Don Dodge on The Next Big Thing

Saying no to great ideas and customers

Focus is critically important to startups and large companies. Focus means saying no to some great ideas. Having lots of smart people and lots of money in the bank can make it hard to say no. I was mentoring a startup, helping them sort through where to focus and how to prioritize the opportunities. I told them to choose their customers carefully. Huh? That's right, choose your customers carefully, and choose what you build / productize even more carefully.

Great ideas come from customers, partners, and employees. Big customers can have very specific needs, and demand those features in your product. Sometimes those customer demands align with your vision, but when they don't...just say no. For a startup that needs all the revenue they can get, saying no to a big customer is very hard. But, saying yes to customer requests that take you away from your strategic vision can paint you into a corner that you never get out of. Once you have those features and those customers you can't just kill them...you are stuck. Your product will never again be the universal, adaptable platform you intended it to be.

Saying no to great ideas from super smart employees is even more difficult. Startups need to focus or they will fail. Big companies have the same problem. Read this Q&A with Apple CEO Steve Jobs from aBusinessWeek interview back in 2004. 

 

Q: Apple has long been an innovative place with lots of smart, passionate engineers. But it seemed to fall off the map in the years before you returned in 1997. What happened?
A: Let's start at the beginning. Both [Apple co-founder] Steve Wozniak and I -- and I think I can speak for Woz -- got our view of what a technology company should be while working for Hewlett-Packard (HPQ ) in the late 1960s and early 1970s. And the first rule over there was to build great products. Well, Apple invented the PC as we know it, and then it invented the graphical user interface as we know it eight years later [with the introduction of the Mac]. But then, the company had a decade in which it took a nap.

Q: What can we learn from Apple's struggle to innovate during the decade before you returned in 1997?
A: You need a very product-oriented culture, even in a technology company. Lots of companies have tons of great engineers and smart people. But ultimately, there needs to be some gravitational force that pulls it all together. Otherwise, you can get great pieces of technology all floating around the universe. But it doesn't add up to much. That's what was missing at Apple for a while. There were bits and pieces of interesting things floating around, but not that gravitational pull.

People always ask me why did Apple really fail for those years, and it's easy to blame it on certain people or personalities. Certainly, there was some of that. But there's a far more insightful way to think about it. Apple had a monopoly on the graphical user interface for almost 10 years. That's a long time. And how are monopolies lost? Think about it. Some very good product people invent some very good products, and the company achieves a monopoly.

But after that, the product people aren't the ones that drive the company forward anymore. It's the marketing guys or the ones who expand the business into Latin America or whatever. Because what's the point of focusing on making the product even better when the only company you can take business from is yourself?

So a different group of people start to move up. And who usually ends up running the show? The sales guy. John Akers at IBM (IBM ) is the consummate example. Then one day, the monopoly expires for whatever reason. But by then the best product people have left, or they're no longer listened to. And so the company goes through this tumultuous time, and it either survives or it doesn't.

Q: Is this common in the industry?
A: Look at Microsoft (MSFT ) -- who's running Microsoft?

Q: Steve Ballmer.
A: Right, the sales guy. Case closed. And that's what happened at Apple, as well.

Remember, this interview with Jobs was back in 2004. He is referring to the time at Apple when he was ousted and John Sculley (sales guy) took over Apple. Jobs says the same thing happened at IBM and Microsoft. 

My experience mentoring that startup, and the Jobs interview, crystallized for me the importance of product focus. Yes, it is good to have multiple features and even multiple products, but they must, as Jobs would say, "add up to something". Every new feature and new product should support the company vision. It should leverage what you are doing and create real synergy. If it doesn't...just say no.

Hard to say no - It is easy to say no when you don't have the people, or the cash required, to do the job. It is much harder to say no if you are a startup that needs every customer you can get, or a big company with lots of employees and plenty of cash. Focus or fail. Focus on building great products, or fail with too many features that "don't add up".

Remember the Peanut Butter Manifesto by Brad Garlinghouse, former VP at Yahoo? Here is an excerpt that captures the essence;

We lack a focused, cohesive vision for our company. 

