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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

Two And A Half Startup Lies And How To Navigate Them

Monday, 14 March 2011 22:14 Published in Startups
I've been thinking about a post on how to focus your early stage startup, and some Twitter conversations of-late have pushed me into writing mode. Too often I hear a wide range of entrepreneurs and advisors spewing falsehoods, which not coincidentally end up to be the same potholes many early-stage founders fall into. I also see a lot of ideas that have been ‘on paper’ for more than six months – read: not built. So here goes the first post exclusively for my all-new personal blog. I won't promise more frequency, but look for a bit less varnish on things now...

Business Plans Rock

The first fallacy is that you need a traditional business plan. If you have 40-50 hours over a two-week period to dedicate to writing a business plan, you should be a market analyst at a big company -- not an entrepreneur. The idea should be burning a hole in you and your co-founder(s) so badly that riding a word processor for that long would feel like Chinese water torture. That time should be dedicated to one of two things depending on the DNA of your startup: either coding a prototype or writing one hell of a set of business requirements. That's it.

That being said, you can't shortcut the information you'd gather and assimilate during a traditional business plan process. You're going nowhere unless you understand your business inside-out, know your competitors cold, understand how principles from other industries could help you disrupt your industry, have a loose set of monetization strategies (more on this later), etc.

My point is gather the data and thrash the snot out of it with your co-founders. Argue about it for hours on-end, change your mind three times, continually add more relevant data points -- just beat it down and turn it into something actionable. And get square with the fact the strategy is never "locked-down." Stay loose and be ready to move toward the opportunity. By nature, this should mean don't waste 20 hours writing it down -- get it in Keynote or PowerPoint and continue debating it vigorously.

Your Idea Will Change The World

The second big lie is your idea alone is enough to make it. Let me be really candid here: ideas are commodities. Execution is what matters. Think about the best bullshitters you've ever known; didn't they always some crazy plan to make millions? The difference between *that* guy and a successful entrepreneur is a marginally better idea PLUS it gets done. Now clearly you're going to have to build a company that's crazy relevant to 5-10 million people, and hope you can reach a rabid group of early influencers inside that market. But don’t ever kid yourself that your idea isn’t being thought about RIGHT NOW by someone with a more advanced market position, more engineers, better funding, more whatever. That’s why it’s an absolute firefight to get something to market FAST. There’s no substitution for getting code in front of users.

And in case you’re worried everything’s been thought of already, look at companies like Hipmunk and Room77 as great examples of nimble, design-focused tech startups who are taking on really big markets like travel. Anyone who travels significantly understands the pain of the process, which Hipmunk has codified and labeled the “agony” factor. Fundamental improvement of an everyday task is almost always a better innovation strategy than trying to convince users there’s a brand new task they need to jump right on.

Revenue Doesn’t Matter

This is where the half-a-lie comes into play. If you want to save yourself a lot pain later, define a monetization strategy for the early users you’re targeting. Depending on whether (and from whom) you raise outside money, this plan will have to be different levels of baked. If you’re targeting the West Coast super-angel type, then spend more time on your prototype and user experience while constructing 2-4 revenue streams that mature strongly with your second 50,000 users. If you’re raising local money in a town like Atlanta or Austin be ready with your monetization strategy first and your sexy prototype second. To our ultimate detriment, there are no points awarded in our region for great design or UI.

While you’ll never hear me fall into the revenue-from-day-one camp, it’s not realistic to think you can ignore the topic for long. At the same time, very few of our most important tech companies could have succeeded without outside funding. A natural early trade-off is profitability for number of users.

While every startup views monetization differently, you can look across the tech landscape and see the have and have-nots of successful strategies. Facebook, Groupon and Zynga are scaling strongly based on quarter-over-quarter revenue driven by advertising and micro transactions, while Twitter is clearly struggling and Foursquare rolls out self-service Groupon-like offers and co-branded marketing deals with AMEX. Hell, even Kayak is aimed at a 2011 IPO based on their revenue fundamentals. The lesson here is those who crack monetization early win.

