More on Pro Rata Investing as an Angel

Leave a reply

My buddy Maneesh Arora asks:
Have you successfully been able to get pro-rata rights as an angel (assuming putting in small-ish amounts of money of $25k or $50k, something along those lines), on Convertible Note deals?
This was in response to my old post Taking Your Pro Rata as Angel Investing Strategy.
First, given that I’m at Launch Capital now and our investment sizes are $100K-$150K, we typically fall into the camp of auto-qualifying for pro rata rights in equity deals (many equity deals have a restriction that only “Major Investors” get pro rata rights, with a “Major Investor” being defined as someone who invests a minimum amount of money).
I looked back on the last few deals I have done, both equity and convertible notes. With respect to pro rata, I have found:
1. Most angels don’t invest pro rata or they don’t understand the effect of pro rata investing, so they don’t speak up when the round doesn’t give them pro rata rights for whatever reason.
2. Bigger funds tend to put limits on who gets pro rata and who does not on subsequent rounds. It would seem natural that they would want to keep as much ownership as possible, and future ownership rights too.
3. Smarter entrepreneurs will use pro rata rights to entice every investor to put in more money. But that does not help the angel who simply does not have enough resources to produce the minimum amount.
4. There are investor entities who are more friendly than others to angels in the round. They tend to give pro rata rights to everyone regardless of the investment amount, on the belief that we are all friendly, invest together often, are thankful of everyone’s help, and want everyone to get the chance to participate in the upside.
5. Being useful, friendly, and present to the CEO increases your chance that you’ll get pro rata rights. Or you may get the chance to put more money in subsequent rounds even if you don’t have pro rata rights.
6. A more direct note to Maneesh’s question: Convertible notes do not guarantee pro rata rights of any sort in the next round. Even if you put those terms in, rarely do those terms express themselves in the next round since they tend to be subject to the new investor’s negotiations. I have rarely seen convertible note terms beyond interest rate accrual get honored. Even during acquisition, any kind of terms that award investors a multiple of the investment may not even get honored.
This is why Convertible Notes are not investor friendly at all, despite the fact that they are the dominant investment structure out there today.
So more money always talks, and smaller amounts don’t give you much negotiating power, nor your pro rata rights, and this is why you must strive to move up the value chain as an investor, angel or otherwise. That can be hard if your resources aren’t enough where you can come up with that much money.
HOWEVER, I still believe that if more angels spoke up, then potentially we would, as a group, have more ability to obtain pro rata rights for all involved and not just “Major Investors”. This is worth going out to angels and getting them more educated on why pro rata investing is important and why they should ask for those rights and walk away when they don’t get them.
Still, investing in your pro rata for as long as your resources can enable you to will allow you to maximize your portion of future success in a startup.

First Impressions with the Lytro

Leave a reply

Last week I got my Lytro from pre-order in the mail and was excited to try it out in the field. I went to the California Academy of Sciences in SF to see what it could do.

About the Industrial Design
It fit well in the hand, although I was very scared of it slipping out and me dropping it. Since it is in a horizontal configuration, I wish it had a palm strap like camcorders do. The wrist strap was OK, but there was no way to tighten it on my wrist and I felt like it was swinging precariously as I walked around. Most of the time I just stuck it in my bag.
The magnetic cap in front was slick, but it kept falling off when I removed my camera from my bag. Couldn’t they have figured out some way of doing a built-in iris protector or attached cap? I’m pretty sure I’m going to lose it at some time in the future. At least a screw on cap won’t fall off, even if it is a pain to get off. Snap-ons might work but they aren’t perfect either.
The on/off switch is a small depression the bottom of the unit. It was hard to find, but eventually I got the hang of just pressing generally where it was.
There was a zoom but I totally didn’t know about it until I got home and read the instructions – who reads instructions right? This is a small row of dashes on the top of the unit. I suppose that could be better and more clearly labeled.
The button to take a picture was a small depression on top. I think I got the hang of where that was to take pictures.
The screen was too small in my opinion. You can press on it to refocus into some area, but the image was so small that you couldn’t tell if the focus changed or not.
The UI in the camera was pretty simple. At least there are no fancy menus to confuse you. The point is to just shoot a lot and not worry about things, right?
Images
Reviewing images on the tiny screen sucked. So I downloaded them to take a look at home. Most of them were pretty good. Image quality is up there although it doesn’t match up to my favorite camera, the Canon G12.
It even seemed to deal with low light fairly well. The lens seemed set at f/2, supposedly to minimize field of view and get you the nice blurred surroundings effect. Noise seemed very limited.
However, I did not really enjoy what I perceive to be the main cool feature of this camera, which was to be able to focus in on different parts of the image while other elements blurred out. After just shooting around, I only had one image out of the whole set which I could do this with, an image of some funky blue jellyfish:

