Free web-based calling!

For those of you who read my blog, you know that I am big believer in frictionless sales.  (see an earlier post)

"Frictionless sales means reducing the pain for customers to adopt and use a service/product and consequently reducing the cost of sales and marketing and service to get a customer and generate revenue.  As I mention in an earlier post, "The less friction you have in your sales and delivery model, the easier it is to scale. The easier it is to scale the faster and more efficiently you can grow."

Well, if we thought we did that at Sipphone (full disclosure-it is a fund investment and i am on the board) with a fat client, I can tell you that we did much better with our newest release at Gizmocall.com.  At Gizmocall, users can now use their web browser, yes web browser, to make free calls to any mobile, landline, or SIP-based network.  With a simple Flash plugin, users get 5 minutes of free calling a day and 10 minutes if they register.  Congratulations to Michael, Jason, and the team for continuing to strive to lower the friction to using our service.  From a business model perspective, we clearly believe there is more to life than just minute stealing, so besides your usual upsell model for minutes and caller ID and other services, we plan on layering in some advertising.  Read Michael Robertson’s blog for more:

My plan with Gizmo Call is to offer phone calls that will feel free because they are paid for with advertising. The popularity of free email services, news services and community sites demonstrates that people will often choose ad sponsored services over paid ones. Because Gizmo Call is written in flash we can insert advertisements into the experience in a helpful manner. If you call 1-800-FLOWERS we can tell you about the great San Diego-based company ProFlowers which is running Valentine’s Day specials starting at $29.95 and offer to connect you to them at: 1-800-580-2913. If you need a plumber or a pizza just dial those words and we’ll pop up a list of vendors you can talk to for those services. Not everyone will want advertising in and around their calls, but Google has proved that targeted advertising is actually useful and that’s what we will strive for.                   

There’s no advertising yet on Gizmo Call which is why free calls are limited to just 10 minutes. Eventually we’ll have text, audio and video advertising – let your mind run with that one! Until then, use Gizmo Call to make some free calls and let me know how it works for you!

The trend is your friend – leveraging the power of commoditization and the efficiency of the web

I always like to say that the "trend is your friend," and it is pretty clear that one of the most powerful trends in the technology industry is the commoditization of existing markets which are currently served by high-priced, proprietary vendors.  In addition, it is also quite clear that companies that can leverage the web for sales, marketing, and even product delivery (downloads or SAAS) can have some significant advantages.  When I look at the enterprise landscape, I am not necessarily looking for the cheap solution, but rather a disruptive one that will allow a company to offer orders of magnitude improvement in performance, price, and delivery.  In addition, there are a few must-have characteristics companies should possess in order to get me interested:

1. large projected market-new emerging markets are welcome as long as we can see the opportunity ahead.
2. capital efficient business models – leverage frictionless sales and the web (try before you buy model, low barrier to usage, downloads, etc.) to create a more efficient and less costly sales and marketing machine.  Also leverage the commoditization trend to deliver products faster, cheaper and better.
3. disruptive technology – orders of magnitude improvement in price, performance, and delivery

A great example of a company meeting a number of those characteristics is portfolio company Greenplum (yes, full disclosure, I am on the board and may be biased in my opinion 🙂 ).  Greenplum is leveraging the power of commoditization to turn the data warehousing market, traditionally led by proprietary vendors like Teradata, upside down.  Rather than rave about Greenplum, I thought I would share a recent article from Bill Inmon, a well known data warehousing analyst who some view as the father of data warehousing:

And with that explosion of data comes a corresponding increase in the costs of data warehousing. In particular, storage costs and the cost of the infrastructure required to support the storage needs are rising. The hardware vendors love to say that storage costs are going down all the time. This appeases the manager who has to pay large sums for the storage infrastructure. Storage costs may be decreasing at a factor of X, but the demand for storage is increasing at a rate of Y, and Y is a lot bigger than X.

It is reputed that one hardware vendor is selling storage for data warehouses at the rate of approximately $750,000 for a terabyte of storage.

So along comes Sun Microsystems and Greenplum with an offer you cannot ignore. How about $35,000 for a terabyte of data up to 24 terabytes?

