Results tagged “techcrunch”

There have been another spate of interesting conversations around the tech industry about what goals a tech company should have, and how they should achieve those goals. Right now, most venture capital organizations and the majority of trade press support an infrastructure that's optimized towards a certain set of results; The question is how we accommodate those who are trying for a different set of results.

One great conversation came from Ev Williams tweeting about tech conferences, and how Twitter would have been received:

I don't think Twitter would have done well at TC50 or Demo. (Likely response: WTF?) Wonder if Google would have. (Search? Yawn.)

I replied, "But @ev, response at TC50/Demo can be determined by reputation & ability to tell a story, both of which your team has." and Ev responded in kind with "Perhaps. But are reputation and ability to tell a story determining factors of success?". At that point, I realized we may have been talking about slightly different things, closing out with the brief observation " Narrative & experience are necessary but not sufficient. They're useful when creating a product, not just onstage."

And the core of it is that TechCrunch 50, Demo, and other tech industry showcase events are really optimized for a certain model of business, following a traditional path of venture capital funding, a certain amount of buzz or attention within a particular community, and (these days at least) an exit route that involves selling to a large incumbent that's interested in that area of innovation. I have lots of friends who have followed this path, and I don't begrudge them their success with it, but I think the logical extension of this path having become well-trodden is that we end up with events that as I mentioned last week, can be fairly criticized as insufficiently world-changing.

Interestingly, that last bit of criticism from Sarah Lacy on TechCrunch, saying that companies that had demonstrated their wares at the TC50 conference had for the most part not been very ambitious, was followed by a thematically similar post by Vivek Wadhwa, asking what value VCs have really brought to the world of innovation. I think the answer to Vivek's question is "It depends." but it's a very healthy sign if TechCrunch itself is questioning the fundamentals of the VC model and startups, and perhaps that skepticism justifies my tentative endorsement of the reigning regime of tech pundits.

But the crux of what I see as this reckoning point for the venture capital industry and venture-backed startups is that VCs are starting to look a lot like record labels. That's not a criticism — I used to work in the record industry, and I've enjoyed collaborating with a number of venture capital firms over the years. In both cases, though, the majority of their work is optimized for a certain model of success. This neatly mirrors Trent Reznor's analysis of what it takes for a new band to succeed:

If you are an unknown / lesser-known artist trying to get noticed / established:

• Establish your goals. What are you trying to do / accomplish? If you are looking for mainstream super-success (think Lady GaGa, Coldplay, U2, Justin Timberlake) - your best bet in my opinion is to look at major labels and prepare to share all revenue streams / creative control / music ownership. To reach that kind of critical mass these days your need old-school marketing muscle and that only comes from major labels. Good luck with that one.

If you're forging your own path, read on.

• Forget thinking you are going to make any real money from record sales. Make your record cheaply (but great) and GIVE IT AWAY. As an artist you want as many people as possible to hear your work. Word of mouth is the only true marketing that matters.

As it stands right now, the VC model is optimized for creating new Lady GaGas. I happen to like her work, so it's good that there will be more of those, both in the tech and entertainment worlds. But some people just want to be indie rockers, making a living with the work they love. It's that goal that is underpromoted in our tech trade press, and that perhaps inspires some of the skepticism around what gets hyped up.

That leads, naturally, to Jason Fried's post on 37Signals heralding their new $100 billion valuation. (At least on paper)

37signals is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1.

Founder Jason Fried informed his employees about the new deal at a recent company-wide meeting. The financing round was led by Yardstick Capital and Institutionalized Venture Partners.

In order to increase the value of the company, 37signals has decided to stop generating revenues. “When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation,” said Mr. Fried. “Once you have profits, it’s impossible to just make stuff up. That’s why we’re switching to a ‘freeconomics’ model. We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!”

I had talked to Jason a few weeks ago when he was planning to write this post, and though timing had it being published at the same time as Twitter's just received $100 million in funding, it wasn't designed to be a pointed critique of any particular company or funding event, so much as an overall pattern of not questioning particular narratives in the tech industry. And perhaps even more, it's a criticism of the fact that we don't question the values and goals that those narratives express.

And that was perhaps the point that was missed in Jason's rant about Mint's sale to Intuit which I blogged about last week. People got distracted by the speculation of whether Mint sold at the behest of the founders or investors. (As it turns out, it was likely the decision of the company's founders.) But the larger point was that, by selling to an incumbent from the last generation, Mint's team was expressing a desire for incremental improvement in an industry, instead of radical revolution. There are merits to both goals, but I know that a lot of us who truly love technology and have had our lives and companies transform by it are hungry to see more people be ambitious and shoot for creating revolutionary change instead of evolutionary change.

It's reassuring, though, that despite coming out on opposite sides of a VC funding story this week, both Ev's questioning of how tech conferences and media evaluate startups, and Jason's questioning of how VCs fund and (over)value startups come from the standpoint of asking: Can't we do more? Can't we do better.

It seems clear that the answer is, yes, we can support different outcomes, ones that optimize for more ambitious or radical changes. But we can't keep following the same path and wondering why it doesn't lead to a different destination.

Sometimes if you do something very difficult, and you do it really well, the end result is that your achievement becomes completely invisible.

I mentioned a year and a half ago that I like Twitter. That was a little bit less common a position to take back then, but in the months since, tons of people have taken to the little messaging service, so clearly this was no great insight on my part -- it's just a useful, fun service.

But of course, that popularity has not been without its problems. Twitter's gotten a reputation for being unreliable, as a result of its rapid growth. In fact, in many ways, the Fail Whale and its related frustrations has come to define Twitter's brand more than almost anything else.

I'm no expert at these things, but there are a lot of reasons startups fail, and the reasons almost never include the fact that thousands of users clamoring for a service. Indeed, it seems to me that most companies (whether they're tech startups or anything else) fail because of being poorly managed. Put another way, execution is everything.

With that in mind, it's worth pointing out how particularly well-executed Twitter's recent acquisition of Summize has been. I don't know any of the deals of the financial or business arrangements, except that I'm a little disappointed that Twitter isn't maintaining a presence in New York City, instead moving all of the employees to San Francisco. That nitpick aside, the public face of this transition was extremely well executed.

Ev Williams, co-founder and the most public face of Twitter, speaks about the deal at some length in this excellent, candid interview with Techcrunch. (Which site, by the way, may rank as my "most improved" blog of 2008.)

Rumors of the Summize acquisition leaked a few weeks ago, but both companies kept discipline around communications and didn't acknowledge or respond to the conversation. And then, when it came time to announce the deal, the sites had been fully integrated, a lengthy and personable blog post complete with a sketch of some future ideas for integration was posted, consistent branding was in place on the acquired site, and the roadmap for what was going on with employees affected by the acquisition was clearly communicated.

In all, that's a formidable amount of coordination to happen across the country, while business deals are being worked out, and while maintaining secrecy about the fact that it's taking place. And, all of that was done with an eye towards providing a good user experience to their shared customer base.

There are a lot of things to criticize in such deals most of the time, though it seems likely that this will be a successful acquisition, from an outsider's point of view. But what's striking to me is that, as quick as so many are to criticize Twitter (fairly) for technological problems, people haven't been as eager to acknowledge a remarkable discipline and execution on the business side of the company. Frankly, all of those who'd suggested that Twitter should be sold to a larger company seem to have forgotten that almost none of the big companies suggested as acquirers have a history of consistently pulling off this kind of execution. And that's even more true for the smaller innovative companies that they've acquired.

Some tenets:

• Contributing to a community, online or offline has value.
• As long as that value is recognized and rewarded, a community will thrive.
• Rewards can take the form of money, recognition, or just personal satisfaction.

The premises having been stated, let's review some of the latest blogosphere fuss. The current wave of conversation around recognizing the value of community contributions began with Jason Calacanis offering to pay the top contributors of link aggregation sites to migrate to the new Netscape site he's managing. Like many things Jason does, it's clever, a smart recognition of a new market and opportunity, and not particularly elegant.

To me, it was initially most notable because of the reuse of the phrase "Netscape Navigator" to describe the users who make the most contributions to the site. A friend referred to it as "brand necrophilia" on a private blog, and I find that a particularly apt description. But of course, the post got a lot of attention for being a fairly brash attempt to grab both users and attention.

Jason also offered the following false assertion, I suspect not because he believed it, but because it's effective propaganda:

The concept of "free" content producers, which I think WIRED called crowdsourcing, is going to be a short-lived joke. A loophole in the content business that will be closed by savvy startups which identify the top 5% of the audience and buy their time.

There were some immediate responses, such as Thomas Hawk's overwrought contribution, titled "Did Jason Calacanis Just Offer to Hire me for $12,000 a Year?" I mention Thomas' post because it references my post from last year, The Interesting Economy, along with the response it inspired from Caterina Fake, Economies of Interest. I wanted to revisit those posts because it gives me a chance to clarify something.

I wrote the "Interesting Economy" post as a half-formed thought, literally thinking out loud, right before I jumped on a plane. Foolishly, I had asked the (honest) question "So does that mean the right answer for cashing in on my interesting work is to ask for a penny from Yahoo?" Naturally, by the time my flight landed, people seized on this as if I had said "OMG FLICKR OWES ME MONEY".

Which, um, is incorrect. My goal was to have a conversation that I would have easily had over dinner with Caterina and Stewart, not recognizing how that could be colored by the hysterical contributions of the blogosphere peanut gallery. A conversation about how most great web efforts will have to appeal to both people's emotional motivations as well as their financial motivations

The good news is, some great conclusions came out of it. Simply, money is a useful way to reward people, but some things are rewarded by things far more meaningful than mere money. Caterina explained this rather eloquently:

Giving and caring include even the simple acts of putting pieces of yourself on the internet -- your photos, your poems, your words -- and these too are fraught with difficulty when it comes to money.

People will contribute to a community if they feel it's worth their time. Now here's where things get tricky. Some people get mad or defensive when you point out that pontification, punditry, and politics are only a tiny part of the reason people communicate through blogs. Similarly, a lot of people have emotional reactions to the fact that contributions are made to online communities like Wikipedia, Craigslist, Flickr, or yes, Digg, for reasons other than pure monetary value.

There is nothing wrong with wanting to make money; That's just not why most people use communication tools.

But there's more than one reason to make a brash offer on the web. Business 2.0 points out, "If nothing else, it's a good PR move to raise the awareness among the Digg-erati that Netscape wants their attention." Even the usually mild-mannered Leo Laporte weighs in, stating a truism that should be obvious: "Digg is what it is because of the entire community that participates there. Ditto del.icio.us, and Flicker, and Newsvine."

And that's the most reassuring part for me about Kevin Rose's response to the latest kerfuffle. He addresses the most critical point in making a successful effort on the web.

Listen to your existing community. Think of what your loyal Netscape users must think - you're essentially telling them that they aren't good enough and that you have to buy better users. You can have the best submitters in the world, but if your community doesn't support you it will never work.

I have met both Jason Calacanis and Kevin Rose a number of times, and I genuinely wish them both well with their efforts. They've both built good sites. If either one's a successful, scalable business, then both sites likely are. But you get what you design for.

Netscape will end up with users who value getting paid for their work. Digg will end up with users who are motivated by the desire to contribute to the community. The question is which kind of site you want to participate in, which one makes the web better, which one makes people happier.

Three weeks ago I said I feel strongly we all need to make something meaningful. I think that we're seeing a clear example of how there's going to be a reckoning between the two types of motivations. I'm pretty comfortable with the side I'm on.