On the other hand, you could play it like the AboutMe guys did and bite on an early exit to a big, rich uncle. Or continue to raise money around massive inside-the-fishbowl hype like Quora did. Unfortunately, that program most often applies to a small fraternity of entrepreneurs, and really only kicks the can down the road a bit. At some point, every platform will have to figure out how it makes money.

And speaking of Twitter, they’ve proven to be among the best use cases on how to get to 200M users while employing a series of flailing monetization strategies. And the latest chapter has management 2.0 locking down the very openness that enabled Twitter’s meteoric rise in the first place. But more on that topic in my next post…

Cheers

While every entrepreneur is an individual, it’s a solid generalization to say we all thrive on turning chaos into an opportunity. It’s an instinct that is seldom limited to solving one problem. Some like to call this serial and parallel entrepreneurism, others prefer side projects. The funny thing is this crazy, plate-spinning lifestyle is not only self-imposed, it’s the method behind the madness of evolving a set of radical ideas into a great company. But once you reach the moment of true potential (I endorse using Paul Freet’s “dimmer switch” first), it’s time to take a leap of faith, chart the course and burn the ships when you reach shore. As I see it, every startup eventually needs your total focus and commitment to succeed.

For us, the time is now and our new company is called Flipcha.

Many of our regular readers heard about our stealth startup last fall, but details have been purposely vague while our team was heads-down in build mode. That’s certainly not going to change with this post, but, in short, Flipcha allows sellers to ‘geo-jack’ consumer traffic at any location to (re)sell their items to like-minded buyers. More details will become apparent as we move into private beta, but our EVIL PLAN is to kick commerce in the head! As you can tell, we’re absolutely having some fun on our journey…

And with that, I’m announcing this will be my final post. It’s time. The match is lit.

So what does this mean to TechDrawl? The answer is TechDrawl will undergo one final redesign to become a blog solely written by Ben Dyer. I have it on good authority that Ben’s new TechDrawl (look for a DNS swap next week before SXSW) will seek to channel the work of Fred Wilson in content themes and frequency. I’ll leave the rest for surprise, but know Ben is one hell of an interesting man. I’ll plan on reading him daily! As for my writing, I’ll continue blogging at my new personal site, and we’ll also stand-up a Flipcha blog at the appropriate time. I’ve always been a fan of how Ben Chestnut and the MailChimp crew run their company blog, so look for something equally informative and fun.

Overall, the last 14 months of being the Executive Editor of TechDrawl has been a blast. Digging back into my journalistic roots to produce daily (or weekly of late) content, interviewing our region’s most interesting personalities and helping local startups get noticed has been a labor of love (a tradition started by Celia). And although we weren’t successful in blocking the legislation, I remain proud of how much dialog we created around Georgia’s Amendment One (which still needs to die!). But the best accomplishment was your increased readership. We saw traffic growth of almost 3x during 2010, so thank you for rewarding us with your attention.

This is not to say everything was easy. A few of my private battles weren’t so private, but in the end I move forward knowing I won way more than I lost (including some epic Words With Friends battles with some of the startup scene's finest). And that’s what it’s all about boys and girls – showing-up to get the job done. You win the moment you enter the arena to fight. Of all my TechDrawl posts, here are four (because three and five are what’s expected) that caused plenty of dust in my face.  These are the ones I hope you remember:

1)   Bootstrapping Is A False Prophet

2)   Hubba, Hubba, Hubba! Money, Money, Money! Who Do You Trust?

3)   Angels Or Posers: Who’s Gonna Run This Town Tonight?

4)   So Begins The Golden Age Of Consumer-Focused Startups

Given Ben’s planning on a more national focus, my final TechDrawl act is to recommend reading Atlanta’s own larger-than-life blogger Lance Weatherby. He’s proven to be a Real American – the Hulk Hogan of the local startup scene – and consistently delivers one of my favorite blogs to read. (For those of you playing at home, I get 20 points for finally incorporating my favorite picture of Lance.)