If you are planning for a data warehouse in your future, you should take a close look at the Sun/Greenplum offering. No, let me say that a little bit more strongly – you cannot afford to not take a look at the Sun/Greenplum offer – not unless you enjoy throwing your corporate resources away.

It is about time that someone lowered the dreadful cost of data warehousing. Some of the leading vendors have been shameful in their gouging of customers. So the Sun/Greenplum offer comes as a godsend.

The offer is so good that in fact, you can afford to buy and install Sun/Greenplum, try it out, and if it doesn’t work, for whatever reason, use the gear for some other purpose. At the price ratio of $750,000 for one terabyte versus $35,000 for a terabyte of data up to 24 terabytes – you simply have to try this offer.

So you may ask yourself how we are able to offer that kind of pricing, 20x cheaper than some competitors, and still get profitable?  Well first, we are leveraging a hybrid sales model where partners like Sun help drive the high end opportunities and our open source street cred and our creation of Bizgres.org helps fuel the download model.  In addition, rather than build expensive proprietary hardware solutions, we are leveraging the power of commodity boxes and clusters to deliver better performance at a fraction of the cost of existing competitors.  In addition, rather than start from scratch we have built some proprietary extensions on top of PostgreSQL, a leading open source database, to make it BI ready.  So combine lower costs to build with a highly leveraged sales model and you can quickly see why we can offer the pricing that we do and build a great business from it.  There is nothing like leveraging a powerful trend, so if you are an entrepreneur building a company with many of the characteristics outlined above, I would love to hear from you.

Why vision statements matter

Vision statements matter.  Sometimes we get too focused on the daily bump and grind, the next product release, and forget about the big picture and what we are trying to accomplish (see an earlier post on Vision).  Trust me, the word vision became a dirty word during the bubble as many companies were long on vision and short on execution.  I am not advocating that we return to that environment, but I am strongly saying that companies do need a vision and that it can help them with their execution.

I went out to dinner a couple weeks ago with a few key executives at a portfolio company and as we started talking about future product direction, it seemed that we all had different ideas of where the company should go.  Seeing some confusion I tried to get us focused back on the basics when I asked the team what our vision was.  The first pitch was great and so were the others but unfortunately they were all different.  It is really hard to drive future product direction when your key executives can’t agree on what the company should be when it grows up.  In addition, it is quite difficult to get your employees on the same page without a simple, succinct vision.  Furthermore, it is hard to build word of mouth marketing without boiling down who you are and what you do in a memorable and short manner.  Yes, it can be challenging to distill everything you are doing into a short pitch but great companies are able to do this.  So let’s look at a few companies in the highly competitive video space that have managed to stand out from the crowd (other than YouTube) and break down their vision statements and taglines:

1. Metacafe: Metacafe is one of the world’s largest online video broadcasters with a global audience of 16 million unique visitors (comScore Media Metrix) watching over 400 million videos each month.  Using our VideoRank™ technology, Metacafe is the only site that mines the collective wisdom of its audience to filter and surface the most entertaining videos, making it the best place to both watch and distribute high quality video content.

Tagline: Serving the world’s best videos

(its saying I’m a pretty big player and it gives you the best videos,not just every video – secret sauce is its VideoRank technology)

2. Revver: Revver is a video-sharing platform built the way the internet really works. We support the free and unlimited sharing of media. Our unique technology tracks and monetizes videos as they spread virally across the web, so no matter where your creativity travels, you benefit.

Tagline: What if creativity could pay the rent?

(sounds a little techie-video sharing platform the way the internet works? the differentiation is in the fact you get paid-the vision sounds like it is more focused on the publisher than the consumer, secret sauce is its platform to pay creators)

So they are both video sharing sites but each has its unique spin to help its employees and users spread the word in a simple way.  In addition, I am sure that their respective vision statements helps guide their future product direction.  Revver probably asks itself, does my next release help me further strengthen my advantage as the best platform to get publishers paid.  Metacafe probably is constantly working to improve its community based voting and algorithms.

