Back in October, Alex and I were two guys and a Powerpoint. 

We raised $350k partially based on that Powerpoint, but *I think* it was more based on the strength of our relationships and the fact that we were working in a big, lucrative space begging for disruption.  The investment was meant to recruit additional developers, carry us to a product, and give us some running room after to iterate.

We're on the verge of accomplishing the first half of that goal.  We hired two great developers and we're literally a couple of days from rolling out some of our product in an early Alpha version.  (No, no, it's not a "launch".  It will probably suck and break on day one, but you've got to start somewhere, right?)

Some entrepreneur friends were surprised and maybe even thought it was unfair that we were able to raise before having at least a demo or something up.  Certainly this is the kind of thing that VCs look for, but angels can be a different story. 

Thinking about risk and value creation in relation to fundraising is interesting to me, because its on the forefront of my mind right now. Since we're about to roll some product out, we have a very clear idea of what the product will look like and where it's going.  Of course, it needs to iterate based on user response/uptake, but that goes without saying.  What's very clear to me, though, is that the iteration and eventual inflection point for the service really depends on additional resources--a kick-ass user experience person and an operational/biz dev person.  These would clearly be our first hires after any kind of a financing, because the product not only depends on seamlessly integrating several complimentary career applications, but also on syndicating our services out to other communities and groups.

So the big question is, why wait?  (Especially if we've identified prospects for these roles, which we have.)

Right now, there's two scenarios:   

1) Launch, iterate with existing team, catch lots of falling knives and try and power our way forward to some arbitrary milestone that brings the term sheets pouring in, not that we or the VC's are even 100% sure what that is.  Then, spend time trying to fill out team.

2) Try and raise a couple million sooner rather than later, since we can very definitely say "This is the product and the near future of the product you are investing in."  We make our hires and hit the ground running, and make a much bigger impact in shorter order.

Option #1 plus a nice hockey stick might bring a higher valuation... but is that really what we should be optimizing for?  Outside of raising ridiculous amounts of money at ridiculous valuations, have you ever heard an entrepreneur attribute their ultimate success to a million or so here and there on interim valuations?  On the VC side, have you ever heard a VC say, "The success of our fund has really depended on waiting another month or so to see more traction on deals and teams we liked"? 

The worst thing that could happen is that we come out, inspire potential partners and employees, and we're unable to take advantage of them because we don't have the resources.  Raising money takes time, focus...   Raising at the moment your product gets really good and people finally get it is probably the worst thing you can do, because then you won't have your ducks in a row for when opportunities knock.  The trick is finding support from folks who see where you are going with something and believe that you have the passion and ability to get it there, even before its a sure thing. 

Fred's post on the USV blog...

And Then There Were Five | Union Square Ventures: A New York Venture Capital Fund Focused on Early Stage & Startup Investing

And Eric's response on his own blog...

Changing jobs, not focus

I talked to quite a few folks about the events of Internet Week and a couple of people brought up the fact that they really weren’t sure who they should be out there meeting. 

I’m not particularly plotting about how I network.  I just try to meet cool, interesting folks and get to know them well.  If I have one good thought provoking conversation with someone passionate about what they do at an event, I consider the whole thing a success.

But if you’re focused on “who to know”, then I think it’s easy to mistake buzz for influence or knowledge.  I think too many up and coming people in the tech scene worry about the “in” crowd or folks that appear on the outside to generate a lot of buzz in the community.  Focusing on them, however, is an easy way to take your eye off the ball and not focus on the things you need to do for your career or your business that make a real impact.

Influence is not measured by blog links or twitter replies, but on size of deals done, decision making, P&L responsibilities. 

For example, when you go to a tech event, who are you more focused on? The doe-eyed videoblogging distraction or the product manager who runs a successful web service for a major media company.  One of them can share some widsom about how their latest user experience redux boosted conversion and traffic.  The other one… well.. not so much.

TechCrunch is the ultimate example of this.  The LA Times called Mike Arrington a “Kingmaker” and certainly everyone treats him like he is—but can anyone actually point to a single instance where a TechCrunch mention was singlehandedly responsible for anyone getting funded or getting a business deal?  I’m talking about a situation where, if TechCrunch had not annointed a company as worthwhile, the company couldn’t have gotten it on your own.  Who has he made King?

I don’t think any VC or angel worth their salt really cares about what Mike’s opinion about a company is—they do their own work and have too much at stake to blindly outsource judgement.  Good writeup, bad writeup, no writeup…  I think companies are realizing that it still takes a great product and a lot of footwork to acheive success—not just one make or break article.  Much of that is because, for most companies, the TechCrunch audience isn’t even really the target crowd the company should be going after.  If you’re building a B2B service, you’d rather get writen up in an industry mag.  Location based marijuana ratings system?  A High Times mention will go a lot further than a TC review. 

The most knowledgeable and influential people that are relevent to your company are often under the radar.  There are tons of really helpful angel investors out there that never blog, never show up at Meetups, Tweetups, MashMeshing, or what have you.  They need to be sought after.  Ambitious startups need to turn over every rock.  They need to go to the successful people in their space and ask them who’s been the most helpful, whose opinion they respect.  Find out who’s in a VC firm’s friend of the family network—who are the individuals invested in VC firms.  Too many people rely on blog traffic and Twitter buzz to figure out who to contact versus their actual potential clients. 

