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Dave Walters

Dave Walters

Website URL: http://about.me/davewalters E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Video Game Theory And Cows: A Match Made In Facebook Heaven

Wednesday, 18 August 2010 05:15 Published in Startups

So what happens when a video game theory professor from Georgia Tech decides to put his theories to the public test? Simple: CowClicker. But don't be too quick to indict Ian Bogost for adding to the fodder that is Facebook gaming – there are actually many reasons for creating this latest craze (insert Chick-Fil-A style joke here). For some percentage of Facebook's half-a-billion users, the prospect of playing the latest goofy game will be motivation enough. But for those thinking more deeply about video game theory, there's an entire back-story you'll want to consume.

But first of all, get your cow clicking on by signing up for CowClicker on Facebook. Once you've settled into the every-six-hours clicking to accumulate points (and realize it's just not fast enough), you can purchase 'mooney' at the rate of 10 for $.50 all the way up to 1,000 for $10. And therein lies the the genius of Facebook games: micro transactions. Given the percentage swing among the Top 25 users on the game's Rankings page, it seems there are more like a couple hundred players versus a couple hundred thousand players, but you have to think some percentage have plunked down the cash.

And now for the deep theory... During the first half of 2010, Ian was involved in both the Game Developers Conference in SanFran and a video game theory seminar at New York University. Coming out of those two events, it occurred to him that real-life interactions would be the best barometer to test his theories. You can read the entire story on why Ian believes some social games are dangerous, and also read lots more on his background. Suffice to say guys like Ian think about gaming on a whole different level than fanboys like me.

I'd recommend consuming Ian's blog in-depth and following him on Twitter if you're interested in video game theory. If your only goal is to get your Mom onto the next Facebook gaming craze, then go ahead and recommend CowClicker! Welcome to the intersection of satire and PayPal – proceed with caution...

So Begins The Golden Age Of Consumer-Focused Startups

Friday, 06 August 2010 20:13 Published in Startups

I’m reminded this week of my favorite musical duet of all-time: Curtis Mayfield and Taylor Dayne doing ‘People Get Ready’. The lyrics of that song kept ringing in my head as I read and listened to Ron Conway, Dave McClure, Brad Feld, Fred Wilson, Mike Arrington and others on the state of entrepreneurship. The quote goes: “People get ready, there’s a train a-comin’; you don’t need no baggage, you just get on board.” As usual, Silicon Valley is leading the way... But, guess what? Chasing the right boarding station or destination ain't the problem. The solution starts by knowing that train is you. That's right, take the red pill, as I'm about to show you how deep the rabbit hole goes...

No matter who says what, the winds of change are blowing. The seed stage environment is improving every day. Even the money guys are in on it. The advent of the $20-$50M M&A event has increased the batting average enough to draw more funding dollars into five key areas: the consumer Internet, mobile, real-time value, crowd-sourced data and gaming. And make no mistake the hockey stick growth of brands like Twitter, Facebook and Groupon contribute to this momentum. This manifests in better deal terms for entrepreneurs, more freedom to engineer exits and the chance to pair-up with an investor team 3-4 times during a startup career.

 

Welcome to The Best Game in Town


500-black

This new funding model snapped fully into place following the Y Combinator Angel Conf, which featured Ron Conway among the guest speakers. Ron is easily the most prolific Web 2.0 investor of our generation (more than 500 over the last 12 years), and is a tireless proponent of entrepreneurs – a wickedly cool combination if you can be one of the 1-in-40 deals he funds. Also invited to speak was Mike Arrington from TechCrunch, who joked he must have been the ‘comic relief’, yet played the role of counter-point to the tee. Arrington's characterization (claimed not to be his own, but the views of more traditional VCs) that Y Combinator-style funding equals smaller deals, which spawns more ‘dipshit’ companies became the defining point of the entire debate. Ron led the charge by saying "bullshit...I radically disagree" then backing-up his argument with data that showed that investor's success rate with startups is improving with the increase of liquidity events. Just as importantly, Conway’s thoughts are stirring changes in the investment landscape that are very much pro-entrepreneur. Ron's simple point was he hopes “any entrepreneur that has 'the guts' to start a company gets funded.” You should absolutely watch the entire 33-minute follow-up panel session with Conway, Paul Graham of Y Combinator and Mike Arrington. What's clear is the status-quo rules of startup funding no longer apply. Short-necked giraffes beware.

One of the first guys to agree with Ron was Fred Wilson from NYC, who agreed 100% and took the next logical step in a July 30 post: this means give a small team a seed investment to determine whether the idea and the people have what it takes to be the next Google or Facebook. In making his point, Wilson also vehemently disagreed with Arrington’s ‘dipshit’ characterization. His quote was:

"I second Ron Conway's hope that "any entrepreneur that has “the guts” to start a company gets funded." That is my kind of thinking. We need more entrepreneurship, not less. So I'm with Ron 100% on this. Of course getting funded does not means 10s of millions of dollars of funding for every entrepreneur. It means enough funding to actually build something and see if the idea and the team has the right stuff to build a company. Then market forces should take over and determine what ideas and teams get more funding and which ones should close the doors and think about what is next for them.

Mike Arrington expressed the contrary opinion, apparently held by many VCs (not me), that this mini explosion in angel investing is creating a bunch of "dipshit companies." I don't know what a dipshit company is. I haven't seen one. If you listen to the chatter on the Techcrunch comment threads, you will see that people think Twitter and Foursquare are dipshit companies. Fine. Many great companies have been built on a wall of derision and I personally think those two are going to join that list of laughed at great companies (and maybe already have). My point is you just don't know what is a crazy idea and what is a brilliant idea. And you don't know what is a great team and what is a weak team. Of course, we have our opinions on that. We make those judgment calls every day. But we are often wrong. VCs are wrong more often than they are right. It is good for VCs if 10x or 100x companies get angel funding. That is more opportunity for us."

At the same moment in time, Dave McClure was laying out his (if you read anything this year make it this one) investment thesis that will serve as the basis for his new 500 Startups Fund. With a style that naturally endears him to co-founders and alienates him from traditional bankers (a stroke of genius in my way of thinking), Dave also contends the path to success involves smaller investments in pre-revenue products as a beginning point. His summary assertion and solution was this:

“Most VCs are Dinosaurs, and the World Wide Web is an Asteroid that hit the planet in a slow-motion cataclysmic explosion 15 years ago. It may take another 5 years for the ash clouds & nuclear winter of Browsers, Search Engines, Social Networks, & Mobile Devices to kill all the T-Rexes, but it's a done deal. The marsupials are taking over and in 2015 there will be a lot more investors that look like Jeff Clavier, First Round Capital, Y-Combinator, TechStars, Betaworks, & Founder Collective than any Sand Hill VC (funny how all the innovation is from non-valley investors, isn't it?).

This is really the key to my investment thesis: Invest BEFORE product/market fit, measure/test to see if the team is finding it, and if so, then exercise your pro-rata follow-on investment opportunity AFTER they have achieved product/market fit.  It's sort of like counting cards at the blackjack table while betting low, then when you're more than halfway thru the deck and you see it's loaded with face cards & tens, then you start increasing your betting & doubling-down.”

