• 16Jan

  Make Versus Buy

  Posted by mark @ 5:27 pm in General 5 Comments

  If you read this blog, you know that we believe that one of the only advantages that a start-up has over the big boys is the ability to execute quickly. As I mentioned in my post on the 3 advantages of a start-up, if you get there first good things can happen.

  Jellyfish.com is a great example of this. Microsoft saw our head-start with a new search advertising model and decided to acquire the company to launch its Live Search cashback service.

  Throughout the Jellyfish experience, we got many questions that went something like this: “won’t a big search company see your idea and just do it themselves?” Seems like a fair question and one we certainly considered.

  But the reality is that big companies often perform a “make versus buy” analysis whenever they decide to launch a new innovation or enter a new market. Sure they have the money and employees to do what the start-up is doing. But big companies have big competitors too, which creates pressure to get to market fast. This time-to-market pressure often means that they put a premium on acquiring that start-up with the head start. That head-start can mean the difference between success and failure.

  This concept came into sharp relief today as I read this Wall Street Journal article charting some of the early mistakes Microsoft made in the search wars that allowed Google and Yahoo! to become the two dominant search advertising companies. One central mistake was a miscalculation in0 this “make versus buy” analysis.

  Microsoft had the opportunity to buy Overture, the early market innovator in paid search way back in early 2003, a move that would have given them a huge head start in paid search. But the company balked at the billion dollar price tag, instead believing that they could build the system themselves.

  The result of Microsoft’s decision? Yahoo! snapped up Overture for more money, and Google and Yahoo! established themselves as the dominant players in search advertising before Microsoft finished building their offer internally. Microsoft has played catch up ever since, and will likely end up buying the Yahoo! search business for a lot more than that early acquisition of Overture would have cost them.

  Lesson for entrepreneurs? If you have a window of opportunity to innovate in a market first, then do it! Get there first, build value, and good things can happen.

  

   

   

   

• 13Jan

  Alice in the Third Trimester

  Posted by mark @ 4:36 pm in General 11 Comments

  Forgive the analogy, but launching a start-up is the professional equivalent of a pregnancy. And no, I’m not referring to the physical pain of pregnancy or trying to compare a company to an actual son or daughter. But still, there is a similarity in that nervous excitement you feel; that feeling of the great unknown you are about to enter. Will everything work out as planned? What if something goes wrong? Leaping off that cliff is exciting/stressful/overwhelming/thrilling all at the same time.

  Our closed beta-test of Alice.com begins on February 2nd, which means we are going to meet Alice for the first time in a few short weeks. It is one of my favorite times in a start-up. The time when everyone on the team comes together to work like crazy to pull off the big idea we’ve been talking about for so long and change the market (we hope). To see something that was once only scribbled on a whiteboard come together and take on a life of its own is an amazing experience and something that I feel very lucky to have the opportunity to experience again. Being in a start-up gives you the freedom to swing for the fences; something everyone should do at least once or twice in their lives.

  Things will be stressful the next few weeks and for months beyond our launch. But they are times you’ll never forget. So wish us luck as we enter the waiting room and get ready to step into the great, exciting unknown.

  

  Brian Wiegand’s daily prayer that Alice will actually work

• 26Nov

  A toucan, muskrat and a buffalo walked into a Startup……

  Posted by brian @ 12:16 pm in General 59 Comments

  This being my 4th startup, I have quickly learned that company culture is one of the most important ingredients for success.  I work hard on a daily basis to ensure that we adhere to our fun and energetic culture at Alice.

  One example of driving this culture at the office is by assigning every employee an animal.  I have this strong belief that everyone’s behavior, temperament, personality and work habits match those of some animal in this world.  I feel this becomes very apparent  after working with someone for about a week.  Once I have had time to observe the employee in the work environment, I get together with the animal naming committee to finalize the choice and setup the unveiling ceremony.  In this graphic, you can see the entire Alice team by title and animal of who we have hired so far.

