more) gender balance in a growing organization of 100+ people?

The technology industry pipeline problem exists for women with barriers at every life stage, from being discouraged to pursue math and science as children, to lack of support for balancing work and parenting as mid-career professionals and many steps between. No one can eliminate every source of structural discrimination overnight.

But what if you still want to change your organization today?

I manage the 500 Startups Growth Marketing and Series A team. Here’s what we do. It’s very simple.

We aim to hire the best candidate for the job and we focus 100% of our recruiting effort on women.

The nature of our work means that we have large industry networks and receive a consistent flow of high-quality people through referral. Logically, this inbound flow reflects the tech industry and growth-marketing average demographics. To counteract the averages, we primarily hire through active, outbound sourcing of referrals from our network and focus our effort on women. We work extremely hard to meet 3 or 4 women for every man when we are trying to add to our team. And this gets us very close to a 50/50 ratio.

Do this well enough and your organization will develop a reputation that precedes you. The most recent person we hired told me that she only considered joining after hearing from trusted friends about our commitment to diversity and inclusion.

I’ve described one method that we use to diversify our staff at 500 Startups, but here are many other dimensions to diversity and inclusion.

Changing the ratio is hard but it’s not complicated. Just start doing it.

You can follow me on Twitter here: https://twitter.com/matjohnson

Profit Pools in SaaS and Infrastructure

noreply@blogger.com (Mathew Johnson) — Fri, 27 Jan 2017 21:39:00 +0000

Much has been written about Network Effects and Platform Potential and New Monopolies in consumer and/or social products. It’s easy to understand how a marketplace like Airbnb or a messenger like Slack build defensible moats through network effects. It’s even fairly obvious how an infrastructure platform product like Segment can build self-reinforcing momentum that takes profit share away from their analytics partners.

Elsewhere in SaaS and infrastructure, it’s less clear which layers and products in the tech stack will be the ones that profit margin naturally flows to, and which layers will become commodities.

Opinion (and bets) within the sophisticated venture and startup community is always divided. In fact this question is one of the most central to venture investors: given equivalent funding and team quality, which products, approaches and categories have an unfair structural and strategic advantage?

I like to think of this question as analogous to core value investing concepts like Warren Buffet’s quip about preferring businesses that even ‘your idiot nephew could run’

For example, a very smart Series A investor I know told me a couple of years ago that he had a strong thesis that test automation services would tend towards commodity, but that margin and pricing power would pool around server monitoring services.

Smart investors in test-automation companies have a different thesis.

One reason that test automation products may tend toward commodity relative to monitoring products is that a series of passing test runs and successful code integrations does not generate the same uniquely valuable time-series data asset that server logs do.

As an investor, I follow analytics and BI products pretty closely. An interesting conversation that I have been having with experts recently is the relation between Amazon AWS products like Redshift and Quicksight and the current generation of venture-backed BI companies like Periscope, Chartio, Looker, and Domo. Many of these products pull customer data into Amazon Redshift and then build visualizations and dashboards from there. Now Amazon offers a similar native product: Quicksight. The platform and associated pricing power risk to these startups is obvious. The alternative thesis is that the Amazon product will always need to offer 100% configurability and complexity so won’t fulfill the fundamental promise of the startup BI products to democratize data analysis down from engineers to line business analysts and managers.

As in the first example, there are very smart venture investors on both sides of this bet.

The core value-investing literature on businesses with defensible moats and lasting franchise value with margins of safety from Buffet, Munger, Klarman, et al. provides amazing insight for venture investors operating in what appears superficially to be a completely different asset class. For further reading, some of the smartest writing on technology investing like Bill Gurley’s Above The Crowd and Tren Griffin’s 25IQ really connect the dots between the two disciplines.

You can follow me on Twitter here: https://twitter.com/matjohnson

Founders Are My Religion

noreply@blogger.com (Mathew Johnson) — Mon, 02 Jan 2017 01:13:00 +0000

My parents raised me atheist. The first time I attended a wedding, I felt deeply uncomfortable sitting in the church. I didn’t find my religion until last year and it took several years of experience as an investor to develop a way to articulate it.

I’ve come to realize that founders who I deeply believe in are my religion.

