WOW: the best summary of the challenges of start-upping in Europe. A must read!

via Martin Warsavsky Blog

US entrepreneurs in Europe beware!

Posted: 09 Dec 2008 04:51 AM CST

While not all Americans love Europe, many, mostly from the Blue States, do.  People in San Francisco or New York City dream of spending part of their life in Italy, France, UK, Spain and some do make it over.  Not many go to the extreme of moving over here and giving up their US nationalities as I did. But after 9 years of being a tech entrepreneur in Europe and being forced to choose between Spanish or US citizenship, I chose Spanish and stayed in Madrid. As a tech entrepreneur, I found Europe in general, and Spain in particular, to be fertile ground for me. The European market is huge, bigger actually than the US market.   And over here, I built Viatel in the UK, Jazztel and Ya.com in Spain, Einsteinet in Germany (the only company that I sold at a big loss) and now Fon.

Europe is great for an American tech entrepreneur because wealth here is better distributed, people are more educated and there are less competitors. Since being an entrepreneur is not very well regarded over here US entrepreneurs find more open niches; But on the negative side the market in Europe is much less homogeneous than in USA, local cultures make it hard to launch pan European products and there are all sorts of taxes, market distorsions and restrictions that surprise a US entrepreneur.

So let´s go over the caveats. The first one that I would like to focus on, one that is particularly brutal is the issue of unlimited personal liability of the entrepreneur.  On the rest of the article I will refer to laws in Spain but I do believe that what I am about to tell you about Spain applies to most of the rest of Continental Europe as well.

USA has a lenient view of failure. Failure in America is not seen as a lifelong chronic disease but as a test of character. VCs in the States look for people who have had a combination of successes and failures as they are more prepared to deal with the tough realities of business life. In Europe however failure is seen as just that, failure, a stigma that stays with you for the rest of your life. So far I have never managed a business that had to liquidate. In all cases, even during the crash of 2002, I was able to refinance, renegotiate and keep companies going. Even at Einsteinet we were able to preserve most jobs. We sold the company at a loss but the loss was limited to the capital invested by myself and my partners mostly at Goldman Sachs.  Recently, thanks to the crisis, I have been hearing horror stories of what happens to entrepreneurs who fail in this Continent vis a vis personal liability. It is not nice.

The basic problem for start up entrepreneurs in Spain and probably most Continental European countries is that there is no such thing as "bankruptcy" in the legal sense of the word.  This is a huge problem for start ups because as we know most of them fail.  So for example if you start a company in Europe, try hard for five years to make it, but run out of money in the end the company is not perceived as a bankrupt company in the American sense of the word.  In Europe going bankrupt is the same as firing all the employees and you as the founder, PERSONALLY owe the money that has to be paid to the employees for letting them go even if the business has done nothing wrong.  I know, it sounds crazy, but this is the case.  So Spain for example, had a construction boom for the last 5 years that ended in a bust, and now entrepreneurs are having to close down businesses. But when they do they have to sell their home or do whatever to pay the severance pay of the employees.  Because in this case not only the employees can sue you (through the Seguridad Social) and force you to sell your home, car, and deprive your own family of whatever they need but if you don't have money to pay now they can hunt you down for the rest of your life. You never recover, you can never declare bankruptcy. You can never start anew. If you start a new business and begin to do well, whatever you make then goes to pay for your past losses in your past business. Spanish law ties your future endeavors to your past endeavors. You never get a clean slate. If you had say 1000 employees, which is what I have had in my other companies you could owe tens of millions of euros for the rest of your life to them. Even though you did not do anything wrong other than failing to generate a profit, you are held personally liable for poor market conditions. This is an enormous risk for a start up entrepreneur. A risk that grows larger the longer you are in business as severance liabilities are not related in any way to employee performance and only related to their duration with the company.

And even if you are lucky enough not to go bankrupt in Europe there are other conditions that dissuade an entrepreneur from starting a business.  One of the reasons that in Europe there's higher unemployment than in America is the extremely high social charges. These are 50% higher than in the States. In Spain a starting level employee who takes home 1000 euros after taxes costs the entrepreneur almost twice as much. In Europe the government takes so much money in between the entrepreneur and the employee that while take home pay is many times absurdly low employee cost is generally high. And not only are social charges very high but salaries are deceiving because by law in Spain and in general in Europe you are forced to pay employees 13 or sometimes 14 months for 11 months of work (a year minus a month of mandatory vacation plus an extra month or sometimes two of a mandatory state bonus regardless of performance).  So if you are an American entrepreneur and you come to Europe and find out that there are no stock options and bonuses and want to pay them as I have done, you should realize that even though it appears that there isn´t additional compensation, in reality there are hidden forms of compensation such as extra months and accumulated liabilities through mandatory severance and these are secured by none other than your own children´s college funds, your home, your car. And this is not all.

In Europe for example, medical doctors play a hard to explain role in business. If in America the ghosts for entrepreneurs are injury lawyers in Spain, France and Italy they are medical doctors. How? If a person does not feel like working they go to a friendly doctor who declares them "depressed" and they can stop working and still get full paid for up to 18 months. At Sybilla a company that I invested in we now have many of such employees, all declared depressed by their friendly doctor and company productivity is seriously suffering. Interestingly the same law does not apply to entrepreneurs. As an entrepreneur you are not allowed to be depressed. This is illegal. If you are nobody pays you. And even when your business fails you, the entrepreneur or admistrador in Spain are not allow to collect unemployment insurance even if you contributed to the Seguridad Social. In Spain and some other countries entrepreneurs are presumed guilty by default and in case of failure everything is seen as their fault even if they truly had a case of mental illness. Mental illness or depression cannot get an entrepreneur away from his obligations to pay but very commonly gets employees away from their obligation to work.

