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Can An Entrepreneur-in-Residence Give A VC That Extra Edge?

interview-with-peter-bance-of-ceres-power

Octopus Ventures, which has been inside a number of early stage tech deals in the UK in recent times, has created a new position of entrepreneur-in-residence and appointed Peter Bance. Bance was formerly Group CEO at fuel cell technology provider, Ceres Power. In this guest post he argues more VCs should have EiRs.

Venture capitalists are great financial engineers. What they don’t know about preference shares probably isn’t worth knowing – and so it should be. Yet it strikes me that this trend for VC houses to be dominated by finance guys is a peculiarly UK and European phenomenon.

In North America, VC firms have a diversity of talent split fairly equally across finance, entrepreneurial and industry backgrounds – i.e. people who can do deals (the easy bit!), people who can build successful businesses and people who can create new markets. If the UK wants to replicate the successes seen in the US, perhaps now is the time to accept that VC houses need to be providing more.

This is why VC firms seriously benefit from embedding entrepreneurial talent on the inside, not just backing top talent externally. Being an entrepreneur is about more than just raising the capital. For example, one particular resource that VCs would do well to have on tap is access to entrepreneurs and individuals who know how to successfully navigate the minefield of dealing with multinational companies. For the growing business it is essential that the CEO can do this well. Entrepreneurs-in-Residence can help VCs fill these gaps in their expertise. EiR is a term which I personally hate, but it does go a long way to describing the role an entrepreneur can play within a VC firm.

The truth is that VCs often don’t know about the realities of running a business. For the long-suffering start-up CEO, it may appear that VCs have no idea what it feels like for a CEO with all the tanks on the battlefield aimed at you when all you’ve got is a slightly worn out slingshot.

Entrepreneurs-in-Residence allow VC houses to provide a wealth of resources, both financial and advisory, which is essential to building a successful business. What does the EiR get out of it? Well I have the luxury of being able to be totally and brutally frank with both the VC and the portfolio CEO and just say like it is. And that freedom will hopefully help the wider team.



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June 18th

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Facebook to Marketers, It’s Time for a Click to Action

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Editor’s note: Brian Solis is principal at Altimeter Group, a research-based advisory firm, and the author of “The End of Business As Usual.” You can follow him on Twitter @briansolis.

You Like me…you really Like me. Wait. Maybe you don’t really Like me after all. According to our Facebook engagement metrics, only 1% of you actually react when we post. So, to keep the numbers up, our team posts more often, asks questions, runs polls, curates content, introduces more and more contests, and asks for your help to submit your pics and videos as part of our “user-generated” content campaigns. We measure success by the Likes, comments, shares, the number of conversations, and reach. While the Likes are rising, we’re starting to recognize the pattern…I guess we never really defined why you should “Like” us beyond the initial click. We just took for granted that a Like equated to an opt-in.

This general scenario is more common than you may think. That’s all about to change however. Marketers must now rethink their Facebook strategy to define click paths and results. As Josh Constine recently reported, Facebook is now giving advertisers access to its API to improve post-click actions. In his post, Constine walks through a series of various scenarios for brands, developers and also local businesses to take advantage of the new Ads API. Here, we’ll talk more about how to start with strategy.

With the updated Ads API, advertisers must now think beyond the “Like.” Facebook’s Ads API will allow advertisers to present ads most likely to take specific post-click action such as content sharing, in-app purchases, Facebook Offers, among a list of other actions (see below). In the great pursuit of ROI, Facebook is also taking a lot of the guesswork out of ad campaign development and deployment to enhance desired performance. The new improvements give Facebook advertisers an unprecedented opportunity to connect with specific market segments based on intelligence to introduce more informed campaigns that trigger relevant clicks, conversions, and return.

What does “more informed” actually mean? Facebook is studying the behavior of its consumer population and as it does, it will provide deeper insights to brands seeking specific actions, such as those who are more likely to be a virtual good buyer, someone who actively shares content, who attends events, individuals who appreciate deals and offers. Over time, ads can be optimized for audiences based on this behavior as well. As such, brands must not only compete for attention and clicks, but also context and relevance based on behavior and preferences.

For brands and agencies, advertising based on keywords is no longer good enough. Now that you have a better shot at reaching the right people based on behavior, advertisers must now also become architects of experiences and outcomes.

