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The Billion Dollar Aqui-hire of David Karp

Charlie O'Donnell — Mon, 20 May 2013 11:01:51 +0000

You can do the math on Tumblr's pageviews, throw in some expected CPM, weighted average cost of capital, and try to justify the billion dollars that Yahoo! is spending on Tumblr.

I think you'd be kidding yourself if that's what this was all about. The Tumblr community isn't going anywhere, but that's not the asset Yahoo! bought. It will be run on it's own and probably not touched too much.

If you're spending a billion dollars on something, you have to be taking the long view--and I don't think we'll be sitting here ten years from now focused on display ads on webpages. At least, I hope not anyway. I hope by then someone will have figured out something more interesting. The next ten years of the internet will be one by great product minds.

Great product minds don't work by committee. Like the great Steve Jobs, all roads lead to one, singular decision maker with not just a vision, but an uncomprimising one. The iPhone was a revolutionary product because of all the prototypes Jobs probably threw against walls until people got it right.

How many web entrepreneurs in their early 20's would have ignored Fred Wilson when he said they should include comments in their blogging platform early on?

Answer: One... David Karp.

In December of 2007, I wrote the following e-mail to Fred Wilson, Brad Burnham, and Bjian Sabet:

"I met with David the other day about using Tumblr to power Path 101 career blogs. I didn't know what to expect, because it wasnt obvious what the biz dev or business philosophy was there.

His response to the idea could not have been more perfect...and his ideas for letting other communities use the Tumblr platform, particularly the nitty gritty details of the integration were really top notch and very forward thinking. He even had some great insight about Path 101's relationship to its crawled resume owners.

And today, a bunch of us went over to help Nate Westheimer with the BricaBox product strategy and David was just as impressive. His feedback was brilliant, but not in the least bit condescending...

I hadn't had much of a chance to talk to David before... He is a rare product mind, and I just wanted to pass on how impressed I was with my interaction with him this week.

Enjoy your weekends..."

They all responded, and Fred wrote:

"A beautiful mind is a wonderful thing."

David Karp is one of the best product minds I know--and if anyone can make Yahoo! into a compelling product experience, he can. I didn't realize how prescient that note would be as I think about Tumblr's nearly certain acquisition by Yahoo! For Yahoo! to survive and be relevant, it doesn't just need more pageviews. It needs product direction and vision--and that can't just come from Marissa Mayer. Product, just like at any startup no matter the size, is a full time job. Marissa needs to run Yahoo! David Karp has been leading product at Tumblr from the beginning and leaning on others for everything else. It's the same way with Zuckerberg at Facebook, Anthony Casalena at Squarespace, Scott Belsky at Behance and Jason at Fab.

It's why Google tried to throw $100mm at Dave Morin at the beginning of Path--to lead all social efforts on the web. They knew that to transform the web properties at Google into a coherent vision for the future, you needed centralized decision making that led to a great product visionary. It wasn't about having Path at all. It was about a product leader.

So all that stuff about how many advertisable pages Tumblr has, porn, no porn, etc... It doesn't matter. This is so much bigger and there's so much more at stake.

My brother once told me a bit of fantasy baseball advice that holds true--overpay for the thing that is toughest to get. There aren't too many David Karps on the market these days, and if you have three billion of cash sitting around, and great product is going to win the Internet one day, it's a no brainer to spend a billion of it on someone like that--and it couldn't happen to a nicer guy, to be honest. He's one of the most polite, personable, down to earth people I've ever met in tech, and I don't imagine having a few hundred million in the bank is going to change that one bit.

Congrats.

Get Your Money for Nothing and Your Bitcoins for Free

Charlie O'Donnell — Mon, 13 May 2013 11:45:59 +0000

Land grab.

That's the term that Fred Ehrsam, founder of Bitcoin startup Coinbase, used to describe the current state of play in the Bitcoin ecosystem.

It's an interesting term, one that a) makes me uncomfortable as an investor and b) I'm not sure totally applies to a marketplace that is all about decentralization and openness. First of all, it's a real estate term, obviously. It applies to a finite, physical resource. As the saying goes, "They're not making more land."

When and where do land grabs happen? Shifts in population, transportation, and economic opportunity produce land grabs. Settlers in the Western United States in the 1800's participated in land grabs. The more real estate you could secure, the better off you were--sort of. Technically, there's only a finite amount of land in Wyoming, but there are so few people there, it's priced as if it was pretty abundant. You could claim a whole bunch of land. However, the land itself had more value in terms of what it enabled you to do rather than having some inherent transactional value in a marketplace--because it was so abundant. Even today, land in the middle of the country is still pretty much dirt cheap--but if you decided to be a rancher on your land, you could probably scratch out a living. Contrast that with Williamsburg in Brooklyn eight or ten years ago. Anything you bought could be flipped now for multiples of what you paid for it--regardless of whether or not you developed it. That's because there's a finite supply of land within a certain amount of subway minutes from Manhattan. There's only N number of plots that are walking distance to the Bedford stop on the L. Increased demand, finite supply, price goes up.

Is there a North Brooklyn real estate bubble? It's entirely possible. We've certainly witnessed recent real estate bubbles before--but they tend to be more pronounced in places like Nevada and Florida where there seems to be tons of land AND tons of excitement about that land. Excitement is overestimated, and development outstrips demand. Lot's of people build, but there's lots—too much—land to build on. Poof, bubble.

