Friday, March 28, 2008

Open Startup: What Does a Mashable Writeup Do For You?

Last Friday afternoon (not the best moment for a PR break, but I'll take what I can get), Mashable posted a generous review of Askablogr. I was curious to see what the mention would do to our traffic curve, and I thought you might be too.

The graph above shows our traffic for the past couple of weeks, with the first jump occurring on the Friday the article hit. The local maximum occurred on the next day, Saturday, at just over 400 visits (about 10x our daily average before the story). The effect faded over the next few days, but just yesterday there was an "echo" spike, higher than the first, as the story and resulting user signups generated coverage in other media (mostly other "Web 2.0" blogs, many of them outside the U.S.)

My next question is how this coverage and resulting member signups will change our daily profile going forward. I'm expecting to hit a new plateau, lower than the peak but with a healthy bump above our run rate before the story hit. I'll let it run for a little while and post again when the answer is clear.

Wednesday, March 26, 2008

Reader Question: Can I Help an Entrepreneur Outside My Focus Area?

Q: I know you are tech oriented. I seek invesment and feedback in something much different (exciting & cool however). Industry interest tells me I need to pursue the idea. Can you help?
Posted by Daren

A: Hi Daren, thanks for the question. I love working with entrepreneurs and helping them succeed, and I feel very lucky that I get to do that full-time. That said, I'm also a big believer in Charlie Munger's maxim that investors should stick to a narrowly defined circle of competence.

I've posted recently on the kind of ideas I'm excited about, and if yours fits somewhere in this general zone I'd be happy to kick it around with you and offer my perspective (for what it's worth). But if your vision sits outside this range, you'd be much better served by finding a mentor who's spent their career in or near the market you want to serve.

A close friend likes to joke that she's "often wrong, never in doubt", and it's a great reminder that opinions are easy to generate, but useful advice is rare.  The worst thing you could do is attach yourself to someone with a full bag of opinions about your idea but no sound basis of experience or perspective.

Askablogr Question: How to Introduce Yourself to the Community (and feature survey)

Q: Hi Chris, is there a community page where I can introduce myself and my blog? Or should I just "ask" around? :)
Posted by Lorenz van Gool

A: Hi Lorenz, sorry if my previous question left this in doubt. I was thinking you would reply to my question with a little background about yourself and the topics you cover. Right now the Q&A flow is the only format for posting to the site, although I'm realizing that we need some way of responding to or commenting on questions to facilitate follow-ups (like this one).

By way of feedback, I'd love to know how you'd prioritize the following features:

  • Reply to an answer you received with a related comment or question (threaded Q&A)
  • Comment on existing Q&A (open to anyone)
  • Rate an answer you received (simple thumbs-up / thumbs-down / flag abuse rating)
  • Other idea I haven't thought of yet
Thanks for any feedback you can provide on the above - we've had a ton of new member signups recently, which has helped us identify a long list of needed enhancements and now we have to choose which matter most.

Tuesday, March 25, 2008

Marc Andreesen's a Charlie Munger Fan Too

A while back I did a series of post on Warren Buffet's partner Charlie Munger and a compilation of his thoughts and speeches titled Poor Charlie's Almanack; The Wit and Wisdom of Chares T. Munger. The longest of these was a condensation of Charlie's speech on the Psychology of Human Misjudgement. (The shortest noted the similarities between Fred Wilson's investment approach and Charlie's).

This morning I was scanning my feeds and noticed Fred giving props to Marc Andreesen for his great post on... Charlie's book, and particularly the Human Misjudgement speech. I'd like to think that this is a case of imitation being the sincerest form of flattery, but in this case I expect both Marc and Fred found Charlie without my assistance. Hey, at least I'm in good company...

Monday, March 24, 2008

Introducing Founders Co-op

As a partial explanation for my recent series of "Investment Thesis" posts, Andy and I are announcing today the formation of a new seed fund here in Seattle called Founders Co-op. I'll be writing about it much more in the days to come, but between our site for the new fund and my investment thesis series, you can get a pretty good sense for what we're up to.

The one thing I will say is that, after 3+ years heads-down at Judy's Book, putting together this fund idea and getting our first few companies up and running has been an absolute blast. We love being a part of the Seattle startup community and are looking forward to helping more local entrepreneurs get off to a running start.

Saturday, March 22, 2008

Reader Question: Do I Use Twitter?