Try clicking on some of the jellyfish, especially the ones in back. Very cool indeed!
So here is where my issues begin.
In order to see the coolness of the camera, I now have to think about the what is in the scene to make this feature come alive. I have to take pictures with things very close to me in the foreground, and then have things in multiple distances all the way into infinity. In that way, the blurriness is accentuated and I can pick around the image to see this happen. Most of the images I shot did not have this quality, and were good images but you can’t really see any blurriness come out when you pick around the image.
This is what happened when I bought a 3D camera, the Fujifilm Finepix Real 3D camera. I had to also think about what I could shoot that would really highlight the 3D-ness of the resulting image. If I just shot some random shot, the 3D effect may not really be noticeable because the elements are too far away and everything still seems flat, which is arguably what you would see in reality.
This makes me think too much. I want the camera to do magic, not make me think about how to make magic. If I wanted to think (and I do with my Canon 60D) then I would just use my old cameras.
But I think we’re in an era where we want cameras to take magical pictures, almost pictures of what we perceive, not what we actually see, or what physics says is out there in the scene.
Take high contrast scenes where there is brightly lit areas inserted in darkness for example. Most cameras fight to figure out how to expose such scenes. Bright light areas often are too bright if you try to expose more of dark areas. Or if you try to expose the bright light areas to get more detail there, then all of the darker areas go black.
However, we do not remember such scenes like that – our eyes are darting around and readjusting what we focus on, and our memories are of what is in the bright areas as well in the dark areas. Certainly there is artistry that results from high contrast images, taking the dark areas and making the mysterious silhouettes in the brighter areas. But sometimes, we want magic to happen. We want to see what is in the bright areas and more detail in the darker areas without having the bright areas wash out.
So I want magic and I want reality when I want them and don’t want to think. I just want to shoot and see awesome results.
This is where I think smartphone cameras like on the iPhone are really the next wave of photography. I would meld Lytro with a image computer that can take both reality and imagined reality and then produce the result I want later with ease and not making me think about the technology. I just want to shoot and have magic come out the other end.
Lytro has some really cool things going for it. As a first iteration, it’s pretty cool but I think I’m demanding more from cameras these days.

The Physical Store Analogy for Internet Competition

Leave a reply

Today I just sent this email to a buddy of mine working on a startup:
If [competitor.com] was a physical store on a street and you wanted to build a store right next to them, what would you build? Would you build exactly the same store or would you do something different?
I always talk about so many me-too products and startups out there today, and the ease of building competitors to just about anything. But entrepreneurs don’t seem to want to stop thinking they can exist and thrive with essentially a clone of something else out there.
My statement/question above is a problem about the internet. In the real world, if you were to build a store on a busy street, would you build exactly the same store? Probably not. You would see that if you wanted all those pedestrians to walk into your store, you’d want to build something with some kind of uniqueness to attract them, and rarely would you want to build the same business that already existed on the street. But on the internet, you can’t see what’s on your street so easily. The browser detaches ourselves from the brutal reality that your competition can be literally a virtual store or two down from you but yet you can’t perceive it as a problem because it’s virtual and not something physically experienced.
And this problem is exponential on the internet as the virtual street you’re building on is limitless in available storefront. Imagine a street with a limited number of pedestrians but tens, if not hundreds of storefronts are squeezing all onto that street, creating ever smaller slices of storefronts for internet pedestrians to walk by, all screaming at them to come in and buy my stuff please!
So ask yourself again – do you want to be yet another storefront on an infinite street or do you want to build something that is truly unique to attract internet pedestrians away from all the same stuff?