My biggest issue with Bitcoin is that the decentralized nature of the system, while potentially promising lots of opportunity to create value for people, may look more like the Midwest than Brooklyn. The actual supply of Bitcoin is somewhat capped, but that may mean that you'd rather be a currency investor than a service business around Bitcoin--because access is going to be open, distributed, and trend towards as free as possible. It's the kind of market where the second you start making a lot of money by being a provider of services, someone's going to come along, copy it, and give it away for free. Why wouldn't all of the Bitcoin supporters make currency conversion, fraud protection, and trasaction processing of various types free for all, to encourage use of the system?

In a Bitcoin world, you'll never be the only provider of something, because that only tends to happen in centralized, regulated environments. Take the internet domain registries. If anyone could sell any names, there wouldn't be as much of a profit to be made in the business as there is now. To me, the magic and promise of Bitcoin is that the friction in the financial transaction system (and hence the profits to be extracted--taken out of the system), will move to zero using technology.

E-mail might be a good example to think about. It's an open, distributed architecture that anyone can jump onto. It's about as democratized as you get. If you add up the sum total of all of the enterprise value created by e-mail related companies, the bulk of it didn't happen until almost 20 years after the first e-mails were sent. Companies like Lotus, or the spam blockers, virus checkers, bulk senders, authentication providers, marketers etc made their money quite a long time after the medium was invented.

On the other hand, are there benefits to being the first investors in Bitcoin related companies? I think there are, if you're a bigger, established fund, with long term minded LPs whose coin you can educate yourself on. By being early to a space, you start building the earliest network of thought leaders in that space. You gain a reputation and, most importantly, you learn. There have been studies done on venture capital returns that state that being first to market for an investor isn't necessarily a good bet with those early companies, but that it provides you with the opportunity to invest in better companies in that market later on. Your first investments in an industry tank, but your performance in that space overall is better over time.

I think the key is understanding which of these markets are worth being early to. There was a time when we thought virtual worlds were going to be that kind of game changing space--where everyone would have an avatar and we'd stop traveling around by plane. That didn't quite happen.

Nanotechnology was another space that investors piled into that was supposed to change the world, but didn't live up to it's promise.

You might even say the same thing for social. What's the sum total of all of the enterprise value that has been created around social, compared to the money that went into it from investors? How much of that value is concentrated in Facebook and LinkedIn? Social changed everything, but few companies actually made money off it and exited by being solely about social.

I like the idea of having a currency that doesn't get manipulated by big banks and political types, but I think I'll always wrap a $20 bill around my Metro Card and my credit card if I go out for a run, just in case. As a consumer, I like knowing that the FDIC insures the cash in my bank and that I'm protected against identify theft with my credit card. Call me old fashioned.

Does that mean I'll likely miss out on the next few years of Bitcoin related investing? Perhaps, but Google wasn't the first search engine and Facebook wasn't the first social network. History has shown that it's ok to wait until the next card gets turned over until you have a more stable environment to root in.

Why Communication with Investors is Important

Charlie O'Donnell — Mon, 06 May 2013 11:20:38 +0000

Board meetings are a pain in the ass.

Unless you're a well funded, growth stage company that has lots of hands on deck--tons of instrumentation that easily dumps out pretty charts and metrics, or luxury amenities like, well, time, most entrepreneurs probably feel like they could be doing more productive things than telling their investors what they did last month.

Same goes for update e-mails. "Frankly, this company is duct-taped together and will be for quite a long time, and shit hits the fan just about every day. Just the fact that we're still here is a major accomplishment, but now we've got to write a rosey little story about how things are great." When stuff is actually bad, you need to find a way to say it without freaking everyone out--and in the grand scheme of things, does it really matter? Shouldn't we just mail you a check in a few years if it works, and let you know when it's a tax write-off if it doesn't?

Obviously, investors might have a few issues with that--for obvious reasons. But, why then, other than "Because we want to know what's going on," should entrepreneurs make investor communication a priority?

1) Good Investor Communication Saves Time

When you have some kind of consistant methodology--metrics you track each month, a meeting that is already booked, a repeat call scheduled, you actually take less time than dealing with individual investor queries one at a time. Investors are less likely to ping you with random stuff when they feel well informed on a consistant basis. So, from a purely selfish perspective as an entrepreneur, if you really want to deal with investors less, you'll setup a good communications strategy.

2) If Investor Communication is Too Hard, Perhaps Your Management Process is Broken

If answering questions and coming up with a review on how things are going feels like reinventing the wheel, perhaps you haven't built in all the management structures you really need to run the business from a well informed perspective. You should already be tracking key metrics and be able to call them up pretty quickly. How much customer engagement was there, what profit or loss did you make on goods sold are all of the kinds of metrics that shouldn't take more than a few clicks. The more you know about what's going on with your business, the easier it should be to tell someone else about it--so communicating with your investors once a month should be a good kick in the pants to get that stuff going.

