The Post Money Value

Pissed Off - Live

I can safely assume that Apple and or AT&T are having a few problems with getting the new iPhone up and running on the network.  I just got through the security line at LGA, heading home.

 

Security guy: "Sir, what's in this box, please, we need to check it."

Guy: "It's a piece of shit iphone I bought for my spoiled brat kid which I stood line for a damn hour to get. Then those phreaking butt wipes couldn't do whatever so I got this box of crap that can't be used and I have to deal with a pissed of kid.  Hey, fry it in that X-Ray machine will ya!"

Technology, I love this stuff.

The Taxi Cab Internet

If you've been in New York or several other cities and be in a cab, you've not doubt seen this:

That gizzmo above and to the left of the touch screen is a Paypass terminal along with a standard swipe device for taking credit cards. The screen, as I mentioned, is a touch screen. Those tabs above are hot and that map is live/moving, along with the news feed from Ken and Lori.  There is an ad above the news video.

I asked the particularly friendly cab driver a few questions:

How long is the average cab ride during the rush hour, inside the city. This was to exclude the Airport runs.  He said can be 7 - 15 minutes based on traffic.  Said some people commit time suicide (his words, awesome, eh!) by attempt to go cross town or this side to that side, etc.  We didn't count them.

Do people futz with this device and/or ask him questions about it? Friendly guy so I thought people might talk with him.  He said that on airport runs, they are very popular (outbound for news/inbound for tourist going "cool!" in 100 languages).  In the city, not so much that he could tell. He made a point of assuring me that he really doesn't know what goes on (wink, nod, smile).  He said 90% of his clients (his word!) knew where they were going or were using their Blackberry (his words, eat THAT Apple :-p ).  At night drunks or people making out so it's ignored.

I have a start-up class to teach later this month and will be interesting when I present the following situation:

What would you do to maximize this opportunity from an advertising or usage perspective?  Is it an opportunity?

It will be interesting to hear what the students have to say,

Canadian Cutback Chronicles

My friend and A list financial blogger, Mark McQueen, has a two part (more probably coming) series on how the Wall/Bay street i-banker folks can survive and cut back given the fun economic times we are in. Part one is here with part two here. 

And a plug for my town, he says:

"Move to Aurora

VC Rick Segal tells me that this is practically a cure-all. Everything is cheaper in Aurora, he assures. Dry cleaning, takeout food, lawn maintenance. Maybe not Starbucks, but the rest of the things you care about. What’s more, First Professional has just constructed a huge WalMart plaza at Wellington and 404, so you can get your environmentally sensitive lightbulbs and DVDs (going out to the movies is too expensive) cheaper now, too."

Aurora is not Homer, Alaska, but is a great place to live and we are cheaper.

Mark's post are funny but I keep thinking every start up on the planet should be pulling out the Live to fight another day" handbook.

Interesting times they are a coming.

I'll keep the lights on for you, Mark, just back the double-wide up over there.

Economy Fun

Hmmm... I just landed in NY City (LGA), got off an Air Canada Airbus with 12 people on it, into a cab, and dropped off on Park Ave in the span of 27 minutes.

No people on the plane. No traffic into the city.

This can't be a good thing.

Quote of the Day

"The people at Craigslist got it right. They answer to pretty much no one. They have an awesome business and they hook guys up with naughty chicks."

Let that be a lesson to you as you work on your start-up.

I love Howard, I really do.

Sample Intent Letter

I've been asked by a number of people to provide a sample intent letter of the kind I spoke about in the post regarding Term Sheet vs. Intent.  I've modified this and mixed from two recent ones to give you an idea of what they look like from our firm.  Your mileage with your VC will vary.

Dear Dave,

Thanks for taking time out of your schedule to meet with my partners and I regarding NewCo. I know a second meeting is a pain but it went very well. We think you did a good job explaining it and based on the first pass due diligence on the space, opportunity and you folks, we would be prepared to dig in more and see if there is a deal to be had between your company and our firm.

As we discussed, I wanted to outline our intent inline with setting expectations on process, major terms and your questions regarding share structure/value.

