Jim Harrer

STARTUPS, TURNAROUNDS, APPDEV, AGILE & LIFE...

Facebook Q2 2012 Results Analysis From The Cigar Club

facebook buy sell holdSo last night the peanut gallery, uh sorry, my cigar club, wanted to talk about Facebook's Q2 2012 results.  Here is a recap for those who don't know:

Facebook, Inc ($FB) reported pretty flat year-over-year earnings growth. They earned 12 cents per share in the quarter that exceeded the consensus estimate by three cents. However, including stock-based compensation, payroll taxes and income tax adjustment, Facebook lost $.08 cents per share compared with earnings of $.011 cents per share in the year-ago quarter.

Revenue jumped 32.3% year over year to $1.18 billion, slightly better than Wall Street's estimate of $1.15 billion. The year-over-year growth was driven by strong advertising revenue (84% of the total revenue) that climbed 28% year over year to $992.0 million. The rest of the revenue from payments & other fees in the quarter. The strong upside in advertising revenues was primarily driven by an 18% increase in the number of ads delivered based on growth in the user base and an increase in average number of ads per page from the prior-year period.  Cash flow from operations increased by $242 million.

How are investors taking the news this morning?  Facebook is down 14.14% to $23.05 (7/27/2012 @ 11:32 EST) check it now

My weekly cigar group went into last night's smoke pretty depressed.  A couple of them got in on the IPO of $38.00 and thought they had purchased extra special rare gold on May 18, 2012 when it appeared on NASDAQ's wall.  Half of the group of six passed on buying Facebook after hoodie-gate, they're words not mine.  I was on the other side of the fence, I purchased a small block, in the after market when it first dipped.  So the group is pretty equally divided three and three, stockholders of Facebook vs really old money who love Wells Fargo and AT&T.  Yes, that is a dig and I will pay for it next week.

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Corporate Attorneys can learn 3 lessons from Jack Daniel's

jack-daniels-vs-broken-pianoA letter dated July 12, 2012 from Christy Susman, a senior attorney for Jack Daniel's has gone viral throughout the Internet.  Twitter, LinkedIn, Facebook, Reddit, Digg, StumbleUp - it's being read by hundreds of thousands of people.  Why?  Because it breaks ranks with the typical harsh, "I'm going to bring you a lot of pain", tone that attorney's learn in law school.  Ms. Susman writes with professionalism, humility and a tone of class which is being dubbed:

The Nicest Ceast-And-Desist Letter Ever Written.

I think you'll agree with me, most corporations would probably cring to see one of their cease-and-desist letters out on the world wide web. Several months ago I had this exact same discussion with an attorney on the other side who justified his asshole tone by saying:

"No hostility intended, but, sometimes I have to wear the hat as the company's counsel."

"No, you're just a prick and have no class Jason," is what I thought and moved on. For some of us, life is simply too short to engage in 7th grade behavior. I think most attorneys, especially outside counsel, immediately go hostile because they want to fight. They're incentivize to fight. Unlike a real fight, they have nothing to lose because they get to run up their client's bill.

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5 Great Startups in Bend, Oregon. A Startup Friendly City.

Bend Oregon EntrepreneurBend, Oregon, is a great place for entrepreneurs. Located in the center of the state, east of the cascade mountain range which provides year-round recreational activities (snow skiing, hiking, fishing and mountain biking) and collects most of the rainfall Oregon is known for. For example, Bend averages just 11.4 inches of rainfall each year and records 295 days of sun shine. This is far better than Portland's 43.5 inches of rain and 200 days of blue skies. The pure beauty of the area, pleasant weather, and year-round activities make it a great place to live. The friendliness of the people in the community make it the best place I’ve ever lived.

I’m not alone, about 76,000 people agree. What many people don’t know is, Bend has an active mentor community filled with successful executives from every industry. Technology, medical, oil & gas, education, legal, software, fashion, film, theatre and sports, just to name a few. We have a lot of 50 “something” retirees who live in the area, looking for worthy startups to mentor. This past saturday I met a retired Navy SEAL commander who is volunteering his time to help as a project manager.  "Failure is not an option" has a totally different meaning for him.  He's impressive and so are all of the other mentors I have come to meet and now call friends. 

With the help of EDCO and the leadership of Roger Lee and Jim Coonan, we’re starting to see these mentors organize. It started as an excel spreadsheet of local “Stable of Experts”, a list of people who are willing to help entrepreneurs in the area, often for no-charge. Now we have our Bend Venture Conference and the VentureBox business accelerator joining the ecosystem.

Recently, I had the pleasure of working with five startups in Bend, Oregon. All were in our VentureBox business accelerator program. We met each Wednesday (3pm-8pm), for 12 straight weeks.  The founders, working with local mentors develop their business strategy using customer development and other lean startup principles. These companies have taken off and are now seeking business and strategic partners, customers (beta testers and early adopters) and angel investors. 

Here are 5 great startups in Bend, Oregon.

JettStream, Inc. (http://JettStreamInc.com)JettStream-Logo-300pxl

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The Lean Start-up MVP – One size does not fit all.

Eric Ries’s bestseller, The Lean Startup, is a thoughtful book that has created a conversation about startups.  It focuses on how to go from the back of the napkin to a Minimum Viable Product (MVP), to get in front of prospects in order to see if the idea is viable.

As with any new methodology, framework or process for the matter, I do not think audiences can truly measure its viability until they practice it themselves and spend time teaching it to others.
Lean-Startup-MVPI’ve had the chance to do both, use it with a couple of startups I’m involved in and teach it in the VentureBox business accelerator in Bend, Oregon.

The key principle of The Lean Startup is BUILD-MEASURE-LEARN.  The goal is to come up with a minimal feature set, bring it to market, measure actionable metrics and finally learn from the experience and then start again.  It barrows heavily from agile software development and favors learning from early adopters versus relying deeply on requirements management by someone in marketing.

I’m all for Build-Measure-Learn, what I have a problem with is Minimum Viable Product (MVP).   What is the definition of “Minimum”? I’ve witnessed entrepreneurs get so caught up in this MVP concept, that they test a product too soon and pivot based on incomplete data.  In my opinion, more time, not less, needs to be spent defining the MVP, including who the audience is that will see it, at each iteration.  Don't make the mistake of thinking the MVP is outside of the product lifecycle. 
MVPs should be matched to audiences. For example, your first MVP may be designed to only been seen by the development team, then management, then marketing and then prospects under NDA.  My point here is, be thoughtful about the process and audience.  Showing it to management or marketing, can quickly throw the team off the rails.  An MVP has its own product lifecycle development process, some stages should only be viewed by the core team.

Keep in mind if you’re building hardware, versus software, you have more challenges because of soft tooling requirements.  Also, don’t under-estimate the power of look and feel.  Ignoring UX/UI in some applications can take you down a rat hole you didn't intend. Each product is different. Craigslist appealed to its audience with it's simplistic UI.  Instagram's UX/UI from the get-go is what helped it go viral. 

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Xbox 360 and the battle for the living room

Let me start-off by saying, "I love my Xbox 360". It's actually hard to believe it just celebrated it's 7th birthday (May 12th).  According to Microsoft, about 70 million consoles have been sold.  When you think about it, a piece of hardware that has lasted 7 years is pretty amazing. It's a testament to the design team, I tip my hat to them.  

the-cable-guy-photoLet me switch gears now and discuss what puzzels me about their strategy. Perhaps some of you can comment and help me better understand what I have wrong.

My living room has an Xbox 360 + Kinect, DirecTV HR20-700 DVR and LG BD670 BlueRay Player all connected to my home theather and Sony 55 Bravia/  It's a nice system, not great in today's terms.  The LG BluRay player is less than a year old, everything else was purchased when we bought our home in 2007.  The piece of equipment I hate the most is the DirecTV DVR.  If you scan our recordings, we only watch like 10 channels on our DTV. It's not worth the $100 bucks a month we pay for it.

In an ideal world, it would be great if my Xbox 360 could be hooked up to receive my free, over the air, HD channels and allow me to record them, like the old Microsoft TV.  That would get me pretty close to dumping DirecTV altogether.  It would be great if they could add the balance of the channels offered on PlayOn (a neat application to sling content from your PC to any DLNA device). It would allow me to turn off my PC, save power and add videos from NBC, ABC, CBS, FOX, Comedy Central, TV.com, TBS, Spike, and a dozen more. I often wonder why Microsoft doesn't just buy PlayOn from MediaMall and grab Jeff Lawrence (President and CEO) and David Karlton (Chief Technology Officer) two smart and passonate guys?  

Next, I would do everything possible to make sure every living room and bedroom had an Xbox 360 in it.  Here are some of the things I would talk to the team about:

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Three lessons learned from the Facebook – Instagram $1 Billion Acquisition.

Ten years ago, I couldn’t finish a dinner with my friends without someone asking me a computer related question. Even though,  I was a software guy, I was their go-to guy all things PC. The last two years it has turned to smart phone applications.  Now that I’m involved in startups and an accelerator, the dinner chatter often turns to startups.

1-Billion-DollarsLast night, all they wanted to talk about was Facebook’s acquisition of mobile photo sharing application, Instagram for a cool $1 billion dollars.  Was Instagram, which is still pre-revenue, worth $1 billion? Yes.  A company’s worth is measured by another company’s willingness to pay.  At this moment in time, Instagram and its team of 13, are worth $1 billion dollars. That shouldn’t be the main question.

To me, the true lesson here is about the founders. I wish I could say I know them, I do not. I’ve never had the privilege to meet Kevin Systrom and Mike Krieger. Based off what I’ve studied about their product, I can tell you that they are intensely driven by the user experience (UX). Instagram user interface is efficient and elegant.  For them, their Minimal Viable Product (MVP) had to have a WOW experience, which is why 25,000 people downloaded the application on their iPhone the very first day it was released in October 2010. Ninty days later, over 1 million people had it on their iPhone.  Today, it’s close to 30 million subscribers and with last week’s release for the Android market, that hockey stick is likely to continue.

So, what are the lessons we can learn from Instagram’s early success?

  1. instagram 1 billionUX (User Experience) matters.  The lean startup and MVP principles don’t always mean your interface can (or should) suck. Also, you have to give credit to both founders for making sure the back-office was well designed and could scale. They clearly learned from Twitter and MySpace’s early failures. In order to have an awesome UX, the total user experience needs to be awesome. The fact they were able to pull this off, with their explosive growth, is impressive indeed.
  2. Focus on what matters. Instagram is available only as a mobile application. Unlike Pinterest, you can’t view it on a website. This was another great decision because it allowed them to stay insanely focused on the user experience.  It also plays well for the type of photos they’re looking for. They want photos of people living life. Pinterest’s market is decidedly different. Just compare the photos on Instagram and Pinterest and you’ll see what I mean.
  3. Keep it lean. According to CrunchBase, Instagram funding was $57.5 million from Benchmark Capital. A total staff of 13, they kept the group agile. Most companies with $50 million in funding would immediately grow to 100 to 200 people. This is impressive to me and something we can all learn from.

So even though I don’t know the Instagram team, I want to tip my hat to them.  Anything is possible, dream big!

…Jim

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Details on the CrowdFunding aspects of the 2012 JOBS Bill.

crowdfunding-1Yesterday, President Barack Obama signed into law the Jumpstart Our Business Startups Act (JOBS), a measure that includes U.S. Sen. Michael Bennet's "crowdfunding" amendment, easing securities regulations in a variety of ways with the goal of aiding small businesses. Many of us have been pushing for easing the requirements needed for startups to raise initial seed money from the public.

In the past several years, the term “CrowdFunding” has been kicked around. The website Kickstarter is jumped out as the clearer in the space creating a marketplace for startups and users to barter startup capital for products or other incentives, other than equity.

It’s always amazed me that anyone could go to Las Vegas and invest $1,000 on the craps table, yet if that same person wanted to invest $1,000 in a startup, they needed to be an accredited investor, meaning you must make $200,000k a year (for the past 3 years) or have a liquid net worth of $1 million or more. The JOBS Act removes this barrier.

Now for the first time in the United States the average Joe Investor (non-accredited) can make investments based on their income or net worth. Companies will be able to raise up to $1 million in a 365 day period.  There are some requirements we know about already, they include:

  • Companies must provide CPA reviewed tax returns or audited financials based on the amount they raise, here is the breakdown:
    1. Less than $100K: You are required to provide your income tax returns and have your financial statements certified by your CEO.
    2. $100K to $499K: Your financial statements will need to be reviewed by a public accountant.
    3. $500K to $1 Million: You will need to provide the investors with audited financials.
  • Companies must have a defined communication plan to communicate with its investors. Since investors can’t look up a stock symbol to get their news, another plan must be developed.
  • No single investor invests more than a specified amount in the offering, namely:
  1. The greater of $2,000 or 5% of the annual income or net worth of the investor, as applicable, if the investor has annual income or net worth of less than $100,000; or
  2. 10% of the annual income or net worth of the investor, as applicable, if either the annual income or net worth of the investor is equal to more than $100,000, capped at a max of $100,000 invested.
  • The websites offering CrowdFunding services must register with the SEC as a Registered Broker or “Funding Portal”.

