Wednesday, June 25, 2008

Report: 3G iPhone costs $173 to make

Via Fierce Wireless

How can Apple and AT&T put a relatively low pricetag of just $199 on the new 3G iPhone? According to research firm iSuppli, the answer is in the low cost of the components. iSuppli estimates the new 3G iPhone will cost just $173 to manufacture, which is significantly lower than rivals such as HTC's Touch Diamond (priced at $785) and Nokia's N96 (priced at $855).

iSuppli says that the most expensive component on the 3G iPhone is the 8 gigabytes of NAND flash memory storage, which the firm estimates costs $22.80. The second pricey element is the touchscreen, which costs about $20. In all, the chips and handset components add up to $164.  iSuppli tacks on another $9 for assembly for a total of $173.

For more:
- read this PC World article

Related stories:
AT&T will subsidize 3G iPhone
Photos: 3G iPhone Launched

3G Penetration Rate In Europe Hits 11 Percent; Does That Mean It Trails The U.S.?

via moconews

In Western Europe, the number of subscribers using 3G have surpassed the 100 million mark, but what's surprising is that this translates to a low penetration rate of 11.1 percent,reports Reuters, quoting figures from Informa Telecoms and Media. Specifically, at the end of May, Europe had 101.5 million 3G subscriptions, counting both phones and modems, out of a total subscription base of 910.8 million. Of course, 3G is important because it encourages people to consume more data and mobile operators are always on the look-out for a way to go beyond voice sales. The surprising part of this report is the low penetration rate in Europe. The report said some markets were significantly higher, like Sweden, Norway and Italy, which had rates at over 25 percent, but still that doesn't seem as high as one might expect, and the penetration rates in the U.S. seem to be higher. This isn't a fair comparison because I'm getting data from another provider, and I don't think M:Metrics includes data cards in their stats, but nonetheless, it's interesting to get an idea of the differences. M:Metrics said that as of the end of 2007, there were 52.2 million handsets with 3G capability in the U.S. for a penetration rate of 23.8 percent. They also have data on some European countries. For instance, the U.K. has a total of 10.9 million 3G-capable handsets, for a penetration rate of 23.6 percent. If the U.S. hasn't surpassed Europe on this, it looks like it is gaining fast. 

Tuesday, June 24, 2008

Virgin goes unlimited for $80 per month

Unlimited monthly rate plans are all the rage and now the monthly price is creeping lower. Starting July 1, Virgin Mobile USA will have an unlimited plan for $80 per month with no annual contract. Unlimited text and messaging can be added for an extra $10 per month.

Currently this is one of the most inexpensive unlimited plans on the market. In February, Verizon Wireless introduced an unlimited calling plan for $99.99 per month. That was matched by AT&T and T-Mobile USA, which added unlimited messaging to that $99.99 price tag. Sprint Nextel meanwhile charges $89.99 for its unlimited plan, which includes unlimited messaging and data.

Sunday, June 22, 2008

A Two-part Rule for Naming Your Startup

via Found+READ

What's in a company name? Plenty. It's your first opportunity to brand yourself. Get it right and you'll stand out as clever, useful, and memorable to potential users and investors — even if your product isn't any good. But get it wrong and you'll flame out before your product even gets out of beta.

So, what makes Brightmail, PayPal and IronPort great names, but Lycos, Xobni and Vidoop really lousy? It turns out there's a formula for effective naming and it's surprisingly simple.

Look at many of the most successful brands and you'll notice they're often compound names, consistently made up of two components:

  • a word that relates to the company product in a direct, literal sense, establishing a clear association between the brand and what the company does.
  • a word not literally related to the product, but rather a metaphorical adjective to evoke a differentiating characteristic or "feeling" about the company's product.

Our minds are built to make connections, mostly at a subconscious level. When a metaphor is detected, it triggers a process in our brains that associates the metaphor with the next object or reference. This naming system forces the mind to take the cognitive step of associating the metaphor to the product it represents, thus forming a positive association to the brand. And once your brain has woven the connection, it sticks, so there's a great chance your company name won't be forgotten.