Charlie Munger and Warren Buffet say they like to invest in management teams they ‘love and admire’. I haven’t been able to get that phrase out of my head for years. George Zachary says he ‘backs revolutionaries who are changing the world’. I love that phrase too.

As an early stage venture investor, belief in the founder is really all I have. I back entrepreneurs at the beginning of many years of ups and downs. The product will change a lot, the market will change a lot, the customers will change a lot, the world will change a lot. I can’t predict any of that. What I can see today and what will continue to be true in the future is the grit of a founder and her ability to articulate a big vision.

At the end of the afternoon on Friday, the last business hour of the year, I met a friend whose company I backed. Five minutes after arriving, he had to step out and take a call to close one last deal for the year. When he came back, my friend told me his company had grown 50% in the last quarter and expected to grow 50% again next quarter on multiple millions of annual revenue. Definitely someone I love and admire.

Last month, I caught up with another CEO I backed. I invested a couple of years ago. His company has gotten to some scale and doing well, but ever since investing, I’ve thought that a major inflection point is always 4 to 6 months away. Still do. My job is to give the advice I can, but most of all to suspend disbelief, eliminate the doubts I can, and back the founder to the hilt.

Sometimes it takes a lot of effort and reflection and self work to steel my belief through the ups and downs in advance of sufficient proof. That helps make me the better person I’d like to be.

To kick off 2017, I’d like to thank the visionary, gritty founders who let us at 500 Startups join them on their hazardous journeys. You make me a better person. Thank you!

You can follow me on Twitter @matjohnson

2013 Tech IPOs - Healthy and Power Law Distribution

noreply@blogger.com (Mathew Johnson) — Wed, 25 Sep 2013 15:34:00 +0000

The tech IPO pipeline has been healthy through Q3 2013. 15 companies are now actively trading on US public markets at a collective market capitalization of over $20B at the time of writing. A number of notable venture-backed companies like Chegg, Violin Memory and RingCentral have not priced yet. This is plenty of public-market liquidity to keep the traditional technology venture and growth capital industry thriving. There is much talk of 'disruption' to the VC industry, but this discussion almost always only means changes in the seed-stage deal-sourcing environment. The back-end IPO market is healthy and consistent.

The most notable feature is the excess returns that accrue to the winners even within the select group of companies that IPO. Similar to 2012 when Facebook's market capitalization dwarfed the rest of the 2012 IPO companies, Twitter's estimated IPO value of around $15B compares favorably to the $20B of combined market cap of all tech IPOs through the first 3 quarters of this year.

Probability Vs Possibility

noreply@blogger.com (Mathew Johnson) — Tue, 24 Sep 2013 17:21:00 +0000

People who know me well know about my fierce and longstanding intellectual allegiance to Nassim Taleb of Fooled By Randomness and Anti-Fragile fame. I claim indie-fan cred for jumping on the bandwagon after reading the original Malcolm Gladwell article about his anti-fragile hedge fund, Empirica - before Black Swan was published.

Most people, lay, journalists, experts, economists still have a hard time with the difference between what's probable and what's possible.

Today, I noticed a small example from daily life, that almost anyone should be able to understand:

I was doing work on my laptop at a coffee shop this morning and had to use the bathroom. I thoughtfully waited until the bathroom was empty, then left my laptop on the table, got up, and made sure to return quickly. The time I was away wasn't more than 30 seconds. In this situation, I am quite confident that it is very unlikely - improbable - that someone steals my laptop, so I don't feel like it's a big risk.

However, this in no way makes it less possible for someone to steal my laptop while I am gone. Those 30 seconds could coincide with a thief coming into the shop just as easily as any other 30 seconds in the day. A thief who sat near me and waited and watched for me to get up with the express intent of stealing my laptop could easily take it. The possibility of theft is not reduced, even though I feel good about the low probability of theft occurring.

MSFTs New Office Suite

noreply@blogger.com (Mathew Johnson) — Mon, 05 Aug 2013 18:54:00 +0000

Microsoft’s new office suite:

Knowledge work has changed; it has become more oriented around communication, and less focused on document production.

Spreadsheets have become automated dashboards

Word documents have become living texts published on the web.