First, given the stage of your company, many of the items on the DD checklist I sent you are not applicable. We will waive the environmental hazard waiver, as a rather humorous example.  My expectation is the there are a couple of weeks of calls, material review, and analysis to do.  We have two other files being worked on, one requiring travel to the west, so there will be some interruptions to the process.  In the past, many hold ups are getting the material from the company lawyers and attorney's so I strongly suggest you send the checklist to them immediately and get them rolling. On items that are N/A, they just are so no worries.  We will need to schedule a site visit and would like to arrange interviews with the named parties that we talked about in my office.  My best guess is 10 - 12 business days to get this done at which time, assuming we are all good, we'll lock down the term sheet.  The materials can be electronic. We have a Sharepoint location you can use as an electronic data room or you can send us a CD/DVD, doesn't matter to us.

On general terms:

Assuming we do this deal, we are proposing to issue a Class A preferred share with a 1x liquidation preference, with an 8% coupon. This is a non-participating preferred share and the 8% is not paid, it accrues until the liquidity event which is usually defined as a sale or IPO.  We require board representation. It is mandated by the way our partnership is structured and is not negotiable. As I mentioned to you in our meeting, if this board seat thing is a problem, we should stop now since we can't waive this.  The size of the board is open to discussion, however my suggestion is 1 from us, a common share rep, you(as the CEO) and two independents which we agree on.

We will ask for drag along and tag along provisions which are fair to all of us. When we get to a formal term sheet, they will be outlined in greater detail.  The sample package of VC documentation I've attached can show you want these and other things look like, but every deal will be slightly different. You are free to have your council review this package so you can get a clear expectation of what's coming. Your lawyers can also go into great detail on each item and how to deal with each one.

We have certain items that fall under the category of "matters requiring special approval." Essentially, this is a list of items that notwithstanding the approval of management and the board, you must have our written consent.  Our board seat and vote from the seat does not necessarily give you approval.  In the 8 years I've been doing this, I've never seen a case where we have said yes at the board and no at the firm level.  Even so, I want to be clear on these issues.  Depending on many things we learn over the next couple of weeks, this list will get adjusted but there are a standard set of items that generally go in regardless.  They are:

• You can't change the corporate structure without JLA's permission. For example, you can't change the incorporation location without our permission. The board may want it and you might want it, but if it (for example) could cause a tax problem or some such for our LPs, we wouldn't sign off.
• You can't modify our share rights without JLA's permission.  For example, you can't have a vote and decide to remove our preference even you have the votes or other shareholders to support it. We have to approve.
• You can't incur outside debt (other than operating lines, etc) over a certain amount (to be discussed) without JLA's permission.
• You can't remove us from the board while we own 10% or more of the company.  While this is normally in the Shareholders agreement, I like to call it out so we all know the facets of this marriage.
• You can't modify the shareholders agreement which changes, in any way, our rights.  This is like the second one but we add it for clarity. This usually is the most contentious so we can have a separate discussion about what we will/won't do.  Rigid flexibility, that's my general motto. 
• No third party transactions (over a negotiated amount)  without JLA's permission. This is there to prevent you from hiring Uncle Ned with us actively approving it.

There are other items which you can read about in the enclosed sample pack but this gives you an idea of what to expect.

Valuation:

You asked about where the value would come in.  Generally and seriously broadly speaking, we believe an investment in this space, at your stage and with the additional capital required, best case, will come in at around a pre-money valuation of $6 million.  Again, this is the best case, no brain farts/problems in the DD process. Typically, what will reduce the valuation are these items:

• Budget adjustments. Essentially, we take your model, do VC Voodoo on it, and come back for a discussion. If we agree on the costs, revenue ramps, etc, and they are materially different than what we start with (your leave behind model), the valuation of the company can change. The key, of course, is getting agreement on numbers which make sense to both of us.
• Market data. Sometimes it will take longer and take more capital to get something adopted. If we think there is more (materially more) risk than when we started this discussion, the value can change.  Yes, we are venture capitalists and we are supposed to take risk, I agree. I make this point only to emphasize the materially more part.

Finally, the references. I've provided you a list of all our portfolio CEOs.  As I mentioned to you in our meeting, please do call them all and meet with as many as you can. I believe this is the best way to find out what I (and our firm) can be like once the deal is done.  Ignore all the he is a nice guy stuff and ask questions about what we did/how we acted when there were problems or issues.  I think you will be pleased with what you find out.

I hope this gives you the information you need in order to determine if we are the right fit for you.  Let me know if you have any questions.  I look forward to hearing from you with respect to proceeding.

Thanks again for coming by and letting JLA take a look at your opportunity.