Lance_Hogan-copy

So adios TechDrawl, and hello Flipcha. As the four of us (Heath, Randy, Ben & I) transition from stealth to full-time startup, I’ll continue to attend events around town, just not with a video crew or a press pass. Or as the actor in that movie George Clooney directed says, “Good night, and good luck.”

This post was brought to you by Flipcha...

Just in time for my annual $99 hit, details are starting to leak out of Cupertino about an improved version of Apple’s MobileMe due this summer(ish). The good news is I have a new Apple product to sweat for the next 4-6 months, but the bad news I’m still going to blow a C-note just to be able to screen share ­– the very definition of throwing money away.

 

So why should you care, especially if you’re not a fully vested Apple fanboi? The answer is equal parts simple and cross-platform – your iTunes library streamed anywhere you want music. Yep, theoretically there will be no more creating playlists to manage how many songs can fit on your iPod, iPad or iPhone, or having to plug devices into a single computer. That certainly resonates for those of us who split time between a desktop and laptop computer – and maybe most importantly, will drop a huge iTunes buying barrier: which computer you’re working on. It’s not like iTunes purchasing needs to be more impulse driven, but I know many people who only buy stuff from at home because that’s where their iTunes library lives. Sometimes you just gotta have that Kanye album while sitting at Starbucks, and your iTunes library is bigger than your laptop’s hard drive.

 

But beyond just streaming iTunes out of a monster data center in North Carolina, some of the new details bouncing around start to get even more interesting. The new MobileMe supposedly sports an entire social layer including the long-rumored iGroups functionality that delivers your own summary page detailing location info and any other geo-specific actions you open up to friends (like pics or videos).

 

And we’re not talking about some crappy check-in app that requires six more user tasks and another set of useless badges. Hinging together the GPS capabilities of your phone, the data from Apple Maps (including real-time traffic) and user-generated content from any geo-enabled app on your phone could make for one hell of a background social graph. And at least you know Apple would be a bit more focused on privacy than the Facebook guys.

 

At the same time, the rumors of Ustream-type functionality starts to make sense of the iPhone’s must underutilized feature: FaceTime. In essence, everyone already has a video server in their pocket that’s backed-up by a 1GhZ processor and 720p video – it just lives a hobbled iPhone-to-iPhone, WiFi-only existence. Imagine if that were set free in some kind of one-to-many broadcasting scenario that would take lifestreaming to its infinite conclusion – the potential could be equal parts astonishing and terrifying.

 

But let’s be clear, Apple’s gotten off to a slow start in the social space with Ping so I’m not holding out hope for some location nirvana. And as my super-geek friend Stephen Fleming points out: “If this involves ANY legacy code from iDisk, it will stink on ice.” There’s no doubt the current file syncing (iDisk) is about as reliable as a carrier pigeon in a hailstorm, and anyone with any sense has already migrated to Dropbox. So clearly Apple has some self-induced potholes to steer around.

 

So will Apple slam-dunk MobileMe like they did the iPad? Probably not, but they’ve got enough hard data from my iPhone and they clearly understand UI design as well as anyone in the world. It’s not hard to believe Cupertino could bring something crazy data rich and drop-dead gorgeous to the location game. Will it be a Foursquare or Facebook Places killer? I hope not given I expect much more from Apple than the average software company. I’d contend today’s location services will end up being the training wheels for new tools and functionality that deliver more way personal value. I, for one, can’t wait…

The Founder’s Choice: Paul Graham For President

Wednesday, 02 February 2011 13:54 Published in Startups

If you have anything to do with startup funding, the Yuri Milner/SV Angel announcement over the weekend to invest $150K on spec in every current YCombinator startup (43 in all) was a neutron bomb – and perhaps the biggest endorsement of YC founder Paul Graham to-date. The no-strings-attached convertible note was quickly snapped up by virtually every participating startup as fast as the analysis started rolling in from the blogosphere.

To begin with, the variance of reaction across the startup ecosystem has been fun to watch. Some think it’s a masterstroke of genius, while others rumble about ‘dumb money’ following ‘dumb money’.  If you haven’t read Jason Calacanis’ Top 10 anonymous survey (and associated commentary) of angel reactions, it’s worth checking out right now. It delivers some great insider, nuanced points on the topic but also illuminates some haters.