3) They Trusted You With Their Capital--Maintain That Trust with Transparency

Whether it's their money or their investor's money, a lot of trust went into investing in you. You are how the keeper of that trust--and you can choose to do things that maintain it or destroy it. While you're not likely to do anything unethical to completely tear it apart in one fell swoop, making your company into a black box is a good way to slowly erode investor trust over time. You owe them more than that. They deserve more than that for trusting you. Transparency helps create an atmosphere of trust. If things aren't working well--that's ok if I feel like, as an investor, you're telling me how bad it is, and that you're giving me a chance to be part of the solution by keeping me informed. I may not be happy about the turn of events, but I signed up to take this kind of risk--so it is to be expected. When an entrepreneur goes radio silent, I start to worry that there's more than meets the eye, things are worse than they are, and that I *could* be helping, but I'm being shielded from the issues. It makes me feel like the entrepreneur took my trust for granted and that, while I respected their ability to run the company, they don't respect my ability to provide assistance, or find someone who can.

4) Transparent Communication Across Your Investors Gains Leverage

If you divide and conquer--updating your investors individually--you're missing out on the potential that something one investor said could inspire some thoughtfulness on behalf of another investor. I might feel one way, but if someone more experienced in this matter weighs in, they could change my mind--helping the entrepreneur to build concensus among investors. I'll have my own opinion, but I'd like to know what other investors think, because maybe someone else around the table has a better idea.

5) You Can Never Know What You Don't Know

You could be the most experienced entrepreneur in the world, but you can't know everything. Getting outside perspective is the mark of a learning entrepreneur--someone who considers other possibilities and wants more information rather than less. You still need to be decisive and not freeze in the face of information overload, but if you can get someone to check your thinking on something without it being a big production, there can be a lot of benefit--even if it just reconfirms your thinking, giving you confidence to move forward or simply sharpens up the details a little bit. Sometimes, despite the fact that you're in the trenches everyday, there's something that you've missed. That's when I'd want someone looking across a number of different companies at my side. What haven't I thought of? Ask that and you become an entrepreneur that is much more prepared to go into battle.

If you need a way to keep your investors updated, you might look into this template.

The Best Leftovers Ever

Charlie O'Donnell — Thu, 02 May 2013 15:50:44 +0000

Yesterday, I got profiled in Crain's about my investment philosophies. They do this cool lunch series where they try a new place and profile both a person and a place. We went to Brick, which is a sorely needed lunch spot by City Hall.

I made the following comment:

"I've looked at 2,000 companies, and I'm funding eight. It's not about picking the eight. It's about eliminating the other 1,992, and the eight are leftovers."

Don't get me wrong, I'm psyched about the investments I make--calling them "leftovers" doesn't really do them justice. But, it does emphasize one important fact: You absolutely do not know the future or know for certain that a company is going to be successful. No one does, despite the best Monday morning quarterbacking. VCs will tell you what they saw in a team or in a product early on, and most of those stories are revisionist history.

Not only that, saying stuff like "This is a great team" isn't really a good investment criteria, because lots of great teams totally fail. In fact, most of the investment criteria I hear, if applied as a filter, wouldn't work to build a good portfolio--early traction, great team... again, lots of people have still failed under those circumstances.

What I'm much more mentally comfortable with is this process of elimination. I'm much more certain about what won't work--teams that don't have talent to match the core challenge of what they're doing, or not playing in big enough spaces. What I'm left with is a bet where I'm saying "This could work." It's not a weak bet--it's a reasonable bet. I'm not going to convince myself that I'm way smarter than I am--that's a good way to fail.

I believe in my teams and their products, but I'm not drinking so much Kool Aid that I don't realize that I'm actually taking risks and don't know the future.

For the record, I actually really like leftovers. When I left for college, my mom told me that she finally figured out how much I was actually eating, because leftovers were piling up in the fridge and going bad.

Taking Responsibility for the No

Charlie O'Donnell — Wed, 01 May 2013 16:08:19 +0000

I hear a lot of funny things about other VCs. This one doesn't really do early stage, that one doesn't really get consumer. It usually stems from entrepreneurs who have been passed up on. Often times, I've literally just closed on an early stage opportunity with that VC--so I'm quite sure they go early.

Beware of the intel you get on VCs from other startups. They'll often gloss over their own miscues and blame the investor.

What I never hear is "I failed to demonstrate product's value proposition." No entrepreneur has ever said to me "I totally see why every VC I pitch thinks my market is too small."

In fact, rarely do I ever find that founders are taking anything to heart from the feedback they're getting from experienced investors. Very quickly they go from retweeting every last but of drool that an investor advises to "Yeah, VCs are morons and if they knew anything, they'd be founders."

If you're not adjusting your pitch as you go through fundraising, it's you that doesn't get it--not the VCs. If I keep asking questions about your market, don't answer with feature ideas. Tell me who will buy this product, why it makes sense for them at that price point and how many customers are out there like that.

VCs are often wrong, maybe even most of the time, but it's a slippery slope to dismiss everyone who says no as "wrong". It's much more productive--and instructive--to think of them as uninformed or unconvinced. This way, the burden falls upon the entrepreneur to get them over the hump.

A founder's job is to convey a clear value proposition and a clear strategy for creating enterprise value. If the people who you pitch don't get it, either you've failed to communicate or you haven't done enough homework to show convincing proof. Yes, a VC needs to take a leap, but we're not going to leap into anything where the founder hasn't even a clue about his or her competitor's revenues--or the five other companies doing the same thing.

It's super easy to drink your own Kool Aid without putting yourself in an investor's shoes. They may not know the market like you do, nor have they experienced the pain point like you have. How can you convince them with sound logic, relevant facts, and firsthand research?