The Case for Hardware + Software + Internet Startups

Leave a reply

“Makers are enthusiasts who hack and modify the world around them in interesting and whimsical ways. Tools and services that used to be inaccessible to all but large manufacturers are now available to everyone. Foreign factories that were impenetrable before are now an email away. Design software costing thousands of dollars per seat is freely available (or very cheap). Hackers are mixing all of these elements together and re-imagining entire industries from the ground up.”
– Vinod Khosla, The Unhyped New Areas in Internet and Mobile, Techcrunch, February 19, 2012.
Vinod Khosla is right. The time is ripe for startups working on products combining hardware, software, and the internet.
Those who know me know that I have been tooting the HW+SW+Internet horn since early 2010. I hinted at it in my post Internet Startup Bubble and The Supposed Super Seed Crash back in July of 2010. But now, more than ever, the evidence is here that hardware is ready to make a comeback in startups. In fact, it already is.
But it’s been hard talking about this for the last 2 years. I’ve met nothing but resistance from the investor community. Practically every VC I’ve talked to has told me that hardware is awful and that software and internet is much better as an investment. And for a long time, it’s been true.
If you think about it, the last VC who was OK with investing in hardware startups entered into the VC business in 1994. After that, the internet came into being and from that point forward, every VC who didn’t jump on the internet bandwagon missed one of the biggest opportunities to make a ton of money. (Of course, those that didn’t jump off the bandwagon at the right time lost their shirts and more). Still, memories about the downsides of bubbles are short; those same VCs were heroes for the money they made and they continued to invest in the internet, and training hordes of emerging VCs along the way. This has continued for 17 years now. Think about it; 17 years of VCs whose thinking has been molded by the success of internet startups and investing in them. And also the advantages of not having to build physical product to get there.
I think the world has changed to the point where the previous advantages of internet/software startups has been declining, and the advantages of hardware startups are ascending.
For a long time, internet/software startups had a distinct advantage over hardware startups. You didn’t have to use up money in paying for inventory of product. Digital products cost so much less and upon copying the bits digitally, the cost of the product declined over time as you sold more. Plus, the internet created distribution mechanisms that were hard to compete with; customers could be reached with extremely low cost and sold to with great ease. But that has changed:
1. Competition in internet/software startups is way too fierce. You start something and competitors pop-up all over the place. With all the easy ways to create software, it is extremely easy to build something that somebody else has built and do it fast.
2. Given the rise of competition and the fact that consumers, along with B2B customers, are deluged by these startups screaming for your attention and your money, the money that you would need to pay for hardware inventory is now money required by internet/software startups to buy traffic. This was not true not too many years ago; now the competitive world has changed – the battle for consumer mindshare AND the IT manager’s mindshare in B2B customers has risen exponentially.
3. Some argue that distribution channels for hardware are limited. However, social, word of mouth, and viral mechanisms for internet/software startups do not work any more and you have to market traditionally to build awareness and brand. This more than equalizes the distribution channels for hardware. At least hardware is unique and not just another website product or service which gives hardware a leg up in customers’ eyes simply because of uniqueness. Do we need another photosharing app?
4. Because it takes longer to gain mindshare in today’s world, you must raise for longer runway – 18 months-24 months at least, which means more money is required in any case.
On the hardware side, advantages are emerging or here already:
1. Hardware technology is commoditized and cheap – what was previously rocket science is now readily available in chipsets to everyone. There is not much out there now that requires serious hardware design resources and custom chip fabrication resources. Advanced technologies of the past are now commonplace.
2. Contract manufacturing can make anything on contract – you don’t need your own factories now. When I worked at Apple back in 1990-93, we had our own manufacturing both here in California and in Asia. I designed plastic parts and oversaw the construction of metal tooling to shoot the plastic. We had to build prototypes, test them and their manufacturability, and arrange our own staff to build everything. Now you can hand off all the manufacturing to contract manufacturers, whether here in the US or in Asia.
Because you do not have to setup factories and manufacturing yourself, you don’t have to raise money to do so like in the past. You can raise the same amount of money as your typical internet/software startup and get product in boxes and on shelves.
3. In huge contrast to internet/software startups, there is *virtually no competition*. It is exceedingly rare that when I meet a hardware startup, that I can find another let alone two competitors! This gives hardware startups an unprecedented period of time where they can advance in the face of no competition and grow and learn.
Universities are graduating enormous numbers of software engineers and everyone is racing to internet/software. Hardware engineers, by comparison, don’t exist in nearly as much quantity. In fact, opportunities for hardware engineers are so limited by a wide margin as these skills have moved offshore to Asia. Thus, nowhere near as many hardware startups appear versus the hordes of internet/software startups.
The barrier to entry is experience and knowledge of hardware. Most people fear it because they have never done it; it is natural to avoid that which is unknown.
4. We are now at the edge of what software can do by itself with respect to the physical world. Having humans type in information or self reporting data is just not practical and filled with potential errors. To do better, you need hardware to do the actual touching and sensing of the physical world and connecting that via software to the internet. An example is Quantified Self – self reporting of physical condition has reached its limits; we need 24/7 monitoring of physical condition to get to next level of knowledge, usage, and innovation.
5. Hardware has become small enough, low power enough to do amazing things for long periods of time. Huge possibilities open up due to low power, small size, and accessibility of the technology. Instead of wearing a huge box that is heavy and uncomfortable and needs to be recharged every few hours, we can wear small, unobtrusive sensors all day long, broadcasting vital information to the internet all day and night.
6. By selling hardware, you make money off every sale. By selling software services on top, you further monetize users far beyond the money made from the sale of the hardware. Due to the intense competition, internet/software startups often need to give away services for free which means survival until customers get to a point where they will pay for something you offer, whereas selling hardware means you make money each time you sell it. But then you offer a recurring, monetizable service on top of that to get more revenue.
This is why hardware+software+internet is the key, not just hardware alone.
7. Accelerator programs are now emerging to bring like-minded and experienced people together to enable better hardware product development. Thes are people like PCH International’s accelerator program help new startups get off the ground and provide competitive advantage because the accelerator startups get access to PCH International’s manufacturing capabilities. Other great accelerator programs are HAXLR8R, a combination China and Silicon Valley hardware accelerator, whose purpose is to spend some time in China to learn how to access and manage Asian manufacturing resources.
Other great hardware accelerators are Lemnos Labs, based in San Francisco, and the newly formed Bolt, to be based in Massachusetts.
The declining advantages of internet/software startups and the increasing advantages of hardware+software+internet startups make hardware the next big emerging opportunity.
The evidence is clear. Over the last two years, here is a list of fantastic startups, using hardware+software+internet:
Evoz – advanced baby monitors, analyzing baby cries with recorded data, and giving advice to new parents. [Disclosure: I’m an investor].
Fitbit – activity monitor and scale for better health and fitness.
Lark – silent alarm clock and personal sleep coach.
Zeo – your sleep manager.
Withings – WIFI enabled scale, blood pressure, baby monitoring.
Lumoback – back health and posture tracking.
Green Goose – making everyday things more playful with tiny wireless sensors that automatically measure what you do.
Leapset – a hardware POS play transforming the cash register for local merchants. [Disclosure: I’m an investor].
Metawatch – a platform for wrist based technology development.
Nest – the learning thermostat.
Elacarte – tablet based menu system for enhancing and optimizing ordering for restaurants. [Disclosure: I’m an investor].
And the list goes on. Still, I meet resistance on this issue.
17 years of entrenched thinking, and exploding economies to power profits and return on capital via internet/software startups make the opinion hard to change. And certainly what I argue doesn’t apply to all hardware startups; for example, to build a new car business like Tesla would still require a ton of capital. However, for small, high technology, connected devices this is exceedingly true.
But that doesn’t mean the VC community has to believe what I believe. If there is anything I’ve learned about investing, it’s that the best returns are derived from not following the herd. This is definitely anti-herd, and I’ll either be totally right or I’ll be amazingly wrong – but if I’m right, I hope to be one of the first to ride the wave of this emerging class of startups to success.

Nobody Wants to Invest in an Ugly Startup

Leave a reply

Every now and then I’ll meet up with a great entrepreneur with a great idea. But then we take a look at what they’ve built and…gag.
Whatever they’ve put up is pain to my eyes. It’s chaotic, unorganized, a white space hell. The colors are garish, chosen for hexadecimal greatness. The fonts chosen are the best that a browser can offer – comic sans and arial are wonderful aren’t they? All the information is lumped together because stuffing as much as you can into that rectangle called a browser means I don’t ever have to click to get to more information – it’s all there on one page!
The problem is…it’s a visual design nightmare. And it makes me want to run away.
Definitely others will and have. But I sometimes don’t. I’ve bet on the ugly, hoping that the ugly will fix itself later. Sometimes it does, sometimes it doesn’t. But until then, the reality remains. Their site is still ugly. And the problem is, until that is fixed, it will chase others away.
Nobody wants to invest in an ugly startup. It’s a problem on many levels:
1. Ugly startups will chase away customers. Customers are also sensitive to great visual design even if they may not be able to articulate it. Ugly startups look un-professional; there is doubt that this company is for real – if it was, they would find a designer and make it look great, right? They don’t want to look at an ugly startup while using it either – it hurts the eyes. If this is true, then it could stifle your early growth and inhibit trial.
2. Ugly startups aren’t brag worthy. If I invest in you, I want to talk you up. But if someone goes to the site and then comes back to me saying, “Gee that’s the ugliest thing I’ve ever seen” – it affects me. Who wants to hear that? I want to hear, “Wow it’s beautiful and cool – great job!”
3. Ugly startups show a critical team deficiency in design, at a minimum in the visual department and maximally in all areas of design. Designers are the hardest to hire for of any discipline out there; if they don’t have one on staff now, will they ever be able to attract one? Or be able to get ahead of competitors who do have design on staff?
4. If you are ugly and can’t get other investors on board, whether they actually come out and tell you it’s because you’re ugly or not, you’re dead in the water. Other investors will stay away knowing that ugliness lowers the probability that anyone wants to give you money and introduces a higher risk that you’ll die.
Time and time again, investing in startups has been likened to dating. Here is more proof of that – who wants to date someone you don’t find attractive?