My theory is an individual (or firm) reaction is directly inverse to two things: 1) how much opportunity those money-slingin’ bastards just yanked out from underneath you, and 2) how much you wish you’d thought of that idea. So if that no-strings-attached $150K just froze you out of deals in your comfort zone, you’re mighty pissed. But if you’re an entrepreneur this really does feel like things are starting to break your way in the funding world. Over the summer, I wrote an article on the Golden Age of Startups, and much of my vision has been wildly exceeded.

In my previous post, I focused a lot on the newly announced 500 Startups, who you would think should be in the Top 5 of those scared silly by the Milner/SV Angel deal. But as my man Dave McClure proves yet again in Jason’s article, you’re always better to have a smart public opinion than a ‘who-stole-my-lunch-money’ private bitching session. I’m confident he’ll continue to draw the best and brightest entrepreneurs to his pirate ship because of who he is personally and the resources 500 Startups provides. News flash: it’s not all about the money!

So let’s look at what this money means to a startup business – keeping in mind that we’re talking YC companies exclusively. For the 2-3 person founder teams that make it through the YC gauntlet (thousands applied, 43 were selected), this is a huge deal. It clears the deck of any fundraising distractions, and should propel virtually every business further down the track. Here’s a short list of why that $150K rocks:

  • No money-raising worries during the final weeks of YC class
  • Time saved equals a better product and tighter market focus
  • Enables 1-2 post-YC pivots if necessary
  • Provides enough capital to secure 5-10x more users (or customers or partners, depending on the business)
  • Gives founders real runway to fine-tune their product for market (not 30 days)
  • Opens up 1-2 additional hires to drive market traction (again, depending on your business that might be an engineer, a bizdev resource or a PR agency)
  • Delivers the potential to just flat skip an angel round and go straight for a VC-led $5-10M Series A with founder ownership beautifully intact
  • Creates the founders’ option to choose a Dave McClure-sized exit in the $20-40M range, hang on the majority for a billion-dollar run like Zuck, or take some money off the table during a later round like Groupon.

Of all the critics, I found the most interesting argument to be that it’s too safe. One of the anonymous founders in Jason’s survey described it as: “Betting on YC right now is like betting on Michael Jordan or Mike Tyson to win in their prime -- not difficult and almost safe.”

While it’s difficult to call spending $6M in the dark “safe,” the point is YC is rockstar central. Perhaps the clearest winner here is Paul Graham and YCombinator itself. Beyond the market validation for YC, this cements Paul’s role as a bona fide game changer in the startup world. (Lest we forget that Paul almost singlehandedly brought sexy back with convertible notes.) If you run all the numbers, it’s most likely that YC’s ~5% equity chunk could be the largest non-founder ownership going into a Series A. The smartest entrepreneurs will drive their valuations hard (growing 500K-750K users) before closing the next round.

All these dynamics are incredibly pro-entrepreneur, and lead to a whole new degree of founder control (Paul Graham’s term) that the most visionary investors are now embracing. It’s no mistake that guys like Paul Graham and Ron Conway are booming based on a policy of giving smart people the freedom to invent and iterate. And if Paul’s right, there are emerging VCs who are ready to continue that into and beyond Series A level deals. Think of the examples that whet everyone’s appetites for what could be: Zuckerberg at Facebook, Pincus at Zynga, Mason at Groupon. And make no mistake, altering the first-level terms of an ecosystem creates cascading change that eventually can be defined as a self-fulfilling prophecy. And who really wants to argue with him when he says:

“Founders retaining control after a series A is clearly heard-of. And barring financial catastrophe, I think in the coming year it will become the norm.”

So will this fundamentally change the economics of angel funding? Yes, in the sense this is now a blueprint for big investors coming into the seed space – although I’d expect only a few have the tolerance for blind investing. For the rest of the angel ecosystem, time will tell based on how successful this effort is. Remember, this a one-time bet on 43 companies for a total of $6M, which is about like pocket lint if you’re sitting with billions of Facebook stock in front of you. One thing’s for certain: the competition for investing in the best entrepreneurs has just ratcheted up again.