Q: Chris, what's your twitter profile? That tends to be an easier way for me to keep track of active bloggers
Posted by Daltonsbriefs

A: I know this makes me a reactionary and luddite, but Twitter's value prop just doesn't resonate with me. Since you've asked I'll go ahead and set up an account just to figure out what I'm missing, but to this point I've felt (perhaps wrongly) that it's too narcissistic even for me (I just can't believe anyone really cares to know what I'm doing / thinking about with that level of frequency / immediacy).

If you're a big Twitter fan I'd love to hear your thoughts on what I'm missing...

Reader Question: Who Do I Support for President?

Q: Chris, which of the three remaining candidates are you supporting for President?
Posted by Daltonsbriefs

A: Hi Daltonsbriefs and welcome to Askablogr! I see you're a McCain supporter, and I'd like to say first that your man was my top pick among the Republican field. Kudos to the GOP for settling on a candidate with some backbone. That said, I've made no secret of the fact that I've been an Obama supporter since early last year. It's unfortunate that the democratic selection process has been as acrimonious as it has turned out to be, but it's probably a good dry run for what's likely to come at Obama in the general election. Good luck to your side and may the best man win.

Open Startup: Askablogr in Mashable

Just before I left the office this afternoon I fired off a cheeky email about Askablogr to the folks at Mashable. They'd recently covered Guy Kawasaki's new project, Alltop, with a focus on the fact that he'd "only" spent $10K to launch the product, which is $2,500 more than I've spent on Askablogr so far.

I didn't really expect them to run the story, because (a) I'm not Guy Kawasaki, and (b) Mashable editor Adam Ostrow has a project called Qwizzy that could be considered competitive. But I came upstairs tonight after a dinner party with friends to find a note from Rahul pointing to this article:
"$10K for Alltop? Guy Kawasaki got taken!"
Thanks for the generous writeup, Kristen - sometimes I enjoy being proven wrong...

Thursday, March 20, 2008

More on Investment Theses: Sequoia Wins on Brevity

Thanks to Mike Arrington for his timely post on Sequoia Capital's Elements of Sustainable Companies. While my own list of investment heuristics is a little more modest in its ambitions, theirs covers many of the same topics while winning hands-down on brevity. My personal favorites from the list include:
Rich Customers
Target customers who will move fast and pay a premium for a unique offering.

Pain Killers

Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.

And, saving the best for last:


Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.
It can be debated how well each of their portfolio companies have modeled all the characteristics they list, but you can't argue with their returns.

Wednesday, March 19, 2008

Open Startup: Askablogr's Second Month

Yesterday was Askablogr's two-month birthday. I posted earlier this week about our recent styling changes (that's our new logo to the left), but wanted to follow up with some stats and commentary about how things are going.

First, some basic numbers for the two-month period:
  • Registered members: 145
  • Questions asked: 239
  • AdSense revenue / eCPM: $5.59 / $1.12
  • Hosting expense: $68
Traffic stats from Google Analytics for the same period:

Here's my quick gloss on how things are going:
  • Overall: The basic functionality is solid, and with the redesign in place I'm no longer embarrassed about how the product looks. We have a long list of enhancements on deck to reduce friction for both bloggers and question askers, but our biggest gating factor right now isn't product, it's adoption. Andrew Chen is our star member and the model for the kind of alpha user we're looking for: he has a unique voice, great content and an engaged reader base. As a result, he's received almost a question a day since he first installed the widget, and has found at least nine of them worth answering. We're still trying to figure out how to find and win the hearts of more bloggers like Andrew, but until we do we don't expect to see much acceleration in our core metrics.
  • Product: Despite the fact that Craig's other projects pretty much took over his calendar this past month, we've been able to keep moving the product forward in small ways. The redesign was the biggest chunk of shipped work, but we're close to releasing a rework of our question asking process which removes the registration requirement for first-time users, which we hope will increase question liquidity. We're also noodling on some tweaks that would expose our value proposition more effectively within feed readers, since many (most?) readers rarely visit the blogs they read.
  • Marketing: I still don't have a systematic marketing approach for the product, but I'd better come up with one soon because my friends and family list is pretty well tapped out (thanks again, y'all). I've been dabbling with an AdWords campaign built around some long-tail keyword combinations specific to our value prop, but don't really expect paid marketing to do more than identify unexpected pockets of interest that we can then target via personal outreach. I also have some Google Blog Alerts set up on some of the same keyword combinations, and will occasionally leave a comment introducing myself and inviting them to take a look at the product.
  • Competition: This is more a marketplace than a competitive comment, but I was encouraged to see Union Square Ventures make a bet on Disqus. Granted, those guys are a real company and have done a great job driving adoption, but Fred's explanation of why what they're doing is cool hits on many of the ideas behind Askablogr (I've excerpted a few lines from his post below):
"Disqus does a few extra things that make a big difference. First, they take the comments and save them on in addition to the blog. And they create profiles for the commenters that aren’t tied to the blog hosting system. Disqus 'abstracts' both the comments and the commenters from the blog hosting system."