If you’re a publisher tool and the only thing you have in your biz dev queue is a big tech blog, then you need to get out there and perch yourself at CondeNast, Martha Stewart, Meredith Corp., Scripps, etc.  People from these places should be your on your board—to help you understand the landscape and to get you in front of potential clients, and you’re not going to find them at gatherings of the young digital “elite”—nor can most of the people considered the “elite” make any intros to these folks.  Contrary to popular belief, the Director of Business Development for the company you think should by you isn’t trolling the blogs for deals—they’re taking inbound phonecalls and setting up real life meetings with companies more aggressive and ambitious than you.

So before you worry about whether you’re in with the right talking head, take a step back and reexamine who you really need to be out there talking to.  Chances are, it’s not the same people everyone else thinks they need to be talking to.

Now that we know who the Democratic nominee will be, it's time to go to work...

Obama for America is looking for exceptionally talented web developers who want to play a key role in a historic political campaign and help elect Barack Obama as the next President of the United States. (Interested in a security expert position?)

This six-month opportunity will allow you to:

• Create software tools which will enable an unprecedented nationwide voter contact and mobilization effort
• Help build and run the largest online, grassroots fundraising operation in the history of American politics
• Introduce cutting-edge social networking and online organizing to the democratic process by empowering everyday people to participate on My.BarackObama

You must have:

• At least 5 years of professional web development experience
• A deep understanding of LAMP development processes and best practices
• Experience building complex applications using PHP and MySQL
• Advanced or expert CSS, Javascript, and AJAX skills
• An abiding desire to put your technical wizardry to work for democracy and for our country

Special consideration given to candidates who have:

• Experience scaling large LAMP applications
• Posses deep knowledge of MySQL performance and query optimization
• Strong practical knowledge of web application security
• Created highly usable user interface/experience for complex web applications
• Worked in a fast‐paced web development environment and have proven their ability to write outstanding code under tight deadlines

Successful candidates will join the development team in Boston, MA. Candidates should be willing to commit to work through the election in November. This is a salaried position. Housing assistance may be available for those not located in the Boston area.

Click here to apply!

When I was a sophomore in college, poking (not literally) around AOL, chatting until the wee hours of the morning was a pasttime. In 1998, you could logon to the AOL software and search member profiles for "Fordham" or "Brooklyn" to find people (girls) to IM with live. New people on tap--it's a concept that has largely disappeared from the typical social web experience today. Now and then, I get a random Skyper from Italy, but young US users don't really use Skype for IM.  Now it's about your friends (and maybe people who read your blog.)

In fact, one noticable change about Facebook in the last few months is the disappearance of "Network" pages. These were pages meant to aggregate all the activity of users in a particular network, be it geographic, corporate or a school. For the most part, they focused

on people you didn't know--random wall posts from strangers, events that were public but not really meant for you, and browsing of people in your city or school but outside your friend group.

This was counter to the experience Facebook clearly wanted you to have--one about your friends and the information they wanted to share with you. So, despite the fact that the site "opened up" to high schools, then to the general public, the experience actually got less open as these network pages disappeared. Even mass friending is generated by your email account, guaranteeing that you're unlikely to get a friend request from someone you don't know, unless you're Scoble or Calacanis.

What this means is that the social signal to noise is still pretty high.  If you think about all the content you see on Facebook, the vast majority of it is content directly tied to people you know.  That's why the events platform is so successful.  Finding relevent events on the web has been a challenge for quite a while, and now, having that filter of being shown events that my friends are going to is as good a recommender as any.  I find more new events though Facebook than I ever did using any other tool.  Evite has much of this same data, but they really blew it by not showing me things my friends are going to. 

Applications have gotten less and less spammy, too, and will be even less disruptive after the next UI iteration.

When you keep your connections to your actual friend group, the pictures, events, notes and updates are all highly likely to be relevent to you.  That's why its so hard to unseat Facebook at moment. Not only are all my friends there, but they're presented to me without much disruption.

Not only that, but that's also why mainstream users don't care about data lock-in. If all my friends are in one place, than what do I care if I can't move them? I don't want to. Imagine if Facebook was a bar and all your friends were there at a party. You wouldn't say, "Hey, all my friends are here... How do we get them out?"

That is, unless it felt crowded, which Facebook's reliance on activity vs. presence ensures it won't. At any given time, most of your friends,  just aren't doing anything, which is fine.

The interesting thing to me, though, is where all the strangers went and whether anyone mainstream really cares. There are video services like PalTalk that are based around random chat rooms, or servicesthat can introduce you to people along specific shared interest lines like last.fm, Flickr, MyBlogLog, but is seems clear that the web has gone the way of Meetup Scott's favorite shirt: "Fuck you, I don't need more friends."

Was it always the case that we preferred our own friends to new folks, and we just didn't have the critical mass of friends online before? Now, it's odd if someone my age or younger isn't on Facebook.

Fred wrote the other day that he think the web is going the way of everyone publishing to the world. I think he's almost right. He should have written "everyone publishing to whoever they want, which includes everyone, if they choose." I'm not sure whether that means people will choose everyone or not.

It's possible we'll wind up in two camps. There are tons of people who go out of their way to make Facebook profiles, MySpace photos, etc. private, and ohers who live out loud. The social implications of the divide are interesting, although I don't necessarily agree with Tom that its a class thing. There are just as many show-off inner city teens on MySpace as their are rich guys who want to publish their health records.

You might say those teens don't know any better, but I think we may get to a world where we just throw up our hands and say, "What was the fuss about anyway? So now you know. Big deal."

You know, there comes a point where we have to stop calling David a "wunderkind" and just refer to him as a really smart, thoughful guy who knows what the eff he's talking about.  I think I'll just shorten that to calling him "David Karp."   Does Anyone Still Read TechCrunch? | David's Log

"After giving some thought to the future of TechCrunch, I think it might be a necessary evil. It’s managed to capture a huge amount of the negative voices in the development community. Unless they’re leaking info, their stories have no real impact on anyone’s business. And so far as I can tell, the development community, at least the brilliant folks I’ve been lucky enough to spend time with, pay no attention to TC (especially on the East Coast). Meanwhile, anytime I catch their awful writing, or feel suicidal and start reading TC comments, I’ll have to remind myself that if these poisonous people weren’t holed up at TechCrunch, I might actually have to interact with them :[ So I think I’m grateful Arrington has charged himself with being the dev community’s douche magnet."

So Haterington is basically admitting that he wants to single out the Twitter team to rile them up.  What is that supposed to accomplish...  besides increased traffic to TechCrunch?

from Hey Twitter I Have A Few Questions Too

"Twitter continues to be annoyingly and constructively responsive to criticism. They respond to this post here, saying “We’re working on a better architecture.” Kind of takes the air out of the balloon when you can’t get them riled up."

I think it's pretty interesting to compare Kara Swisher's focus on the ongoing coverage of Yahoo!, Microsoft and Facebook--companies where billions of dollars are at stake, the future of search and the ad market, and the whole tech landscape, with Mike's continuing shoulder chip and insistance on picking on one small startup company (and a guy who doesn't even work there anymore) whose extreme popularity is causing them to face some tough technical challenges. 

The unfortunate thing is that it's causing a non-story to bubble up to the top of TechMeme.  I wish we could bury stories there, because a petty Haterington vendetta is not news as far as I'm concerned.

Paul Graham recently wrote a piece about cities.  He puts forth Cambridge as a city of ideas, New York as a city that is all about money (where people doing startups are second class citizens) and the Valley as a place for startups. 

I’m not about to start comparing the Valley to New York City.  That’s just silly, because the Valley has a multi-generational head start on creating tech startup companies.  However, given that, it does make me wonder why Cambridge and the Boston Area is so far behind the Valley, because Route 128 has been a tech center since the late 1950’s.  I mean, “Harvard and MIT are practically adjacent by West Coast standards, and they're surrounded by about 20 other colleges and universities,” as Paul puts it.  Perhaps he should be explaining why his City of Ideas gets less than a third of the venture capital investment that the Valley does.

I think the fact that Cambridge is a city of ideas is exactly why you could say it’s questionable how great a place it is to do a startup.  In an environment dominated by academia—where you lack time pressure, a sense of immediacy—you’ve probably got just as much of a chance of creating an interesting intellectual exercise in burning cash as you do building anything that resembles a real company.  I mean, have you ever tried collaborating with an academic institution if you’re a business?  Your startup would run out of cash before they figured out the right academic chair to lead the effort and which pool of research money to allocate for you.  It’s no accident that startups need to be spun out of these institutions to be successful.  Plus, seen any hugely successful companies come out of university incubators lately?  (And no, Zuckerberg’s dorm room does not qualify as an incubator.)

Also, think about it another way.  What are the last 10 or 20 really novel "ideas" in the startup world?  Things that required a leap of thought...   We can debate it and certainly I'm up for creating a list, but when I think of good ideas, I think of del.icio.us, Skype, Wikipedia, Twitter, Bug Labs, Slingbox, Google (b/c of the biz model)...   Hardly seems like Cambridge has a lock on the idea generation market in the startup world.

Ideas today are a commodity.  Anyone can have an idea, so being the Capital of Ideas is pretty much equivelent to building your city of out of straw.  If I were a co-founder of 3PigsTech.com, I’d think about building somewhere whose choice of building material was more formidable. 

Which brings me back to New York City.  By saying that “New York tells you, above all: you should make more money,” Paul Graham is basically admitting that he’s never been north of Central Park, on the Lower East Side, or out into the Boroughs.  I grew up as a finance major in NYC and I made the same mistake that Paul makes.  It wasn’t until I finished school and got about three years into my career that I soon realized that there was a lot more going on in NYC than just Wall Street. 