Now advertisers can specifically optimize for…

1. People talking about this page
2. Page likes
3. Page post likes
4. Page post comments
5. Page post shares
6. @ mentions
7. Check-ins
8. Photo tags
9. Offers shared
10. Offers claimed
11. App installs
12. App used
13. Credit spend events (number of times someone uses credits in the app)
14. Credit spend amount (value of credits that were spent in the app)
15. Number of RSVPs

This is a click to action…

Designing campaigns now require brands and advertisers to think about the “click to action” they want to encourage. I refer to this as the A.R.T. of Engagement, where brands intentionally design campaigns to provoke relevant actions, reactions, and transactions. To take advantage of Facebook’s API, brands must now employ sophisticated advertising approaches that combine segment and contextual research, segment-specific strategies, app and channel development for each approach, UX, creative design, and real-time conversion metrics, review and optimization.

It’s more than Likes or forcing people through Like-gated apps or campaigns. Now it’s about performance and conversion science where…

1) Contextually relevant content appears in front of qualified and desirable audiences that…

2) Triggers a defined, useful action that…

3) Leads to optimized click paths that result in material content or activity, which then…

4) Motivates conversions to preferred outcomes and…

5) Delivers a more integrated, consistent, and efficient experience.

To engage more effectively through Facebook’s social advertising platform requires that all strategies and campaigns commence with a stated purpose. I believe that the best way to outline these scenarios is to begin with the end in mind and work backwards from there. By starting with the end in mind, the ability to research desired behavior and who to reach as a result becomes incredibly clear…and also inspiring.

The dimensions of engagement you’ll need to define are 1) what are you trying to accomplish, 2) what the experience looks/feels like, 3) what benefits you’ll offer and what they mean to the people you’re trying to reach, 4) the desirable outcomes you wish to measure, 5) How people feel as a result of the A.R.T. experiences you evoke, and 6) What the experience will look like in the most prominent channels of your connected customers.

This is why you’re now an architect of experiences and outcomes. It takes vision. It takes design. It takes measurement and optimization. The A.R.T. of Engagement is realized through a Social Experience Framework that starts with intentions and ends with resulting sentiment…not just the outcome.

There’s an old saying, “it’s not the gift that counts, it’s the thought behind it.” The same is true for social advertising, marketing and well, business overall. Intentions count for everything. Therefore your intentions must be realized as experiences where technology serves as the enabler to creatively and contextually engage to create experiences that meet or exceed expectations and ultimately inspire desirable outcomes.



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May 8th

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Strategic Healthcare Investors’ Investment Thesis

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Editor’s note: Dave Chase is the CEO of Avado.com, a patient portal & relationship management company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.

This is the second part in a two-part series on strategic investors in healthcare.

Healthcare IT departments have focused much of their attention on the $19 billion portion of the stimulus bill that is providing billions of subsidies for the adoption of electronic health records. While this is logical given the available money, it is paying for health IT systems optimized for the “do more, bill more” model of reimbursement that is rapidly being replaced by a value and outcomes based – a 180 shift in focus.

It’s hard to argue with modernizing the record-keeping in healthcare that isn’t far beyond how medicine was recorded in the time of Hippocrates. Thousands of lives are saved as a result of this modernization (e.g., avoiding frequent, deadly prescription errors). On the other hand, most companies benefiting from the stimulus have two massive gaps that will need to be addressed for health systems to thrive in the new environment they are facing.

  1. The core of the legacy healthIT systems was optimizing the reimbursement model where the “patient” isn’t much more than a vessel for billing codes. For entirely rational reasons given the legacy reimbursement model, their success was measured by their ability to get as big of a bill as possible out as fast as possible. The shift to a value and outcome based model of reimbursement literally flips provider incentives on their head (e.g., hospital readmissions are penalized rather than rewarded).
  2. These systems were designed for a static healthcare system with rigid technology architecture not known for its nimbleness. There is one area of consensus about the future of the U.S. healthcare system — it’s destined to go through radical transformation. Nimble systems will be required to respond to a rapidly changing landscape.

Filling these gaps present an opportunity for investors of all stripes — particularly strategic investors such as those associated with health systems and pharmaceutical companies. It is becoming crystal clear to healthcare providers that what they thought was going to be their 100% solution is really best optimized for just 25% of where healthcare money is spent (hospital-based care). Critically, 75% of healthcare spend is directed towards chronic disease. Legacy healthIT have their strength in automating internal workflows of hospitals and other clinical settings. In those high intensity settings, healthcare providers make the decisions that drive the patient health outcomes. With chronic disease, it’s an entirely different story. The decisions a person (or their family) make drive the health outcomes. For example, does the patient fill a prescription and take it properly (more than half don’t)? Traditional healthIT does virtually nothing to ensure that people make the necessary lifestyle choices to optimize their health.

