“However, historically, we’ve not found it hugely valuable yet, simply because we have such a challenge in front of us already with 25 million active, engaged small business pages and only a million advertisers. We already have the touch point with the business, and for us it’s about trying to continue to prove the value to get them to engage more deeply and become advertisers, whereas I think a lot of the value of the channel is actually kind of getting out to reach those businesses. That is a fortunate problem that we don’t have right now.”—Facebook’s Levy: ‘No Singular Event’ Triggered Decline in Businesses’ Organic Reach | Street Fight
“The classic telco arbitrage story was long distance and international. Long-distance and international connections used to be very expensive, no longer are, but telcos pricing had not fallen to match, and first calling cards and then Skype arbitraged the difference between the list price and the real economics of long-distance or sub-sea fibre. Mobile messaging apps do something similar for data, arbitraging the gap between the economic cost of a few K of data and the price charged for SMS. As cellular data speeds go up, we should expect voice apps to take off in a big way as well: the pricing gap is not as big but things like on-net/off-net call pricing will also go away (with both positive and negative margin effects for telco, for reasons I won’t go into here).”—
“The challenge with the full stack approach is you need to get good at many different things: software, hardware, design, consumer marketing, supply chain management, sales, partnerships, regulation, etc. The good news is that if you can pull this off, it is very hard for competitors to replicate so many interlocking pieces.”—Full stack startups
When I first started my blog, I was tempted to write about the latest marketing tactics, those which would immediately grab people’s attention and give them an advantage in the quickly-changing industry. But each time I considered these types of posts, I felt they lacked depth and purpose. They…
“I’ve seen safely 30 percent inflation on early-stage deals in the last year. And we continually ask ourselves, “How big can this get?” And for a lot of things that don’t seem like they can get that big, it’s not a rational conversation to have with the entrepreneur to say, “We think you’re worth less,” when someone else thinks [he or she is] worth more. It’s not only uncomfortable for us, but I fear for what some entrepreneurs are going to have to deal with when they set really high expectations for their seed or A round and have to go back and deliver, in theory, some sort of appreciation to their early investors. There’s no way around that ending badly.”—Sunil Dhaliwal, Founder and Managing Partner of Amplify Partners
“While the company isn’t likely to offer continental breakfasts and spa bathrobes with an Airbnb logo handstitched on the breast, Chesky does hint that “there might be an opportunity to democratize a lot of the services that the Four Seasons provides.” To that end, a source familiar with the company’s plans indicates that Airbnb has tested an airport-transportation service similar to Uber. One top industry researcher, who asked to remain anonymous so as not to alienate any traditional hotels, said that it’s not a stretch to imagine what might come next. “Once the guest has made a decision where to stay, [he or she] may need a dry cleaner, or a restaurant in the neighborhood, or transportation service to and from there. Airbnb could become a travel agent for the people who are staying with its hosts.””—Inside Airbnb’s Grand Hotel Plans
It took me six years to realize that during my first company, I saw only the first 50 days of the business. That is, I only saw half of what the business could have become, maturing to a 100 day organization.
Across a scale, startups begin at day 0. Established businesses, often those that are public (and those that aren’t reinventing themselves), are at day 100.
A founder begins with an idea or a problem that needs to be solved. Sketches and scribbles fill notebooks. At this time, the idea isn’t fully realized or tested. It’s just a thought with the potential to become a passion later on.
More research goes into the idea. Discussions with close friends begin, checking if the idea has legs. The single founder who started the idea likely finds a close a friend to go deeper into the problem and begins to evaluate the market potential.
A team forms to focus on what now becomes a base or minimum viable product. Early stages of sales begin, identifying paying customers in a target vertical.
For example, this is the stage where Diapers.com had a website but founders were running to Costco to purchase diapers in bulk while processing orders manually, with the help of their dads.
Employees join the original team. Either sales are growing very well or not growing aggressively as planned. A brand around the idea cements. The organization is fairly flat, with the founder still performing generalist tasks. Early attempts at paid marketing begin and a basic understanding of core unit economics emerges.
