The Giant Wasteland and the Tiny Vault

This post was originally published on the 42Floors Blog.

So there’s this popular series of video games with the title “Fallout,” which are set in various post-apocalyptic versions of the US. In addition to presenting hours of engaging gameplay, they represent a rich metaphor for startups and life in general. In each game, the hero emerges from a tiny underground vault where he (or she) has lived his entire life thus far. The vault is completely isolated from the outside world, both to keep the residents safe and to prevent them from leaving. Never mind the reasons for the hero’s emergence; they are slightly different in every game, although always related somehow to saving the world. The first thing that the vault dweller notices is how big the outside world is. He never realized how tiny his world was until he left it. The second thing he realizes is that the world is full of radioactive mutants (or are they zombies?) who want to kill him. He proceeds to spend the rest of the game blowing those mutants to pieces (and that’s where this parable starts to diverge from the point I’m trying to make).

I would say that all of us (at least everyone reading this) have at some point had an awakening. We were toiling away at our corporate job, or suffering through some unsatisfying relationship, when at some point a light went off. We realized that we didn’t have to stay in the vault, or possibly we even noticed for the first time that there was a vault at all. A lot of vault dwellers just sort of assume that the world begins and ends at those doors marked “don’t enter”, and never really give much more thought to it. Or, for the startup founders out there, possibly we became obsessed with an unsolved problem, and realized the only way to solve that problem was to go out on our own.

So we packed our bags, and said goodbye to all our friends (or maybe we snuck out at night), and headed out those big doors. The first thing we realized was how big the world out there was. And that’s just what we can see. It goes on and on and on and on. For a while, it’s fun. We’re on our own, doing our own things. And killing mutants is kind of fun, and least for the first few weeks or months. But then we realize that it’s sort of lonely out there. and that we don’t always know what we should be doing. Maybe our first startup idea didn’t work out, and we had to pivot, or maybe playing the field was fun, but we realized that we only get to eat what we kill (even lions and tigers don’t get to eat every day). Somewhere down the road, there was the realization that if you stay outside by yourself for too long, eventually you turn into one of those mutants.

Around this time, we started to notice that there were a lot of doors out there. And they led to other vaults. Some of them said things like “Big Corporate Job,” while others might have said “Series A Startup,” or even “Developer Training Bootcamp.” I bet that a number of them were labeled with various types of self development programs or meditation retreats. And I’ll also put money on the fact that a bunch of them even had people camped outside, trying to get us to come in. Some of us were able to ignore those doors, and decided to hold steady and pitch our own tent, but most of us probably tried visiting a few of those enclaves.

As we entered some of those doors, we realized that these vaults came in all shapes and sizes. Big and small, accepting and exclusive, homogeneous and heterogeneous. We could find pretty much anything we were looking for, if only we knew where to look for it (this is San Francisco, after all). But, most importantly we realized that we could only visit one vault at a time. So we had to make choices. And once we stepped through those doors, there was a certain amount of gravity keeping us there (it was almost like they wanted us to forget that the outside world even existed). Some of the vaults were led by charismatic and well-spoken leaders (the Paul Graham type, or the Steve Jobs type, or maybe even the Charles Manson type in some unfortunate cases). Some of the people in one vault would tell us about the evils of other vaults. “That one is a cult,” they said. But that always shifted the burden onto the accuser. “Why aren’t you a cult as well,” we would ask.

But at some point, we realized that they were all the same. Not in that they were all actually the same, but in that they were vaults. They all contain interesting and potentially valuable things, but are designed as vaults, which mean that they try to keep other things out. And since we made the decision up front to not be contained, it probably isn’t in our interests to join one whole-hog. But rather, it makes sense to stay for a while, to absorb what we can, and to take it with us. And then to head back out into the radioactive wasteland, to do it again. Maybe one day we will find a vault that fits us perfectly, but more likely, we will eventually build our own vault, which contains an amalgam of the things we discovered while we were out there. Some of them came directly from other vaults, while others may have come to us while we were camped out in the wastelands. And some may even come in the form of other people, whom we met along the way and decided to team up with. Because it’s a lot easier to kill a mutant when you have him flanked.

So what’s the lesson here? First of all, you’re probably doing a lot better than you think. You took the hardest step when you decided to leave the vault for the first time. Everything after that is just keeping the momentum. And don’t let anyone force you back into a vault. And make your time count. Because, at the end of the day, none of us wants to turn into a radioactive mutant.

Why everyone loves the iPad mini (even though the screen sucks)

I was hanging out in downtown SF the other day, and of course I had to visit the Apple Store to play with the new iPad Mini. Everyone pretty much ignored the all-new New iPad (let's refer to it as iPad 4), while there was a 3-deep queue to play with the mini. I even seriously considered buying one on the spot (pending availability). So why are people going gaga over the mini, when the iPad 4 is actually a much bigger refresh in terms of hardware? (iPad 4 is a generational leap in both CPU and graphics performance).

So I'm pretty sure that cost is not the distinguishing factor. Last time I checked, you could buy a refurbished iPad2 for just $349, which is pretty close to the mini's price. It's likely that a lot of people don't know about Apple's refurbished models, but if cost were the biggest factor, people would be breaking for the Nexus 7 at over $100 less (and they are to some degree, but I'm guessing that Apple will sell a lot more iPad minis than Google sells Nexus 7s).

Retina Displays Aren't Disruptive
So when we look at the mini more closely, we can start to understand why it's so great. It basically has the same guts as the iPad 2 (the 2011 model), but in a smaller and lighter package. The screen is about two inches smaller, but the same resolution as the iPad 2. Which gives it a higher pixel density (the dots are closer together) than the iPad 2, but a lower density than the new iPad 4. All of the reviews complain about this, but the reviewers proceed to lavish praise on the mini, and say that it will replace their other iPads.

So there's a problem with these retina displays that Apple is gradually rolling out on their machines - they are a nice-to-have, but not really disruptive to what we already have. When you look at disruptive technologies (as defined in The Innovator's Dilemma), they typically enable use cases that their predecessors didn't (such as allowing devices to be smaller or lighter). There isn't actually any new use case that a retina display enables, other than being prettier. It's not like visible pixels in any way diminish the functional experience. Sure a lot of uber-geeks rushed out to buy the Retina Macbook Pro, but I'm actually waiting until retina displays become the default in a year or so (and they will, if you look at Apple's typical technology adoption curve). Apple even went in sort of the wrong direction when they rolled out the retina iPad - it was a bit thicker and heavier than its predecessor, and the battery took longer to charge. This is not to say that iPad 3 was a flop, just that Apple has typically focused on size and weight above any performance specs. The iPad 2 has continued to sell briskly despite being almost two years old, and I think that part of the reason is that people don't entirely get the retina display thing. The iPad mini corrects the big iPad's deficiencies by offering an alternative scenario, one where size and weight are king.

Size Does Matter
Here's where the iPad mini wins over iPad 4. The iPad mini is small and light - actually shockingly so. It's a lot smaller - the roughly two-inch difference on the diagonal translates into 50% less screen volume (and the area surrounding the screen is smaller as well. But the most amazing part is the weight - while the iPad was always uncomfortable to hold for any length of time, the mini can be held effortlessly with just one hand (and, if you look carefully, every press photo of the iPad mini includes a hand grasping it). I could actually use it for reading a book, much as I currently use the Kindle. I pulled out my new Kindle Paperwhite and compared it to the iPad - the Kindle has a significantly smaller footprint, but the iPad is noticeably thinner (and still fits comfortably in one hand. The Kindle weighs a bit less, but it's actually less significant than you would expect.