“Getting patients to adopt healthy behaviors represents a tremendous economic opportunity for life sciences companies and health care systems.” Ernst & Young Perspectives 2012

Manufacturing vs. Service Orientation – The Difference Between Throwing Rocks or Birds at a Target 

Healthcare providers who have demonstrated the most impressive positive results with challenging patient populations recognize that there are two main care approaches. Many leading hospitals have adopted a manufacturing-based model borrowed from Toyota. In contrast, with chronic disease, a service-based approach is necessary to effect behavioral change. In a manufacturing setting, with enough practice a machine will do what it is intended to do and doesn’t have a mind of its own. However, as anyone who has been in a service-based business knows, human interaction frequently leads to the best outcomes if there is any complexity.

The following is an analogy from Dr. Douglas Eby who is a leader in one of the health systems that has the most impressive results in a very tough environment (click here and see video at the end of the article for more). Think about throwing a rock at a target. Similar to a manufacturing scenario, with enough practice a well trained professional can hone their skills and hit the target most of the time. Now imagine rather than throwing a rock, you are throwing a bird at a target. Perhaps you can impact 10-20% of whether that bird hits the target. However, the other 80-90% is going to be driven by understanding the bird’s motivations. Perhaps putting food or the bird’s babies at the target would be necessary to drive the bird’s behavior.

Like the bird example, doctors push patients toward a desired health target. However, only those healthcare providers that have systems and processes optimized for engaging patients have had significant success with chronic conditions.

Rapid Iteration Imperative  for Disruptive Innovation in Care Delivery

“Necessity is the mother of Invention” Aesop

As highlighted in The Rise of Nimble Medicine , the healthcare providers driving breakthrough results aren’t tweaking an existing model. Rather, they have developed new models that are repeatedly tested and optimized. As one who has implemented traditional healthIT systems at healthcare providers ranging from small rural facilities to large inner-city hospitals, the process is very involved with months of planning before go-live. During that process, there is a boatload of process planning and re-engineering before configuring the system to reflect what has been decided. The process is weighted 80-90% toward pre go-live with 10-20% focused on post go-live to deal with go-live issues and further training.
Contrast that with highly dynamic environments where the pre and post live weighting needs to be flipped on its head (i.e., 20% planning, 80% analyzing, refining, testing, etc.). While some areas of healthcare will be stable, the most critical area to manage is where the greatest costs reside — chronic disease. Best practices have begun to emerge, however one can expect rapid iteration to address the various areas of chronic disease management. Some of the legacy systems such as Epic have strengths in its ability to address different workflows after significant customization (this is why even small to medium sized health systems spend north of $100 million on their implementations. However, healthcare providers report that if they need to reorder workflow, the system has to be reconfigured with significant time and expense involved.

Eric Page of Amplify Health has shared his experience doubling the national average for outcomes related to sleep disorders. Page described their experience as one that involved repeated testing and re-ordering of steps in the process. Changes were made day by day. I expect that rapid iteration will become the norm for the leaders of the next generation of healthcare delivery as they hone their craft.

In a piece for the New Yorker, Dr. Atul Gawande outlined how, early in the 1900s, more than40% of household income went to paying for food and food production consumed roughly half the workforce. Beginning in Texas, a wide array of new methods of food production were tested. After many pilots, tests and information dissemination, food now accounts for 8% of household budgets and 2% of the workforce. As a wide array of small innovations ultimately led to the transformation of farming, so too is a rapidly building wave of innovative new care and payment models leading to similar breakthroughs in healthcare. I call this Nimble Medicine.

Human Centered Design Trumps Procedure Centered Design

“Listen to your patient, he is telling you the diagnosis” William Osler, M.D.

Health systems have begun with modest efforts to weave in patients into the care process. Amazingly, simple secure messaging has been held up as a great breakthrough in medicine. That a technology (email) that has been around for 40 years is held up as a breakthrough, in and of itself, is a statement. I liken the limited efforts to invite the patient into the process to sipping from a muddy puddle of water in the Sahara Desert — it’s a welcome improvement but far from arriving at the promised land. Healthcare organizations that will thrive (not just survive) recognize that a tweak to systems (both healthIT and business process) that were designed around the patient as billing vessel will fail miserably. As we’ve seen in many areas, tweaks to an architecture designed around a different model never succeed in the new paradigm.  If they did, AOL and Yahoo would be the leaders in social media and Siebel would be leader in CRM. Before long, you will see the equivalents of Facebook and Salesforce.com emerge in healthcare.