So that’s three industry-leading voices beating the drum in favor of the entrepreneur. Pro small investments in small teams. In favor of allowing founders the choice to sell early (with the hopes they start something new again). Down with (that’s fancy for ‘proponents of’) investing dollars before the product/market equation has been completely hammered out. Smart angels helping smart entrepreneurs early. Hell yes, a proven model.

And now for the best news of all: any town with 'nerds and rich people' trying to replicate their success can just skip it all, pass go, collect $200 and move into this new world. It means losing the burden of trying to replicate something we never could. It means the world doesn’t need $250M funds to engineer real change in those five key growth areas: consumer Internet, mobile, real-time value, crowd-sourced data and gaming. (Sure, high-dollar industries like medical devices and green tech require a traditional view of capital infusion but that's a different beast altogether.)

Dave McClure lays out the stages of this new funding model incredibly well (including the investment amounts required):

1) Product: $0-100K, 3-6 months to develop basic MVP (minimally viable product) that's functional & useful for at least a few customers. Get to small product/market fit.

2) Market: $100K-$2M, 6-12 months to test marketing & distribution channels, understand scalability & customer acquisition cost, conversion to some non-zero revenue event. Get to large product/market fit.

3) Revenue: $1-5M, 6-24 months to optimize product/market fit and get to cash-flow positive.

By the way, each of these phases are completely linear and based on success milestones. If you fail one, you pivot or kill the idea. It’s a high-velocity game and one that supports the double-down strategy laid out by McClure. Plus it exposes more ideas and entrepreneurs to the market, which is good for the business of both startups and investors.

 

Alice, Wonderland is Where and What You Make It


chesire_cat

So the real question is: What does this mean for towns like Atlanta, Raleigh or Austin? How does this thinking become part of our reality? First of all, notice I never said this was The Golden Age of Angels. This is your time and responsibility as founders. To succeed, it's going to require more collaboration and elbow grease from the nerds (entrepreneurs). It’s not a mistake that Boulder is quickly becoming a booming town for startups. TechStars has just introduced their 11 latest funded companies, and the second Open Angel Forum Boulder event has just gone down. Catch a read on Brad Feld’s latest blog post to see what real momentum looks like. This wouldn’t be happening if there weren’t great fundable ideas around every corner. Notice how the outsiders took note: Jason Calacanis tweeted "I've been stopped three times in one block in Boulder... Does everyone here work at a startup!!?!? :-) and @Scobleizer is in scoble-heaven: @techstars! Boulder is killer startup ecosystem – it's nuts how smart these bastards are!" Make no mistake, investors will travel for real opportunity.

For emerging cities, this means coders, UI/UX and marketing people all need to get busy co-mingling and creating consumer web and mobile companies. The type of businesses that can be created with light capital and scale with automated resources. You have to do this NOW and OFTEN, not just once a year at Startup Weekend. Fundable ideas in the consumer space will draw investors from all over. The big names will attract a new crowd of angels both locally and abroad. Their seed money will attract more entrepreneurs to the game.

In my hometown of Atlanta, this has the added bonus of rinse and repeat sustainability with killer nerdy schools like Georgia Tech and SCAD. That's with why I have no doubt Sig's void will not only be filled, but improved upon. In fact, show me a $10M seed fund directed at the consumer space, and nature will do the rest... So if you're a bootstrapper who wants to be funded on your terms, wake-up and realize this new breed of angel is exactly what you've been rallying for! These new angels (rich people) look to be a minority shareholder, and want you to be the leader and decision-maker for the company (including when and where to exit). Under these terms, if you refuse to seek good money to scale, know that the shovel is in the corner of your parents' garage. If you still want to arm-wrestle me on the subject, I ask you read the wise words behind Jason Calacanis' recent advice to entrepreneurs:

"Today I’m sensing a bubble in angel investing... In fact, startup companies are being bought for what I would describe as “the high end of normal.” Over the next three years we will see an M&A bubble as large companies deploy mountains of cash to buy startups that are strong in some combination of revenue, brand and customers. When the bubble is expanding rational entrepreneurs should focus on three things: a) raise a lot of money at a large valuation, b) getting a lot of customers (who are willing to spend), and c) selling."

So, I offer this advice to entrepreneurs-in-the-making: dust-off your biggest ideas and get them formulated and modeled-out. Build a prototype and acquisition engine before a business plan. Thrash them hard with the smartest people you can find. Figure out exactly how much cash you need to get to a minimally viable product to market. Do everything possible to get the concept in front of potential customers for a first-level reality check. Give yourself a month at most to accomplish these tasks, and then start shopping the deal to this new breed of investor.

As always, your best bet is to find someone who can engineer a warm intro to one of these 50 or so dealmakers who are leading the charge. If no one bites (either from a straight investment perspective or acceptance into a TechStars or Y Combinator style program), then pivot. The worst thing you can do in this new world is become entrenched on an idea or miss the boat as you bootstrap your startup into oblivion. Hell, if you can impress a guy like Paul Graham at Y Combinator your idea might not even matter. They’ve got plenty of good ones in need of startup ninjas.

Also know there are seed incubators in virtually every second-level startup town in America: Atlanta has Shotput Ventures; Austin has Capital Factory; Washington DC has LaunchBox Digital; etc. Your town may not have a Ron Conway or a Brad Feld yet, but there’s no doubt the model is coming – and it will affect the thinking of your local angel investors. And if all else fails, follow the lead of my LessConf buddy Jon Crawford of Austin-based Storenvy: get yourself into Y Combinator and shuffle off to San Fran Valley for a while. Or, get your groove on in Boulder. Then come back home if it makes sense. Go find your success and return as an angel-entrepreneur. Better yet, become a leader and make it happen here. My point is do what you have to do.

So entrepreneurs, the great news is it’s all in your court. The conditions are strong. Ron Conway’s data shared during the CrunchUp interview shows that game-changing companies are being formed every two years and his portfolio has shown strong growth over the last 10 years despite volatile economic conditions. There truly has not been a better time to build a startup inside one of the 'Hot-5' consumer categories. So get to it, and push for greatness. No one in this new world wants to see the sixth me-too copy of a mediocre company. As the old adage goes: Go big or go home.

I leave you with this... There is plenty of baggage to go around. Plenty of people will tell you it can't be done. To borrow a line from Dave McClure: "Fuck. That. Noise." There is a valid, profitable reason the best startup investors put their total faith in entrepreneurs. They place them on a pedestal-of-awe because that's where the source of innovation and future revenue begins and ends... Know I share the same belief that each of you are The One, but the question is... Do you?

Maybe The Google Monster Ain’t So Scary After All

Thursday, 05 August 2010 02:28 Published in Technology

With the news that Google stopped work today on Wave, I’m starting to think I’ve been giving them too much credit as a product company. There’s no doubt they can build and monetize a business like search, and I expect they’ll add another big chunk of bottom line revenue with DoubleClick for Publishers. They kill at running huge-scale automated systems that have fat transactional revenues streams under them – and if anyone can find a revenue model for YouTube, I’d bet on Google. Plus they’re more dedicated to raw innovation than virtually any other company on the planet. But can they build something from scratch, market the thing and change the world? The answer seems to be no if you use Nexus One and Wave as examples.