There you go.  As I said, this will change depending on the company, management experience levels, etc.  I have a package of sample term sheets, shareholders agreements, etc, that are also provided so the management team can get a broad overview of the paperwork pile.

I hope this helps many of you in your financing endeavors.

Dancing With the One Who Brung Ya

Saul Lieberman, a lawyer in NY/Israel asked a great question in response to the intent post.

"Once you send your "intent email" and you and the entrepreneur are on the same page, what are your expectations regarding the entrepreneur continuing to negotiate with other investors?"

Excellent question. I expect him/her to keep talking to everybody.

Here is my view on the whole VC dance process. 

Until you have a signed term sheet where you've agreed, in writing, to some period of either no-shop or exclusivity, entrepreneurs should pursue every opportunity and continue to talk to anybody returning calls.  Given the whims of the day, human nature, what's hot/not in the minds of your potential financing source, keep talking until somebody delivers a term sheet with conditions you can accept.  Once you sign it and you've agreed to work just with the VC (or other financing source) stick to your word and follow through.

Now having said that, the amount of time you should 'lock up' with a VC is obviously a critical issue.  In my opinion, you should talk to everybody, give out the information people need to get to a term sheet (less customer calls), and get people as far down the path as possible before any lock up.  If you take this approach, you don't have 90 days of exclusivity nonsense, it is much much less.

Keep your options open until you get on final approach.

Thanks, Saul.

Dell Computers - Still Crazy After All These Years

Technorati Tags: Dell,Jeff Jarvis

3+ years ago, world class journalist/blogger Jeff Jarvis was in a serious war with Dell computer. Reading Jeff's "Dell Hell" became almost a national obsession.  In fact if you 'Google' Jeff, before you even get done typing his name, you will get:

So, despite this, I figure 3 years, it can't still be that messed up.  Here just the highlights of my side trip to Dell land.

I needed to get just a base desktop unit. No monitor or anything else for that matter, just a cheap box. After making my way through the Canadian web site, I managed to place an order for something around $450.  It was with some decent hardware, memory, large hard drive, etc.  It wasn't a bad price and despite the web site blowing up twice (it happens), I was good to go.

Email one comes in saying, your order is verified, life is good, let's rock -n- roll.

Email two comes in time stamped AFTER email one, 10 minutes or so later saying, just want to let you know we're thinking about this and we'll send you another email shortly verifying/confirming, etc, etc.

Hmmm.. This don't look good for moose and squirrel.

 

One day goes by and I get a phone call from, you guessed it, Dell. They leave voice mail telling me, yo dude, you ain't getting a dell just yet, call our order verification department. <sigh>

I call the 800 number and get this rather lame sequence:

1. Thank you for calling Dell, press one for english (in english) and two for french (in french). Note to French Canadians, this part wasn't lame, don't yell at me.

2. If you got an extension, press one.  If you didn't get an extension press two. (huh? If I don't press one, can't you figure it out?)

3. You will here a series of tones while we transfer your call.  Beep, Boop, Beep.

4. Elevator music. For 45 minutes but, duh, the call is important to them/us/you/him/her/it.

I hang up, of course.

That was yesterday.  This morning, I have yet another voice mail from the Dude at Dell (a dudette actually) basically saying the same thing, give us a call.

Same sequence as above except when we get to item 4.

The new item 4: Elevator music for 7 minutes and then "We're sorry, the department you got transferred to is closed, call back on our next business day." <click>

Right. July 4th, silly me, Dell Canada, of course, July 4th, what was I thinking, Canadian arm of a company open on July 4th, how positively insane.

And it appears those crazy kids at Dell, while wanting to talk to me and show me the love, ran the credit card right on through. 

Not that my trip to Dell should be a total loss, here is a great inspirational video from Steve Harvey, a super comedian, that was sponsored by Dell.

How to Hire the Killer Marketing Person or Company

I've given a bunch of talks at the local universities over the past couple weeks talking about the usual VC things as well as some operational issues such as hiring for companies.

One topic which came up a couple of times was the notion of hiring somebody (or a company) in the all important area of marketing.  On this category, I had a fairly simple way to dig through your options.

First, present this photo:

Then ask this question:

You are now charged with coming up with an Ad/Marketing campaign to counter this. What would you do? 

You'll get a fairly good idea of how that person or agency thinks and what they could potentially do for you.  Lots of students out there had some pretty good ideas to this seriously hard problem.

