Monday, July 28, 2008

Cure for RIAA disease?

Y Combinator, a bi-annual startup camp, recently published some startup ideas that they want to hear from the next wave of applications. The first stated problem..

"1. A cure for the disease of which the RIAA is a symptom.
Something is broken when Sony and Universal are suing children. Actually, at least two things are broken: the software that file sharers use, and the record labels' business model. The current situation can't be the final answer. And what happened with music is now happening with movies. When the dust settles in 20 years, what will this world look like? What components of it could you start building now?

The answer may be far afield. The answer for the music industry, for example, is probably to give up insisting on payment for recorded music and focus on licensing and live shows. But what happens to movies? Do they morph into games?"

(Welcome to America! It's the only country that considers suing anyone legitimate.)

Paul Graham is right on about the broken system, but we can't blame the music labels for suing music download population at massive scale. But I still blame them for not being able to adapt their existing business model to the digital age. I don't advocate violating copyrights nor endorse any form of illegal downloads. Let's just be honest here. Ever since peer-to-peer downloads surfaced, the music industry failed to suppress the emergence of online music sharing.... I mean illegal ones at least.

The whole music industry ecosystem is overly complicated and hard to make any dramatic changes. Yet, the music labels need to realize that the system is broken and embrace new business model.

True Anthem just closed funding from angel investors. Maybe they should've applied for Y Combinators. Is this the answer to the music industry?

Tuesday, July 22, 2008

Venture Capital: MBA's Dream Job?

(Broadcasting from a Volvo dealer in Brighton, MA. Why not spend this time to jot a few things?)

Having been involved with MIT VCPE Club along with over a year of working as a venture capitalist, I learned the gist of what VC is all about. I wasn't the GP with a pot of money to make my own investments, so I'm not even going to try saying that I really understand everything.

I'm constantly approached by eager MBA students asking me how they can get into venture capital industry. Here are some quotes from the conversations. I get these questions so often that I might as well just list these out to increase traffic in my blog.

Make your pick as to which ones are your own questions. My answers in parenthesis (my response)
  • "I know it's impossible to get into the industry, but I want to get in." (No, it's not impossible to get in. But do you REALLY want to get in? VC is one of the most interesting jobs out there. With the right background/advice/interest, you can reallly fuel the innovation economy, work with exciting technologies, work with super-duper entrepreneurs, and ...... perhaps change the world. You see all these high-profile venture investors hanging out at social events sourcing deals with a glass of cocktail/beer chatting about the next big thing. There's gotta be a flip side as well right? As a non-GP [I call them PWNM - people with no money], do you really understand what you would be doing?] As long as you understand this and love doing it, by any means, go for it.
  • "What do I need to do to prep for summer internship/full-time job at a VC firm?" (To be completely honest, I don't know. I feel happy about where I am and kind of things I was able to do in this cottage industry. Simply put, I got lucky. But it was "polished luck". If you force me to tell you what you need to do, I would say.... (1) attend social events where VCs hang out. Say hi, say something intelligent, prove that you are somewhat of a value to them. (2) Take some classes (if you are in school) or teach yourself what REALLY goes on behind the scene. For example, learn valuation, scenario analysis, strategic analysis, term sheets, psychology between investors and entrepreneurs, operations, become a master of specific vertical/technology/etc. )
  • "You must be super-smart to get a job in VC" (Many VCs are indeed very smart but not as smart as many others. If they are THAT smart, why's their industry batting average below 10%? It takes certain effort to become a successful VC. It's actually not a really brain power game.)
  • "I'll take any job at any VC firm and move onto the top-tier fund" (A lot to be said about this. Please don't, by all means. (1) just like any other jobs, love the people you work with/for. Say, you work for Sequoia. Your business card gives you confidence. You walk into the office, and you absolutely hate the people. Is that your dream job? Having said that, they probably would not have hired you if it were to happen in the future; (2) mobility from one firm to another ain't that easy, especially when the funds are not the best "friends"; (3) alll venture funds have different investment strategies from size of investment, type of technology, stage of company, etc. If you love the founders with PowerPoint and are absolutely passionate about building a company from scratch, a billion dollar current fund is just not going to fly. You will end up working, mostly likely, on very different set of strategic problems. Most importantly, you will NEVER see (actually end up investing in) founders with PPT.
  • "All VCs talk to each other" - Yes, many VCs talk got each other because they syndicate deals. At the end of the day, realize that many VCs actually compete against each other for high quality deals. Without going into gory details, realize that it's more of friends or foe situation.
The list is remote from comprehensive. If there are any other questions, please ask in comments. I'd be more than happy to answer.