Healthcare Soon to be Driven by Deflationary Economics

All men are prepared to accomplish the incredible if their ideals are threatened. -Maya Angelou

Behind virtually every business model in healthcare delivery has been an assumption of real estate bubble like perpetual healthcare inflation. It’s not hard to predict that deflationary economics will drive healthcare in the future given the government budget crises from Main Street to DC that are largely driven by healthcare costs. While one expert warns of health care bubble another calls the upcoming period The End of the Third Bubble (PDF). Unsurprisingly, those who thrived after past bubble bursts were those with lower costs structures and systems that were nimble.

The diagram below is one of the drivers for why employers such as IBM have aggressively changed their healthcare buying approach.

Cost-cutting isn’t limited to the government. Why? It is employers who foot most of the ever-expanding healthcare tab and are starting to flex their muscle. For example, IBM has shifted from thinking about healthcare as an employee benefit to a large cost driver that will impact their profitability. IBM recently made a decision as to where to locate 4,000 new hires based on their analysis of where they received the best value from their healthcare expenditure. Consequently, they determined that Dubuque, Iowa was the best location to expand their employment. With wide cost differentials, it’s conceivable that CFOs and CEOs will believe that their fiduciary responsibility to shareholders will necessitate the kind of analysis IBM acted upon. If they don’t, they are liable to get lambasted by Wall Street.


This kind of analysis is a scary prospect for communities that are high cost locations for healthcare. It may shift how communities think about economic development. Having a great ROI for healthcare may be of greater benefit than a tax break. Conversely, communities with expensive healthcare have what amounts to a healthcare “tax” that will push businesses away.
Many health systems operating at a loss or a razor thin margin, may wonder how they can deal with these changes. Smart healthcare providers are taking painful lessons from the failings of another industry that consisted of local monopolies and oligopolies that seemed protected by capital infrastructure barriers to entry — the newspaper industry. The few newspaper organizations that have thrived realized that it can still be profitable to operate on a lower cost structure. With the majority of hospitals operating as non-profit, mission-based organizations, they should have a relatively easier time making the transition. Non-profit organizations don’t have to explain to public markets why a flat or declining top line revenue figure can be a good thing (assuming they get costs optimized for the new normal). As an example, already forward-looking organizations have already bucked conventional wisdom thinking they need to acquire practices to develop an accountable organization. I have seen both non-profit and for-profit health systems recognize it is more capital efficient to create strong physician networks via open software solutions than acquiring practices and mandating a closed system.

The New Normal
Given where most revenue comes for a health system, their optimization has been focused on hospital-based care. Even there, the new reimbursement framework takes into account what happens after a patient leaves the hospital. That is, there will be large and ongoing penalties for hospital re-admissions. In the old world, hospitals have been rewarded when someone was readmitted. Consequently, there was little focus on addressing post discharge patient engagement…until now.

However, the biggest changes are coming with the shift from a reactive to proactive model when it comes to chronic disease management. In the old reimbursement model, health systems waited for someone to present themselves at the hospital and that was viewed as more revenue to add to the coffers. Going forward, health systems will be accountable for people even when they leave the facility, and so will face an entirely new set of information technology demands. It’s why you see some hospitals going around floors with iPads ensuring patients about to leave have a scheduled visit with a doctor after they leave. The healthcare providers understand that is one of the best ways to avoid re-admissions.

To get a feel for the scale of change, you can look at the change from a reactive, hospital-centric model to a proactive, human-centered model that took place in Denmark. These figures were provided by IBM’s Director of Healthcare Transformation that has been actively involved in Denmark as well as leading a large employer coalition actively driving the reimbursement model changes. The following are a few examples from what happened before and after their change in Denmark:

  • Before, 84% of people died at the hospital. Today, 90% die at home which is greatly preferred by most people. This is enabled, in part, by video conferencing, remote monitoring, etc.
  • Before they had 157 hospitals. Today they are down to 21 (with corresponding reductions in hospital days).
  • 80% healthcare encounters are asynchronous which better fits people’s schedules for non-emergent item.

To sum it up, to support the array of new demands, healthtech will need to be human-centric, affordable and nimble. These aren’t the adjectives typically applied to traditional healthIT systems. Just as we have observed the military frequently spending money on capital built for the last war such as aircraft carriers and other slow moving military tools. Over time, the military learned that it was as much or more important to focus on the hearts and minds of those they were trying to work with and that remote intelligence tools have been highly effective at winning battles. When it comes to managing chronic disease, winning the “hearts and minds” of patients and remotely monitoring health are similar skills not factored into systems developed for the legacy reimbursement model.