So when we break down the name Brightmail, we see that "mail" indicates what the product does — they make email — while "bright" is metaphorical, framing their product in a positive light. This same logic applies to PayPal; "pay" is literal, "pal" is metaphorical. Ditto with IronPort, a provider of email and web security products — "iron" is a metaphor for strength and "port" is a literal reference to what the company product protects: network ports.

Search company Lycos tried a made-up word, to ill effect. After all, what's a lycos? Xobni makes a cool email service, but someone had to tell me that xobni is "inbox" spelled backwards. Vidoop is just yucky. Reminds me of, well, you know.

Of course there are startups that get so far out in front of their competitive fields, or whose products are so exemplary, that names which ought to have been tricky are nevertheless well received.

Consider Twitter. If you had asked me a year-and-a-half ago, I'd have said it was a terrible name — all I could think of was "twit." But people's associations with Twitter are good because its communication tool is first-in-class and offers a great experience.

I was recently asked to consult with a startup that is considering re-naming itself. It's a good thing, because the name they're using now is totally confusing. It's one of those Google-wannabe made-up words that sounds vaguely Latin, but isn't. Worst of all, it doesn't tell users like me anything about the company's product (they archive web pages). When the company explained the name to me, I got even more confused.

In my view, while site archiving is useful (and they do it well), this probably isn't a broad-based enough service to be elevated to the level of a consumer utility, as search or micro-blogging (Twitter) have been. This means their made-up name is unlikely to ever be turned into a verb (like "to google" or "to tweet").

I suggested some new names, based on the two-part formula:

: Archi sounds like architect, a good association. It also refers to archive. "Arch" as a prefix is "chief," so metaphorically it evokes priority. Text is literal for content. Combined you might get: "storage for vital web content."
PermaPage: "Perma" evokes impermeability. "Page" is literal.
ArchWeb: "Arch" for "archive," and the metaphorical "priority." Web is web.

Evan Paull is software engineer for Mark Logic and a startup consultant.

VC Fund Raising Manual - Documentation

via Specific Marketing


When you are preparing documents for VC fund-raising, the one piece of advice you will be given by a lot of people is that you need a 'business plan' document that you should send to the VC firm. You are also supposed to have an 'executive summary' that you can send up front.


That doesn't mean to say you shouldn't have a business plan, but I suggest you don't email that to a prospective investor. There are several reasons for this:

1) VCs don't read business plans, they are long and boring

2) Neither a business plan nor a business plan summary achieve what you need to achieve at the point of first contact

3) The business plan will start floating round the start-up scene, I have seen many dozens of business plans that were not intended for me

The documents that you should prepare for the fund raising should be alinged with the phases of the fund raising process. In my experience, the following is useful (I will elaborate on a few docs later on):

1) Pre-pitch phase: 2-3 page teaser document

2) Pitch: 15 slide (or so) PowerPoint presentation

3) Due Diligence: Depending on your business, you will need to present the following documents:

Documents related to spending money:
- Financials (past and forecast). Probably prepared in a professional accounting software and exported to either Excel or Word format. If you prepare your financials in Excel, this is fine for a seed stage company.
- Hiring plan associated with the financials (where appropriate)

Documents related to the product, the technology, their development and protection:
- Technology outline (if any). Word document format
- Product outline. Word document format.
- Product development plan. Word document and associated Gantt charts, probably in MS Project
- Patent strategy (if any). Word document.

Documents related to sales and marketing:
- Marketing plan. Probably in PowerPoint format.
- Sales plan. Various formats, but either an export from a CRM system (to Word) or an Excel spreadsheet

Document related to your industry:
- Industry and M&A analysis. PowerPoint format.

4) Legals - after you have signed a term sheet

You should have prepared digital and physical copies of all contracts that the company has signed in the last few years, as well as any previous investment agreements and the articles of association of the company.

General comment:

Prepare all these documents separately. There are many good reasons for keeping them separate.

