Don Dodge on The Next Big Thing

TechStars Demo Day - Boulder 2008

Don Dodge — Wed, 20 Aug 2008 22:02:54 GMT

TechStars is a startup incubator based in Boulder, Colorado. TechStars selected 10 teams and provided funding of about $15,000 per team, free office space, operational support, and mentorship from former entrepreneurs and business leaders.

This is the second year for TechStars, and they have already had an acquisition. SocialThing was recently acquired by AOL.

The teams presented today to about 100 VCs and Angel investors for the first time. These companies are three to six months old and have two or three founder employees.

Gyminee -A fitness social network for detailed tracking, online accountability, and motivation. With Gyminee, you can find workout programs and track your progress, track your food and nutrition, and set goals for whatever is important to you. On the social side of things, you can find GymBuddies to keep you accountable towards your goals and participate in fitness challenges. They already have over 35,000 users and over 1.2M page views. On the nutrition side they have a database of 50,000 food items complete with nutritional information that you would find on the label. You can track your diet, calories, and nutritional value. Freemium business model. Free service where you can upgrade to premium services for $5 per month. Looking to raise $300K in seed funding.

Ignighter - Wish dating could be as fun and easy as
going out with your friends? Ignighter is group to group dating. Meet people the way you do in real life...like you did in college. Ignighter is about hooking you and your friends up with someone else and their friends. They believe group socializing is safer and less intimidating one to one blind dating, and leads to personal dates. Ignighter has elements of Facebook for groups and Match.com for dates. They have an iPhone app that uses GPS to find other groups close to your current location. They have over 10,000 registered users. Business model; premium services like better search placement, and of course advertising. Looking to raise $300K.

Peoples Software - WhozAround? from People’s Software takes the pain out of making plans with your friends with planning and scheduling tools that plug right into your Facebook account, your contact list, or your mobile phone directory. Lightweight and location-aware, WhozAround sorts your friends, makes plans with one click, and outputs your events into a clean feed that can go right to your calendar, email, or your phone.

Peoples Software founders are Susan Mernit formerly a VP at Yahoo and AOL, and Lisa Williams, a founder of several companies, and formerly at Boston.com. It is great to see two women founding a cool new startup. Business model; locally targeted advertising. They believe they can get $7 to$10 CPM rates because of the local targeting, and by partnering with regional media companies. They are seeking $225K in seed funding.

Devver - Takes the tools that developers already use on their desktops and turns them into cloud-based services. Currently focused on Ruby tools and testing suites. Strong emphasis on test suites. They will add PHP, Python, and Java later. They will also have an open API so that developers can add other languages.

By putting developer tools in the cloud, they can execute them more quickly, reduce setup and configuration time, enable easy scheduling, display rich reports, and make it simple to share data between team members. The dev tools and environment is set up once on a cloud based server, then team members can be added quickly and have all the same tools, projects, and code.

Business model; subscription fee of $100 per developer per month. Sales channel - seems to be word of mouth through the Ruby development community. Seeking $200K in seed funding.

The Highway Girl - is a traveling music show for the digital age. Hosted by singer songwriter Samantha Murphy, the show educates artists on how to manage their careers in the digital age while also giving fans a true behind the scenes look inside the life of a singer / song writer on tour. It is initially based on Samantha Murphy, but soon will include other artists. TheHighwayGirl.com will sell exclusive content on the artists they feature, as well as act as liaison between artist and fan on non-traditional transactions that connect them.

Samantha delivered one of the most unusual startup pitches I have seen. She sang a song about raising money and building a business. Wow! Samantha is an incredibly talented singer /song writer. Business model; Exclusive content, tours, merchandise, and a traveling music tour called The Highway Girls. Also partnering with TopSpin. Seeking $500K in seed funding.

Application Experts provides Software as Service (SaaS) to venture capital and private equity fund managers and to the pensions, endowments and other parties that invest in venture capital and private equity. Based in Denver, Boston, and Chicago. The founders were in private equity firms prior to founding the company.

The idea is to build a social network of private equity and venture capital investors to share best practices and information. They also provide a deal tracking dashboard to help manage the pipeline of investment deals in progress.

Their target audience has plenty of money and is willing to pay. They charge $3k per person with a minimum of $15K.

Occipital - Photography has evolved over the years, but the ways we interact with digital photos are still decidedly primitive. Occipital is using artificial intelligence to organize your photo stream, enabling vivid recollection with groundbreaking visualizations.

They can stitch photos together into a panorama, automatically label and tag photos, and construct 3D scenes from your photos. They can zoom in, fly over, step inside buildings...all based on simple photos stitched together into a 3D presentation. They find objects in your photos and link them to the same or similar objects in other photos and stitch them together. This is hard to explain with words, but the visual demo was amazing.

BuyPlayWin.com - Combines online shopping with tournament games. Buy products, play games, win the product. Every shopper gets a chance to win full refunds for everything they purchase by playing fun games against other shoppers. For example, buy a $120 college text book. Compete with six other people who are also buying the book. Win the game and you get the book for free. They use the profit margin in the product to pay for the winners purchase. If a product has a 33% profit margin they need three players to break even. With 10 purchasers they make a very nice profit. They are seeking $400K in seed funding.

Foodzie - An online marketplace where consumers can discover and buy food directly from small artisan producers. The Foodzie technology makes it simple for small producers to sell their products online and aggregate all these products within a marketplace that makes it easy for "foodies" to discover the very best food. They focus on gourmet foods and organic health foods. These are high end and high margin products. Foodzie takes a 20% commission on every sale. Traditional retailers take 50% margin, while a distributor takes another 10%. The food supplier only ends up with 40%. So, with Foodzie the producers get to keep 80% of each sale. They are seeking $350K in seed funding.

Travelfli - helps frequent flyers maximize the full potential of their loyalty programs and discover the value in this hidden currency. They help users manage their award programs in one centralized and secure place, find ways to get free travel using their miles, and book award travel online. TravelFli allows you to aggregate frequent flyer miles and hotel points from family members and keep track of al the various rewards programs. They help you keep track of when miles expire, or when there are special promotional programs for your miles.

There are over 120M people in frequent flyer programs, and trillions of frequent flyer miles that never get used. There are 17M elite flyers that account for 43% of all flights. These elite flyers are a very lucrative market for airlines, hotels, rental car agencies, etc.

Business model; commissions on all sales. Advertising - CPMs for travel are very high. They will also sell aggregate data on flights, hotels, and car rentals. They are seeking $500K in seed funding.

Ycombinator startup demo day Boston 2008

Don Dodge — Fri, 15 Aug 2008 14:27:00 GMT

YCombinator provides seed stage capital and a 10 week startup boot camp for budding entrepreneurs. At the end of the 10 week session Y Combinator invites VCs and angels to an investor day / demo day. Today YC unveiled 20 new startups to about 80 Boston area VCs and investors. Scott Kirsner (Boston Globe) and Roger Krakoff (Sigma Partners) are pictured here in the first row.

The companies covered areas like; a startup job site, video conferencing, cloud database software, a site for students, a news aggregation service, photo-sharing, social browsing, POS customer satisfaction surveys, white labeled social news, audience response software, music distribution, green certification, site creation for small business, a mobile-focused Evite competitor, a secondary ticket market, an event site, and a comment crawler.

These companies are only 10 weeks old, so some haven't launched yet and are still in stealth mode. Here is a summary of some of the companies that have launched.

Frogmetrics - puts touch screen devices into the hands of customers to get accurate, real-time feedback at the Point Of Sale. Frogmetrics measures customer satisfaction, employee performance, and advertising effectiveness to tell businesses what their customers think about products, services, and employees. Survey response rates typically exceed 85%.

The software aggregates data from unlimited locations, highlights significant trends, and helps companies gain insight into business performance—instantly, from any web browser.

Posterous is dead simple blogging by email. Just send text and attachments to post@posterous.com—no signup and no setup. You can photos, audio, video, documents, and rich text. Posterous automatically sets up a blog for you, then sends you an email reply with the URL address of your new blog.

TicketStumbler - a site to find and buy tickets to sporting events. Similar to StubHub, except TicketStumbler aggregates tickets from all the various ticket resellers. You can search by date, price, location, etc.

Best line of the day came from the TicketStumbler presenters "People go to Facebook to "poke" friends or some useless thing. People come to TicketStumbler to buy tickets. We make money on every sale."

Anyvite - Similar to Evite, a way to create events and invite guests. Ideal for the small to medium events. Simple to use. Guests can use email, SMS or IM to be notified of new events, and to respond without even visiting the site. Anyvite’s fully integrated mobile interface gives users the freedom to create and manage their events at any time and from any place.

Job Alchemist - a site for online recruiting, launched Startuply, a startup-specific job site, in July 2008. New sites targeted to specific industries and communities can be launched and populated in as little as 30 days.

Their next product will be JobSyndicate, a distributed affiliate job network. Companies put recruiting bounties on jobs, and anyone can use the widget technology to advertise these jobs on their site. When a publisher sources an applicant who gets hired, they get half the bounty: a payout of $2-10K or more.

There were several other interesting companies that I can't talk about yet because they are still in stealth mode. The 20 companies this year were very polished and business focused. The Boston area VCs are paying attention to Ycombinator now.

Some of the VCs I talked to included; David Hornik (August Capital), Fred Wilson (Union Square Ventures), David Beisel (Venrock), David Baum (Stage 1 Ventures), Rich Lavendov (Avalon), Roger Krakoff (Sigma Partners), Neil Sequiera, David Orfao, and Joel Cutler (General Catalyst), Eric Hjerpe (Atlas), Jeff Glass (Bain Capital), Bijan Sabet and Rob Go (Spark Capital), Saar Gur (Charles River Ventures), Jonathan Seelig (Globespan Capital), and Jo Tango (Kepha).

Dharmesh Shah (HubSpot), Bob Buderi (Xconomy) and Scott Kirsner (Boston Globe) attended the YC Demo Day and wrote reports on their blogs.

How does web advertising work? How effective is ad serving technology?

Don Dodge — Tue, 12 Aug 2008 17:50:00 GMT

Lots of startups and VCs are betting their business on web advertising as a business model. They point to Google, Yahoo, and other big sites as examples of success and assume they will have proportional success. Not likely.

In a previous post "Is Ad Targeting The Next Big Thing" I asked why we aren't seeing higher CPMs and better targeting based on all the attention data from Web 2.0 services and click stream data. I heard from several advertising executives and would like to share their insights here.

Michael Yavonditte, founder and CEO of Quigo (acquired by AOL) answered my questions with these concise and insightful responses;

(1) It's hard to use all the available data to target. There are lots of reasons for this. Advertiser confusion is a big one. Too many choices can overwhelm advertisers and create a watered-down marketplace.

(2) Advertisers will pay more for inventory that converts better but they also need scale. Often times better targeting leads to smaller quantity.

(3) I know of some "attention data" being used/tested. The results can sometimes be surprising and counterintuitive. It's very hard to find new targeting data that can also scale across lots of inventory or sites, which is why behavioral targeting hasn't become a multi-billion dollar market yet.

(4) There is a ton of inventory but not enough high quality inventory at the moment. I think prices will eventually move up as new ad formats are invented and big branding dollars begin to match online user consumption habits.

OK, let's dig a little deeper. First let's level set on some definitions.

Page Views - We need to distinguish between advertising on Search Engine Result Pages (SERPs) like Google, and advertising on typical web content pages like Yahoo.