This is exactly what we're doing with bloggers, blog readers and the Q&A they create together via Askablogr. But we'd like to think we've taken the solution one step further to solve an even bigger problem that Fred highlights in the same post:

"There is one problem with blog comments – most people don’t read them. "

We think our approach of packaging and inserting reader / blogger Q&A as inline posts is a big improvement on traditional blog comment systems because it gets these conversations up into the inline posts where the average reader will find them. (P.S. to Fred Wilson - I don't think we need your money, but if you want to sign on as an advisor I'd love to have a chance to work with you).

That's all for now, but comments are always welcome, and (especially for you feed readers out there), you're always invited to ask me a question.

Tuesday, March 18, 2008

Reader Question: OpenSocial vs. FB/MySpace/LinkedIn

Q: Is OpenSocial going to really open up the social graph and enable new social nets to provide solutions to users w/o forcing them to recreate their networks? Or will FB/MyS/LinkedIn maintain a lock?
Posted by rr

A: Hi RR, apologies for the delayed response on this (I try to turn all questions around w/i 24 hrs max). If you've been reading me for a while now (and particularly today's Investment Thesis post), you know that I'm a Facebook skeptic and a Google fan. This has less to do with the individual merits of each company's product offerings and more a reflection of my belief that open systems beat walled gardens every time.

With respect to Facebook in particular, even the "success" of the platform strategy doesn't appear to have turned into real money for anyone just yet (the Zygna guys are welcome to tell me different), and I doubt their effort to control access and extract rents will hold up for long. Andrew Chen is as close to this topic as anyone I know and his recent analysis feels spot-on: if there's money in there, it's on the brand side and not in pimping users out to 3rd parties via access control. There's value there for sure, but it's not $15B worth and they're not going give Google a run for the performance marketing dollar anytime soon.

I'm also a firm believer (and have posted to this effect) that the world will come to view your personal data silos (contacts, attention, etc.) as yours to control, and not the posession of the service providers you happen to patronize. In that sense, Open Social just anticipates a much broader liquidity of personal data stores that is likely to come about as users claim ownership of (and extract value for) their attention data. If I'm even half-right about this, any walled garden sits on the wrong side of the trade and will be forced to either open up or watch its 'monetizable users' walk out the door.

So, without even dipping too deeply into the merits of OpenSocial as a toolkit, I think history is on the side of giving users control over their own data. Facebook and LinkedInmay need to pretend otherwise to make the most of their liquidity window (should it appear - things are pretty ugly out there), but that dam won't hold water for long.


Investment Thesis: Ideas Drill-Down

This is the third installment in a series. For context, here are links to the prior two posts:
- Investment Thesis Envy
- Investment Thesis: The Basics

This one will focus on the beliefs and assumptions I use to evaluate the content of an investment opportunity (independent of the people behind it, or the price at which it's offered). As noted in the previous post in the series, this framework is based in large part on my personal experiences, including things I've tried that worked and (more indelibly) things that didn't.

One more reminder from the previous post: all of the notes below live within my self-defined "circle of competence": using technology to connect individual consumers with stuff (whether it's merchandise, digital content, service providers or - most important of all - other people) in a fun and emotionally satisfying way.

1. Mind the Gap

This is the headline opportunity that most of the themes below map into. Put simply, even though their customers are all online, most businesses still aren't (or at least not in a way that matters). This is especially true for small and mid-market businesses, but even most global companies severely under-allocate resources to their online channels relative to their potential value. This was the foundation of our success at Adjacency (back in the first wave of Internet adoption), but it's also the engine behind Google's astounding rise as the default matchmaker between online searchers and (mostly) offline sellers. Nearly every other online enterprise that's delivered value over time (think eBay, Amazon, Expedia) is a variation on the same theme, and it could be argued that Yahoo foundered because it never really figured out that this was the foundation of their business.

Despite the current excitement around online social media "platforms" like Facebook and MySpace, none of them has yet figured out how to translate all that online social activity into transactions in the way that Google has done in search. And while institutional VCs gamble on cracking that nut, small-scale seed investors like me can make hay just by closing the many persistent gaps that exist between online customers and real-world businesses.

2. Distribution, Distribution, Distribution

At last count more than a hundred million websites are now competing for the attention of the hundreds of millions of web users worldwide. Unless you have a global brand or a captive base of existing users, Google effectively owns the front door to your online business, and will send you customers (or not) depending on how well you conform to their ever-changing rules. No new online business can survive unless it makes distribution (i.e., customer acquisition) a fundamental pillar of their product and marketing strategy.

Most of the excitement (and correspondingly frothy valuations) surrounding large-scale online communities is owing to their theoretical ability to aggregate audience on behalf of partners. Everyone now wants to claim that their social network is a "platform" that can deliver targetable slices of audience to advertisers and merchants much like Google does in search.

Unfortunately, most of these claims will fall flat as partners begin to realize that the audiences don't come to these applications in a buying mood, but there's a kernel of insight here that shouldn't be overlooked: building audience online is difficult, time-consuming and expensive, and the firms that can aggregate audience and purchase intent at the same time just might have a business on their hands. The new business ideas I like the best have one or more unique distribution insights built into their DNA, and assign that problem the same level of importance as their path to monetization.

3. Me-Value Delta

I've since repackaged the idea in a way that makes sense to me, but Brad Feld beat the concept of "Me Value" into my head as a Judy's Book board member, and he's absolutely right. Given the asymptotically infinite array of options and equally low switching costs of the Web, your only hope of success online is to channel JFK by asking as little as possible of your early adopters and delivering as much value as you possibly can in return. The bigger the gap (or delta, for the mathematically inclined) between your ask and the value delivered, the greater your chance of delighting your users, earning you referrals, feedback, repeat visits, and all the other positive-reinforcing cycles you need to succeed.

Too often I talk to founders (or prospective founders) who are so in love with the envisioned end-state of their product that they grossly overestimate what they can ask of their users during the initial engagement phase. My uniform response is that they should be thinking a lot harder about what they can do for that precious group of early users, and not what their users can do for them. Conversely, founders that are already planning to take smaller bites in order to focus on maximizing the Me Value Delta for their early adopters are much more likely to get my support.

4. Free is NOT a Business Model

Fred Wilson has written passionately and convincingly about Free as a business model, by which he really means that a 3rd-party payer is picking up the tab. And while I agree with him in theory and think this approach can make a lot of sense for VC-backed companies, it doesn't make any sense at all for the kinds of companies I like to work with.

I've been down that road myself, trading a big chunk of my cap table to buy the time required to chase a big 3rd-party-payer idea. I've also built a business on credit cards and cash flow, a much more nerve-wracking experience, but ultimately more rewarding in every sense of the word. While either path can work, I've come to believe that the customer focus and financial discipline enforced by the latter is healthier, more fun and more satisfying for everyone involved, including the seed investors who provide just enough capital to get the ball rolling. This point of view is only reinforced by Paul Graham and the Y Combinator team's successful example of a new investment model: as the cost of doing business online falls toward zero, the capital allocated to starting a new Web business should come down as well.

So to get my attention with a new business idea, it has to be clear that someone will open their wallet for what you're doing, and not just to rent out your eyeballs. And while that requirement may cause me to miss some great opportunities, it also filters out a lot of noise.

5. Niche is Nice

I learned this one the hard way. When Andy and I started Judy's Book back in 2004 we saw a huge opportunity to help bridge the gap between online customers and local businesses. But rather than go deep in a specific vertical (e.g., plumbers, architects, real estate agents, etc.), we opted instead for an organic, user-driven approach in which members could list and review whatever kind of local business they wanted. And while this approach did help us quickly build a large and passionate user base, it also "randomized" our value proposition in a way that was ultimately destructive of that community, and of the business as a whole.