I’ve had many conversations with entrepreneurs about the absolute terror of creating a business that Google could replicate with 20 engineers over a long weekend. While that’s probably still a somewhat legitimate worry for the two-person startup, I think the lesson here really is that Google web tools are the raw material you can comfortably use as part of your technical solution. Their strength lies in creating building blocks, not buildings. And the tech landscape is littered with examples that prove great UI design always wins over a truckload of poorly assembled features – witness 37Signals, Balsamiq, Wufoo, etc. And I can't think of a single UI improvement they've driven beyond threaded conversations in GMail.

The other important role Google plays is market maker. Their amazing pace of innovation rarely comes out the sausage grinder as a world-changing product, but it sure as hell can legitimize a market – like Google Voice did. Most Voice users I know are closer to creating a drinking game out of the transcribed text than depending on it for serious business communications. But more importantly, the market legitimacy enabled a company like Twilio, which has in-turn spawned hundreds of 2-3 person startups – including my man Andrew Watson at OtherNum. So at least all those innovation cycles don’t go to waste, but the Google kids haven’t quite figured out how to use their superpowers for their own benefit.

So maybe Google will simply continue to power its growth with big M&A deals like DoubleClick, but there’s always the chance the next product out of the gate will be a world killer. The next litmus test will be Google TV, which I would tell you is a Bermuda Triangle-like product space that’s stymied every big player that could have killed it – Microsoft, Tivo, Apple, etc. The fact they’re partnered-up with Sony to cook the platform directly into TVs give me a glimmer of hope that computing might finally end up in my living room in a meaningful way. And behind Google TV is Google Games, which a quiet $100M investment in Zynga should bring to life quickly.

They’re fun to watch from the outside, but I’m less scared of them as an entrepreneur these days. I’d love to hear other entrepreneurs’ take on Google as a competitor.

As a kid, our family played lots of games – board games, card games, video games, lawn darts, baseball, volleyball and almost anything else you can imagine. The one game that was never really a kids' adventure was Scrabble, which turned out to be Clash of the Titans between my grandfather and my mother. It was my grandfather who would routinely crush the New York Times crosswords in less than 30 minutes versus my mom who was a national runner-up in the Spelling Bee in her teenage years. Suffice to say, there were always at least two dictionaries near the board and it was fun to watch them battle it out. In retrospect, I probably learned more words and definitions than most kids during those years.

So fast-forward to July 2009, and along comes a killer iPhone game called Words with Friends (WwF) from Texas-based Newtoy Inc. Of course I have a genetic predisposition to join in the fun – at least as long as my mom doesn't have an iPhone. WwF was created by two ex-Ensemble Studios brothers named Paul and David Bettner, who were hot off working on Halo Wars but preferred to run a small-scale indie studio themselves. At its core, WwF a word-based game that automatically applies the dictionary to words being played, and it rotates turns asynchronously using the app-level notifications feature in the iPhone. So you know exactly when it's your turn, and it's up to you to drop high-scoring words.

In reality, the game is very much similar to traditional Scrabble but it's dwarfed the original in online app popularity. The numbers as of about a month ago are mind-boggling: 1.6M active daily users who average ~1 hour daily; serves >1.5B ad impressions monthly; and more than 1B user moves. That's called traction!

My WwF user name is DaveWalters, so come and find me for a game. This is easily the most addicitive game to find its way onto my iPhone (thanks @Stammy). I will tell everyone in advance that Stephen Fleming is the apex predator of my contact list, and you can get a competitive little 350-point battle from Keith McGreggor, Melanie Brandt or my wife. I'd love to hear any player suggestions as taking on word ninjas gives me more ammo to run down Fleming...

Enjoy Words with Friends!


Cartoon Credit: Penny Arcade Inc. via @jeffhilimire.

Having spent years in loyalty marketing, I’ve been a Scoutmob fan since Day One. I love the idea of group buying power driving great deals at great merchants. I love the idea of being incented to try new local businesses – and yes, I’ve become a regular customer of some based on my trial experience. And I ultimately love it when a service like Scoutmob intersects with a local boutique where our family spends a decent chunk of money. This was exactly the case on Saturday when one little iPhone app saved me $75 in a single shot at B. Braithwaite. The entire experience got me thinking about why two specific brands I interact with daily aren’t a single company. Yep, I’ll say it: Foursquare needs to buy Scoutmob right now!

For those not familiar, let’s look in-depth at Scoutmob, which will further explain my rationale for this being the deal of the year. Forget the Groupon model of pre-purchasing deals via credit card, although that fact is what sets Groupon seriously apart from most of its competitors – especially when you’re talking $1M a day in top-line revenue (assuming Groupon CEO Andrew Mason’s silence equaled consent when Mike Arrington dropped that number during an on-stage interview at last week’s Social Currency Crunchup).

Scoutmob has an oddly two-headed view of their offers, where the website acts more like Groupon (but ‘redemption’ of the daily deal only gets the code emailed or texted), but the iPhone app treats the entire experience differently – which is where the Foursquare mojo really kicks in. The Scoutmob iPhone app is a complete database of all offers (not just today’s), which can be accessed anywhere, anytime. In fact, you can even locate deals via the GPS in your iPhone (hint). And then there’s the redemption model; your GPS must match the physical location in order to generate the offer code. How can this not be a match made in heaven?

And let’s be honest, Foursquare could use a bump in its value proposition. While they’re hard at work developing brand-level relationships with the likes of HBO, Zagat and The History Channel the Holy Grail is deals – especially in this economy. (That’s really what Location Layers are all about, right?) I’m not talking about the crappy 5% discounts retailers give to anyone or free tacos for the Mayor, but large-scale, behavior modifying deals. While they’ve recently crossed the 2M member and 100M check-ins milestones, it’s a perfectly legit question to ask what drives the next 10M members and 1B check-ins.

And Foursquare clearly has the momentum and funding to throw Scoutmob’s geographic expansion into hyper drive, which is their main job right now. Sure, Michael Tavani and the Scoutmob team could close their own deal and continue to grow organically but why take the slow road? If Dennis Crowley and gang are true ninjas, they’d approach the deal like Jeff Bezos and Tony Hsieh did when Amazon bought Zappos. They’d figure out how to draw some of Scoutmob’s cult brand status into the Foursquare experience. They’d understand users love great content wrapped around great deals, and not everything can (or should be) crowd sourced. Overall, the Scoutmob brand could be a huge boon to the Foursquare universe.

From a Scoutmob perspective, the ability to geographically scale at warp-speed would be epic. And forget about launching into new markets as an unknown brand. Imagine the two teams sitting down and plotting a new market strategy with Foursquare check-in data as a primary driver. Now that’s how you launch a new city – with a built-in audience of 100,000 Foursquare users.

So I can hear everyone screaming right about now: Dave, you’re going to cost Atlanta one of our only real B2C startups. Wrong. Part of doing this deal right should be leaving Scoutmob in Atlanta. The cost to build a company in Atlanta is low compared to NYC, and the talent needed to scale the core operations can come from anywhere. As I’ve recently contended, Atlanta’s a pretty good place to setup shop.