Therein lies opportunity for healthcare investors to look to innovative approaches from startups experienced in engaging consumers. Strategic investors, in particular, have extremely high motivation as their traditional businesses get disrupted. As we saw with the shift from analog to digital media and landlines to cellular technology, entire new categories of software emerged that trumped tweaks to legacy systems. The early customers and partners of the new categories of software were the ones that were able to manage the industry shift. The shift from the “do more, bill more” reimbursement model to the value and outcome based reimbursement model in an industry larger than any other creates an opportunity strategic investors seek to capitalize upon.



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May 7th

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The MB&F HM3 Goes To The Moon

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No self-respecting gadget lover can deny that MB&F’s very high-end artistic wrist machines are overall cool. Most of us can’t afford them, but items like this certain stir our ambitious sides. Recently MB&F released a new limited version of their Horological Machine Number 3 (HM3) watch that was designed and produced in collaboration with a boutique Finnish watch maker named Stepan Sarpaneva. This isn’t the first time that MB&F (Max Busser & Friends) has collaborated with artists and watch makers on even more limited editions of their already limited watches.

Based on a limited edition version of the HM3 called “The Frog,” (due to the eye-like hour and minute indicator domes), the MoonMachine watch incorporates Sarpaneva’s iconic grimacing moon face (you can hear more about Sarpaneva here) which he uses for his moon phase indicators. The replaced the date disc and can be seen through an open sapphire crystal window over a spinning automatic rotor which powers the mechanical movement. MB&F watches are purposefully avant garde, and for the right people are a blast to wear. There will be three versions of the HM3 MoonMachine watch with each being limited to just 18 pieces. Price is $98,000 each, but they’re small so you should pick up two.



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May 7th

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Think You Deserve To Be Called a CEO?

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Editor’s note: Alexander Haislip is a marketing executive with cloud-based server automation startup ScaleXtreme and the author of Essentials of Venture Capital. Follow him on Twitter @ahaislip.

Congratulations. You’re the CEO of a startup. You’re doing the hardest job in business. You’ve raised money from venture capitalists and turned down better-paying jobs elsewhere. You’ve mastered complicated things such as capitalization tables and common things, such as payroll. You’ve fought with competitors, coworkers, friends and even yourself without losing your way or your wits. You’ve inspired others to work beside you each day to make your dream a reality. I salute you.

Now, everybody else calling himself or herself a CEO—listen up, this is for you: stop it. Just stop calling yourself a CEO.

Stop putting “CEO” on the business cards you printed last week at Moo.com for YourLastName Consulting LLC. Take it off your LinkedIn page. Remove it from the résumé you’re passing around in hopes of getting hired. Self-titling as CEO is an atonal homage to structurally mandated social hierarchies, not a statement of your iconoclastic self-determination.

Maybe it’s generational. Steve Jobs’ early business card read: “Vice President, New Product Development,” in part because he recognized he didn’t have the skills to run the company he wanted to build. At least not yet. Bill Gates went with the classic and somewhat understated “President.” But today’s tech titans have opted for something much more conspicuous. If you were one of the folks to get an early Mark Zuckerberg card, you may remember the supercilious line: “I’m CEO, Bitch.” Way to stay classy, Zuck.

Facebook aside, title inflation is bad for business. Calling yourself the CEO will label you as either an egoist or someone with confidence compensation issues. That will make people less willing to work with you or help you. Taking the top title in a company also suggests a limited vision of what your company can become. Ask yourself: would you still be CEO if it were a $100 billion business or would you require what’s euphemistically called “adult supervision?”

So stop pretending to have attained a title you didn’t earn and start doing what you need to do to get to where you want to be. Here’s how:

Attract Awesome People

Jobs had Wozniak and later, MarkkulaClark had Andreessen. McNeally had Bechtolsheim, Joy and Khosla. A remarkable CEO should be like the moon, illuminated by the reflected light of all the stars he or she has brought into orbit. Awesome people act as accelerants to whatever you’re doing. They push ideas forward, execute with aplomb and challenge you to new heights.

If you can hire, hire. If you can’t hire, bring them into your orbit as advisors, friends and fellow travelers. Get them to invest their creativity and energy.