We want to do everything and be everything -- to everyone. We've known this for years, talk about it incessantly, but do nothing to fundamentally address it. We are scared to be left out. We are reactive instead of charting an unwavering course. We are separated into silos that far too frequently don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics.

Our inclination and proclivity to repeatedly hire leaders from outside the company results in disparate visions of what winning looks like -- rather than a leadership team rallying around a single cohesive strategy. 

I've heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.

Focus or Fail - It happens at startups, and it happens at big companies. It sounds easy, but it is much harder than you might imagine.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also Follow me on Twitter @DonDodge .

 

Do Windows or Mac Operating Systems Matter?

Robert Scoble asks "Does anyone in Silicon Valley care about Windows anymore?" I think the bigger question is "Do Operating Systems Matter Anymore?" Of course every computer needs an operating system to work, but does anyone care which one? Increasingly users are spending more time with applications that run in the browser, and rarely interact with the operating system.

In the old days there were "killer apps" like VisiCalc or Lotus 123. The choice of app determined which operating system you purchased. Today most applications run in the browser so the underlying operating system is irrelevant to the end user. 

With hundreds of millions of Smartphones and Tablets flooding the market, and hundreds of thousands of apps, does anyone think about operating systems? Probably not. But that doesn't mean they aren't still wildly profitable.

Microsoft annual revenues are over $62 Billion and growing. Apple is bigger than Microsoft, at $65 Billion and growing. Both are powerful companies making huge profits. Much of Microsoft's revenues and most of its profits come from Windows and Office. Apple has diversified significantly so that most of its revenues and profits come from iPods, iTunes, iPhones, and iPads.

Cost of hardware - Computing has always moved to smaller, faster, cheaper platforms. Starting with million dollar main frames in the IBM days, to hundred thousand dollar mini-computers in the DEC, SUN, Data General days. Thousand dollar personal computers were the next step in computing. And today, hundred dollar Smartphones and Tablets are the hot platform.

Software prices dropped too - It was common to pay hundreds of thousands of dollars for software on the old main frame computers. Software for Mini computers typically cost tens of thousands. PC software cost hundreds of dollars. Web based applications are a few dollars a month, or maybe free, funded by advertising dollars.

Economics of Computing - While the cost of hardware and software has dropped significantly with each platform transition, the number of users has multiplied ten fold, or more. So, the economics still work. Look at this chart from Morgan Stanley analyst Mary Meeker;

With the explosion of computing devices at such low prices do operating systems matter? Every device needs an operating system, but it has become a low cost, low margin commodity. Where is the future of computing?

Phone Computer – Your cell phone will become your primary computer, communicator, camera, and entertainment device, all in one. The exciting new applications run in the browser, with application code and data in the cloud. There will be docking stations everywhere with a screen and a keyboard. You simply pull out your phone, plug it into the docking station, and instantly all your applications and data are available to you. You can connect to the Internet via your cell phone service, WiFi hotspot, or wired connection.  Your phone will have enough storage so you can decide which applications and data are stored on your phone, and which will be in the cloud. Replication will work seamlessly in the background so that you always have a backup copy of your data in the cloud.

Cloud Computing – The explosion of reliable broadband bandwidth, virtualization technology, cheap storage, memory, and servers, has made Cloud Computing the obvious choice for the next decade. There are huge cost advantages versus on-premise servers. Why buy servers, hire IT admin to manage them, buy operating system licenses, application licenses, pay 20% maintenance fees every year, worry about security updates/breaches, hassle with asset management, etc., when you can just “pay as you go” with cloud computing resources? You can buy compute cycles from Amazon, or hosted applications like Gmail and Google Apps. Google also provides a cloud infrastructure with an integrated development environment to build scalable web applications. The Cloud provides lots of choices and cost advantages.

Browser as Web OS – The browser is becoming more important than the underlying Operating System. HTML5 puts many OS capabilities into the browser, especially off-line storage/use. Google is developing Chrome OS that is essentially a browser and operating system in one. The Chrome CR-48 Notebooks are now in beta test, and will likely be available to the public later in 2011.