A critical inflection point occurs. The founder realizes, at this day, that building an idea and building a business are two different skills. “Am I [insert specific skill, i.e. sales, product, etc.] person or am I CEO and a manager?” the founder asks. The team is much larger and specific functions are created for employees but growth may slow - where too many inputs occur and therefore, the challenge shifts to managing. The core product expands in hopes of generating more sales.
The creation story of Twitter is relevant to highlight in this stage, where the original product mind behind the service, Jack Dorsey, stepped down and a more business oriented leader came in, Dick Costolo. Braintree, a payments infrastructure company, experienced a similar transition where founder, Bryan Johnson, stepped back and recruited an experienced manager, Bill Ready, to lead the business to an $800m acquisition by EBay.
Today is the most important day in the company’s life-stage, where the founder must choose a hard right or a hard left for business direction. Should the founder turn right, the company continues to sputter along with associated headaches of re-accelerating growth. However, should the founder turn left, hard realizations come to light: “I’m not cut out to serve as CEO. Should I step down and find a replacement?” The founder accepts reality - the world of black and white - and decides the organization is ready for evolutionary change.
With costs under control, the company is no longer flat as resources have been realigned. Clear hierarchy and structure guide the work day with defined processes. Operating groups and mid-level divisional managers are put in place. A new acting CEO focuses on the original product and begins to optimize sales. Growth begins, and more importantly, predictable and recurring revenue emerges.
Words like “efficiency” and “accountability” become part of the vernacular in the office(s). Management continues to zero in on key performance indicators (KPIs) and cost drivers to the business. The entire company is a significant multiple greater in headcount from the early days. Instead of revenue and growth problems, the business suffers from communication and culture hurdles. Investments in people management and retention begin.
Sales are at an all-time high. Profits are near and more importantly, strength of will set forth by the founder is now displaced by strength of financials. The company continues to build in unison, extracting value per employee as never before seen. Depending on expectations from the private market, that is, if the company took venture capital, now is a good time to consider a liquidation event (i.e. M&A or IPO).
Disruptors, like HotelTonight, a last-minute hotel OTA (online travel agency) or, Airbnb, a rental home marketplace, not only changed an entire and entrenched industry, but continue to grow faster than their peers.
Today’s company is no longer an idea but a tangible business, with products, profits and people. The public market welcomes a successful startup transformed into a burgeoning organization.
“For now, it isn’t that simple. Apps are walled off from one another. Many developers haven’t included links. Even when they do, Google must strike deals with app developers individually to examine the content, rather than unleashing spiders that crawl the Web unimpeded. Google hopes to surmount that obstacle by allowing app developers to submit their apps themselves to Google to be crawled.”—
“Meanwhile, many tourism companies do not offer online booking, and these days, nobody wants to call, leave voice mail messages and wait on hold, she said. Peek will provide these businesses with a Web page with photos, a description of the service and availability, and a way to book reservations and pay.”—
“You also have to be really good at context switching, depending on the size of your portfolio, switching every half hour to an hour from one company to another to another, always on the lookout for portfolio value add [like new hires]. You have to be happy to work 10 to 12 hour days, then do email and still go to bed feeling like you’ve accomplished nothing because it’s so varied that having a sense of achievement and success is nearly impossible.”—Jeff Clavier of SoftTech VC
“Unbundled, single-purpose apps are the way to expand share on the homescreen and Facebook is pulling it’s core desktop experience apart as their audience moves to mobile. The acquisitions of Instagram and Whatsapp are part of this strategy, yet while this strategy makes sense, it comes with execution risk.”—#Homescreen2014
“Beyond the business class lounge neither readers nor advertisers seem to have a massive appetite for a new form of delivery. Vogue sells 192,763 print copies compared to 8,314 digital ones, Good Housekeeping 410,981 compared to 3,561. TV Times only sold 217 “copies” on digital compared to 254,376 on paper. It’s not the only title that can’t decide whether to stick or twist. Look at it from the publishers’ point of view. Are they moving from one format to another or contemplating a future where the complexity increases but the revenue doesn’t?”—
“Among the various considerations, menu availability is the most important decision-making factor for consumers in at home (their city) while proximity (near me now) is the most important consideration to travelers. Both at home consumers and travelers say that mobile is a critical platform to help make decisions about where to eat.”—Report: Mobile Apps More Likely to Impact Dining Decisions than Online
“If you cannot get an entrepreneur to listen to you objectively and rationally, then you have lost your greatest hope of postively impacting that investment. And that is a tool that VCs should not throw away lightly.”—A VC: The Perception Of Conflict Is Conflict
“But when it comes to buying, many of these same social curation sites have traditionally returned customers to third-party brand and retailer sites to complete their transactions, often leading to checkout abandonment. “Because the quality of our partners’ checkouts vary widely —between the good and the bad there’s sometimes a 10 percent difference in conversion — and because consumers are [being asked to leave] their current environment — there’s potential for a disconnect,” says Morton.”—One Cart to Rule Them All
The use of data has always been an asset in the travel industry. Airlines were pioneers in the use of data to optimize seat pricing, crew scheduling and flight routing. Similarly, hotels employed data to manage room inventory and optimize pricing. The travel industry was also one of the first to capitalize on the value of customer data by developing products such as customer loyalty programs. Historically, this data has largely been transaction-based, such as booking reservations, recording account balances, tracking points in loyalty programs. Today, analytics-driven business intelligence products are evolving to further and better utilize available data to help travel companies make decisions, serve customers, optimize their operations and analyze their competitive landscape. Technology providers like Sabre have developed and continue to develop large-scale, data-rich platforms that include business intelligence and data analytics tools that can identify new business opportunities and global, integrated and high-value solutions for travel suppliers.
Direct Booking Concerns
Attracting and Enabling New Content in the Travel Marketplace: We are actively adding new travel supplier content to reinforce the virtuous cycle of our Travel Network business as well as generate revenue directly through incremental booking volumes associated with the new content. We have been successful in converting notable carriers that previously only used direct distribution such as JetBlue to join our GDS, and we believe there is a similar opportunity to increase participation of less-penetrated content types like hotel properties, where we estimate that only one-third participate in a GDS. In addition to attracting new supplier content, we aim to expand the content available for sale from existing travel suppliers, including ancillary revenue—a category of airline revenue that is projected to increase 18% from 2012 to 2013 according to IdeaWorks. We see additional opportunities to capitalize on this trend, including support of our airline customers’ branded fare initiatives.
Our Travel Network business is exposed to pricing pressure from travel suppliers. - In addition, travel suppliers’ use of alternative distribution channels, such as direct distribution through supplier-operated websites, may also adversely affect our contract renegotiations with these suppliers and negatively impact our transaction fee revenue. For example, as we attempt to renegotiate new agreements with our travel suppliers, they may withhold some or all of their content (fares and associated economic terms) for distribution exclusively through their direct distribution channels (for example, the relevant airline’s website) or offer travelers more attractive terms for content available through those direct channels after their contracts expire.
Travel suppliers’ use of alternative distribution models, such as direct distribution models, could adversely affect our Travel Network and Travelocity businesses. - Some travel suppliers that provide content to Travel Network and Travelocity, including some of Travel Network’s largest airline customers, have sought to increase usage of direct distribution channels. For example, these travel suppliers are trying to move more consumer traffic to their proprietary websites, and some travel suppliers have explored direct connect initiatives linking their internal reservations systems directly with travel agencies, thereby bypassing the GDSs. By enabling the shifting of costs onto travel agencies and travelers, this direct distribution trend enables them to apply pricing pressure and negotiate travel distribution arrangements that are less favorable to intermediaries. In the future, airlines may increase their use of direct distribution, which may cause a material decrease in their use of our GDS. Travel suppliers may also offer travelers advantages such as special fares and bonus miles, which could make their offerings more attractive than those available through our GDS platform. For example, in 2010 American Airlines announced its “Boarding and Flexibility” package which, according to American Airlines, provided additional benefits to travelers who book their airline tickets directly through their website.