Different people can create these docs independently without interfering with others.

The content is in relevant formats.

You gain the ability to distribute certain documents specifically to certain people whom you are dealing with during due diligence and legals, but not to others. For example, should the VC hire a technology expert to evaluate your technology, then these people really don't have to see your financials or your sales and marketing strategy. Likewise, when the VC is asking potential customers about your product, then they don't need to see your financials, or technology outline or patent strategy either. Having separate documents allows you to compartmentalize your information and distribute it on a when-needed and need-to-know basis. This reduces the likelihood of leakage somewhat. Also, should a VC abort due diligence, you haven't shown them all your documents, but only a few.

You can also send documents one by one (no VC is going to read all these documents in one go). Also, it gives quite a nice impression when a VC asks you for your [...] plan and you can send over a whopping doc one day later.

The first two documents are the most important ones, so I will describe them in somewhat more detail below.

Teaser Document

I suggest this a 2-3 page long PDFed Word document. This document has several purposes:

1) to enable you to pitch to a VC
2) to mentally prepare the VC for the pitch
3) to enable the VC to communicate your story within the firm

The content of the teaser document should cover the most important aspects of your company, but not all of them. It should cover:

Product: what is your product, why does it matter
Market: why are you addressing an interesting market
Team: who will make it happen

The ideal thought that a VC should have when reading this document is: "Hmm, very cool, I want to see these guys pitch…" So, don't try to answer all the questions in the document. Leave blanks. You are not trying to convince people to do something. Your purpose is to make them curious. To want to know more. To want to meet you and have the opportunity to find out more.

(By the way: obviously you won't call it 'teaser document', right?)

Pitch Presentation

Endless articles have been written about this one. Have a look at the Stanford Educators Corner, loads of good stuff here, including this one:

As I said before, I have seen 100s of start-up pitches. Some were brilliant, some were disasters, most were somewhere in the middle of the extremes. Your document should cover the same points as your teaser doc, but there is more information in it:

Product: what exactly does it do? What pain does it make go away?
Market: who are the people who will benefit from your product? why is this an interesting market?
Business model: how will you make money? why is this a good model?
Marketing & sales: how will you bring your product to market and how will you sell it? will you have good margins and if so how large are they? what are the costs of sales?
Industry: who are your competitors and how will you compete? are there elements of buyer, supplier or regulatory power that impact you? how are you going to maintain a competitive advantage?
Team: who will make it happen? do you have a good mix of experience and hunger?
Financials: how much money is this going to cost over what period of time? how much revenues do you expect to generate? what are the key variable that will influence your revenue forecasts?
Investment case: is this sector acquisitive? what are the acquisition drivers in your industry? What are the acqusition drivers going to look like say 3 years from now? how do you fit into all of this?

If you can present a case covering the above points on some 15 slides (some 2 slides for each point), you will have done better than most. When I was working at Library House, we asked presenters to cover all the above points in 7 minutes (no more than 12 slides). And yes, it is possible to do that very well.

Overall, the request in the pitch is NOT to get investment. Your simply want to further intrigue the prospective investor. You want them to dig in, to do due diligence on you and work with you during the coming weeks.

As a side note: sometimes you are asked to pitch your company at a public event. In this case, I suggest you don't include all the detail of a one-on-one presentation. This is more of a shorter 'teaser' presentation document in that case.

I will cover how to pitch to a VC in one of the future episodes.

Friday, June 20, 2008

about idea investing

Via VentureHacks

Ideas need not apply

Posted: 19 Jun 2008 12:34 PM CDT

There were a lot of good comments on yesterday's Do you know any idea investors? post. Here's a few of them.

Michael Staton says:

"I'd say if you can't bother to build it yourself, get potential customers lined up, build revenue on an easier offshoot, or convince someone else to build it in their spare time, then you should reevaluate whether you are an entrepreneur."

