• 23Sep

  To Patent or Not To Patent?

  Posted by mark @ 11:16 am in General 6 Comments

  Does it make sense for an Internet start-up like Alice to file for patent protection? In the good old days of online business method patents (when the PTO was issuing patents like Amazon’s One Click) the answer was a resounding YES. Today I’m not so sure.

  I’ve tallied up my pros and cons on a yellow pad. Here they are:

  Cons:

  • They are hard to get . The pendulum has swung away from business methods patents. Recent decisions by the PTO require that your software claim be “tied to a particular machine.” Huh? Does that mean you can still claim online software so long as your claim includes some language about how it works on an individual screen? Who knows? Even the great Google PageRank invention may be kicked to the curb (great post here).

  • They take forever . I’ve heard the current wait is around 5 years to get your application examined. This is crazy! Online years are like dog years, meaning most patents will be completely irrelevant for the start-up team. For example, Brian and I filed two patent applications for Jellyfish in 2006. The company has already been sold and we probably aren’t even half way in our wait for the PTO to make its review of the patent. We also filed for patent protection at NameProtect, but we’d changed business models by the time the patent was ultimately rejected.

  • Biz method patents hurt consumers . The original goal of the US patent system was to encourage innovation by rewarding inventors with a monopoly and incentivizing them to teach others to spur more innovation. This doesn’t work in Internet start-up land. I’ve actually been counseled by our lawyer NOT to search pending and issued patents in our market because of fear of finding something and being at risk of willful infringement. So much for innovation. Awarding a monopoly simply hurts consumers, who have less choice. Are consumers better off if Friendster sues Facebook for its issued patent on basic elements of a social network? Hardly. The monopoly may work in industries like life sciences that need to recoup R&D, but it is just plain stupid for business method patents. There are lots of investor/start up folks that feel the same way (check out Brad Feld’s thoughts here as one example). Ok, I’ll step off my soap box now.

  Pros:

  • Investors like them. Ok, maybe not all investors, but lots of them like to hear that you’ve filed for patent protection. I just read this great post by VC Daniel Cohen, in which he counsels his portfolio companies to avoid patents. But even Daniel mentions that having a patent claim or two on file doesn’t mean he will rule out a potential investment. Bottom line: I’ve never heard an investor reject an investment because the company filed for patent protection and lots of investors love to invest in patent-pending stuff (even if they never read the patent).

  • Acquirers may like them. I’ve sold two companies and neither was purchased because of a patent. That said, it is certainly possible that Alice.com’s patent claims may be a key reason for an acquisition or a step up in valuation.

  • We need to join the arms race. Companies like IBM, Microsoft and a host of other big boys are patenting machines. If we ever get sued, it sure will be nice to have a claim or two in our arsenal.

  • They don’t cost that much to file. More about this below.

  My verdict? Alice will be playing the patent game. Despite my dislike of the system, we have to play with the rules that exist. At the end of the day, it really comes down to basic opportunity cost of capital analysis. We’ll likely spend $15k to 20k for our Alice.com patent filings. Sure, we could use that $20k lots of places, but the return we get in raising capital and the potential bigger return we may get in an acquisition or future litigation savings is still worth the investment.

  I’d love to hear whether you think I’m wrong and what experience you’ve had in the land of patents.

• 17Sep

  Executing on Gut Feel

  Posted by mark @ 9:55 pm in General No Comments

  Just came across this great post by Simeon Simeonov on the secrets to entrepreneurial success. Simeon boils it down to three things:

  1. Luck and Good Timing
  2. Gut Intuition
  3. Iterative Improvement

  I think this quote sums the post up nicely:

  The best entrepreneurs have both a strong gut sense and the ability to iterate quickly and cheaply. This tends to make them luckier because they are better prepared to take advantage of opportunities.

  I completely agree with Simeon on this. Success in a start up is about getting to a new market opportunity first. In every start up I’ve worked in, Brian and I have used a few key data points to validate the business model, ultimately relying on a strong intuitive feel that the business will work. We then jump in with two feet and figure out the most efficient way to get the offering launched. Post launch, we quickly abandon what isn’t working and embrace what is, bobbing and weaving our way to a viable business.

  I would also add a fourth item to Simeon’s list: a sprinkle of ignorance in the industry you are entering. In my experience, not being an “expert” allows you to think in fresh, bold ways, without the “baggage” of being in the trenches.

  This isn’t to say you shouldn’t become an expert-because you will need to be to make the business work-but approaching a market problem and thinking “what if?” is much easier when you aren’t bogged down in the minutia of the industry at the outset.

  James Kilgarriff had a great post about the combination of quick decisions and fresh intuition for entrepreneurs here, and I love this quote:

  “Many entrepreneurs will enter new markets and industries without having any specialised knowledge and many do this on a “hunch.”

  Alice.com is more than a hunch (don’t worry investors!), but we are applying these principles again now. We took a fresh look at an industry, got an overwhelming sense that a new model would work from several easy to obtain data points (not a six month research study), and are quickly building an offer to get there first. Here’s hoping Simeon is right.

• 12Sep

  Is it Nap Time Yet?

  Posted by brian @ 2:19 pm in General 3 Comments

  Everyone knows about the horror stories of working 100 hour weeks and the fun ride of a startup. One of the overlooked secrets of maneuvering through the mental stress and personal risk trauma of making your startup successful that every entrepreneur goes through, is an afternoon Power Nap. Many of our employees take a 15-20 min nap 2-3 times per week at the office just after lunch.   With www.Alice.com being my 4^th startup and napping being part of our hard working and really fun culture, I thought I would get a little more savvy this time around about the nap process. After countless wake ups and interruptions through the years, I decided to implement a high tech and innovative solution to allow me to have an uninterrupted nap to fully achieve all of the wonderful benefits.  Adding the colored rubber band to the door handle means that there is a nap in session so please do not enter.  I am not going to tell you what it means if you see two rubber bands on the handle

  

   

  I highly recommend the 20 minute power nap. When I suggest it to people they usually give the following excuses:

  1. I could never get to sleep in 5 min’s
  2. If I took a nap, I would sleep for 10 hours and never be able to get back up
  3. I take naps on the weekends and have no time to nap at the office
  4. The office isn’t a daycare where we have nap time and story time (At Alice we actually do both..hehe)

  I am sure there are many more excuses that I have heard over the years that I am forgetting. The common theme with most of these excuses is that usually the person has never really attempted to nap or are in an office environment where this is not acceptable.  This has to change

  Well I am here to tell you to give it a try and that the 20 min power nap actually works. People too quickly look to caffeine before considering the more healthy nap option. The Two Studs over at getclicky.com apparently have the same philosophy as we do. This video discusses many of the nap benefits including, focus, alertness, weight loss and more creativity to mention a few.

  Napping enthusiasts have included Albert Einstein, Napoleon Bonaparte, Thomas Edison and at least three presidents: John F. Kennedy, Ronald Reagan and Bill Clinton.  Other good reads about the value of naps here and here. 

  Why not give napping at the office a try?  Will it help you perform better at work or possibly lead to a more successful startup?

• 11Sep

  Alice in Lights

  Posted by mark @ 7:54 pm in General 1 Comment

  The first Alice.com homepage is up and running. Our graphic designer doesn’t start for a couple more weeks, so you won’t see anything flashy, but it feels good to start building the site.

  Seeing Alice up in lights begs the question: How are we going to roll out this business?

  The Alice.com Pre-Launch Strategy

  There is quite a bit of discussion and advice online about the best pre-launch strategy, but it really boils down to one simple thing: Getting as many potential customers to pay attention to you as possible. For us, this goal translates into two objectives: 1) build a pre-launch waiting list/following of potential customers; and, 2) get the attention of influential bloggers and media so that they write about us at launch and beyond.

  How will we do this? Good question. Here are a few key themes that will guide our plan.