SERP ads - Google has been very successful with SERP advertising for two basic reasons, and lots of complex reasons. First, SERPs have the advantage of targeting an advertisement to a very specific search term entered by the user. Second, the user is in active "search and discovery mode" so they are more open to an ad offer.

Display or text ads on content pages from Yahoo, MSN, AOL etc., don't have either of the above advantages. Content pages have hundreds or thousands of words so it is hard to target. And, the user is in passive "browse mode".

How do ad servers work? Most ads, other than SERP ads, are targeted based on content on the page, in very broad categories like; news, sports, business, politics, etc. They try to dig deeper into the context of the page, but with varying degrees of success.

Daniel Jaye, a former exec at Tacoda, (now part of AOL) explained to me some of the complexities of ad servers. Here is a snippet from our discussion;

Most ad servers do not allow the ability to perform complex targeting based on the wide variety of data available, but the issues are complex.

1) Ad Targeting technology (most ad servers have the following insufficiencies):

a. Multi-valued attributes (ie a browser (person) may be a member of several segments, how do you choose/prioritize?, traditional Boolean logic doesn’t suffice)

b. Complex Boolean targeting (ORs, ANDs, etc in specific order of evaluation)

2) Inventory Management

a. Multiple criteria: Ad servers have to prioritize delivery based on multiple criteria today: (roadblocks/takeovers by content or by targeting criteria, schedule commitment, performance objectives, etc.). The more data we add, the more difficult it is to predict and allocate available inventory, manage pricing/scarcity etc.

With regard to real results, the performance improvement varies. For some categories (auto intender, consumer electronics shopper, etc.) the performance gains are clear and relatively easily obtainable. For the broader set of offers, automated optimization has many challenges and has NOT demonstrated a clear advantage over basic techniques like frequency capping and contextual targeting.

There were several industry terms in Mr. Jaye's response that need further definition;

Frequency Capping - means restricting or (capping) the number of times (frequency) a web user sees a specific ad within a 24 hour period, across a whole network of web sites. This is a simple concept, but incredibly difficult to execute millions of times a day, in a split second, for every individual user, over hundreds of web sites. Contextual Targeting - means targeting ads based on the words (context) on a page. Again, simple in concept but incredibly hard to do at web scale in less than one second. Road Blocks / Takeovers - when one advertiser wants to dominate (Takeover) all available pages and (Block) other advertisers. Sometimes referred to as a "carpet bombing advertising campaign".

So, the ad serving technology needs to improve significantly. Results from ad targeting campaigns need to be proven. And, the ad serving technology must be easy for a junior ad buyer to understand and use.

Mike Troiano, a former advertising exec, currently CEO of MatchMine, said on his blog;

Sometimes tech folk forget that at the other end of the digital tentacles reaching across the ad-powered web, sooner or later, is a person pulling the levers. Joe Blow media buyer - think pimply-faced state college graduate 2-years out of school making $18K/year and living in Queens - simply can’t keep up with the pace of innovation on the web. They learn a few of the biggest ad targeting systems, which incidentally are the only ones with sufficient scale for them to complete their buys and move on, and crank 90% of their ad budgets through them. Once in a while one of the better ad network sales guys buys them some really good sushi and makes a decent case for some experiment, and voila, that technology gets thrown a $10K “test buy” bone.

The equation the ad buyer solves in his head:
What is the probability that doing this will make me a hero with my boss and/or client? What is the probability that said boss and/or client is going to smack me for wasting time on this $10K diversion instead of doing everything I can to “optimize” the $500,000.00 buy we already have in process on Yahoo? Is the potential upside of 1. materially greater than the potential downside of 2.?

Everyone agrees that ad serving technology will improve, and that "attention data" will be used to better target ads. They also agree that advertisers will be willing to pay higher CPM rates once the effectiveness is proven. As usual, the technology will advance faster than the customer's ability to use it and desire to pay for it. The big question is when will all these factors converge to launch another multi-billion dollar market?

What do you think? Leave a comment and join the discussion.

Olympic swimming gold captured by Silverlight

Don Dodge — Mon, 11 Aug 2008 13:44:59 GMT

Have you seen the amazing Olympic final in the men's swimming 4X100 relay? World records were set by many swimmers in this race and it all came down to the final touch at the wall. The Americans beat the heavily favored French team by .o8 of a second. You can see it again thanks to Microsoft's Silverlight and NBC.

The quality and clarity of the Silverlight video is absolutely amazing. I don't normally watch video on my PC because of it is usually slow and poor quality. Not any more. This is fast, no jerky motion, and awesome quality. Note the "powered by Silverlight" logo in the lower left hand corner.

You can watch continuing coverage of all the Olympics events on MSN.

Is Ad Targeting The Next Big Thing?

Don Dodge — Wed, 06 Aug 2008 18:15:00 GMT

Better targeting equals higher ad rates - Lots of startups and VCs are pinning their hopes on this simple premise. It seems obvious, but there is very little evidence to support it. So what is wrong?

Is the ad serving technology not able to take advantage of all this new "attention data" to better target the ads?
Are advertisers not willing to pay higher CPM rates for the better targeting?
Has ad targeting been tried with all this "attention data" and the results are not much better?
Is there just too much ad inventory which is depressing prices?
Are we just too early in the game to get good results?

Cnet writer Stefanie Olsen has a good story on what VCs think will be the next big things. Not surprisingly, they think ad targeting will be huge. Here are a few nuggets from Stefanie's story;

"The first wave of Internet investing dealt with commercializing the Web, helping companies like Amazon.com and eBay get on their way. The second wave has been about helping people socialize and connect through sites like Flickr, YouTube, and Facebook. The third, venture capitalists say, will be about making sense of all the data people create around the Web, and then searching for patterns in the data to improve the delivery of personalized content, search results, or advertising."