To get the true benefits of awesome people, focus on diversity. You want to have as many different perspectives on a problem as you possibly can, so bring on the best people from as wide array of backgrounds and from different generations. They’ll learn from each other and the confluence of their experiences will be the basis of company creativity for years to come.

Most importantly, attracting awesome people to your company precludes retreat. You carry too valuable a cargo of energy and confidence invested by others to turn back.

Build an Experience, Not a Product

Eric Ries has put the concept of the minimally viable product (MVP) front and center in the minds of Silicon Valley startups. But this focus is somewhat misguided. Products give you utility and then may be discarded. Products are the one-night stands of business. Experiences give you memories and good experiences will bring you back for more, it engenders a long-term relationship. The best CEOs know this instinctively and do all that they can to create and cultivate an attractive experience for their customers.

Once you’ve got a good experience, cement it with the bond of buying. A funny thing happens when people buy your product: they invest their energy into the choice and will find reasons to justify their action. In the early days of Apple, customers loved their computers because they had to pay a boatload of money for them. They found aspects of the experience they could rave about just to justify their purchase to others.

That price tag is valuable to you too. It focuses the mind tremendously and forces you to deliver a unique and memorable experience of real value. When you offer a product for free, you aren’t forced to justify your existence to customers or show a useful benefit. That’s why we see half a dozen Instagram clones.

A CEO doesn’t market a product to users. A CEO sells an experience to customers.

Learn Finance

If you wanted to be a rock star, you’d have to learn to read music and if you wanted to be an award-winning novelist, you’d have to learn basic grammar. It should not come as a surprise that if you want to be the CEO of a business you should learn finance. Yet we regularly see founders blowing off finance or outsourcing major financial decisions to hired guns.

There’s no secret to learning finance. There are plenty of good books that can take you through the basics of accounting up to the execution of liquidity preferences under preferred stock agreements. Interview friends that have run their own companies, worked in banking or had P&L experience for a division in a larger company. Start using QuickBooks. Today it’s easy to find help online from corporate finance communities such as Proformative.

For startups, there’s one important financial metric that matters more than any other: months left to live given your current burn rate. Real CEOs know this number and manage it religiously.

Define a Big Goal and Take Small Steps

Plenty of wannabe Silicon Valley CEOs have read Jim Collins and will tell you about their BHAG (That’s their Big, Hairy, Audacious Goal). They’ll tell you that they want to revolutionize the datacenter, or change the face of mobile payments, or create a new paradigm for social sharing, or something equally nebulous. That’s great. But it’s the ability to both set that goal and show how you’re going to achieve it that marks a real CEO.

Successful CEOs balance aspirations with operations. They focus on things that can be done today to secure customers and growth over time—not on the title they put on their business cards.



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May 6th

Apple

7 New Educational Startups Founded By Minorities in Tech

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Editor’s note: Wayne Sutton is an Entrepreneur, Advisor and Partner of NewMe Accelerator, a residential technology start-up accelerator/incubator for businesses that are led by under-represented minorities in the technology industry.

One of today’s most challenging yet promising markets is the educational system. If you want to see startups hungry to disrupt an industry, look no further. Founders are trying to solve the problems plaguing our education system: including reconciling student debt, providing students with the skills required to land a job both before and after graduation, and offering the best course material online regardless of age, location and educational level.

Millions of people are headed to the Internet to learn. And now everyone, from professors to entrepreneurs, are looking to launch a platform to solve the problem of a broken traditional educational system  – And many believe that Silicon Valley will have the answers.

If you look at the demographics (high school dropout rates, high unemployment and the number of people taking online courses) you’ll find a common denominator; minorities are leading in three categories. In 2011, only 57 percent of blacks and Latinos graduated from high school, compared to 80 percent of Asians and 78 percent of whites. While data reports that only 1% of tech startups are founded by African Americans, you’ll find a significant number of educational startups founded by minorities (women, Hispanics and African Americans) in the now-increasing 1% of minority tech startups.

So where are all these startups hiding you ask? Well here are seven up-and-coming educational startups founded by minorities that I believe will have an significant impact in the educational space  – not just for minorities but for anyone looking to learn online, current students and teachers alike.