So while some European countries do have great advantages to start businesses among them, no capital gains tax on businesses owned and sold in over 5 years, starting a business in Europe is riddled with danger.  Having built businesses in the States as well I know that USA has its negative aspects.  One would be the "legal tax" of doing business.  Legal expenditures for the average business in Europe are in my experience 70% less than in USA.  Moreover in Europe you don´t need to worry about frivolous lawsuits nor insure yourself against them.  But in Europe we have all sorts of entrepreneur obstacles such as net worth taxes, which are as high as 2% of your global net worth per year, we have a medical system in cahoots with employees, we have social charges that are twice as high, and lifetime liability for business failure.

So what do European entrepreneurs do?  Many times they find loopholes but these loopholes even though they are sometimes legal, because we live in the black and white world of Napoleonic laws, they are pathetic to say the least. For example in some case entrepreneurs in Spain are not the legal administrators of their business but find instead people with no net worth to take the job so if things go wrong they are off the hook. And I heard worse things.  In some instances, entrepreneurs in the construction industry ask all new employees to sign blank pieces of paper when they join so the entrepreneurs can force them to resign without severance should they need to do so.  I know that it sounds insane to an American used to courts that interpret the intent of the law that a simple trick like that would work, but in Spain it works. Another common trick that is illegal but almost normal is that when employees want to resign for their own reasons they ask the entrepreneur to fire them so they can collect unemployment insurance.  Another one is that employees who are collecting unemployment insurance offer to work for cash pay but not on the books so there´s no proof that they are working and collecting unemployment and entrepreneurs go along because they save social charges.   And this is but a small list of tricks, illegal maneuvers and loopholes that the system of rigid laws, high social charges, and forced severance has created.  So when you see unemployment statistics in Europe they tend to be inflated in the sense that there are a lot of people in Europe who are both working and collecting unemployment insurance.  The problem is that the employment statistics are also inflated in the sense that there are a lot of fake sick people in Europe who are supposedly employed but who are not working.

Now here is an extreme example. The ultimate American start up, the Hewlett Packard, the company that started in a garage would be illegal in Europe.  In Europe everything is regulated.  People cannot legally work in a garage.  In Germany for example there is legislation that defines what a workplace is.  I know that it´s hard to believe but there are even laws that do not allow employees to work further than a few meters away from a window so unless this famous garage has a lot of windows already working in a garage can get your business close.  Moreover there is almost a concept of bondage involved in the employee company relationship with a set of rights that creep in and build over time that go against the basic principle of the start up namely of trying new business concepts that may fail. Even eager start up employees who understand that a start up has risks and want to be part of the adventure are not allowed to waive any of these rights.  If an employee wanted to sign a piece of paper that said "I declare that I know this is a start up and we don´t have money in this new company to get an office and I accept to work in this garage and I renounce my rights to a window" a government inspector could come and close the whole company anyway.   In general I would say that in Europe the concept of trying things out just does not exist, if you try you are liable, if you try you have to behave as an established business.  There´s no concept of an incubating business in temporary start up conditions. The moment you are in business you have to abide by the rules of business and this rules are against start ups.

Bottom line, if you are a US entrepreneur or a US company thinking of opening up a branch in Europe you have to learn that while the market here is huge that Europe is a whole new world when it gets to the rules of the game of starting a business.  Think less of stock options which in any case are frequently illegal or taxable when they are given out even when they are out of the money, less of bonuses because bonuses are already part of employee compensation and instead interview very very well before you hire because firing is tough and lack of productivity is not reason. In Europe it is not illegal to ask personal questions in an interview, indeed interviewing is much easier in Europe than in America, what is harder is to lay people off.  Even if you have a sales person who has been unable to close a single contract it is illegal in Europe to argue that you are laying off this person because he or she produced no sales.  In Europe, a sales people are not supposed to sell, they are supposed to show up for work and if they fail to maek sales the fault always, invariably lies with the entrepreneur. When the entrepreneur fires this person it is always a wrongful dismissal that must be compensated for.

Now, to end on a positive note, I can say that in my 13 years of building businesses and managing people in Europe my personal experience has been good.  While in one of my portfolio companies there is a high number of people who declared themselves depressed this has only happened with one of the managers who ever reported directly to me. Also, because I never had to close a business, I was not caught personally owing a lot of money to former employees. Employee morale at Fon for example is great and I have not seen any cases of people abusing the system. Moreover, in Spain, and in Europe in genera, there are fortunately very many highly ethical people who don´t abuse the system even if they could. As a result there are many successful entrepreneurs and successful businesses in Europe. But, overall I would say that European society is not business friendly and especially not start up entrepreneur friendly. If you come over, create jobs and do succeed don´t expect the recognition that you get in the States.  In Europe, as an entrepreneur, you are much less likely to be seen as an engine of economic growth and more as a person who gained unfair advantage over average folk who are struggling to make ends meet. And, if you are American, even more so. So American entrepreneurs coming to Europe, beware!

reblogging: managemetn funds

New trend: the management funds Posted: 08 Dec 2008 06:45 AM CST I predict that there will be a new trend soon. It is what I would call management funds. My idea is that as as a result of the crisis, banks, hedge funds, governments end up owning and having to manage businesses and have no clue of how to do it, very able managers will be in short supply. Managers will then say. "Ok, I will manage your business but don´t pay me a salary. Now it´s my chance to get 20% of the upside".

interesting stats on radio and podcast usage in UK

via James Cridland's blog

In the UK…

9.4 million adults listen to radio over the internet every week. ¹ That's 18% of the population. ²

1 million adults use last.fm (or similar personal online radio services) every week. 70% of them claim their live radio listening habits are still unchanged. ³

28.7% of adults live in a household with a DAB receiver in it. ⁴

83% of podcasts users listen to podcasts that are more than a week old. ¹

11 Things Startups Should Know About Enterprise 2.0

via readwriteweb

Written by Bernard Lunn / August 21, 2008 1:40 AM / 17 Comments

« Prior Post Next Post »

Yesterday we wrote about Enterprise 2.0 from the point of view of the Enterprise, the buyer. The conclusion was that the impact of social media on the Enterprise was very big, addressing the very "nature of the firm". This post looks at Enterprise 2.0 from the point of view of the vendor, specifically startups. This is a 30,000 foot view, but we aim to get past the hype to insights you can use in your startup. Further posts in our recently launched Enterprise Chanel will drill into specific market segments, companies and technologies.

1. Subscriptions are the best revenue you can get. Subscription revenue is more recession proof than advertising and more predictable than traditional enterprise software licensing. As long as you don't mess up, you will have a low churn rate. Then your new subscriptions drive your revenue growth
2. It is much easier to get subscriptions from a business than from consumers. Sure we all love the idea of consumer subscriptions, the potential is enormous. But do this reality check. How many subscriptions do you pay for? How many current subscription costs would you love to eliminate or drastically reduce? What would your really (no, really) agree to pay for every month? We are in a serious consumer recession in the developed markets that may last a while. What was always hard, just got an awful lot harder. Selling to business is much easier, if you focus hard on the next rule.
3. The other 80/20 rule. 80% of enterprise IT budgets just "keep the lights on". Only 20% goes to new stuff. I learned this in the technology nuclear winter in 2002, when a 20% cut in IT budgets meant that no (zero, nada) new projects were approved. If you can show how to reduce that 80%, you get a better shot at the 20%. That 80% market is a replacement market. You need to know what cost you are replacing. The incumbents are looking at the 20% budget as well and they have the inside track. You have to attack the 80% to make it big.
4. "Parallel replacement" is new. The old enterprise replacement market was based on capital expenditure write offs. If the client bought a $1m license fee over 5 years ago, you had a shot at selling another license fee for something "better, faster, cheaper". In the new enterprise world of SAAS and open source, upfront license fees are the exception rather than the rule. Buyers prefer to hold onto the old stuff a bit longer until they can see either an open source or SAAS alternative. Replacement is always very risky, leaving incumbents in control and startups banging outside the door in frustration. So you need to show that you can run in parallel with the existing solution for a period until you are established enough to be a viable, safe replacement. Step 1 is run in parallel, step 2 is replace. This is what Google Apps and Zoho are doing to Microsoft office (I use both Google Apps and MS Office. Even though I use Office less frequently I own a license, so why delete it? When I get a new laptop I will decide whether I need to buy Office). To play this new parallel replacement game you need to a) offer a free entry point (the Freemium strategy) so you get traction with a low cost of sale and b) you need to show one very clear new value proposition that will tap into that 20% budget for new stuff.
5. Have one simple new "blue ocean" value proposition that any business user can understand. You need this to access the 20% of budget going to new stuff. Being "cloudy" is not a value proposition, it is simple]y a way to deliver your value proposition. The incumbent can always launch their SAAS equivalent. Your free entry level just gets you through the door so that you get a chance to upsell to your subscription; free is not a value proposition. You have to show how you will do something really basic such as either a) increase revenue with a low cost of sale or, b) reduce cost on an existing process or c) create strategic sustainable advantage in measurable ways. Most likely you will do this by enabling better collaboration/communication, both within the enterprise but also, more critically, outside the firewall to the "extended enterprise". For a startup, this has to be "blue ocean", a market that has not yet been defined by the incumbents. By its very nature, this means the market size will be very hard to define and there will almost certainly not be recognized external authority that has defined the market size. Smart VC understand that Blue Ocean strategy and precise market size estimates seldom go together.
6. SaaS ++ means that Open Source is no longer a problem. Open Source has been great for buyers but it has also taken the entry level market away in most segments and that trend shows no sign of letting up. That is bad news for a startup looking to sell traditional software with a "better, faster, cheaper plus we try harder" replacement pitch. You cannot undersell Open Source. That has forced many ventures with great software and strong teams into the dead-pool. With a "SAAS ++" offering, you can use Open Source as the base, add a bit of new code and bundle it all up with hardware and service in a monthly fee. Unless buyers really want to do all that in-house, using their dwindling internal IT staff, you have a shot at it. SAAS alone however is not a barrier to entry. Anybody can replicate it. Which means (smart) VC will/should pass. You need the "++" bit as well. That is likely to be something to do with viral, communications and network effects that create a growing user base and proprietary data coming from that base. That is the "magic sauce".
7. You need to become a very good financial and data modeler. You will need some old-fashioned face to face relationship selling to get large enterprises to understand your solution, so that the "powers that be" encourage adoption and do not seek to block it. But the business will grow one subscriber at a time and users convert to subscribers one click at a time. Modeling becomes a core competency. Modeling the costs of all the SaaS components (R&D, hardware, infrastructure software, software maintenance, system and data maintenance). Modeling the cost of subscriber acquisition using SEO, SEM, social networking, conversion from free to paid and inside telephone sales in a highly efficient funnel process that delivers the right $ per subscriber. Modeling the revenue growth with multiple what if variable assumptions. Modeling the ROI for your clients at various levels of adoption.
8. Most external market size projections do not help your business plan. Forrester Research reports that Enterprise 2.0 will be a $4.6 billion market by 2013. That is not nearly granular enough for a real business plan. You are not really in the Enterprise 2.0 market. Saying "we will get 1% of the $4.6 billion Enterprise 2.0" market is totally meaningless and will simply get you shown the door in the VC office. You are in the market of solving a specific business problem, for a specific type of customer, competing against specific incumbents and startups. That is how you need to build a market size, from the bottom up. This is particularly true for "blue ocean" strategies where the market has not been defined by an incumbent. Building the real world, bottom up market size takes real hard work and detailed market knowledge. Look for a small enough market where you can get 20% and take that to 50% share and then leverage that market to get 10% in another market. Rinse and repeat. It is an old formula, but it works.
9. You need VC, they need you but there is a disconnect. Since 2000, most VC have sent any business plan with the word "enterprise" straight to the trash. With good reason. During the nuclear winter, the enterprise IT market was dead as a dodo. Then the big incumbents got into the consolidation game and it looked like you would count enterprise IT vendors on the fingers of one hand. The cost of entry was high, needing expensive sales teams upfront and the revenue was lumpy and unpredictable. Yech. Better to back a few inexpensive developers building a free service that some big vendor would buy and figure out how to monetize. That was a great game for a while. Most VC now view it as in its final innings at best. There is a shortage of buyers, no IPO market, we are in a cyclical downturn for advertising and in a major funk figuring out how social media can be funded by advertising. So VC need Enterprise 2.0. But they have missed the early winners. Very few of the current Enterprise 2.0 startups are venture backed. This is a disconnect. The early players always find it easier to bootstrap than later vendors. Today you need capital to fund the ramp-up and to build distance from competitors as the Enterprise 2.0 market moves from "below the radar" to "early hype" phase, thus dragging more entrants into every category.
10. Vertical is not the same as Horizontal. Classic Web 2.0 services such as Delicious, YouTube and Skype are geared at mass markets. Anything that is more niche has tended to be called "vertical". That is confusing. Vertical means a specific industry such as banking, healthcare or manufacturing and sub-sets of those industries. Horizontal (applying to any industry) should mean a set of common and linked features used by a specific type of person in the company (e.g. accounts payable by Finance, CRM by Sales and so on). The general rule of thumb has been for vertical ventures to be bootstrapped and eventually rolled up into larger entities. VC tend to view vertical as too limited. Horizontal on the other hand is big enough.
11. Know how to deal with secrecy, structure and control needs. Social Media is about being open, loose, unstructured, informal and fun; no ties allowed. Enterprises are about secrecy, structure and control. Ties show that you are serious and fun is for after work. The ties and fun bit is just style. But secrecy, structure and control is real. If you threaten those, many forces within the enterprise will shut you out. It will be like the red blood cells attacking the foreign virus. On the other hand, if you go along with all the secrecy, structure and control rules of the enterprise you will lose the social media benefits of extended enterprise collaboration and innovation. Many people within enterprises understand this and some of them are in a policy-making position of authority. In general, the trend is towards loose, unstructured, "emergent business networks". So "make the trend your friend", but beware of the very strong forces of opposition and deal positively with their legitimate needs.

Conclusion

What is your position in the Enterprise 2.0 market. Do you work in IT in a large Enterprise? Do you work for a large incumbent Enterprise IT vendor? Do you work for a startup that is going to change the Enterprise world? Are you writing about this rapidly emerging market? Do you have unique insights or research to share? We would love to hear from you in the comments and maybe as a Guest Author. Email us if you're interested in writing for ReadWriteWeb's Enterprise Channel.

50 Social Sites That Every Business Needs a Presence on

http://www.insidecrm.com/features/50-social-sites-012808/

Marketing on a Startup Budget: 101 Free Offers and Coupons to Advertise Your New Site

http://www.insidecrm.com/features/marketing-startup-budget-051208/

The Funded - a perfect deck

Having done over 150 investor pitches across five companies, a concise and well-organized deck is critical to success. No deck will be "perfect," but here is what I learned.

First, the deck should evolve as you meet with investors and evaluate their reaction to each slide, so use version numbers with the file to avoid confusion when sending the deck around. Next, avoid revealing confidential information, such as pending business deals or secret release features. Finally, make sure that each slide is very concise, using one line of text per bullet and no more than six bullets per slide. If possible, use graphics or a chart instead of text.

The whole deck should take 20 to 30 minutes to get through without questions, assuming that half of the meeting will be questions. The ten slides that you need, in my experience, are:

1. Vision: What are you trying to do, and why are you doing it?

2. Market: What is the market you are addressing and the estimated value of this market over the next 5 to 10 years?

3. Team: Who are the key three to five executives (Vision, Operations, Tech, Sales, Marketing), and what are their specific qualifications in the target market?

4. Offering: What is your exact offering? If possible, present a three to five minute pre-recorded video demonstration.

5. Roadmap: Where are you in your offering release cycle and with respect to gaining traction?

6. Deals: What are your major partnerships, relationships, etc.? This slide should include various logos.

7. Differentiation: How are you different from your three main competitors? This slide should have a simple table.

8. Stats: What are the basic statistics of your company (Round, Investors, Employees, Location)?

9. Financials: What is your high-level projected P&L for the next two years plus the current and previous year, if available?

10. Capital: How much capital are you raising and what will it be used for?

This type of simple presentation has always worked for me. Please add any other ideas or lessons that have worked for you.

Egypt named best country for outsourcing

via AllAboutEgypt

An industry analyst positions Egypt as the Middle East's clear winner to take advantage of the boom in global outsourcing, already worth an estimated $300bn in 2009.

The report, 'Can Middle Eastern Countries Fulfill the Eastern Promise,' developed by independent technology and research firm Yankee Group, examines the strengths and weaknesses of Middle Eastern markets - namely Egypt, UAE, Oman, Bahrain, Jordan and the Kingdom of Saudi Arabia (KSA) - as countries seeking to attract outsourcing dollars to their economies.

Egypt was assessed as having the strongest position based on its young population, sustainable and abundant talent pool of technologically skilled and multi-lingual university graduates. Its geographical position - close to Europe and Asia - coupled with strong government support are also factors which contribute to Egypt being an outsourcing hotspot.

The report highlights Egypt as the only Middle Eastern country generating a significant number of technical graduates and refers to the UN 2007 Human Development Index (HDI) which ranks 177 countries on the number of tertiary students in the fields of science, engineering, manufacturing and construction. Kuwait scored 33; Qatar, 35; UAE, 39; Bahrain, 41; Oman, 58; Saudi Arabia, 61; Jordan, 86; and Egypt, 112, compared to India, 128 and China, 81.

Multi-lingual capabilities are also a key factor in a country's attractiveness as an outsourcing destination. The report highlights Egypt as the 'only truly multi-lingual country' in the Arab world when comparing Middle Eastern countries for the seven key languages spoken in the BPO and ITO sectors. According to the report Egypt has an abundant talent pool of graduates fluent in English, Arabic, French, German, Italian, Spanish and Portuguese, whereas the UAE, KSA, Oman and Bahrain typically only possess English and Arabic language skills.

Companies using Egypt as a base for software development, technical support contact centers and research facilities include SpinVox, IBM, Intel, Microsoft, Cisco, Oracle, Satyam, Wipro, Orange, Alcatel, Teleperformance and Vodafone, among others.

plan B on fund raising

GUY KAWASAKI OF HOW TO CHANGE THE WORLD | SEPTEMBER 9TH, 2008 - 01:44 PM 
(98) FOUND THIS USEFUL. DO YOU? 

Here's how most entrepreneurs approach venture capital funding raising. I call it Plan A. It's a plan and an outcome that no one talks about but happens all the time. I've been on both sides, so I should know.

• Step 1: the entrepreneur cogitates: "Let's raise $1-2 million so we can focus on programming and marketing and not worry about raising money. We'll hit all our milestones and then go out for another $5 million in two years and get acquired or go public soon after that." Believe it or not, many companies raise the $1-2 million and sometimes more because venture capitalists compete for the deal.

• Step 2: the entreprenur fantasizes: "Our most conservative forecast is one million users in the first six months. We need to scale to prepare for this, and the reason why VCs gave us money is that they want us to scale and win the land grab."

• Step 3: the product is late, and the dogs don't eat the food. After six months, there are 10,000 users, not one million. The company has scaled up its expenses but for no reason. Money is tight, but the VCs are still clueless and accustomed to initial projections being off by orders of magnitude.

• Step 4: Unbelievably, the company is still able to raise a second round of $5 million. Life is good. The entrepreneur "knows" that things are going to pick up so she scales up some more to prepare for the "hockey-stick" growth curve that coming soon.

• Step 5: Another six months go by, and there's still no viral explosion. (To continue the hockey analogy, the handle, not the blade, is touching the ice.) The venture capitalists that the entrepreneur thought were true believers and BFFs (best friends for life) go to Demo and see three products that do the same thing that appear to be further along.

• Step 6: Out of the blue, the lead-dog venture capitalist calls up the day after a partners meeting and says, "We just don't see how you're going to make it. We want to give your company a 'soft landing' by merging it with our online dogfood company. And we'll call some executives we know at Yahoo!, Google, and Fox Interactive to see if they're interested. We want our money back before you burn through it because my partners think this has gone on too long."

• Step 7: The entrepreneur hangs up the phone in a state of shock. A week ago in a board meeting, no one said anything about shutting down the company. She thought that her investors were getting a little antsy but were fundamentally still behind her. She calls the investors "stupid, arrogant bastards who don't get it" in her staff meeting–conveniently forgetting that she's missed three years of forecasts by 90% and has burned through $3 million.

• Step 8: The company rapidly implodes. No one wants to merge it with another dog in the venture capitalist's portfolio, and no one at Google, Yahoo!, or Fox Interactive is interested. This is a fundamental fact of companies: they are bought not sold. That is, an entrepreneur or investor can seldom call up logical buyers and get a deal done. All an entrepreneur can do is create a good company and pick up the phone when a buyer is calling.

  The company is sold for pennies on the dollar for what little assets (intellectual or physical) that it has. Some money is returned to the investors. The management team toys with two ideas: first, buying the company from the investors, but it quickly realizes that it created a dog that's not worth buying. Second, suing the investors for not fulfilling their fiduciary responsibility to the company, but when the lawyers laugh at this idea, the team gives it up too.

As readers of this Open Forum blog, I want you to be open to another way. I call this Plan B. In this plan, you take very little if any venture capital until you need capital to expand, not create, your product. Here's how it works:

• Step 1: You dig, scratch, and claw yourself to $100,000 of funds from your friends and family. Maybe you work as a YCombinator company. You take no salary. You live with your parents, and you keep your day job at Microsoft. You hope your spouse doesn't get laid off. You have no office, but work virtually and meet your co-founders at Starbucks if you have to. Everything you use is Open Source or shareware.

• Step 2: Rather than trying to boil the ocean ("the mobile sector"), you boil a tea kettle. Rather than paying to attend high-end conferences, you hang out in the lobbies of the hotels where the events are and meet the same people for free. Rather than hiring a PR firm, you suck up to bloggers and hope they cover your product. Rather than buying booth space, you get on Twitter and use it to gain a reputation for your product.

• Step 3: You're late with your product too (because everyone is late), but you're not burning $250,000/month, and you don't have to tell increasingly greater lies at monthly board meetings. Finally, you release your prototype. TechCrunch covers your release because you wrote Mike Arrington a compelling one-paragraph message that you sent on a Friday afternoon because you know he reads email on weekends.

• Step 4: This is where the miracle occurs–lo and behold, people like your product. (Truly, miracles have to occur whether you're bootstrapping or venture-capital funded. It's just that if you're bootstrapping, there's more time for the miracle to happen, and a smaller miracle suffices.) Month to month, you're showing 10-15% growth, and monetization, praise God, has started.

• Step 5: Now you have options. First, you can contact venture capitalists with a company that's already shipping to raise capital to expand your business. This is a very different discussion than raising capital to build a product. Second, you can continue to bootstrap and grow by using your cash flow. Three, you can pick up the phone and agree to meet with Google, Yahoo!, Fox Interactive, or any other company that has noticed you.

Many readers of this blog are not tech entrepreneurs, but the merits of Plan B are the same for almost any type of business. You can try Plan A as long as you realize that the hard work begins after you raise venture capital, and you will need a bigger, faster miracle to make everyone happy. Or, you can just believe me: "Plan B, don't leave home without it."

Sequoia on the new global (dis)order

Sequoia Capital on startups and the economic downturn

View SlideShare presentation or Upload your own. (tags: depression recession)

all about podcasting

via http://socialcreativity.wordpress.com/

PODCAST CREATION GUIDELINES

How To Create a Podcast - About.com's step-by-step tutorial for podcast beginners.
iLounge Guide to Podcast Creation - another guide for creating your own podcast for absolute beginners.
Podcasting Legal Guide - find about legal issues relevant to podcasting in this Creative Commons guide.

PODCAST HOSTING, SHARING AND NETWORKING (FREE)

Pickstation - A Digg for podcasts and music.
Collectik - "Mixtapes for podcasts": find, share and organize podcasts.
Podbean - Free podcast hosting and publishing.
Castpost - Free hosting for audio and video clips.
HeyCast - A tool to create video podcasts. Essentially, HeyCast creates RSS feeds from any existing video files on the web. It doesn't provide hosting or sharing features.
Blubrry - A podcast network that lets you create a podcast and browse the podcasts of others.
Evoca - "YouTube for voice recordings": create audio recordings from your computer mic, your phone or Skype, share them with others and embed them on websites.
ThePodcastNetwork - A network of podcasts on a range of topics including business, entertainment and comedy.
MyPodcast - podcast hosting solution offering unlimited storage, bandwidth, and free templates for your podcasts.
PodServe - this service is still in alpha stage, but everyone's invited to try it out. It offers a hosting space for your podcast and a directory of user-created podcasts.
PodcastPeople - a service that enables you to post text, audio and video materials to your own customized show, and even earn some income from it through sponsors.
PCastBaby - free podcast hosting service offering 10MB of storage space and unlimited bandwidth.
Podomatic - create, find and share podcasts with this free service.
Blubrry - create your podcast on Blubrry; browse through other podcasts and create your personal playlist.

PODCAST ADVERTISING

Podango - get free unlimited hosting for your podcast and share ad revenue with Podango 50/50.
Podbridge - Provides podcast metrics and advertising.
Podtrac - a service that connects podcasters with advertisers.

AUDIO TOURS

TourCaster - Find audio tours of your favorite cities and download them to your iPod.
iAudioGuide - Find audio guides for major world cities and download them to portable devices.

VIDEO PODCASTING

Veodia - Create live TV shows and convert them to video podcasts.
Blip.tv - A "video podcasting" service. Broadly similar to YouTube, but the focus is on independent creators, who get a share of revenue.

MOBILE PODCASTING

Podlinez - a simple service to listen to podcasts on your phone.
Gabcast - Record podcasts straight from your phone.
Yodio - Record audio from your phone, add photos and captions.

TEXT TO PODCASTS

BlueGrind - Converts text (especially blogs) into podcasts.
Feed2Podcast - Convert any RSS feed into a podcast.
Talkr - Convert blogs to audio podcasts.
Odiogo - convert RSS feeds, text articles and blog posts to podcasts.

PODCASTS TO TEXT

CastingWords - a podcast transcription service that converts podcasts to text for $0.75 minute. It employs human transcribers.

PODCAST DIRECTORIES

Grepr Podcasts - A directory that makes recommendations by finding patterns in your interests and comparing the interests of others.
Yahoo Podcasts - Explore podcasts, listen to them, subscribe to them and even create your own.
MobilCast - directory of podcasts and radio shows, complete with playlists.
PodcastAlley - a podcast directory with over 30,000 podcasts. Maintains a monthly top list.
DigitalPodcast - a simple, categorized podcast directory
Podcast.net - a very comprehensive podcast directory; contains tens of thousands of podcasts.
PodcastDirectory.com - a directory of podcasts with a top list, a list of featured podcasts, and categorization.
PodcastDirectory.org- a simple directory with a very clean layout.
Podfeed.net - on Podfeed you can host and share your podcast, find podcasts, as well as read and write podcast reviews.
iAmplify - A premium directory where you pay to download self-help podcasts.
Earkive - Directory that lets you listen to podcasts on your phone (mobile or landline)

LIVE PODCASTING

Talkshoe - Create your own live talkshow or interactive podcast.
Waxxi - Audio shows streamed live, mainly with notable technologists. Once recorded, the live shows are available as podcasts.
NowLive - A social network that lets anyone create a live, interactive talk show. Stickam for audio, in some ways.

PODCAST HOSTING (PREMIUM)

PodcastSpot - Offers both free and premium podcast hosting.
SwitchPod - a podcast hosting service, with unmetered bandwidth, statistics and even some promotional opportunities.
Hipcast - create audio, video materials and podcasts and post them to your blog.
Libsyn - Liberated Syndication will host your podcasts for a modest monthly fee.

PODCAST SEARCH

Everyzing - Audio and video search engine.
Podscope - an audio and video search engine that searches the words spoken in podcasts.
Pluggd - Discover and share podcasts, and search for specific parts of podcasts using advanced search technology called HearHere.
PodNova - Podcast search and community.

PODCAST FORUMS

Podcast Alley Forum - a well visited forum on everything related to podcasting.
DigitalPodcast Forum - a good forum for promoting your podcast.
World Podcast Forum - a fresh forum about podcasting.

PODCAST CREATION SOFTWARE (OFFLINE)

Propaganda - Create professional podcasts including background music, jingles, crossfading and more. Windows only. Free trial, $49.95 to buy.
Audacity - Free, open source software for recording and editing audio. Versions for Mac OS X, Windows, GNU/Linux and other operating systems.
Adobe Soundbooth - Advanced audio editing from Adobe. Windows and Mac. Free trial, $199 to buy.
Wildvoice Podcast Studio - Record audio, add music and sound effects and upload to Wildvoice.com or other sites. Windows only.
SnapKast - Podcast creation for Windows. $79.99.

PODCAST CREATION SOFTWARE (ONLINE)

Odeo - Perhaps the most popular podcasting platform. It allows you to record audio within your browser, embed it anywhere and create your own audio channels.
Hipcast - Record high-quality audio right through the web browser or your phone. No additional software needed.
Gcast - Record, mix and broadcast your podcasts. You can record messages by phone and upload MP3 files from your computer.
Podomatic - This site lets you record video and audio online directly from your browser. You can also receive in line calls from listeners wanting to leave voice comments.
ClickCaster - create, broadcast and sell your very own radio shows and podcasts. You can record audio right from your browser or upload an existing MP3.
Wild Voice Shout Recorder - Online service that lets you record audio files through an intuitive interface but doesn't let you edit them or add special effects.

MISCELLANEOUS PODCASTING TOOLS

Enablr - make your podcasts indexed and searchable.
PodShow - a network that brings audio, video, podcasts, and music to your computer, iPod, mobile device, or television.
Divicast - enhance your podcast with images and text and share it with everyone.
Divvycast - where podcasting and music meet. Helps bands to create podcasts.
Podbop - Find bands in your city and download free MP3s to your iPod to preview their music ahead of the show.
Noisely - Enter a subject you're interested in, and Noisely serves up a selection of podcasts you'll like. Press play, and all the 'casts stream continuously until you stop them.

1$ a day .... all inclusive!

Boost Mobile, Cricket simplify rate plans

By Sue Marek

Comment |  Forward

With the economy in the tank, consumers may be looking for a cheap and easy wireless deal, and prepaid providers Boost Mobile and Cricket Wireless are looking to capitalize on that trend. Last weekLeap Wireless announced that its Cricket service would offer new daily rate plans called PayGo that provide customers with unlimited service for $1, $2 or $3 per day. The $1 plan includes unlimited local calling and voicemail, caller ID and three-way calling. The $2 plan offers the same as the $1 plan plus unlimited text and picture messaging. And the $3 plan adds unlimited U.S. long distance, international texting, mobile Web and directory assistance.

Now comes word from Boost Mobile that it is launching a new flat-rate of 10 cents per minute for all calls, no matter what time of day. The Boost Mobile plan, called Pay As You Go, lets customers pay by the minute without a long-term commitment. Plus they already can get unlimited nationwide push-to-talk service from Boost for a flat-fee of $1 per day.

J.D. Power and Associates' says that subscribers prefer flat-rate plans with unlimited minutes. In the company's annual prepaid wireless customers satisfaction study, the overall satisfaction among U.S. prepaid users is higher among those who subscribe to flat-rate plans with unlimited minutes vs. those who have per-minute pricing plans because of the cost advantages associated with the flat-rate plans.

Does it make sense to update your social networks via a voice call?

via Techcrunch UK

6 Comments

by Mike Butcher on October 6, 2008

Ping.fm, a fairly new service that lets you update your status on several social networks at once, has signed a deal with the UK's Spinvox whereby you can now update your status via a voice call. Ping.fm works on Twitter, Facebook, Jaiku, Pownce, LiveJournal, Tumblr, MySpace, Bebo and Friendster. It's not unlike Socialthing, another an activity aggregator. There is also HelloTxt which has been around since September 2007 and also has a mobile version.

But there's a slight problem. Facebook has plans to allow you to update your status on other socnets, which would potentially kill Ping.fm and others like it for at least a large part of the market (though not all of course).

That makes Ping.fm a feature, and the fact that Ping.fm is a project started by two guys in their spare time says a lot. So is this new Spinvox add-on of any real value? Does it make sense to call a number and suddenly update 30 social networks at once with "I'm on the train, looks like I'll be late for that meeting" or similar?

Christina Domecq, SpinVox co-founder and CEO says "Bloggers and other active social networkers are tired of being stuck in front of their computer screens, updating network after network to stay in touch with their friends." But that doesn't make sense to me - those guys are the mavens of this business - they actually love text input and, in my experience, can't stand having to call people. They will even hunt and peck on a terrible iPhone keyboard and download the Twitterific iPhone app to avoid calling people.

And as many have found, the real power of Twitter comes in turning it into a sort of 'cloud conversation'. If I used Ping.fm to have one single, blasted-out conversation across all socnets that would pretty much destroy my network. And annoy my friends/followers. Adding voice just confuses that.

And unfortunately SpinVox's "sexiest" service is not its integration with social networks, but it's voice to SMS service, which remains an utterly indispensible, though paid-for, add-on to your mobile. I can see Spinvox's desire to extend the service into socnets, but it is a mere incremental add-on to the existing service. This is a bit of extra code, nothing more. But at least it makes for a smart distribution ploy - this is very cheap viral marketing.

In fact, there's going to be more interesting ways for Spinvox to extend its platform and really this isn't the killer one. For me it's still voice to text or voice to email, or perhaps even voice to IM, which is going to be the best route. And there may even be ad-models to be wrapped around this because Spinvox's technology is smart enough to understand the content of the messages, making ad-targeting a plausible scenario.

VC Fund Raising Manual

via specific marketing 

How do you successfully raise VC money?

When I was working as the VP of Analysis at Library House, a business information and research company focussed on high potential start-ups and specifically on venture capital-backed companies, I worked with dozens of VCs, analyzed well over a 1,000 start-ups, and saw many hundreds of start-ups pitch.

During my five year tenure, I have come to one fundamental conclusion: most companies don't raise funding, not because their company is not interesting enough, but rather because they don't actually understand how VCs think and work. They also do not understand the process of how to raise venture capital.

Today, I read an article by Josh Kopelman, in which he mentioned a ' Founder's Manual for Pitching a VC'. I think the notion of some sort of manual is a great idea. I personally think that although the pitch itself is important, it is just one component of many when raising VC funding. Starting with this article, I thought I would write up the 'VC Fund Raising Manual'. This will include not just the pitch, but effectively the whole process.

VC Fund Raising Manual

Outside of scope: I will not discuss whether find raising from VCs is a good or a bad thing or whether other options are more appropriate or how to compare them or how to choose. Or how to raise angel funding. Or how to bootstrap. I just can't find the time to explain them all.

This manual is for those that have already made up their mind that they want to raise VC funding. It explains the process of doing that.

In this manual, I will do a great deal of generalization and simplification. Please keep this in mind.

Introduction

Overall, what one needs to understand when raising funding is that there is a highly conserved process of going about this. Most VCs follow this process. It is important that you understand this process and all the drivers that are important at each individual step. The VC fund raising process looks (more or less) as follows:

1. Identify relevant VCs - 8 weeks

2. Prepare documentation - 8 weeks (you select VCs at the same time)

3. Approach relevant VCs - 6 weeks

4. The pitch - 30 minutes

5. Commercial due diligence and further meetings - 10 weeks

6. Full partner pitch and issue of term sheet - 4 weeks

7. Term sheet negotiation - 4 weeks

8. Legal work - 4 to 8 weeks

9. Sign deal and money in the bank - 1 day

Total time for fund raising: 2 months preparation and on average 7 months actually raising the money. Please note that this is a gross generalization, it might be shorter or longer than this, but as a general assumption, this should be fine.

I will explain each step in detail using separate blog posts.