Before I dive into this post, I want to apologize to those who may be sensitive to the non-PC nature of this. Anyway, as always, I have met and spoken with a number of startups during the past week. There are obviously all different types of companies with different funding needs but the ones that have stood out negatively for me are the startups that come in with a pre-baked senior management team and no product. In other words, I have major concerns when I see SVP of this and SVP of that and I wonder to myself who is going to do all the work if everyone is a Senior VP. When there are too many chiefs and not enough indians, I worry about how decisions get made and wonder if egos and titles are more important versus getting product out and customers on board. Sure, some of these teams were quite impressive but in a startup environment keeping your burn low until you get your product in the market and refined is imperative. In addition, more often than not, business models may change slightly or drastically and what you initially set out to build and deliver may not be the same in the future. What that means is that your SVP of Marketing may not the be right person 12 months from now. So do yourself one favor when starting a company-get the right people on board to get the product delivered and the first few customers and as you get feedback from the market and your team, figure out your next hiring needs. Don’t worry about titles and focus on building an insanely great product. Having too many chiefs and not enough indians can burn lots of dollars and also scare away potential investors.
Month: September 2007
Video advertising just got a big boost
NBC just announced that it is going to offer free TV show downloads online allowing viewers to take more control of their content. I agree with Fred ,however, that while this is a smart move that this is only half a step since they are limiting the view to 7 days before it self destructs. More importantly, this makes me think about the free vs. paid discussion and how media companies are increasingly understanding the possibilities and scale that free can provide over paid. Finally, this move by NBC, I believe, will help open the floodgates for all kinds of video advertising technologies. In the first iteration of the NBC download service, users will not be able to skip commercials. My thought here is great, NBC needs to get paid, but they will also have to be innovative and creative and test many different forms of video ads to maximize viewership and revenue. As we all know, the web is great for targeting and with this move I see a world where one-to-one customized video messages will be delivered directly to the viewer based on location, time of day, content, etc. Of course, I have to give a shameless plug here for one of the fund’s portfolio companies, Visible World, as this is what it does for video advertisements on broadcast, cable, and web. Based on our experience to date, better targeting, more relevancy, and customization equals more satisfied viewers and more revenue. Of course, this is just one example of video advertising that should flourish with free downloads. I would also love to hear your thoughts about other potential forms of advertising that you believe will be delivered around this content
The constant battle between revenue and usability
I am definitely the first one to understand that there is no free lunch on the web. At the end of the day, someone has to pay for all of the great services and content out there. To boot, I am a big believer in the ad-driven model of content. To this point, there is a battle being fought at every web content company on a daily basis between product manangement, engineering, and ad sales. What is clear on the web is that every little change can make a huge impact in terms of usability, traffic, and revenue. The more you err on one side vs. the other can help companies make or break their numbers. It is this battle between usability (simple and clean) vs. revenue (balance between getting what you want vs. being cluttered) that is constantly fought behind the scenes.
Take Forbes.com as an example. I have always liked the content but over the last 6 months I have basically stopped going to their site or any link that someone sends me from Forbes. Why? I cannot stand the in-your-face advertising and the clutter. First, it starts with a big-ass splash page before getting you to the site and once there a Forbes.com video clip starts with a pre-roll ad. Once I click on another page, I am confronted with another video ad that starts right away. Once again, I like the writers but honestly this site has become too revenue focused and consequently too cluttered. As a user, I feel like I am spending more time dealing with turning off video and audio ads and skipping splash screens rather than reading content. I am sure the Forbes.com business folks have done their analysis between lost unique visitors versus more revenue per page, but in the long run striking the right balance between usability and revenue is key. And as I sit down with my portfolio companies, it is also this balance that we all seek to achieve because we understand that what we may gain in short-term revenue increases may hurt us in the long run if our audience base declines over time.
Board meeting advice
Over three years ago, I wrote a lengthy post on how to run a great board meeting. And after having been at a few board meetings in the past couple of weeks, I was reminded again of one of the most important rules of running a great board meeting – be prepared and make sure there are no surprises for you and for the board members.
Here is an excerpt from that post:
1. Be prepared: Board meetings are like theater. Like any play, I expect the CEO to have a well thought out and scripted agenda for the meeting. The most efficient way to do so is to lay out an agenda and get feedback pre-meeting from the other board members to ensure that the board covers appropriate topics and allocates the right amount of time for each one. From an update and preparedness perspective, the CEO should always go into the meeting having a complete understanding of where the various board members stand in terms of any major decisions. There should be no surprises. This means that the CEO should have individual meetings and calls in advance of the board meeting to walk each director through any decisions that need to be made and the accompanying analyses behind them.
If all you do is follow this advice then I can guarantee you that your board meetings will run more smoothly. As for my point on board meeting being like theater, my thought here is that I really believe that much of the work between active board member and CEO happen behind the scenes and not at a board meeting. Regardless of your viewpoint, I suggest leaving ample time for pure discussion. The best board meetings that I have attended are loaded with discussion on various key strategic issues and the worst are ones where we are expected to view powerpoint slide after powerpoint slide for simple updates. If you are interested in hearing more about my thoughts on board meetings, I suggest reading my earlier post.
Do you believe in the Red Shift theory?
The first time I heard the term Red Shift was from my portfolio company, Greenplum. Greenplum has used red shift to characterize the nature of the existing database market where exponential data growth driven by network computing and internet applications have outstripped the capacity of existing mainstream vendors. Hence, a new approach was needed (our database software running on commodity clusters) which would allow companies to load and query terabytes of data at 10-100x performance and scale over traditional vendors. Ok-enough of the sales pitch. Moving on, it is clear that red shift data requirements are only a fraction of what’s necessary to meet this exponential growth as it will put tremendous strain on the existing IT infrastructure consuming ever-increasing amounts of CPU cycles, energy, storage, and more. If you want to read more about this red shift theory, I suggest checking out a great article by Richard Martin in Information Week. Martin neatly summarizes Red Shift as defined by Sun’s Greg Papadopoulos to be:
- Red Shift refers to companies experiencing exponential growth in demand for raw computing power
- Red-shift companies tend to be Web 2.0 focused like YouTube and MySpace, or big financial, energy, or pharmaceutical companies
- Those companies, Sun CTO Greg Papadopoulos says, will experience similarly high levels of growth in users, revenue, etc., while blue-shift companies will grow relative to GDP
- Along with the cost of powering and cooling in-house data centers, the red shift is driving a surge in utility computing and software as a service
Based on my experience with both consumer Internet and companies selling infrastructure, I can say that this all feels right to me. It is also no wonder that virtualization which helps IT consolidate servers and increase capacity utilization and utility computing are top of mind again. Think about Amazon’s S3 and EC2 which I have written about before as utility storage and processing for the masses. I am definitely meeting more and more startups which are starting to offload some of their computing requirements to these services. And of course, while Greg Papadopoulos is pushing this vision of the red shift, he has put Sun in a great spot to execute on this with new platforms and ways of keeping up with this exponential demand. The only question as Mark Anderson points out in the article is not if there will be an exponential increase in servers sold but how many of them will be Sun servers running Solaris versus open systems. Either way, it looks like the stock market has been voting with its feet as Sun has been performing quite well as of late. And as a VC whether you believe in the red shift or not, we would all like to find companies experiencing hypergrowth where one of the main uses of capital will be for scaling the infrastructure to meet demand. That is what I call a good problem to have.