Anand Rajaraman, co-founder of Lightspeed portfolio company Kosmix, posts about how to stop email overload and break silos using wikis, blogs, and IM.

We hit the email wall at my company Kosmix recently. When we were less than 30 people, managing by email worked reasonably well. The team was small enough that everyone knew what everyone else was doing. Frequent hallway conversations reinforced relationships. However, once we crossed the 30-person mark, we noticed problems creeping in. We started hearing complaints of email overload and too many meetings. And despite the email overload and too many meetings, people still felt that there was a communication problem and a lack of visibility across teams and projects. We were straining the limits of email as the sole communications mechanism.

We knew something had to be done. But what? Sri Subramaniam, our head of engineering, proposed a bold restructuring of our internal communications. He led an effort that resulted in us relying less on email and more on wikis, blogs, and instant messaging. Here’s how we use these technologies everyday in running our business.

* Blogs for Status Reports
* The Wiki for Persistent Information
* Instant Messaging for Spontaneous Discussions

The effects of the communication restructuring have been immediate and very visible. They include a lot less email and almost none on weekends; better communication among people; and 360 degree visibility for every member of the Kosmix team. After we instituted these changes, everyone on the team feels more productive, more knowledgeable about the company, has more spare time to spend on things outside of work.

Anand goes into detail as to how blogs, wikis and IM are used by all employees, and how this has streamlined the communications in the company. I highly recommend reading the whole thing.

Monitor110 recently shut down after raising $20m over three rounds. One of the co-founders wrote a portmortem of Monitor110, highlighting 7 mistakes that the company made:

1. The lack of a single, “the buck stops here” leader until too late in the game
2. No separation between the technology organization and the product organization
3. Too much PR, too early
4. Too much money
5. Not close enough to the customer
6. Slow to adapt to market reality
7. Disagreement on strategy both within the Company and with the Board

(found via Brad Feld)

At the other end of the spectrum is a post mortem of a bootstrapped two person startup that shut down last month after building for 1.5 years but not raising any venture capital. This founder’s lessons learned are more tactical, but no less important:

1. If your idea starts with “We’re building a platform to…” and you don’t have a billion dollars in capital, find a new idea. Now.
2. It’s a marathon, but it’s a marathon made of sprints
3. Initial conditions matter. A lot.
4. Developing in a vacuum never works.
5. Beware the chicken and the egg.
6. Prototype any 3rd-party libraries that you’ll be depending upon, before you base your product on them.
7. If you’re doing anything other than building your project and getting users, it’s premature.
8. The product will take longer than you expect. Design for the long-term.
9. People have an incentive not to crush your dreams. Take everything they say with a grain of salt.
10. Know your limitations.

(found via Brian Green)

I would recommend entrepreneurs to read both posts.

“Those who cannot remember the past, are condemned to repeat it.” — George Santayana

Rick Segal’s (a VC in Canada) recent post made me smile with recognition:

It’s around 2a in Toronto, midnight here in Edmonton. 260 summaries, plans, ideas, and virtual napkins are staring at me with an evil grin.

It can feel like it is hard to get a VC’s attention. I’d like to think that it isn’t because we’re bad people, and it isn’t because we’re lazy people. But we do get pitched a lot, and the ambient noise level is high. The quote above goes some way to explaining why a VC can’t give an hour to every entrepreneur who wants to meet. So what is the best way to break through the noise?

I agree with Venture Hacks’ advice on what to send an investor when they say:

Summary: An introduction captures an investor’s attention, but a great elevator pitch [executive summary] gets a meeting. The major components of the pitch are traction, product, and team.

Venture hacks goes on to advise on what not to send an investor, and I agree again:

Summary: Don’t send long business plans to investors. Don’t ask for NDAs. Don’t share information that must remain confidential.

So how do you write a good executive summary that can break through the noise? Garage.com has an excellent summary (italics mine):

The job of the executive summary is to sell, not to describe.