  

  A few rules, you can’t create your own animal.  If we did that, I would choose a lion or some sort of majestic bald eagle but I have been given a toucan as my animal (not be be confused with the Fruit Loop cereal mascot)   Toucan’s are very unique and you know when one is in the room.  They have very loud vocalizations and can be heard at long distances.   They are also extremely feisty, smart, friendly and playful.  This describes me to a tee (not so sure about the “smart” quality)

  Reading this you probably think that you wouldn’t want or care about your animal but I have had on many occasions new employees putting pressure on me after a week to reveal their animal.  They didn’t feel a complete part of our Animal kingdom (I mean team) until they knew what their animal is going to be

  The staff then uses these animals on name tags, door signs, Yammer icons etc….In many cases the employee will decorate their work area with pictures of their animal.  We have a ton of fun with it.

  I have worked with all kinds of animals over the past 3-4 years at Jellyfish and Alice.  We’ve had house cats, kangaroo’s, armadillos, gorillas, beavers….. and the list goes on and on.  If you have received an animal name from me in the past and are reading this post feel free to introduce yourself and your animal name in the comments

  There is a ton written on company culture including the Zappos story and a VC’s perspective. This is just one small example of how much fun we have working at Alice which sets the tone for the overall company culture.  I feel that one of the CEO’s jobs is not only to take a lead in driving the vision but often over looked is to cultivate an overall culture that will ultimately lead to the company’s success.

  Brian

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• 19Nov

  The 3 Advantages of a Start-up

  Posted by mark @ 4:36 pm in General 20 Comments

  You’re in a start-up, and you’re about to start competing against some giant company. As an entrepreneur, you know the drill. It’s you against Bill Gates or Jeff Bezos or Michael Dell or Howard Schultz, or even a two-headed monster like Sergey & Larry.

  

  

  Let’s face it–the cards are totally stacked against you. They have SO much in their favor. They have:

  • More Brains
  • Better Technology
  • An Army of Employees
  • Buckets of $
  • Huge Credibility with the Press
  • Lots of Customers

  They can outprice you and outlast you in any market they choose.

  As entrepreneurs, why do we choose to fight this kind of battle? I’m prepping for a presentation I’m giving tonight at the University of Wisconsin and I asked myself that question. How can a start-up ever carve out a space, let alone win the game? Brian and I have had a few successful start-up’s (Brian has 3 to his name, and I’m working on my 3rd with him right now). Thinking about our experiences, I was able to come up with the ONLY three things that you have going for you as a start-up.

  They are:

  (1) Speed & Agility. Big companies can’t move as fast as you can. This is by far the most important advantage for a start-up. You may have a great idea, but I’ll bet that the same idea is kicking around the big company competitor too. The issue for them is that they have a huge organization to drag behind them. They can’t turn on a dime. You can. You can get there first. And getting there first is huge. Jellyfish is a great example of this. We hit upon a new, disruptive search advertising model and got to market with it first. Microsoft saw our head-start and liked it. If we had waited, taken too much time, over analyzed, we would have lost. In a start-up, lack of speed kills.

  (2) No History. What I mean by this is that in a start-up have no baggage, nothing to protect. In a start-up, you can dream up crazy ideas, without any regard to protecting the company’s revenues/ employees/customers, or upsetting the politics of the organization. You are free to think of the way things should be if you could design the perfect world. You have freedom to try to disrupt the status quo. Most big companies worry what will happen if the status quo changes. They worry about protecting next quarter’s number. They worry about getting stuff through legal. You are completely untethered from these kinds of restrictions.

  (3) A Different Kind of Employee. There are lots of really, really smart people that work for big organizations. But there is something that brings the best out of people when they work in a start-up. The start-up environment is so empowering and invigorating when you realize that you have a HUGE impact on the success or failure of your company. It’s on you. You have the power to change a market, and you get caught up in the journey and the mission. I’ve seen the power of a small committed team of start-up employees, and I’ve been fortunate enough to have a business partner that does a tremendous job of cultivating and leading the charge. Small start-up teams can accomplish amazing things.