  • Build Curiosity. You’ll notice a subtle hint on Alice.com about our market space, but no real details on the business. You will see various schools of thought on how much to share about the biz pre-launch (in particular I like this post that calls it the Big Bang versus Darwinian launch approach), but one of the things we learned at Jellyfish was the importance of building suspense pre-launch and pulling back the curtain slowly. There is a balance here of course, but consider a site like Akoha.com . By staying somewhat stealth they can give targeted media the inside scoop. In my opinion, they have a much better chance of attracting blog and media attention with this secretive approach:

  

   

  • Give Something Valuable. You have to give your audience a reason to pay attention, whether it is a blogger that needs a well reasoned argument or an end customer that is bombarded with countless marketing messages and needs a good reason to tune you in. The best kind of value here also encourages users to spread your brand virally across the Internet. Brian and I are already talking about how to do this with Alice.com, and I’m excited to share some of the ideas that we cook up soon.

  • Have Some Fun. Don’t take yourself too seriously. Using humor is a great way to engage people and personalize your company. One hot area you see this today is viral videos, which seem to be the pre-launch strategy du jour. I think many of these videos get a little too goofy, but some companies (see here and here ) have used them to great success.

  • Have Personal Credibility. This is a point that Ben Yoskovitz makes in his post about launch strategy that I really, really like. The message here is “don’t be a faceless start up.” If you’ve earned some credibility, use it to your company’s advantage. That’s why you see the Flywheelblog linked on the bottom of Alice.com. I’m much more inclined to engage with a site online if I can see the people behind it.

  • Back it up with a Remarkable Product. Most important of all, be careful not to over hype and under deliver. I watched with a bit of dread the launch of Cuil.com recently. They did a great job of building up pre-launch buzz and got amazing coverage on launch day. The problem is that their site didn’t match the hype. The backlash was pretty harsh (see here and here for example) and they are going to be hard pressed to recover. The Cuil experience is something we will work very hard to avoid in our pre-launch plan.

  Please make sure to visit our very 1st home page and drop us your e-mail. And if you have a favorite pre-launch strategy that has worked for a company, we’d love to hear about it.

• 05Sep

  Empty Desks

  Posted by mark @ 10:39 pm in General 3 Comments

  I hate this week in the life of the start-up company. Moving week. The new space is great and it will help us attract talented people, establish our new company culture, accommodate growth, etc.

  But I really hate all the empty desks.

  

  In each of the companies I’ve helped start, I’ve stared down a row of desks like this and worried about filling them up. It is that sense of urgency, of being close to the edge, that makes a start-up so energizing and makes you bond so much with that first group of employees that helps start the flywheel spinning.

  It sometimes feels overwhelming how many pieces of the puzzle have to fit together to get a company off the ground and ready to capitalize on a market opportunity: office space, banking relationships, furniture, technology, leadership team, fundraising, hiring plans. All of the pieces require proper timing, thoughtful decisions and an element of risk. You need to get them all moving forward, believe in your business idea, and remind yourself that all of it is necessary to get you to the finish line.

  Next up on the list: closing our first major round of fundraising. We hope to finish up our investor meetings next week. Things are always much easier with money in the bank!

• 02Sep

  Alice.com

  Posted by mark @ 7:10 pm in General 16 Comments

  We have a name! I’ve talked quite a bit about the struggle we’ve had coming up with a unique, fun and memorable name, so it is with great pleasure that I announce our new company name:

  Alice.com

  Why Alice.com? It meets all of the criteria that I mentioned in my last post. It has personality and it stands out from the crowd in our market space. And most importantly, it is really memorable and supports the value proposition of our new company perfectly. What is that value prop you ask? You’ll have to stay tuned to see what Alice is up to.

  Downside? The name wasn’t cheap. We paid six figures, but consider this: We are going to be spending a tremendous amount of money and energy getting consumers to even know we exist. A name like Alice.com gets people to smile, tells them immediately that we are different, AND gives us the best chance that you will remember us two weeks or even two months later. Well worth the price in our opinion.