Pretty much every reviewer lauds the mini for its size and weight - I think that's the real disruption here. Much as the tablet is disruptive to the laptop, the 8-inch tablet is disruptive to the 10-inch tablet. My short-lived Nexus 7 (I sold it after a month) was a bit too small for comfortable reading, but 7.9 inches seems like an appropriate tradeoff. With the iPad mini, you can do everything you can on the iPad, pretty much without compromises. Text is still readable at that size, and the touchscreen isn't any more difficult to use. I found the Nexus 7 to be slightly uncomfortable when compared to both a smartphone and a tablet - Google uses a slightly awkward version of the phone UI with the Nexus 7. Part of this may have to do with the aspect ratio - the Nexus 7's screen always seemed a bit too narrow, while the iPad's 4:3 ratio is just right (even though it has to letterbox movies).

Putting Lipstick on a Bulldog
The Mini is also arguably prettier than the full-sized iPad, which hasn't changed much in terms of looks since the second model. The mini looks (and feels) a lot like a blown up iPhone 5, which is actually a good thing. It's likely that some of the interest is due to the iPad mini looking so different from the iPad - non-nerds definitely don't care about what's inside of the box (so long as the performance is reasonable).

So the iPad mini is better than the iPad 4 in all of the ways that matter (size, weight, and cost), and only lags in the ways that don't (namely performance and screen resolution). Which gives it all the makings of a disruptive technology. I suspect that it will become Apple's best-selling product, and the big iPad will become akin to the 15-inch Macbook Pro, which is vastly outsold by its 13-inch little brother. But that's ok, because Apple is the most profitable company in the world, and they can afford to build two lines of products, one for technology nerds and the other for the mainstream.

Has AMD's Clock Run Out?

AMD recently announced that they massively missed their quarterly numbers, and that they plan to lay off 15% of staff. Of course they are blaming it on the economy, but as a long-time follower of the CPU scene (and a perpetual fan of the underdog AMD), I can say that isn't really the case. Sure, PC sales may have ticked down a bit, and even Intel's numbers lagged this quarter, but the real problem is that AMD has become irrelevant by failing to release competitive chips. They relied on the low-end market for the bulk of their sales, which was and extremely dangerous move (as I will explain later).

About ten years ago, I wrote a column about AMD's upcoming Athlon 64 processor, which was to be the first mainstream 64-bit processor. At that point, 64-bit processors were exciting because they finally allowed PCs to address more than 4GB of RAM, and also offered a number of improvements that are extremely exciting to CPU geeks. While Intel had offered 64-bit processors in a few high-end workstations, they were ridiculously expensive, and never really caught on. AMD was essentially offering an affordable processor with next-generation capabilities.

I actually bought one of the first-gen Athlon 64s soon after they launched. I loved that machine, and every now and then, I drag it out of the closet whenever I need an old Windows XP machine for some testing. The Athlon 64 had a long life as a desktop processor, and it was also popular in servers. A number of top tech companies used it in their servers because it could do more work per watt of power consumed (which is the most important thing once you reach that scale). In fact, Dell sold a diminutive computer just a couple years ago with an original Athlon 64 inside.

The problem was that the Athlon 64 was pretty much the last in AMD's string of hits. Intel quickly eclipsed them by releasing the first dual and quad-core CPUs, and managed to scale performance much more quickly. While AMD did pretty well in the server market, 64 bits didn't offer a huge advantage on the desktop, and Intel eventually released their own processors that were 64-bit compatible. By the end of the decade, AMD needed a new hit. They did manage to release an affordable 6-core processor  - I happen to own one of those, being the CPU nerd that I am. However, Intel's midrange i5 offered more performance at tasks that don't require massive numbers of cores, so they sold modestly at best.

AMD needed a new hit. They bet on an entirely new architecture, nicknamed Bulldozer, which completely rethought the way that chips were designed (I won't go into the specifics, but it attempted to compete with Intel's Hyperthreading technology). It promised up to 8 cores on a single chip, where Intel offered a maximum of 6. The problem was that Bulldozer was about a year late, and when it finally came out, performance was much lower than expected. In fact, the Bulldozer processors are usually slower than the generation that they replaced. AMD pretty much admitted defeat on that one, and announced that it was basically withdrawing from the high-end PC market (although they continue to make processors for the server).

So AMD retreated to the low-end, releasing chips that performed modestly for a reasonable price. Since acquiring ATI in 2006, they have focused on creating chips with integrated graphics capabilities. At the low-end, they offer significantly better graphics performance than Intel's integrated graphics, and a lower price. The problem is that the margins on these low-end PCs are small, and they are extremely sensitive to economic fluctuations (AMD actually had to take a write-down because they have so much unsold inventory). Although AMD managed to turn a profit in the past based on these processors, it's unlikely they will be able to continue this in the future. More importantly, ARM is taking over the low-end.

As I've pointed out in a few previous posts, ARM is quickly increasing its chip performance to the point where it overlaps with low-end PCs (for the uninitiated, ARM designs power most smartphones and tablets on the market these days). People are already replacing their laptops with tablets (one of the real reasons AMD's sales have dropped), and within a year or two, we will be seeing PCs and laptops based on the ARM platform. Google's just-announced Chromebook is only exceptional in that it features an ARM processor rather than an Intel chip. And rumor has it that Apple is considering moving its Macbook Airs to ARM, which would allow them to decrease size without compromising on battery life.

So AMD is being squeezed on both ends. At the top-end, Intel is beating them on performance, and on the bottom, ARM manufacturers are eating their lunch. They have a few reasonably competitive products in various niches, but that's about it. This is pretty much the classic story of a company undergoing disruption by competing technologies. My guess is that it struggles along in mediocrity for a few more years, and then either exits the processor business entirely or is acquired by a competitor. It's possible that AMD will pull an ace out of its sleeve with the next generation of processors (currently not even on the roadmap), but it seems like this might be the end of the rope.

Why Ouya isn't Going to Work

So there has been a lot of buzz on the Internet about a Kickstarter project called OUYA. For the uninitiated who have been living under a rock for the past week, OUYA is an open-source game console based on the Android Operating System. It plugs into your TV, and allows you to play games on your big screen (rather than on your phone or tablet screen, which has been the recent trend). And the overall mission is for this to be an open platform, unlike XBox and Playstation, so anyone can develop games for it (most independent developers can't afford the fees required to publish their games on the big consoles). And one more thing - it only costs $99 if you donate to Kickstarter right now. Unsurprisingly, Ouya was the fastest project to ever hit $1 Million in funding on Kickstarter, and it crossed the $4 million threshold in just a few days. I think it's also likely to be Kickstarter's first huge flop. I'm skeptical that they can make the product they are promising, and this should be obvious to anyone who gives it a close look. I see a few major red flags - namely that there are too many moving parts in getting the hardware right (let's not even address the software and marketing issues), and that the team doesn't appear to be cut out for the mission.

Hardware Manufacturing Costs and Complexity
Let's be realistic - even if they use completely off-the-shelf components, the cost is just way too high for them to pull this off at the promised price-point. If you look at the specs they have given, we are probably talking close to $50 just for the raw materials required for the console. From what I can determine, the Tegra3 SOC is $15-$25, but that's only a small part of the console. A number of other pieces are required, as the SOC doesn't include a number of important interfaces (Bluetooth and Wifi). Even if they can find an off-the-shelf logic board that includes all necessary components, they still need a custom case and a power supply.