1. UniversityNow
The mission of UniversityNow is to help ensure that affordable, high quality post-secondary education is available to people everywhere. To accomplish this, UniversityNow is building a network of the most affordable and accessible accredited universities in the world, starting with the launch of New Charter University.
Gene Wade, Co-Founder

2. Houlton Institute
Houlton packages courses into credentialed and non-credentialed programs targeting adult learners. By revenue sharing with partnering institutions, partners are able to monetize their expertise. Houlton creates one-of-a-kind online programs from its unique and exclusive partner network, which are disseminated via Houlton’s scalable, personalized, web-based learning platform.
Dennis Robinson and Dan Merritts, Co-Founders

3. Demo Lesson
Demo Lesson is a revolutionary online hiring platform that gives teachers the power to market themselves.
Mandela Schumacher Hodge and Brian Martinez, Co-Founders

4. Qeyno Labs
Qeyno Labs works with local partners and schools to bring technology-enabled career discovery into under-served classrooms using game-like rewards and mentorship from successful professionals.
Kalimah Priforce, Co-Founder

5. StockOfU
StockOfU allows individuals and businesses to buy “shares” of college students in order to help subsidize a student’s education costs.
Ty McDuffie, Founder

6. Pathbrite
Pathbrite delivers next-generation solutions that help students and learners of all ages collect, track and showcase a lifetime of achievement, and recommend pathways for continuous success.
Heather Hiles, Founder and CEO

7. Code Academy
Code Academy is an 11-week program that teaches people how to build web applications.
Neal Sales-Griffin and Mike McGee, Co-Founders

With these seven startups, and many, many more launching shortly, the educational system is ready for disruption. And after that, the real question is “What impact will these educational startups will have on our economy?”  And “Will they prepare students to land qualified jobs after graduation? Or provide them the skills to launch their own businesses?”

Do you see the educational system being changed by these new startups?



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May 6th

Uncategorized

Startups Live & Die by These 5 Street-Smart Laws of Advertising

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Editor’s note: Evan Peelle is a Los Angeles-based marketer with experience in web-based startups and conducting online marketing campaigns, including PPC, mobile, and search marketing.

“Money alone isn’t enough to bring happiness . . . happiness [is] when you’re actually truly ok with losing everything you have.” – Tony Hsieh, Delivering Happiness: A Path to Profits, Passion, and Purpose

Disclaimer: This article’s sole purpose is to address the core principles of advertising in a new and edgy  way. This is not for the faint of heart or those highly sensitive to socially charged public issues. So suck it  up and buckle up. You’re about to be taken to school (of hard knocks). Class is now in session.

Everyday we surge past the homeless never stopping to consider the power they possess to  advertise effectively with no budget(literally). Startups could learn a thing or two from these highly misunderstood band of street-smart entrepreneurs.

Seriously, they ARE testament to the fact that you and I have hard-wiring to market to others in attempts to meet our survival needs(both in business and in life). Carefully observe how these 5 use cases display the 5 levels of advertising power.

Note: You’re probably working at a business right now that’s been founded on one or more of these five principles. Observe carefully.

The Screamer

“The truth isn’t the truth until people believe you, and they can’t believe you if they don’t know what you’re saying, and they can’t know what you’re saying if they don’t listen to you,. . . unless you say things imaginatively, originally, freshly.” - William Bernbach (1911 – 1982), Founder of DDB Int Agency.

The Screamer curses yelling absurdities to get attention. His audience doesn’t understand his message no matter how loud) and they avoid him like the plague. To survive in business it’s essential to have at least ONE clear message. Lack of empathy for prospects could cost us our lunch.

Hype works the same way, it’s divorced from a target audience and falls short of connecting with target audiences and what’s meaningful to them.

The Beggar

“Advertising is a tax for having an unremarkable product.” -Robert Stephens, Founder of the Geek Squad.

Begging is the oldest profession. He’ll get face-to-face asking directly for what he wants. “Change please?”, or the more ambitious, “Got five dollars”. He gets results by asking clearly for what he wants. Though his business is severely limited by the steep investment of time and energy.

It’s easier to receive payment when you can ask clearly and directly… if you ask enough people.

The Cardboard Holder

“Make it simple. Make it memorable. Make it inviting to look at. Make it fun to read.” - Leo Burnett (1891-1971), Advertising Executive, Named New York Times 100 Most Influential Men of the 20th Century.

These guys invented automated advertising. He finds heavy traffic(literally) and posts his message (Ad) for the world to see. The message gets leveraged across 1000’s of eyeballs everyday with little to no effort on his part. As a business using leverage to his benefit. His message appeals to an almost infinite number of people. He’d make a kick-ass Search Engine Marketer.

His strategy is to present clear compelling messages in front of large audiences.

The Street Performer

“Let us prove to the world that good taste, good art, and good writing can be good selling.” - William Bernbach (1911-1982), American advertising creative director.