  We are in the process of transferring the name now, so don’t be alarmed if you still see a domain landing page on the site now.

  Idiot or genius? Please tell us what you think.

• 28Aug

  Fundraising Week

  Posted by mark @ 9:52 pm in General No Comments

  We’ve been extremely busy this week pitching prospective investors. After great meetings with Venture Capitalists, Angel Funds and other rich folks that like to put money in start ups, Brian and I are both very optimistic [fingers crossed].

  I’ll post more next week about our fundraising adventures and our new name (we’ve got one!). Have a great Labor Day!

• 19Aug

  We Need a Company Name–Part II

  Posted by mark @ 4:18 pm in General 6 Comments

  Naming this new company has been a struggle, in large part because we place a huge importance on this step in the start-up process. It impacts everything, including things like recruiting and fundraising that set the path of company well before a single customer even sees the name. I ranted a bit in my last naming post about how hard it is to pry a good dot-com name away from the domainer industry. In this post, I’d like to talk about the rules we apply when someone puts another potential name on the whiteboard for consideration. Think you’ve got a good name? Then step up to the Board and we’ll see if your name is up to snuff. (Note: these rules are somewhat specific to the consumer-oriented business we are starting)

  

   

  Tier One Considerations:

  • Can the Dot-Com Be Registered/Purchased? The rules we set out below mean most of the names that make our whiteboard have already been registered by someone, and buying the name is the only potential option. In fact only our “frugal” CFO was brave enough to put a name on the whiteboard that wasn’t registered: Spinningdoor.com. He registered it himself and made the argument it was perfect for the company. We told him he only liked it because it would cost the company $9. By the way, he has it for sale (ds@spinningdoor.com) if anyone is interested
  • Is the Name Fun? One of the best things about a consumer offer is that you can have fun. Unless you’re out to cure cancer or market to bankers or lawyers, have some fun with your name. We love names that make people smile.
  • Could it be a Mega-Brand? Picture it on the side of a stadium, sponsoring American Idol, on a blimp. Can you see it? If not, subtract a point.
  • Is The Name too Limiting? Usually the best candidates will have either nothing to do with the actual product or service or only suggest certain elements of the business to a consumer. These are easy to protect as trademarks and don’t unduly limit the company down the road as the business may change (for example, naming a company www.beer.com may make it difficult to sell something different later). We tend to favor names that give us a completely open canvas (like Jellyfish did).
  • Is it Easy to Remember & Spell? This is where most of our names fall off the map. We set up three tiers here: 1) completely made up words; 2) actual words, misspelled; and, 3) actual words with the correct spelling. We really favor tier 3. As a start-up it is hard enough to get someone’s attention; don’t force them to remember a funky made up word or misspelling. This doesn’t mean you can’t succeed with a tier 1 or 2 (consider Google or Flickr), but why make your job harder by naming your company Kulabyte or Cuil? If your neighbor told you this kind of name, would you remember it two hours later? How about two months?
  • Is it Bold & Unique? We love names that stand out without zillions of dollars of marketing. The best names make you smile a bit and ask “what do they do?” One word of caution: picking a bold name will put you close to the idiot/genius line. I remember getting an e-mail from a college student at Michigan State right after we put up the Jellyfish.com blog pre-launch. The e-mail basically said we were a bunch of idiots for picking the name Jellyfish and that their entire dorm floor was still laughing. I saved that e-mail (in fact, I still have it) as a reminder not to ever hire anyone from Michigan State
  • The Word of Mouth Test As a final test, I love to think about how easy it would be for an early adopter of our product to tell someone to try it. Do they feel good/cool/savvy saying the name? Does their buddy remember it?

  Not many names make it through this criteria. And it’s easy to get depressed when you spend so much time brainstorming that the name Spinningdoor.com starts to look good (sorry Dave) or you find yourself spending time on dotomator.com (raises hand). But we’ve done of good job of staying true to our rules and reminding ourselves that we are setting a very high bar (we’d reject most of the start up company names profiled on TechCrunch, for example).