Had the team decided to focus on just the console, and designed it to work with some common USB or Bluetooth Controllers (eg the XBox or PS3), they could have shaved off a significant amount of the cost. Sure, I know that a top-notch controller is important, and the company really wants to distinguish itself from what's out there, but there are plenty of off-the-shelf controllers that could suffice for now. As it is, they specced custom a gamepad with integrated touchpad, which can't be cheap to manufacture. If they can source the parts for $25 at the scale they are proposing, I would be seriously surprised. Se we're talking at least $75 in raw parts, plus the cost to put it together and ship it. So building the hardware will cost at least $100, and probably more than that.

So manufacturing hardware isn't cheap - everyone I know who has built a hardware product has found it to be far more difficult and expensive than anticipated. The biggest problem is typically not designing the hardware or building the prototype - it's getting the thing manufactured so that it would actually work. A lot of things that work in your R&D lab can't be manufactured at scale, and you usually don't find that out until you try. The first run production usually doesn't work, and then you have to figure out what happened (at your cost, not the manufacturer's). Having experienced hardware engineers and supply chain people can help, but there has to be a large enough "screw-up" budget. At the prices they've listed, I can't see much room for that.

Team
So who is team OUYA? Well, that's not entirely clear (most of the people on the promo video are game developers). So far as I can tell, the company doesn't even have a website at this point (which is strange, considering that they aren't exactly in stealth mode). From the Kickstarter page on OUYA, I've been able to determine that the CEO is one Julie Uhrman. Perusing her Linkedin, I see that she has about nine years experience in the gaming industry, so at least she has something that could be helpful in building a new platform. The problem is that none of that experience involved manufacturing hardware. If she is so experienced, and the opportunity so big, then why hasn't she been able to raise money from institutional investors?

I also see that Yves Behar is involved, which is where the sleek design for the controller came from. A sleek design is important, but it's not necessary to build a good console. The original XBox did fine despite being pretty ugly and having a poorly designed controller (although it did have Microsoft's marketing muscle behind it). And it isn't clear that Behar is any more than just a consultant (OUYA is working with fuseproject, Behar's consultancy). The Kickstarter page says that plenty of other people are involved, but they "would get fired if we tell you who they are." So hopefully there is actually some real firepower behind the hype, but those people need to leave their existing jobs before they can work full-time on OUYA. Honestly, it kind of says something when a founder can't get his or her team to quit their day jobs. I regularly see founders get great people to quit jobs and take huge pay cuts to work with them.

As it stands, OUYA has a team that's obviously long on design and hype, and short on documented execution. Which makes sense given that they have been able to collect $4 Million in "donations" with very little to show for it. For all we know, the "working prototype" could be a Tegra3 development kit with a USB controller attached.

I'm actually less worried about the BD deals than the manufacturing. If the team succeeds at building the hardware but can't get anyone to develop for it, I'm sure that they will at least figure out how to get some existing Android games to run. So backers will get a working device with a small library. If, by contrast, they screw up on the hardware, the whole thing is completely useless, and no one ever gets anything. It doesn't matter what cool launch titles are out there if the hardware isn't right. 

To be honest, unless they manage to poach someone senior from Apple's supply chain and manufacturing, I don't think that they have a shot of pulling this off for real. 

Comparisons and Conclusions
So how is this different from The Pebble or any of the other projects that raised a ton on Kickstarter? Well, in general those were the product of an experienced team who had built comparable products in the past. The team behind the Pebble built a similar watch for the Blackberry that, while simpler, showed their ability to produce. Some of the other high-grossing projects were video games by developers who have already built similar hits (Brian Fargo, who is building a sequel to Wasteland, built the original game and founded Interplay). And, to be fair, none of these high-grossing Kickstarter projects have delivered yet, so the jury is out on all of them. I faintly remember a metal iPhone case that completely killed the phone's reception, and hope this won't be one of those.

So I wouldn't recommend putting your money on OUYA. If they are successful, you can buy the console when it comes out. When you figure in the probability of the team delivering a real working product that lives up to the hype (estimated generously at 10%), the retail price would have to be $1000 for a commitment to be worth it. Since they have already hit the funding target, I would let them work out the kinks with the money they have already raised.

Pivots are a Trap

It's kind of common in Silicon Valley to meet up with someone you haven't seen in a while, only to find out that his startup has completely changed directions. Like it used to be all about selling catfood, and now it's all about building a better mousetrap. In fact, if you've talked to me in the past year or so, you've probably heard at least three different stories about what I'm building, depending on when we last talked. Over the past few years, the term "pivot" has entered the technology startup vernacular in a big way. The problem is that pivoting is actually one of the biggest mistakes that startups make.

So wait a second. Pivots are a bad idea? Why are pivots a bad idea? Well, I can think of at least two reasons. The first is that most startups pivot way too soon, and the second is that when you pivot, you are generally trading a set of known problems for a set of unknown problems.

Success Takes Time
I'm going to put it out there - most technology entrepreneurs fail because they don't stick to any one thing for long enough. Success is hard, and it takes time - a lot of startups take years to achieve even ramen-level profitability. So when I see someone building a completely new product every six months, I wonder whether they are giving themself enough time to actually validate their concept before moving on to something else (note that I've been as guilty of this as anyone else). It's super-easy to justify why your idea didn't work - "nobody wanted it" or "we didn't build the right product." Sure, maybe you didn't build the right product, but if you only spent a couple months trying to sell it, it's impossible for you to know that.

About a month ago, I was having lunch with an old friend who doesn't work in the startup space (it can be a good reality check to have a few of those). I told him that I was feeling dejected because no one wanted my product. After giving me a brief pep talk, he asked me how long I had been trying to sell this product. It turned out that it had only been about three months since I started actively working on this manifestation. He laughed, and said that it's pretty close to impossible to build a product and get paying customers on only three months. I realized that my expectations were unrealistic, and decided to keep going at it for longer. It's kind of interesting to talk to non-startup people - they always have a much different point of view than startup founders/employees. For example, my mother (who is an entrepreneur, albeit the old-school type) has been telling me for years that I need to stick with things for longer. It just took me a while to see things that way. Sure there are some overnight success stories, but most of the time it doesn't go that way.

Most successful people I know took several years to achieve success. I was recently hanging out with some people who were in my YCombinator class back in Summer 2009. They have been working on the same product for about three years, and didn't hit profitability until the end of year two. And that seems like it's about par for the course. My friend Gabi launched her food blog over three years ago, and just had her first cookbook published this month. Point is that this isn't going to happen overnight, and you need to give it time.

So I know - being an entrepreneur takes your entire working career and compresses it into just a few years (or at least that's what Paul Graham says). When you've been working on a product for three months, it's like a year of big-company time. The problem is that the outside world doesn't operate at the same pace. So, entrepreneurs often end up giving up way too soon, and move on, hoping that the next thing will be easier (more on that later). I know a number of really smart people who launch interesting product after interesting product. But the problem is that once they finish one product, they are on to the next before they truly see out the first.

For a lot of people, it's easier to build products than to make businesses work, so they default to building new things on auto-repeat. Now, they can just say "I pivoted," and all is good (except that it's not). Since this blog is all about self-discovery, I will admit to having made the mistake I warn you about. We built two products at our current startup that we abandoned. Both of them were reasonable businesses, and we abandoned them way too soon. We were hoping for some sort of magical adoption curve, and when it was hard to close our first paying customer, we paniced and pivoted. But I'm pretty sure that we could have succeeded with either one in the longer-term, and that pivoting was a mistake. But hey, hindsight is 20/20.

You Succeed By Learning
One of the nice things about startups is that you learn a lot of new and interesting things. In fact, if I had to pick one reason to start a startup rather than working at a big company, it might be that I would learn much more at the startup (assuming that I used the time effectively). You can immerse yourself in an entirely new industry of your choosing, and learn a ton about that industry in a relatively short time. The problem with pivoting is that you often throw out a good portion of that learning in the process.