The street performer presents his talent to a captive audience. He salts the crowd, incites interaction, and gets involvement, making them a part of his own show. Using juggling, strumming, and dancing as sweat equity he demonstrates entertainment value. All the while risking lighting himself on fire (risk liability). As a business he’s a step above, understanding the power of giving value up front and then asking for money after delivering. This keeps them coming back for more, over and over again.

The talent model is one of exhaustive effort yet generates customer loyalty through participation.

The Funnel Builder

“What really decides consumers to buy or not to buy is the content of your advertising, not its form.”- David Ogilvy  (1911-1999), Dubbed The Father of Advertising

These kids were tossing money off the pier. They were playing a game made by a homeless guy. He had made it out of cardboard, cups, and a blanket. People tried to get their money into the various cups ‘winning points’ in hopes to sink one into the elusive jack-pot!

It was a cash(coins) machine(asset), accumulating wealth while he was on the beach getting tan sipping mojitos somewhere. It was a funnel that attracted prospects with a value proposition. A perfect example of a user driven experience (giving the audience tools to play the game.)

Building an automated funnel that generates cash while you’re not around (no labor, low overhead) is the zenith of entrepreneurship. Do this and your golden ticket to financial freedom is guaranteed.

Live Your Own Dream

Does that sound familiar to any of us? The entrepreneur’s dream; raking in dough while sipping margaritas on the beach. Here’s the recipe to turning your startup into an automated advertising cash machine.

  1. Listen to your customer carefully.
  2. Use one clear and direct message to speak to their needs.
  3. Find out where your prospects already are, then place your messages in front of them.
  4. Give value up front. Incentivise them to take action.
  5. Build your product around their secret hopes / desires or fears / frustrations.

Follow these timeless and proven laws of advertising to supercharge your start up, blow past your break even point, and wiggle into profit. Live it up my friends and make an asset that will pay you in your sleep (on the beach).



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May 6th

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Putting Plans to Work: Best Practices for Hackathon Demo Days

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Editor’s note: Erin Tao is a business development associate at Aviary — and, yes, its hackathon organizer. Follow her on Twitter @etaooo.

For anyone who enjoys (or has a knack for) planning, organizing a hackathon is not terribly difficult: it’s a matter of understanding your goals, assessing needs, and figuring out how to bridge the two. Naturally, this is much easier said than done.

The most important part of a hackathon, by far, are the demos. I mean, they’re what make the event worth attending in the first place. Sponsoring companies wouldn’t offer money to anything that didn’t provide exposure. Developers wouldn’t forsake sleep if they couldn’t show an eager audience the hacks they built overnight.

Pulling off demos at Photo Hack Day and Photo Hack Day 2, for example, has proven to be a continuous learning process, with a much more public (and much less forgiving) learning curve. There’s no need to be a n00b, we’ve actually done a lot of the screwing up for you.

Format

Almost every sponsored hackathon will have two sets of presentations: those that kick off the event (for sponsors to introduce developers to their APIs) and those that close it (for hackers to show what they’ve done). Since company demos are the most visible component of the hackathon, ensuring that this portion runs smoothly is key to the event’s success. The caveat: extensive preparation is useful to a certain degree. You can – and absolutely should – do a number of related tasks in advance, but a significant portion of hacker demos require efficient, on-the-fly work that takes place within a short amount of time.

Photo Hack Day 2 was organized almost entirely through three tools: email, spreadsheets, and HackerLeague. How you choose to keep track of everything is up to you, but I’d strongly suggest the following for each set of demos.

Part I – API demos:

  • Keep a company database handy. Any correspondence with a particular company should be labeled and filed away. It wouldn’t hurt to note how up-to-date companies are with their essential obligations, such as a cross-promotional blog post, whether or not they supplied a logo for the website, or when they paid any sponsorship dues. A CRM will help streamline the inbound and day-of workflow, but keeping everything in a consolidated document in a single browser window saves a significant amount of time compared to digging through archives. I’ve included a sample spreadsheet where I organized the relevant information, and left a few examples of notes that I didn’t want to forget. (Note: the template is the same as what I used for both Photo Hack Days.)
  • Encourage presenters to use layman’s terms for sake of efficiency. If hackers are curious, they will approach a company developer and ask questions after a presentation is over. Being overly technical hampers presentation speed.
  • Distribute guidelines on good presentations ahead of time. As a rule of thumb, attendees and developers are generally fond of the following: Cool APIs, funny presentations and no PowerPoint.
  • Establish time limits and follow the schedule. Higher-level sponsors generally demo longer, and with more materials. