Tuesday, May 31, 2005

Markets vs. Technologies

During the irrational days of internet bubble 1.0, I had started a software company along with a college friend. Looking back now, I realize that I made a number of mistakes. I learned a lot from that experience though, and I think the most important lesson I took away from it is that markets are not the same as technologies.

Like many entrepreneurs at the time, I was a technical geek, and loved any exciting new technology. My mistake however, lay in thinking that people would pay money for a product just because it was exciting and new. In hindsight, it seems like an obvious mistake - with the exception of a very few technophiles, people don't pay for technology, they pay for convenience. Customers only care about the technology to the extent that it allows them to solve problems better, faster, or cheaper than before.

Our company, along with several others during the bubble, fell into the trap that technology is all it took to build a company. We focused on how to solve a problem, rather than looking at what problems to solve. Since then, I've had this idea repeatedly stressed, not only in my readings, but also in my entrepreneurship and VC classes at Stern.

But my question is, why didn't I think of this the first time around? I'm a consumer too, so why wasn't my natural inclination to think as a consumer? I should have focused on the problems that I could address, rather than the technology I could use. I think one of the causes was my education and experience at the time I left to start the company. After getting my undergrad degree in Chemical Engineering, I went to work as a consultant at Price Waterhouse, doing SAP implementations. In both my coursework, and then in the first couple of years at work, all my training and evaluation were based on how well I met the requirements presented to me. Problems or requirements were handed down as scripture, and all my effort was spent on the mechanics of figuring out the heat transfer coefficient, or the right sql to generate a report. Not once was I encouraged to ask why these requirements were the right ones.

After my company folded and I went back into consulting, I moved into positions of more responsibility, and a lot of my new responsibilities were to do exactly that - determine what to do, rather than how to do it. I realize that until I had the mechanics of development down, I wasn't qualified to do this job, but I don't know why this need was completely ignored in school and in my first assignments.

Most of my engineering education was about teaching me how to think analytically, not about the specific subjects I learned. That's why I was able to take the problem solving concepts I learned in chemical engineering, and apply them to programming. With this focus on skills rather than facts, it seems really surprising that the program didn't take it one step further, and teach us to question the problems themselves, not just the solutions. This may be a result of many of the professors having been academics their entire careers, and not worrying about the business value of what they were teaching. With all the efforts that schools spend on making sure their graduates succeed, it would be an easy win to make sure that every technical graduate had to take at least one class that stressed this type of thinking.

But even if school could be excused for neglecting this education, I don't understand why companies would not drill this into every new hire's head. Since they make their revenue from solving clients' problems, it only makes sense that they would want every person in the company thinking that way from day one. To this day, I see companies who think that developers don't need to worry about the business needs, just about their code. The most successful companies though, make sure that everyone in the organization knows that they exist to solve client needs, and development avoided is much better than development done quickly.

While simple, this is probably one of the most important lessons I've learned in my career. I know many people who've gone through the same learning process, but who now assume that it's common sense. If you are responsible for the development of someone else - as a teacher, a manager, or a mentor - don't take this skill for granted, and make sure you convey how important it is to focus on needs, not technologies.

The Echo Chamber

Wow, every so often you get a slap upside the head that makes you realize how much you take for granted. I had one of those explaining the "Long-Tail" phenomenon to someone that doesn't live in the VC/technology blog world.

The "Long Tail" refers to a concept of niche marketing, first coined (or at least made popular) by a Wired magazine article last October. Basically, it says that once you get away from the constraints of the real world that force limited selection, you will find that there's plenty of interest in less popular items. Although a few hits may have massive numbers of sales/followers/viewers, the sheer number of non-hits means that, in aggregate, they can be as big or bigger than the few hits at the top of the heap.

There's a lot more to this, and I highly recommend subscribing to Chris Anderson's Long Tail blog. More to the point however, is how much this idea resonated with a certain group of people. VC's and entrepreneurs seemed instantly attracted by the new concept, and soon you heard this phrase in just about every blog entry. VC's spoke of hearing "Long Tail" pitches at every conference and cocktail hour. It soon got out of hand, with people seeing "Long Tail"s everywhere. Even the term's coiner, Chris Anderson, said he had "a genera-presentation given to him recently by a venture guy which had a slide titled "Obligatory Long Tail Slide"".

While such overkill and subsequent backlash is not uncommon, the part that struck me is how narrow this overexposure was. The friend I introduced to the term "Long Tail" works in financial services marketing, and is by no means cut off from the online world. She was intrigued by the concept of the long-tail, but seemed shocked when I told her it was already a completely overused phrase, especially when I directed her to the original Wired article that launched it - just 8 months ago.

There's no doubt that blogging and other new media tools have allowed ideas to spread faster than ever before. But I wonder if in doing so, it's increased the gulf between the attitudes of those in the "echo chamber" and those outside. If so, I worry that it will make it harder for entrepreneurs and VC's to truly understand their markets. One of the fallacies that I fell into was thinking that blogs, because of their "broadcast" type nature, represented wider audiences than the personal conversations I have with other technophiles. While this is undoubtedly true, it's important to keep in mind that despite their reach, blogs are probably still closer to 1-on-1 conversations than to mass media communication.

Update: Here's the actual "generic long tail slide". And it seems that bloggers aren't the only ones that tire of new ideas quickly. Paul Kedrosky mentions that investors do the same thing too.

Monday, May 23, 2005

VC Dreams

There's a new meme in the VC blogosphere - "Good luck getting into VC".

Not only are a lot of VC bloggers talking about this (most of them flowing from this original post by Seth Levine), but even the NY Times has gotten in on the fun, saying that even if you're lucky enough to get into VC, chances are, you won't succeed.

Now, as aspiring VC, I've heard this many times before - virtually every person I've talked to in the industry has said that it's incredibly difficult to get in, and many have also said that it takes more than a little luck as well. But despite all of the dismal forecasts I've heard before, every person I talked to in person encouraged me to keep trying if it was something I really felt passionate about. These new rounds of posts however, seem to take the attitude that if you're not already part of the club, you really have no business being there anyway. It's actually rather surprising, because most of the VC bloggers (that I read anyway) don't seem to be so cliquish normally.

One good thing though, is this new round of posts got me thinking about why I wanted to be a VC in the first place. A benefit of the difficulty in getting a position in VC is that it weeds out a lot of the competition. A few years ago, we all heard stories about rock star VC's that cashed in big, and so there was a lot of shallow interest in getting into VC. Once a lot of these people heard how difficult the path was, most of them headed over to I-Banking, consulting, hedge funds, or whatever looked like the most sure way to a pile of money.

The people that I know who continue to pursue a VC career are the ones who have a true passion for it. Now don't get me wrong - I'd like to make a little pile of money myself, but I also realize there are more surefire ways to do it.

Recently, I sat down and tried to articulate what exactly it was that drove me to seek a career in VC. I thought a passion for new enterprises and new technologies was what it took to make a good VC. I had a hard time figuring out why someone with those same passions wouldn't go and be an entrepreneur instead. But even though I had thought about trying my hand at a company again, that didn't get me as excited as the thought of entering VC.

Although I enjoy technology, and I thrive on the excitement and challenges surrounding start-ups, my true passion lies in the development of relationships. If those relationships revolve around technology and intellectual challenges - so much the better. I think that's why the VC industry seems to appeal to me - it seems to be more about the people, teams, and relationships than just about the newest technology.

I'm planning to continue my stubborn assault on the VC industry - I figure that if it's worth getting into, it's bound to be hard, and even if I'm not ultimately successful, the networking skills and job search capabilities I'm cultivating now will make finding a job in any other industry a snap.

Bookmarks to go

Between school, work, and home, I run across a lot of interesting websites that I want to look at later, and like most people, just bookmark them for later review. However, since the computer I bookmark them on is not always the one where it's appropriate to review them later, I'd been trying to figure out the best way to synch my bookmarks across multiple computers.

I heard of the bookmark synch extension for firefox, and had it recommended by many people. Trouble is, I'm behind a firewall at work that only allows port 80 connections outbound, so I couldn't synch up to an FTP server.

I've been hearing about del.icio.us for a few months now, and it's definitely been useful for when I've been at a computer that wasn't mine, and ran across an interesting site. Instead of emailing myself the address as I used to, I started posting them to my del.icio.us account. However, the thought of manually entering all of my old bookmarks was daunting, and I hadn't found a way to add bookmarks that was as easy as cntl-d in firefox. Until I could address those concerns, it was still a secondary bookmarking method for me.

Over the past couple of days however, I've discovered a couple of tools that I hope will address these issues, and allow me to really start using del.icio.us for all my bookmarks. First is the Foxylicious extension for firefox, that allows you to set up daily synchs from your del.icio.us account to your local browser. Tags are used as folders, and you can even create nested folders by using a delimiter in your tags. It also appeared to have added a context menu item to post a page to your account, making bookmarking easy.

The other problem - migrating my current links - was solved through a neat utility provided by Julian Bez. You export your bookmarks to an html file and then upload it to his site. The site then shows you each of your bookmarks, and allows you choose whether to upload it to your del.icio.us account, and if so, what tags to use. After that, you simply enter in your account name and password and it posts all of those chosen bookmarks to your account. It took me about 15 min to take care of all my bookmarks, and now I'm all set.

I still have to see if this combination is sustainable in the long run, but it definitely has gotten me one step closer to being location independent when it comes to my computing needs. More about that goal later though.

Saturday, May 21, 2005

Here we go

Ever have a night that changes your life? Well, tonight's probably not one of those nights for me, but for some reason, it's 5:00 AM, I have class in 4 hours, and I've been awake for the past 3 hours thinking of blogs, personal technology, and the marketplace of ideas.

What is this blog? Well, it'll hopefully serve multiple purposes, but overall, it's in the nature of an experiment. Reading my blog subscriptions recently, as well as articles in the mainstream press, there's been a continuing theme that blogs are bringing about the democratization of ideas - that they allow anyone with a good idea to be heard, and to find others to converse with. So this blog is my way of testing that proposition. Will I be able to break into conversations via online communication that I haven't participated in before?

Well, like any good experiment, we have to have a control group. After all, if my ideas go nowhere online, it could just be because I have really bad ideas, right? Fortunately, we have a great control group - my off-line life. I think I have fairly comparable writing and speaking skills, so we'll see how my on-line progress compares to "real-life" relationships that I develop.

So what conversations do I want to contribute to? Well, my passions are technology, entrepreneurship, and politics. Three things unfortunately, that seem to draw the most voices - will I be able to be heard above the madding crowd? At least if I don't succeed, my failure will be private - by definition, I guess.