Quantified Me

Leave a reply

It all started back in 2002 when I signed up for my first triathlon and joined Team in Training to help prepare me for it. It also set me on my big science experiment which was “how fast can Dave Shen really go?”
You see, I had a lot of negativity surrounding my first (and also subsequent) triathlon attempt. People told me that my knees would give out, that I better be careful or else I would get hurt. They told me that I was 37 and that trying to race a triathlon “at my age” was a risky proposition for my overall health.
But I didn’t believe them. And now, here I sit 10 years later and still going strong and injury free at 46 years of age. And getting faster each year.
When I got started on my big on-going science experiment, I decided that I was going to stop training with these programs provided by books and magazines. I was determined to train like what I thought a professional athlete trained like – lots of technological and physical support and a great coach too. Someday I should write what it was like to come from zero swim/bike/run experience to completing 6 Ironmans, numerous swim and run races, and ultimately becoming a Total Immersion swim coach last year. For now, I want to talk about one aspect of my training which has led to wiring myself up in many different ways, gaining insight into the future of training and health through technology.
My coach was Mike “M2” McCormack, a popular triathlon coach in the SF Bay area. It was he whom I credit with introducing me to truly data driven scientific, high technology bike training using a Computrainer. We also explored the training via heart rate zones, but we ultimately switched to training via perceived exertion which yielded better results. Logkeeping in Excel kept me on track and now I had a way to go back into my training and look at what went well and what went wrong. I also bought a Garmin 305 GPS watch to track at a detail level my heart rate and performance on runs.
Along the way, I read an article about Andy Potts training for triathlon and Ironman using a data driven, scientific approach. It was a fascinating look into an elite’s training regimen. His coach would take data from his previous workouts and derive workouts for the next day adjusted for his performance on the previous day, and what his condition looked like in the current day! Wow! This meant that if we could gather enough information about our bodies during workouts and our subsequent recovery, we could, in theory, generate an appropriate workout for the day after, whether hard intervals or total rest.
Fast forward to 2011. I was peaking for the LA Marathon and came across Tim Ferriss’s popular book 4 Hour Body. Yet another eye opener on two levels – one was the realization that there is a lot of crap out there on training, health, and fitness, and two, that you have to be data driven in your health and training or else you will never know if you are doing better than the day before.
Going on his suggested diet, I dropped in weight and body fat % to my usual race weight at the LA Marathon, but then I dropped even lower post marathon and plateaued underneath my racing weight! I would never have known that if I had not been tracking my weight and body composition daily. The constant feedback and monitoring were necessary to know that what I was doing had any effect at all, and whether I had to adjust or not. It was gratifying to see that I did not return to my higher pre-race weight.
In following the 4 Hour Body regimen, I got really interested in tracking everything about me. Here is my current complete list of gadgets for tracking me and what I track with them:
Withings Scale – Weight, Fat % sent to website!
Omron Body Composition Monitor – More weight, body fat %, muscle %
Tracking weight, body fat, muscle % for fat loss, and also muscle gain due to weight lifting.
Garmin 305 GPS Watch w/ Heart Rate Strap – the best training tool for running
I store all my runs here, in addition to storing them on Runkeeper. It is good to refer back to my workouts and see what my times are for certain distances.
Finis Swimsense Watch – swim metrics tracking – strokes, lengths
I can track a lot of swim metrics with this watch, but not nearly as many as the ones we need for Total Immersion. Still it’s the best swim watch out there. I now swim with two Swimsense watches to track the action of both arms and am working with the developers on creating a data driven training program for swimming.
Lark Sleep Monitor – tracks your sleep patterns
I don’t have problems sleeping, but I am interested in the amount of sleep I get versus athletic performance. It’s vibration alarm is best in class just as a simple alarm clock.
Fingertip Pulse Oximeter – measure heart rate in the morning
Measuring heart rate every morning can give you insight on whether you’re fully recovered from a previous day’s workout or not. A Pulse Oximeter is much easier to use than holding a heart rate strap onto your chest and reading a watch display.
Microlife Peak Flow Meter – Measures lung function
Following my discovery that had mild exercise induced asthma, I got interested in seeing what my typical air flow numbers are for my lungs. A fancy peak flow meter in my doctor’s office costs several thousand dollars; this little gadget only cost $39.99 on Amazon!
After discovering all these devices, I realized that the cost of these sophisticated instruments had dropped considerably. With the advent of the internet, we are able to take measurements and send them instantly to the Web for storage and further analysis. Most significantly, technology has commoditized a lot of the hardware components required to build these devices. At one time, it took rocket scientists with a lot of infrastructure to create these tools; this is not true any more. And the technology is getting smaller, cheaper, and requires less power than their predecessors. We can now wear these sensors and devices all day and have our measurements beamed to the internet for storage and analysis! Certainly, the Quantified Self movement is gaining momentum where self tracking is promoted and explored.
Still, we are early in the evolution of human data (see my post The Evolutionary Path of Data). Along the data continuum, we have just begun to enable data collection on a regular basis although we are just touching on being able to do it 24/7. For sure we can display/visualize/graph what data we do collect, but it needs to be more complete, consistent and frequent to enable discovery of more knowledge.
Coupled with my experiments in fitness, training, and health, I also realized that the insight we could gain from tracking our body’s metrics constantly was an enormous opportunity. For example, in the area of fitness and training, I see huge potential in guiding people to better health and fitness by exposing the results of what we are doing to ourselves at any time, like what we are eating, how we feel, and how we exercise. Already in Total Immersion, we are experimenting with individualized data driven training. It is my belief that beyond fitness and training, the ability to give us better feedback and guidance on treating our bodies better is untapped and presents the next horizon in health and wellness.
It is gratifying to see startups emerging in this area. Still, we are in very early days on the Quantified Self movement. At the moment, I am resigned to tracking and compiling metrics by hand and then working out insight from the data. I welcome the day when we are uploading our body metrics every second of the day and having intelligent systems tell us where we can do better, stop doing stupid things to our bodies, and live better, healthier lives.