Thursday, July 17, 2008

Why Google Slows Down Acquired Companies

Time to talk about real business now.....

Why Google Slows Down Acquired Companies

Google is a do good, no evil company. For entrepreneurs who build great companies, getting acquired by Google is probably one of the best news you can ever hear. They make tons of money and get a great opportunity to work at a great company. What about your "baby" that made you all this fame?

A further look at Google's historical acquisitions somewhat reaffirms the demise of startups within Google, with a few exceptions. (http://en.wikipedia.org/wiki/List_of_Google_acquisitions)

Feedburner and YouTube are obviously doing great. Well, monetization is still a big question mark, but they are certainly in the leading pack.

Isn't technology integration part of the diligence question during the acquisition process? If so, do entrepreneurs care if they get mired in the Google's proprietary stack?

Saturday, July 12, 2008

Friday, July 11, 2008

Murderous wait

"We're going to kill you if you try to cut in front of me".

- angry bald man yelling at me when I asked him how long he was waiting in line for iPhone 3G

Well, I peaked inside the store and left.

Thursday, July 10, 2008

Who has time for this?

I'm always amazed by the tech geeks' ability to find workarounds.....

How To Save $200 On The iPhone 3G, Maybe (AAPL, T)

Who's in to trick AT&T?

Who exactly are VCs?

How to get into VC industry is one of the hottest topics. But then, did you ask yourself if your background matches the general population of venture investment professionals?

See: NVCA/Dow Jones Venture Census

peHub's critique of prestigious education killing venture capitalists.. well.. many highly educated people are recruited by well-established big companies with big salary, work-life balance, great network, etc. But what other schools have as large startup competition as MIT's 100K?

Wednesday, July 9, 2008

Creating new market opportunities

These days, I spend a lot of time hanging out on the MIT campus to have a quiet time while missing my little girl Daine at home. I see many students also hanging out on campus. What a relief to feel that I am not the only lonely person here.

Today, I ran into a friend who's interning at a local high tech startup. "So... what do you do there?", I asked. She told me that she's working on this super-meta-physical crazy rocket science out of MIT lab related to detecting nuclear materials without having to open the casing, and she's helping them figuring out creating new market opportunities. Phew~~ So, I asked "what do YOU do there?". She said that she spends a lot of time trying to understand the isotopic composition of materials to see if the company's technology can be used in new applications. She reiterated the fact that she's a bit frustrated, because many compelling applications are constrained by the current state of proprietary technology.

Well, here's what I have to say....
  1. Technology is good only as long as there's a strong market need. This sounds so niche, but this is the pitfall of many technology startups. They try to see how their original technology fits into new applications/markets. Quite often, the technology needs to adapt to the new market opportunity. So, what do I mean by this? When thinking about creating new market opportunities, you really need to understand where the big market is before getting into the technical due diligence. Why waste so much time (as a business person) to understand all the science while you can spend lots of productive time thinking about new applications? You really need to start with a premise "okay, my baby can detect something without opening". You don't need to understand the isotopic composition of materials to detect hazardous materials inside. By putting so many constraints in your original assumption, you might have thrown out at least tens of useful, promising market opportunities.
  2. Work in a team to list out everything you can possibly list out. Innovating on ideas just cannot be done individually. I don't care how smart or creative you are. You just need to ask as many people as possible to aggregate as much information as possible. Criticize and ask questions. Give "stupidity grade", explore more, and pick the ones that seem most promising supported by a few facts (market size, regulations, tech trends, etc.)
  3. Then, comes the technical diligence. If there are large market opportunities and interesting enough applications, can we build this product, given the current state of technology? I'm sure people much starter than me can figure out the technical aspect better, but the real question is how much capital, time, and resource? Given the infinite amount of all these, pretty much anything can be done unless the application is just too wacky. If the product cannot be built with "reasonable" capital, time, and resources, move on.
That's it. This is the innovation strategy 101. Now look back and think about reversing the above steps. What do you think?