There are a lot of additional conditions, including background checks on the issuer. For a complete list, check out CrowdSourcing.Org

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A great customer experience begins with a smile

The Power of a Smile

It was a cold, dark January morning. The clock on my truck read 5:32am as I pulled out of my garage for a business meeting over to Portland. Two tons of steel was protecting me from the outside elements, yet I shivered as the ice mist hit my windshield.

My brain needed a jolt, so I headed over to Dutch Brothers Coffee, pulled up to the window, and was greeted with a big smile - “Good morning, what can I make for you this beautiful morning?” I’m charmed by her positive, friendly outlook. The combination of the friendly service and fresh roasted coffee resulted in a great way to start my day.

Dutch Bros. CoffeeCan a smile change where you do business? As I drove to Portland I reflected on my own experiences and thought about where I spent my money.

Magazines like Entrepreneur, Fast Company and Small Business have been writing articles covering great customer service for years. I love the legendary story of the Nordstrom clerk who accepted a return of automobile tires from a customer, even though Nordstrom doesn’t sell tires. However, most businesses simply can’t relate to that tale, and never focus on what they can do to improve repeat business. Can it be as simple as a smile?

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Old Dogs and New Tricks – Thinking like a Startup

You could say I’m an old dog in terms of technology. I started my first business in 1986, back when a Hayes 2400 baud modem was the hot ticket. Fast forward 25 years later, president of two public companies (Mustang and Starbase), a couple corporate turnarounds (Web Associates, Starbase and Alchemy) and two startups (Mustang and EventMingle), you could say I’ve earned my battle scars.

For those of you who have been following my blog know, I have recently been working with 7 startups though our VentureBox business accelerator here in Bend, Oregon. Startups live in the constant state of thinking of ways to disrupt competitors and pivot business plans to grow rapidly in order to increase cash or traction. This week, I had a lot of time to think a lot about the differences between startups and well established businesses. One of the questions that came to mind was: “When is it ok for an older company to stop focusing on cash and traction?" I tried to pick my words carefully. Note, I didn’t say stop altogether, I said stop focusing.

Information TechnologyBusinesses, as they mature, develop large customer bases they have to support. They have infrastructure in place. They have made decisions about their back office systems such as accounting, CRM, work flow, servers, operating systems, technology partners, etc. Next thing you know, years have gone by, you have tens of thousands of customers and 1,000 employees. Cash and traction may no longer be a focus. Every decision needs to take into account, how will it affect my customers? How does the change impact my back office? Next thing you know, your company is not as agile as before and you ask yourself, "How did we get here?"

Each of the turnarounds I led had major back-office issues. Web Associates built web content for HP, Apple and other companies, yet didn’t build the internal controls to track the cost of producing those pages. They assumed we made money because it was a six-figure sale. You can't improve margins if you don't know - to the dollar - what the margin is. Just like in a startup, find metrics you can easily track in a graph.

Starbase’s accounting system didn’t talk with the customer support ticket system, which resulted in customers getting support even if they never actually paid for the software, which resulted in longer DSOs then we had to have.  We couldn't easily inform customers when the defect was fixed by engineering because the CRM app didn't talk to the defect tracking system and version control. These disconnects cost us margin and didn't help us build raving fan customers.

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Selling what you believe, the power of Why before How and What.

The work with our startups intensifies this week as we continue to work on Customer Development and The Lean User Experience. As our Founders move closer to defining their Minimal Viable Products (MVP), they have gone out in the market and interviewed potential customers of their products. As a result, some of our startups have made pivots in their business plan.

I like to celebrate these pivots with our startups. We're six weeks into the process, we've saved monthes of development time by not building software no one will purchase. We're learning more and more about their market segment each and every day. One interesting observation is, with each pivot, the founders are becoming even more passionate about their business. I contribute this to the fact the nine founders are going through this together\, and they're gaining positive energy from the team. This is another benefit of an accelerator; you push through the challenges at a much faster pace.

why how whatThe importance of WHY, before HOW and WHAT.