Email Innovation Lacking, Still a Huge Opportunity, Hard to Exploit

Leave a reply

For the last two weeks or so, I was having a ton of Mac problems. It seemed that my OS had gotten corrupted, so I thought that upgrading to OSX Lion would clean up the OS and upgrade me since I was going to do it eventually.
The nightmare that threw me into is probably best told over a beer – somehow I was one of the unlucky few where OSX Lion upgrade over an existing OSX Snow Leopard was just not possible and became unstable over a few days, leading to not being able to boot the Mac at all! I managed to roll back to OSX Snow Leopard (no little trick there!) and think I’m back in action.
But this post is not about my upgrade problems. It’s about email. During that small window of time when OSX Lion was working, I opened up the new Mac Mail and saw….a visual makeover and the additions of grouping by conversation. In fact, it defaulted to conversation grouping. What a disappointment. Here was an opportunity to revolutionize email and the most innovative force in technology decided to just do a visual makeover and add what Gmail has had for a few years now?
Like I said, disappointing.
Email has not been innovated in decades. It’s still the same old thing. Oh, people have tried, but then most fail miserably as startups. Some of the things people have tried or are doing:
1. Grouping and viewing messages by sender.
2. Turn email into a social network and view messages that way.
3. Adding windows to email to make it into a professional or personal CRM.
4. Graphical views of email that are beyond the rows of messages we see today.
5. Group email by conversation.
Perhaps item 5 is the most dominant innovation in email, and most notably through Google’s Gmail. In fact, it is dominant because Google refuses to give you another interface. If you sign up for Gmail (or Google powered business email) and you use their web interfaceYou also see this in Facebook messaging, but I believe Facebook’s implementation is subtly better because they always show the conversation that has the latest message in on top. If you use offline Mac mail and pop into Gmail occasionally, Gmail always shows the conversation that came in first on top that you have not read. It takes a few days of working in the Gmail interface before their sorting becomes somewhat effective. This is why I find the web interface to Gmail so annoying; since I go back and forth between Mac Mail and Gmail, Gmail never gets the chance to stay current to what I’m doing and when I do use Gmail in the browser, it’s always sorted in the wrong way. And I always lose key messages because the little flags and bolding are the only signals that something new has come in. And it makes me read those messages in the conversation first before I get to the very last, most recent message. Contrast that to Facebook’s conversational grouping and they are OK because they sort the recency of messages differently.
Which gets me to what I did next after I rolled back to OSX Snow Leopard. Fearing that my rollback was also corrupted, I ran it for about a week now but storing all changed files on Dropbox and only using the browser for email to minimize changes on the hard drive in case I had to start over again. It was also a rare opportunity for me to really see if I could adapt to the Gmail interface because I was now not switching back and forth between Mac Mail and Gmail.
After 7 days, Gmail (and Yahoo! Mail!) still annoyed the heck out of me. But after 7 days, my Snow Leopard Mac seemed stable, and I got my old Mac Mail back minus their conversation grouping which was the annoying part of Gmail to me anyways and I didn’t miss it.
Here, Apple had an opportunity to leap email several levels and didn’t take it. They just made the app look a little different and added what Gmail was doing, which I annoys me when I use it. Really disappointing.
Now follows my wish list for what I want or need in email, but hasn’t been done yet or needs to be redone:
1. A better search.
Searching on Yahoo Mail is miserable. Searching on Gmail is pretty good which is to be expected from Google BUT is a poor solution for the original reason why I lost the email in the first place due to other UI problems. Searching on Mac Mail is pretty darn good but could use some tweaks.
What’s missing in search is the time element. Often I know that an email came yesterday but somehow I can’t find it. Can’t I filter by only showing results from yesterday? No – I gotta wade through all the other crap that gets returned from the search just to get the one I want.
I believe people naturally use time as a memory aid. Where did I put my keys? I go back in time, retracing my steps through the house, and find that left it on the table by the door and not in my usual place. Or I know he sent me an email right after our meeting….last Tuesday. So I go back to last Tuesday and find the email.
Some searches have advanced filtering but they are all inconsistent. If I search on my boss Elon in Mac Mail, I can only pick 2 choices of where to search (All Mailboxes and my current mailbox) and From, To, Subject, and Entire Message. What if I only want to see messages from Elon that are about one of my companies and not any others? Can’t do that. I start typing in the search box all that text and then select Entire Message and then I’ve got all sorts of random stuff showing up.
2. Taking huge blocks of email headers and using visual techniques to highlight or even remove them completely from view.
If we say that we like the email header view that’s been around since the dawn of internet time, then I think this could be optimized further. One of the big problems here is that there is huge information overload. Trying to find something in the clutter is super hard. Spam filters have tried to help somewhat, creative filters which dump certain emails to relevant folders is another.
But one thing I have not seen tried is using some visual technique to highlight or remove completely from view. Well, not completely true. When I search, I remove all the non-relevant results from view. OK one case. Read/unread is now a blue dot in Mac Mail although some mail readers using greying out. So maybe two. I think, though, we need more cases where filtering causes email to either drop back in visual hierarchy or completely disappear from view.
Take my time example. Why can’t I select only show me email from Tuesday? Then all other email would disappear and only Tuesday email would be shown? Or show me only email from my boss Elon. I can sort the column, but then I see everyone elses email also cluttering up my view. I can search, but I get every mention of Elon in every field of the email.
Even if this was to visually set back every email that was an advertising email, and bring to the foreground emails from real people – that would be valuable. Now why wouldn’t I want to remove them? Because I’m a shopper and I still want to see some deal emails and not just see them completely. This is why I always go through my junk folder. Who knows what my computer decided to mark as spam? It makes a ton of mistakes.
3. Despite my lack of love for conversations, their OSX Lion Mac Mail visual implementation of conversations is pretty good.
I like how you can just scroll and then you can see conversations, each in its own block. This part I love. On Gmail, they are hidden behind each other once you’ve read them – now I can’t scan them! I have to manually open them all up to refresh my memory on the thread.
I also hate sorting by header to see if the subject can generate conversations. That doesn’t work. I’d love to see this combined with visual techniques to drop back other emails or remove them entirely from view, so you ONLY see emails from this thread and conversation.
4. Search by attachment media type.
Why can’t I view all emails with pictures attached? Or PDFs? Or Excel docs, Word docs, etc.? If it’s all pictures, then why not show them in a UX conducive to that media type, like in a slideshow or grid metaphor, or for docs I have a swipe-able (or equivalent) way of going through them quickly, and then also being able to easily return back to the email that it was attached to.
5. View by calendar.
OK back to my comments on time. Time can also be expressed as a calendar, as a grid with days of the week for any month or similar. If it’s a monthly grid, then I can just pick on it and see only emails that came for that day. It could even have a cool graphical representation that abstracts the number of emails that came in on that day, or some other summary information like 3000 emails, 30 attachments, 12 pictures, etc. If it’s zoomed in to a weekly via with 7 days, maybe the graphical view abstracts in more detail, like showing me a bar graph of emails that came in at each block of time. I could click on one of those blocks, and then it would show me all the emails that came in within, say, that hour. There would also be easy nav to jump to the next hour.
6. Better personal information tool integration.
My Mac Mail is always open. I have often written notes, keep key information like lists of designers I’ve worked with, and even written whole blog posts in draft emails. On the Mac, I don’t really have a good place to take notes. I’d have to start using Evernote to really get some power but that is a separate thing. And Word just blows for that. Every time MSFT releases a new Word version, it takes that much longer to launch. Sucks!
Maybe notes can be treated like Mail that you never send – you just can file them away, you can search on them, attach them to calendar events, or associate them with emails.
Scheduling often comes with an attached invite.ics which, upon clicking, opens up my calendar and presents the opportunity to reply to the invite. At least on the iPhone, Mail has some nice features where you can auto-create calendar events and the iPhone is smart enough to link some text that seem like dates. But I want more than that. When I create a calendar event, I want it linked back to the email that created it, and I want that email accessible so that when the day of the meeting comes, I can quickly go back and review the purpose of the meeting before the meeting starts.
And I want to only see that as a self contained context; don’t show me all the other crap around it. Just show me the emails associated with that calendar event and that’s it.
7. Better view by person, and info about that person.
Again, email UIs fail here. You sort in the sender column and then try to find the send there. Man that sucks. Try doing that in Yahoo Mail when your inbox is huge. Their paging eventually stopped working for me.
I should have a way of searching by person, and then having all the time and visual filtering that I have, only I’m acting only on one person’s emails with me.
It would be nice to be able to pull up additional info about someone, especially those I don’t know. I think this is potentially a more advanced business CRM function than for personal use.
8. Better integration with address book.
Mac Mail’s integration with Address Book is pretty good. But it could be better. When I find a contact, I want to be able to easily get to all meetings and emails with this person, perhaps even getting back to the first email or email introduction I had with this person. Right now, when I meet someone new, I always type it in the notes. This is because later, I often forget the person, but I remember I met that person through another person. I search on my friend’s name and pull him up because I put that in the notes field.
9. Search the SPAM folder.
This is so simple but ignored. Why can’t I search my Spam folder too? At least once a week I always open up my Spam folder because I don’t trust the filter to grab and hide stuff I wanted to see. I have to remind myself to do it regularly because there are always emails that get stuffed in there that I want. And it seems that even if I say this is not spam, eventually they get caught again. What’s up with that? Woe be to the guy who has a new domain; he’ll get tossed in there for sure. Or woe to me for starting a new business with a new name; I have to prove to the spam filters out there that I’m not spam.
10. Better Spam filtering.
No matter what we do, Spam manages to always get through. And non-Spam seems to get caught also. Somebody needs to do this better.
11. Local and location integration.
Everyone else is doing location based services, so why not email? If I knew where an email was sent, that would enhance searching a great deal. Sometimes I remember where I sent an email, as a way to find an old email. Perhaps I was on a business trip in NYC, or at a conference. Speaking of conferences, if I was emailed from someone I didn’t recognize and I looked up from where and saw it was at a conference that I was at, it could help jog my memory of who this person was and why he was contacting me.
What other innovations on email are out there? Here are two I recently encountered:
LookAcross – magically, they are able to determine when someone is most likely to respond to various communication modes, like email!
Tout App – templated emails, email management and analytics, plus connection with CRMs.
There is a plethora of email clients on Wikipedia but seems like the dominant ones are the ones we all know and love according to this report from Campaign Monitor.
Anything else interesting out there?
In any case, history has shown that email is hard to create to a successful separate business out of. This is why my disappointment with Apple was so acute; they had the chance to release something really innovative with Mail and didn’t do it, AND didn’t need to worry about survival as a startup.
In the meantime, I will have my decades old, time sorted, header interface that I’ve come to know, love, and hate….