Powerpoint presentations have given way to live and recorded video talks.

The new office suite is made up of collaboration tools, not just new versions of solo-worker focused productivity apps. These types of apps are on the decline. The next 'word-processor' will probably look a lot more like Quip than like Word. Microsoft is refreshing its brand and cash cow boldly and correctly.

Ray Ozzie was ahead of the curve by bringing Groove into Microsoft and focusing on collaboration. Groove was just a little bit too wonky too early, and Ray did not have time for Microsoft style internal executive competition.

One aspect of the consumerization of enterprise technology has been the ability of workers to cherry-pick a set of the best products for their needs. This trend has created best of breed brand names with network effect businesses. These important companies rightly command premium valuations.

Microsoft has not shied away from placing large, accurate bets on acquisitions at non-consensus price levels. This strategy is going to pay off in a positive way for Microsoft’s continued leadership in its core markets.

Microsoft knows that, going forward, enterprise buyers will not settle for inferior copies of excellent and widely used category-winner software like Skype andYammer.

In the productivity market, Microsoft is executing on the investment thesis that only a few winning technology companies really matter, and those are worth a significant premium to their also-ran competition. The antilog M&A strategy is buying runners-up and market failures with good technology and teams and banking on pushing those products out through the acquirer's bigger channel. With app switching costs low, and network effects available to category winner collaboration apps, there is no reason to expect that losing collaboration products will suddenly outcompete winners due to a change in ownership.

This is the one strategy that a large, cash-generating incumbent can employ to avoid business disruption by new innovative startups: Buy the category-winning product and brands.

Pebble Watchface Tutorial - Arabic Numbers

noreply@blogger.com (Mathew Johnson) — Mon, 05 Aug 2013 17:23:00 +0000

I just created my first Pebble Watchface. I have had my Pebble since February, but it has taken me a little bit of time to think of a good idea for a Pebble Watchface that only required swapping image assets from an example Watchface. The idea: Big Arabic - Arabic-script numbers substituted for Western-script numbers in the Big Time example Watchface. The whole project took me 30 minutes, and I love my new, custom Watchface. Big Arabic looks like this:

First, I created a new project called 'Big Arabic' in CloudPebble, the dead-simple hosted Pebble App IDE. When I created the new project I chose to use the 'Big Time' template available in CloudPebble:

Second, I looked through the files and file structure pre-populated from my template. This is a really simple Watchface. All of the numbers for the Big Time template are individual PNGs that take up a quarter of the Pebble screen (72x84px.)

Next, I found a large image on the web containing Arabic-script numbers 0-9. I wanted to find the absolute simplest way to cut this image up into individual 1/4-Pebble number images, and found this easy tutorial on Preview in OSX: http://mac.tutsplus.com/tutorials/app-training/preview-os-xs-secret-weapon-image-editor/

I used Preview to generate 10 72x84 Arabic number images, then I went back to my CloudPebble project and replaced all of the number image resources with my new Arabic-script images. After this I went out on the web and found an icon-sized image of Arabic script, resized it to be the same size as the example menu icon in my CloudPebble project using Preview and replaced the example image with the new icon.

Last, I opened big_time.c in CloudPebble for the first time and made two changes to the code. First, I changed the display name within PBL_APP_INFO from "Big Time" to "Big Arabic". Second, because the original Big Time Watchface is white numbers on black background, and my Arabic number images are black numbers on white background, I changed window_set_background_color from GColorBlack to GColorWhite

After saving my changes in CloudPebble, I clicked over to the Compilation tab and ran a build. When the build completed, I got a short URL linking to my new Watchface, Big Arabic that i opened on my phone and loaded on to my Pebble.

Super-easy, fast and with barely any coding, I have a cool new custom Watchface. You can get it here yourself: http://builds.cloudpebble.net/4/2/42cc68d25c4c4a3bbe2ab3053dd05b1c/watchface.pbw

Next up, something more involved - I cannot wait for access to the accelerometer in the SDK.

VC as Talent Agency

noreply@blogger.com (Mathew Johnson) — Tue, 27 Nov 2012 17:07:00 +0000

There are two functions that I want to see a venture firm provide to portfolio companies that are new and atypical.