The executive summary is often your initial face to a potential investor, so it is critically important that you create the right first impression. Contrary to the advice in articles on the topic, you do not need to explain the entire business plan in 250 words. You need to convey its essence, and its energy. You have about 30 seconds to grab an investor’s interest. You want to be clear and compelling.

Garage.com breaks down the 9 elements of a good executive summary as follows:

1. The Grab
2. The Problem
3. The Solution
4. The Opportunity
5. Your Competitive Advantage
6. The Model
7. The Team
8. The Promise
9. The Ask

If you’re looking to raise capital, I suggest that you read the whole thing.

Paul Kedrosky points to a paper by Hans Hvide asking, “What happens to a startup if the founder dies?“:

I analyze the causal effect of the founder for firms in their infancy by using variation in the occurrence of founder death. Both cross-sectional and within-firm estimates suggest that founder death has only a slight effect on firm performance, as measured by firm survival, profitability, or growth. I interpret this as the founder being substitutable even in a firm’s infancy and that the main function of the founder is to discover new opportunities and setting up the firm rather than managing it.

Or as Paul sums it up:

Hey, What if the Founder Gets Hit By a Bus? Nada

It is hard to reconcile this research with our our investment experience; we have found that strong founding teams matter a great deal. In fact, we specifically include as part of Lightspeed’s stated mission “to partner with exceptional entrepreneurs “.

Digging deeper into the research paper sheds some light into the potential areas of disconnect. Hvide’s research is based solely on a set of 6,800 companies started in Norway between 1996 and 2003. Of these, only 40 were information technology companies where the founder died. These two facts may be two reasons that the conclusions from Hvide’s research are not broadly applicable to the sorts of company in which we typically invest.

At least Hvide’s research gives comfort to VCs who invest in non tech Norwegian startups founded by unhealthy or risk taking entrepreneurs. Unfortunately, or perhaps fortunately, Lighstpeed isn’t such a VC firm!

Bill Morrison, the internet analyst for investment bank ThinkPanmure put out an interesting report today that is worth reading for people in the online media space. He concludes:

1Q08 was, in our opinion, one of the worst fundamental quarters for publicly-traded online media companies in several years. Roughly 66% of the companies we cover missed expectations or lowered their outlook. We believe online media is in the midst of a cyclical downturn, yet 75% of the companies we cover need to accelerate growth to meet the consensus estimates this year. That is highly unlikely given macro headwinds, in our view… Within advertising, we favor names with minimal CPM exposure such as GOOG, RATE, and MCHX.

This sounds gloomy, and is consistent with other recent announcements such as eMarketer lowering their forecasts for 2008 online ad spend and Pubmatic finding lower CPM rates in their latest survey.

It is important to note though that large companies and small companies face very different situations. As Pubmatic notes:

The PubMatic AdPrice Index revealed surprising weakness in monetization for the vast majority of Web sites. Large Web sites fared the worst while small Web sites managed to maintain their monetization rates. eCPMs for large Web sites (more than 100 million page views per month) dropped dramatically by 52 percent from 38 cents in March to 18 cents April. Medium Web sites (1 million to 100 million page views per month) were nearly flat, with monetization dropping from 34 cents in March to 33 cents in April. Small Web sites managed to improve their monetization, increasing from $1.18 in March to $1.29 in April.

EMarketer’s report still projects 23% growth in 2008 online ad spend, and ThinkPanmure notes that growth for the public internet companies is slowing, not stopping.

There is no doubt in my mind that a slowing economy is impacting advertising spend. However, the shift of advertising to follow time spent is continuing to drive growth in online media. The trend is our friend.

Furthermore, for startups, micro issues (such as whether the new sales person in Detroit started in Q2 or Q4) will continue to have far greater impact on making this years revenue goals than any macro factors will. Startups should not look at the woes of the publicly traded online media companies as their own fate.