3 VC Questions You Should Not Answer

Here's a dirty little secret: Most 'confidential' or 'close to the vest' information we get comes from people talking and answering questions they probably shouldn't answer.  I'm not sure why this happens over and over but they do.

So, make a little card for yourself and carry this around with you when you are on the money hunt. Since nobody wants to take my advice to simply not answer these questions, I've provided handy answers so you can feel good about saying something.

1. Who else are you speaking to? [Answer: The usual suspects.]

2. What pre-money value did you have in mind? [We are looking for a deal that provides great returns for all of us.]

3. Can we speak to a few of your customers so we can better understand the value proposition? [No. Customer calls are post term sheet due diligence]

Really. Don't answer these and if you must, see above.

Term Sheets vs. Intent

I've said this many times before but it's worth repeating: Nothing is worse than having a term sheet pulled during the process. It is awful for you and it is actually awful for the VC who pulls it from many perspectives not the least of which is reputation.

My view has always been that you should get a term sheet as late in the process as you can stomach which should be inversely proportionate to the likelihood of the deal closing.  The farther down the road, the more likely it goes the distance.  These term sheets that get flung out to companies so there can be a lock up while the VC does the sniff test is just not a cool business practice.

From the entrepreneur's perspective, they want to know what the VC is thinking in terms of value, structure, etc, etc.  It's fair and, in my view, reasonable to want this data so you can make a decision on spending time with a particular VC, Angel, etc.

I've found over the last few deals and interactions on potential deals that a letter/document which spells out what is being contemplated goes a long way toward setting expectations and getting people on the same page with respect to process.

If I am working on an opportunity and I believe it has a shot at making it through the due diligence process, I will almost always give the entrepreneur the following information in an email and/or a letter:

• An intro paragraph that says deals like yours will typically fall into the following zone for a structure. This is not a term sheet rather a document designed to give you an idea of where my head is at with respect to what I'd be willing to do assuming all the stars line up.  Yeah, I say it that clearly with that language; the lawyers have a serious Maalox moment.
• The share structure (i.e. Preferred, 1x liquidation, etc)
• The best case pre-money value.  I don't do a range rather I say, assuming this opportunity is a 10 out of 10 (or better), this is the value I will subscribe to it.  I do it this way because I want the entrepreneur to know, up front, her best case.  It seems fair and we all know what we are shooting for.  Naturally, this has high risk of people getting seriously annoyed if the value is lower. It can look like a bait -n- switch but I honestly believe people should know that if this is better than sliced bread, this is where I would end up.  I've had entrepreneurs say thanks but no thanks.  The value, in the best case, isn't what they want, so we part friends right there.
• The timing with respect to when a term sheet comes in our process.

By structure, mentioned above, I am referring to things like board seat(s), protective provisions, matters requiring special approval, etc.  Any decent VC can spend 90 minutes with an entrepreneur and get a good feel for what they are likely to want from a structure perspective assuming they are interested. We, for example, always have board representation. Always, no exception. So telling you this immediately seems to be a smart thing to do because if you are not giving up any board seats, your call but not with my coin. 

The upside of this process is we both save time, part friends, and don't go down an expensive path (time and/or money) only to find ourselves at an impasse that could have been avoided with a simple 'here's what I'm generally thinking' memo to the company. 

I wish more VCs would do this.

Arrogance is Just Like Ice Cream

Arrogance is like ice cream because it comes in at least 31 flavors and can get really really messy if you aren't careful.

Here's an example which, unfortunately, has its roots in truth as I type this entry.

Let's say you have two phones, one in your office and your mobile.  And let's further say that you'd like to only have one voice mail system to have to deal with.

There are, of course, a zillion ways to deal with this. You can get fancy with a universal follow-me number that the calling public knows or you can go simple.  Your cell phone, when the call is unanswered, goes to your office system.  So, lots of solutions to help, right? Right.

Well, here's one solution that if you have or were thinking about doing, you might want to think again.

A CEO just finished me this story.  He is raising capital and a certain VC says, yeah sure, give me a call and we'll set up a meeting.  The CEO is then zipping down the highway later in the day.  He places a call to the VC's cell phone. It rings 3 times and then a voice message pops up:

"This is Joe Blowski.  I don't accept messages here. Call my office at 555-1212 if you really think you have to leave a message." <click>

The CEO then goes into a rant about driving, not having a way to capture the number, and on and on.  The smug attitude  on the call, what a guy, and on and on.  The CEO was so mad, he wanted to call the cell on the spot, in my conference room, so I could hear just what a tube steak this person really is.