When I think of ideas, I think of creativity, not just scholarly research and publication in academic journals.  An idea has no value unless it’s either a) new or b) executed.  If execution is a business phenomenon, I can’t imagine a better place to execute than NYC (or the Valley, if you’re a tech startup), but in terms of new ideas being generated from creative people, I wouldn’t exactly hold the ivory towers of Ivy League schools up against the creative culture of NYC.  New York City is a mecca for design, fashion, dance, art, film, theater, international relations—it’s not difficult to imagine that this stew of creativity rubs off on other industries. 

Hedge funds, for example, are a great example of creativity leaking into another industry.  The most forward thinking, creative investors break out of old institutions to play markets in out of the box ways at hedge funds.

We even solve creative engineering problems here.  Peter Semmehack from Bug Labs, an open source hardware company pushing the limits of creativity in the consumer electronics space, has always said that he has found the best and most creative engineering talent here in NYC.  Need to explore a completely unfamiliar environment millions of miles away?  That was the challenge for the Mars Rover, and it’s no accident that much of it was built here, by HoneyBee Robotics. 

Paul also makes the point that someone creating a startup in NYC would feel like a second class citizen.  I have to be honest—I’ve felt that way several times, but mostly from people outside NYC.  Within the city, I’ve actually felt really supported.  Most of my 21 angel investors are not only in NYC, but they’re either NYC natives or have lived most of their lives here.  Among my large diverse group of friends (I grew up here, went to school here, never lived anywhere else, and know tons of people doing very different professions), I’ve received fantastic support.  No one ever asks me why I don’t just go into investment banking or trading. 

In fact, most of my friends aren’t even in finance at all.  Some of my closest friends are a magazine publisher, a lawyer, and a producer for televised mixed martial arts.  I play on a softball team with two PR folks, a clinical psychologist, a chocolate retailer, two IT guys, another lawyer, a teacher, a media buyer, and oh yeah, one guy in finance.  Most of the volunteers at the kayaking program I participate in don’t even have regular 9–5 jobs.  The other day, I was out on the dock with a guy that resells guitars and plays in a band, a former non-profit exec, a public health researcher, and another IT guy.   And these people don’t all live in big luxury apartment buildings in midtown.  They live with roommates in Astoria, in studios on the Lower East Side…  just scraping by but still loving every minute of it.  And we haven’t even mentioned all the actors and actresses.  Surely they’re not in it for the money, right?

So, the idea that NYC is just all about the money is just ridiculous…. just as ridiculous as this:

“One sign of a city's potential as a technology center is the number of restaurants that still require jackets for men. According to Zagat's there are none in San Francisco, LA, Boston, or Seattle, 4 in DC, 6 in Chicago, 8 in London, 13 in New York, and 20 in Paris.”

How about we make the list “number of restaurants that don’t require jackets for men”?  I have a feeling NYC would lead that list, seeing as the total number of restaurants in NYC minus 13 is probably more than SF and Boston combined.  Is this really how Paul thinks his YCombinator startups should make decisions on where to build their business?  By restaurants with jacket requirements?

But rather than argue about whose city is better, which is similar to the arugument about what language to code in, go with what you know.  Generalizations will get you nowhere.  It would have made no sense for me to build Path 101 anywhere else but NYC, because my network is here.  I found a great technical co-founder, two amazing developers whose experience could not be any more well-suited to their tasks, and a slew of supportive angels.  That doesn’t mean all this stuff comes in a box if you move your startup here, but if you can say the same thing about your neck of the woods, be it Louisville, Miami, the Valley or Cambridge, stay put, keep your head down, and build like the dickens.  Your city is what you make of it and how you build your network, not what the pundits tell you it is. 

Seth posted a great networking post that I could have written myself...    In fact, I pretty much did write all that in my failed attempt to write a book for college freshmen.  However, he's written it a lot more concisely worded (I tend to be overly verbose, if you haven't noticed) and tailored it to the VC world.

I'll add a few notes directly to his, and then I'd like to include a snippet from the book I was writing about what exactly you want to get accomplished when you sit down and have a networking meeting or call--the information you want to walk out with.

One thing I would add on to #5 and #6 is using Pubsub.  If you meet someone that you'd like to go the extra mile with in terms of staying in touch, create a Pubsub feed via RSS that includes their name, the name of their company, and their industry... perhaps even a competitor or two.  This way, you get relevent news that you can share with them up to the minute and comment on.  That will keep you current enough to be interesting.  There's nothing worse than sending stale articles to people in an effort to try and impress them.  (Well, I suppose there are lots of worse things, but its just an expression...)   

Ok, so here's what I wrote about what you should be talking about in a networking call or meeting, and its written to be relevent across industries. 

You might think that questions like "What do you do?" are too obvious and the kind of thing that you should have figured out before the interview, but to be honest, I don't think that outsiders really know what a firm does until someone inside explains it to them.  Now, obviously, you don't want to come to us and say, "What is Union Square Ventures?", but perhaps you could still ask stuff like, "So I researched about what your investment strategy was and I see that you invest in IT-enabled services, but can you give me a little more detail on what kinds of companies fit into that catagory as you define it?  How did you come to the conclusion that was the best place to invest?"