  To date, we’ve only gotten a few names through this process, at which point we run a full trademark search, talk to our trademark counsel about any issues and try to buy the domain. A few of our favorite candidates have fallen off the map here. But we have gotten a great name to the finish line. As soon as we finalize the dot-com purchase, I’ll let you know what it is.

• 14Aug

  The Value of Traditional PR?

  Posted by mark @ 3:41 pm in General 3 Comments

  There has been a lot of discussion over the past few days about the future of Public Relations in a new media world. The debate was kicked off by Robert Scoble in a post in which he took a subtle kick at the traditional Public Relations route for start-up companies. In the days since, Steve Rubel, Michael Arrington and a host of others have chimed in. The basic question is this: Does a start-up company need to hire a traditional PR firm in order to get attention/press or do companies with good products always rise to the top of the attention heap?

  PR was a key part of our success at Jellyfish.com. We launched Jellyfish in June of 2006 with a Wall Street Journal article covering the launch. That coverage started a snow ball of press, and helped us attract top talent, raise more money and get the attention of Microsoft which later purchased us.

  

  We wouldn’t have gotten that article without a traditional PR firm. But that doesn’t mean I’m sold on traditional PR. Frankly, I think it is a necessary evil. Here’s the Jellyfish recipe:

  1) Join the Blog ecosystem. After coming up with the Jellyfish advertising concept (now used as the basis for Microsoft Live Search cashback), Brian and I immersed ourselves in the blogosphere. We found the thought-leaders in the industry (folks like John Batelle and Scott Karp) and we made reading them a daily part of our job. It opened up our world and made sitting in Madison, Wisconsin not so limiting.

  2) Launch our own blog. We spent a great deal of time on the Jellyfish blog pre-launch, discussing the search market and the problems with that market that were creating our opportunity.

  3) Engage the bloggers in our industry. Once we had our own content and something relevant to say, we reached out to the important bloggers and a few of them started to follow our story.

  4) Hire a traditional PR firm. In our case a firm in the Valley (Connecting Point). This was last on our list and it came after we’d already gotten a beach head in the new media world ourselves.

  Why did we hire a traditional firm? Because we needed access. Like it or not most tier 1 bloggers AND almost all of the traditional media use PR firms as gatekeepers. Being headquartered in Madison, Wisconsin, has a few advantages, but access to national media and bloggers is not one of them. It might as well be Siberia to many in the Silicon Valley world.

  In the case of Jellyfish, we got the attention of John Batelle, Scott Karp and Pete Cashmore without a PR firm on the strength of our business ideas and our personal contact strategy. But there were many other blogs (TechCrunch, Om Malik, Greg Sterling) that didn’t give us access until our PR firm opened up the door with an introduction. And we didn’t even get a whiff of attention from the traditional media world until our PR firm started leveraging their relationships to get us in the door. The reason seems pretty simple, a reporter at the Wall Street Journal (or any other Tier 1 target) gets inundated. They need gate keepers to filter our the crap and a good PR firm can earn that gatekeeper status.

  My takeaway from that experience is the following:

  1) PR Starts with the Company Leadership. Our PR firm was fantastic at making introductions, but they didn’t give us much else. Completely outsourcing everything to them would have been a disaster. The pitches and the substance behind those pitches came from us after a lot of hard work. You get out of your PR firm efforts what you put into it. Bloggers/New Media should be approached in a direct, personal way, not with scattershot form Press Releases. We are starting those efforts with our new company right now on this blog.

  2) At the end of the day, it is still who you know. Like it or not, you need to hire a PR firm that has great contacts or you run a HUGE risk of not getting the attention you deserve. This is where I take issue with Scoble and Arrington, who argue that good ideas cut through the clutter. In Scoble’s example, a buddy of his clued him into the company. I need to get into his network, and I live in Madison, Wisconsin. I don’t run in his circle, but I can hire someone who does. We didn’t get into TechCrunch (or the Wall Street Journal for that matter) until we leveraged a contact from our PR firm. And it wasn’t because we didn’t have an interesting idea (in fact, our Jellyfish cash back concept, now in Microsoft’s hands, has been the subject of multiple posts on TechCrunch since). And TechCrunch is just one of many that didn’t pay attention without that PR introduction.