At the end of the day, I think this is a perfect match. I get that Scoutmob has big aspirations in a billion-dollar market defined by Groupon, but the question always is how do you ensure you’re Number One or Number Two in a market? The Groupon effect has created a litany of imitators, who are funded to all different degrees. If the Scoutmob guys really want to fulfill their vision to deliver deals nationwide, what better rocket to strap yourself to than Foursquare? And those stock options have a pretty good chance of being worth some serious coin over the next 2-4 years. Hell, now that Scoutmob has a NY office, you guys are virtually neighbors!

I’m Holding Out For A Startup Pioneer

Monday, 02 August 2010 04:06 Published in Startups

Another Saturday morning Twitter conversation got me thinking about big-idea startups. For me, it all comes down to the quality of the entrepreneurs – both in ideas and execution. Paul Freet cut out a couple tweets that went like this:

“The best markets are zero-billion dollar markets. $0 today. Your innovation makes it $1B+. Tough to prove. Need visionary investors.”

“If market must pre-exist, Zynga never gets funded. Social gaming was $0 in 2007. $1B this year.”

After a momentary concern that some anti-bootstrapping activist had hacked Paul’s Twitter account, it occurred to me that true rock stars are made this way.

I’ll use my own partner Ben Dyer as an example. It was 1977 and the guys inside a computer hardware dealer had just written themselves some non-mainframe software. Peachtree Software was spun out of The Computer SystemCenter in 1978, and Peachtree Accounting was bundled with the first IBM PC. And yes, that was the first business software ever for microcomputers. Rock star made.

And Paul’s point about Zynga is spot-on, which makes them the modern-day equivalent. In this case ‘social networking’ sites were the IBM PC, and social-enabled gaming was the category created in 2007. Talk about a first-mover advantage in a Facebook ecosystem that would grow into a 500M member web destination. Again, Mark Pincus delivered perfect timing into an exploding market. Rock star made.

And make no mistake; the same phenomenon repeated itself through the ‘80s and ‘90s with companies like Adobe and Amazon respectively. So if this can happen as easily in 2007 as it did 30 years earlier, then who’s working on harnessing the next seismic shift? Realistically, this isn’t the type of company building that fits in a nice little box. It’s the kind of effort where people – friends, family, investors, analysts, media, etc. – look at you like you’re nuts when you outline your plan for world domination of something they can’t see or understand. Hell, if you’re really genius, you might not even be able to explain it sufficiently.

So I ask this simple question of entrepreneurs: Does your startup idea baffle people? If so, you’re on to something and now it’s time to figure out if it’s pure genius or your own delusion. Seek out 10 of the smartest, hardest-working folks in a related category (I’m assuming your idea is so big it doesn’t fit into an existing one) and find a way to get 30 minutes face-to-face. If more than one meeting turns into a two-hour session including whiteboards and peer introductions, you’ve got a winner. Batten down the hatches and prepare for a long, hard run at changing the world.

On the other hand, if all 10 glaze over within 5 minutes then be real with yourself and move on. In most towns you’ve not burned all the bridges, but it might have earned you a 'maverick' reputation you’re probably better off with anyway. ‘Cause that’s probably how you roll…

So how does a startup town find these pioneers? Or can they be found? I certainly don’t have all the answers, but I know an ecosystem needs big wins – and this is who delivers. Maybe most importantly, how do we get the hell out of their way?

My final question is who’s the next Ben Dyer or Mark Pincus? Nominations?

If You Want Something Done, Send A Startup Guy

Friday, 30 July 2010 21:22 Published in Startups

We here at TechDrawl spend countless hours, days and weeks debating all that is startups, and inevitably it all comes back to the people. Investors, entrepreneurs, mentors, professional services people, etc. ­– everyone has a role to play in the startup universe. That’s why we love video interviews, and have gone even longer-form with the South’s most impactful voices like Vivek Wadwha, Sig Mosley, Chris Klaus and even Urvaksh Karkaria (I can’t help razzing my journalist buddy).

One of the guys on my upcoming list is Scott Burkett based simply on how much he’s done and what he gives back in the form of StartupLounge. But the dude blew me away this week, so here’s my pre-Drinks On Fifth story on Scott. Never fear; this absolutely will not preempt our video interview – if only for me having 45 minutes of fun filming it with Scott…

Anyone who follows Scott (or his partner-in-crime Michael Blake) on Twitter is likely familiar with a most unfortunate story this week: the foreclosure and eviction of a Lithonia family whose son was the first Georgia casualty during Operation Iraqi Freedom. Spc. Jamaal Addison was killed during an ambush on March 2003, and the Lithonia branch of the United States Post Office has been renamed in his honor. And in a miserable twist of fate, the family is set to be evicted on the very day set aside to honor Spc. Addison, Monday August 2nd. You can read the entire back-story at the AJC, but suffice to say Scott wasn’t going to let it go down like that. (It’s also relevant to know Scott served in the US Army, 3rd Infantry Division (Mechanized), 1st Brigade, 3d Battalion, 64th Armored Regiment.)

So Scott (along with other concerned citizens who were touched by the story) set out to solve the problem. He reached out through the Veteran’s Administration, and made contact with the Roberts family. Scott led the effort to secure new housing for Roberts, while folks from Grandmothers for Peace International have helped the family setup the Jamaal Addison Fund at the Delta Community Credit Union’s branch at 1025 Virginia Ave. in Atlanta.

Scott tells me he’s got 4-5 other startup guys committed to the fundraising effort, and they have more than $4,000 raised as of Friday afternoon – and hopes to be in the $8,000-10,000 range by early next week. They also have a group put together to help the Roberts’ move early next week. If you want to contribute financially, you can contact the Delta Community Credit Union at (404) 715-4725. To contribute your manual labor or other assets, contact Scott via first initial + last name AT starpoundtech.com.

So let's take a minute and draw a few startup lessons out of Scott’s effort this week:

Focus: Scott is not a guy you see at every networking event in town. He’s simply too busy as the COO of Atlanta-based StarPound. Yeah, that means he’s busy making it happen everyday, and doesn’t have much time slack.

Action: When he saw a spot to make a difference, he moved quickly with decisive action. No committees, no debating – just the tactics needed to stop the problem.

Giving Back: Scott has run StartupLounge for years, and has probably given more back to the entrepreneur and startup community than he’s taken. How many people can you say that about?

Humility: Scott won’t merchandise what he’s done; in fact I’d expect him to actively downplay it and define himself as part of a larger effort to help a family in need. But never underestimate the role of being the first to rally the troops.

Whether you’re trying to build your own company – or have an exit behind you – take a lesson from Scott. See the problem and engage to solve it. When something requires your attention, move with a quickness. And help those who need it the most when you’re fortunate enough to be able to.

Well done, Scott. I’ll be honored to buy you as many Drinks On Fifth as we can consume during one 45-minute interview. Although that may lead to TechDrawl’s first NC-17 rated content…

About twice a week I’m involved in some type of conversation about how we all consume content ­– whether it’s my theories on managing Twitter (a topic for another day), how much network television I watch (not much), or why I love my TEDTalks podcast. The reality is there’s more content flying at us every minute, and the acceleration Apple’s iJuggernaut (iTunes + iPhone + iPad) has brought mind-boggling amounts of data to our fingertips. And I’ve been considering where the limits are.

Social media has spent the last 3-4 years convincing me I need all this content, but how much information is too much for one human to consume? What productive things did I used to do with the time I now spend reading Twitter, checking Facebook or perusing my 20+ RSS feeds? Am I better or worse because of all this content? I’m not sure I have the final answer just yet, but I know I’m more informed – which I’ll accept for now. If the last five years were all about delivering content beyond my wildest dreams, then I firmly believe the next five are going to be about making sense of all the streams.

And the first step in this migration is upon us: an entirely new class of applications coming to market that are purposefully designed to protect me from this overload – or in some cases, just format the overload to look pretty. Tools like Pulse, Apollo and Flipboard are all trying to help me drink from the proverbial fire hose.

 

RSS on Steriods: Pulse and Apollo


pulse

Let’s start with Pulse, which is a stunningly beautiful RSS reader for the iPad. It aggregates feeds from multiple news outlets like the New York Times, Boston.com and TechCrunch. It manages content the exact same way any RSS reader would (although much more beautifully) in that it displays the original RSS content, and then links to the page in mobile Safari if the reader wants maximum detail. Soon after being mentioned by Steve Jobs at June’s WWDC (like hours later), the app was momentarily pulled from the iTunes store based on complaints from New York Times (NYT) lawyers. They contended it violated the Term of Use based on the fact the app was paid, not free. The storm didn’t last long, but the issue of RSS content being pushed into a paid app is something that will have to be sorted out in this new world.

 

apollo

The next app that matters is Apollo from Palo Alto-based Hawthorne Labs, which is an equally great UI but adds an entire layer of automated content discovery. The best parallel I’ve seen to describe the app is Pandora. You add content feeds, rank items, create weightings by spend more time reading specific topics, and the system improves the quality of content delivered to the user over time. The guys behind Hawthorne are ex-Google and ex-Bing, and have a stated objective to become the Newspaper of the Future – I’ll skip the TM I’ve seen in other publications... Suffice to say these guys are aiming big, and if their algorithm lives up the dream, watch out.

Both Apollo and Pulse are critically dangerous to big media companies who are trying to monetize by selling display ads around the content. While the most popular articles will get the click to mobile Safari (which also delivers the ads), a serious RSS audience of power users can significantly reduce the web analytics KPIs the ad ecosystem uses to price and buy ads: monthly pageviews and unique users. Another complicating factor for both Pulse and Apollo is the fact they’re $3.99 and $4.99 respectively. So in essence the app maker is the only one locking in real revenue based on the content – clearly an issue for the business of content creation. Sure the site might get some bonus traffic (Pulse launched with NYT featured, and sold 35,000 apps which equals some pretty monster free traffic) but will the trade-off actually end up being the final deathblow to an overly fragile newspaper industry? It very well could be.

 

A Different Beast: Flipboard


flipboard

So if RSS is dangerous to content providers, then what if an app harvested your own social networks and delivered the content pre-formatted? Plus it pulled a ton of content via an ever-growing list of curated feeds? That combo would have the potential to change the game entirely – and it’s called Flipboard. (And this one is full-on venture backed and is free to users so we can render the NYT argument null.)

While the curated feeds are interesting (especially when a guy like Robert Scoble is hand-selecting a “Tech Influencers” list), many of the early users I’ve talked to are using it to wrangle their Twitter and Facebook streams. And speaking of Scoble, his blog is a great place to get the inside story on Flipboard as he was an early beta tester – and very public advocate.

The best thing about Flipboard is it feels like a completely natural way to consume content – even though it didn’t exist two weeks ago. It’s that revolutionary – and yes, I hate that word. At the same time, Flipboard introduces a supercharged version of the business model problems RSS readers create. Because the content is pulled from your tweet stream, major providers like the NYT, Wall Street Journal or Wired aren’t going to stop posting their stories to Twitter – and users certainly aren’t going to stop dropping bit.ly links to things they like. The bottom line is if your brand does Twitter, you do Flipboard – like it or not.

 

The End of Media as We Know It – And I Feel Fine


And this is where it gets scary for my day job. As a dude who creates a ton of content on a monthly basis, the incentives for success could change radically. The more insightful and on-point our content gets, the bigger my headline will be in Flipboard. It doesn’t get me more readers or more ad dollars – it gets me better placement in a third-party reader. While it sounds like a really bad scenario, I’d challenge my fellow content creators to consume and accept the Flipboard model – or risk being version 2.0 of the media that gets killed by steady march of technology. I know I’m thinking about it full tilt with the clear understanding that a better UI will always wins out over a crappy UI. Content could easily become the cost of entry as opposed to something that can alone be monetized.

And from a user perspective, the features of my preferred application are now almost as important as the content inside the application. With the advent of Twitter – and the rise of literally hundreds of apps to view Twitter content – the world’s expectation for user interfaces have changed forever. And this new world doesn’t much care if their solution isn’t compatible with your site’s monetization efforts. Worst-case scenario, you can expect some content providers to lockout some RSS apps, but that does nothing to mitigate Flipboard. It’s kinda scary to think my own content consumption habits might be the biggest threat to the economics of my day job.

I’m not entirely sure what the solution is here – in fact, if I knew I’d be making absurd amounts of money working for Rupert Murdoch or some other old media tycoon. I do believe it requires a completely fresh look at content syndication between app builders and content creation entities. The economics of apps will never support full-on licensed content, but folks like the NYT better figure out how to get a smaller piece of a bigger pie to remain viable.

Perhaps the best model out there is the other famously failing industry: music. The majority of the talent make little or no money by selling content (read: music CDs), but drive huge dollars by monetizing all aspects of their fame – be that concert tickets, merchandise, TV licensing, etc. And don’t kid yourself, this is happening today with blog ninjas like Hugh MacLeod, Gary Vaynerchuk, Chris Brogan and that other dude I mention up above. My point is your currency is – and always has been – eyeballs. Leverage apps like Flipboard, and the rest will follow…

It’s going to be a very interesting 12-18 months for the world’s biggest name content creators. What are your thoughts on the solution? For those of you without an iPad, Flipboard will make total sense in the video below:

When you think of Twitter, it’s often relatively inane 140-character updates interspersed with highly relevant content you don’t have to traverse the web to find any longer. It’s that dichotomy that has led to Twitter’s meteoric rise – effectively mirroring the schizophrenic nature of how we consume information. And every once in a while an ultra-relevant conversation breaks out among 3-5 folks on a Saturday afternoon, which was the case last weekend on the continuing topic of investments and startups. The discussion was led by the ATDC's Keith McGreggor, who used his own startup BackNoise as a real-life example in discussing the finer points of raising money versus bootstrapping. There was also significant conversation about the mechanics and business drivers of angel investing. Good stuff all around!