And let’s close with what this means to those cashing the checks. The second most important benefactors in this deal are YC companies number 11-43. If you assume the Top 10 get funded almost instantly, this $150K could easily be the difference between three hits out of 43 (7% batting average) and eight hits out of 43 (19% batting average). And yes, the next Facebook or Zynga could come from this second-chance group.

So yeah, I think the Milner/SV Angel/YC deal is pure genius and I hope it drives a few big hits to ensure something like it continues to be an influence across the startup world. Now where’s my 2012 polling place again?

My tweet stream was ablaze yesterday with incessant links to the ends-of-days-ish Amazon offer over at LivingSocial. Sure a 50% off coupon for anything at Amazon is a big deal, but I was impressed by LivingSocial’s ability to replicate the Groupon/Gap frenzy of last year – to the tune of more than $20M in top-line sales according to the TechCrunch kids. And this wasn’t just the tech press driving page views – an insanely diverse set of people I follow (and who rarely promo any kind of deal) couldn’t help themselves. But among all this hype and commerce was a single voice that hit a weird note for me: Martin Tobias, who is the CEO of competing daily deal site Tippr.

 

Early in the day I saw a small media blip about him describing how LivingSocial had a client-side validation bug that would allow a buyer to hack the source code and purchase multiple certificates even though the T&Cs said one per person (his analysis, not mine). My first reaction was it felt like sour grapes. Clearly having Amazon as a strategic partner and primary investor in your daily deal site is a huge coup for LivingSocial, and honestly, I’d expect it to draw some haters. For the best overview of this story, check out Business Insider’s coverage from yesterday.

 

But the reality is we all compete every minute of every day for users, mindshare, investment, etc. – and I can imagine that competition is 100x in a saturated market like daily deals – but we all have failure points in our software, in our decision making, in our hiring, in virtually every aspect of our startup life. There are a hundred flavors of the old adage ‘if you’re not failing, you’re not really trying’, and every one is spot-on. But hey, Martin’s got a hell of a track record as a Microsoft engineer, investor and startup CEO. That’s where personality comes into running a company. I never would have played it that way, but I’m sure some others would.

 

But then late last night a blog post of his popped out of @HackerNewsYC, and he went from sour grapes to underhanded in my book. He concludes his first post with the following paragraph, which I can only assume was intended to try and paint his actions with a brush of altruism:

 

“Don't let anyone tell you software is easy. Don't trust your business to software cobbled together as a hobby that just happened to take off. Don't underestimate the value of good software engineering. At scale, when you are selling real volume and doing serious business, the details matter."


Those are all relevant points, but what he also did in the post was to screen shot source code and show everyone where to modify the value – and exactly how to defraud his competitor. Really? So instead of just taking the opportunity to trash the security credentials of a large competitor, you just tell everyone on Hacker News how to rip them off too? Oh yeah, he posted this blog WHILE the offer was still live at LivingSocial, which is by far the most egregious part of this whole episode. That’s simply unacceptable, and I would have thought someone with a track record like Martin would know better. Again, we’re not talking about a 20 year old who hasn’t been around the block.

 

And in case anyone thinks this is just me on my high horse, I read some of the comments on HackerNews after writing most of this story. They go like this:

 

prpon: Honest question to fellow hackers and entrepreneurs: Do we have to take every opportunity to put down your competition? Are there not enough venues to market yourself? Wouldn't a simple post like this be enough? LivingSocial does not guarantee that you get what you ordered like Tippr does.


desigooner: I'd hardly call it "hacked". The post is oddly smug to claim that LivingSocial got gamed easily and their "design" is flawed and that their own solution is better. Meh. I'll pass. Such a blog post about a competitor isn't the best way to brag about your own product.


sandeepshetty: I know the post is by a competitor, but wouldn't telling Living Social about it first and giving them time to fix it before blogging be the "right thing" to do?