The cell phone as your computer, the Cloud for applications and storage, and the Browser as your operating system. These are huge changes in computing. They are happening now. Ten years from now will people care about Windows or Mac operating systems? Not likely.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

 

Do tax rates effect startups and job growth?

Everyone wants a vibrant economy, innovation, and job growth. Do lower tax rates result in more startups and job growth? Do higher tax rates have the opposite effect? Tim Kane in the Huffington Post argues "Cutting Taxes Will Boost Entrepreneurship".

There are strong opinions on both sides of this issue, but very few facts. Most of the people arguing about it are politicians who have never started or managed a real business. In the USA, Democrats think big government spending, redistribution of wealth, and higher taxes on the "rich" are the right approach. Republicans believe less government spending, less reguation, and lower taxes stimulate job growth.

The problem is our society needs elements of both approaches, but neither one is completely correct. In the political compromise we get the worst of both worlds. Gigantic budget deficits, runaway spending, minimal job growth, "lower" taxes on the rich, reckless business risks by some capitalists, and an unstable economy.

The good news is that no one in the startup world listens to politicians. No entrepreneur decides to start a company based on promises from Democrats or Republicans. And, my belief is no one decides to NOT start a company because the tax rate is 35% versus 30%. Nice theory, but in practice the last thing an entrepreneur is thinking about is taxes. There are dozens of other more important concerns than taxes. Of course at some point taxes DO become onerous and would disuade an entrepreneur, but we are no where near that point today.

Tim Kane argues lower taxes would be better, but introducing a flat tax might be the best compromise;

"Over the last couple of years, I've been conducting economic experiments to see if progressive taxes affected entrepreneurial behavior, and early (unpublished) results confirm the empirical studies, with a surprising twist: Making taxes more progressive (that is, raising tax rates on the rich while lowering them for everyone else) lowers the incentive for people to take risks that might make them rich. But the surprise was that higher flat-rate taxes had no effect on entrepreneurial behavior."

"The facts point to a solution sure to please no one. Taxing the rich will hurt the economy, but raising taxes on everyone won't. The implication is that Congress could adopt a flat tax with a relative high rate and actually enhance job creation while helping to balance the budget."

Personally, I have never met an entrepreneur that said "I would start a company if only the tax rates were lower". The barriers to starting a company are much more fundamental. Things like local zoning laws that don't allow you to start a company out of your house or garage. Or, government regulations like OSHA, reporting requirements like 401B, legal issues like patents and trademarks, and other frustrating government issues.

Federal, state, and local governments are NOT here to help you start or grow a business. They create all kinds of rules and regulations designed to protect citizens, assuming that "business" is always to blame. This quote from Tim Kane's article sums it up;

"Democrats historically look out for workers, while Republicans tend to look out for corporations. The problem is, entrepreneurs are neither and/or both at once."

There is no "business" versus "labor" in startups or small busnesses. They are all just people trying to build a better future. Entrepreneurs who work their butts off to earn $250K are not rich, and shouldn't be penalized with higher taxes. They work hard for every penny.

Tax rates should not be used as economic policy or social policy. Taxes should be a way to fund government requirements, not a social policy to redistribute wealth to those that aren't as successful. 

If politicians want to stimulate the economy and job growth the best thing they can do is stop spending money they don't have, and leave entrepreneurs alone to do what they do best. The federal budget deficit is a real problem now. It has been growing for 30 years, but the last few years have been unbelievable and unsustainable. Take a look at this chart if you dare. 

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

Startup founders can have their cake and eat it too

Back in the day Venture Capitalists were  king makers. They decided who got funded, facilitated strategic partnerships, and brokered M&A transactions for their portfolio companies. The world has changed...a lot. Evelyn Rusli wrote an insightful story for the New York Times about how startup founders are more in control now. Angel Investors are willing to invest more at higher valuations, and Private Equity investors are willing to invest huge sums at later stages and allow founders to cash in some of their stock. VCs are left in the middle with much less power.

Now startup founders can "have their cake and eat it too". They can get the funding they need to start or expand their company, AND maintain ownership control, AND take some money off the table by cashing in some of their stock before an exit. This is a big change.

Traditional Venture Capital (VC) investors would invest $1M to $3M in a Series A and take 40% to 60% of the company. More importantly, they would take Board seats, and sometimes control the company. Sometimes the BOD would replace the founders with seasoned executives, and later take on additional rounds of financing that would dilute the founders ownership to minimal levels. The VCs had all the power. Not anymore. From Evelyn Rusli's the New York Times story;

“For the next-generation opportunities around the Internet and social networks, I believe the biggest opportunities will be driven by young founders who maintain their C.E.O. positions,” said Jim Breyer, an early investor in Facebook and a partner at Accel Partners.

Angel Investors, "Super Angels" and some forward thinking VCs like Founders Fund and Accel Partners changed all that. Angels are typically wealthy entrepreneurs that have started and sold several companies. They are founders themselves and identify with the startup founders. Ron Conway, Mike Maples, Aydin Senkut, Jeff Clavier, Paul Graham, Brad Feld, Dave McClure, Paige Craig, and lots of former employees of PayPal, Google, Facebook, etc. are very active Angel investors. Often they can invest enough to cover what would have been a traditional VC Series A round.

Later stage investors like Yuri Milner (DST), Founders Fund, and Andreessen Horowitz are willing to invest from $50M to hundreds of millions in private companies at very high valuations. In the past only an IPO could support such high valuations. Not anymore. Now later stage investors are investing at billion dollar valuations and allowing founders to cash out some of their stock. In the NYT story, Andrew Mason, founder of Groupon says;

“By taking money off the table, you’re expunging a big source of risk, allowing you to focus on the interests of the company you’re building instead of your own,” said Andrew Mason, the 30-year-old founder and chief executive of Groupon. He said he was able to sell some of his shares in D.S.T. Global’s initial Groupon investment, a $135 million round last April.

Still Not Easy - Plentiful capital, and low cost of startup resources like Open Source software, cheap hosting, and pay as you go services, has made it fast and cheap to start a company. That doesn't mean it is easy. Far from it. It may be easier to start a company, but it is much harder to be discovered and gain traction with users and customers. There is a lot of competition for user attention.

There is another disruption happening in Press, PR, and startup promotion. The traditional PR agencies are of diminishing importance. The press editors don't have the king maker power they once had. The old line startup conferences can't charge the high prices they once did. Social media, blogs, Twitter, and Facebook are changing the way startups market to their customers. Techcrunch Disrupt, Ycombinator, Launch Conference, and TechStars provide a grand stage for startups to strut their stuff for little or no cost. That is disruptive.

All these changes have put more power in the hands of the startup founder. That is a good thing.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

Startup founders can have their cake and eat it too

Back in the day Venture Capitalists were king makers. They decided who got funded, facilitated strategic partnerships, and brokered M&A transactions for their portfolio companies. The world has changed...a lot. Evelyn Rusli wrote an insightful story for the New York Times about how startup founders are more in control now. Angel Investors are willing to invest more at higher valuations, and Private Equity investors are willing to invest huge sums at later stages and allow founders to cash in some of their stock. VCs are left in the middle with much less power.

Now startup founders can "have their cake and eat it too". They can get the funding they need to start or expand their company, AND maintain ownership control, AND take some money off the table by cashing in some of their stock before an exit. This is a big change.

Traditional Venture Capital (VC) investors would invest $1M to $3M in a Series A and take 40% to 60% of the company. More importantly, they would take Board seats, and sometimes control the company. Sometimes the BOD would replace the founders with seasoned executives, and later take on additional rounds of financing that would dilute the founders ownership to minimal levels. The VCs had all the power. Not anymore. From Evelyn Rusli's the New York Times story;

“For the next-generation opportunities around the Internet and social networks, I believe the biggest opportunities will be driven by young founders who maintain their C.E.O. positions,” said Jim Breyer, an early investor in Facebook and a partner at Accel Partners.