No more "I" in NYC: How the city is changing whether you like it or not

Charlie O'Donnell — Mon, 29 Apr 2013 10:33:48 +0000

Seemingly overnight, a bunch of parking spaces disappeared in New York City--replaced by bike share racks. Lots of car owners aren't happy about it. For that matter, lots of people in the city have argued against bikes for years. Residents of Vinegar Hill signed a petition to prevent a greenway from going through their neighborhood--citing that "The Greenway would bring thousands of bikers from all over that would add noise, traffic hazards, and garbage to a neighborhood that currently has none of that."

Noise.

And garbage.

Cyclists?

Yeah, because all those bikers are usually seen tossing styrofoam cups off their bike as they ride--blasting boomboxes like it was 1985.

But it doesn't really matter, folks, because this is happening. Oh, it might not be your particular street and you may be able to fight off a particular lane or particular parking spot--but the bike thing? It's now. When 10,000 shared bicycles hit the streets of NYC, the flow of the Big Apple and the battle for street supremecy between cars and bikes will have shifted for good. And it's never going back. You better start looking both ways before you step off the curb and start watching to see if you're standing in a green bike lane.

You see, cities can no longer survive being congested by cars with one person in them and a billion parking spaces being taken up by cars that rarely get driven. We've lived as pretty selfish individuals--taking up way more space, creating way more garbage and casting a much bigger carbon footprint than the planet can handle. Things have to change.

We're being shoved, kicking and screaming, into a city that favors the greater good. Want to drink all the soda you want? Sorry, because the rest of us need to pay for your health care. Want to park your car on the street? Sorry, we need that spot for a bike share program. Don't like the Second Avenue construction? Sorry, new subway line being built in the name of improved public transportation. Broadway becoming a pedistrian plaza and car lanes disappearing--tough luck my driving friend. You just wait until 42nd street is next.

It's all moving towards a more sustainable city--one where shared resources and health are being prioritized over the individual. We're becoming more and more of a collective. Even the fight to hail a cab using your phone--it's all about efficient use of resources. If we can match one more empty cab with a passenger, and tip the balance of making it reasonable for one less person to own a car, it's going in that direction, and there isn't a union, interest group, historical stone or neighborhood organization that can stand in the way.

The balance in New York City has shifted my friends. I'm not trying to advocate for it--I'm just telling you how it is. You can fight it or join it, but it isn't turning back.

Welcome to "we".

Just Say No

Charlie O'Donnell — Thu, 25 Apr 2013 11:42:30 +0000

I reserve the right to be 100% wrong on any of my investment decisions--but at least I make them, and I try to make them fast.

Too often, I hear of VCs taking four, five, six, even seven meetings with an entrepreneur only to get to a no. Honestly, if you're thinking about an early stage company, there really isn't enough data to process across seven hours of meetings. If you can't walk out of one, maybe two meetings without getting there, then you're never going to invest--so just say so. Entrepreneurs will appreciate it, and you'll free up your time to find something you're really excited about.

The problem is that a lot of investors lack conviction. Just because you've been able to raise money doesn't mean you know what you're doing. And yes, a lot of this stuff, frankly, doesn't look like anything at first. Pouring over it with a fine tooth comb isn't going to change that.

What investors are trying to avoid is passing on Tout when it could be Pinterest or passing on Burbn when it could be Instagram. They want to hang around the rim long enough without passing to see if it goes anywhere, so they can pounce on it as if they were always interested from the begining. I'm never going to do that. The chances of that happening are so remote that it isn't worth wasting my mental bandwidth keeping an eye on everything and certainly isn't fair to entrepreneurs.

In fact, if you attempt to keep an eye on everything in hopes for a pivot or a pop, I'd venture to say that it will actually distract you from gaining insight into something else that will require your full attention. I say no as soon as I can, because I really can't have you hanging around in my inbox for the next month wondering if I'm in or not. It takes a ton of time to keep reading persistant e-mails, but takes very little time to just say no.

My Career Regret - The Money and Interestingness Trade

Charlie O'Donnell — Mon, 22 Apr 2013 05:27:38 +0000

Ten years ago, I was an analyst for the General Motors pension fund, working on fund investments into leveraged buyout funds and venture capital deals. I literally wrote the investment memo for GMs investment into Accel IX, otherwise known as the "Facebook Fund." (I wasn't a lead on the deal team or anything--just a gruntworking analyst.) Still, I came into contact with some of the largest names in the private equity world--partners from top PE firms like Blackstone, Carlyle, and TH Lee, top venture firms like Summit and Accel--and even debt/distressed funds like Cerberus and Apollo. These folks were absolutely minting money--but because I didn't really know what I wanted to do with my career, I didn't spend any time building relationships with them. In fact, the one area I was pretty set on eliminating from my consideration set--leveraged buyouts--was the area where partners seemed to make the most money.

Now that I'm gathering capital, that seems to have been a missed opportunity. These folks were literally pitching my team, and because I didn't necessarily want to do the same thing as they did, I didn't care much to spend time with them.

And that's not to say that the only reason anyone should network with somebody is because of money--but the reality is that access to capital is an enabler. You see, people doing interesting stuff often need capital to make that stuff sustainable. That's the whole venture capital world in a nutshell--and it's crazy fascinating. People are inventing stuff that sounds utterly ridiculous (a box that makes things!) and turning them into reality. That chip that enabled the authorities to see that kid in the boat from a helicopter--someone invested in that. Not only that, whoever invested in that chip is probably feeling like a pig in shit right now for being a tiny little part of that capture--and more for the experience, the meaningfulness, the pride--the overall interestingness of it all versus whatever money came out of it.

Because, venture isn't about the money. I mean, sure it's an asset class and investors expect a return--but if you were really just going for trying to make the most amount of money possible, you'd go work for a private equity fund or a hedge fund. Those places don't make chips that can see terrorists from the sky, though. In fact, they don't make much of anything, other than money. In fact, they make for pretty boring stories compared to saying that you backed the medical device company that will enable one of those bombing victims to run the marathon next year. That's pretty damned interesting.

That's what I didn't realize--that I had something to offer. My interest in tech and eventual move to venture capital, New York's growth as a venture capital community--it's all super interesting, and would have been to all the people I knew who had so much money that money didn't mean nearly as much as a good story. That's why people buy pieces of sports teams. It's not about the money--it's about interesting stories, access, and things that aren't buyable by just anyone.

If I had to do it all over again, I should have realized that as a young, curious guy, I'd eventually get into stuff that would have been super interesting to an experienced private equity investor who had more money than they knew what to do with. Just the other day, an entrepreneur came in who was working at one of those funds. I told him, "So the partners are going to back you, right?" He hadn't really considered pitching, because he figured that wasn't what they normally did. I told him how what they "normally" do and have been doing for the last 20 years might not be as fun or as cool as what he was up to.

They're out there searching for interestingness and he had it in spades.

If you're early on in your career, stick around people who have made it that you find likeable and of good character. Even if you're not intending on following their footsteps, undoubtedly, you'll find yourself in a position to offer them the money for interestingness trade. It's done all the time--and it will enable you to keep doing what you're passionate about, and you'll be able to share your passion and interestingness with someone who really doesn't need the money, but who loves and appreciates funding more interestingness.

The Battle for Indoors

Charlie O'Donnell — Wed, 17 Apr 2013 15:25:00 +0000

So Shopkick is apparently profitable, driving hundreds of millions of new sales to merchants--remember them? The in-store retail check-in app?

And Belly? They just had their millionth Point of Sale loyalty check-in.

What do they have in common? They're making real business progress towards bringing retailers together with customers. In the face of "software eating the mall" they're helping make the retail shopping experience better for the hundreds of millions of humans who still walk around outside and occasionally go into physical stores.

And they're not alone. Nomi just raised $3mm to help retailers understand their customers--the ones that are actually in the store, by using analytics around their mobile devices.

Today, at Demo, SocialSignIn launched to "solve the problem of businesses knowing more about their online visitors than those standing in their physical location." (Disclosure, I have a business relationship with the company.) They enable a merchant or venue to provide free wifi access in exchange for basic customer data and a continuing digital relationship. No more captchas or struggling to tweet a pic of your favorite desert because you can't get coverage.

This could mean loyalty, or something more creative. Personally, I'm rooting for Foot Locker to allow me to pick the sneakers I like online, and then bring them to the counter when I sign in at the store. I can't tell you how much I hate chasing down a customer rep who is on their way "to the back" to get someone else's shoes. "WAIT WAIT... Got these in a 12??"

This is

There are a bunch of trends at play here. Three years ago, in "the Foursquare post that launched 1000 VC's" I wrote:

"Being able to connect web advertising, recommendations, and social media buzz to an actual person walking into your store has long been the holy grail of the advertising world."

I still believe that, whether or not Foursquare has come through on that promise yet (glad they got an extended life to help try to make that happen through Foursquare for Business, though). I still walk into stores. They still have no idea who I am or what I'm there to buy--but I feel like we're getting closer.

Here's what else I believe:

Bandwidth will continue to be an issue. You can't connect with your customer in-store if they can't connect to their network. Wifi and offloading the traffic to the pipes in the ground is going to play an absolutely major role. Verizon and others know this and will undoubtedly encourage as many mobile devices as possible to get out of the tower bandwidth and into the fiber on the ground.
Identity is important. When wireless networks were first built, they were built with the expectation that you were using this at home with your laptop. You didn't need an identity layer because you weren't walking around with your wifi enabled mobile device. For security, trust and even business reasons, this needs to get solved. You want your friends to be able to login to your home wifi when they come visit you, but you don't want your neighbor to mooch off your wifi--or maybe you do, but just not during peak times. You want to treat your best customers even better. Om wrote about this in his "Data Darwinism" post. Not only does he want to get treated like a whale when the data says he is, but "some of the nicest people in real life turn into a baboon’s backside once they are online and are anonymous". Identity and mobile is going to need to become a mutually beneficial tradeoff if mobile is ever going to improve our experience of the outside world.
Router companies are going to see this as a way to climb up the stack--and the space is going to get very acquisitive very quickly. If I'm Cisco, and I just spent a billion on Meraki, I'm going to look for more and more ways to generate cash from my installed base of physical hardware--and that's going to mean smart software in the router and various services around it.
Knowing where you are indoors is going to be important. Apple bought WifiSlam to help triangulate your location and Floored (one of my investments) is scanning indoor spaces with cutting edge 3D tech.

Thoughts? Opportunties? What am I missing? What are you excited about?

Nothing: Accomplished

Charlie O'Donnell — Tue, 16 Apr 2013 15:00:58 +0000

Your grand plans. The best you could ever hope to achieve...

A failure.

A failure to strike fear. We are unafraid.

A failure to change our way of life. Future marathons will undoubtedly have record sign ups. I wish I was running NYC tomorrow, in fact.

A failure to deliver any kind of message. We are loud. You are silent.

A failure in execution, as loss of life was so much less than it could have been given the crowd numbers. Right now, our experts our dismantling your weak attempts to hurt more of us, lifting prints, executing searches, tracing receipts, reverse engineering cell records. You will be found and brought to justice.

We will bury our dead, treasure their memory and they will forever be revered as empowering symbols in the struggle to protect the freedoms you sought to vanquish. Their lives will not be lost in vain, and in their name we will continue on.

We will heal the injured. Many will run a year from now. Injured bystanders who have never run a day in their lives are waking up today in hospital beds resolving to complete the race next year, and many more after that. You have failed to do anything but embolden them.

In the end, your life lived alone, suffering whatever private pain you selfishly felt the need to inflict on others, will have been a complete wasted effort. It is similar to the lives that past hatemongers have led. You will only ever be cared about as a footnote to our history--a meaningless and empty nomenclature that failed to be human, to connect, to love and be loved.

Undoubtedly, you are our failure, too. Somewhere along the line, we ignored you, passed you over, and failed to recognize your sickness--or perhaps that you even existed.

For this, we are truly sorry. In the end, in a society where we believe anyone can achieve greatness, your life will have meant nothing, and you will have accomplished nothing.

Introducing New Yorkers to the Water

Charlie O'Donnell — Mon, 15 Apr 2013 10:26:04 +0000

For almost ten years, I've been volunteering on New York City's waterfront--introducing lifelong New Yorkers and tourists alike to kayaking. It's a reminder that a) they live on an island and b) that NYC's waters are usable. In fact, the more you come up with creative recreational uses for our waterfront, the less likely the city will be to do things like park garbage trucks on it or simply fence it off as a passive shoreline balcony for some wealthy waterfront condo.

I started at Pier 26 at the original location of the Downtown Boathouse--and eventually worked my way over to the newly created Brooklyn Bridge Park, where I co-founded the Brooklyn Bridge Park Boathouse.

One thing holds true no matter where on the waterfront I am--there's no more rewarding activity I have ever been a part of in New York City than volunteering at kayaking. Every season, we put thousands of people on the water. Every single last one of them, no matter how excited, scared, apprehensive, or even disgusted they were at the idea of getting in a boat and paddling around the waters that surround NYC, is absolutely thrilled by the time they are done--and completely grateful for the experience. It's the most positive thing I've ever experienced. They love being reminded that whether you're in Manhattan or Brooklyn, you live on an island, and that the water is yours to use. They love doing something new and different. They love challenging themselves and getting over a potential fear. They love getting wet in the heat of NYC summer.

That's why I'm so excited for our plans in Brooklyn for 2013. We're planning a major expansion to our youth kayaking activities--including the creation of a youth kayak polo team. Given how few organized kayak polo teams there are at this age level in the US, even though it's a global sport, we could very easily be sending local Brooklyn high schoolers to national competitions within a few seasons. It's a very exciting endeavor!

But, we need help. Kayaks aren't exactly cheap--and we need the time of qualified instructors. We're raising $12,000 on Indiegogo, but we'd be able to expand our programs even further if we overshot our fundraising targets. We've got some cool rewards, including trips on the harbor and private paddling time. If you've been down to the NYC waterfront and enjoyed these volunteer kayaking programs--or if you just want to give a local Brooklyn kid a sense of accomplishment or lessons in teamwork, please consider participating in our campaign. Thank you.

What ever happened to Print Shop?

Charlie O'Donnell — Fri, 12 Apr 2013 00:15:07 +0000

When I was in the fifth grade, I made a pretty penny printing out desk covers. I don't know if anyone else did this, but I'd get my pack of 10,000 Print Shop clip art items, pick a tiled format, and put someone's name in the middle of an 8 1/2x11 sheet of paper. They got to pick which clipart they wanted--tanks, ponies, you name it. I think I told them for five or ten bucks. Friends would place them on the top of their desk at school, and cover the desk in clear contact plastic. Instant customization. Ink paid for by my dad.

The Print Shop'ing didn't stop there. The videos of my grandparents' 50th Anniversary in 1989 have visual evidence of the six foot long Congratulations banner than I made them--that took nearly two hours to print and half a printer ribbon full of ink.

In fact, I even bought one of the first color dot matrix printers with my own money--mostly because of my Print Shop creations.

So where is that behavior now? Home banner making seemed to go away with the advent of ink jets and lasers--which print one sheet at a time, but making foldable cards, door signs, etc. doesn't seem to be a big home computing use case anymore. You can actually still buy versions of Print Shop, but I don't think the product is supported, and I'm sure it's probably pretty behind the times.

Is Zazzle the new Print Shop? I really don't think so. One, I don't really think the creation ability is much better on Zazzle than the old Print Shop and two, not being able to print stuff out yourself at home or get something at least the next day feels like a loss.

Maybe it's a generational thing? Is there some Mac Print Shop replacement that the kids are using these days to make "Do Not Enter" signs for their room?

New Brooklyn Bridge Ventures Investment: Five Takeaways from the ElectNext Funding News

Charlie O'Donnell — Tue, 02 Apr 2013 15:43:10 +0000

Today, ElectNext announced that they had raised $1.3mm to launch a data, analytics and marketing service to bridge the data gap between politicians, lobby groups, and their constituents. The company provides contextual political data to media properties (Crunchbase for politics) and in turn uses that reach to provide actionable insights for campaign managers. Brooklyn Bridge Ventures led the round.

Describing it that way, however, makes the story a bit neater than advertised. This business model isn't how Electnext started, nor was investor interest always this strong. I think there are five key lessons here that put the company in the position to succeed that they're in now:

1) Find a lead.

It's very fashionable these days of crowdfunding and party rounds to go out, tell a good story to individuals, and piece together a lot of cash from a lot of folks--with no investor in particular really taking any responsibility for advising the company. I had been meeting with Keya and her team months and months before I actually invested--because I liked the space and was impressed by her personally. Yet, the product needed direction and Keya had a lot of questions about how to prioritize her time as a non-technical founder. We've been on a schedule of meeting up every two weeks and have worked together to hone the strategy. It's been a terrific partnership and I've been super impressed with her ability to learn fast. She knows campaigns like the back of her hand, but she's a first time CEO of an internet startup. What's most important here isn't that I was around to help--but that Keya has an innate ability to ask relevant questions at the right time. I think it mattered less who the lead was, and more that, unlike a lot of other entrepreneurs, Keya reached out and leveraged the resources she had around her wisely. Her success thus far is a function of her ability to know when and what to ask--and to surround herself with people who can provide her answers.

2) Fail fast.

Many startups in the political space have tried the direct to consumer offering--like Votizen and Popvox. It's a tough slog, and, at the end of the day, it's tough to gather the audiences and then figure out a business model to support the effort. ElectNext started out along that path, but quickly realized that it would be more efficient to leverage the existing audiences already at major media properties. They left themselves plenty of cash in the bank to pivot and give themselves enough runway to execute the new model when the writing was on the wall for the consumer offering.

3) Use existing models of success.

In the poltical data space, information is all over the place, and often inaccessible, even though voters want to be informed and political figures and groups want to get their data out. Media properties gather big audiences, but none of them are quite resourced to solve the data problem. This problem isn't new. Singleplatform built a $100mm business gathering up menu data for restaurants and augmenting the offering that media properties had--creating a service to merchants in the process. They power, for example, the menus you see in Foursquare--something Foursquare would have been unlikely to gather themselves.

When ElectNext looked at their strengths, they had great media relationships, disaggregated data, and two sides that wanted better transparency--as well as the interest in making transparency actionable. Same situation. The SinglePlatform team was very generous with their time in helping ElectNext work through it's model and solidify a base for an attractive offering to all sides. The business isn't exactly the same, and ElectNext's knowledge of their space helped them craft a custom offering for their stakeholders, but they started out in a great position because they had seen a similar model work elsewhere.

Too often, startup try and reinvent the wheels around business models, inventing completely new things that have no proxies for success in other areas. That limits who you can learn from and seems incredibly risky, versus porting over something that worked in another sector and making it fit for what you're doing.

4) Keep up with the investors you meet, even when they turn you down..

Sometimes, you can tell when an investor genuinely has interest in you as a team, but just can't get their on the model. This happened to ElectNext. Everyone seemed to be very impressed with their team, but a lot of people didn't love the consumer offering. When the company pivoted, they solidified their offering, got some key proof points, and had continued warm enough connections to investors they had met previously to reapproach people. Almost overnight, investors jumped on board with the new model. The key here is that the change in the company was real. It wasn't just a slight tweak. It was a definitively different approach--one they committed to before necessarily waiting to hear what investors thought.

5) Go find the customer money.

The driving force behind ElectNext's consumer to B2B pivot was the thought of "What will customers pay for?" The aim was to create a real business and so they sought out ways they could provide real value to paying customers. They stayed in constant contact with key customers and built up a network of "friendlies" that could give them back channel feedback on what would appeal and what wouldn't. This helped them hone their offering.

If you've got interesting political datasets, work for a media organization that covers politics, or you're running communications and/or social media for a government official, candidate or lobby group you should reach out to Keya at keya@electnext.com to find out how you can work together.

Time for VCs to Get Their Act Together

Charlie O'Donnell — Mon, 01 Apr 2013 11:30:42 +0000

VCs,

I believe that the purpose of venture investment is to serve entrepreneurs. Many of us, however, seem to regard investing as some kind of dodge or hustle. We have theories that are the worst kind of popular tripe, our methods are sloppy and our returns are highly questionable.

Many of us, fellow VCs, are a poor investors.

That is why some entrepreneurs have turned towards an alternative to getting investment from us...

Going into business for themselves...

In the past week, both AngelList and FundersClub got SEC "No action" letters--notices that their crowdfunding platforms were going to be allowed to keep operating without fear of getting run over by the government.

Call it fate, call it luck... call it karma...

A lot of people have asked me over the last year what I think of crowdfunding. I'm of two minds about it, to be honest.

In the short term, I think it will be kind of a mess. A lot of companies that probably shouldn't get funding will get it, because of the novelty of the platform and the momentum investing that tends to characterize individual investors.

That will cause some VCs to try and outbid them, causing more and more hype for mediocre deals. At the same time, the good deals that hit the traditional markets will also be overfunded--because VCs will fear companies getting financed by other means.

At the same time, the talent market will heat up even more. These crowdfunded companies will pour a lot of new money into the market for human capital, driving salaries up. It will be harder and harder to get quality hires for the rest of the companies.

Then, reality will set in.

I don't really think a bunch of individuals with little to no experience are suddenly going to "beat the market" when compared to people who do this for a living fulltime. Plus, I've heard, and can anecdotally corroborate, that most angel investors put 70% of all the money they will ever put into startups to work in their very first year of angel investing. Why? Because they realize it's super hard, a lot of work, and dealing with the companies then they need more financing and start hitting a wall is much more difficult than just writing checks. For many investors, its a pretty sobering experience. It's going to be no different in the crowdfunding world. Moneyflows will come pouring in at once, and when returns aren't there, they'll dry up quickly.

Just like in the stockmarket, some individuals will thrive as direct investors, but they'll do so by focusing on it fulltime, investing in the right infrastructure and research, and coming up with an investment process and philosophy. Most won't do better than average, and so they'll turn to professional managers.

This is where I'm optimistic. My hope is that funds, too, will access this crowdsourcing market. They'll be more transparent about their returns, and what they do to add value. Track records and PPMs will be public, and individual investors will pool their knowledge and research to start investing in funds.

The best funds will not only rise to the top, but they'll be free from catering to institutional thinking. For years, VCs have been pitching and getting funded by the most conservative investors on the face of the earth--pension funds and endowments. When you have to defend deals you did to a pension board, you inevitably take less risk. I think going direct to the public will make fundraising easier for VCs and allow a much wider variety of strategies and types of investments. This will be a good thing for everyone.

What will also be a good thing is that the competition will force VCs to be better actors in the ecosystem. Gone will be the days of meeting with a company seven times only to turn them down based on something you knew during the first meeting. Gone will be the mindless intros of "other people we like to invest with" where no VC is willing to stick their flag in the sand and to be the first one in. Gone will be the days where VCs can just hang around the rim for weeks and weeks, even months, on deals without ever saying yes or no--letting entrepreneurs just hang out to dry while the risk is taken off the table. Early conviction and real value-add will count for more now than it ever has before.

So while I look forward to the challenge and feel well prepared against the quick, inexperienced dollar--something most NYC VCs have always dealt with--I think we're going to see a lot of noise about companies raising crowdfunded dollars. I'll say this:

Nothing beats an active, thoughtful, experienced, and in-person investor who can see you for coffee in just an hour or two. That's not happening in many cases where VCs and "professional" angels are making companies jump through lots of hoops to no avail. If many VCs don't up their game in terms of being decisive, helpful, and respectful of an entrepreneur's time, the VCs on the bottom are going to fall seriously behind in a world of increasing alternative options for capital.

Do you have an underwater blowtorch?

Charlie O'Donnell — Fri, 29 Mar 2013 21:00:28 +0000

This post is either brilliant or idiotic. You've been warned...

You're on a boat. There's a terrible storm at sea. The boat capsizes, washing everyone overboard except for you and one other person. You're both stuck inside, unable to get out because only the hull is peeking above the water--but the sea is rising fast in the cabin. Your only hope is to break through the bottom of the hull to escape. You find a hammer, but its going to take you a few hours to bash through. Luckily, you've also found yourself the only remaining scuba tank--and it has just enough air left to give you enough time to break open a squeezable hole, maybe less.

The other survivor swims over, sees you intermittently breathing through the scuba tank as you go to work on the hull. He asks, "Can I have some air?"

You reply, "I hate to be that guy, but do you have an underwater blowtorch? 'Cause otherwise..."

It's not that you're trying to be a jerk--you certainly understand his need for air--but you share that air and you're both toast--because you won't have enough time to bust out of the hole. What's the point of that?

Well, it's kind of like that with VCs, or most professionals, and time. You feel like you're literally drowning--holding on to the precious little free spots of time you have left in your calendar. Then someone comes along and asks for some time, which is fine, except they're not really bringing anything to the table in return.

I can't tell you how many emails I get where someone just says "I'm not pitching, I'd just like to learn more about Brooklyn Bridge Ventures."

To which I'd really love to respond, "Do you have an underwater blowtorch?"

The thing about an underwater blowtorch is that it's not particularly useful to most people, most of the time--but when you need one, you really need one. For someone else, it's not an underwater blowtorch--maybe it's a six foot plumbing snake or a spare tire or a purple hat that matches a particular coat. Whatever, it doesn't matter--the point is, no matter how busy someone is, every single person has some item or short list that they will move everything else aside for.

When you're an individual VC, time is in short supply, but I am absolutely, 100% willing to make time--you just normally have to get me... something. That's the way it is for everyone. I see too often people just trying to either a) give something I don't need, like coffee or alcohol, neither of which I ever drink or b) trying to minimize how much they're taking from me. I've never taken a five minute meeting. If you're offering five minute meetings, it comes off as desperate. Go find someone that you are the underwater blowtorch for--and try and get a normal sized meeting with them.

I put out a ton of content on this blog--and so when I get someone asking for a "general take on fundraising for early stage companies", it's like... "Umm... I kinda have a blog for that, plus I speak in public about once a week..." On the other hand, if you found a specific post and have a specific, relevent, interesting question... YAY! Happy to engage. Interestingness and clever conversation is everyone's underwater blowtorch.

The more homework you do to figure out what someone really needs, the more likely it is they'll make time for you.