Almost every big idea has a niche analogue that will scale faster and more reliably than the 'hail mary' approach required to chase its more ambitious cousin. Similarly, there are dozens of proven playbooks that, with a little tweaking, can profitably be run somewhere new. Taking this route may require the founders to swallow a little pride and downsize their ambition to transform the world, but it's much better to embrace that choice right at the start than be forced to the same conclusion when it's really too late to do much about it.

6. The Web as Database

The Semantic Web is a genuinely exciting vision and rallying cry, but it's years away from being realized, and even then will likely fall far short of the unified theory of everything put forth by folks like Tim Berners-Lee. But that hasn't stopped some very bright people from figuring out how to use the Web in its current messy, unstructured form as an incredibly informative database. (In fact, the difficulties these teams have overcome amount to competitive barriers to entry, effective for as long as the Semantic Web remains a distant hope).

Google is the ultimate version of this, but less ambitious approaches can be equally powerful when applied to a specific business problem. In almost any field of online endeavor, if you can master the aggregation and normalization of data across many different public and private websites, patterns will emerge that can be leveraged to create value for you and your customers. I love it when I come across companies that are applying this insight, either to power their own business strategy or to create uniquely relevant business intelligence for others.

7. The Future is NOT Now

Entrepreneurs are futurists by nature: they imagine a world that is different and better because it includes some innovation of theirs, and then they set about making that future vision a reality. Unfortunately, the real world often takes a long time to align itself with those future visions (if it does so at all). Knowing this, I tend to favor bets that are likely to reveal their promise soon or not at all. And as much as I love to think about what the future of Web technology may hold, my check-writing appetite is limited to companies with low overall capital requirements, near-term cash flows and a target breakeven date measured in months, not years.

8. Think Locally, Act Globally

Economic globalization is massively complex topic, and investing strategically on this theme is light years beyond the reach of a small-scale investor like me. That said, the global nature of the Web means that global opportunities tend to find their way into the strategy of almost every company I work with, more by accident than by design. Maybe the founder has a family connection in another country, allowing core functions to be sourced overseas at competitive rates. Maybe the founders spot a theme that's been played out in the U.S. but can be easily adapted to a foreign market. Whatever the reason, being open to global opportunities has become the accidental theme that keeps popping up in the companies I work with.

The formulation of this theme (and its last place appearance on the list) reflect its role in my investing activity. I don't intentionally set out to chase global opportunities (quite the opposite, in fact), but I'm always on the lookout for creative ways to bring the global marketplace to bear to accelerate returns, lower costs or tap new customer audiences.

Now that I've started writing about it there's plenty of other stuff swirling around in my head on this topic, but that should be enough to keep you busy for a while...

Monday, March 17, 2008

Askablogr Question: Site Redesign Ships Today

Q: Hey Chris, are you happy with the new Askablogr design?
Posted by Craig Huizenga

A: Hi Craig, thanks for asking. Tomorrow's the 2-month anniversary of Askablogr's initial release, and our visual experience still looked like my original wireframes (which is pretty much where it came from). Thankfully, one of our team members from Judy's Book, Ron Rundus, was willing to wave his magic wand over it for a few hours, resulting in the design refresh we shipped this morning. And while we didn't really tackle the user flows (which still need some attention), we now have a much more appealing and intuitive visual presentation. I particularly like the idea of giving questions and answers different text colors to make the different voices stand out, and the widget design is also a big leap forward from the original.

As always, we still have plenty to do to make the product really sing (dropping the registration requirement for asking questions is the next big item on the list), but it's satisfying to keep moving the idea forward in ways large and small.  I'll be posting a 2-month stats update later this week, but today is redesign day!

Thursday, March 13, 2008

Investment Thesis: The Basics

Per my recent post introducing the topic, this is the first installment in a series in which I plan to put in writing the themes and heuristics behind my early stage investing activity. For this first post, my goal is just to categorize and 'bucket' the major themes. In subsequent posts, I'll pick up each of these and examine them in more detail.

First, the basics:

Companies rarely succeed or fail on the strength of their ideas alone; the quality of the team and their ability to communicate and work together has at least an equal role in a firm's ultimate success or failure. These two factors interoperate to create (or fail to create) economic returns for the founders and investors. But even in a positive return scenario the price paid for performance can compare unfavorably to competing and less risky investment alternatives.

So, to feel good about writing a check to a founding team, I have to get my head around their ideas and the people behind them, *and* we have to agree on a price that balances the first two factors against the daunting risks faced by any new company.

So far, so ordinary. What (I hope) makes this interesting is the set of beliefs and assumptions I put into each of these buckets, which are unique to me and reflect my idiosyncratic bundle of experiences and observations as an employee, founder, investor, and business partner. In shorthand form (with details to be added in later posts), here's a rough cut at how I think about each bucket:

Ideas: Charlie Munger has two great quotes that apply directly to building a sound intellectual foundation for any investment thesis:
  • "Stick to a narrowly-defined circle of competence", and
  • "It is better to remember the obvious than to master the esoteric"
I've spent the last 15+ years working at the intersection of consumers and 'interactive' technologies (including pre-Internet stints in audiotext and in-flight entertainment systems). I started out helping existing brands connect with their customers electronically, but for the last 10 years or so have focused almost exclusively on creating new consumer applications and brands online.

Drilling down, most of the online applications I've helped to build fall into two major categories: branded retailing (e.g.,,, and social media platforms (e.g., Judy's Book). In the process, I've learned a ton about supporting disciplines like search engine optimization, search engine marketing, online advertising, lead generation, viral marketing and game dynamics (to name just a few).

So, despite being in the 'technology' business for most of my adult life, my "circle of competence" isn't in technology per se, but in using technology to connect individual consumers with stuff (whether it's merchandise, digital content, service providers or - most important of all - other people) in a fun and emotionally satisfying way.

From an investment perspective, the ideas that I connect with and understand the best tend to stay pretty close to this problem set. And even when the "esoteric" comes into play (think Semantic Web, microformats, data portability or any one of a dozen other exciting ideas that might be applied to solve these kinds of problems), I tend to evaluate it through the lens of the "obvious": i.e., how does it make life better for a definable group of people who would be willing to pay for the benefits delivered?

Team: The more time I spend with entrepreneurs (and would-be entrepreneurs), the more I appreciate the maxim that "ideas are like a**holes - everyone's got one." Value is created by people who can turn ideas into products, products into companies, and companies into businesses. This is hard enough to accomplish as an individual contributor within a going concern, but the kind of people who can do this from scratch (and not just jump on board a rolling train) are rare indeed.

In evaluating the people behind an idea there are too many variables to itemize in this introductory post, but the things I care most about (and are an immediate no-go if absent) include my top three:
  • Integrity - I wrote a long post on this subject a while back, but the core idea bears repeating: there are lots of ways to make money, and most of them are legal, but far too many achieve their returns by deliberately exploiting human weakness. I'm happy to limit my investment options (and possibly even my returns) by avoiding this kind of entrepreneur, not least because if they're OK screwing someone else there's every chance they'll do the same to same to me the first chance they get.
  • Passion - It's sad that this idea has become a business cliche because it's far more rare in real life than common usage would suggest. The kind of passion I'm talking about isn't to be confused with money-hunger or raw competitiveness (not that those attributes are necessarily bad). Instead, it's an almost religious conviction that the insight they're building on is so real and powerful and fundamentally right for the customer they have in mind that they're not going to sleep until they've gotten it right. As long as it doesn't cross over into delusion (a real risk) this is powerful stuff, and is almost a requirement for the difficult first phases of a company's life (yes, exceptions exist).
  • Emotional Intelligence - At the earliest stages of a company's growth, almost nothing is certain. Passion and conviction are only effective when paired with the ability to listen, hear and adapt to all the subtle cues - from customers, team members, sales prospects, business partners, etc. - that, taken together, hint at the correct course for the business. In my experience, this is the least common attribute among prospective founders, and therefore the most valuable. As the noted military strategist, Helmuth von Moltke famously asserted, "no battle plan survives contact with the enemy", and founders whose passionate conviction in their ideas prevent them from adapting to conditions on the ground are unlikely to succeed.

Price: "Fair" pricing for early-stage investments is a dissertation-worthy topic which I'm neither suited nor qualified to tackle. My lens, at least for this post, is limited to the qualitative and personal considerations that govern my thinking and check-writing.

The primary constraint on my pricing appetite is capacity. At this point, I'm investing only my own money. I often co-invest with others (more on this in a later post), but I'm not spreading my risk or leveraging my bets with other people's money, so my capacity is finite, limited to the share of my liquid net worth I (and my wife) are prepared to allocate to these kinds of bets. Because this number is small relative to competing pools of investor dollars (e.g., institutional VCs), I only look at deals where a relatively small amount of money (i.e., from tens to hundreds of thousands of dollars) can command a 'meaningful' share of ownership in the new enterprise, where 'meaningful' is counted in whole or double-digit percentage points.