Luca says:

"The idea is the easy part. If you are a first-time entrepreneur, try scaling down your concept to something whose value you can prove with friends & family money, then go to professional investors. If your idea does not lend itself to such an approach, try your hand first with something you can bootstrap."

Ben says:

"An idea has a dollar value of $0. If you don't believe in the idea enough to commit your cash/sweat equity to build it or a version of it to show it can work, why should friends, fools and family?"

You are subscribed to email updates from Venture Hacks
To stop receiving these emails, you may unsubscribe now.
Email Delivery powered by FeedBurner
If you prefer to unsubscribe via postal mail, write to: Venture Hacks, c/o FeedBurner, 20 W Kinzie, 9th Floor, Chicago IL USA 60610

Saturday, June 14, 2008

What should I send investors? Part 1: Elevator Pitch.

via VentureHacks/Pmarca

"Summarize the company's business on the back of a business card."

Sequoia Capital

Summary: An introduction captures an investor's attention, but a great elevator pitch gets a meeting. The major components of the pitch are traction, product, and team.

If you're building an interesting company, people will offer to introduce you to investors—it makes them looks good. In Hollywood, content is king; in Silicon Valley, dealflow is king.

So, what should you send investors? Send an elevator pitch and a deck. We'll cover the elevator pitch in this article.

Get a first meeting with an elevator pitch.

A great elevator pitch is more important than your deck and less important than the "introducer". If you don't have an introduction, the elevator pitch is critical to a cold call.

An introduction sells the investor on reading the elevator pitch, which sells the investor on reading the deck, which sells the investor on taking a meeting. Many investors will just skim the deck and take a meeting if the introduction and elevator pitch are good.

An elevator pitch.

Send a brief email that the introducer can forward with a thumbs-up. I crafted this elevator pitch from Marc Andreessen's job listing for Ning:

Subject: Introducing Ning to Blue Shirt Capital

Hi Nivi,

Thanks for offering to introduce us to Blue Shirt Capital. I've attached a short presentation about our company, Ning.

Briefly, Ning lets you create your own social network for anything. For free. In 2 minutes. It's as easy as starting a blog. Try it at

Ning unlocks the great ideas from people all over the world who want to use this amazing medium in their lives.

We have over 115,000 user-created networks and our page views are growing 10% per week. We previously raised $44M from Legg Mason and others, including myself.

Before Ning, I started Netscape (acquired by AOL for $4.2B) and Opsware (acquired by HP for $1.6B).

I've admired Blue Shirt's investments from afar. We're starting meetings with investors next week and I would love to show Blue Shirt what we're building at Ning.


Marc Andreessen

Your email should be no longer than this example (which is already too long).

Dissecting the elevator pitch.

Let's dissect this pitch:

Subject: Introducing Ning to Blue Shirt Capital [A useful subject line!]

Hi Nivi,

Thanks for offering to introduce us to Blue Shirt Capital. [Reiterating the social proof of the introducer.] I've attached a short presentation about our company, Ning. [Did you notice the attachment?]

Briefly, Ning lets you create your own social network for anything. For free. In 2 minutes. [What is the product? What does it help the customer do? Who is the customer?] It's as easy as starting a blog. [What's the metaphor?] Try it at [Link to the product, screencast, or screenshots.]

We built Ning to unlock the great ideas from people all over the world who want to use this amazing medium in their lives. [What's the big problem or opportunity?]

We have over 115,000 user-created networks and our page views are growing 10% per week. [Traction.] We previously raised $44M from Legg Mason and others, including myself. [Social proof and more traction.]

Before Ning, I started Netscape (acquired by AOL for $4.2B) and Opsware (acquired by HP for $1.6B). [Team.]

I've admired Blue Shirt's investments from afar. [Why are you interested in Blue Shirt?] We're starting meetings with investors next week and I would love to show Blue Shirt what we're building at Ning. [Call to action and subtle scarcity.]


Marc Andreessen [Contact information—how thoughtful.]


See David Cowan's excellent Practicing the Art of Pitchcraft for more examples.