This voice mail message and process did strike me as a bit odd. I can't think of many businesses where you wouldn't want to give your customer a way to talk with you or, at a minimum, have an easy way for you to leave  a message.

Keep in mind I don't know the VC in question and didn't actually hear the message (I declined) so I can only report the outcome not the intent.

I'll have rocky road, double scoop.

Secret New Enterprise Blackberry

Secret New Enterprise Blackberry
Originally uploaded by RickSegal.

Here's the problem with those people at TechCrunch, Engadget, etc.

They are successful which makes them soft. They now have cushy day jobs. No more digging through virtual trashcans trying to outdo the next blog. Naaah. Now they just phone the stories in.

Some of us, still look for the glory. Some of us have to travel all the way to Newfoundland to find the secret testing site of the new enterprise Blackberry device by RIM.

On a slightly more serious note, don't you want to talk to the person who thought this up? Remember in 1995 when AT&T deployed those phones with keyboards and for a brief (3 months) you could dial into CompuServe (or the Unix email system I was on at MSFT).

The people who thought this up probably had the business objective right, probably even had a business case that would make sense to you and I (assuming it was for a mobile device).

I asked the desk clerks on various nights if they had ever seen anyone use that keyboard. All didn't even realize the keyboard was there and most said people used cell phones anyway.

Time flies, eh?

Newfoundland Icebergs and Your Excuse

Newfoundland Icebergs
Originally uploaded by RickSegal.

For those of you looking for an amazing vacation: Newfoundland. I've uploaded a set of iceberg photos that should be able to convince you why.

The people, food, b&B accommodations, etc, were all just amazing.

The full set is here.

Thanks but They Ain't Windows Live Writer

Many of you have been kind enough to send me links to the Mac blog writing applications. They are all nice but they are not Windows Live Writer.

Why? Because I'm lazy and I want to concentrate on writing, not formatting a post.

MarsEdit (which this post is written in) comes close and they get major points for answering a technical question via email within 45 minutes. For a free download? That's off the charts goodness in the technical support world.

Lazy:

1. I don't want to futz with markup language, even those it is fairly brain dead. I used Wordstar, I get this stuff.

2. I want it to preview as it will look on my blog.

3. I want tables, pictures, etc, to just be dropped into post and away we go. Futzing with sizing, moving around, etc, thanks, pass.

etc, etc, etc.

So far, a couple of bids around the $6,500 mark to clone Windows Live Writer. Stay tuned.

From the Hmmm Department

Up here in Atlantic Canada, Mary rules; the Colonel ain't squat.

It seems the good folks in Mary's marketing department decided to combine a little of the old fashion (Billboards) with this Internet thingy.

So, of course, there is an assumption that you can simply zip over to your computer and pop Mary Browns into Google and get right to those money saving coupons. Not exactly.

You can type wwww.marybrowns.com right in your favorite browser and see the video. You can see the small monthly special logo/link at the bottom of the page which has the word coupon right there. You can click it, see it, download it, and finally print it.

All this to save a few coins on a Big Mary chicken sandwich. My Hmmm, is simply wondering about the number of people who will do all of this vs. other ways to get people into the stores.

I wonder if it wouldn't have made more marketing sense to tell people to SMS chicken some place to get back a free drink code word or something. Yeah, the SMS message would, in theory, cost something but people love to spend good money on free. Or call a free *chicken number to hear the secret code word.. Whatever.

It's observation while I chase down a salad for lunch.

P.S. I could be wrong but Sandwhich is not a correct alternative spelling of Sandwich. Somebody should let Mary's web people know.

A Different Approach to Getting My Attention

You just can't make this stuff up.

Here is an email thread that wandered through my inbox:

From: Mark xxxxxxx Date: Thu, 20 Jun 2008 To: Rick Segal Subject: Time Sensitive - Invest Opp

Rick,

I got your name from [] who indicated you might be a good fit for our company. After reviewing your public profile, blog, general google results, we've concluded that we can allow your firm the opportunity to review our company for investment. I've attached a one page summary of our company. As you will see, we believe that within 9 months, we will obtain $200 million in revenue with only minor losses of $10 million.

We will accept your investment proposal up until midnight, Oklahoma City time, tonight. If you will require an extra hour or two, please notify me within 7 hours of the expiry time so I can convene a management meeting to review this request.