The trick is to make your vision broad enough to allow you to grow into it, yet be differentiated, and obviously simple to remember.  You want all of your employees when they are talking on the phone with customers or friends or even at cocktail parties to give a simple description of what your company does and how it does it.  You want the next degree of relationships to be able to explain just as easily as your employees – this is how great buzz builds.  You want your key product guys asking themselves how does this next release help our company continue to deliver against our vision.  So remember before launching into a variety of different directions, think long and hard about where you want the company to go and how to distill that vision into an understandable and simple pitch to help get the message out.  Take the simple litmus test at your next management meeting to see if you are all rowing in the same boat or different ones.  Doing this does not guarantee success but definitely helps get you and your team moving in the right and more importantly the SAME direction.

One hurdle to a true wireless revolution – ease of use

It is pretty clear that Scott McNealy’s pitch years ago that the "Network is the Computer" is finally coming into fruition with broadband penetration at 50% and wireless data speeds getting faster and faster every year.  Having a network available to you 24/7 makes it easier to keep your data in the cloud and accessible by any device, anytime, and anywhere.  I had an interesting discussion yesterday about what many people call the third screen, your mobile device, and why I believe it is still early in the game.  Sure there are a plethora of startups going after this market with a whole host of new applications including streaming video, blogging, geotagging, social networking, gaming, and advertising services.  But I still believe the one missing piece is that our third screen or our wireless devices still need to be easier to use.  There are only so many early adopters out there and I strongly believe that the big money will be made when cell phone and software companies figure out simpler and easier ways for consumers to access wireless data services.  Only when the so-called "soccer moms" and other more mainstream users are able to discover new applications/services and easily install and access them will we have a true wireless explosion.  This past Christmas I witnessed firsthand the power of wireless killer apps when I sent some MMS photos of my family to my parents and in-laws who were instantly hooked and upgraded their phones and plans to make it easier for them to use the new services.  Of course, they started playing around with their phones and started asking me about other new applications they could use but partly gave up because some of them weren’t exactly intuitive.  Sure, I understand that it is partly a chicken and egg problem as well since pricing is still high for data services and it still isn’t easy to use and there aren’t enough killer apps to make people want to pay.  To that end, it is great to see companies like Alltel make an attempt at solving this problem.  Of course, the devil is in the details, but having a widgetized , personalized home page which any developer can build to is a first great step in making this happen.   Also keep an eye out for Yahoo and others like Netomat (full disclosure- i am on the board) who are both working in different ways to make web-based services as easily accessible on the phone as our computer.

Bring out yer dead…I’m not dead

We all know that there is something different this time about the web startup market.  As I have written before, it costs next to nothing to get a service on the web (look at MyBlogLog as an example), the market is much bigger as broadband penetration has grown from 10% to 50% over the last 5 years, and I hope that we have all gotten more prudent with the amount of funding that startups initially need to get their service up and running.  This cuts both ways as a lower barrier to starting a company means a lot more competition in each market.  Given that, it is not surprising to me that a number of startups that have raised money over the last 12 months seem to be making the news in the blogosphere for laying off staff or even (GASP) going out of business.  The timing seems about right – startups raise about 12-18 months of cash to hit some key milestones and then either go out for more funding, get acquired or go out of business.  Until now, most of the news was centered around the first two paths.  So it is inevitable that we will hear about failures especially as management teams and investors make the hard decision to pull the plug early rather than plod along.  This also may mean that rationality is still with us as people understand that funding the 30th tagging site or 50th video site may not be the best use of capital. 

If there are always going to be 1-3 winners in a space, then more competitors equals more failures. Combine this with the fact that this new resurgence of web startups is much more publicized and transparent than the first generation.  So more startups and more news outlets and blogs means that we are only going to hear more and more bad news in 2007.  That’s ok.  We have to remember that in the echo chamber of the blogosphere, this news of death and layoffs seems to reverberate quite loudly.  Just because we hear about it and hear about it from more sources does not mean that the sky is falling.  From my perspective, this is no different than the past.  Startups are risky and a number won’t make it but some will hit it big.  In addition, startups have to be flexible and more often than not their business models will adapt once they are out in the market which means a layoff or two may happen.