Wednesday, June 11, 2008

On the Road to An IPO, Jingle Networks Prepares to Launch A Voice Ad Network.

via techcrunch

Erick Schonfeld


Jingle Networks has already captured a six percent market share of directory assistance calls with its 1-800-Free411 service. But, with IPO rumors swirling, that might not be a big enough business. What if Jingle expanded into a voice ad network? I have learned that it is preparing to do just that. Confirms CEO George Garrick:

At this point I'd call it the Jingle Ad Network. We have advertisers that want to get into more environments, and have technology to serve ads. We are talking to publishers about acquiring enough inventory to be significant. We are starting to sign deals with companies that have large numbers of calls. I imagine it will be a few months yet before we bring anything live, probably later in the third or fourth quarter.

Today, Jingle offers free directory assistance calls in exchange for playing two audio ads, one before the caller asks for the number and one before the number is given. Its Free411 service gets 20 million calls a month. That is 40 million advertising opportunities a month. Not every call can be matched with an ad, but a very large number can. Already, Jingle has more than 150,000 advertisers, many of them local. National advertisers include McDonald's, Earthlink, AMC Theaters, FordDirect, Allstate, Cablevision, Columbia House, Days Inn, Miller Brewing Company, and Travelodge. Its top categories include stores, restaurants, banks, and doctor's offices.

Jingle can use the call volume and ad inventory on Free411 as an anchor for a broader voice ad network. Any information line, movie line, or call center could hook into the ad network to lay ads while people are on hold. Most companies look at their call centers as a cost center. Being able to generate one to two cents per call in revenue would be significant for many companies. And as voice apps take off on the Web, that could present another opportunity, although Garrick says the call volume is not there yet. As with any ad network, it is a numbers game. The more call volume Jingle can fill with ads, the better its economics.

Does this mean, Jingle is preparing for an IPO. Garrick doesn't rule it out. He says:

We expect to become profitable before the end of this year. If we look at the public markets, it won't be until next year.

Jingle is not the first company to try to do this. Already, it faces competition from startup VoodooVox, which is building its own voice 2.0 ad network. VoodooVox claims that it currently powers 320 million ad-supported calls per month, and reaches 30 million consumers. But Jingle does have a leg up in that it already generates a lot of ad inventory on its own, and it is expanding its own free ad-supoprted calls to include driving directions, weather, and other information services.

Of course, there is always the specter of Google, which offers its own free Google411 directory assistance service. Google411 does not even have ads yet, and is treated more like a research project to test voice recognition algorithms. But Google could jump on the voice advertising train any time it wants.

Monday, June 09, 2008

Angel, VC, or Bootstrap?

Note: I wrote this piece a couple of weeks back, inspired by Greg Linden's blog post (see below). Inc then picked up the piece and asked me not to publish it until it appeared on the Inc website. The article appears on the Inc website today with some minor edits.

Greg Linden was one of the key developers behind Amazon's famous recommendations system -- the system that recommends books, movies, and other products to Amazon customers based on their purchase history. He subsequently went to Stanford and picked up an MBA. In January 2004, he launched a startup named Findory to provide everyone with a personalized online newspaper. You cannot imagine anyone who could be more qualified to make a startup like this a success. Yet Findory shut down in November 2007. In a brilliant post-mortem, Greg says his big mistake was to bootstrap his company while trying to raise funding from venture capital firms; he just couldn't convince them to invest. He should have raised his funding from angel investors instead.

This is an important decision every startup founder has to make -- where to raise their funding. The three viable sources at the very early stages of a company are:

  • Friends and family. Yourself, if you can afford it.
  • Angel investors. Usually wealthy individuals, but includes outfits such as Y Combinator. (My firm Cambrian Ventures is also in this category, although we are currently not actively seeking investments; we're too busy running our own company Kosmix.)
  • Venture Capital (VC).

To understand which option is best for your startup, you need to understand how investors evaluate companies. While investors evaluate companies across a range of criteria, three that stay consistent are: Team, Technology, and Market. Angels and VCs evaluate them in different ways. Here's how.