But wait, you're thinking, there are plenty of deals out there where that amount of money can get you a stake in a really exciting new business, even if your ownership claim is measured in fractions of a point, where the ultimate financial return to you could be much, much greater. And while that's absolutely true, it misses the main reason why I make early stage bets: I love spending time with founders, thinking about their markets and business problems and looking for ways to help them succeed. If I just wanted to write checks and wait for distributions my price parameters would be completely different, but I wouldn't have any fun doing it, and having fun is important to me.

In my next post on this subject I'll pick one of these three topics and drill into the specific heuristics I apply when evaluating an early stage investment. If this topic is interesting to you, stay tuned.

Investment Thesis Envy

Some of my favorite blogger-investors have posted recently on the whys and wherefores behind their investment approach, including Fred Wilson on his latest fund at Union Square, Brad Feld on the launch of Foundry Group, and Paul Graham on what sets Y Combinator apart from traditional VC.

While each of these three has a slightly different take on where and how to make smart bets, collectively they reinforce my suggestion in a recent post that:
" investing is smart investing no matter what you're buying: know exactly what you want to buy, know exactly why you want to buy it, and have the patience to wait until you find exactly what you're looking for at a price you know is fair."
While it's nowhere near as crisp or comprehensive as the frameworks advanced by these three, all of my recent bets have been informed by a set of ideas about where opportunities exist and why small companies succeed or fail. Taken together with my recent dive into Charlie Munger's thoughts and writings, the posts above crystallized for me the importance of codifying and documenting my own investment thesis, partly to help in screening new investments, and partly to shine a brighter light on my ideas to see which ones really stand up to scrutiny.

This is no small task, and I expect the act of writing it down alone to point out some ugly cracks and inconsistencies. My plan is to break the topic down into a series of posts over the next few weeks. I'll title them all with "Investment Thesis" so you can read or skip as you see fit. As always, reader feedback and questions are more than welcome.

Wednesday, March 12, 2008

Shakespeare and Eliot Spitzer

I almost feel bad for piling on to the avalanche of finger-waggling in Eliot Spitzer's direction, but when I read the New York Times' coverage on the story this morning I couldn't get Shakespeare out of my head:
"For 'tis sport to have the engineer/ Hoist with his own petar...."
- Hamlet, Act III, Scene 4, Lines 206-207
It's sad to see someone so capable fall so fast, but the gap between his public persona and private behavior is just staggering. To crusade for tougher laws for soliciting sex while running up an $80,ooo tab for the same is a breathtaking show of hypocrisy, which makes me think of yet another line from the same play:
"The lady doth protest too much, methinks"
- Hamlet, Act III, Scene 2, Line 230
Whenever I see someone shouting from a soapbox, I always wonder what they're trying to hide with all that noise...

Tuesday, March 11, 2008

Askablogr Question: How to Turn Off Q&A Autopost

Q: hey chris, one quick question. if i originally gave you my wordpress name and pass to auto post-thru Q&A to my blog, is there a way to turn that off?
Posted by zellunit

A: Hi Matt, thanks for the question. It's not a scenario we've dealt with yet, so the answer (at least for now) is a hack: I think if you break your current install by going through the "change" process (found in the Edit menu on your profile), and then reinstall as "Widget Only" (vs. "Full Install"), you should get the desired result.

Let me know if that doesn't sort it out for you and we'll see what else we can do, and thanks for identifying a new use case we need to add to the roadmap...

Thursday, March 6, 2008

Watch Out for the Bus

I had a meeting yesterday with a friend and colleague whose mom recently died at the relatively young age of 64. As we were talking he also shared that his dad had suffered a debilitating stroke just six weeks after he retired. Coincidentally, on my way into the meeting my mom forwarded me a poem from a teenage girl with terminal cancer. Unrelated to any of the above, a few weeks ago my dad had to be airlifted to the hospital to address a fast-developing case of internal bleeding (he's OK now).

Maybe it's because I turn 40 this year, or because my kids are growing up so fast, but I've been reflecting more than usual on how little time we have to pursue our dreams and spend time with the people we love. As a result of many long conversations on the subject over many years, a close childhood friend and I share a shorthand phrase for this: "Watch out for the bus". In longhand, the rough translation is this: death is certain, the timing of death is uncertain, so try hard to live your life in such a way that, whenever the bus hits you, you can be at peace with the choices you've made.

I sometimes lose track of this idea in the daily press of work, family and current events, but it's never far out of mind. The convergence of events described above was a welcome reminder.

Andrew Chen Does it Again: Excellent Post on Viral App Growth and Attrition

If you're interested in social media and aren't already a subscriber to Andrew Chen's blog, you should be. Today's post is just one example of why: a companion post to his earlier analysis of user cohort segmentation, Andrew lays out a mathematical model for viral user adoption and attrition over time that makes it painfully clear why apps that don't deliver compelling user value rarely survive their initial burst of user adoption. In Andrew's words:
"If your retention sucks, then look out: The new invites can't sustain the growth, and you end up with a rather dire 'shark fin.'"
But don't just take my word for it, do yourself a favor and read him for yourself.

Google + BlackBerry Integration Update: Contacts On The Way

One of my earliest (and most viewed) posts was this one on Google / Blackberry integration. At the time, I said that the only missing piece was integration with Google contacts. Well, according to this article on Read/Write Web, contacts integration is on the way.

Per the Contacts API site, Google hasn't yet shipped the BlackBerry integration script I'm looking for, but with the API in place it won't be long before they or someone else tackles that piece of work. Their post on the release suggests as much, saying:
"For example, developers can use it to... [w]rite sync applications for mobile devices or popular, desktop-based contact management applications."
Despite the recent swoon in their public market valuation, Google continues to impress with user-centric innovations that (I believe) only cement their position as the anchor of the people-centered Web. Now if someone will just hurry up and ship that BB contacts interface...

Monday, March 3, 2008

Fred Wilson Channeling Charlie Munger

As most readers of this blog know, I'm a big fan of Warren Buffet's partner Charlie Munger, but as a startup investor I follow Fred Wilson just as closely. I just read this Fred Wilson post and I swear Fred was channeling Charlie when he wrote it. If you don't want to click through and read the full post, here's an excerpt from Fred:
"Conviction and discipline are two sides of the same coin. I think you need to start with conviction.... [C]onviction isn't worth anything if you don't pair it with discipline. Once you have a thesis, you need to stick to it."
And here are a few nuggets from Charlie on precisely the same themes:
"More important than the will to win is the will to prepare"
"Stick to a narrowly defined circle of competence", and
"Good ideas are rare - when the odds are in your favor, bet heavily."
It's easy to think of venture investing and public market investing as entirely different animals, requiring different frameworks and attracting entirely different kinds of people. But as the examples above suggest, smart investing is smart investing no matter what you're buying: know exactly what you want to buy, know exactly why you want to buy it, and have the patience to wait until you find exactly what you're looking for at a price you know is fair.

Digital Media Riddle: Where Are Prices for Digital Content Going Up Instead of Down?

A while back I posted about some counterintuitive trends in digital media. My example then was Colligent's success at selling tools and analytics to support a new model of marketing for the digital music industry. Today's example is even more surprising: despite growing inventories, increasingly transparent (and competitive) markets and frictionless online purchasing, prices in microstock photography are actually rising.

The most recent eye-opener came in this article from Selling Stock, an industry newsletter (subscription required). Here's the quote that caught my eye:
"Traditional stock producers have long agreed there was room for higher pricing in the microstock niche. Now that microstock is no longer new, its leaders are testing those waters. Fotolia recently launched an upmarket offering, with prices in the range of $20 to $100. It also raised prices of its micro collection. As of 2008, prices are up as much as 50% in some categories at the Getty Images-owned iStockphoto."
Year-over-year price increases of 50% are something you expect in monopoly-dominated industries, not in our brave new world of free online everything. But microstock is coming in underneath the much more expensive alternative of traditional stock photography, and as traditional stock buyers discover the market (and as image quality and rights packages in microstock improve to meet their needs) demand is shifting from stock to microstock at an accelerating rate. It's not yet clear whether the net result will be a smaller overall market for stock photography (in dollar terms), or just an expansion in the total number of images sold. What is certain is that microstock marketplaces and market makers are in a great position to capitalize on the shift.