Angel Investors, "Super Angels" and some forward thinking VCs like Founders Fund and Accel Partners changed all that. Angels are typically wealthy entrepreneurs that have started and sold several companies. They are founders themselves and identify with the startup founders. Ron Conway, Mike Maples, Aydin Senkut, Jeff Clavier, Paul Graham, Brad Feld, Dave McClure, Paige Craig, and lots of former employees of PayPal, Google, Facebook, etc. are very active Angel investors. Often they can invest enough to cover what would have been a traditional VC Series A round.

Later stage investors like Yuri Milner (DST), Founders Fund, and Andreessen Horowitz are willing to invest from $50M to hundreds of millions in private companies at very high valuations. In the past only an IPO could support such high valuations. Not anymore. Now later stage investors are investing at billion dollar valuations and allowing founders to cash out some of their stock. In the NYT story, Andrew Mason, founder of Groupon says;

“By taking money off the table, you’re expunging a big source of risk, allowing you to focus on the interests of the company you’re building instead of your own,” said Andrew Mason, the 30-year-old founder and chief executive of Groupon. He said he was able to sell some of his shares in D.S.T. Global’s initial Groupon investment, a $135 million round last April.

Still Not Easy - Plentiful capital, and low cost of startup resources like Open Source software, cheap hosting, and pay as you go services, has made it fast and cheap to start a company. That doesn't mean it is easy. Far from it. It may be easier to start a company, but it is much harder to be discovered and gain traction with users and customers. There is a lot of competition for user attention.

There is another disruption happening in Press, PR, and startup promotion. The traditional PR agencies are of diminishing importance. The press editors don't have the king maker power they once had. The old line startup conferences can't charge the high prices they once did. Social media, blogs, Twitter, and Facebook are changing the way startups market to their customers. Techcrunch Disrupt, Ycombinator, Launch Conference, and TechStars provide a grand stage for startups to strut their stuff for little or no cost. That is disruptive.

All these changes have put more power in the hands of the startup founder. That is a good thing.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

Women rule the Internet and Tech press

Aileen Lee, partner at VC firm Kleiner Perkins, wrote a guest post for Techcrunch entitled "Why Women Rule The Internet" Aileen makes the point that women are the "majority of users of social networking sites and spend 30% more time on these sites than men". She continues, "according to Gilt Groupe, women are 70% of the customer base and they drive 74% of revenue.  And 77% of Groupon’s customers are female according to their site".

The killer quote is at the end "Women are the routers and amplifiers of the social web.  And they are the rocket fuel of ecommerce.  The ongoing debate about women in tech has been missing a key insight. If you figure out how to harness the power of female customers, you can rock the world." I encourage you to read the full post on Techcrunch.

Last week at SXSW (South By South West) was filled with parties and receptions every night. I had great conversations with Jessi Hempel (Fortune Magazine), Kara Swisher (Wall Street Journal), Caroline McCarthy (CNET), Maya Baratz (Wall Street Journal), Stacey Higginbotham (GigaOm), and Katie Boehret (Wall Street Journal). I also ran into Alexia Tsotsis (Techcrunch), Megan McCarthy (Techmeme), and others.

It didn't occur to me until the end of the night that I spent most of my time with female journalists. Hmmm...where are all the male journalists? I am sure the guys are around somewhere...but I didn't see them. Then I started thinking about other prominent female tech writers like Sarah Lacy, Mary Jo Foley, Jolie O'Dell, Ina Fried, Leena Rao, Xeni Jardin, Gina Trapani, and many more. I only have room for three pictures in this short post, and I'm sure you know who they are. More photos are on my Twitter stream.

Why are there so many great female tech writers? Because they are great communicators. In both directions. They express themselves well, and they listen carefully. We testosterone controlled males sometimes have trouble listening. That can be a problem if your job is learning about new things. It can also be a problem when thinking about how to build social services that are engaging.

The success of Zynga, Groupon, Gilt Groupe, Zappos, and many other shopping, social, gaming sites is due largely to women. Women have played a vital role in building Techcrunch too. It wouldn't exist without Mike Arrington, but it wouldn't be as good as it is without Heather Harde (CEO), Sarah Lacy, Leena Rao, and Alexia Tsotsis.

Women are also in leadership positions at the biggest tech companies. At Google we have Marissa Mayer, Stephanie Tilenius, Susan Wojcicki, Megan Smith, and many more. At Cisco, Padmasree Warrior is the CTO. Claudia Fan Munce is Managing Director of IBM Venture Capital Group. And, Intel Capital has lots of women making investments, including my good friends Lucy McQuilken and Christine Herron.

If you want to follow some awesome women on Twitter you can subscribe to my Top Women In Tech list. Get a daily feed of tech insights from women who are making it happen.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

Start-ups? We need more finish-ups

Over the past 3 weeks I have seen over 300 start-ups at Stanford Startup Labs, Launch Conference, DEMO, and SXSW. StartupAmerica is a great new program to encourage more entrepreneurship in America. There are startup incubators sprouting up everywhere, and venture capital is plentiful. Is the problem not enough startups, or not enough "finish-ups"?

Venture Capital firms invested $21.8 Billion in 3,277 companies in 2010. Angel Investors invested another $16B to $20B in 50,000 more early stage startups. Many other companies startup with no funding from VCs or Angels. In fact, there are over 500,000 new companies started EVERY year according the the US Small Business Administration (SBA).

Most startups don't finish. Thirty percent of new companies fail in the first year, and 50% fail within 5 years. Second time entrepreneurs have a higher success rate than first timers. Programs like Ycombinator, TechStars, Stanford Startup Labs, and other incubators greatly increase the chances of success. 

Failure is Experience - When I travel the world speaking to entrepreneurs I tell them that in America we don't use the word "failure", we call it experience. At Google we believe that  "achieving 60% of the impossible is better than 100% of the ordinary". We set impossible goals  and shoot for them because it creates a whole different mind set. Think about the trajectory required to hit a target at 1,000 feet versus a target at 100 feet. That difference in trajectory, and thinking, will create a much better result than aiming for 100 feet.  That is a fundemental difference in philosophy that drives us towards success. Failure is not viewed as shameful, and will not prevent you from achieving future success. 

Mentorship matters - Maybe Startup America should devote some of their program to mentorship programs and incubators that convert more start-ups to "finish-ups". Just increasing the success rate of existing startups by 10% would create millions of jobs and stimulate local economies. We should encourage experienced entrepreneurs to help new startups through programs like SCORE (Service Corp Of Retired Executives) and programs like Ycombinator and TechStars. We should celebrate and honor people who take the time to mentor startups and help them succeed.

Why isn't there the equivalent of The Oscars or Emmys for entreprenuers and mentors? The closest thing we have is The Crunchies. Great, but lets take it to the national stage, and even international stage and celebrate entrepreneurship everywhere. Aim high! Hey, Steve Case and Scott Case, are you in?

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

Women dominate Tech press at SXSW

My first night at SXSW (South By South West) was filled with parties and receptions. Great conversations with Jessi Hempel (Fortune Magazine), Kara Swisher (Wall Street Journal), Caroline McCarthy (CNET), Maya Baratz (Wall Street Journal), Stacey Higginbotham (GigaOm), and Katie Boehret (Wall Street Journal). I also ran into Alexia Tsotsis (Techcrunch), Megan McCarthy (Techmeme), and others.

It didn't occur to me until the end of the night that I spent most of my time with female journalists. Hmmm...where are all the male journalists? I am sure the guys are around somewhere...but I didn't see them. Then I started thinking about other prominent female tech writers like Sarah Lacy, Mary Jo Foley, Jolie O'Dell, Ina Fried, Leena Rao, Xeni Jardin, Gina Trapani, and many more. I only have room for three pictures in this short post, and I'm sure you know who they are. More photos are on my Twitter stream.