Assuming that you have spent some time working on an idea, you have probably immersed yourself in the market, and have gotten to know the players. Maybe you know what makes them tick, or what their problems are, or even what they don't want (if you built a few products that they wouldn't buy). One of the ways to learn how to succeed is to methodically eliminate all the ways not to succeed. If you can keep the problem space relatively constrained, you can eventually work through it. But when you pivot, it is likely that you put yourself back at square one. This is a calculated risk you have to take, and sometimes it makes sense, but I think that people are too prone to doing it. Maybe, rather than picking a new target customer or going from B2B to B2C, you can figure out a slightly different manifestation of your product that would address your customers' objections. Since you've already spent time getting to know them, and it's probably easier to get them to buy than trying to sell an entirely new product to someone you don't yet know.

Success is About Execution
There's another elephant in the room, and it's that execution is the most important thing. Lately it has been in vogue to say that "ideas don't matter," and you know what, they really don't. The most important thing is that your team can execute (meaning some combination of building a product, getting people to pay you for it, and raising money). And, if you can't execute successfully on your current product, you need to ask yourself why you will be able to execute on the new idea. Nothing is going to magically change if you pivot. You still need to build the product and either get people to pay you for it or give you funding.

I find that, a lot of the time, "we pivoted" means "we couldn't execute." I will even apply this to myself. At my first startup, we had a tech-heavy team and were trying to build B2B products. Which require a long sales cycle, and we weren't able to stay motivated for long enough to execute. It's possible that we could have succeeded with a different product, but I also think there were a number of lessons we had to learn, and if we had been able/willing to stick it out for longer, we might have learned them (I'm only learning them now). If you want to figure out how to execute, you probably aren't going to do that by changing directions, but by figuring out how to get past your customers' objections. When you pivot to something new, you just mask the problem because building something new feels inherently productive. Instead, you should spend your time figuring out how to actually execute.

Wrapping Up
So, even though giving up what you're working on and building something else often seems like the best option, it usually isn't. Do something that you're willing to stick with for a long time, and then stick with each manifestation for long enough to make sure that it actually has time to work. Mark Pincus recently had a quote that I think sums it up pretty well:

One thing I learned is that while your vision should never change, you should keep trying different strategies until one works. If you can fine-tune your instinct and have confidence in it, then you can keep taking different bites of the apple and keep approaching the problem in different ways until you get it right.

But it's important to realize that taking different bites of the same apple is very different from biting into an entirely new pear or banana, and it seems like a lot of people are actually doing that. But, if you're willing to be honest with yourself, I'm pretty sure you will eventually figure it out.

A Rant On The State Of E-Books

I've noticed a disturbing trend lately. Despite having a Kindle (which I sometimes prefer to reading a physical book), I still find myself buying a ton of paper books. And it's not that I want to read books on paper - I love being able to carry around a single device that has my entire book collection stored on it. The problem is price - if you are buying books that aren't newly released, you can typically get the print version for significantly less than the e-book. Sometimes you have to buy a used book from an Amazon merchant to get a big discount, but you can often buy the book directly from Amazon. For example, I just ordered this book, and paid $6.80. By comparison, the Kindle version still runs $13.99.

E-book pricing may be the only thing that keeps brick-and-mortar booksellers in business. The other day, I was visiting The Strand, a bookseller in New York City. At the front of the store, they have a section labeled "Lower Priced than E-books," where they prominently compare their in-store prices with Amazon's Kindle prices. It makes no sense that a brick-and-mortar reseller should be able to undercut the Kindle on anything (except for maybe used books, which I will get to later). While I love browsing the bookstore, a bookstore has both less selection and higher fixed costs than someone like Amazon, and there is no way they can possibly compete on price (unless this is just a gimmick to get you in the door).

Have I yet mentioned that e-book pricing is ridiculous? And I don't even care that I don't actually own the Amazon e-book like I would a paper book (although a lot of people take issue with this). For me, the problem is that I shouldn't have to pay more for something that required less work to produce and ship to me. I'm doing you a favor by buying the e-book - it costs a lot less to sell an e-book than a paper book. You don't have to print the book, ship it to stores or the reseller, and then finally deliver it to my doorstep. I just click "buy," and you copy a few bits to my device.

E-books also get rid of that pesky resale market (you know, the one that lets me get my paper books for less that they would cost on the Kindle). You don't see Amazon merchants listing used e-books for sale, since Amazon doesn't allow you to resell your Kindle books (this would be possible to do in a secure way, but I'm sure that publishers will never allow it). E-books are forever tied to the system you purchased them on (except for one not-very-generous "lend"). There is pretty much no way for anyone to sell an e-book for less than retail price?

So what's the problem? I think it's the publishers. Amazon actually tried pretty hard to keep the price low on e-books, limiting the price of most books to $9.99. Then Apple negotiated different terms on its iBooks program, and Amazon had to kowtow to the publishers to keep its rights to sell the books. Prices quickly shot up to $12-15 on a lot of books. Now, most e-books come in at prices that are equal to or higher than the print versions. This sounds great for publishers, but hurts everyone in the longer-term. It takes longer for books to move over to digital, people buy fewer books, and overall the economy stagnates.

Amazon has attempted to encourage lower prices on the Kindle store by increasing the revenue split on lower-priced books (books between $2.99 and $9.99 are eligible for a 70% royalty rather than a 35% royalty). This works great for independent authors, and you see a lot of books on the Kindle Store for less than $10, because the author makes more money in most cases. The problem is that e-books compete with paper books in the publishers' minds - every time they sell an electronic book on the Kindle or Nook, they have lost a potential book sale at the full hardback or paperback price. Never mind that they might actually make more money by pricing the book lower (because they would make more per book AND sell more copies) - the publishers still see e-books as a threat.

So what's the solution here? I think that e-books need to move to a system where they decline in price over time. It's fine for the price to be equivalent to a paper book at first, and the price should stay in lock-step over time. As the price declines, Amazon should encourage publishers to drop the e-book price as well. A related scheme would involve dropping the E-book price by X% of MSRP every three or six months until it hits a preset lower bound. In the shorter term, Amazon may want to consider dropping prices to price-match used book prices. By the time that a book hits $0.01 on the Amazon marketplace, there is a lot more supply than demand. By lowering the e-book price to $4 (the minimum cost with shipping on the Amazon marketplace), publishers could probably sell a lot of copies of these previously dead books.

I guess there is another solution, and that's the death of the traditional publishing model. Since anyone can publish a book on Amazon and sell it in the same place, there is no need to go through a traditional publisher. More and more authors are taking this route, because they end up with much higher royalties (no fixed costs to recoup), even if they sell significantly fewer books. Sure, authors still need to figure out how to market their books, but Amazon already does this to a degree, and I'm sure that they will become more effective at this over time (maybe Amazon will offer marketing services for a small fixed fee or per-book royalty). Plus, from what I have heard, the publishers' marketing efforts are pretty poor on all but the most popular books. It might be preferable to just come up for a bit of money to do electronic marketing, and to just consider that a cost of business. I'm sure that many well-known authors will switch entirely to digital over the next few years - the question is how quickly and completely this transition will occur.

In conclusion, I think that I'll keep buying paper books for the time being. Sure I love my Kindle, but the paper book economy is markedly better for the consumer right now. Plus, I still need a doorstop every now and then, and the Kindle just doesn't do a very good job with that.

We Interrupt The Regularly Scheduled Message For a Sponsored Tweet

American Express and Twitter just announced a new promotion. If you link your Amex card with Twitter, and then Tweet out a sponsored hashtag, then you will receive a discount at a selected merchant. For example, if you tweet out #AmexHM, you receive a $10 back on a purchase of $50 or more at H&M. This comes close on the tail of American Express' recent deal with Foursquare, which allows Foursquare users to receive a discount on their bills at selected restaurants and stores when they connect their cards and check in on Foursquare.

Everyone expected that Twitter would eventually figure out how to make money from its 350+ million of users and 200 millions of tweets per day (those numbers were released in June 2011, and are almost a year out of date - I'm guessing that the real numbers are around twice that). I had always expected them to monetize the twitter stream by inserting ads into the stream, or by running banner ads on Twitter. Twitter does now support "promoted tweets," but this is clearly just the tip of the iceberg. People have gotten really good at filtering out advertising (I didn't even notice that there were ads on Google until it was pointed out to me), so promoted tweets are obviously just that - ads. What we are now seeing is an entirely new kind of advertising, and this one is much more subtle. Rather than having the brands advertise directly to their customers, Twitter and Foursquare are getting you and me to fill that role instead. 

Hashtag Marketing
The hashtag was invented around 2007, although Twitter didn't officially support it until somewhat later. It essentially allows Twitter users to mark their tweets with relevant metadata, such as #SxSW or #500Startups. Twitter now lists the trending hashtags, and if you look at those tags, you can actually get an idea about what is going on with the Internet and in the world in general (this is clearly a distorted view of the world, but let's leave that alone for the time being). Regardless, hashtags have become an accepted part of our culture, enabling us to sum up important concepts and memes in a single word (#lolcatz).

So now that the hashtag has crept into our culture, brands have figured out how to co-opt and even corrupt this medium. As you read through your Twitter stream, some of the content is free and well intentioned, and some of it is paid. The problem is that it isn't immediately obvious which is which, at least upon a quick read. As we quickly scan through our Twitter feeds, we pick out a few links for clickthroughs, and quickly discard the rest. But this is where the insidious part comes in - even if we don't consciously parse the ads (or immediately discard them), our brains are still receiving them. When we see "#AmexHM" in our feed, potentially accompanied by a message about how awesome American Express is, we are subtly influenced to apply for our own American Express card, or even to use it more (disclosure: I happen to have an American Express card). In the case of Foursquare, we see that our friends have checked in at a sponsored venue, and may be more influenced to go there ourselves (and when we go there, we will use our American Express card to get the discount).

I personally am somewhat offended by the whole thing. I have built up a (small) Twitter following through posting quality content to my Twitter feed, and now corporations expect me to spam my friends in order to get discounts (which also requires me to spend money on their brands). This makes sense from a business perspective (they are literally paying us to do their marketing for them), but it somehow feels distasteful. And as I browse through a Twitter search for some of the sponsored hashtags, it appears to be working. Is it working well enough to make lots of money for everyone involved? I'm not sure, but I think that this is the start (or maybe just the mainstream emergence) of a new type of marketing.

Are we headed towards a digital dystopia, where brands are able to corrupt every aspect of our lives? I think it's too early to tell, but Twitter has definitely stumbled onto something big. By teaming up with brands to add promotion to the "non-ad" parts of their platform, Twitter may be able to infuse marketing into increasingly greater numbers of tweets. If they can manage to extend this concept without overusing it or making it stale, they may be able to build all their potential into a real business. The next few years will be interesting as these businesses mature, and may transform the face of Internet advertising.

Are You Solving Problems or Just Building Products?

A few weeks ago, I wrote a post-mortem for ten products that I built and subsequently killed (actually nine, because the tenth is in progress and appears to be doing well so far). I got a lot of comments, both on my blog and Hacker News, and they led me to think a lot about what I learned. Some people questioned whether I had learned anything because I restarted so many times, and I had to ask myself whether that was true. Should I just throw in the towel and relegate myself to building things for other people, or have I learned what it takes to be successful this time around?

Then I started to think about my current product, and why things seem to be going pretty well. When I thought about it, I realized that we have done things in a fundamentally different way this time around. I'm convinced that this difference in approach is the main distinction between success and failure, and I'm going to attempt to describe it in the next few paragraphs. Essentially, you should be asking yourself the following question:

Is your goal to solve a problem, or just to build a product?

Problems vs Products
A lot of entrepreneurs (and especially wanna-be entrepreneurs) do things entirely the wrong way. And I've made this mistake many times, so I have the right to be critical. In essence, they think up a product, and then decide to build that product. So, this works sometimes, but it's not a fundamentally successful approach. And the reason is that, at the point where you think up the product, you have no idea whether or not someone actually needs it (sure, you can imagine in your head that someone else needs it, but who knows whether that matches reality). It just seems like a sort of interesting product that might be fun to build, and that someone might be willing to pay for. Maybe you even thinks it solves a problem that you have, but who knows whether it even truly solves your problem? When you use this approach, you care more about building the product than actually solving any real problems.

At this point, a lot of people go out there and attempt to get validation for their product. If you go to any startup weekend, you will see a lot of people doing exactly this sort of stuff. Which is better than just building the product right then and there (especially if you have to pay someone else to do it), but these folks are already starting off on the wrong foot. There are a few factors conspiring against their success, and the most important is confirmation bias.

If you already have a complete product concept in your head (possibly including screen shots that you mocked up in Balsamiq or Keynotopia), you already are somewhat attached to it. And you will be focused on trying to build up mental support for that product while simultaneously writing off anything that disagrees with your hypothesis. Any time someone tells you that they like your product idea, you are going to mark that off as a potential win, and any time someone tells you that they don't like it, you mark it off as someone who probably "didn't fit your target market." I've been through this with a lot of fledgling entrepreneurs, and I've seen it happen many times. They are trying to prove to themselves that their product is awesome, and by extension that they are awesome (you are already awesome, whether or not you build this stupid product). The problem is that building a successful company has very little to do with this sort of mental masturbation.

A slightly better question than "is this product awesome?" would be "does this product solve an important problem?" But even that isn't quite there, because even if the product does solve an important problem, you are still focused on that stupid product that you invented in your head before you ever talked to a single customer. You aren't focused on the problem, but on building that product. Even if you do build it, and it does sort of solve a problem, it is likely that you will be too focused on realizing your vision to pivot the product so that it solves the problem.

Some successful businesses are built in this way, because the company eventually figures out that the product does solve some major problem, finds a lead customer, and then throws out their preconceived notions in order to actually make that customer happy. The problem is that it's hard to get your head out of your butt long enough to realize this, and customers don't always tell you "I would LOVE your product if only you changed it to do something slightly different." Actually, people say this sort of stuff all the time, but many of us are pretty poor listeners. Once you've been around the block a few times, you actually start to pay attention to this sort of feedback, and when someone tells you something, you sort of start to get an intuition as to what they actually want (hint: customers don't always tell you what they want, because they often don't really know what they want). 

So What's The Problem?
Now that I've spent a while talking about how not to do it, I can move onto the "correct" way to do things (at least in my opinion). So, instead of thinking about building any particular sort of product, you want to formulate a hypothesis which looks something like the following:

I think that (Problem X) is a significant problem for (Customer Y) 

That's it. Now hopefully you will have some idea that it's actually possible to solve Problem X, but even if you don't, you may be able to figure this out later. Not knowing how to solve the problem is potentially even better than knowing the solution, because you won't lean towards any one solution before gathering enough evidence. Remember that if something is a large enough pain point, people will use pretty much any solution, even if that solution is only moderately less painful than the original problem. But it's now your job to validate that the problem exists. So your first task is to spend a few weeks (or maybe more if the problem is super-complicated) talking to everyone who might potentially have Problem X.