"Everyone talks about all the data that's being created and how valuable it is, but the way you make it available is by doing something actionable with it," said Rob Hayes, partner at First Round Capital."

"Social networks and social media sites have created so much new ad inventory on the Web, but they have yet to make significant money from it."

"We are really fascinated with data and the ability to use it to increase effective (cost per thousand) for ads. There's this explosion of inventory, but people haven't figured out how to monetize it yet--data will be the difference," said Fouad ElNaggar, a principal at Redpoint Ventures."

I have seen so many companies, literally hundreds, that are building social, fun, aggregators, filters, recommendations, communities, and services that all boil down to one thing...building profiles from implicit data and explicit actions to better target advertising. It is the biggest "head fake" in business history. All these widgets and services appear to be fun consumer toys, but underneath they are advertising driven data collectors.

It seems obvious that if you can collect demographic data from users when they register for a service, and then collect preferences, rankings, click stream data, social network connections, etc, that you should be able to use this data to better target advertising. It will happen...but there is no evidence of it yet.

Low CPM Rates - Social Network content sites get the lowest CPM rates, an average of $0.27, but sometimes as low as $0.02. Gaming sites are the highest. Several months ago I talked to a Facebook App developer who told me his app is generating 300 million page views per month. Wow! Then I asked what kind of CPM (Cost Per Thousand) ad rates he was getting. He shrugged and said somewhere between $0.02 and $0.05 per thousand. That pencils out to between $6K and $15K of advertising revenue per month for those 300 million page views.

Last night at Mashable's SummerMash in Boston, I talked to the founders of a new startup called Wiggio which is building a collaboration tool for college students. When I asked about their business model they said "highly targeted ads based on user demographics". I asked them if they had checked with the major ad networks to see what kind of CPM rates they could expect. "Well,...uh...no." I suggested that they should spend some time researching this out before going too much further.

In October I will be hosting a forum at MIT on advertising networks and the future of online advertising. We are recruiting some of the brightest minds in the advertising world to speak at the forum. I hope to dig deeper into some of these issues to better understand the problems.

What do you think? Why aren't we seeing higher ad rates? Is the targeting technology not working? Or, are web surfers just not responding to the ads?

Why VCs say no 99% of the time

Don Dodge — Sun, 03 Aug 2008 17:27:38 GMT

Venture Capital investing is a very tough game...and very lucrative if you are good at it. Part of my job at Microsoft is working with VCs, so I have learned a lot about the way they think...and why they say No to 99% of the deals they see.

Fred Wilson has another great post today on Venture Fund Economics which I covered in my previous post. After posting that I remembered a blog post by Jeff Bussgang, of Flybridge Capital Partners. In it Jeff explains why VCs want to see every new startup...but say no 99% of the time.

"As one wise old VC once told me, "the trick in this business is to spend very little time on a lot of deals, and then a lot of time on very few deals." In other words, see everything to be a better investor, but exert a very tough first filter so that you only spend time on very, very few deals. In my experience, a typical VC has the bandwidth to actively "spend time" or actively work on only one to two deals at any given time and perhaps 10-20 in a year -- as compared to those 300-500 they get exposed to."

What are the odds? - VCs are exposed to about 500 opportunities a year. They spend time seriously looking at about 20 companies a year, and invest in two or three. So, they say no about 99% of the time.

We all say no 99% of the time - I would guess that every one of you reading this blog have a stock portfolio with 5 to 10 individual stocks or mutual funds. There are more than 5,000 publicly listed companies to choose from, and another 5,000 mutual funds. But, out of 10,000 possible companies you chose 10 to invest in. Why? Why did you reject the other 9,990 companies? Obviously there are more than 10 good companies to invest in. Other investors chose to invest their money in the other 9,990 companies...why not you?

We invest in people we know and companies we understand - We do this in our own personal investing, and VCs, with rare exceptions, do the same when they make decisions. We all say no 99% of the time, and we reject perfectly good companies, but we invest in things we feel comfortable with.

Find the right VC match - Don't be too quick to change your strategy or company pitch just because the first batch of VCs rejects it. It is all about finding the right VC that is interested in what you are doing and comfortable in the market space. Don't waste time trying to convince a reluctant VC. Move on and spend the time finding the right VC for you...that "gets it" the first time. There are at least 1,000 VCs in the USA. They all have different investment tastes...just like all of us do. Go for it!

Why VCs look for 10X returns - What you need to know when pitching a VC firm

Don Dodge — Sun, 03 Aug 2008 15:16:08 GMT

VCs want to invest at least $5M in startups that have potential 10X returns. That is because it takes as much time to manage a $1M investment as it does to manage $5M. Secondly, every startup looks like a winner when they write the check, but Fred Wilson suggests that 33% will fail, 33% will break even, and 33% will be big winners. VCs start out hoping for a 10X return on every deal but average about 3X to 4X after all is said and done.

VC Firm Partners - If a VC firm raises a $250M fund they will probably have 5 partners in the firm, with each partner managing about $50M. If they invest about $5M in each company over several rounds, then each partner will sit on 10 company boards. That is about all a single partner can handle and still do a good job for the portfolio companies.

VC Firm Investors - VC firms raise money from Limited Partner investors like insurance companies, pension funds, university endowments, and wealthy individuals. These investors know that venture investing is risky and expect higher returns to compensate for the risk, typically 3X their money over the 10 year life of the fund, or a net IRR of 30%. More on this later.

VC Firm Economics - VCs usually take a 2% - 3% annual management fee and 20% to 25% (carried interest) of any capital gains on exits. So, when you take out the VC fees and gains, and factor in the LP investor expectations, what does the VC fund have to return? Fred Wilson of Union Square Ventures did a great post on this and provided some real numbers on his model.

There are a lot of numbers here, but if you study them carefully they explain almost every question you might have about how a VC firm works.