Ok, so its much wordier, but that's essentially the "What do you do?" question.  You just can't ask "What do you do" because you're supposed to have researched this beforehand.  Truth is, its really hard to research exactly what someone does unless you're a very experienced person in their industry, and since we're talking about networking as a younger person starting out, I don't think some improved verson of "What do you do?" is such a bad thing.

Ok, so here's the passage from my book that didn't go anywhere...

"Ok, so no coming out and asking for a job upfront. We’re just doing research at this point, right? So, what do we actually want to know from these people? The four most relevant questions a student can ask networking contacts are:

1. What do you do? The Old Standby. It’s the easiest question to ask and get answered. The key here is that when someone tells you that they are an astrophysicist, you need to make sure you know what that means. Some follow up questions to make sure you have the answers to make sure you understand exactly what someone is doing include:

a. Who do you do that for? (Are they self employed, work for the government, a firm, etc.?)

b. Why would they want that done? Why does it help them? (Of course, don’t ask if the answer is obvious. If someone is a firefighter, don’t ask why the city wants fires put out, lest you come off like a pyromaniac.)

c. Does everyone who does what you do work for the same type of company that you do? (Some lawyers work for law firms, others work for corporations, and because of that, their jobs are somewhat, but not entirely different.)

We’re not interested in only what someone does for a career. Remember that we said our idea of success involves your whole life, and that who you are isn’t simply defined by what you get paid to do for a living. What does your contact do outside of work? Do they have a family, a hobby, or are they involved with a charity or volunteer work? It is important to get a sense of the whole person that you are talking to, not just one facet of their lives.

2. How did you get into that? This question will give you answers about their past, but may uncover some helpful clues that you could use for your future. How they got into what they are doing now basically outlines the steps you might need to take should you be interested in pursuing the field that they are in now. It is also important to understand whether or not they actually planned on getting where they got into, or whether they pretty much fell into it. What seems to happen a lot is that the actual job they do is unexpected, but it often stems from poking around in some related area. This is why the message behind this book is not to start planning, but just to start poking.

3. Where do you think it will lead you? Obviously, no one can predict the future, but most people at least have an idea of where they would like their jobs to lead, or at least whether or not they want it to lead somewhere else. Is this the last stop on the line, or just one of many?

4. Now that you have a sense of the present, past, and future of this person’s self navigation, you need to measure how genuine it is. Maybe this person is at a place in their life that is the exact opposite of where they actually want or intended to be. It is important for you to ask how ideal their situation is and what, if anything, they would change about it, besides the pay, of course.

5. Possibly the most important thing you can ask every contact you speak with is for a recommendation to speak with someone else. This will ensure that your network grows. Whether the recommendation comes from your indication of interest in a particular field, or just your contact’s idea of what you find interesting, trying to get each contact to lead to a new one is a great way to build up your network and increase your chances of coming across something great. Just ask the person if they know of anyone that they think you would be interested in talking to. Keep it open-ended.

Keep in mind that networking is a two way street as well. What you tell them is just as important as what they tell you. By telling people about your interests and your search to find out what it is that you want to do, you accomplish several things. First, you impress people that you are an ambitious, motivated person who is trying to be thoughtful about the direction they set themselves out in. Having people think well of you isn’t such a bad thing, of course. Second, it gets the word out about your interest. Every person you talk to then becomes a scout for you. In the back of their mind is now an alarm set to go off when an opportunity for you comes their way, and the more people you talk to, the wider you cast a net that might catch something that might prove interesting to you.

At this point, for the average freshmen, networking should be all about asking a ton of questions. Yet again, this requires us to throw away antiquated ideas about what’s cool and what isn’t. Remember how, in high school, two minutes before class ended, you’d get all annoyed about that one kid that had to ask just one more question. Well now, asking questions are a sign of intelligence. Smart people ask questions—they know what they don’t know. You’re at college to learn—not just in the classroom, but in every facet of your life. You should be out meeting new and different kinds of people, asking them about where they came from, what they want for themselves, what they value and who they want to be. When you are at the gym, you should ask people to show you new ways to fend off that freshman 15. When you walk by an open door in your dorm and someone has a great inflatable couch, ask them where they got it. Learning off of other people is a great skill to have, and all it takes is a little effort.

So how does this work? Do you just call up everyone in your newly created contact list and rattle off five questions? No, definitely not. First off, unlike a telemarketer, you want to have some consideration for trying not to catch the person at a bad time. Contacting the person beforehand to schedule a second conversation is the best way to go. In general, e-mail is a great icebreaker if you have their e-mail address. I find that when people drop me an e-mail, I can answer it on my own time, and an e-mail will never inconvenience anyone. With a phone call, you never know what they might already be up to when they pick up the phone. Everyone is different, though. You should try and judge it based on your knowledge of the person. Drop someone a call or e-mail just to see if they might be willing to answer a few questions about their career and when it might be convenient for them to talk. Never send anyone questions. You want to actually speak with these people, because that forms a better connection. When you have a good conversation with someone, as we said before, it builds a real relationship. When you e-mail questions, it becomes more of a one-way relationship about what they can get you.