This reminds of the scene from the movie Monty Python and The Holy Grail where the dead collector comes through town to clean up the streets.  As he pushes his cart through the town, people start piling up dead bodies.  However, one seemingly dead body claims he isn’t dead.  The same goes for web startups – we will see more bad news but that does not mean the market is over.  It also doesn’t mean that we shouldn’t write about the failures as we can all learn from them. 

Here is an excerpt from the movie:

The Dead Collector: Bring out yer dead.
[a man puts a body on the cart]
Large Man with Dead Body: Here’s one.
The Dead Collector: That’ll be ninepence.
The Dead Body That Claims It Isn’t: I’m not dead.
The Dead Collector: What?
Large Man with Dead Body: Nothing. There’s your ninepence.
The Dead Body That Claims It Isn’t: I’m not dead.
The Dead Collector: ‘Ere, he says he’s not dead.
Large Man with Dead Body: Yes he is.
The Dead Body That Claims It Isn’t: I’m not.
The Dead Collector: He isn’t.
Large Man with Dead Body: Well, he will be soon, he’s very ill.
The Dead Body That Claims It Isn’t: I’m getting better.
Large Man with Dead Body: No you’re not, you’ll be stone dead in a moment.

Just to be clear, the fact that it seems like more and more startups are running into hard times does not mean that the market is in serious trouble.  And while I believe the failure rate may be even higher in this go round, I also expect that the dollars lost per failure will be orders of magnitude lower than in the first Internet wave.  When the 30th tagging site or 50th video site have hard times, that is not cause for alarm.  What will scare me is if we start seeing more unproven startups raise significant amounts of first round capital at frothy valuations and spend it on Super Bowl commercials or if Google starts to hit the skids.

Communicating with your board

A couple weeks ago I sat down with a new CEO of one of our portfolio companies, and we discussed goals for 2007 and what I and the board expected of him.  Yes, there was your usual conversation about getting more customers, building out a team, and ramping up revenue while managing costs, but one of the most important points I made to him was in how to communicate with the board.  I can tell you that one area where many first-time CEOs fail is in communicating and working with their board.  Either they don’t give you enough information, they give you too much, or they feel that the only news to share is good news.  I have written a few posts in the past on board communication including We Don’t Like Surprises and the VC/Entrepreneur Relationship. Given how important this is, I thought I would share a few simple thoughts with you.

With respect to your information flow, make it timely, transparent, and relevant:

1. Timely: we don’t like surprises.  Tell me in advance.  When you think we are going to miss the quarter by a significant amount, don’t tell me 2 days before the end of the quarter, tell me as soon as you can.  We are partners and this gives us all an opportunity to prepare contingency plans in advance or control our hiring before we run into a wall.  CEOs who communicate well make sure the bad news travels just as quickly as the good news. If you don’t tell us early, we can’t help you.

2. Transparent: let me know as clearly and concisely what the issue is and don’t spin me.  Transparency means sharing the raw data with me as well as the short summary of why something happened positively or negatively. If we don’t get a deal this quarter, and you really don’t think it will happen, don’t keep it on the sales pipeline and set the wrong expectations for us.

3. Relevant: I don’t need to know every little detail of your day-to-day operations but we also do need to be apprised of what is important. Relevancy of course changes with company stage as well.  Knowing as soon as possible about the first couple of engineering hires is relevant in a startup but knowing about the 10th engineer does not require a real-time update.  If you not sure if a specific update is relevant, err on the side of more is better.  Sending an email update out to the board is simple, and trust me, if the news is important, those board members who are more engaged or concerned will reach out to you.  If it really is a big issue (positive or negative), I suggest calling a few of the board members to discuss with them. 

At the end of the day, information flow comes down to trust – board members trusting the CEO and the CEO trusting the board.  The CEO-Board relationship is a two way street.  Board members have to be just as direct, open, and upfront with respect to our expectations for the CEO and the management team.  This means getting a plan in place for the year that is discussed, vetted, and ultimately finalized which the board and the management team sign up to. If you abide by these simple rules, I can assure you that these tips will go a long way towards helping you build a very strong and healthy relationship with your board.  At the end of the day, keeping any relationship strong and thriving is dependent on how well everyone communicates with each other.