The odd face of Facebook
Facebook, one of the fastest growing social network sites has really screwed up User Interface (UI) design with its new look. Take a look at the screen capture above. Now you tell me in 5 seconds the intuitive difference between clicking on: [Facebook] and [home], [home] and [profile], [profile] and [Georges van Hoegaerden], [settings] and [profile], and [settings] and [Georges van Hoegaerden].
But more importantly, Facebook has clearly not read my blog on removing the technology language to appeal to consumers, an issue that prevents many consumer technology companies from maximizing their growth potential. But who’s counting at Facebook these days?
Facebook is a technology company that exposes social networking capabilities in a very technological fashion. The examples are plenty: the workings of the UI described above, the categorization of data optimized to suit their internal data-models and the very complicated way to add applications to the platform, and we can keep going on. But for now, they’ll get away with it. Other consumer technology companies won’t be that lucky.
A great user interface can never be an objective by itself as that just presents a pretty face, try living with a person that only has that. The ultimate user experience (and this is where I politically depart from the previous analogy), is defined by an ecosystem of capabilities, cost and ease-of-use that creates the real and sustainable appeal.
BMW figured out early on that the Ultimate Driving Experience™ is what sells cars albeit their engine capabilities and timing was their initial core strengths. Today they sell the sum of all parts, The Ultimate Driving experience: great engine capabilities, spiffy performance, practical design and excellent comfort - a thrilling way to drive from A to B.
Facebook currently has a horrible “Ultimate Social Experience”: good (but no longer unique) social networking, so-so performance, impractical design and pretty bad comfort. Those are probably the reasons why 90% of my Facebook friends never use any Facebook features but simply create an account.
Many of Facebook’s recent poor decisions (including ad network issues etc) are evidence that user growth is outpacing their ability to grow up. And that could be catastrophic. Facebook is a great social networking platform with a lot of potential that many people rely on.
Facebook better watch out and prevent that too many people will start hating it. Those same users may use Facebooks own social networking capability to turn it off as fast as they initially turned it on.
10 Investment lessons learned over 10 years
I visited the entrepreneurs week
at Stanford this week where many MBAs were
walking around with new business ideas. Since we
raised a fair amount of money ourselves
in the last 10 years we've been focused on
startups, I wanted to give some advice that may
be helpful to any first time entrepreneur:
1) Define the end goal of the company in a newly defined market
The determination of pre-money valuation, even for the first round, should be based on the disruptiveness of the company when it grows up. The goal is to find the investor that understands the path to that goal, not an assessment of the current value of the company. The starting valuation then becomes a reverse calculation from that goal.
2) Don't set a valuation, but have one in mind
The valuation is usually suggested by the investor, but ofcourse, you don't have to take it. Ask your potential investor to value the company after you give them the pitch, the outcome of that tells you whether the investor really understands your unique proposition. If it is too low, it may be because the clarity of your pitch. If not: walk away.
3) Have an operating plan ready
An operating plan defines how you turn technology into a business, without it there is simply too much room for debate and depreciation. Show investors you know how to run the business. The more you do the easier it is to cement your use-of-proceeds.
4) Find an investor you truly like
Every entrepreneur deserves to be treated with respect. Waste no time talking to deep pockets with awful personalities, but don't be afraid to get some straight talk. Check TheFunded.com for war stories and ask around. Later, when business gets tough bad guys usually get a lot worse.
5) Define business disruptiveness
Building technology is one thing, but yielding a disruptive business value is even more relevant. The latter is defined by macro-economics, not just a more clever way to improve existing technology.
6) Take passion over domain expertise any-day
Find a lead investor that has passion for the business problem you are about to solve. An investor that claims to have domain expertise is usually the one that doesn't understand disruption within or across that domain.
7) Don't get squeezed
Investors like to put investments into past investment categories and make an assessment of how much it costs to build your business. Don't let them stray too much from what is in your operating plan, if you do you will get punished for it later, both on the execution side as well as in excessive dilution.
8) Know the investment allocation
Usually a little harder to do with angels but VCs should have a total investment amount allocated to the business. Ask them for the total allocation upfront, so you know when you need to go shopping somewhere else. Also, don't be afraid to ask who else needs to sign off on this deal within the VC firm, in most cases it is a very democratic process internally with a primary sponsor. After your first meeting you should get in front of a General Partner, talking terms.
9) Control your own eco-system
Investors like to wiggle around and determine how much money should go into R&D, Sales, Marketing, Business development, Support and G&A. Too much money in marketing is usually an indication the product or service lacks real viral adoption and that should be avoided. If the balance of this eco-system is not guarded heavily by the entrepreneurs the result is an excessive bleeding and further dilution in subsequent rounds.
10) Balance your board
A board without a balance of technical and business expertise can really bring a company down when the going gets tough. The technical board members will spend too much time validating deep technology progress without real affinity for the bottom-line. On the flip side a demand for too early revenues can have disastrous effects on product or service readiness and customer experience. Keep them both in check.
Be honest and transparent, too much talk without real interaction with a prospective investor is a bad sign. Paint a realistic risk-management picture, in which you describe both the pluses and minuses, not unlike the way a VC sells their risks in a Private Placement Memorandum (PPM) to its limited partners. Feel free to e-mail us if you need help.
1) Define the end goal of the company in a newly defined market
The determination of pre-money valuation, even for the first round, should be based on the disruptiveness of the company when it grows up. The goal is to find the investor that understands the path to that goal, not an assessment of the current value of the company. The starting valuation then becomes a reverse calculation from that goal.
2) Don't set a valuation, but have one in mind
The valuation is usually suggested by the investor, but ofcourse, you don't have to take it. Ask your potential investor to value the company after you give them the pitch, the outcome of that tells you whether the investor really understands your unique proposition. If it is too low, it may be because the clarity of your pitch. If not: walk away.
3) Have an operating plan ready
An operating plan defines how you turn technology into a business, without it there is simply too much room for debate and depreciation. Show investors you know how to run the business. The more you do the easier it is to cement your use-of-proceeds.
4) Find an investor you truly like
Every entrepreneur deserves to be treated with respect. Waste no time talking to deep pockets with awful personalities, but don't be afraid to get some straight talk. Check TheFunded.com for war stories and ask around. Later, when business gets tough bad guys usually get a lot worse.
5) Define business disruptiveness
Building technology is one thing, but yielding a disruptive business value is even more relevant. The latter is defined by macro-economics, not just a more clever way to improve existing technology.
6) Take passion over domain expertise any-day
Find a lead investor that has passion for the business problem you are about to solve. An investor that claims to have domain expertise is usually the one that doesn't understand disruption within or across that domain.
7) Don't get squeezed
Investors like to put investments into past investment categories and make an assessment of how much it costs to build your business. Don't let them stray too much from what is in your operating plan, if you do you will get punished for it later, both on the execution side as well as in excessive dilution.
8) Know the investment allocation
Usually a little harder to do with angels but VCs should have a total investment amount allocated to the business. Ask them for the total allocation upfront, so you know when you need to go shopping somewhere else. Also, don't be afraid to ask who else needs to sign off on this deal within the VC firm, in most cases it is a very democratic process internally with a primary sponsor. After your first meeting you should get in front of a General Partner, talking terms.
9) Control your own eco-system
Investors like to wiggle around and determine how much money should go into R&D, Sales, Marketing, Business development, Support and G&A. Too much money in marketing is usually an indication the product or service lacks real viral adoption and that should be avoided. If the balance of this eco-system is not guarded heavily by the entrepreneurs the result is an excessive bleeding and further dilution in subsequent rounds.
10) Balance your board
A board without a balance of technical and business expertise can really bring a company down when the going gets tough. The technical board members will spend too much time validating deep technology progress without real affinity for the bottom-line. On the flip side a demand for too early revenues can have disastrous effects on product or service readiness and customer experience. Keep them both in check.
Be honest and transparent, too much talk without real interaction with a prospective investor is a bad sign. Paint a realistic risk-management picture, in which you describe both the pluses and minuses, not unlike the way a VC sells their risks in a Private Placement Memorandum (PPM) to its limited partners. Feel free to e-mail us if you need help.
Develop an experience, not just a product
Thursday - December 13, 2007 Filed in: Strategy
| Positioning
In the food industry there is a clear distinction between a chef and a cook. A chef invents new dishes from scratch through experimentation, deep knowledge and experience. A cook takes a few successful recipes, adapts them to his beliefs and serves them up to a large audience. Both are fundable business models, but they rely on different factors to become successful.
In technology this distinction is not often thought about when funding companies. It would be very easy to judge that a chef is always a better innovator to invest in, but I find the opposite to be true in many scenarios I've run into. Different investment and growth scenarios are to be expected from investing in Daniel Boulud's new restaurant in China versus the growing chain of Fleming's restaurants, even though they taylor to roughly the same price points successfully.
Research institutes spin out great chefs, but struggle with scale and mass adoption. Great sales, marketing and business founders in technology usually depend on the continuous innovation only the chefs can provide. The workings of VC funds forces us to combine the chefs with cooks so that the ecosystem provides both continuous innovation and mass adoption at an early stage.
As a CEO, we provide the leadership and direction that pairs the chef and cooks, all you need to do is: do what you do well. Just like Remy in Ratatouille, we will pull your hair to ensure the right dishes are produced - on time.
Cyclical innovation
Tuesday - August 29, 2006 Filed in: Strategy
| Venture
Capital
This may be my most unexpected subject: Microsoft's
good side. As a forever Mac user I am not a big
proponent of the demi-cartel position Microsoft
instills on the computer industry, yet I realize that
at the same time Oracle pursues a cartel in the
database business and Apple is driving for a cartel
in the music business. So all the major players
deploy the tactics that suit their success in the
market. C'est la Vie.
But my recent observations of Microsoft are very positive. Today I read the XBOX people are prepping tools for individual game designers to build their own games. That is big. Big as in free-markets. The free supply and demand characteristics of free-markets are brought to the gaming industry, absolutely beautiful. Microsoft will be a winner through an effective platform on which both the supply of the Long Tail and the Body (main stream supply) of the gaming market thrive.
Also, interesting has been the personal experience with Microsoft, especially the entertainment group. I am currently positioning a Venture Company portfolio company to Microsoft (full-body gesture recognition), and within less than two weeks they respond, call and are prepared to setup a meeting. Companies like Apple, Sega and many others can learn something from this agile behavior of a big gorilla. Microsoft is truly changing.
But my recent observations of Microsoft are very positive. Today I read the XBOX people are prepping tools for individual game designers to build their own games. That is big. Big as in free-markets. The free supply and demand characteristics of free-markets are brought to the gaming industry, absolutely beautiful. Microsoft will be a winner through an effective platform on which both the supply of the Long Tail and the Body (main stream supply) of the gaming market thrive.
Also, interesting has been the personal experience with Microsoft, especially the entertainment group. I am currently positioning a Venture Company portfolio company to Microsoft (full-body gesture recognition), and within less than two weeks they respond, call and are prepared to setup a meeting. Companies like Apple, Sega and many others can learn something from this agile behavior of a big gorilla. Microsoft is truly changing.