Most firms build their tribe of entrepreneurs and deal-referrers through social and educational events for portfolio executives, friends of the firm, and industry experts. These programs can be as simple as a backyard BBQ at a GP’s house or as structured as True University. Tools can be as low-tech as a CEO dinner, or as cutting-edge as private Q&A applications at 500Startups and First Round Capital. The primary result of these activities is brand building in the entrepreneurial community. The principal benefit is keeping a firm’s deal-flow network warm. This is vitally important, however, portfolio companies do not win or lose because of an expert talk on product/market fit.

Most firms can recommend a proven bookkeeper, or a known professional recruiter. Firm preference dictates whether services like these are presented as a suite of resources in the Andreessen Horowitz ‘talent agency’ model, or as a quieter more traditional referral in the Benchmark model. Further, good firms can provide business development and sales introductions.

The first function that I want to see offered to portfolio companies is a hiring process concierge. This is specifically not a professional recruiter function. Recruiters, whether paid by portfolio companies or by investors generally play a filter role. Entrepreneurs who are the best recruiters work the opposite way. They invest substantial time in identifying and actively pursuing potential hires at all levels. They take special care to examine a potential hire’s online presence and write long, thoughtful cold emails to prospective candidates selling the mission of the company and the potential fit for the candidate. I was recruited by Kevin Merritt to Blist/Socrata in this way. It is astonishingly effective. Most CEOs do not think they have the time for this and professional recruiters do not have the credibility among developers and technology professionals to execute this strategy. Under about 50 employees, founders don’t need a recruiter, they need a hiring process concierge who can research and ghost write prospecting communication for founders to send and then make sure that founders follow up with the best and most responsive candidates.

The second function that I want to see offered is infrastructure code, approach and decision sharing among portfolio companies. It is extremely common for startups around the time of their Series A to spend several months paying off technical debt and building out common infrastructure pieces like an internal user to user messaging system with cascade to email with user preferences or an automated test and deploy system with monitoring, zero down-time deploys, feature flags and A/B testing. Portfolio CTO get-togethers are not enough to prevent each company from having to reinvent its own wheel. Shared code repositories and cross-company educational code reviews that include integrations of third party components like payment providers would save expensive time.

Product Market Fit Poker

noreply@blogger.com (Mathew Johnson) — Fri, 02 Nov 2012 18:34:00 +0000

Product Market Fit Poker from Matt Johnson

Earlier this week, I was fortunate enough to be able to give a talk on Product/Market Fit (& Poker) at 500Startups. My (sparse) slides are embedded here.

When you are running a startup, each week, sprint, month or quarter you make an assessment about what cards you are holding and then choose how much to invest in either top-line growth and scaling, or 'figuring-it-out'. I like to think about each assessment and investment period as a hand of poker. The only problem is that it's generally not clear what cards you are holding.

The answer is measuring product/market fit. If the market is really ready for your product, then you should be pushing all of your chips into the middle of the table and scaling like crazy. If the market isn't quite that ready, you'd be a fool to do that. The trick is that measuring product/market fit is no easy task. Marc Andreessen, who coined the term, not only said that 'nothing else matters', but also that 'you know it when you see it'.

This difficulty has not stopped a number of smart and accomplished entrepreneurs, investors and marketers from developing a series of useful metrics and rules of thumb that get at the notion of product/market fit and can help entrepreneurs know what cards they are holding at each round of decisions and resource investments.

Thanks again to 500 for hosting me!

Venturebeat Cloud Security Roundup

noreply@blogger.com (Mathew Johnson) — Mon, 08 Oct 2012 18:20:00 +0000

I have a cloud-security round-up on Venturebeat today!:
http://venturebeat.com/2012/10/07/5-cloud-native-security-companies-to-watch/

Bromium, Authentic8 and the Cloud-Native Security Renaissance

noreply@blogger.com (Mathew Johnson) — Wed, 26 Sep 2012 03:48:00 +0000

Important advances in security are happening right now due to the large secular trends of virtualization everywhere and the aggressive unbundling of modern application development in the cloud. A few of the most exciting cloud-native security startups have just released the first versions of their core products in September 2012.

The way we build and run apps today on virtualized cloud infrastructure stitched together from many third party cloud service providers has dramatically changed the surface area of an application that needs to be secured, defended and monitored.

Today, up and down the stack, it's common for every component to be delivered as a third party service, from Typekit fonts - the icing on the presentation layer - to a managed DB service from MongoHQ. This trend builds on the third party services that are already a fait accompli: CDNs, app monitoring, exception logging, etc. All of these services, including your own core application logic are likely running on layers of virtualized hardware - usually Amazon AWS.

In general, third party services provide better security for your app because each third party provider can have a deeper knowledge of their domain, and can afford to focus all their attention on it, whereas if you managed that service yourself, you may not have the bandwidth to stay perfectly up to date on it. However, this general principle goes along with increased uncertainty. As a customer, you can't have perfect information about the precise security practices of any particular cloud service provider.

Excitingly, there has not yet been a new series of security company exits for companies that are truly native to the massive secular cloud and virtualization trends. Clearly, there will be, and soon. This is an investable trend right now.

I highlight a few of the most interesting new security companies that are truly cloud-native below:

Bromium puts a cloud of micro-VMs on your local machine, isolating each process within its own VM. This prevents malicious code entering from the browser to metastasize throughout your computer. Bromium just started shipping its first release vSentry focused on Windows 7 on September 20th 2012. Bromium has a blue chip team that previously founded Xen, and is capitalized to match, having raised over $35M from A16Z, Lightspeed, Ignition, Intel and Highland.

Also in September 2012, and at the other end of the incumbency spectrum, Qubes released an open source direct competitor to Bromium based on Linux. The Qubes developers are best known for devising some well-publicized virtualization exploits, and may not have any outside funding at all.

Instead of bringing the cloud to your desktop, Authentic8 is taking your browser to the cloud. Authentic8 just started letting consumers into its beta in September 2012. A8's disposable browser securely connects you to a browser instance in a newly created, isolated environment every time you start a new session and destroys that environment afterward. Virtual execution in the cloud keeps any malicious code from reaching your local machine. Like Bromium, A8 has a blue chip team that previously founded Postini, but has been far more measured in their approach to venture capital having announced only a single round from Foundry Group and Merus to date.

Tinfoil Security is one of the best cloud security examples of the consumerization of IT trend. Most development teams building web applications do not address security systematically. Instead security work tends to combine a loose set of best practices (hashing passwords, etc.) mostly implemented most of the time clustered around a particular employee with domain knowledge having the spare cycles to carve out the time to make a security enhancement. Tinfoil provides a simple third party web service that systematizes security monitoring for web apps in much the same way that CI tools have helped systematize the build process and reduce long stretches of broken builds.

Similarly, Netflix is known for building a tool called SecurityMonkey to systematize application security testing and monitoring across their infrastructure. While Netflix has made a loose promise to open source SecurityMonkey, a few engineers there are contributing to a parallel open source security-testing platform called Gauntlt. Gauntlt provides a platform and domain specific language to systematize the use of common security testing tools in the same way that popular deployment platforms like Chef let developers systematize deployment scripts that were previously run locally.

Obviously big companies are not standing still. Virtualization vendors like VMware have their own security offerings and older security companies are starting to pivot their product positioning towards these new kinds of cloud security issues.

Beyond putting a cloud of VMs on your computer like Bromium or putting your browser sessions in the cloud like Authentic8, Intel/McAfee and ARM are working on a third interesting category virtualized security product. DeepSafe from Intel creates a small VM as close to the hardware as possible that intends to provide a clean source of truth to compare the primary computing environment against in order to determine if it has been compromised by malware. Chipmaker ARM is building an identical product through a joint venture for ARM chips.

Of additional interest are Amazon's quiet experiments into doing some browser processing in the cloud with the Silk Browser installed on the Kindle Fire. While pitched as a performance upgrade, adding additional security resources in the cloud along the lines of Authentic8 would be a natural fit.

This post has been confined entirely to security for the cloud services trend, and has left out any discussion of mobile security, an equally large opportunity and the subject of a future post.

Growth Hacking Checklist

noreply@blogger.com (Mathew Johnson) — Tue, 25 Sep 2012 02:37:00 +0000

“My biggest surprise was when we launched the Facebook app and it didn’t go viral”

-Startup CEO quote

“The month after we decided to stop all marketing and put the product on auto-pilot was our biggest month ever”

-Startup engineer quote

Ok – what could anyone possibly say about Growth-Hacking that hasn’t already been said? What with high-profile startup bloggers Sean Ellis & Andrew Chen kicking things off, backed up by solid 30under30 prospects like Danielle Morrill, an honest to goodness GHIR at 500.co writing exceptional posts at Numerate Choir, a board on Quora and now even a multi-part series on Techcrunch .

I believe this discussion has come up and has been sustained by the fact that most startups are not thoughtful about their marketing, but the successful ones are.

Most startups rush into too many ‘standard’ marketing activities, and then only dabble in their consistent execution over time. This is very natural human behavior that successful companies and marketers must guard against. The psychology and results of this kind of unsuccessful marketing is exactly analogous to the many ways in which retail investors lose money in the stock market: short attention spans, emotional and irrational decision-making, and always an insufficient edge on the market.

Startups, please consider the entire attention and resource budget that you have allocated to marketing and distribution, audit all of your marketing activities against the qualities in this six-point checklist, then double-down on your most effective activities and prune the mediocre ones.

Marketing/Distribution/Growth-hacking Checklist:

Is this leveraged?

Just like you hope to establish a profitable business model for your company, you want to get more out of a marketing activity than you put in.

Content marketing? If your name isn’t KissMetrics, your own marketing team cannot hope to generate the velocity and volume of content and interaction that a community like Onstartups (Hubspot) or YouMoz (SEOmoz) can.

Building on Facebook? SocialCam saw a short window open in the Open Graph API that let them passively inject video links into your friends’ newsfeeds. A brace of competitors quickly copied this distribution leverage, but SocialCam went one better by overlaying the platform leverage of popular Youtube videos on top the existing Facebook platform leverage to create the CDO-Squared of distribution. Competitors were left pushing videos created by their own small user-base into the newsfeed until Facebook turned down the volume on that Open Graph channel.

Is this sustainable?

When Facebook detuned its Open Graph channel, all of the social video crowd were caught out and now require a re-think. Even SocialCam selling for $60M is a far cry from being one of the fastest growing companies of all time a few short months before.

Skype, on the other hand, shows that a company can ride virality for ten years and counting all the way up past 700M users with wholly-owned user relationships through multiple acquisitions and hairy legal wrangling. This is largely the result of network effects being at the product’s intrinsic core, and not hitching the company’s fortunes on an unreliable third-party social platform.

Like Skype, Dropbox’s famous referral scheme fits neatly in with its core product interaction: sharing documents across devices. Is your company counting on a referral program to drive a product that isn’t frequently referred?

Is this core to the product, brand and business model?

A product doesn’t need to be a core communication utility or social network to build a long-term sustainable leveraged growth machine.

Surveymonkey has done just that to the tune of $1B valued on business fundamentals. Surveymonkey’s business model aligns its own goals with those of its customers. While even passionate Dropbox customers might prefer to pay less for the service, Surveymonkey customers would like nothing better than to pay Surveymonkey more money, because it would mean that they had a bigger email list to market to.

Zappo’s isn’t even a company that helps one party send email to another, but their primary marketing tactic was a counter-intuitive growth hack as good as any other. Free shipping and returns let Zappo’s wage asymmetric warfare against incumbent shoe sellers. By taking on this additional cost structure, Zappo’s did not have to outbid competitors for scarce ad inventory and could grow by word-of-mouth instead. In other words, you need to have a clear and concrete reason for people to retweet or like, not just the buttons to do so.

Is there a unique insight or special edge that we have?

The harsh light of ad-buying and paid customer acquisition illustrates this issue clearly.

Whaleshark Media is a roll-up of many of the largest online coupon and affiliate sites on the web. By virtue of scale, Whaleshark can negotiate the best affiliate payouts from affiliate networks and merchants. In some cases this means that Whaleshark sites can offer coupons with larger discounts than smaller competing deal sites. This also means that Whaleshark can spend more on paid advertising than a smaller site and still be right-side up. If you are competing with this kind of structural advantage, you had better be sure that you have a different advantage that outweighs this.

Similarly, Instagram’s unique insight and competitive advantage was pure craft and design. Other mobile photo apps had the same features, but were obviously less well crafted so there was no reason to use them. In effect, other photo apps brought knives to Instagram’s gun fight. This is the simplest point, but also one of the most important. As a hypothetical, if your web startup is launching a mobile app and you don’t invest enough for the fit and finish to rival other successful apps, the rising tide of mobile will not automatically lift your boat.

Is this measurable and able to be optimized and evolved over time?

One-time arbitrage opportunities and market insights tend to disappear quickly as competitors catch up and consumers get over-supplied. The path forward from success is continued optimization.

One of Zynga’s main competitive advantages over other social game publisher is its ability to cross-promote a new game to the audience of its older games. This advantage helps Zynga get new titles to scale before older game titles start to lose the interest of their players. Since games tend to go out of style relatively quickly and the Facebook platform ecosystem is always changing, Zynga needs to keep measuring and tweaking the promotion strategy and mechanics for each new game. Without measurement and improvement, Zynga would not have been able to sustain its string of hit social games.

Whitepages.com is a very large web property that spends millions of dollars each month on paid search. Like many companies, their initial SEM cost is not initially profitable based on first transactions. Whitepages’s search spend only goes into the black if some new customers acquired via search marketing return for a second monetization event without a second paid click. Without measuring and optimizing for retention, one of Whitepages primary customer acquisition channels would be entirely closed off and the company would be much less viable.

If this works, will it lead to success?

One of my favorite thought exercises for growth-hacking and marketing is to ask what future success looks like for the company, and then work backwards to assess whether a particular marketing activity can credibly get the company there. For example, if your company has raised high single digit millions in venture money or more, you should be thinking about marketing activities that, if everything goes right, could build a business worth $100M or more. Small-bore marketing activities are the single biggest mistake that I see startup marketers make. Ad buying provides an excellent example. For most online businesses, it’s not credible to believe any amount of ad inventory will get your company to $100M. If you are tacking on a basic social media strategy of blogging, Tweeting, Facebook page updates and ‘share this’ buttons, it’s highly unlikely that this effort will contribute to building a large and special business.

In the day to day cut and thrust of startup operations, please take a more than usually critical eye to all of your marketing and growth strategies and spend your scarce time on activities that are leveraged, sustainable, and core to your product promise and function.

Like this? Email me at mathewgjohnson ‘AT’ gmail, or find me at http://mattishness.com/ or Twitter @matjohnson

Getting a startup job business guy edition

noreply@blogger.com (Mathew Johnson) — Tue, 04 Sep 2012 18:15:00 +0000

First new post in two years. This is just a short one to hopefully break the ice.

Today, a friend introduced me to a smart young business guy looking to get into the startup world. This is the advice I gave him.

Of course, the best way to break in is to start your own company. Even Y-Combinator has begun accepting fairly non-technical people from business schools as part of teams that also have some technical chops. In reality, many people don't want to go this route, or don't feel comfortable with it and want to get their foot in the door as an employee first.

If this is the case and depending on your resume, I think the best plan right now would be to either join a small company more on the order of 10 employees in general marketing, or join a larger startup company in sales or finance/accounting. In either case, the goal is to find a way to add tangible, unique and valuable work product.

In a small company, marketing is kind of a catch-all for everything that is not writing code, so there are a bunch of different things that you can do to help out.

I would actually look at sales or accounting more closely. The goal here is to put a succinct example of quantifiable success at a successful company on your resume. For example, if in 6 months you could say: I was the top producing rep at Twitter or Box.net or Yammer or something like that, then you'd have a really good story to leverage into other more interesting jobs. Additionally, right now enterprise SaaS companies are a really big deal and repeatable sales success is their biggest problem, so I think that now is a particularly good time for sales to be an entry-point.

On the finance/accounting/risk side, I think that there are a lot of jobs, but not too large a pool of qualified applicants in the industry. For instance places like Zynga and Square have a lot of need for these people, but I have only ever met a few people in the industry who do this.