VC Fees and Gains - Note that on a typical $100M fund management fees can take $20M off the top, so there is only $80M left to invest. That 2% annual management fee over the 10 year life of a fund really adds up. Also note that if the fund returns 4X on invested capital (4 X $80M = $320M) that the VC gets 20% of the gain or $44M ($320M - $80M = $240M, less the $20M in fees = $220M. The VC gets 20% of that gain or $44M.

On a $100M fund the VC gets $20M in fees and $44M in gains over the 10 year life of the fund. Now you know why everyone wants to be a VC.

VC Limited Partner Returns - In this case the LPs invest $100M and get back $256M, or about 2.5 times their money. Because they invest their money over the first 4 years of the fund, and collect their returns over the last 5 years of the fund, their Internal Rate of Return (IRR) averages about 30%.

What does this mean to entrepreneurs? - When you pitch to a VC you need to show the "potential" for a 10X return. The truth is that no VC knows which company will return 10X and which one will fail and lose all the money. Believe me, if they knew...they would only invest in the winners. Like I said, they all look like winners when they write the checks.

VCs will not invest in startups that address a small niche market, or companies that are profitable but don't look like they can bring 10X returns. They are not interested in potential 4X returns because they know that on average 66% of all investments will either fail or break even. If a company starts out looking like a 4X return, chances are, given the long VC history, it will break even at best. It is like probabilities in poker.

So, here is the inside secret to all of this. Build your plan on a 10X return, expect a 4X return, and hope you don't end up in the 33% failure category.

Partnering with Microsoft - What you need to know

Don Dodge — Thu, 24 Jul 2008 17:03:00 GMT

Microsoft's Worldwide Partner Conference was held last week in Houston. If you didn't attend you can see videos of sessions here. There were over 10,000 people at the WPC this year. Microsoft loves partners, and over 90% of Microsoft's revenues is influenced by partners.

How to start partnering with Microsoft

Become a partner. The first step is to sign up on-line as a partner. Microsoft partners are eligible for lots of free on-line training that covers technology, support and business.

Marketing help. Visit the Partner Marketing Center to learn about how you can participate in Microsoft marketing campaigns and resources to help you build your own campaign.

Build your sales channel. Microsoft has a Partner Community program that helps you find appropriate channel partners and build alliances.

Get free software and support. The Empower Program for ISVs helps new software companies get software, consulting, and MSDN subscriptions for the low price of just $375. The software alone is worth over $10,000.

Join the ISV community. Microsoft has a special ISV Zone for software companies. Find partners, get leads, get beta software, and get involved in the community.

Microsoft Startup Zone. If you are a startup you should visit the Microsoft StartupZone. The StartupZone is managed by the Emerging Business Team which is focused on helping startups build a relationship with Microsoft. There is a special Partner Section of the StartupZone with lots more information about specialized programs that might be right for you.

Emerging Business Team. How can the Emerging Business Team help you? It depends on the stage of your company and what type of help you need.

If you are in the development stage we can sometimes help you get access to beta software or get you access to our performance labs and testing labs. If you are launching your product we can sometimes hook you up with a relevant Microsoft marketing campaign. If you have a product that complements a Microsoft product or adds functionality we can introduce you to the product team for a possible closer partnership. If you are already actively selling to customers we can sometimes introduce you to the Microsoft Account Manager for those customers. We can also refer you to Systems Integrators who might be interested in picking up your product.

Who can help my startup? The Emerging Business Team is organized by product area. Visit Microsoft StartupZone to see who covers each area, and an email address where you can reach them directly. They are all listed right on the front page.

Microsoft is serious about partners. There are thousands of people at Microsoft dedicated to helping partners succeed. Take the first step and join the partner program.

Me.dium social browsing and social search

Don Dodge — Wed, 23 Jul 2008 14:55:00 GMT

Me.dium is a web browser plug-in for Microsoft's Internet Explorer that turns web browsing into a social experience. It gives you a personalized map of the Internet showing where you are, and what web sites your friends are visiting in real time. You can use it to discover new people and places that are relevant just to you. It also allows you to surf with friends in real-time. It's just like hanging out in the real world, but online.

How it works

Go to Me.dium.com and sign-up for a free account. Download the plug-in and install. You will be up and running in minutes.

After your account is set up you can add friends by either finding them on Me.dium or inviting them to join via an email invitation.

See where your friends are. Once you have built your friends network, and they have Me.dium installed, you can see what web sites they are on, and watch them as they move from site to site. You can go to the same site, see what they are looking at, and start up a chat discussion...all in real time.

Kris Olson from the Emerging Business Team sat down with David Mandell, VP of Marketing at Me.dium, to go deeper into how Me.dium works, their target audience, how people are using Me.dium, and future plans. Check out this video of the interview.

Video: Microsoft Startup Accelerator Program - Interview with David Mandell, Me.dium

Transcript as follows:

KRIS OLSON: So, we're here with David Mandell, the head of marketing for Me.dium at MIX, and I'm talking to David about how Me.dium got started, what it's really trying to do, who the customer is, how the team got together, and what marketing is like at Me.dium, because he has a really interesting bio on his Web page, and I want to hear more about that.

DAVID MANDELL: Sure. So, Me.dium is, from my perspective, a truly exciting challenge for several reasons. First of all, it's really about changing context. And, the thing that really turned me on, on the Me.dium side, is what people understand now about their online experience is a solitary experience. They sit in front of a computer, whether it's a Web site or a program, et cetera, and it's just them and the page, them and the program that they're dealing with.

As in the real world, there's always tons of other people out there doing similar things, looking at the same things, looking at other things that are relevant, and your friends are out there. But in your current context of online experience there's no way to access that information.

So, what Me.dium really does for the first time is give you access to all that information, all that social contextual value that you get in the real world, and bring that into your online experience. So, for the first time you can actually see who else is around you.

KRIS OLSON: So, you have a little window like listing your friends who are online at the same time, or what they're browsing or --

DAVID MANDELL: Sure. So, Me.dium gives it to you in several ways. The first thing you get is a real time map. So, when you're browsing, you glance next to your browser, and what you can see is all the other people out there in real time, and what they're looking at. You can bump into your friends, you can see where the crowds are, you can find recommendations based on the actual activity of other people. So, you're not sitting there by yourself in front of a Web page; you're now actually in an environment.

KRIS OLSON: It's kind of like Second Life and real life.

DAVID MANDELL: Yeah, but it is the real life --

KRIS OLSON: But it's your life --

DAVID MANDELL: -- and that's the thing

KRIS OLSON: -- exactly.

DAVID MANDELL: It's always been out there, right, but you could never access it. And that's really what Me.dium is about. Me.dium is giving you access to that interaction for the first time.

So, the challenge from a marketing perspective is what you really have to do is change someone's context. They're very comfortable right now, thank you very much, interacting with their computer in a solitary environment. So, in essence it's not cheaper phone calls, you're not giving someone something that they immediately see is missing from their lives, right? So, the challenge is getting them to understand that there is this whole new wealth of information and value out there that they just never had access to before, and how do you interact in that world.

KRIS OLSON: So, who's -- like who's your main target audience at this point? Who's kind of picking it up fastest and getting that?

DAVID MANDELL: So, it's very interesting, because it's actually a fairly broad swath of demographic at this point, and I think what most of the people that are picking it up right now are people that are looking for more, right? So, it's not really targeted -- it's not really been adopted by a specific age group per se, but more about people that spend time online and are used to spending time online.

Social networking plays a big part in it as well. There used to be social online. So, what Me.dium is doing is kind of combining the two, giving them that social interaction that they're used to on the social networks, but they're giving it to them in a real time environment, so when they browse, you can actually surf with your friend now for the first time, you can actually see who's around you.

So, moving forward, the marketing efforts will probably be more on the social networking group, so people that are used to managing their entire socialized online through things like Facebook and other social networks --

KRIS OLSON: Twitter, whatever.

DAVID MANDELL: Twitter, exactly.

KRIS OLSON: Yeah, I saw a mobile one today here. I can't remember the name of it, but it was like to go out -- it was an application where it helped you go out to parties, 100 percent mobile, like who was coming where, when did they arrive, which is the hottest place to go to tonight.

DAVID MANDELL: Sure, and that's a great example that it's all evolving.

KRIS OLSON: Yeah.

DAVID MANDELL: In my mind, what's happened now is, you know, kind of the first stage of the way was information based, right, and now it's getting more social and people-based. And currently that implementation is experienced through a Web site, okay, so -- or a social network, a destination, if you will.

And what's happening now is that's sort of disaggregating, right? So, I can get my Facebook updates on my phone now, I can interact whether or not I'm on the Web site.

But what I still don't have access to, which is really what Me.dium is bringing to the party, is that real time activity layer, so the people layer of the Internet. Being around those people really changes everything. So, for the first time you're not just by yourself online, right, you're truly in an environment with others, you're getting all the social and contextual value that you get from the real world, but in your online experience for the first time.

So, I can see what's going on next to my browser, I have a buddy list just like I would have in a chat client, but now when I interact with my friends on my buddy list, I'm actually having a contextual conversation with them.

So, when I send you a message, for example, I can just say, hey, have you seen this? And when you get that message, you know exactly what I'm talking about, and you can pop over on your map and see -- look at what I'm looking at, right?

KRIS OLSON: That sounds cool, yeah.

DAVID MANDELL: And I can actually see you come over into my view, say, oh, there's Kris, she's sitting right next to me, I wonder what she thinks about this page, right?

So, now it's more like we're walking through the mall together. I can say, what do you think about this shirt? You can say, oh, I like this shirt better; or have you seen this toy for dad, because he'd like that?

But the point is you're now interacting the same way you would in the real world, as opposed to the way you've been limited to online, which is through e-mail interaction or short messages or non-contextual pieces of information that are asynchronous.

KRIS OLSON: So, as a marketing person, I'm curious about like how are you reaching people, what are you doing to let them know about this.

DAVID MANDELL: So, a couple of things. The first thing we do always is make the product as viral as possible. So, when you use Me.dium, we make it as easy as we can for you to invite your friends, and you get them to experience the interaction of Me.dium, because obviously it's much more powerful if you invite someone and explain to them what it is than if they're just listening to me talking about Me.dium.

The other thing we're doing is working with partners, so people like Microsoft, which give us access to a much bigger market, give us access to new tools and new ways of interacting, which is a huge help for us.

But at this point it's a very broad mix of marketing tools that we're using.

DAVID MANDELL: So, David Mandell from Me.dium.

What is Me.dium? What Me.dium is really about is enabling people to find information together. And we do that several different ways, the first of which is really about bringing the whole aspect of social interaction to your browsing experience, so when you're online it's not a solitary experience; it's about seeing who else is out there, seeing what's around you, browsing with your friends, getting information from all the social contextual value that you get in the real world, but in your online experience for the first time. So, that's really what Me.dium is trying to accomplish.

And working with the Emerging Business Team at Microsoft has simply been invaluable from our perspective, because what it's really let us do is get access to information that we never thought we would get before.

So, for example, we were one of the launch partners for IE 8 beta, and they just provided an invaluable stream of information back and forth as we tried to develop on the new platform. We got access to people at Microsoft that helped us both from a marketing and from a development perspective, we got access to intelligence from -- on the development side that helped us get the code written faster, helped us with questions we had.

So, from our perspective, what it really does is speed up development and speed up time to market, and as a startup, time to market is everything. So, it's been a crucial part of Me.dium and our development.