You can read the article that started the multi-day conversation, along with multiple posts on Lance Weatherby’s Force of Good blog. While the conversation was specific to Atlanta, the lessons are spot-on for virtually any startup town that’s not Silicon Valley – from Raleigh to New Orleans.

Enjoy an instant replay of the Twitter stream below:

lance
Is it the investors or the startups. Let's find out. http://bit.ly/aOxKZo
10:39 AM Jul 24th via bitly
keith
Ok, @lance I'll bite: would you fund BackNoise? All of your criteria are met. Could easily get a valley deal.
10:45 AM Jul 24th via Twitter for iPhone in reply to lance
colin
@keithmcgreggor Better question: would you fund BackNoise?
10:46 AM Jul 24th via Tweetie for Mac in reply to keithmcgreggor
keith
@colinake I already do.
10:48 AM Jul 24th via Twitter for iPhone in reply to colinake
keith
In fact, I'll go one further: Backnoise is ready to grow (not that it's stagnate... It's not). Next step is...?
10:52 AM Jul 24th via Twitter for iPhone
keith
Based on what you know about it, what funding round/level should BackNoise seek? (Presume the ability to get a conversation with anyone.)
10:56 AM Jul 24th via Twitter for iPhone
jeff
@keithmcgreggor hard to answer without understanding how to get to key next milestones for the business.
11:03 AM Jul 24th via TweetDeck in reply to keithmcgreggor
keith
Will you sign an NDA, @jbmcconnell ? :) :) :)
11:09 AM Jul 24th via Twitter for iPhone in reply to jbmcconnell
keith
Kidding aside, an excellent point, @jbmcconnell ...
11:10 AM Jul 24th via Twitter for iPhone
keith
I'd begin my answer with a question: How valuable is a secure private conversation?
11:12 AM Jul 24th via Twitter for iPhone
lance
@keithmcgreggor It has nothing to do with me. Does BackNoise have a team?
11:45 AM Jul 24th via web in reply to keithmcgreggor
lance
This is about to get fun.
11:45 AM Jul 24th via web
keith
@lance team: yes. Very experienced. Past 8+ figure exit. Also, extremely technical shogun.
12:16 PM Jul 24th via Twitter for iPhone in reply to lance
greg
Spectator... this should be fun... RT @lance: This is about to get fun.
11:49 AM Jul 24th via TweetDeck
keith
@jackgfoster don't just spectate! Jump in.
12:19 PM Jul 24th via Twitter for iPhone in reply to jackgfoster
lance
@keithmcgreggor If said team were going full-time @backnoise might be angel fundable. $250k on $500 pre.
12:25 PM Jul 24th via Tweetie for Mac in reply to keithmcgreggor
keith
Continuing the dance with @lance ... We'll stay hypothetical here.
12:46 PM Jul 24th via Tweetie for Mac in reply to lance
keith
Remember: this is hypothetical. I am exploring the dueling theses of @lance and @davewaltersatl/@techdrawl
12:48 PM Jul 24th via Tweetie for Mac
bryan
@keithmcgreggor is BackNoise secure?
12:24 PM Jul 24th via Nambu in reply to keithmcgreggor
keith
@bryanwiltgen trivially so.
July 24, 2010 12:48:24 PM EDT via Tweetie for Mac in reply to bryanwiltgen
keith
Ok, @lance, assume the team is full tilt / full time on BackNoise. Now, what's next in the assessment?
July 24, 2010 12:49:42 PM EDT via Tweetie for Mac
keith
Working Lance's checklist: * product demo? http://backnoise.com/?atdc * team? asked and answered. * social proof? >700k pvs this year.
July 24, 2010 12:55:50 PM EDT via Tweetie for Mac
keith
* further social proof: people use it, tell their friends, then their friends use it. All marketing of backnoise has been word of mouth.
July 24, 2010 12:57:56 PM EDT via Tweetie for Mac
keith
* traction: repeat users, bounce rate less than 25%, time on site > 30 minutes. * traction: surprising uptick in classroom usage.
July 24, 2010 12:59:11 PM EDT via Tweetie for Mac
keith
as @pfreet mentioned: * premium version with a clearly articulated, readily achievable revenue stream
July 24, 2010 1:00:15 PM EDT via Tweetie for Mac
keith
* differentiation: ease of use/speed/scale key. Several near competitors in the free market, with varying degrees of social integration.
July 24, 2010 1:02:38 PM EDT via Tweetie for Mac
keith
So, @lance, a clearly social pure-Atlanta deal.
July 24, 2010 1:04:07 PM EDT via Tweetie for Mac
keith
A C2C and B2C play that's been operating 2.5 years, proven, with a B2B or B2C premium model in the wings.
July 24, 2010 1:06:33 PM EDT via Tweetie for Mac
lance
@keithmcgreggor If said team is going to work on it full-time $250k on $500k pre.
1:06 PM Jul 24th via Tweetie for Mac in reply to keithmcgreggor
keith
Now for the speculation, @lance. What do you think the deal would be in the valley? (Remember, a conversation could be had with anyone.)
July 24, 2010 1:08:06 PM EDT via Tweetie for Mac in reply to lance