How Venture Capitalists Evaluate Startups

  • Market. Venture Capitalists want to invest in companies that produce meaningful returns in the context of their fund size, which typically is in the hundreds of millions of dollars. To interest a VC firm, a company needs to be attacking a large market opportunity. If you cannot make a credible case that your startup idea will lead to a company with at least $100 million in revenue within 4-5 years, then a VC is not the right fit for you. It's often OK to use consumer traction as a substitute for market opportunity -- many VCs will accept a large and rapidly growing user base as sufficient proof that there is a potentially large market opportunity.
  • Team. Venture Capitalists use simple pattern matching to classify teams into two buckets. A founding team is deemed "backable" if it includes one or more seasoned executives from successful or fashionable companies (such as Google) or entrepreneurs whose track record includes a least one past hit. Otherwise the team is considered "non-backable."
  • Technology. Venture Capitalists are not always great at evaluating technology. To them, technology is either a risk (the team claims their technology can do X; is that really true?) or an entry barrier (is the technology hard enough to develop to prevent too many competitors from entering the market?) If your startup is developing a nontrivial technology, it helps to have someone on the team who is a recognized expert in the technology area -- either as a founder or as an outside advisor.

Here's the rule of thumb: to qualify for VC financing, you need to pass the Market Opportunity test and at least one of the other two tests. Either you have a backable team, or you have nontrivial technology that can act as an entry barrier.

How Angels Evaluate Startups

There are many kinds of angels, but I recommend picking only one kind: someone who has been a successful entrepreneur and has a deep interest in the market you are attacking or the technology you are developing. Other kinds of angels are usually not very high value. Here's how angels evaluate the three investment criteria:

  • Market. It's all right if the market is unproven, but both the team and the angel have to believe that within a few months, the company can reach a point where it can either credibly show a large market opportunity (and thus attract VC funding), or develop technology valuable enough to be acquired by an established company.
  • Team. The team needs to include someone the angel knows and respects from a prior life.
  • Technology. The technology is something the angel has prior expertise in and is comfortable evaluating without all the dots connected.

Here's the angel rule of thumb: you need to pass any 2 out of the 3 tests (team/technology, technology/market, or team/market). I have funded all 3 of these combinations, resulting in either subsequent VC financing (e.g., Aster Data, Efficient FrontierTheFind), or quick acquisitions (Transformic, Kaltix -- both acquired by Google).

I've written about the stories behind the Aster Data investment and the Transformic investment previously on my blog. In both cases, notice how my personal relationship with the founders, as well as my passionate belief in the technology, played big roles in the investment decisions.

Friends and Family or Bootstrap

This is the only option if you cannot satisfy the criteria for either VC or angel. But beware of remaining too long in this "bootstrap mode." An outside investor provides a valuable sounding board and prevents the company from becoming an echo chamber for the founder's ideas. An angel or VC can look at things with the perspective that comes from distance. Sometimes an outside investor can force something that's actually good for the founder's career: shut the company down and go do something else. That decision is very hard to make without an outside investor. My advice is to bootstrap until you can clear either the angel or the VC bar, but no longer.

Back now to Greg Linden and Findory. By my reckoning, Findory passes the team and technology tests from an angel's point of view -- if you pick an angel investor who has some passion for personalization technology. The company doesn't pass any of the VC tests. Given this, Greg should definitely have raised angel funding. My guess is that this route would likely have led to a sale of the company to one of many potential suitors: Google, Yahoo, or Microsoft, among many others. Of course, hindsight is always 20/20! I have deep respect for Greg's intellect and passion and wish him better luck in his future endeavors.

For further reading, I highly recommend Paul Graham's excellent article How to Fund a Startup.

useful posts on angel investing

Basil Peters has a series of posts up on Angel blog that talks about the problems of Convertible Notes for Angel Investing, suggests Exchangeable Shares for Angel Investors, and even provides a One Page Term Sheet for Angel Investors.