Setting up a time to talk in the future also gives the person an opportunity to get mentally prepared for what they might talk to you about. Even if you don’t give them the questions beforehand, knowing that they will speak with you about what they do will probably cause them to do a little thinking about it beforehand.

Lawsuits: Sxip mauling investors in Vancouver's Silicon Forest

Sxip Identity, a Vancouver-based startup that's built a tool for porting your Web identity across sites, may have hustled investors out of $370,000 by misrepresenting acquisition efforts by tech titans Google and Yahoo. Founder, CEO and president Dick Hardt (no joke) now says the company is insolvent, and has no plans to honor the convertible bridge notes which were to revert to cash or equity upon sale or additional investment in the company. Where did the money go?

Well, Sxip Identity apparently owes Sxip Networks, also founded by Hardt, $4.7 million — and owes Hardt $275,000. The angel investors have filed suit, alleging that Hardt never disclosed the existence of the other company, and that the arrangement puts Hardt in a position to recoup money from the company before other investors do.

Well, I guess now we know.

1) Our hours are really flexible. We can meet up anytime between 11PM and 8AM. Sleep can always be rescheduled.
2) We will never come home and complain about our boss.
3) We'll pay for all our dates the old fashioned way. (Old fashioned=Circa 1999...with worthless stock options)
4) You can tell all your friends that you're dating a CEO who runs their own company. You can leave out the fact that the CEO is also the secretary, the janitor, middle management, and a web design intern.
5) Some of us have millions of dollars in the bank. Of course, it belongs to our investors, but still...it's in the bank.
6) You get to be a beta tester of the next Google or Facebook.
7) We're good at teamwork. We have to be...not all of us can code.
8) We're not afraid of commitment. In fact, let's move in together... you know, economies of scale and all.
9) Your place is closer to my office and has more bandwidth. Do you mind if I just leave this server here? Really? Is it loud? I never really noticed.
10) Your parents will just love us... They're accredited investors, right?

Bonus: Passion: We haz it.

Dan Farber suggests that Twitter should just charge a subscription fee as a business model.

"Much of what gets sent via Twitter is a form of self-advertising. If you like Twitter so much, how about paying $5 a month for the privilege."

I think Dan's got it partially right.  Clearly there are people who use Twitter as self advertising.  The presidential campaigns, Gary Vee, Jason Calacanis...    with thousands of followers, many of whom are also influentials themselves with hundreds of thousands, if not millions, of blog and social network eyeballs as a group, are clearly getting a lot more tangible value out of Twitter than someone who uses it to share with 6 friends.  I think it's important to have both sets of users.

The casual users with small networks of friends potentially contribute much more to Twitter, in aggregate, then they get back--so charging them the same fee that Jason Calacanis has to be doesn't make a lot of sense, and would put up an artificially high barrier to growth.  These users contribute a lot of good data--zietgiest data, brand information, or simply good local content that others might be able to leverage off of to create value themselves.  They're not pitching a candidate, product or book, so why charge them?

I think there should be tiered pricing.  What do you think Gary Vee would pay for Twitter if, like Dan suggests, it came with some SLA's and rebates for outages...or rather, what is Twitter worth to Gary?   Given his recent book sales, I'd say that he wouldn't blink at $50/month--or at least he shouldn't.  Neither should Jason, or Obama, CNN, or Zappos.  If you have 5000 followers, that's about a $10/CPM to your message across.  Given the number of Tweets to phones, the engagement level of the users, I'd say that's pretty cheap, actually.  Then we could scale it all the way down to like 300 followers or something at a few bucks a month. 

One piece of advice that sticks with me is to try and hire so that you make yourself irrelevant--the goal being to build a well oiled machine that runs smoothly without you. This as opposed to one that comes to a grinding halt without you involved in every last decision.

One of the early mistakes I made so far was not to be aggressive enough about hiring early on. That put us behind where we wanted to be because it just takes a long time to find great hires--finding the right skills set, personality, timing. It's just a lot of variables.

So, recently, I met a completely amazing person who has the ability to take the business and operations of Path 101 to the next level once we launch in a month. Of course it's earlier than I ever thought I'd think about hiring a business person, but the more I think of it, the better I think it makes our product.

There are a lot of product challenges we will have moving forward: striking a balance between providing objective career information vs. possibly making candidates available for recruiting, incentivizing people to present honest portrayals of themselves in their content and data, not necessarily wht they think will just get themselves hired first... challenges that demand focus, creativity, lots of observation with respect to the product.. These are things that tend to get bumped when rasisng money, working out legal negotiations with partners, recruiting, working up financial and marketing plans... so it stands to reason that a product focused CEO would want to find a great businessperson as soon as possible, right?

I think that a lot of CEO founders have a hesitation around this and they possibly stay as CEO way too long--to the detriment of the business. I'm the opposite. I know exactly what I'm best at--getting out into the flow of conversation, being "outside guy", being creative and reaching out for business development, making connections, evangelizing. Our business prospect thinks it's too early to join... but I'm more concerned with waiting until it's too late.

There's a nice piece in the Times about Yelp and how it has achieved nice growth and a small critical mass by focusing on the fanatics.