  So there they are entrepreneuers. Your 3 advantages. Use them wisely.

  And if you were planning on coming to my talk tonight, I just gave away my best stuff, so you can probably just stay home

• 11Nov

  Alice.com Announces $4.3 Million in First Round Funding

  Posted by mark @ 8:00 am in General 25 Comments

  We announced our first round of funding for Alice.com today (full release here).

  

  A few takeaways from our fundraising efforts with Alice:

  We Were Able to Raise a Large Round with Common Stock
  Brian and I are really pleased to have raised over $4 million dollars in common stock financing. We were able to do this by utilizing a couple of great local angel funds and a number of individual angel investors, many of which also invested in us at Jellyfish.com back in 2006-07. I chalk up our success in raising large rounds of angel money (here and at Jellyfish) to the following three things, in order of importance: 1) a track record of success; 2) a disruptive model and clear path for executing on the opportunity; and, 3) a passionate team that effectively communicates the business. If you don’t have #1, the other two become even more important.

  We Avoided Venture Capital, For Now
  This was a big debate in the company, as we had several VC funds at the table. Alice.com is a big model, and we’ll be looking for subsequent investment to take advantage of our opportunity. So why not get hooked up with a solid VC fund from the outset? It really came down to weighing the negatives of granting VC preferred stock rights and other controls to the positives of getting a long term capital partner with lots of “dry power” to fund the future growth. We opted to stay with common stock, a diverse cap table, and maximum options to pick the right partner for our next round. As one Venture Capitalist put it to us, “if you can get the funding you need with a common round, why wouldn’t you?” I’d be very curious to have readers weigh in on this decision. I still think it was the correct one, but arguments can certainly be made against it.

  The Sky Isn’t Falling, But It Is Tough Out There.
  We started raising this round on August 28th, before the financial crisis and stock market meltdown hit full steam. I’m happy to report that although the round took longer to complete than we anticipated, we did hit our goal fundraising range. Our biggest issue was not getting turned down from people; it was investors cutting back on the amount they ultimately invested. Bottom line is that the company was still able to get the funding needed, even in this tough environment. I hope others are finding the same thing!

  I’m Curious to See Whether the Slow Economy Helps Our Coverage
  I’ve heard several commentators mention that one benefit of starting a company in a recession is that there aren’t as many competitors, and there isn’t as much start-up noise to compete against. This will be a first test for Alice.com of that claim. We don’t have a PR firm (yet), so our outreach on this funding news was somewhat limited. I’m very interested to see whether the economic downturn and lack of activity in the start-up world is one element of our coverage. I’ll do a follow up post on what we did to promote the release and a summary of the coverage we get soon.

  We Are Poised to Launch in March 2009.
  It feels great to get the funding completed and turn full attention back to executing on the business. We’ll be doing a closed beta in January and are poised to launch the first Alice.com offering in March 2009. The pressure to have a successful launch is intense, especially when you have past successes, but that is part of the allure of a start-up.

• 06Nov

  Start-up Advice from John Doerr

  Posted by mark @ 12:32 pm in General 1 Comment

  The folks over at ReadWriteWeb have starting putting up video coverage of the web2.0 Summit (Thanks!).

  I just watched a very interesting interview of VC superstar John Doerr of Kleiner Perkins fame, in which he gave start-ups his list of 12 tips to cope with our current economy. You can watch the full interview here, but his tips were as follows:

  • Act Now, Act with Speed. If you are adjusting your biz to today’s environment, don’t wait.
  • Protect Your Core. Cut fat, not meat.
  • Maintain 18 Months of Cash. In addition, know where you stand with your investors. Are they going to continue supporting you?
  • Defer Facilities Expansion. Be lean with your facilities, software, etc. In other words, run lean.
  • Re-evaluate R&D Priorities.
  • Re-negotiation all Contracts. Including real property leases.
  • Get Everyone in Your Company Selling.
  • Offer Equity Versus Cash.
  • Secure Your Cash. Don’t park your cash in anything risky, including money market funds.
  • Watch Your Leading Indicators. Figure out the metrics that show where your biz is going and watch them like a hawk.
  • Over Communicate.
  • Keep the Faith. We will emerge from this stronger.

  Thanks for that last tip John; I was starting to get pretty depressed! I just wish he would have added one more to his list. Don’t go to conferences; save your money and watch the videos from the event online

• 31Oct

  In re Bilski–Software Patents are Clear as Mud

  Posted by mark @ 12:25 pm in General 6 Comments

  The Federal Circuit struck another confusing blow for software patents yesterday in the case In re Bilski. For you lawyer-types, there is a detailed analysis on the Patently-O blog.

  I won’t go into the legal minutiae of the decision, but it basically confirmed that a business method process is eligible for a patent only “if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”

  So now the $64,000 question for software patents: what does it mean to be “tied to a particular machine”? Is it enough that your business process runs on a standard computer?

  Unfortunately, the court leaves this question wide open, stating “We leave to future cases the elaboration of the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine.”

  Thanks for nothing. The industry will now spend millions of dollars in legal fees and lots of time and energy trying to figure out whether this means the end of software patents or whether there are a few “magic computer words” that can be inserted into software/Internet patent applications to satisfy this standard without really effecting the substance of patent coverage for software.

  I’ve already blogged about our struggle to decide whether to seek patent protection at Alice.com here. Bilski doesn’t really make the decision any clearer. If all Bilski portends is that you can tie your claims to a computer hooked to the Internet, we need to file. But it could mean that software patents are now dead on arrival. To use Fred Wilson’s great analogy to the nuclear arms race (here), maybe Bilski means those nuclear bombs we’ve been stockpiling just all became duds. Or maybe not. Clear as mud.

  The more I see this mess unfold, the more I think the whole patent system for software/business methods should be replaced. The current system is hopelessly out of sync with the speed of business innovation, has an exclusionary period that stifles innovation rather than encourages it, and adds a huge expense to both small and big companies alike.

  Every company has a built in incentive to create a better way of doing business that attracts customers. Why should they also be rewarded with close to two decades of monopoly power? The patent system for software/business methods should simply exist to ensure that the companies that come up with some really innovative stuff get a small period of time to reap a reward before the rest of the market rushes in to copy what they invented.

  My recommendation: create a system with a quick examination process (perhaps a peer review on obviousness/prior art) and a very short exclusionary period (2-3 years?). 2 years in Internet time is a lifetime.

• 23Oct

  Microsoft is Evil & Crest is Fresh. . . Who is Alice?

  Posted by mark @ 2:01 pm in General 4 Comments

  With our first round of funding now closed (more on that soon), we’ve turned 100% attention to building Alice. For starters, the team kicked out a new version of Alice.com yesterday, which includes a bit more about what we’re up to with the company and links to our favorite song “about Alice.”

  

  But the new site also brings a key question front and center: Who will Alice be in the minds of consumers? Sure, we think we’ve got a great business model, with a unique offer and the opportunity to build a new kind of retail platform with competitive advantages. But we need to take that disruptive model and package it up into an overall promise that will resonate in a simple way with an identifiable set of consumers. In other words, we need to develop a brand and a story that matches the value propositions of our company.

  I recently came across brand tags, a site that does a fantastic job of showing how brands live in minds of consumers (thanks to Adam Singer over at The Future Buzz for clueing me in). The site, a creation of Noah Briar, is brilliantly simple. Enter the first word that pops into your head when you see a brand. Overtime, this has built up a giant aggregation of brand associations that allows you to see into the publics collective brand view. If you spend a little time plugging in brands, you’ll see who is doing a good job branding, and who is not (granted, the branding and the underlying product are inextricably linked). Here are a few of my favorite examples:

  The Good

  • Crest (top thoughts include Bright, Clean, Fresh and Minty)
  • Amazon (top thoughts include Books, Cheap, Convenient, and Everything)

  The Not So Good

  • Hummer (Wasteful, Gas Guzzler and Big)
  • Microsoft (Boring, Monopoly, Evil and Sucks)

  What will we see years from now when Alice.com is up on this list? That’s what our team is working on, arguing about, and deciding right now.

• 16Oct

  Caffeinated Advertising–A Whole New Take on Buzz Marketing

  Posted by mark @ 4:56 pm in General No Comments

  Talk about buzz. Our company was just Yammering about a really creative advertising campaign by 7 Eleven designed to capture buzz from the upcoming Presidential election (and give out some personal buzz in the process). For the next month, you can register your “vote” every morning by stopping into 7 Eleven to fill up your coffee in either a blue Obama or red McCain coffee cup.

  

  This is a fantastic example of viral marketing at its best. When Brian and I founded Jellyfish, we recognized that the rules of advertising were changing. The consumer now has the power to filter out boring, mass marketed, interruptive advertising messages. Advertisers need to give the consumer some tangible value to pay attention.

  The 7 Election campaign does this on several levels:

  • It is fun and incredibly viral (I’ve already sent this out via e-mail and Twitter and there are lots of folks blogging about it), giving 7 Eleven free brand awareness
  • It is timely and press worthy, with traditional news outlets like the WashingtonPost and NewsDay , among many others, writing about it
  • It includes a direct response impulse without dropping price (I want my candidate to win and I’m more inclined to grab that cup at 7 Eleven where I can both register my preference and walk around with an advertisement for both my candidate and 7 Eleven)
  • It is cheap. Print up some cups, and slap together a website. Beats the heck out of annoying us all with 30 second tv ads, billboards, etc.
  • Best yet, it might actual work, as the Company claims to have predicted the last two elections

  

  Don’t like the way the results are shaping? Then you’d better drink up. Kudos to 7 Eleven.

  We are working to make sure that the marketing plan for Alice follows the new rules of advertising. Give consumers a reason to tune you in, make your advertising a mutually beneficial event, and consumers should reward you with their attention and (hopefully) their business.

• 03Oct

  Starting a Company When the Sky is Falling

  Posted by mark @ 6:47 pm in General 4 Comments

  There has been lots of hand wringing this week in the start-up community over the US financial crisis. (for example, here and here and here). The discussion was fueled in large part by a post by Jason Calacanis in which he states that “50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.”

  

  Although I found this claim a bit Chicken-little’ish (even in booming economic times the failure rate on start-ups is very high), I really like the advice Jason gives in his post. Namely, that you should stay lean, and focus relentlessly on your business model without being afraid to quickly adapt in your effort to build a great company. There are lots of similarities between Jason’s tips and the way Brian and I have operated in our past start-ups. In particular, I couldn’t agree more when Jason writes: “If you’re idea is wrong, it really doesn’t matter. What matters is if the original ideas allows you to evolve into your big idea.”

  The only problem I have with the post is that Jason seems to suggest that being a lean, focused, rapidly innovative company is required because of the economic downturn, which infers that crappy ideas and bad execution can actually lead to success in times of economic prosperity. You bring up some great points Jason, but they should apply regardless of the macro-economic climate in which we find ourselves.

  The financial meltdown hasn’t impacted Alice significantly (knock on wood). We are pleased to be wrapping up a large angel round of investment for Alice.com right now. Although the fund raising has been more difficult because of the financial market meltdown, we are still going to close our round as planned and obtain the capital we need to execute. What’s more, Brian and I have met with several potential VC partners in the past few weeks that are still very active in funding new ventures.

  My takeaway is that the future is still bright for start-ups that have a good idea and a good team to execute on that idea. Let’s hope it stays that way, and that trying economic times like these makes us all better at bringing innovation to market regardless of what is happenning in the stock market.

   

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