DAVID MANDELL: So, MIX has been a great experience for us at Me.dium for several reasons: First of all, just getting to feel the culture, rubbing shoulders with the people that matter, getting access to people that are using the code, using the product, sharing stories, swapping problems; but on top of that again it's been access to people, so not only seeing how people use your product, but also getting access to the people at Microsoft that you're trying to expose your product to, right, because they have -- they are the gatekeepers, they're the people that own the keys to the market of user adoption. And the more time you can spend with them and the more time you get input on your product and how to make it better integrated with the Microsoft suite, the more value you have down the road.

So, MIX has truly been an invaluable experience for us, and we plan to be here as much as we can.

The 7 deadly sins and 10 lessons of a failed startup

Don Dodge — Sat, 19 Jul 2008 17:12:00 GMT

Failure is part of the maturing process in the startup world. If you haven't failed...you aren't trying hard enough, or you aren't "pushing the envelope" far enough. I have always said "Success is a terrible teacher. Success masks over flaws that may hurt you later."

Roger Ehrenberg - the co-founder of Monitor 110, wrote a story on the lessons he learned from this recently failed startup. [found via Fred Wilson] He lists "seven deadly sins" that lead to their demise.

The lack of a single, "the buck stops here" leader until too late in the game
No separation between the technology organization and the product organization
Too much PR, too early
Too much money
Not close enough to the customer
Slow to adapt to market reality
Disagreement on strategy both within the Company and with the Board

In my opinion there are two key reasons Monitor 110 failed; first, no clear CEO leader, and second, too much money. Trying to run a startup as a group of friends or make decisions by committee will never work. Too much money allows you to waste time, ignore danger signals, and continue down a wrong path for too long.

More Lessons - But here is the story of GameClay, another startup failure at the other end of the spectrum. They didn't raise any VC money...and still failed. [Found via Jeremy Liew]

1. If your idea starts with “We’re building a platform to…” and you don’t have a billion dollars in capital, find a new idea. Now.
2. It’s a marathon, but it’s a marathon made of sprints
3. Initial conditions matter. A lot.
4. Developing in a vacuum never works.
5. Beware the chicken and the egg.
6. Prototype any 3rd-party libraries that you’ll be depending upon, before you base your product on them.
7. If you’re doing anything other than building your project and getting users, it’s premature.
8. The product will take longer than you expect. Design for the long-term.
9. People have an incentive not to crush your dreams. Take everything they say with a grain of salt.
10. Know your limitations.

Building a startup is the most difficult, and most rewarding, thing anyone can do. Sometimes you can even make some money at the end of it all. There are so many things that can go wrong it is a miracle when a startup actually makes it.

It is important to celebrate our successes, learn from our failures, and value them equally. Failure is important...because success is a terrible teacher.

Microsoft revenues top $60 Billion

Don Dodge — Fri, 18 Jul 2008 12:58:00 GMT

Microsoft (MSFT) announced revenues topped $60 Billion for the year ended June 30, 2008, an increase of 18% over last year. This was the largest annual revenue growth since 1999. Profits were $17.6 billion, up more than 25 percent from a year ago.

Growing a Yahoo every year - Microsoft is strong and growing. Revenues were up $9 Billion over last year. Just to put that in context, Yahoo (YHOO) recorded total revenue of less than $7B for the whole year last year. Microsoft is growing more than a Yahoo a year. This is truly amazing.

All divisions reported strong increases. Here is the breakdown of the 4th quarter numbers by group;

Windows Client: Revenue $4.37 billion, up 15 percent;
Profit 3.23 billion, up 16 percent.

Server & Tools: Revenue $3.74 billion, up 21 percent;
Profit 1.37 billion, up 39 percent.

Online Services: Revenue $838 million, up 24 percent.

Business Division (Office): Revenue $5.26 billion, up 14 percent; Profit $3.34 billion, up 12 percent.

Entertainment and Devices (Xbox, Zune): Revenue $1.58 billion, up 37 percent. Profitable for the full year.

Strong Growth - Management offered the following guidance for the full fiscal year ending June 30, 2009:

Revenue is expected to be in the range of $67.3 billion to $68.1 billion.
Operating income is expected to be in the range of $26.3 billion to $26.9 billion.
Diluted earnings per share are expected to be in the range of $2.12 to $2.18.

All divisions are doing well and forecasting strong growth next year. Microsoft's cash balance stands at nearly $24 Billion, and is growing at over $1B per month.

Microsoft has been repurchasing common stock on the open market, totaling $12.5 Billion last year, and $27.5 Billion the year before. These stock buy backs lower the number of outstanding shares, which in turn, increases the earnings per share.

Newspapers take notice - blogs are the future

Don Dodge — Thu, 17 Jul 2008 16:11:53 GMT

Blogs are going professional and replacing newspapers for insightful, fast breaking, news and analysis. The same thing happened to network TV news years ago. Chris Mathews, Tim Russert, Bill O'Reilly, and others replaced the "just report the facts" news casts with more personal, insightful, opinionated commentary.

TechMeme has several blog articles over the past week that made me think about the parallels between TV news vs. Meet the Press, and newspapers vs. blogs. The direction is the same. More personal and more opinionated. Chris Mathews, Tim Russert, and Bill O'Reilly are personalities that make the news personal, interesting, and sometimes controversial. Blogs do the same thing for text based news and commentary. Newspapers and magazines should pay attention. The smart ones already are.

The Industry Standard says the TechMeme Leaderboard of "A-List" bloggers is being replaced by professional publishers.

"the old-school A-listers aren't being displaced by the many talented B-to-Z listers out there. Rather, the Leaderboard is increasingly populated by mainstream publishers, tech blog networks, and corporate blogs and PR sites."