They quoted Jeremy Stoppelman:

“We put the community first, the consumer second and businesses third.”

That's paying off for them and it does make you wonder whether or not you can continue to be that way to attract the mainstream audience.

I was thinking about this the other day now that I have an Eee PC.  I'm liking it so far, but the keyboard is definitely maddeningly small.  Still, I'm getting better at it.  Anyway, one thing I'd really like on it is the ability to read feeds offline.  I currently use Newsgator products to read feeds--both Feeddemon and Newsgator Mobile.  I love the syncing capability.

But unfortunately, Newsgator doesn't have a Linux product.  It does, however have an API into their syncing infrastructure.  However, without a Linux product in the first place, most of the people I know that are using Newsgator are corporate types.  Newsgator Go!, their mobile product, is for Blackberry and Win Mobile.

With no Linux client and no iPhone app, what are the chances that the developer community is going to care enough about their product in the first place to develop on top of their syncing api.  Developers tend to build things to solve problems for themselves.  Not surprisingly, NO ONE has built a Linux RSS desktop client on top of their API.  Even a Thunderbird plugin would be nice, b/c Thunderbird can handle RSS feeds and it works in Linux.  So far, nada, zilch. 

Salesforce has the same problem.  Salesforce has no Thunderbird plugin because they say it's not a big enough chunk of their potential audience to make a business case for.  Perhaps, but think about the particular audience they're missing.  If you're not trying to reach out to the group of people who have rid themselves of Outlook in favor of an open source e-mail client, you're really missing out on a potentially passionate, creative, and innovative userbase.   If you're a platform company like Salesforce, you need those folks to stay on the cutting edge. 

So when you're building, the geeks might never get you to profitability or critical mass, but don't underestimate their importance in your community, especially if you're trying to get people to develop on top of and around you.

When I was a freshman in college, I went to my school's club fair.  I like the idea of helping change this country for the better, so I checked out the school's political clubs--the young democrats and the young republicans.  I had visceral reactions to both because it seemed like they were more into politics than they were into progress.

That's how I feel about Hilary Clinton.  She ran a good fight, but she can't win--she doesn't lead in the popular vote, the delegate count, the superdelegate count, or in campaign funding--yet her interest in furthering her political career has gone beyond what's good for the party and what's good for the country.

"Politics for the sake of politics" is kind of what I feel like when I read Chris Messina's post about Data Portability.  Chris is a good guy and working really hard for what he believes in, but complaining about which technologies are featured on the Data Portability front page...   *shivers*...    Makes me totally not want to get involved at all.  It's like arguing whether Dave Winer invented RSS.  As far as I can tell, some combination of Nick Bradbury and Dick Costolo invented RSS, because Feedburner and Feed Demon are the most useful tools I had related to it. 

And I can imagine what those Data Portability meetings are like, too.  Arguing over which standard to adopt, figuring out a way for Google and Facebook not to "own" it all...    You know what, just lock up my data somewhere safe and try not to lose it.  We're talking about data portability, but meanwhile it seems like every other week someone loses my data in a cardboard box full of server tapes.  Monster, Visa...  Who's in charge of protecting my data over in these places?  Courtney Love?

Speaking of music...

Nothin' to do and no where to go-o-oh I wanna be se-DATA-ed.

Most of this open data stuff has been a helluva lot of political and PR posturing, like on who's joining or not joining Data Portability.  One thing I can guarantee is that everyone who joins that workgroup is self-interested and won't agree to anything that doesn't lose them money or positioning.  It feels no better than ClownCo...  oh... wait... Hulu, that's right.  Damn, I liked the original name better.

Face it.  No one cares about the user but the user.  And you know what?  The user doesn't even care about data portability either.   These are people that pay almost a hundred bucks for mobile plans and phones that are years behind the rest of the world.  They pay almost a hundred bucks for crappy television.  They pay another fifty bucks for broadband more fitting of a third world country.   You think they care about syncing up their Facebook friends with their LinkedIn contacts?  Most of 'em, believe it or not, don't even know what LinkedIn is.  You know what they think when they visit the "jail" that is Facebook?

"Oh, look, Mary's single again...   I gotta try to hit that."

"Oh, look how drunk Tommy was... what a funny picture."

"Oh, look, someone threw an electric hamburger at me."

So while you're out there trying to publish and share open standards, Facebook is building a tool that follows many of Scott Heif's 50 Reasons...    It's fun, because people will think they're a loser if they're not on it, because it gets them sex and/or love, etc.

When Microsoft builds something useful that solves a problem for me, I'll use it.  I don't care if it locks me in.   Plaxo used to be spammy and now they build a useful tool, so I'm using it.   Altruism and politics aside, if it's useful, they will come...  and they will come not because it's open or decentralized or because Google doesn't own it.

And while I'm at it, all the open financial publishing standards in the world aren't going to prevent the next big accounting scandal either.

The idea of building competitors to Twitter on the same platform, or redistributing Twitter to multiple players reminds me of the idea that New York City should be rebuilt in Ohio because it would be cheaper. Or perhaps we could distribute a little of New York City in every state of the Union. New York City is what it is because of the people who live and visit there. Building another New York City in Las Vegas doesn’t result in the phenomenon that is New York City. In a very important sense, Twitter is decentralized at its core, it is rhizomatic rather than arborescent.

Go in alone or with a partner?  How do you find and recruit a partner?

Need a business person?  A developer?  Where?  Who?

How do you know if they're the right person?  What do you ask on an interview?

And what do you pay all these people??

I've covered some of these issues in the posts below, but if you'd like to discuss startup hiring issues with a great group of up and coming entrepreneurs, you should definitely come to nextNY's Building the Team Community Conversation.

We'll be discussing, with the help of some great conversation leaders (entrepreneurs, a recruiter, a VC), the ins and outs of startup hiring. 

Please join us!

I pay for Plaxo.  My premium service gets me Windows Mobile sync, which has been great, supposedly gets me LinkedIn sync, which currently doesn't work, and what I found out today is absolutely inadequate customer service by phone.

I was just trying to look up the e-mail of someone I recently connected to in LinkedIn.  It should be in my address book, because I sync LinkedIn to Thunderbird through Plaxo. 

Not so much.

Hmm... I went into Plaxo and there's not even a trace of that LinkedIn sync in my account.  It's not an available feature.  The only place the Plaxo site even has it is on their marketing pages for premium accounts.  So I call up customer service and the best thing they can tell me is "Our engineers are working on it."   I asked them how long I'd gone without this feature.  They had no idea.  That conerns me, because this is one of those things where I'm suspicious that it's more than broken--it may be that Plaxo is being blocked by LinkedIn for business reasons.  Either way, it would be nice to be told when a feature I'm paying to use and that I do actively use goes down. 

I told her I wanted a timetable of when this was expected to be fixed.  She had no idea... but she said that someone would get back to me.  I said, "Great, I expect someone to get back to me with a timetable within 24 hours, because this is a feature I'm paying my hard earned money for." 

She said, "Let's hope for the best."

Seriously?

"Hope for the best?"

Where's Stacy from Plaxo when you need her?  Do they have anyone else trolling the blogs?

In her recent "Web 2.0 economy hangs in limbo" post, Caroline McCarthy gives her professional assessment of the frothy atmosphere of startup sponsored parties...

"...young women left and right were posing for photos with snappily-dressed Mashable overlord Pete Cashmore..."

That's Caroline on the right posing with Mr. Cashmore, for the record.  Should have been "Young women like me..."  Hell, why wouldn't you pose with the guy?  Dude's a handsome fellow.    

The article goes on to paint a picture of Web 2.0 companies being in trouble because of the economy, lack of business models, high burn rates.  Sure, every company has to watch their wallets because of the economy, but lightweight companies built on Web 2.0 technologies are uniquely positioned to take advantage of the economic downturn. 

For example, consider how much money the average company would save by switching to a free conference call provider--a provider using the latest technologies whose overhead is so low that they can afford to just make money off of giving the core product away for free and upselling for extra features. 

Plus, people think that ridiculous schwag and wasted sponsorship dollars is limited to startups.  I'm sorry, but has anyone been to a non-tech industry conference lately?  How many people have sponsored bags, pens, squeezey stress shapes from companies already making millions in revenues and far past their venture capital burning days. 

Perhaps my friend Caroline needs to spend more time at Ruby, PHP, MySQL, etc. users meetup, where developers are building great gamechanging applications instead of going to all the big flashy sponsored parties before making a generalization on the economic prospects of Web 2.0.  Not all of us are handing out light sabres.

I've written before about Web 2.0 Whac-a-mole--the tendency for interesting, lightly funded or bootstrapped startups to get bought out by bigger companies and then to disappear into innovation oblivion.  It's really unfortunate, because a lot of them had the potential to be very disruptive, but instead had their red Swingline staplers taken away from them in exchange for some nice payouts to first time entrepreneurs who still owned a majority of their companies. 

del.icio.us never became the people powered search competitor to Google.  MyBlogLog never became a distributed social network across the web.  Of course, nothing against those founders--it's difficult to turn down a bird in the hand, but certainly it seems like the idea of using their parent company's resources and reach to really make a bigger impact than they could have done alone hasn't seem to play out.  Just ask the Tickle folks, who's $70 million baby bought by Monster died a slow 4 year death.

So when I heard that Microsoft was going to buy Xobni, I was pissed.  That would have sent the chances of their ever being a Thunderbird plugin down to about zero.  Small remnants of the service would have maybe made it into Outlook 2015, long after the frustrated founders left the clutches of their Redmond overlords.  If you're long e-mail as the gateway to a smarter social graph, this was not an acquisition you wanted to see happen.

Seems like founders Adam Smith and Matt Brezina thought the same thing and so they walked away from the acquisition.  Fantastic!  Good for you guys!  At the end of the day, money's great, but I think they realized they have a great opportunity here to be something a lot bigger... why not take a shot?  They're obviously smart guys capable of building interesting products, so it's not like this is the only potential for money they'll ever have.  It's not like two talented developers are ever going to wind up homeless.  I applaud their interest in doing something bigger and look forward to being able to use their tools on either Thunderbird or gmail.