Why are there so many great female tech writers? Because they are great communicators. In both directions. They express themselves well, and they listen carefully. We testosterone controlled males sometimes have trouble listening. That can be a problem if your job is learning about new things. 

One other thing I noticed, the night was very comfortable and fun because they weren't pitching me...and I wasn't pitching them. Most time at conferences is spent being pitched new ideas by startups, or me pitching them on the awesomeness of working with Google technologies. It was a relaxing respite to just talk with these people about tech trends, issues, and interesting topics.

I have no deep insights today, just an observation that women make great writers and conversationalists. And, women are dominating the scene at SXSW. I think that is great!

BTW, if you want to follow some awesome women on Twitter you can subscribe to my Top Women In Tech list. Get a daily feed of tech insights from women who are making it happen.

Mike Arrington, MG Siegler, Om Malik, Rafe Needleman, Ben Parr, Pete Cashmore, Marshall Kirkpatrick, Matt Marshall, Anthony Ha, Clint Boulton, Jon Brodkin, and others are great tech writers too. I just haven't seen them yet at SXSW.

Observation #2: SXSW is like Spring Break for older kids like me. Non stop parties with a conference on the side. It is a great way to catch up with your 1,000 closest friends and meet new people doing new things. Come join the fun.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

Launch and Demo your idea in 3 minutes - why your elevator pitch matters

Some entrepreneurs are really good at describing their idea and vision in three minutes, some are not. Here is why it is important. Investors, employees, customers, and partners all need to "buy in" and get excited about your idea. They will form an initial impression in three minutes or less. This first impression is the lens through which everything else is viewed.

I saw about 100 startups at the Launch Conference this week, and will see another 80 at the Demo Conference next week. The good ones stand out immediately. How can you get noticed? Don't expect to tell the whole story, just enough to get them curious and wanting to know more.

You need several different pitches. The demo pit / exhibit area pitch is 1 minute. The on stage pitch to the audience is 6 minutes. The investor meeting pitch is about 30 minutes. The key to an “elevator pitch” is to get them interested, answer the basic questions, and get to the next meeting. It is called the “elevator pitch” because you should be able to explain your new company idea to a prospective investor in the time it takes to ride an elevator to their floor. What should you cover?

The Problem – Start with the problem you are solving or the need you are filling. A real life story or scenario about the problem helps the investor understand the problem or need in personal terms, and agree that it is an interesting problem that needs fixing. Dave McClure says too many entrepreneurs start by talking about their solution and whiz bang technology. How they do it versus the problem they solve. If the investor is not interested in the problem…there is no way they will be interested in your solution. Once they are nodding their head about the problem, move on to the solution.

The Customer - Who is your target customer and how much will they pay for your product or service? Your target customer defines your market segment, size, competitors, and growth potential. Investors will "connect the dots" in a few seconds and decide if they are interested in hearing more.

Stop here for feedback - If the person you are talking to doesn't care about the problem you are solving, or doesn't identify with the customer you are targeting...stop and move on to the next prospect. You are wasting their time, and more importantly, your time. If they nod in agreement, tell them about your solution.

The Solution – Explain why your solution solves the problem, and why it is better than other solutions. We do X for Y, or we are the X (well known product) for the Y market. Again, don't explain how it works…but why it works. It might be cheaper, faster, smaller, easier, more enjoyable, or whatever. Don’t waste time explaining the technology, or flowcharting the process or value chain. Just explain why your solution solves the problem better than anything else.

The Competition – If there is no competition there probably isn’t a market. Competitors help the investor understand the problem, existing solutions, and potential size of the market. Even if you think you are inventing a new market, the problem has been there a long time, and people have figured out ways to solve it. Acknowledge that there are existing ways to partially solve the problem, and companies that have part of the solution, and why yours is better. Investors will be very nervous if there is no competition.

The Business Model - Who will pay? Is your solution a vitamin or a painkiller? Vitamins are nice to have, painkillers are a must have. There are some problems that no one will pay to solve. There are other problems where the one getting the benefit is not the party that pays the money. Sometimes there are multiple players in a value chain. Be very clear about where you are in the value chain, who will pay for your solution, and how much they will pay.