So even if you agree with publicly attacking your competitors’ success (which I don’t), shouldn’t there be some form of mea culpa if it turns out you didn’t just see the Big Bad Wolf? (It turns out that LivingSocial has a clearing process that manages final approval of who gets the deal – see this link for the final analysis.) Technical design is equal parts art form and time-to-market. We’ve all made front-end design decisions based on the fact there was a back-end process that enforced the hardcore business rules. I’m sure a team the size and prominence of LivingSocial has thought extensively about fraud and how to protect their systems. Just because you do it differently, doesn’t mean you’re right and they suck.

 

And just for the record, I’m neither a CEO of a competing daily deal site or a LivingSocial user. I prefer to pay full price at Amazon, and grade my daily success by how often I forget to redeem killer deals before shutting down the laptop around 1a. Yesterday, I was the smartest man in the world :-)

What Matters More? A Carrier Or A Phone?

Wednesday, 12 January 2011 17:27 Published in Technology

As a customer of virtually every major cell phone carrier over the last 15 years, I’m not going to dispute Verizon has always had the best call quality and fewest drops. I don’t need any stats or an engineering degree to know CDMA handles calls better, which should be Job One of a smart phone correct? The problem with Verizon was always an ultra-crappy selection of phones (yes, I still recall being the a Blackberry laggard with my oversized 7750 when everyone else had their light new 7100). But all that changed yesterday with the announcement the iPhone 4 is available on Verizon in early February. But should anyone outside of overloaded network nodes like San Francisco and NYC care?

It’s pretty straightforward if you boil it down to numbers. If you have a contract, AT&T likely has you by the short hairs after upping their smartphone cancellation fee from $175 to $325 last June in advance of their iPhone 4 launch. If you want an early look into how much it’ll cost you, check out this AT&T iPhone ETF cost widget at Wolfram Alpha. If you’re like me and have a family plan with three iPhones (two with contracts), then you ain’t going nowhere!

But even if you’re sitting with no contract, let’s look at the real-life implications of change. Here are the factors that should weigh on your decision:

1) Your call quality will improve with Verizon – PLUS

2) You can get an unlimited data plan (although pricing is still a mystery) – PLUS (but only if it’s under $40/mo)

3) You will have access to Verizon’s mobile hotspot features one month before AT&T – PUSH

4) You can’t tell a caller “Hang on, let me read that email you just sent.” – MINUS

5) You travel outside the US and want to take your Verizon iPhone – MINUS

6) You have a smartphone addiction problem, and bounce your SIM card across 3-4 devices a month – MINUS

7) You love your iPhone 4 bumper case – MINUS (the ringer mute switch has been moved slightly)

8) You think 3G is super-lame and want 4G now – MINUS (although in fairness, that means trading any iPhone for a USB modem as LTE phones are still 5-6 months out)

So unless you live in certain sections of San Francisco or New York where the iPhone is disturbingly close to a $500 brick, then the Verizon iPhone is probably not the smartest move right this minute. On the other hand, if you’ve stubbornly held out through many generations of craptabulous smartphones on Verizon, go drop the $299 for the 32GB version now! (Pro Tip: I have the 16GB and shoot enough video and carry enough pictures that I wish I’d ponied up the extra cash for the 32GB.)

And let’s not forget to add Verizon to the list of companies that are now complete revenue and market slaves to Apple’s product development schedule. I’ve already heard rumbles of AT&T users holding out until summer for the iPhone 5. In fact, most of fanboi users I know (and definitely the media) have turned iPhone upgrade watching into something close to an Olympic sport. The reality is Verizon just launched a long-in-the-proverbial-tooth smartphone, and didn’t even wire it up with their new LTE service – for 'design reasons', which is likely code-speak for battery issues.

So the question is simple: should you get a Verizon iPhone? If you’re already a Verizon subscriber, don’t use your cell phone for business, and also carry a Flip Video in your pocket or purse then go get one (yes the iPhone video is as good as a Flip Mino, and the 5MP HDR pictures rock). If you don’t match up with most of those attributes in a Venn diagram sense, then save your money for the iPhone 5. (It’ll be interesting to see how carrier wars will factor into new product availability in the post-iPhone 4 world!)