Hotels pay transaction-based bookings fees based on rooms booked. Car rental companies and cruise lines pay transaction-based booking fees. For car rental companies, booking fees are calculated based on the number of bookings for vehicle pickup. For cruise lines, booking fees are based on each sailed cabin. These hotel, car rental and cruise line contracts contain standard representations and warranties, covenants and indemnification provisions.
Hotel Reservation Platform, a “Central Reservation System (CRS)”
Our CRS platform serves over 13,000 properties and approximately 80 chain codes globally. Historically, generating GDS hotel bookings has been the primary reason that hotels use CRS services. Based on our estimates, in 2012, we had the largest hospitality CRS solution based on our approximately 26% market share of third-party CRS hotel rooms distributed through our GDS, with our next closest competitor at 17%.
“The challenge of venture investing is that the model depends on investing in things that are laughable, because those are the only things that can make billions of dollars from zero in a few years. So you kind of want people to laugh at you and think you don’t understand the sector. You just have to be sure that you understand why they’re laughing.”—Ignorance — Benedict Evans
When laptops started to become more prevalent in corporate America, it brought with it the promise of freedom. That is freedom from the office, freedom from the cubicles farms, and freedom from the the ball and chain of the corporate world, the desktop PC. From executive to sales people to…
Over the past couple years I have been fortunate enough to get the chance to work with some incredible entrepreneurs. These interactions, along with my own entrepreneurial experiences, have given me a lot of material on which to reflect when it comes to what makes for a great entrepreneur.
“But Microsoft has no browser-based OS to show Chromebook OEMs, and has no light-footprint operating system suitable for basement-priced laptops except for Windows RT, which is unsuitable for non-touch screens. And unlike Google, Microsoft can hardly afford to give away Windows.”—Chromebooks’ success punches Microsoft in the gut
“This means that the internet gets several times bigger. One could talk about time, or engagement, or use, or value, and all of these metrics are problematic, but it is clear that mobile devices will become the dominant part of the internet - we will stop talking about ‘mobile internet’ in much the same way that no-one talks about ‘new media’ anymore.”—What does mobile scale mean? — Benedict Evans
“The “backend of the travel industry” is full of cr#$p complex and inefficient legacy software built (and patched over and over) during the ‘80s and ‘90s when the GDSs and the OTAs were built. Horrible UX/UIs still live in the desktop computers of too many hotels, travel agencies, airlines and other travel companies.”—
There are key differences between the traction phase and the growth phase of a company. Understanding what stage you are at, helps you focus on the right goals, metrics, channels, and team structure. But how do you know when you are ready to transition from one phase to the other?
“The most important thing about travel is experience. And as travelers become more sophisticated, they become much more focused on the experience. And so things and innovations that help enrich the experience is where the opportunity is. I don’t think things that tend to diminish the experience or minimize it, like kiosks, have a future.”—Skift Q&A: Hospitality Investor Lee Pillsbury on 100 Years of Industry Disruption
“Mobile-game design is all about psychological manipulation. Candy Crush Saga, for example, baits players by making them wait 24 hours for a new influx of free lives, and telling them that the only way to keep playing immediately is to pay for new lives or ask their Facebook friends for help. This is what game designers call “pain avoidance,” and it’s helped games like Candy Crush Saga become hugely profitable. QuizUp, though, doesn’t have any stealth mechanisms for forcing you to pay, and it doesn’t require you to do anything with your Facebook friends. It just makes it as easy and addictive as possible to play, and the nature of the game means that people want to invite their friends organically. “Candy Crush is a good example of what I call forced virality,” Fridriksson says. “You get to a level, it’s addicting, but in order to continue you need to share it or ask your friends for help. We are trying to do the exact opposite. We don’t really reward people at all for sharing.””—QuizUp’s Growth Secrets
“In mobile this is quite different: nothing is settled. We have the web and apps and of course app stores, and then we have many complications - voice, in-app payments, web apps, hybrid apps, widgets, push notifications, social messaging apps, Google Now and Siri. Then there’s the hardware layer - images, barcodes, NFC, bluetooth, location, motion sensors etc. Innovative and disruptive new interaction models can very often find a route to market, far more easily than they could on the desktop internet. Sometimes, they scale to a hundred million users in a year to two. And we have more and more waves of innovation coming, with things like local wireless from Apple and deep linking to within apps from Android, and a very fast-evolving social messaging space, and more things in 2014 and beyond.”—Mobile interaction models — Benedict Evans
“The best emails feel personal. And they are. Flash sales site Gilt Groupe, for example, sends over 3,000 variations of its daily email, each tailored to past user click-throughs, browsing history, and purchase history. Of course, building true customization and targeting abilities is a transformative process that requires specific capabilities and supporting infrastructure. Customer information – which often lives in different parts of the organization – must be aggregated to create a single view of each consumer. A targeting engine must be built to guide the right message to the right person. And operations need to be ready for the change; creating and sending 3,000 emails per day is very different than sending one mass email blast.”—Email Marketing: Think Inside The New Inbox - Forbes
“In a seed round, you can get by on who you are or some buzz or social capital, but a Series A is about the kinds of plans and numbers that come out of a rigorous dedication to traditional business processes. You may be able to get away with raising a seed round without even taking a guess around the economics of an individual salesperson, but don’t attempt to raise $5mm without knowing that answer—and if it turns out not to work, why wouldn’t you want to know the answer to that question a year ahead of time at your seed round?”—Tough Questions
You never get a second chance to make a first (ad) impression. When making the decision to expose your “virgin” audience to advertising for the first time it’s especially important to focus on the quality of the ads. Why? Because the quality of that content will impact the audience’s future…
Many first time founders began their path towards entrepreneurship while working at a larger company. In fact, the experience of working for a company is typically the catalyst for starting their new business. Perhaps they were frustrated with how slow things moved within the corporate environment or they found the day-to-day becoming increasingly boring.
The common “big company” problems and inefficiencies eventually lead to a “big idea” and that’s when a person transforms from employee to founder. Night and weekend projects become more important in mental energy than checking in and clocking out Monday through Friday.
So, the founder leaves the company and ships the idea. She runs with it and builds. Along the way, the first time founder experiences the infamous “troph of sorrow" and continues to focus. Releases of improvement begin and then wiggles of false hope appear. Signs of the promised land come into realization…and then, a larger company comes in to swoop up the team and potentially the product (read: an “acqui-hire”), ideally having an acquisition of liquidity.
And now, as the story goes, the founder is back at a big company.
Granted, this is one outcome in the journey from employee to founder (and one that’s become increasingly commonplace lately) and it may be the best option at the time. Others include building a startup, having a larger company purchase the business and staying on to grow it as a separate business line - as another example.
But, can entrepreneurs really sustain and reside in a big company atmosphere? It’s a bit of an oxymoron and a question that comes up often with the current M&A trend of “acqui-hiring” in New York and Silicon Valley.
Simply, the definition of reside (to be situated or be in a permanent place) doesn’t correlate to the first experience (that initial genesis in the story above) when the original employee transformed into a founder. This same person who witnessed the inefficiencies of larger companies and made a decision to leave a stable work life is most likely not the same person who could re-enter such a world and be content as well as thrive.
At a startup, you’re tasked with growth and building something people want. At a big company, you’re tasked with a specific role, to carry out an existing business and support something people already use.
Stop and read that last paragraph. The statements are two, very different ends of the spectrum. On one end, your mission is tackling a wide unknown. It’s an unknown that is the riskiest of prospects, with no certainty of reward and more likely than not, you’ll end up failing. On the other end, lies a path that may have been set by a previous employee before you, with a structure that was more mature and protected from failure than the early stage business you built.
*Note: There are exceptions to this. A handful of big (even public) companies are filled with amazing entrepreneurs that I can count in private discussions with friends. Bigger companies are becoming smarter about acquiring growth-oriented talent rather than role-oriented, particularly learning from the passion each founder showcases about her business. The logic is that a growth-oriented employee can become a “jack of all trades” through all functions of the organization.