Don't hold back, and don't be secretive. Just talk to people who have that problem, and be totally open. Let everyone you know that you are trying to solve this problem, and ask them for intros to their connections who might have it. Here are some of the questions you might want to ask your potential customers.

  • Is X a big problem for them?
  • Is X their biggest problem? (if not, you may want to just ask whether you can solve their biggest problem instead)
  • Are they willing to pay money to solve this problem? 
  • Are they willing to invest their time in solving this problem? (your lead customers will probably end up investing more time than money)
  • Are they willing to pay for a beta product that solves even a marginal portion of this problem? 

Once you start to do this, you will realize one of several things. The first could be that this problem isn't something that keeps people up at night. Maybe they would like to have it solved, but they won't really put any time and effort into solving it. Which bodes poorly for you, because they actually have to use your product, and unless your product provides enough benefits, they won't bother to adopt it. Now it's possible you will realize that your target market isn't the right initial target, but if that's the case, you want to start talking to people who do fit the new target market.

The second thing you will hear is that this is a big problem, but it isn't the blocking problem for most busineses. We recently had one customer whom we really wanted to land. After spending a while talking to them and even building custom features for them, we realized that they were more focused on solving a different problem, which was blocking their business progress. Since they were spending all of their engineering effort on solving that problem, they didn't really have time to work with us, even if we kept lowering the barriers to entry. We eventually realized that we should focus on solving that particular problem later, and change our energies to focus on a slightly different problem for other customers.

So, there's a third answer, and that's the one you want to hear. "I stay up all night thinking about that problem. We couldn't find a solution so we're even thinking about building one ourselves." When you hear that from a few people, you just might have hit on something.

Iterating Towards a Solution
So, what do you do now? You have a problem that people need a solution to, but you still don't want to jump immediately to the solution. It's likely, however, that you will need a product to get much further. So you want to define a fairly narrow and limited product that demonstrates some sort of solution to the problem. Most likely it won't solve the entire problem, but that's why you want to make it narrow and limited. Building a small product forces you to narrow your scope until you have something that's actually doable within a small amount of time (it's going to take a lot longer than you think). So you build the product, hopefully in less than month, and you go back to the customers with your prototype.

Now you are at the big moment of truth. Most of the time, that product won't be exactly what your early adopters want, but hopefully it will be close. At that point, they can make the small conceptual leap and tell you how to change the product so that it meets their needs. You do that, figure out how to productionize things, and you have the beginnings of a business.

And, if your customers hate it, you can go back to the drawing board. Maybe you need to solve a slightly different part of the problem, or maybe the problem as you understood it was different from the problem that they understood. It's likely that you will actually have to show your customers a few different concepts before you hit the nail on the head. You just want to make these iterations as small as possible so that you waste minimal time and effort (and also so that you can solve your customers' problems as quickly as possible).

Our Story (So Far)
So, as you probably guessed, most of my previous products were just that, products. And it turned out that the problems they solved weren't big enough (or, at the very least, we weren't focused on the solution, but rather the product and its features). This time around, we started out broad, so broad in fact that we didn't even have the initial problem in mind. We just said that we wanted to solve problems within a particular economy, and spent a while thinking about what the biggest problems were for that economy. Once we had some concepts, we started doing customer development. I think that we put in about a day of engineering effort into hacking together a demo to show to these initial customers. But it didn't really have any features - it was just an illustration of the broad problem we wanted to solve.

From the initial customer development we did, we were able to get enough information to build a rather ugly prototype, which took about a week. We were still focused on the problem - we just wanted to show some different approaches we could use to solve that problem. With this demo, we got some more customer feedback, which actually got us to the point where we thought we knew which approach to pursue first. We spent about a month building that product, and then went on a massive customer development trek to the bay area. We met with about 15 potential customers within the span of a week, but by the end of the second day, we realized that our customers wanted something different from what we had built (the features were pretty much correct, but the format was slightly wrong). The only plus was that several people told us they wanted this new product as soon as possible. We headed back to New York, and started building that new product. We hope to have our early adopters using it (and paying) by the end of the month. So that's our story so far; I will let you know how things turn out.

How I Made Information Consumption Into A Conscious Choice

I recently realized that I just don't have enough time in the day. Having just moved to New York City a few months back, there are a ton of things that I would like to do and see, but I never seem to have time for them. For example, I've been here six months, and haven't been to the theater, and I've only been to one museum. Now working on a startup is a compromise - it's next to impossible to make a startup successful while leading a balanced lifestyle. However, if all you are doing is working, then something is probably out of balance. While you can work 14 or 16-hour days for a short period of time, this isn't sustainable over any significant duration.

In my case, I found that I would arrive home (from work) at around 10PM most nights, and then I would spend an hour or two lying on the couch surfing the web, mostly because I was too exhausted to get up and go to bed. At 11 or 12, I would stumble into bed, only to repeat this cycle the next evening. Maybe I would do something fun on Sunday, but it is likely that I would actually be too burned out to accomplish anything other than vegging out.

I was recently hanging out with a friend, and told him that I was feeling tired and burned out. His response was that I should do yoga. He told me that monks practice yoga 24/7, and never get burned out or tired. This advice seemed almost right, but I felt like there was more to it than just that. I wasn't looking for a band aid, but wanted to get to the core of the problem. I thought for a while about what exactly it is that makes monks able to work day after day without getting tired. And then it hit me - conscious consumption of information.

The Root of the Problem
A monk in a monastery is making a conscious choice to practice yoga and meditation. He is always focused on the present, and never has to focus on more than one thing at once. He doesn't get distracted from his tasks or meditation by email or by his cell phone - he does just one task at a time, and is fully focused on only that. This led me to form a new hypothesis - the fatigue that we experience is caused not by working, but by fighting to stay focused and on task. Every time you have to fight your attention span, you fatigue yourself. I have admitted for quite a while that I am a poor multitasker, and get distracted pretty easily. When I have three things on my plate at once and work on them simultaneously, it takes longer to get them done that if I did them sequentially. I do best when I can make a list of the things I have to do, and then work down that list one item at a time, focusing all my attention on the task at hand.

The problem we have in our society is that there are too many distractions in daily life. Most of us go through the day with our email open, and some people even receive a popup whenever a new email comes in (I have no idea how they manage to handle this). The web allows us constant access to any information we could possibly want - it's as simple as popping open a new browser tab and doing a Google search. And, since the advent of smartphones, we have access to this information pretty much anywhere in the world. You can't ever get away from this continuous data feed, which only widens over time. And the amount of information we have access to keeps increasing. In the past several years, we have seen the emergence of Facebook, and Twitter, and Foursquare, and aggregators such as Reddit and Hacker News. With all of this stuff, it has become possible to fill an entire day with the consumption of empty information calories.

I thought a lot about how I consume information, and noticed some disturbing patterns. A lot of times, I would begin my day by popping open Hacker News or one of my favorite new sites, and clicking a few links. These would have links to other articles, which I mindlessly clicked on. Before I knew it, I had wasted an hour or two, and actually hadn't learned all that much useful information (yes, reading some news is good, but the returns diminish over time). This would often repeat several times over the course of the day, often starting when I woke up and continuing until I was actually lying in bed.

