Dec 23

I’ve just setup a Pledgebank here to encourage Kathy Sierra to start blogging again. For anyone who doesn’t know the story of what happened, you can read her statement and probably find traces of the original post somewhere in the wayback machine but basically some wacko made graphic death threats and scared her enough that she stopped writing. This thoroughly sucks because not only did her writing have huge educational value and daily insights for people making software, but it had massive inspirational value as well. The essence of her mantra “help your users kick ass” absolutely changed the way I look at how we build our stuff.

Kathy’s last post to Creating Passionate Users was a call for ideas on how she could resume her writing while avoiding a traumatizing situation like that one from recurring. At least half the value of her blog was the conversation that spawned the comments of her posts. I propose a member-only community site where yearly membership dues paid to Kathy gets one a year’s-worth of access to her writing and the ability to interact with other readers. I’m willing to set up this private site and pay the fee if we can get 200 other people to commit to joining. If you’re interested in this, sign the pledge here and spread the word. It sucks that those threats occurred Kathy but the software world misses your voice. RSS readers everywhere have a serious void. Please come back.

Expiration for the pledgebank is set for New Year’s ’08.

UPDATE: put this image on your blog if you want to help recruit:

Sign my pledge at PledgeBank

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Dec 21

SantaTrumanShow.jpg**Warning spoiler**

Weird Friday thought: do you think kids get freaked out when they realize an entire society has conspired to fool them into believing in Santa Claus? From their perspective it’s gotta feel a bit like the moment of revelation/disillusionment Jim Carey’s character goes through in the movie Truman Show when they learn it’s not just an isolated bit of trickery but that the entire world is in on the charade.

Am I thinking too deeply on this one? Admittedly I’ll probably perpetuate the Santa myth if I ever have kids because the magic of seeing them believe has to be priceless. But at the same time, are we doing it for us or them at that point? Maybe both… How do parents deal with that moment of having to admit to their children “sorry, it was all a big hoax and the rest of the world was in on it too?” Ouch.

Dec 18

in place of their currently dysfunctional hybrid of class tracking and sub-accounts.

The goal: I would like to know how much we spent on various marketing and advertising initiatives with a breakdown by individual occurence so that I can see we spent a total of $X on conferences this year and be able to drill down on specific amts for each conference. The same goes for online adspend across various channels like pay-per-click, sponsored banners, direct email, etc broken out by vendor. Likewise with outsourced efforts like PR, directory submission services, SEO. Ditto physical collateral broken out by literature, t-shirts and schwag, etc- you get the point. This would be so much easier if we could tag every transaction with multiple tags (provided tags can have a parent tag).

The current failing:Instead we have this strange way of doing things whereby we assign each transaction to an expense account (okay, necessary GAAP stuff) but then we have an optional class tracking feature where we can assign it one (and only one) class. There are recommendations on how to best use class tracking but unfortunately you can’t track multiple dimensions (ie. I can use class tracking to track by geographic location or business department or marketing initiative but not all three). Seems like allowing ad hoc tagging and having the ability to do multiple, hierarchical tags would solve this and allow people the flexibility to track across any number of dimensions… grrrrrr quickbooks…. And Intuit has a lovely policy of sunsetting their products every two versions and forcing you to upgrade- we’re coming up on our sunset period. Let’s hope they add this capability to this year’s edition.

For that matter, is anyone aware of a viable open source alternative to Quickbooks? Some brief research reveals one called GNUcash which looks interesting. Is there a de facto winner out there though that everyone uses or are OSS accounting packages still too primitive and we’re stuck with Quickbooks for the time being?

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Dec 17

I had the opportunity to appear as a guest on Robert Scoble’s show when I was up in Half Moon Bay last month. He just posted the interview this evening (~20min). In it we talk about virtual appliances, open source server applications and how our technology is eliminating days/hours of setup time and bringing an entire class of server software within reach of the average, non-technical user. Big thanks to Robert for having me on his show and to Francine Hardaway for the introduction!

Leave comments here if you have any.

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Dec 12

So we’ve pitched to ten different VC’s in the past week. There’s no substitute to learning through doing and we’ve learned a good deal in the last few days. Here’s a distilled version of the relevant lessons for anyone else who is in the process of raising venture capital:

  1. Logic is expected but emotion is what gets the callback: Your primary mission in the initial pitch is to excite & engage- not to educate (beyond the baseline level of clarifying any obscure aspects of the opportunity). The secondary mission is to instill confidence in the idea / team / market, but that comes after catching their interest- in that case all you’re doing is free consulting for them so they know more about the space. Educating them about the technology is worthless if you didn’t grab their interest. Nobody is going to pick up the phone next week and call you back because the numbers worked and the model made sense, they’ll call because they want to be involved and are excited about what you have.
  2. Feedback across VC’s is highly inconsistent: this is not a science by any means, it appears to be more of an art. For us there was very little overlap in consistency of feedback across VC’s. Going into it I thought this was a fairly standardized science in the way that insurance companies have templated ways of analyzing risk but feedback and types of questions asked to assess the opportunity were all over the map.
  3. Nobody cares about speculative TAM and projections slides: only one out of the ten VC’s we pitched asked us for a slide on the total addressable market and nobody asked to see our financial projections. We had a deck of 12 slides and included 3 appendix slides at the end as optional ones we could bring up to show projected financials, list of applications in our library and quotes that corroborated our claim of a promising TAM. They recognize these type of slides are highly speculative – they just want to see that you’ve been through the thought process and understand the space and where you fit in.
  4. Quality of the referral is everything: I’m stunned with how easy it was to secure meetings when we had a referral. Rapport by proxy via a trusted mutual connection is invaluable and gives you a great ice breaker to start the conversation. I’m not saying you couldn’t land meetings via cold calls but having an email intro produced a near 100% success rate for landing a meeting. It probably helps that we have a very disruptive technology that sits squarely at the intersection of two important trends right now, open source and virtualization. But still the intros were invaluable.
  5. A few minutes spent researching the people and firm is priceless: it’s not about you, it’s about them. What does your product mean to them and how does it fit within their portfolio? It’s completely acceptable to ask the VC what types of investments excite them right now. Knowing their background and about the companies in their existing portfolio helps you couch your opportunity in terms that they’ll be receptive to.
  6. It’s a conversation, not a pitch: if it turns into a one-way presentation, you’ve lost. Just pack up your stuff at the end, exchange pleasantries and don’t expect to hear back from them. The phrase that springs to mind is “people don’t like to be sold to, they like to have the ability to buy things.” When you approach it from this mindset it becomes a simple show & tell of your company given what you know that excites them.
  7. Nothing beats having customers: our confidence in talking about our business was hugely boosted by having four month’s-worth of customers under our belt. I would have been way more stressed and defensive if we had pitched without customer validation. If you’re planning to pitch a VC, do what you need to do to get at least a handful of customers first. Heck charge people even just $5 for whatever you have. The simple confirmation that people are willing to pay for what you have strengthens your position immensely.
  8. Remember they need you as much as you need them: Roger Dawson says that it’s a natural human tendency to always under-value your hand in a negotiation. It’s important to recognize the VC’s (while they may be contacted all the time) need good companies to fund as much as the companies that approach them need funding. Deal flow is their blood supply.
  9. The timing of taking money: so we hadn’t planned to be talking with VC’s this early but conversations led to other conversations and somehow we ended up in front of them. So long as it’s not detracting from your ability to execute on the business and you have a good story, I’d say the earlier you begin talking with them the more options you keep open. Having cash in the bank and flexibility on the growth trajectory you’re able to take puts you in a stronger position and gives you that “walk away power” that’s so key in a negotiation.
  10. A concrete demo goes a long way: if your product demo’s well and a demo of the actual technology can be appropriately worked into the preso, do it. It brings everything down to a very tangible level and can answer questions immediately that would otherwise manifest from talking in abstractions. A picture is worth 1000 words and a demo is worth 1000 pictures.
  11. Getting derailed and not getting through all the slides is a good thing: don’t be bummed if you don’t make it through your slides, in fact rejoice in this situation. We found ourselves in one meeting that ran 30min over- the VC was deferring calls from his wife who was waiting for him in the parking lot and we still never made it through the entire deck. This means you’ve engaged them and there’s more to talk about (which is the whole point of the pitch).
  12. Take sources like The Funded with a grain of salt: consider that the population of people posting to those sites will have a bias of being mostly people that got turned down. There’s still value to reading feedback there but take it as one data point and not the gospel of VC quality.
  13. These lessons come at face value from an amateur who is new to this game and the bottomline is that until we actually close the funding, we’ve realistically achieved nothing. We had a good experience with everyone we spoke with and even the ones that flat-out passed on the opportunity gave us helpful feedback about why they weren’t interested. If you’ve pitched and have any advice or perspective to add, please add them via comments.

    UPDATE 12/13: one more bonus nugget to add:

    #13 Don’t hoard your best contacts until the end: doing so means you miss out on the strongest feedback early on that can sculpt your pitch. Going into it we had thought the strategy would be to cut our teeth on the smaller fish first saving the big guys for the end, but we ended up pitching the most reputable firm on #2 and that actually gave us great confidence with which to approach everyone else. The more you pitch the tighter the story becomes – I would say don’t worry about blowing contacts while you’re still figuring it out. Dive in, listen to their advice, ask them what was weak and strong about the story and iterate on the story to incorporate those changes for next time. They may even refer you to somebody else they know if they like it but find it inappropriate for their portfolio for some reason.

    UPDATE 12/22::

    #14 Don’t script your pitch: Make a slide deck that serves as a framework for the talk but speak impromptu about the slides and use questions that engage the participants. Have a few key phrases that are like a comfortable home base you can return to and work from if you get jarred but don’t rehearse the pitch verbatim. Doing so will make it forced and contrived plus it’s more brittle to questions that inevitably arise and lead it off course. This is a “show & tell” session for what you’ve built and where you’re headed as a company. If you’re a true believer in what you’re doing, let this candidness shine through and talk openly about your business as you would with a friend or family member. The slide deck gives a predictable skeleton structure to the talk and ensures a logical progression and coverage of the major points.

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Dec 12

is still a smart friend who reads a bunch of feeds and has coffee with you once in awhile.

It’s not Bloglines (though, Mark Fletcher, you are my hero). It’s not Google Reader with it’s dominant market share. Newsvine, Thunderbird and Newsgator… negative ghostrider.

We were talking about this on a walk yesterday- if you’re like me you’ll go through cycles where you purge every feed you’re tracking. Over time you slowly accumulate new ones feeling like you might be missing out on important developments until you realize you’re under water again in a noisy sea of posts ignoring 90% of them anyways. So you prune everything back- the veritable “binge & purge of RSS consumption.”

The happy medium I’ve ultimately settled upon is to follow a small subset of blogs and a few news sites and look to a handful of respected individuals and groups for awareness on important industry developments. RSS was a great invention to amplify one’s ability to track stuff of interest from a bunch of disparate sources- the first layer of amplification was centralizing all these sites into one reader. But the next layer of amplification is learning to rely upon trusted experts in the various fields of importance to filter the noise, synthesize the relevant info with their own expertise and share the important insights in person (and ideally, in a group of experts). Like roots of a tree that continuously branch for maximum surface area and absorption, this is why groups like Refresh are hugely valuable and why hubs of face-to-face casual interaction like Google campus and the coffee shops in San Francisco are such hotbeds of innovation.

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