We will consider moving to Canada should we receive a binding notice of tax benefits and inducements from the Canadian Government along with your investment proposal.

Our investor due diligence process will be required prior to finalizing your investment.

Thank you.

I love this gig.. My reply back:

To: Mark xxxxxxx
Date: Thu, 20 Jun 2008
From: Rick Segal
Subject: RE: Time Sensitive - Invest Opp

Mark,

Thanks for writing. I've always appreciated it when [] sends me a referral. I've given your proposal careful consideration and, in order to beat both the midnight and 7 hour prior deadlines, I've decided to pass. I believe timeliness is an important quality.

Be careful out there!

best,

>R<

I forwarded this thread to [] with a big smily face and within 2 minutes got back OMG and then within 7 minutes after that, got an Amazon gift certificate with 'sorry sorry sorry' as the card.

As I said, I love this gig!

Congrats to Qik and Flixwagon

As a start-up, nothing is more rewarding, more gratifying, more empowering than being joining the big leagues. To reach the top of your game and be welcomed into the elite group is an honor not lightly bestowed on just any company.

So, it is with great fanfare and enjoyment that I congratulate mobile video companies Qik and Flixwagon for being declared dead right alongside RIM and Microsoft.
First, we have Michael Arrington doing up mushroom clouds when it comes to what he thinks Apple is going to do to RIM and Microsoft. Yeah, iPhone is going to kill RIM and Microsoft's mobile business. Right. Next fantasy?

And the next fantasy comes right on cue. We have Robert Scoble using the "kill" phrase with respect to Qik and Flixwagon. It seems Robert found another company in the same space and because at this very moment, the new flavor of his month has features that the other two don't have at this very moment, the other two must, according to Scoble, surely die.

I could spend an hour ranting about these blog posts, in particular Scoble's who should know that it's only software and the words "next release" usually cover the feature hopping. And let's not even debate the whole notion of different apps for different users, etc, etc.

Let us just do two things.

Item one: A hearty congrats to both Qik and Flixwagon. When you are declared dead these days, you are in good company. Apple, RIM, Microsoft, Amazon, Ebay, etc, have all be declared dead at one time or another. Sometimes they get dead multiple times! So, well done, takes a lot to get into this crowd.

Item two: The lesson for you is simple. Take it all in as feedback, adjust as required, and ignore the rest.

Rent-A-Coder Fun - Follow Along

As I start my trek in Newfoundland chasing Icebergs, I thought I'd get a little coding project started: Cloning Windows Live Writer for the Mac. I've posted a job up on rentacoder.com which outlines a fairly easy requirement. I'm looking to get a native Mac application that is look and feel like Windows Live Writer. It doesn't have to share files or do anything particularly fancy, just the basics.

Assuming I can get it done where it can post stuff to this blog, I will release the source code into the wild and see what grows.

Stay tuned, should be fun.

Kindle Fun for the Whole Borders Family

I really like the Amazon Kindle. I have two, one as a loaner and one for personal use. It's a great way to carry stacks of books in a simple device for reading.  Just recently on a trip to the U.S., I took the device into a Borders bookstore.  There, at the new non-fiction table, I checked out the new books by looking at the covers, thumbing the book, etc, and -assuming I wanted it- ordered it on the spot via the Kindle's wireless connection. Lots of money saved.

After doing this twice, a store person came up, asked me what I was doing and after hearing my answer, got into a serious lather trying to stop me by explaining the store's policy against people grabbing 'pricing research'.  I thought that was a bit of stretch but admired the attempt at some type of response.

I made the suggestion to the manager who happened to come along that maybe having a Kiosk in here allowing me to locally download electronic copies either with my hard copy or as an alternative would allow them to make some money off of me.  Cut a deal with Sony for branded E-book devices they were hawking.  I knew, of course, this person had no control over the chain. 

The reaction was, however, funny and sad at the same time:

[Laughter] Right. I'm working for a technological backwater. If it was up to these people, we'd be using an abacus for checkout.  Use your Kindle all you like, I have one as well. Just buy something, I need this job.

Fun, eh?

More Lessons from Fruit - Habit Changes

I can't tell you the number of business plans that have, as a central  theme, this huge requirement to change somebody's habits.  In the course of discussing this issue with the entrepreneur, it becomes really hard to convince them that changing people's habits - forget perceptions- is a seriously non-trivial task.

A Workflow Example

Consider my previous blog point about Entourage and the back up issues, specifically the lack of what I called proper back up and archive services.  While I think it is a seriously bad problem, the Mac Operating System (Leopard) can somewhat deal with the situation BUT there is a habit change.

In Leopard, time machine is touted as basically system wide snapshots of your machine. If the machine is hooked up or connected over the air to a large hard drive, clones of the machine are made in the background on the external device. If something blows up, no problem, time travel back to the time you want and, presto, life is good.

No habit change for Time Machine, just turn it on. Easy enough.

With Entourage, well, that's another matter. In order to get this to all work correctly, you do have a few habit changes. First you have to use local folders (ie pull the data off the exchange server) and second, if you are a laptop guy (the MacBook Air in my case), you'll need to either remember to plug in that USB drive or buy the external device made by Apple which allows you to come home/office and have Time Machine see the device and start backing up over the air.

You can't just take a full snapshot of your machine in the state she is in with the shared/exchange folders only. If you do and then restore to a different time, the local changes get wiped out when you sync with the server as the exchange server always wins.

The Right Mouse Button (aka Secondary Click)

92% of the personal computing world uses, gets, and understands the right mouse button. Currently around 8% of the world is all about every way possible to avoid it.  Along comes the gestures in the track pad.  A two finger tap = the right mouse click. Brain dead simple, right? I've been showing this to PC folks and virtually all of them think it is an unnatural act. Comments like "that's not it is supposed to work" are repeated to me over and over.

Simple change in the face of big perceptions of what is 'supposed to be the right way.'

The lesson here for you is to watch carefully what habits/perceptions, no matter how small (or in my case how big) have to change when your product or service is used. 

They will impact your take up rate.

Memo to Harvard: Canada is NOT part of the U.S.

I'm standing here in The COOP which is the bookstore (I think) jointly representing Harvard and MIT. I'm in the U.S. Travel section. It has a great selection, in the U.S. Section, of Canadian travel books. In the U.S. Travel section. Harvard.... There is a sliver of hope. As I type this two others just walked up and started to rant at an employee on this very point.

The Great Slog Over to the Mac

Many people have been asking about my use of a Mac these days.  Interestingly enough, this wandering over to Apple land has been really enlightening for me, as a Venture Capitalist.  Here are some of those thoughts. Remember, I'm filtering this as a Venture "is there a buck to be made" Capitalist and not a Mac vs. PC person.

Size matters

Compound Annual Growth Rate (CAGR)for the Mac has been impressive in North America. On college campuses, etc, lots of people are coming up with the money to buy a variation of the product.  I start to look at this from two perspectives, new purchases and people making the switch from one platform to the other.

Once I break down all this growth, I want to figure out where the opportunities are, if any, for me to turn a buck into ten.

Observation one: The "Nobody uses a Mac" refrain is starting to loose its place on the default answer list. Whereas two or three years ago, that probably worked in most VC pitches, today, you have to be a little more thoughtful about where/when/if the Mac might fit into your product strategy.  It might not, true, but the products have gained enough raw market share and market momentum, you can at least justify the time/expense of taking a look. 

Clearly web based applications/services along with things like Google Gears will make this argument possibly less relevant.  I will only observe that if you said "Mac is back" when it comes to the land of Venture Capital, I might not totally agree with you but I for sure wouldn't laugh you out of the office.

Pain = Opportunity (maybe)

Microsoft Office touts file compatibility across the platforms. For a new person, this is generally true. You can create a Word document and flip it to your PC buddy with (generally) no issues. Same with Excel and Power Point.  Generally.  I say generally because there are a number of 'ouch' points that business users will find. One example. Password protect a Power Point slide deck on the PC and guess who isn't going to read it? Exactly.

Then there are just some bad things. Entourage. For somebody new who buys a copy of Mac Office and loads up Entourage, you won't have many problems or issues.  Mac enthusiasts will tell you to just stay with the mail client that came with the Mac. They will be correct in telling you it is a great out of the box product, very well done. True, but Entourage plays well with Microsoft Office applications and does its thing when it comes to Microsoft Exchange.

All well and good until you talk to change or crossover types like what I am currently simulating.

Then you find that Entourage has such glaring flaws and WTFs in it that if I didn't know (like/respect) the Mac business unit head personally -Craig Eisler- I'd swear the conspiracy theorists were right. They think Microsoft deliberately makes the product bad to dissuade business IT departments from recommending it which in turns dissuades enterprise customers from starting to by Mac units in mass quantities. I don't think so.

The single bad thing? Backing up your mail folders. If you are an Outlook user, you know you can archive stuff based on folders, dates, etc.  In Outlook world, I only keep 30 days worth of sent mail on the server with the rest being archived off into a offline file. Company files that haven't been active for 4 months is another example. I do all of this to keep the active/working email set as small as possible.  Not on Entourage. This critical corporate/enterprise thing called archiving and back up is flawed (aka missing) from the product.  There are other items but this one is the biggest.

I recognize the platforms aren't the same and Outlook certainly is going to be Entourage nor the other way around. Still, basic functionality seems to be lacking in a product that is supposed to be for the enterprise which is just, at the very least, surprising.

And of course, what would life be without the obligatory dialog box showing an application, errrr, in a state of flux. 

From the ENGLISH version of Mac Office:

This could be an opportunity for you. Maybe. Build a better Outlook on the Mac that does a superior job of hooking into Exchange.  And here's the fun part: The Microsoft Exchange folks will help you and  'love you long time'. One of the beautiful things about big multi-product companies is the fierce independence of those units along side a serious desire to protect market share. If you create a product that means Exchange is going to keep seats, sell more seats, displace a Lotus Notes installation, etc, you are a bud.  Exchange is instrumented with API hooks into everything.  I've seen a number of open source mail clients that do an amazingly great job of talking to Exchange. Even Mac mail does a half baked attempt. 

The point here is that it might be an opportunity that years back didn't exist. That CAGR combined with some serious flaws/pain in products & migration, could possibly spell opportunities.

Observation Two:  It seems to me a software package that sits on the PC and analyzes what's gonna need to get done order to move -smoothly- over to a Mac could make some coin. Replicating directory trees (or explaining Mac land to the PC person), figuring out what programs you have on the PC and what you'll need to do those things over on the Mac; these are just some of the things a "welcome" package could do.

As an added bonus, you can do sponsored recommendations and placement ads, etc when the PC person goes hunting.  Again, you'd have to do the homework of CAGR of your target market and then figure out the numbers with respect to where the new users are coming from, how many, etc.

Might not be a VC investment but I'd buy a copy!

Living in somebody else's shoes, walking the walk, etc, is probably the fastest way to feel some pain and think up a solution. If you are right, lots of people will be feeling that pain and looking for your solution.

Windows Live Writer and the Pain Hoop

I'm doing my thing (or trying to) on a MacBook Air. I'm working on a post that talks about this but one thing stood out that I thought was relevant to those company managers/founders out there.

Ask yourself this question: How many hoops would a customer jump through in order to use your product. Put another way, how much pain will somebody endure before dumping your product or service.

Consider Windows Live Writer.  I think the product is off the charts great. I've found nothing - on the Mac- that beats it. I like this product so much that I spent the money for Parallels and have a Windows session running on my MacBook Air which contains exactly one application: Windows Live Writer.  The Parallels session makes this device a bit pokey, I don't care. It's a hassle to boot up and get to Windows Live Writer; I don't care.  I'll take the pain, jump the hoops because the product, along with some great add-ons, simply is the best.

And your product? Your service? What hoops and pain will your 'loyal' users endure in order to use or keep using your stuff.

It does matter when somebody else is only a click away.

Everybody Deserves 100 words

It's around 2a in Toronto, midnight here in Edmonton. 260 summaries, plans, ideas, and virtual napkins are staring at me with an evil grin. Grinning because on the flight over, I plowed through 150.

I could delete em and claim and email bug/screw up.

I could send out a canned, I looked but passed, when I really didn't.

I could do two a day and answer the complaint emails with sorry, busy.

Or:

I could plow through them because everybody deserves a shot.  I got my shot doing a start up (Chapters), got my shot doing this VC stuff, and generally got breaks along the way from people who thought I deserved a shot.

Your 100 words? Make em count. Problem, Solution, and why somebody will care (and pay).

Back in the days of 640 x 480 generally fixed screens, same fonts for everybody, etc, I was trained at the 600 email a day palace called Microsoft. The cardinal rule? Keep it to one screen.  These kids today? Text messaging.  The fixed length limit means to the point.

An exercise for you: Try to put your elevator pitch in a Twitter Tweet.  Then graduate to 100 words.

Back to the grind.