The Team – What experience do you and your team have starting companies or specific experience in this market segment? Are there any well known advisors or financial backers helping you? Do you have connections to people who can help you get your first customers?

The Close – We are solving a big problem, in a growing market, with a model that works, and a team that can execute. We need X dollars to reach Y milestone. We need investor partners to help us achieve this success. Show passion and confidence. Ask them to join the crusade. This is going to be The Next Big Thing.

Spend one minute on the problem, three minutes on the solution and demo, and 30 seconds each on the competition, model, team, and close. That is 6 minutes. Practice it 20 or 30 times. Every founder and early employee should be able to do the elevator pitch. Practice in front of friends, then practice in front of strangers that know nothing about your idea. Quiz them after to see if your message got through. Every potential new hire needs to buy into the story just like investors do. In many cases customers need to buy into the story too. This is important. Get it right and life will be much easier. Get it wrong…and you will get a NO in 6 minutes or less.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge

 

Search is amazing compared to 10 years ago at AltaVista

We all use web search engines a lot...about 3 Billion times a day around the world. We hear pundits say that search sucks, or hasn't advanced much beyond 10 blue links. Eleven years ago I was director of engineering at AltaVista, the best search engine in the world at the time. The advances in search since then have been truly amazing. Even comparing Google today to Google four years ago is pretty amazing. See the screen shots below.

Fred Oliveira wrote a balanced story today, Search and Spoiled Bloggers that I found amusing. Fred said "Search is far from perfect...but it doesn't suck". I agree.  Pundits would have you believe search innovation is dead. They are wrong...very wrong. If you don't have time to read this, at least scroll down to the end and watch the video. It is hilarious, and reminds us just how far we have come.

Compare this Google result page from 2007 to a similar result page in January 2011. The differences are amazing, yet so subtle and smoothly integrated that we hardly noticed when it happened.

 

Now look at a similar search result from January 2011. Notice all the additional search result types, photos, videos, news results, etc.

Now take a look at this search result for a tiny restaurant in Hampton, New Hampshire. Note the maps, address, telephone number, directions, Google Places page, customer reviews, Instant Search, etc. These features weren't there a few years ago. But, they were added so smoothly and gradually that we hardly noticed the changes over the years. Also note the absence of advertisements. If there isn't a relevant ad...Google doesn't insert generic ads.

Some of Google's search innovations are very subtle or behind the scenes. For example, the amazing speed of the search is the result of huge investments in servers and infrastructure. The freshness of the results is attributable to a Google project called Caffeine. It is a new search index that provides 50 percent fresher results for web searches, and the largest index of web pages ever assembled. Google Instant uses predictive text to anticipate what a user will search for, displaying results instantly as you type each letter of a search.

There are so many Google search features you almost need a search engine to find them all :-) Things like weather, stock quotes, sports scores, time conversions, unit measure conversions, language translations, book search, shopping, news, blogs, etc.

For example, do a search for a new movie title like "No Strings Attached". Google instantly knows that while "no strings attached" could refer to many things, there is a new movie by that name, so that is probably what you are looking for. Google also knows your approximate location if you are signed in, so it displays local movie theaters, show times, photos, ratings and reviews. And, they do all this in the blink of an eye...less than 2 tenths of a second. Amazing!

Search innovation will continue for years to come. In fact it will accelerate. There is much left to do. Local and Mobile search have lots of possibilities for innovation that leverage location awareness, personal preferences, and social network inputs. Based on these signals search results could include relevant coupons, offers, and advertising. Mobile phones will have better voice search, QR code and bar code recognition, and utilize the camera for things like Google Goggles search, and many more innovations. 

The best innovations are the ones we use without even noticing them. They are so simple, intuitive, and smoothly integrated that we instantly use them without even thinking about it.

Oh, and search is pretty good at finding funny and relevant videos to. Take a look at this. If you don't laugh and nod in agreement...you must be 20 years old or younger. :-)

 

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column. You can also follow me on Twitter @dondodge