knox

@lance Just stepping in. Valuation?
1:09 PM Jul 24th via web in reply to lance
keith
A critical conversation for us is whether such a deal, clearly fundable, should seek funding, or bootstrap onward.
July 24, 2010 1:10:21 PM EDT via Tweetie for Mac
keith
This is the Atlanta startup conundrum: how do the growth needs of a startup reconcile with the area's ability to fund for scale?
July 24, 2010 1:15:21 PM EDT via Tweetie for Mac
keith
I realize that the conundrum comes down to the risk aversion question, but I want to take it more toward the thesis of @techdrawl...
July 24, 2010 1:17:10 PM EDT via Tweetie for Mac
keith
... which seemed to be that C2C or B2C startups do not get funded because the town's heavily B2B (a simplification I know).
July 24, 2010 1:18:48 PM EDT via Tweetie for Mac
knox
Am digging the theoretical scenarios post-Sig.
1:18 PM Jul 24th via web
keith
So, with respect to brain drain, why would a startup seek local funding if valley funding results in a higher val., given affinity?
July 24, 2010 1:19:56 PM EDT via Tweetie for Mac
lance
@keithmcgreggor Given that I am pretty sure I know who the founders are the only option is to self fund until valuation goes higher.
1:20 PM Jul 24th via Tweetie for Mac in reply to keithmcgreggor
keith
Set the actual identities of the founders aside for a moment, @lance. Given the particulars, could/should this startup get ATL funding?
July 24, 2010 1:24:06 PM EDT via Tweetie for Mac in reply to lance
knox
I think that the B2C, B2B, C2C, etcetc conversation (re:angel investing) is misguided
1:23 PM Jul 24th via web
knox
Deals that have strong leadership from investors usually get funded
1:24 PM Jul 24th via web
keith
I actually agree, @atlantatech ... just drawing in the distinctions raised in the two (or three) recent blog posts.
July 24, 2010 1:24:49 PM EDT via Tweetie for Mac in reply to atlantatech
knox
@keithmcgreggor "should" or "can" ?
1:25 PM Jul 24th via web in reply to keithmcgreggor
knox
Also, investors that have deep resources (John Imlay) make the deal easier to complete
1:27 PM Jul 24th via web
keith
@atlantatech let's go with both: "should" and "can" ?
July 24, 2010 1:27:50 PM EDT via Tweetie for Mac in reply to atlantatech
knox
@keithmcgreggor Lance's valuation should get it funded. It can get financed if strong leadership from investor standpoint.
1:29 PM Jul 24th via web in reply to keithmcgreggor
lance
@keithmcgreggor Need to remove market risk by showing revenue and customers must articulate why they are buying.
1:31 PM Jul 24th via Tweetie for Mac in reply to keithmcgreggor
knox
Recent blog posts are theoretical in nature. Nice to think about...
1:32 PM Jul 24th via web
knox
@lance $250 on $500 would get a he** of a lot of deals funded in ATL
1:33 PM Jul 24th via web in reply to lance
keith
I happen to agree with both Knox and Lance.
July 24, 2010 1:38:41 PM EDT via Tweetie for Mac
keith
So, 250k in, 500k pre => 750k post. No pref.
July 24, 2010 1:40:44 PM EDT via Tweetie for Mac
keith
Let's carry this a bit further, because we're getting close to the crux of the matter in town.
July 24, 2010 1:41:57 PM EDT via Tweetie for Mac
keith
250k round equates to probably a 2-5 angel confederation (presuming - at least from my own stance - a 2x holdback for pay-to-play subsequent
July 24, 2010 1:43:10 PM EDT via Tweetie for Mac
knox
@keithmcgreggor Common ain't gonna happen IMO. Investor takes capital risk, needs an incentive. Easy to do clean term sheet.
1:42 PM Jul 24th via web in reply to keithmcgreggor
keith
This is where I'm headed, @atlantatech. The devil's in the details, where the deed is done.
July 24, 2010 1:44:41 PM EDT via Tweetie for Mac in reply to atlantatech
knox
@keithmcgreggor 5-10 these days, 2-5 if ur lucky. Yes, make sure (if you can) that angels can re-up 2-5 years downstream.
1:46 PM Jul 24th via web in reply to keithmcgreggor
knox
There's just less cash and less appetite for risk than there used to be. Guess you can call it a problem. Reality more like it.
1:47 PM Jul 24th via web
keith
Let's assume the number is 5 angels, in for $50k (and hopefully holding back $100k for downstream).
July 24, 2010 1:50:20 PM EDT via Tweetie for Mac
keith
Assume that those 5 are not just in this deal, but in sufficient deals to cover their bases. How many bets per angel concurrent? 10?
July 24, 2010 1:52:15 PM EDT via Tweetie for Mac
keith
Where I'm headed is that this is an eggs-in-the-basket problem, a variation on @lance's premise about fundable deals.
July 24, 2010 1:53:19 PM EDT via Tweetie for Mac
knox @keithmcgreggor Prob 2-5 deals per, 10 max, with Sig/Imlay an extremely rare exception July 24, 2010 1:56:29 PM EDT via web in reply to keithmcgreggor
keith How many fundable deals must exist for an area to support a healthy angel investment community? July 24, 2010 1:57:23 PM EDT via Tweetie for Mac
ben Re current topic: Making a full day of presentations on a B2C Internet play Monday, but not to the usual suspects, and not all local. 1:58 PM Jul 24th via TweetDeck
keith I think it's beyond safe to assume that not every angel can see or be offered a spot in every deal. July 24, 2010 1:59:07 PM EDT via Tweetie for Mac
keith Spot-on, @lance. The rules of engagement are clear about accredited investors (and these are the sorts of angels a startup would want). July 24, 2010 2:00:30 PM EDT via Tweetie for Mac
lance @keithmcgreggor Well before we go there an angel needs a net worth of $15 million for that type of activity. 1:59 PM Jul 24th via web in reply to keithmcgreggor
knox @keithmcgreggor You need ongoing exits (personal and investment) for angel community to thrive. ATL has far fewer than 10-15 yrs ago. July 24, 2010 2:00:02 PM EDT via web in reply to keithmcgreggor
keith An oft-quoted heuristic is that for 10 bets placed, 1 or 2 are big winners which mitigate the net damage done by the other 7 or 8. July 24, 2010 2:02:46 PM EDT via Tweetie for Mac
knox @keithmcgreggor In theory, yes. In reality, if only local deals, prob 1 in 20 July 24, 2010 2:05:33 PM EDT via web in reply to keithmcgreggor
ben Also working on B2B deal, but investors must know data center issues to appreciate. Again cherry picking accordingly. 2:06 PM Jul 24th via TweetDeck
keith So, what's the Atlanta angel investment stance? July 24, 2010 2:06:25 PM EDT via Tweetie for Mac
keith The math I'm doing seems to suggest that the available angel risk capital pool is small with respect to the number of startups. July 24, 2010 2:08:55 PM EDT via Tweetie for Mac
keith Thus, a blooming trend to pure bootstrap for otherwise fundable companies. July 24, 2010 2:09:58 PM EDT via Tweetie for Mac
keith Where bootstrap here means FF round, max'ed credit cards, fast to revenue, ... July 24, 2010 2:10:58 PM EDT via Tweetie for Mac
knox Or the angel capital available is large with respect to number of fundable startups. Back to starting point, I see? lol 2:10 PM Jul 24th via web
ben @keithmcgreggor @atlantatech With current econ trends, money advisers probably allocating ever lower % of portfolios for angel-like risk. 2:10 PM Jul 24th via TweetDeck
keith Right again, @atlantatech . So, are we healthy? July 24, 2010 2:11:44 PM EDT via Tweetie for Mac in reply to atlantatech
keith More money into fewer deals (not sure how to characterize that overall risk). July 24, 2010 2:12:29 PM EDT via Tweetie for Mac
ben Angels must not be so wealthy that wins don't move the needle, unless they are purely investing for sport. Ideal angel is still striving. 2:13 PM Jul 24th via TweetDeck
knox @keithmcgreggor In flux. Denial that Sig is leaving, shock that he actually is, etc 2:14 PM Jul 24th via web in reply to keithmcgreggor
keith I'd concur with @BenJDyer with respect to % of portfolio allocated to high-risk capital. July 24, 2010 2:14:08 PM EDT via Tweetie for Mac in reply to BenJDyer
keith A great observation: an ideal angel is still striving. High risk yielding significant individual impact for the angel investor. July 24, 2010 2:15:32 PM EDT via Tweetie for Mac
knox @BenJDyer Well, if that's the case, each city on average would have about 3 angels 2:16 PM Jul 24th via web in reply to BenJDyer
knox @keithmcgreggor Yes, I think you are right. For now, working smartly on fewer deals. No more eHatchery stacks of checks... 2:17 PM Jul 24th via web in reply to keithmcgreggor
keith Do we need Sig 2.0? Is it an essential that one or more folks bring deals together? July 24, 2010 2:17:46 PM EDT via Tweetie for Mac
keith That "still striving" observation was from @BenJDyer ... wise! July 24, 2010 2:18:41 PM EDT via Tweetie for Mac in reply to BenJDyer
keith Must. Resist. Urge. To. *MISQUOTE*. Shakespeare. ("I've not come bury @secretsig, but to praise him. The good that men do lives...") July 24, 2010 2:22:04 PM EDT via Tweetie for Mac
matt @keithmcgreggor That has been the @Stormpulse experience (which is why I was [sorry] butting in to your tweetstream). 2:14 PM Jul 24th via TweetDeck in reply to keithmcgreggor
keith @mattwensing and I am a fan of Stormpulse (but I think you knew that already!) July 24, 2010 2:23:00 PM EDT via Tweetie for Mac in reply to mattwensing
keith Actually, the best line from that speech is "O judgment thou art fled to brutish beasts, and men have lost their reason." July 24, 2010 2:26:08 PM EDT via Tweetie for Mac
keith Where's the answer lie? I've heard @lance talk about the dearth of fundable deals. I've heard startups talk about the dearth of angels. July 24, 2010 2:28:55 PM EDT via Tweetie for Mac
sig @keithmcgreggor if you can get a higher valuation somewhere else look at it. also look at the risk/cost of moving there and then do the math 2:29 PM Jul 24th via TweetDeck
keith Welcome, @secretsig, to the conversation! July 24, 2010 2:29:25 PM EDT via Tweetie for Mac
keith Clearly not an easy issue to untangle, even when presented with something concrete. July 24, 2010 3:12:26 PM EDT via Twitter for iPhone
keith Enjoyed the conversation here and on the two blogs today. July 24, 2010 11:12:23 PM EDT via Twitter for iPhone
keith On BackNoise itself ... stay tuned. July 24, 2010 11:15:12 PM EDT via Twitter for iPhone