Starve Yourself To Get Lean

noreply@blogger.com (Mathew Johnson) — Tue, 16 Mar 2010 19:16:00 +0000

What is waste and how to find it? Lean in the large definition as well as in the more narrow lean start-up definition is first and foremost about reducing waste. Well, what is waste and how do you find it anyway?

One of the best ways to learn what is, and isn’t, waste is by imposing constraints on your start-up and starving yourself of resources that are non-essential. Once you start cutting things out, you'll likely find that you can move much faster in general and apply your new-found speed to reducing cycle time increasing the pace of validated learning about customers.

So what are some examples of good constraints to try out? Here are 10 great ones I've culled from other people and my own experience:

Pretend you only have an MVP and that's the whole business. Later on, you will want to sell your MVP to earlyvangelists with your big vision, but think about how much feedback you get about your core value prop by presenting an MVP as a going concern.
Pretend you didn't raise that much money and put most of it in an account that requires board approval to access.
Pretend you don't have engineering resources available so you have to duct-tape a business process together from several existing websites and services like Wordpress, Wufoo and a Paypal button.
Pretend you don’t have design resources or ability so you make your own logo in Powerpoint and Picnik with a cool font from Dafont.
Pretend you have zero sysadmin skillz. You can prove a great deal of business success deploying your Rails app on Heroku before it makes economic sense to take on that responsibility yourself.
Pretend you can only use free or open-source products. Instead of Adobe products, use Aviary, Inkscape or Paint.net
Pretend you have tons of users but no testers or QA department. If that were true, it really pays to have developed a strong core competency in automated Selenium testing, and incremental cluster deployments.
Pretend you have no other people but need a sales department. Gurbaksh Chahal didn’t let being one-teenager shop hold him back when he needed a VP of Sales, he just invented a new name to handle big accounts himself.
Pretend your coworkers are a full day different even though they may not be. Think how much more sloppily you can communicate when you’re sitting right next to your teammates than if they were a timezone (or 9) away. Elancers know this. 37Signals knows this.
Pretend you have no domain experience. This is perhaps the most important and the hardest to pull off for smart people with vision who do have experience. You may have sold a similar product with a different name and brand perception into a similar market in a different year in a different part of the business cycle in a different funding environment – but each of those things on its own is enough to completely change your start-up outcome.

Whatever you think you need, there’s a ton of value in pretending you don’t have it and can’t get it – and then going ahead solving your problem anyway.
This post was largely inspired by Auren Hoffman's Kill things to grow post.

Audition: Pitching Hacks for Actors

noreply@blogger.com (Mathew Johnson) — Wed, 13 Jan 2010 05:44:00 +0000

Audition: Pitching Hacks for Actors

When you pitch your company or idea to potential investors, in large part, you are pitching yourself. You are auditioning. Fortunately, there's a book for that: Audition, everything an actor needs to know to get the part, by the guy who cast The Graduate, full of great dialog from actual auditions.

Actors can pitch; Matt Damon could raise VC any day

Some gems from Audition:

"What are you fighting for? The actor must find a positive motivation, since it will serve him in a more forceful, stronger, more emotional way than a negative choice will."

"Do you know what I saw? An actress looking down at the floor, standing pigeon-toed, whom I couldn't hear. An actress who seemed full and half-dead, spiritless, with no humor, no charm, no appeal. Do you expect me to hire such an actress for my play?"

"You are going to have big trouble being an actor, with all the limitations you set for yourself. Can't you expand your concepts about yourself?"

"The more discoveries you make in a scene, the more interesting your scene will be."

"Communication's not easy.We all tend to be lazy, thinking "Well I said it and it's his fault if he doesn't get it.""

"Particular attention should be paid to a fact: virtually no actor is too loud."

"What do auditors expect from a reading? An opening night performance, that's all."

Buy the book, already!

Mostly On Twitter These Days

noreply@blogger.com (Mathew Johnson) — Tue, 10 Nov 2009 19:41:00 +0000

follow me on Twitter

Mathew Johnson

noreply@blogger.com (Mathew Johnson) — Wed, 28 Oct 2009 19:51:00 +0000

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."