Another scenario is that I would be working on something productive, and would notice that I had a message or two in my email inbox (thanks to the unread message count showing on the tab). I flippped over to my email inbox, and the message was inevitably bulk mail of some sort. This lead to me being both annoyed and distracted from whatever I was working on. At this point (since I was already off task), I typically found an article that I previously opened in a browser tab, but hadn't yet read. Half an hour later, I realized that I should be working on something else, and that I hadn't gotten as much done that day as I would have liked.

My Solution (Yours May Vary)
As a result, I started thinking about how I could tune my life to reduce distractions. I don't believe in self control - studies have shown that exerting self-control today makes us more likely to cheat later on. The only way to effect long-term change is to modify your behaviors such that your old habits are no longer possible. I realized that the main problem was mindless information consumption - reading a web page is fine, but you should be conscious about the decision to visit that page, and that should be all you read (unless you consciously decide to consume a different page). Likewise, doing email is fine, but there is no need to do it constantly. Despite spam filters, there is still a lot of semi-spam to deal with every time you open your inbox (for example, newsletters that you want to receive but that show up at some random point during the week). If you only check mail a couple times a day, you can reduce the inpact of that semi-spam to an hour or two a day.

The final problem is smartphones, which make information consumption continuous. I actually held out a lot longer than many of my friends before making the plunge into the smartphone world. I remember being slightly sad when I got my first smartphone, because I knew that I was an Internet addict, and know that this would make the addiction continuous and complete. And this prophecy was true - my smartphone consumed me. Whenever I had a free moment, I would check my email. It actually felt like a real addiction - I would start to go through withdrawal if I went for more than a few hours without email. Every time that I wanted more information about something, I would pop open a browser and look it up on the web. If I was ever bored, I would just pop open my favorite browser and start reading (even if there were other people around).

So I made three resolutions.

The first was that if I wanted to look something up on the web, I had to write it down on paper first. I can look up anything that I want - I just need to think about it consciously beforehand, and to decide that it makes sense to interrupt my work flow. This helps to keep me honest, because  lot of times I realize that whatever I'm curious about isn't all that important.

The second was that I would only do email twice a day. The first time would be when I get to work, and the second would be right before I head out of the office. If people need to get ahold of me faster than that, they can call or send an SMS. I may eventually setup some sort of system for dealing with urgent emails, which are a lot rarer than one would expect. It's pretty uncommon that someone NEEDS to hear back from you in less than 8 hours, and can't get ahold of you via some other method of communication.

And the third was that I would get rid of my smartphone, at least for a few months. I ordered an LG phone from circa 2009 off of eBay. It does phone calls, and text messages, and that's about it. It actually does have some sort of crappy web browser, but it is slow and inconvenient enough that I won't be tempted to use it unless necessary. Interestingly, it is now impossible to activate a phone on Verizon without at least a minimal data plan - I had to select 75MB for $10, meaning that I only save about $20 per month by ditching my smartphone.

At this point, it has been just over a week, and I'm already feeling better. My head is clearer, and I'm feeling slightly happier. When I wake up in the morning, I have time to make a good breakfast and meditate for half an hour before heading in to work (since I don't check email before heading in, it's a lot easier to do this). I can focus better at work, and I get more done (even though I leave the office earlier). And, when I get home, I have an hour or two to read before going to bed (about halfway through A People's History of The United States). Sunday is reserved for doing something interesting that involves zero technology. Sure, I do worry about getting lost since I don't have Google Maps at my immediate call, but that's actually part of the fun. There is actually research showing that overreliance on navigation software is turning our brains into mush...

Post-Mortems For Ten Products I've Built

I recently made a list of all the products I've built (in full or in part) since I started working for myself, and there have been at least ten of them. Yet, none of these have gotten significant traction, and most have eventually folded (with the exception of my most recent project, which I'm sure will eventually be a huge success ;-). I have never really done a post-mortem for anything I've built, so I decided to write out a brief description of each, including my take on why it failed. To be fair, other people have successfully executed projects that are very similar to some of my failed products, so I'm not saying that any of these ideas is unworkable. Here they are (in no particular order).

1) Tweedledo
This was a web-based todo list (still live at http://www.tweedledo.com). I built the initial version in late 2009, and added features through the beginning of 2010. This was mostly an experiment that eventually became a semi-useful product (for me at least). The key differentiator from other task lists was that you could use SMS or email to make the item show up on your todo list. I find that I often want to write something down while I'm talking to a friend, and this is a simple way to make it an actionable item. I never really figured out how to get people to use this - I told some friends about it, and while a bunch tried it out, the product didn't seem to be sticky. When coupled with the lack of a reasonable revenue model, I eventually abandoned it. I still use it on occasion to write down my own tasks, although I have found that sticky notes/whiteboards are more useful.

2) InstantQ
This product provided a replacement for the restaurant pagers that alerted patrons when their table was ready. Rather than using a pager, this system notified patrons via a SMS or phone call. We got to the semifinals of the MIT 100K business plan competition with this concept, and were accepted into YCombinator (even though Paul Graham hated the idea). Basically, when we started to talk to restaurants, we realized that most restaurants didn't need it (since they didn't have lines, even at peak times). The ones who had the most demand already used pager systems, and weren't really interested in getting rid of it (even if we were cheaper on a per-unit basis).

Incidentally, at least one company (www.qless.com) has managed to build a business out of a similar product. It turned out that the primary challenge here was building an effective sales and marketing strategy rather than just building technology (which was relatively simple). QLess succeeded by casting a much wider net than just restaurants - they focused on all sorts of businesses with waitlist problems. Our engineering-heavy team wasn't able to make the sales effort that was required for this to succeed. We may have actually given up too soon on this one, although I have no idea as to the actual size of the business opportunity.

3) InstantQ V2 
This was our pivot from the original InstantQ product. Paul Graham imagined a dial that restaurants could turn to adjust demand on a real-time basis. What we built was a restaurant marketing platform that sent targeted, time-sensitive promotions to drive demand on off-peak nights. Business were supposed to get email addresses and phone numbers from their customers, and we would then send out promotions on a nightly basis. This was built by the same engineering-heavy team that build the previous product. We gave sales/BD our best effort, overall spending about three to four months trying to market this by going door-to-door at local restaurants. Eventually, we discovered that the willingness to pay was much too low when compared with the amount of time required to close a sale. It can also be difficult to get restaurant patrons to give away their personal information - I think that significant marketing expertise is required to make this work.

After a while, we got tired of selling and gave up, allowing our startup to die. To be fair, there were issues in both my personal life (my father passed away quite suddenly) and my business partner's personal life (his wife got pregnant) that made our arrangement untenable. However, I think that we were fundamentally unable to execute on this idea in the first place. I suspect that this business could have worked if we had tweaked some parameters and assembled a more sales and marketing-heavy team.

4) Rentize
The concept behind this was that you could rent your things to people in your neighborhood. We built a product (in early 2010) that allowed people to list the things they had for rent, with the idea that we would build the other half (allowing people to actually rent those items) once we had a significant inventory of goods in our database. We killed the platform before launch for a number of reasons.

After spending a while thinking about the things that people would rent, we identified a few major categories (tools, party supplies, etc...). We quickly realized most items wouldn't actually rent for all that much on a per-day basis. When you couple this with the fact that the parties involved have to schedule two meetings (one to pick the item up and another to drop the item off), the value proposition seemed pretty bad. We figured that most people wouldn't go through the schlep required to make a few bucks. Even if you ignore this, the amount we could make as a per-item commission would be pretty small.

A few companies appear to have built this concept into a company (eg RentCycle), but they have had to essentially hack the system by focusing on B2B rentals. Businesses usually have a physical location, allowing customers to walk in and pick up/drop off the items (reducing friction). Some rental businesses even provide drop off/pick up services, reducing friction even more. Businesses can also charge more per day for a rental than would a regular person, and typically carry insurance that covers loss or damage (eliminating the need for the marketplace to carry insurance).

5) Wish List
This product was a wish list that allowed people to find the best prices on the things they wanted. Basically, you type in whatever you want, and the product finds the best prices on the Internet. It then sends periodic email updates as prices drop. The problem with this (we found) is that most people don't know exactly what they want to buy. As we did user testing, we realized that people weren't responding terribly well to the product.

Our conclusion was that a search engine wasn't really appropriate, and that a browse-based interface would probably be more effective (since people didn't know exactly what they wanted off the bat, and needed to be guided down a decision tree). To make this feasible, we would have had to narrow down the scope of the product from "everything" to one particular vertical. One of my business partners (the guy who had been working on this the longest and held controlling equity) was unwilling to pivot the concept, leading to a standoff where the other two of us walked out. The product eventually ended up dying as the remaining guy went back to work.

The lessons learned here were more structural than technical (I think that the product could have gone a lot further if there hadn't been irreconcilable differences between the founders). First of all, I learned not to ever do free work "for equity." In this case, I worked for about six weeks without having anything signed, and when I walked out, I got nothing for my efforts. This is not to say that I won't come on as co-founder, but I believe that the initial dating phase should involve a paid contract (I'm willing to be flexible on rate so long as there is a good faith effort). Also, no work happens before the paperwork is signed (I will give people one day of free work as a good faith effort, but that's my limit).

In addition, I learned that I have to be aware of what my business partners are working on at all times. At some point, I kind of realized that I was doing all of the work (building/refining the product), and no one else was really getting anything done. When I am engrossed in coding, it can be challenging to pay attention to the other aspects of the business, but I need to do this.

6) SimplyHours
This was a platform that allowed people to hold open office hours. People could register and list office hours, and other people could come in and schedule them (by providing a phone number or Skype). We got a few VCs to actually use this, and they seemed to respond relatively well (got some reasonable leads). We started to think that this could be used as a marketing platform for service professionals (basically, people would offer open office hours every day or week to bring in new customers).

This idea was abandoned when my partner decided that he wanted to work on something different. I was already in talks with my current business partner to come aboard his startup, so I didn't continue the project alone. The site is no longer live because the domain expired, although I may put it back up at some point, since I think that there could be some potential to make this work.

This mishap only helped to reinforce the "I don't work for free" stance. I'm still friends with the guy I worked on this with, but I believe that he significantly undervalued my work. Basically, I built the whole damned thing, and then he wasn't willing to put in the time to market it (he did put in some time, but less than I spent building it). He now pays for programming talent on an hourly basis.

7) SpeakerGram
This provided a platform to connect speakers and conference organizers. Speakers could put up a profile, and then organizers could use the platform to request engagements. We signed up about 3,000 speakers, including some high-profile people. After running the site for a month or two, we realized that there were two sides to this, the speakers and the conference organizers. In order to succeed, we would have to initially focus on one or the other.

After some debate, we decided to focus primarily on meeting the needs of speakers (our friends at One Clipboard have built a great solution that caters to conference organizers). There were actually two kinds of speakers - the speakers who get too many requests to handle, and the speakers who would like more requests. Serving the latter would primarily involve doing lots of SEO/SEM (which was basically uninteresting to us), so we decided to serve the former. We were already serving Foursquare, who was getting several requests per day, so we used them as the prototype, building out a number of new features. We signed on a few more customers, and were ready to start billing them (at one point we were a week from launch). However, back-of-the-envelope revenue calculations told us what our investors had been saying all along - the market wasn't big enough. We looked at the most popular features in our platform, which led us to the next product offering.

Eventually, we decided to shut the product down because it was taking up too much of our time. As a startup, we have limited resources, and supporting our existing product was detracting us from building the next thing. We decided the honorable thing to do would be to let our customers know we were shutting the product down, and to give them a reasonable amount of time to find a new solution. In the end, we announced our shutdown around the end of December, and shut off new signups at that time. Existing customers were promised support until February 1, and we offered to export data for anyone who requested it. The site is actually still live (http://www.speakergram.com), but we will be taking it down in the next month or so.

8) About/Team/Press
For a small company (and even a large one), managing a website can be a pain in the butt. First of all, you have to build these pages in the first date, and then you have to keep them up to date. Most likely, this requires some sort of content management system or static web pages that are distinct from the company's actual product. In many cases, the engineers are the only ones who can update the about/team/press page, and they are busy doing other things. The result is that most companies have about/team/press pages that are significantly out of date. Ironically, these pages are some of the most frequently viewed on a website. We built a solution that allowed people to easily create and manage a company's about, team, and press pages.

We abandoned this when we were on the verge of launching an MVP (the customer feedback was reasonable given the state of our product). There were some issues with market sizing, but this wasn't really the resulting cause. Essentially, my business partner decided that he wasn't interested in spending his time selling this product, and decided he wanted to do something else instead (something more exciting). We ended up restarting the company, leading to what we're working on right now. It's actually live on the web, although I'm not going to publish the URL because the demo is slightly broken (and I don't have time right now to fix it).

9 & 10) Two Consulting Projects
I can't say much about these since I signed NDAs in both cases, but I built two projects as consulting gigs (one in early 2010, and another in early 2011). The idea in each case was that I might come on full-time if the product took off, but as I learned previously to always charge for my work, they were initially structured as consulting work.

The first project was built for someone who was already a successful offline businessman. It was a great idea with significant revenue potential, but represented a huge departure from the client's existing business. In addition, there were significant regulatory hurdles that we would have needed to clear. I built a working web-based prototype, and delivered it to the customer, but in the end, he never had sufficient time to see this through to launch. I think that his initial vision was too large - he wanted to roll out web and mobile at the same time, but had no idea how big an undertaking it is to even launch one product. I got paid, but I was kind of disappointed because I would have liked this to launch (I think it would be useful to a lot of people).

The second project was built for someone I knew socially who approached me when I had some time to do extra work. I could tell that he or she wasn't serious about this project, but somehow suppressed those concerns (I will write it off to poor judgment). The project quickly spiraled out of control as the client added more and more features to the specification. In the end, the client decided to change his or her mind and work on something completely different, and expected to not pay for any of the work I did. Fortunately I learned my lesson on previous projects, and collected an up-front deposit, so it wasn't a total loss. I ended up spending about twice as many hours on this as we had initially anticipated in the SOW, and collected only a fraction of the contract price. In the end, neither this nor the alternate concept ever launched, and this one hit the deadpool before it went live. I think that it had some potential, but clearly the person I was working with had neither the experience nor skill to pull it off.

My big learning here is that I need to carefully vet all clients, even if I am doing work on a contract basis. If I think that the client isn't serious about launching this or see any other red flags (such as the lack of ability to focus on a single project), I need to run away as quickly as possible. Also, it definitely makes sense to have a lawyer read all contracts before signing.

11) Scaffold
This is the project we're working on right now. No post-mortem yet, since we are destined for incredible success. It's completely different from anything I have worked on before, and I think that it has a huge amount of potential.

Conclusion
I think it's important to pick apart both your successes and your failures. In many cases, you learn a lot more from the failures than from the successes (since, when you fail, you make mistakes that you can learn from and try to avoid the next time). At this point, I've worked on enough projects to see some interesting patterns emerge when I study things at a macro level. It can be difficult to see your flaws when you are deeply engrossed in something, but if you step back, you can a slightly more detached view. While I've pretty much run out of space for this blog post, It is likely that these patterns will be the focus of a future essay.

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