Frequency of Product Usage in Startup Strategy

Leave a reply

I just read Mark Hendrickson’s post-mortem for Plancast on Techcrunch and the section on sharing frequency hit a chord.
When I meet startups, I mentally run their product or service through this test, which is the test of frequency of product usage by their customers. Simply put, if the frequency is high, then their product idea stands a greater chance of surviving in the marketplace. If the frequency is low, then the probability of dying is much much higher.
What do I mean by frequency of product usage?
When a user uses a product tens or hundreds of times a day, this is the dream – to work on a product that is so necessary by a large customer base that they need to use it that much! An example of this would be email – too bad it was created and set free to the world because someone could have made a lot of money on that, or at least in the early days.
Once a day is not bad either. Once every few days still OK. I read the New York Times email digest and website once a day generally, so I can remember to go there. What about the other news sites? Hard for me to remember which ones I do read when I visit them so infrequently.
Once a week – hmmm – getting to that limit. Once every 2 or more weeks and I think you’re in trouble.
That’s because people forget very easily what services and products they use, especially in this crowded world of me-too products. When your memory is sketchy, it’s easy for someone else to hop in there and supplant you.
Take travel services for example. How often do people really go on vacation? Normals tend to go maybe once a year, if that. If I find your site, use it to plan a vacation, and don’t worry about going on vacation until next year, do you think I would remember to come back to you? If you’re a startup, the odds are against you that you’ll even be alive by then.
This goes for both consumers or enterprise customers – if a business customer doesn’t find a daily or constant use for your product, then how can it find some justification for buying your service?
That doesn’t mean that what you’re working on shouldn’t exist, or couldn’t become a big business. The big problem is that you’re a startup with limited resources and survivability and some lower frequency services should really be done by more established companies. You, on the other hand, need traction and revenue as fast as possible before you run out of money. This is why frequency of usage is critical at early stage; if you have a product that people only occasionally want or want at special situations, you’ll never be able to build enough customers before you die.
So you have three choices. Either you must work on something that has a high frequency of usage, enough to attract users who find you useful enough to use often enough to keep coming back; OR you must find a way to buckle down and exist long enough for enough customers to sign up and generate enough traction and revenue for you to survive as a company. There is one other possibility and that is to add some high frequency elements to your low frequency of usage service to keep interest in and around your main service, despite the fact they may actually use the main service only intermittently.
Any of these could work and convince me to invest but working only on a low frequency of usage service in today’s super crowded marketplace definitely will not.

Stop Showing Product Screen Shots at Board Meetings

Leave a reply

This week I went to a board meeting. It was one of the best board meetings I’ve been to in a while because it was organized, efficient, and it went fast – about 1.5 hours. We talked about the important high level strategic things we needed to talk about, set actions, scheduled our next board meeting and adjourned.
I thought back over the last year about the many other board meetings I’ve attended. I thought about why some of them took much longer than 1.5 hours and seemed to drag on and on. One thing I could think of that did stand out was the presentation of product screen shots and the subsequent discussion about the product.
Now I’m not against all discussion of products in the board meeting. You should present the product development pipeline over the next few months or quarters. You can give an overview of the important major products, features, and services you’ll be launching (or killing). You can talk about holes in your offering and what competitors are doing that you are not and to have board level approval of a given direction.
But almost always, what derails a board meeting for some lengthy period of time has been the presentation of a product, some deeper dive into features, and the dreaded product screen shots throughout.
When this happens, then the comments come out. And ideas. Lots of them. Innovative ones, some good, some terrible. Everyone wants to chime in and make the product better. They start commenting on the design – the colors, the interface, the copy – everything.
Why not? It’s up there on the wall projected for all to see.
Is this bad?
At a high level, no. We should have these discussions about the product. They should involve all the important people they should.
But I would argue that this should not happen at a board meeting.
Board meetings are time to touch on all the major strategic, high level initiatives of the company. It provides oversight and governance, and drives the strategic direction of the company. You get a lot of experienced people in the room who have run companies before and they tell you where you are doing well, where you are doing better, and where you are heading towards danger.
And you take care of board level business like approving acquisitions, key hires, option grants, etc.
I just don’t think a board meeting is where you’d want to also have a big product discussion.
Then everyone jumps into the fray, and these discussions go every which way. The discussion is good, but the clock is ticking. All the while I’m glancing at my watch wondering when we’re going to get back to the main agenda since we’re off on a tangent now and have no idea when we’re getting back on track.
Eventually we do, but now a 1.5 hour board meeting has turned into a 3 hour affair. I look back and always note that if we didn’t have that product deep dive and discussion, this meeting would have been less than 2 hours.
There is a time and place for product reviews and discussions. Let’s schedule a separate meeting to do a focused presentation on it. We can ask for specific feedback, ask people to try it out, present research and findings on why we’re doing things a certain way or not.
Board meetings just aren’t the time to do this. Every time, inevitably the board meeting drifts and valuable time is used up when it shouldn’t be. So please, let’s just let board meetings be board meetings, and if you want to have a great product review, let’s set up a separate meeting for that where we can be prepared and have a great focused discussion on it, and not waste valuble board meeting time with it.

Fund Raising is a Necessary Evil, A Rite of Passage

Leave a reply

As I’ve said before, ABR. Always be fund raising. It’s just a part of your ongoing activities as a founder. Sure, you might not like it. It might not seem ‘core’ to your business success. It is. Building a business is not about only building a product and seeing if customers like it. You can’t just do those things in business that you enjoy. Make fund raising a habit. Don’t only engage every 18 months.
– How to Develop Your Fund Raising Strategy by Mark Suster
Every year, I meet entrepreneurs who say they hate fund raising. They don’t want to do it, they want to get it over with, they wish they could go back and build their business, doing the coding/designing/etc.
I hate it when they say that.
Fund raising is a necessary evil. YOU MUST DO IT. Without it, your company can’t survive. You need the money to get to the next level.
But I hear that nobody wants to do it.
Yes it sucks. Begging for money sucks. From the first time you begged your mom for money to buy that comic book to now when your begging investors for money, it still sucks.
I’m sorry but I’m tired of hearing it. As Mark Suster says in that quote from his latest blog post, it is something every founder needs to do and do well. If you aren’t good at it, then there is no better time to start learning how to do it then when you’re raising money for your startup.
It never stops. It seems like it does, but as Mark points out, it really never stops. As a founder, you are always out there selling yourself and your company. You need to start building these relationships early, as soon as possible after raising your first round. Big money is best gotten through familiarity over time, not social proof, not a quick glance at a deck, not an emotional reaction to the coolness of your screen shots. So you better get good at selling yourself so that you can get needed money later when you need it.
Raising money is a rite of passage to being a real entrepreneur. Yes it’s uncomfortable. Yes it seems like it wastes your time. But it IS a big part of building any business.
So get over it. Get comfortable with it. Use this time to figure out how to sell your startup and get people to invest in you and your venture. Go out and raise your round whether it takes 1 week or 12 months and stop complaining about how much it sucks. The future is filled with things you’ll have to do for your startup that suck – you need to get used to doing things that you don’t like and get good at all of them if you’re going to excel as an entrepreneur.