Simon Sinek, an adjunct staff member of the RAND Corporation, one of the most highly regarded think tanks in the world. He wrote a best seller, "Start with Why: How Great Leaders Inspire Everyone to Take Action". Yes, his principles focus on leaders and the importance of communicating "why". I could write about this topic for pages, but I want to stay on point for this post, so...

Sinek believes you should communicate to your customers: WHY your product/solution matters, than HOW it does it and finish with WHAT it does. We believe most companies do this in reverse. Starting with what features the product has, how it does it so well and finishing with why you should but it.

"Sell to people who believe what you believe." Says Sinek. "People don't buy what you do, they purchase why you do it."

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Breaking down the Investor Pitch

Our VentureBox founders have finished week 5 of our 12-week Venture Launch program. The pitches continue to get better each week.  Feedback is critical to the learning process, so after each pitch we give the founder a breakdown of what we've heard, what worked and what didn't.

TechStars, a popular high-tech accelerator, has a great video series called "This Week in TechStars". This past week they did a breakdown of Flixmaster's pitch.

Enjoy!

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Does it create Cash or Traction?

I recently sat down with one of the VentureBox startups I'm coaching, and we were reviewing their short term goals, over the next 30 days. They had a lot on their plate; it was time to groom the list. So I asked them a simple question:

 

Does it create Cash or Traction?


cash or traction

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This Week In Startups - A weekly dose of startup insight.

This Week In Startups - A Damn Good Show!

If you have missed the first couple hundred shows, like I have, don't sweat it. They're all online. I actually subscribe to their iTunes podcast, and have been catching up on them while I hike with my dog Morgan. The last couple weeks have been remarkable, however, if you truly want to have fun, listen to some of the old tapes from 2009 and it will confirm just how fast our tech industry changes.

This Week in... is a web television network covering a wide variety of topics from tech to entertainment. Produced out of our Culver City studios, the shows feature guest experts, founders, movie stars, comedians, technologists and CEO’s — all keeping you up to speed on what’s happening this week with a fast and funny style. Informative and entertaining, ThisWeekIn is the place for whatever your interests may be.

The company was founded by Jason Calacanis (co-founder of Weblogs, SVP AOL, CEO of Mahalo), actor Kevin Pollak and Mark Jeffrey and is based in Culver City, CA.

I've been listening and occasionally watching some of the Podcast and have found them informative, educational, insightful and entertaining. Jason Calacanis is an excellent host with an amazing memory. If you're an entrepreneur or angel investor, especially if you don't hang out at all the startup events, you'll want to catch this show each week.

 

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A Twitter Guide for CEOs and Business Owners

Twitter for business owners, explained.

Admittedly, Twitter is an application that most business people never get. You need to live in Twitter and study how other people are using Twitter successfully to connect with existing customers while finding new sales prospects. My goal in this blog post is to highlight how I think businesses should be using Twitter. I also plan to give you some examples of how businesses in different sectors should be taking advantage of Twitter.

First, if you own a business and you’re new to Twitter or still, just don’t “get it” let me give you a quick overview. Twitter is a micro-blogging application designed to send updates or notices to a group of followers. The founders picked 140 characters because that was the limit on most SMS phones for text messaging. The application quickly found a home beyond cell phones where 140 characters could have easily been expanded. However, something interesting happened by accident, the 140 characters made people “get to the point” by using their 140 characters wisely.

If you own a small business owner and wonder how many people in your local area are potential customers, check out a site called LocalTweeps (http://bit.ly/6Sl16o) and do a search by zip code. LocalTweeps' audience is less than 1% of the people in your area using Twitter, but it’s a good place to find people in your area that have established followers. You should add your Twitter account to their free directory while you’re on the site.

Why businesses should use Twitter.

For the purpose of this blog post, I’m only going to focus on two reasons you should create an active Twitter social media program. Obviously, there are more, but let’s stay focused on these two: 

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Kickstarter–Where some really great ideas are born.

 

Kickstarter_Logo

One of the things I love watching our 9 founders go through our VentureBox Venture Launch program, is the energy they get from each other. As the class finishes week 4 today, it’s really fun to watch the team development among the founders. Each are struggling with many of the same challenges, however since they’re going through the class as a group, they’re managing those challenges better than going it alone.

Don't underestimate the power of the team dynamic in a business accelerator. Even though each founder is working on a completely different product or service, they're all doing it together. No question is dumb, and the answers often apply to each of the startups anyway. So it's all good.

That brings me to Kickstarter. If you haven’t heard or visited this site I encourage you to do so.

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