Plus, you’ll still have the AT&T service to blame when you physically drop the phone or just feel like hanging up on someone. Imagine the hours of conversation and thousands of blog posts that would be sacrificed if no one could complain about AT&T service…

And for the record, my answer is the phone.

Best Buy: This Ain’t Your Grandpa’s Sears Roebuck

Tuesday, 04 January 2011 03:17 Published in Technology

I’ve been a Best Buy fan for years, and not just for midnight game console lines or a series of Reward Zone shopping events where I’ve cranked some sweet deals. The epic example was my Samsung 50” plasma HDTV I bought two years ago for $699 one Sunday night. That was a hot price already but they actually sent me a $100 price adjustment check two weeks later (auto price matching FTW!). So yeah, I love me some Best Buy but they deserve some cred on a bigger level too.

From a market perspective, it’s hard to argue they weren’t the biggest winner in the demise of Circuit City’s retail business in early 2009 – even if many analysts believe Circuit City was effectively killed by a timely combination of Wal-Mart selling cheap Vizio flat-screen TVs, and a horrendous management team. So how – during miserable economic conditions – did they become an 800-pound gorilla?

Three years ago, they were just another electronics retailer trying to build as many stores as possible while the credit markets were free flowing. But when the economy tightened, they seemed to get even smarter – and really begin to understand market trends as manifested by their sales data. For example, remember last September when the Best Buy CEO Brian Dunn said the iPad was cannibalizing laptop sales by up to 50% in store? He quickly backtracked, but let’s be clear: he knew what the sales numbers have now proven. An iPad can handle email and web surfing pretty well, and that’s what most people use laptops for. There are now dedicated Apple sections in most larger Best Buy stores.

And just a week before, Dunn shared another distribution-related nugget that apparently impressed no one but me: 40% of the products they sell online are picked-up in store. That’s huge, and points to channel advantage the likes of which few companies could replicate. Don’t get me wrong, a pure ecommerce play like Amazon will always have a huge SKU (and probably price) advantage over a traditional brick-and-mortar retailer, but Best Buy has clearly defined themselves as the market leader and is selling things how people want to buy them.

The story isn’t all roses though – especially if you’re an investor. After a blistering second quarter of 2010 (ending Sept15, and showing a 62% growth over the same period in 2009 led mostly by new store sales), December’s Q3 announcement was a reality check. Key metrics like same-store sales, earnings and revenue were all off by 5%, 4% and 1% respectively. The markets punished Best Buy with a 15% haircut on their share price that still shows in early January. But they seem to be soldiering on in the innovation department…

The latest example is word from CES this week that Best Buy has created their own publishing network called Best Buy On – complete with original content and of course, tons of advertising opportunities. Early reports show access to almost 150,000 in-store screens (the looped content shown on every TV in their ~1,100 stores) plus specialized department-level screens, plus BestBuy.com, plus, plus… Advertising Age is reporting ad buys from the likes of Proctor & Gamble, Duracell, Braun and Sony. The usual suspects lined up first, but I’m willing to bet this ends up as a nice kicker to traditional MDF strategies common in retailing.

It’s pretty damn smart any way you slice it: Best Buy adds a completely new revenue stream on top of SKUs and provides more buying context for its customers (who by the way, are influenced by BestBuy.com to the tune of 60% for in store purchases). Certainly they face some interesting conflict-of-interest issues – and will likely never get into product reviews – but they’re not trying to be Edward R. Murrow here. They’re doing what any publisher on the planet does – creating content to sell ads around. And yep, they already have all the audience needed. And speaking of leveraging an audience, I’m not even giving them complete cred for the BBYOPEN.

They’ll be fun to watch over the next 6-12 months, and yeah I’ll continue to do my part to keep their revenue up!