After a multitude of angel investor conversations over the last couple weeks (including Drinks On Fifth interviews with Sig Mosley and Vivek Wadhwa), I’ve come to one core question – and no one captures it better than Jay-Z: Who’s gonna run this town tonight? Between the economic downturn and Sig Mosley not issuing any new term sheets, there’s a vacuum a mile wide in Atlanta – a town that has all of the underpinnings necessary to be the next Boulder or New York. So who’s it gonna be? Someone we all know from inside 285? A shadow player who has local staff but that most entrepreneurs have never heard of? An East Coast outfit who has a stringer or EIR hanging around Atlanta? A complete outsider like Jason Calacanis with his Open Angel Forum? Or worst-case scenario of all: no one fills the void. Here’s my thought on what’s next…

First off, let’s be honest: Atlanta has the infrastructure needed to be a much bigger player than we are. Here are 10 truths I dare you to argue with:

  1. An airport that gets you almost anywhere in the world direct.
  2. An overall cost of living that embarrasses the West Coast or Northeast.
  3. A full-fledged research institution that churns out ninja engineers like crazy in Georgia Tech.
  4. One of the nation’s top technology-based incubators in ATDC.
  5. A design school that produces stunning visual artists and game designers in Savannah College of Art & Design.
  6. A vacancy rate in commercial real estate so high it drives insanely pro-startup prices and terms.
  7. A residential real estate market that’s always been ultra-competitive with other tech centers – and has taken an additional economy-driven haircut.
  8. Access to mid- and executive-level management talent from multiple Fortune 500 companies across industries like shipping, CPG, transportation, finance, etc.
  9. A no-brainer relocation spot for the future executive-level talent needed to drive the business.
  10. A thriving social life for young, single professionals.

 

Sure the traffic sucks and it’s hot in the summer, but get over it – every city has its issues. This town is ripe for the picking!

There’s another aspect of Atlanta you can’t ignore: in the absence of Sig, the rest of the angel class is a town of followers. While logic dictates this is a hindrance in growing an overall startup ecosystem, I would argue this might be our saving grace. If we can find the right minds to lead, the rest of this town will follow – that habit can’t be broken easily. What do you think would happen if a guy like Ron Conway or Chris Sacca funded in 2-3 Atlanta companies in the real-time data space? What if the Pied Piper changed the tune from B2B to something more of-the-now? You guessed it: the startup ecosystem would shift on a dime – and the angels would battle to the death to align themselves in deals alongside these heavy hitters. But I actually don’t think the solution is 100% external – I believe the new blood would only serve to shake the locals from a slumbering sleep (both investors and entrepreneurs).

I’m going to skip my “swing for the fences” speech on what types of companies entrepreneurs should be starting for one simple reason: natural selection. Once 3-4 new-style deals are done, I believe the transformation will be complete in less than six months. That’s a direct testament to how I think entrepreneurs have tried to build companies to be funded versus building what they really think users will love.

At the same time, entrepreneurs are not without blame here. I’m considering assembling a Crazy 88s-like band of ninjas to personally hunt down all startup people who ask investors and advisors for NDAs – you really gotta stop embarrassing yourself and our town. And secondly, quit asking for funding based on business plans – real investors fund URLs and working products.

But overall, I’m wildly optimistic about the quality and quantity of startups that can come from this town if there’s a clear path forward. I don’t think it’s an understatement to say startup folks have been beaten down. That bat’s been swung at me personally, and it’s not a Louisville Slugger – it tattooed B2B-SaaS on my arm for a week. But if we can break out of these shackles great things will happen. Imagine a Tech engineer, a SCAD designer and UGA journalism student joining forces to create a digital media company. Done…

At the end of the day, I think the major shift lies on the shoulders of outsiders – unless there’s some hidden individual or syndicate that’s ready to do 5-7 deals a year. (And honestly, I don’t care who you are as long as you’re in it for the love of the game.) We need someone like Jason Calacanis, Brad Feld, Ron Conway or Chris Sacca to wipe the slate clean. Someone with massive street cred, a solid track record and the resources necessary to take a company from a $25K seed round through a $5M Series C without getting crammed down. But those guys aren’t going to move here, they’re only going to delve into select deals that make sense for them. Think of them as the crowbar prying the door open so we can see the light.

So what does ‘owning this town’ really mean? As Vivek Wadhwa recently told me: “You don’t need billions of dollars, you need seasoned, successful, good human beings who are ready to help other human beings.” Let me boil that down even further: it really means an individual or small group doing 5-10 six-figure deals annually across a wider variety of startups. This gets the ball rolling, and other angels will follow suit – both regionally and nationwide.

vendetta

So the real question is: when the revolution happens, will you help push it forward or will you defend the old school? What side of history will you be on? I ask the question equally of investors and entrepreneurs because it will be ours to live day-in and day-out. Will you mentor younger entrepreneurs? Will you make investments based on passion for an idea not an actuarial view of the world? Will you lead the community? Will you become an angel following a successful exit? Will you finally welcome the consumer Internet with open arms? Will you give away 10% more of your company to make it 70% larger? And most importantly, are you willing to celebrate failure enough times to have a real crack at creating the next Facebook or Google?

Ask yourself these hard questions, and let’s all recognize we’re at a seminal point in our ecosystem. We can reboot the entire thing and unlearn all our bad habits, or we can be lazy and let inertia rule the day.

So again I ask: who’s gonna run this town tonight?

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