Tag Archives: vc

Google In-App Payments Appear Slated For a Full Launch in May

Google may be looking at May for a full release of much anticipated in-app billing features, at least according to an e-mail sent today by a payments company the search giant recently acquired to former customers.

In a letter leaked to TechCrunch, Jambool, which was behind virtual currency platform Social Gold said it will discontinue the service in favor of a Google in-app payments product in May. But Jambool customers can use the company’s merchant console through September and get financial statements through February of next year. Google acquired Jambool last August for a reported to $70 to 75 million, just as the company was being cornered on the Facebook platform by the emergence of Credits.

Google’s in-app payments product is currently in beta testing. A handful of developers, including Disney’s Tapulous, have gotten their hands on it to experiment with in hits like Tap Tap Revenge. But it’s not out to consumers yet.

In-app billing promises to bring Android developers the income that has long eluded them on the platform, at least compared to what can be made on iOS. Across multiple platforms including iOS, developers are transitioning from reliance on upfront paid apps and advertising to a model that resembles what has worked on the Facebook platform — virtual goods. Two developers, Pocket Gems and TinyCo, have raised sizable rounds from Sequoia Capital and Andreessen Horowitz respectively on the bet that dominant gaming companies will rise in the next 12 months.

There are a number of remaining questions, however, about how Google will implement in-app payments. Google’s Eric Chu, who oversee the company’s relationship with the Android developer community answered a few of these in an interview in January.

1) Can it execute payments well? Part of the original reason why Google Checkout turned out to be so lackluster, at least from our understanding, was that it suffered from a convoluted vision. It was initially conceived as a product that would help small to medium-sized businesses, but then internal politics turned it into a product aimed at larger corporations, which require more time-consuming custom work. Secondly, it’s unclear how the product is being internally managed — how much is it under the purview of the Android team, and how much is it under the oversight of the commerce group under eBay veteran Stephanie Tilenius?

2) How strongly will Google enforce the use of its approved payment methods in the Android marketplace? Developers selling content, goods or services within apps on the Android Marketplace have to use an “authorized Payment Processor,” which basically means Google Checkout or direct carrier billing. There are two exceptions: if you sell physical goods or services like movie tickets or digital goods that can be consumed outside of the application, which is presumably the loophole that companies like Amazon or media publishers can use to sell songs or content through other payment systems.

Conceptually though, we find Android’s payment policies less problematic than on other platforms. There will be multiple Android app stores, some of which will be heavily promoted by carriers like Verizon or by competitors like Amazon, which developers can turn to if they want to use alternative payment methods.

Can a start-up raise too much money?

Some wise words from a VC guys and a games industry guy on money, money, money….read on…

“Together with Nic Brisbourne of The Equity Kicker / DFJ Esprit, I am writing a series of 50 questions you should ask when raising venture capital. We expect the series to run for a year, after which we will collate the answers into a book. We view this as a collaboration, so please comment to help make this series even more useful.

Can there really be such a thing as a startup raising too much money?

Of course there can. The history of investment is littered with example of companies that raised too much capital, were feted by the press, government and investors and then imploded before their products had made a dent on the market.

From the games industry, the most recent example is RealTime Worlds, which raised $104 million and closed a few weeks after it launched its magnum opus, APB. During the dot com boom, there were many examples, but perhaps the most egregious was Boo.com, which raised $135 million, spent it all within 18 months and went bust without having really launched a product at all.
Why is having too much money bad?

Having too much money is bad because it stops a startup from fulfilling its primary function: to iterate its way to product/market fit.

In a previous post, I explained what product/market fit means, and why it is so important to a startup. I hope it will quickly become apparent why too much money is detrimental to the process.

Finding product/market fit is about iterating. It is about changing the product, the business model or even, in its most radical form, the entire target market, in response to feedback from customers.

I’m not for a moment suggesting that a startup CEO needs to respond to every crazy idea of every customer. He or she needs to use face-to-face conversations with customers, detailed analytics, feedback from the sales and marketing teams and every tool in the workshop to understand where the perfect confluence of product, market and team occurs.

He or she then needs to reshape the company to deliver on that confluence. That can be a very scary process.

ngMoco CEO Neil Young pivoted away from paid-for games on the AppStore because he believed that he could not achieve meaningful scale as a games business given the rapid downward trend in pricepoints. He abandoned a business model that was currently profitable for his company based on his belief (and copious evidence) that transitioning to a business model that was free with microtransactions satisfied the market need much better – and would be much more profitable. Eighteen months later, he sold ngMoco for $400 million to DeNA of Japan.

The concept of pivoting may be overused in 2011 (see this New Yorker cartoon), but it is a useful one. It is a phrase that allows startup entrepreneurs to say not “we failed” but “we tried, and learned, and are trying again.”
Change is scary, and money makes it unnecessary

Companies with lots of money don’t need to pivot. They can tell themselves that the problem is with the sales team, or with customers not understanding the product, or with usability issues.

They tinker under the hood instead of understanding the market. They spend money on a sales force to pitch, instead of forcing the CEO into the marketplace to hear from his prospects why they are not buying. They execute, execute, execute.