Andrew Chen has a good post on how to forecast advertising for web startups:

The right way to model out inventory is a number of equations - I’ll pretend that a site has two types of inventory, their “brand” stuff and their “direct response” (aka remnant) inventory:

Brand revenue = # campaigns sold * average campaign size * brand CPM
Direct response revenue = (total impressions - brand impressions) * remnant CPM
Total revenue = Brand + remnant revenue

In an actual forecast, you could get a ton more detail in the brand revenues side, since what you really care about is the # of ad sales people you have, how many campaigns they’re selling per quarter, the size, etc. Again, think of this as an enterprise sell, and treat it as such.

Essentially, he suggests that brand advertising is a function of the size and efficiency of your direct ad sales force (and is demand constrained) while remnant advertising can go to networks and is supply constrained.

As Ed Sim notes about a direct ad sales force:

… many entrepreneurs underestimate the direct capital and management costs necessary to build such a team. In many ways, building a direct ad sales team is similar to building an enterprise sales team. These thoughts may seem quite basic to you but here they are nevertheless. First, don’t ramp up your sales team too quickly until you have a product to sell. That means if you don’t have scale or enough eyeballs you are better off using Google Adsense. If you don’t heed this advice you may quickly burn yourself out of business. Secondly, I know that many startups may not know what kind of ad units to sell but be careful of not having a standard product list or rate sheet when you go out to the market.

This advice can be difficult to follow in a new market where there are no standard product lists, which is why new forms of advertising are hard.

The WSJ recently noted something that developers have known for a long time, that bigger monitors increase productivity:

Researchers at the University of Utah tested how quickly people performed tasks such as editing a document and copying numbers between spreadsheets while using different computer configurations: one with an 18-inch monitor, one with a 24-inch monitor and one with two 20-inch monitors. Their finding: People using the 24-inch screen completed the tasks 52% faster than people who used the 18-inch monitor; people who used the two 20-inch monitors were 44% faster than those with the 18-inch screens.

This got me thinking about other areas where buying “cheap” can be a false economy:

1. Large monitors. As noted above.

2. Comfortable ergonomic chairs. Your team spends most of their working time sitting in these chairs. If they are not comfortable, they won’t be in those chairs, and thus they won’t be working!

3. High Quality Speaker Phones. Conference calls are a part of doing business. If the people on the other end of the line can’t hear all the speakers in the room, you risk losing the nuances of the communication.

4. Experienced Law Firms The big silicon valley law firms are constantly involved with negotiating financings, venture debt, acquisitions and other legal matters on behalf of startups. They know which terms are “market” and not worth fighting over, and which are out of the ordinary. Firms that don’t have the same volume of deal flow often want to fight every point. While their zeal on your behalf is commendable, in the end they usually end up with “market” terms but take longer to get there. That results in higher legal bills for all parties, and greater conflict between partners where it wasn’t necessary.

5. Administrative Assistance. At some point making entries into Quickbooks, figuring out which insurance plan to sign up for and finding the cheapest airfare to LA for that conference become a poor use of founder’s time.

What are some other areas that readers think startups should not skimp on?

I’ve noted in the past that some online and offline distinctions are starting to blur. Some companies are finding that the easiest way to monetize their content is to turn bits into atoms and sell the atoms - people are willing to pay for things in the real world that they would never pay for offline.

There seem to be three major approaches to combining online and offline:

1. Single order custom manufacture

Over the last ten years manufacturing processes and technology have improved to the level where it is now possible to make single items on a custom basis. This has spawned a lot of the convergence in online and offline business models.

There has been the most activity in the market for photo books, including Apple, Shutterfly, Picaboo, LuLu, Blurb, Mypublisher and many others.

Zazzle, Cafepress and Spreadshirt take a similar approach to selling custom printed T-shirts, coffee mugs, mousepads and more.

A more collaborative example is Tribbit. Tribbit mirrors offline behavior by allowing multiple users to build and “sign” a group online card, which can then get printed out and presented to the recipient - in effect a group contributed photobook.

All of these examples are focused on user generated content. But rather than using user content, Tastebook, backed by Conde Nast, lets you choose from an extensive collection of recipes to create a customized cookbook. Techcrunch says:

TasteBook is a service that lets users take their favorite recipes from partner sites (starting with Epicurious) and create printed cookbooks that are delivered to them and/or friends. Users can add their own recipes as well, and customize the book with their name and other information.

2. Small order custom manufacture

Occasionally, one of the problems that can occur with single item custom manufacture is that the processes used for single items can result in lower quality. This is definitely true of T-shirts - many of the custom T-shirt sellers mentioned above have an “iron on” quality to them. The only way to make a high quality T-shirt with a silk screened print at a reasonable cost is make a batch.

Threadless takes this approach to it’s T-shirts. They have done a great job of building a community online, soliciting T-shirt designs, winnowing out the best designs for production through community input, and making batches of these shirts. This way they keep quality up, keep costs under control, and minimize inventory risk by selecting only to make T-shirts that are likely to sell out.

JPG Magazine takes a similar approach to the issues of its magazine. JPG is a physical magazine focused on photography. It solicits all its photos and articles online and its online community helps determine what gets printed. In a world where a new magazine launch can cost $40m before breaking even, JPG got to profitability at vastly smaller scale. A sister magazine focused on travel, Everywhere, has its first publication on Nov 27th.

3. Tying an online experience to an offline purchase

Whereas many of these companies start with an online experience and drive to an offline transaction, Webkinz starts with the offline transaction, and drives to an online experience. They have been able to draw synergies from their online casual immersive world and their physical plush toys and have sold millions of their toys to date. Barbie has had similar success with it’s online casual immersive world Barbie Girls which hit 3 million users in the first 60 days.

Another example is Hidden City, which was recently funded for a a horse themed trading card game aimed at little girls; each card unlocks a digital horse avatar online that girls can play with. The founder was behind the megahit trading card games Pokemon and Magic: The Gathering; he is clearly evolving with the industry as casual gaming moves online.

Conclusion

I expect more innovation in this area of combining online and offline business models. I am actively interested in meeting companies taking this approach. Let me know if you know of more!

The following is a guest blog posting by Laurie Thornton,the principal and co-founder of Radiate PR, a boutique public relations agency representing emerging growth companies in the Silicon Valley and beyond. Radiate is also Lightspeed Venture Partners‘ PR firm.
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While attending the Lightspeed Internet User Acquisition Summit last month, three of Silicon Valley’s most respected journalists – Matt Marshall of VentureBeat, Rebecca Buckman of the Wall Street Journal and Erika Brown of Forbes — offered some insider tips on PR. Whether you’re familiar with the ins-and-outs of the process, most agree that public relations can deliver tangible results: drive significant Web traffic, fuel user acquisition and contribute directly to a company’s bottom-line. Here’s a snapshot of what was shared that afternoon, plus a few more thoughts on the ABCs of publicity, aimed at first-time, do-it-yourself entrepreneurs.

-Know Your Target – Take Careful Aim: Any practitioner will tell you that tailoring a story pitch is essential. It’s well worth the time to thoroughly research the target outlet, understand the readership and know what the specific journalist covers. Sought after reporters receive upwards of 200 pitches a day. You won’t even make the first cut if your story idea isn’t spot-on.

-Implement the 30-Second Rule: The editorial world is saturated, so engaging a journalist at the outset is the hardest part of the job. Make the pitches brief – no more than a few short paragraphs. Too much text is a turn off! Craft your story idea as a well devised teaser and the reporter will be more likely to respond. You’ve got very little time to get their attention, so make it count.

-It’s Not Just About You: The majority of journalists won’t write about Company X’s new product, but they might cover it within the context of a larger category article or trend story. Consider Jaxtr, a VoIP contender. Here’s an opportunity to tell a David vs. Goliath story about how their service stacks up against Skype, the reigning industry behemoth who is generating some negative headlines at the moment. Package a timely story idea about how your company is making its own notable impact, or uniquely competing in the broader market.

-Users Tell it Best: During my firm’s nearly four-year tenure representing LinkedIn, we frequently parlayed user success stories to demonstrate the tangible value of a social network for business – one that could help you land a job, get a trusted referral, etc. With these editorial placements, user sign-ups measurably increased. Then there’s PeerTrainer, a social network for diet and fitness, who utilized astonishing ‘before and after shots’ of a successful user. The compelling story of this woman’s personal journey landed her on the cover of People Magazine, where she directly credited PeerTrainer with her 100-pound weight loss. For both companies, the testimonials proved the most convincing and powerful way to attract and secure new users, and motivate existing ones.

-Patience, My Friends: The PR process can be likened to the sales cycle. Can you imagine your business development guy closing a major deal with a coveted strategic partner with one intro email and a single follow up call? Coverage doesn’t always happen overnight.

-Play Fair, or Don’t Play at All: We expect journalists to be fair, accurate and truthful in their reporting. Conversely, we need to play by the same rules. Always be straightforward and don’t cover up or candy coat the facts. Also, if you ever offer an exclusive – stick to your commitment. Forge reciprocal relationships with journalists. They pay off for both you and the reporters – everyone can win.

-Oh, Yeah — Please Don’t Forget About the Product: A solid product that tracks to its promised claims is a check-box requirement for any successful PR program. Expectations are extremely high, even in the early Beta phase. Budget and bandwidth constraints aside, don’t rush out before a product is adequately tested and refined. The press and other critics will take notice. Not even a really clever PR pro can compensate for an offering that doesn’t deliver. Resist the temptation to simply get your offering out there as quickly as possible before it’s really ready. If you can, take that extra time to make your product shine from day one. The great publicity will follow.

People are asking what a widget is worth, and in particular what a Facebook app is worth. Lance Tokuda, CEO of Rockyou (a Lightspeed company), received a lot of coverage when he told the NY Times that the Superwall app was worth more than $10m.

Despite my previous attempts at building a framework to value a facebook app, I now think it makes little sense to talk in the abstract about what “an app” is worth. It’s better to apply the same principles to think about what a company is worth. A company will have various distribution channels through which it reaches its users; this can include its own website, a Facebook App, a Myspace widget, a distribution deal with AOL, SEM on Google, email virality, and others. Viewed this way, open platforms, and distribution, are opposite sides of the same coin.

In the late 90s, some companies pinned their futures to a single distribution deal with a single portal, and paid up for the privilege. Others, wisely, diversified their dependency on any single channel. A company that defines itself solely as a Facebook app runs the risk of relying on a single distribution channel.

Companies like iLike and Flixster (a Lightspeed company) have built their systems as a single database; their users can access the same data regardless of if they come in from their Facebook app or from their website. As the other social networks open up their platforms, these too will become alternative channels to reach users with the same system. It’s like one kitchen serving multiple restaurants.

On this basis then, we can apply standard mechanisms for valuing a media company, but adding the virality factor that is peculiar to social media:

Value of a social media company

= # of users x value of a user

= # of users x RPM x lifetime “pageviews” generated by user and subsequent invitees

= # of users x RPM x lifetime “pageviews” generated by user x virality factor

= # of users x RPM x “pageviews” per user per month / monthly churn rate x virality factor

(Note that I use the term pageviews loosely - these can include canvas views or any area that the company can put an ad.)

So value goes up as RPM goes up. RPM goes up depending on how targeted your traffic is; whether you’ve got endemic advertisers, demographically targeted users or just broad reach.

Similarly, value goes up as PV/user/month goes up. This argues that companies with high ongoing engagement (ie some aspect of ongoing utility) will be more valuable. Higher engagement often comes with access to the social graph through an API.

Value goes down as monthly churn goes up. One of the factors that reduces churn and increases “stickiness” of a social media site is how much “archive” value is built on top of the site. The more you commit to adding information to an site, the stickier that site will become.

Finally, value goes up as virality goes up. Virality will be different in each distribution channel, so this will need to be evaluated separately, depending on what viral growth modes are open in each social network.

As Myspace, iGoogle/Orkut, Hi5, LinkedIn, Bebo, Tagged and others open up APIs to their platforms, I think the companies that treat each social network as a distribution channel, rather than defining themselves as an application on a single platform, will create the most value.