  3) Get a PR firm that has great relationships. The best thing a PR firm can do in our new venture is tell us they are extremely busy and can’t take our work. If I’m selling the firm on the idea and why they need to take us on, that is a huge message. It tells me they don’t pitch every company that walks in the door with some cash. It means their relationships with media are solid. And at the end of the day, that is what we are buying with a traditional PR firm.

  I’m going to take my own lessons right now by using this content to reach out personally to Scoble, Arrington and the others that are talking about this stuff right now. It is the start of building New Media credibility for our next venture. Wish me luck!

   

• 12Aug

  We Need a Company Name! Part I

  Posted by mark @ 10:32 pm in General 11 Comments

  It is getting really, really hard to name a new company. We’ve been working for months on a name for our new start-up, made dozens of offers for dot-com names, and done several full trademark searches, but we still have “New Co” on the door.

  

  How bad has it gotten? We just offered +$200k for the dot-com name of a small, mythical, woodland creature and we likely won’t even get a response from its owner. Mark Cuban recently blogged about how state and local taxes and paperwork are huge barriers to entrepreneurship, but I think the domain name system may be the biggest hurdle of them all.

  When Brian and I started Jellyfish.com just over two years ago, the process was much easier. We brainstormed a couple of weeks, found Jellyfish.com for sale on a domain auction site, paid $25k for it and were off to the races. Perhaps we just got lucky. But I think the process is getting tougher by the day.

  Here is my theory why:

  1) The “Domaining” Industry is Booming.

  The Stock Market may be in tough shape, but times are good for domain speculators. Forbes just ran a piece on flipping domains yesterday and there is sophisticated money moving into the space, so this isn’t limited to Mom and Pop operations. (I guess I feel better after reading that cpc.com just went for $202,000). Why is this industry thriving? To quote your Grandfather (who likely told you to invest in real estate) “because they aren’t making anymore of it!” Consumers have been trained to go to the dot-com space and with a finite dot-com supply comes opportunity.

  The other lynchpin in the domainer industry is Google AdSense, which gives domainers the ability to charge rents on all of their virtual property. The formula goes something like this: register as many names as you can for $9 a pop, slap up some contextual “Sponsored Links” from Google, let the virtual properties start to earn rent, and wait for some sucker (err, I mean visionary entrepreneur) to come along and offer you six figures. Here is an example of the type of dead end site we keep turning up time and time again as we brainstorm potential New Co names:

  

  When you are making lots of AdSense “rents” off of a domain, you aren’t in a hurry to sell it. Seeing a website like this at the end of a dot-com name you are coveting for your next start-up typically means “Not for Sale.” If end users stopped using the dot-com address as a search tool and clicking on the first sponsored link they bumped into, the entire industry would likely implode. But this isn’t likely to happen anytime soon.

  2) Everyone Wants to Be an Ad Network, Further Limiting Supply

  To compound the problem, the domainer industry has also caught ad network fever. Online ad networks are hot. If you can engineer your business to fit into this space, you’ll see lots of M&A activity and very high valuations. When M&A kicked into high gear in this industry a year or two ago (capped by Microsoft’s acquisition of aQuantive for $6 billion last year), many of the big players in the domain speculation industry decided that the sum of their domains was much greater than the parts. They stopped selling off their best dot-com properties to gain the scale and reach needed to play in the advertising space. This drives the prices up on the already precious few dot-com names that are still for sale. I don’t mean to sound bitter, as I salute anyone who can make a living doing creative things, but these guys sure are making my job harder.

   

  

   

  In my next post I’ll talk about our rules for naming and the process we are going through at New Co to come up with the next Jellyfish.com name.

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