Against a business model that does not work.

Raising money is a great thing. Having lots of it is a wonderful comfort. But for a startup trying to find its place in the market, it can be disastrous.”

Start-up Advice from Mark Suster

Some wise words on start ups courtesy of Mark Suster (sucessful entrepreneur you know!)…

“I usually tell people that everything I learned about being an entrepreneur I learned by F’ing up at my first company.  I think the sign of a good entrepreneur is the ability to spot your mistakes, correct quickly and not repeat the mistakes. I made plenty of mistakes.”

Below are some of the lessons I learned along the way.  If there’s a link on a title below I’ve written the post, if not I plan to.  The summary of each posting will be here but the full article requires you to follow the links.

For now it’s mostly an outline for me to follow (in no particular order).  I’ve now started so be sure to look for links.  If you want me to do one sooner rather than later leave a comment.  If the topics seem interesting to you please sign up for my RSS feed or email newsletter on the home page.

Disclaimer: I ran two SaaS software companies.  My experiences come from this.  I can’t say they’re applicable to all businesses but I think many of the lessons will be applicable to most tech firms.

1 – Should you start a company or go work for someone else? – In this post I talk about whether it’s time to “earn” or to “learn” – a guide on thinking about when to start a company.

2 In the Beginning (most common early mistakes) – Many founders make mistakes in the first 12 months of business that cost them dearly as they build their companies.  These mistakes revolve around intellectual property, founding team members, initial product that is built and market validation.

You also need to consider founder scenarios, ownership, prenuptials and stock options.

Learning to work with lawyers.  Start early, build relationships, make them a part of your business.

Do you still need a business plan to start a company?  Conventional wisdom amongst uber-startup CEOs and VCs is that you don’t need a business plan.  Just launch and iterate.  They’re wrong.  While you shouldn’t write a Word document, a good financial model is a must.  This post tells you why.

4 Choose your investors carefully.  There are many bad investors out there – I call them VC Seagulls.  Read here to see some of the signs to be careful about.

5 Hiring at a Startup or Looking for a Cofounder? Know thy Weaknesses –  Before you build out your senior (or even junior) team you need to inventory your strengths / weaknesses.  Be honest with yourself.  And don’t hire 5 clones.  Plug your weaknesses.

6. Don’t Drink Your Own Kool Aid – There is a hype curve in any company.  Press, journalists, analysts, friends and family can reinforce the sense that you’re “killing it.”  As Public Enemy says .. Don’t Believe the Hype.  The only way to build a sustainable customer is to listen to customers, partners, suppliers and employees.  This post talks about how the Kool Aid effect happens.

7 Save Your Spin for Someone Who Cares – How should you best use your PR with VCs or business development partners?  This post covers the topic of why PR is so important but so often misplayed.

8. Good Judgment Comes from Experience, but Experience Comes from Bad Judgment – You can read lots of books or blogs about being an entrepreneur but the truth is you’ll really only learn when you get out there and do it.  The earlier you make your mistakes the quicker you can get on to building a great company.

9. Beware Rocket Fuel

10. Naked in the Mirror – Most companies have growing pains and moments of intense self doubt.  It is compounded because you read your competitors press releases yet you still stand naken in the mirror every morning.  This post talks about this issue and how to get over it.

11. Punch above your weightclass – Startup founders are often tempted to bring in the heavyweights early.  This is very frequent in sales because it seems like the easiest solution when you’re not hitting your numbers.  I argue that you should always hire people who aspire to be one level above their last job (e.g. one “weight class” higher).

12. Turn your Organization Inside-Out – Many companies are too insular.  You need to get all of your input from the outside and have that inform your company and product direction.

13. JFDI – What separates entrepreneurs from those the offer tons of advice but sit on the sidelines?  Entrepreneurs guide themselves by the Nike slogan, “Just Do It.”  They know that they need to move the ball forward everyday and make decisions with incomplete information.  They know that at best 70% of their decisions are going to be wrong and they find ways to correct their direction.  They JFDI.  This post explains.

14. MVP

15. Elephant, Deer and Rabbits – Many companies make the mistakes that I made in trying to serve multiple customer segments early in your company’s existence.  In this post I argue that most companies should be Deer Hunters but at a minimum narrow your range and hunt in one segment.

16. Embrace Losing – I hate losing.  I really hate losing.  But you need to embrace losing if you want to learn.  Channel your negative energy.  Revisit why you lost.  Ask for real and honest feedback.  Don’t be defensive about it – try to really understand it.  But also look beyond it to the hidden reasons you lost.  And channel the lessons to your next competition.

17. You’re Most Vulnerable Just After You Win a Deal – Competitors have nothing to lose.  Internal enemies at your client play their cards more openly.  Thing can get ugly.  Never celebrate until the ink on the contract is dry and the check is in the bank.

18. Crossing the Chasm

19. When you’re a Hammer Everything Looks like a Nail

20. Flipping Burgers – In some companies the CEO does not have the complete grasp of every function of his/her company.  They essentially outsource the thinking on technology, sales, customer service, whatever.  This is always a warning sign to me.  This post covers the lessons I learned the hard way, from trying to run a burger chain without first flipping burgers.