Fred Wilson, an A-list blogger and VC, thinks blogs are personal and that is what makes them unique. Fred says;

"This blog is me and I am this blog. It's mine and will always be mine. I understand why many of the individuals who made blogging what it is are either moving on or turning their blogs into businesses. That's the way it is."

Blogs vs Newspapers - Big Differences - We are starting to see professional publishers (newspapers and magazines) get into blogging and make it a business. This makes perfect sense to me. But there are big differences. Blogs are personal. The author is the star, not the newspaper brand name. Blogs are news and commentary, not just news. Blogs are fast breaking stories that can be edited and updated later, not highly polished newspaper articles that get printed tomorrow.

There will always be a place for network TV news, newspapers and magazines. Blogs provide another channel for the big media publishers to leverage their talented writers and brand, with several advantages. Blogs have the advantage of instant delivery over the Internet, and basically zero cost of distribution. It is generally accepted that blogs will be fast, unedited, frequently updated, and opinionated.

Blogs are a conversation - Newspapers and print media are one way broadcasts. Blogs encourage conversation with comments and cross linking. The writers are accessible and responsive. This is why I get most of my news from online news sites and blogs.

Web Innovators Boston

Don Dodge — Wed, 16 Jul 2008 14:18:00 GMT

WebInno, founded by David Beisel of Venrock, is a Boston based Web Innovators Group where startups can demo their stuff to the tech community.

Last night there were three startups that presented on stage (Main Dish) and eight other startups that showed their stuff at tables (Side Dish) around the perimeter of the room. There were hundreds of people, my guess is 800, in attendance.

Main Dish

Totspot - a place for parents to publish a page about their kids and share with family and friends.
Webnotes - a tool that helps you create and manage online annotations. Very similar to Onfolio.
Zeer - a grocery product community that helps people “believe in what they buy.” Connects people to product information, consumer communities, and buying advice.

Side Dish

211me - Personalized mobile mashups
WordChamp - Free online language learning
PaperG - Local online advertising
Creaturepark / Ingeeni Studios - Games
YouCastr - Interactive sports streaming
LuckyCal - Mixes together information from your calendar with public events to find events that might interest you.
Snipd - Stealth mode. No idea what they are doing.
Tikatok - Kids create their own stories – and publish those stories into books for friends and family.

The audience voted Zeer as the best presentation/idea. I liked WebNotes, but found myself comparing it to JJ Allaire's Onfolio, and asking what is different?

WebInno is a great Boston Web 2.0 networking event for upcoming startups and "all the usual suspects." I saw Dharmesh Shah (HubSpot), Ben Saren (CitySquares), Matt Douglas (Punchbowl Software), Shawn Broderick (TrustPlus), Karim Nurani (Trinet), Reed Sturtevant (Microsoft), Mike Tyrrell (Venrock), Mike Werner (Web Studio Project) and bloggers Chris Herot, and Pito Salas. I was surprised, and delighted, to see Kevin Marks from Google. Kevin is based in Mountain View and is the evangelist for Open Social. I am sure Scott Kirsner and David Cancel were there somewhere but I didn't see them in the masses of mayhem.

Thanks to David Beisel for organizing the WebInno event. In October I am organizing an event with David focused on web advertising networks - opportunities and challenges.

Upcoming Boston Events

Software Industry Conference 2008 - July 17-19 [Register] This is the Shareware Software conference hosted in Boston this year. Microsoft is a sponsor.

TECH Cocktail Boston 2, Boston - July 24th, 6:30PM
Tequila Rain by Fenway Park [ REGISTER ] I went to the Tech Cocktail last year and it was a huge success in terms of turnout. So many people it was hard to move around or carry on a conversation, but a great party, lots of technology people that you don't see on the conference circuit.

Advertising rates dropping, Social Networks lowest CPM

Don Dodge — Tue, 15 Jul 2008 15:57:50 GMT

PubMatic published its monthly AdPrice Index for July 2008 and it showed ad rates declining in most markets, especially Social Network sites. PubMatic draws its data from 4,000 Web sites that take ad network advertising, 85% of which are based in the U.S.

Surprisingly, small web sites can demand significantly higher CPM rates than larger web sites. This may be due to better targeting smaller niche markets that advertisers consider more valuable.

Advertising rates vary in each market space too. News sites and gaming sites traditionally have the highest ad rates...Social Networks have the lowest rates.

The average CPM rates across all web sites and market segments is just $.36 per thousand page views.

How many page views are required to generate $1M in advertising revenue? Based on this average CPM of $.36 it would take 2,777,777,777 page views, or about 2.8 Billion.

Now you know why Steve Ballmer says the advertising business is all about scale. It takes billions of page views to make any money. The more page views and scale you have, the more advertisers want to advertise on your ad network. The more advertisers you have competing...the higher the ad rates.

Bambi Francisco's VatorTV launches Newsroom

Don Dodge — Tue, 15 Jul 2008 15:03:00 GMT

Bambi Francisco left CBS MarketWatch about a year ago to launch her own company, Vator.TV. Last week VatorTV announced a new design and new contributors to its Newsroom. I am one of the new contributors along with Mark Cuban, Fred Wilson, and several others.

The new design will make it easier for users to uncover the hundreds of video interviews, blog posts and community comments that have made the site a go-to resource for startup news and information. For instance, VatorNews has a couple hundred videos of lessons from entrepreneurs and investors, sharing advice about what it takes to be a successful entrepreneur and what investors look for in an entrepreneur.

The newsroom will also highlight video and text-based content generated by Vator's growing community of contributors. Recent contributors include venture capitalists Jeremy Liew and Fred Wilson, and technology executives like Microsoft's Don Dodge. Each contributor will now have their own channel that readers can subscribe to.

I wrote an article "Does Web 2.0 = Bubble 2.0?" that has generated a lot of interest and comments on VatorTV. You can find my "channel" on VatorTV here.