So what does it take to land yourself more than four hours of one-on-one meetings with the likes of GRP Partners, Foundry Group, Redpoint Ventures, AOL Ventures and at least four more heavy-hitting investors? You could take your great idea and killer pitch on the road, and never lock-in a schedule like that. So it’s simple: get your startup registered to present now, and take down one of the top three spots (audience vote) at Startup Riot. Now that’s a prize package.

For those not familiar with the Atlanta institution that is Startup Riot, this is the fourth year of our town’s biggest startup demo day. The 2011 version is being held February 16 at The Tabernacle, and features Andrew Warner of Mixergy as the keynote speaker. And in true rapid-fire fashion, the event gives 50 startups three minutes on stage in front of 500 of the most influential investors, mentors and fellow entrepreneurs. It’s a chance to take your company to the next level, or jump your way right into the scene.

In addition to top-tier investor meetings, the winning startups get legal and marketing services, and the overall winner also takes down more than $8,000 in video production services. Talk about a great way to make bootstrapping less painful!

So get yourself registered to pitch or attend, and I’ll give everyone an insider’s pro tip: my main man Allan Branch from LessAccouting took the top prize last year with his trademark mix of simplicity, clarity and a small dose of profanity. So leave your Fortune 500 boardroom pitch at home, and come ready to wow the crowd. Enjoy the post-pitch interview with Allan below, and we’ll see you in February.

Mansell Group Continues Buying Spree

Tuesday, 07 December 2010 05:04 Published in Startups

After taking on a strategic investor in The Riverside Group in Q210, Atlanta-based Mansell Group has pulled the trigger on another roll-up opportunity by acquiring Seattle-based email service provider (ESP) WhatCounts. The joining of the two privately held companies will double Mansell Group’s current client roster of over 600 customers – and have roughly the same effect on revenues and employee count.

WhatCounts, like Mansell Group, sports a diverse customer base including Alaska Airlines, Amazon, Costco, Fox News, REI and Ziff-Davis. Beyond traditional SaaS email delivery, WhatCounts also markets their Broadcaster appliance designed to install internally to keep transactional messaging costs down. The device can even be hosted in the company’s tier-one colocation facility if a firm doesn’t want to manage the bandwidth.

Clearly this move continues to pull Mansell up market towards the highest-volume ESP heavy hitters like Atlanta-based Silverpop, and away from SMB-targeted solutions like Atlanta’s other key player, MailChimp. I’d expect CEO Allen Nance and his expanded team to continue strong M&A work, with a earlier stated preference for more social media tools as well.

We’ll keep an eye on Mansell Group, and wait to hear they’ve snapped up every ESP from here to Wichita :-)

Help Save The World This Weekend, Literally

Thursday, 02 December 2010 05:08 Published in Startups

If you’re a hacker and have some free time this weekend, you need to get over to the GTRI Conference Center for Atlanta’s version of the global Random Hacks of Kindness (RHoK) movement. The two-day event pulls together legions of volunteer software developers and matches them up with disaster management professionals to create software solutions to problems around the world. For example, last June’s RHoK 1.0 event in Washington DC produced Chasm, a software-based algorithm that predicts landslides by better interpreting existing data. One of the event’s main sponsors, The World Bank, is already piloting the solution in the Caribbean to better inform local building strategies.

And speaking of sponsors, the list of companies behind RHoK is impressive. Going back to 2009, a team of employees from Google, Microsoft, Yahoo!, NASA and The World Bank joined together to ‘hack for humanity’. During the next year, the event has become global, and will happen concurrently in more than 20 cities from Bangalore to Tel Aviv to Chicago to Juarez, Mexico. As the starting point for the hacking, the disaster management pros have delivered a set of problem statements designed to guide the development.

Atlanta’s RHoK event will be held Dec 4 and 5 beginning at 9a at the GTRI Conference Center. You can sign up at the RHoK website, and can even stay overnight to crank with your team if the mojo strikes you. And there are some pretty cool prizes in-play for the winners, including roundtrip airfare for two to anywhere in the US and a Sony PlayStation 3. So why not save the world, and have a crack at great prizes?

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