21. Crocodile Sales

22. The End of the Mexican Road

23. Beg for Forgiveness

24Lies, Damn Lies and Statistics

25. Cutting into Muscle

26. Rolling out the Red Carpet on the Way Out the Door – Many companies wait until their star performers quite before offering up serious incentives to stay.  There are only 4-5 great people who make a difference in any startup.  Know who yours are and roll out the red carpet while they’re still inside the castle.

27. Boards & Board Meetings

28. Advisory Boards – Many first-time entrepreneurs form advisory boards and grant 0.25-0.5% equity to each adviser.  Should you?  This post talks about why equity for advisers should only come if they write a check and if you do set up an advisory board what the best way to run it is.  Also a quick note on how VCs view advisory boards (summary answer is – we’re cynical).

29. The Burning Platform – There are 3 steps you need to solve to effectively sell your products. 1) Why buy anything? 2) Why buy mine? and 3) Why buy now? The first two are easy – it’s the third that drives faster sales conversions. This post covers the three questions of sales.

30. Avoiding Death by a Thousand Cuts

31. Easy Money vs. Pure Strategy

32. Missionaries vs. Mercenaries

33. The Fallacy of Channels

34. Demo booths

35. International Licensing

36. Founders taking money off of the table.  Controversial topic but in many scenarios this aligns the incentives of founders and VCs allowing both parties to “swing for the fences.”

37. Do you need an MBA to work in a start-up? Many careers require MBAs (investment banking, strategy consulting and private equity to name a few), but my opinion is that if you want to follow a start-up career an MBA isn’t necessary and considering the cost and debt you’d incur could actually make you more risk averse and a less likely entrepreneurs.  The post talks about the “5 C’s” of an MBA.

38. Give in graciously

39. Swim with the Sharks without Being Eaten Alive

40. How to (re) approach people at conferences – Many people swarm a panelist after he/she finishes speaking.  Other people turn up at conferences and just “wing it.”  In this post I talk about how to maximize your attendances at conferences or trade events and meet the right people.

41. How to present at big meetings without going down a rat hole.  Big meetings are hard to manage.  Unless you have a sponsor to help you manage the process and know how to deal with detail merchants, naysayers and silent partners you’ll find yourself in big trouble.

42. The Yo-Yo Life of a Tech Entrepreneur: We all find ourselves in the habit of working late, traveling too much and eating like crap.  In your twenties it’s manageable.  In your thirties it starts to catch up with you.  When you hit 40 life changes.  You need to get serious about finding a way to bring health & fitness into your life as an entrepreneur.  This is MY story.

Does there need to be a pain point for an investor to invest?

I recently met with Nic Brisbourne at DFJ Esprit and pitched him for investment into a company that I am involved with; so was interested to see his view on whether something can be fun, meet no ‘pain point’ and raise investment. After all life should be fun…

The pleasure principle – companies shouldn’t only focus on pain points

Perna Gupta is the CEO of Khush, the developer behind the music creation iPhone app LaDiDa – an app which has been downloaded 270,000 times and is unashamedly about having fun.  She wrote a guest post on Techcrunch on Sunday complaining about how her company had got to the final stages of two prestigious start-up competitions, been the audience favourite, but been dismissed by judges because she isn’t solving an obvious pain point.  In her words:

Earlier this year, my company advanced to the final stages of two prestigious start-up competitions. Both times, I got up on stage and belted out my prezo in C Major (our product is LaDiDa, an iPhone app that helps bad singers make music), and then backed up the singing with solid growth metrics on our business. The audience loved it, and LaDiDa was a crowd favorite to win in both contests. But when it came time for the judges’ feedback, I was frustrated to hear a familiar refrain: “Your demo is great, really cool app,” they said, “but we can’t give you this award because your product doesn’t solve any obvious pain point.”

In the rest of the post she goes on to argue that investors’ focus on pain points is resulting in a lot of worthwhile companies not getting funded.  As she points out, Twitter and Facebook weren’t about solving pain points when they started.  Nor are the pornography, sports and coffee industries.

As an investor I love a business that solves a clear pain point as much as anyone.  When pain is being removed it is much easier to be sure that a market is there, but I think our major pain points have largely been solved, and targeting pleasure, or happiness is increasingly going to be where the action is.

For most consumers the burning question is ‘how can I be happier’ rather than ‘I wish I could get rid of XYZ irritant’.  And LaDiDa makes people happier, it is fun, it promotes togetherness and sharing, and it makes you a better singer.  What’s not to like?

Check out this promo video from their iPad app to get a flavour (and this is a fun experience too…)

50 questions: What does an LP look for in a venture capital fund manager? – Games Brief

Few entrepreneurs take the time to realise that VCs are often under the same pressure as startups: they have to find capital, satisfy their investors and keep up with a changing market.

In this week’s 50 questions post, Nic Brisbourne explains what Limited Partners, the source of funds for many venture capital firms, look for before they will invest in a VC team.

Read the full answer at The Equity Kicker.

50 questions: What does an LP look for in a venture capital fund manager? – Games Brief.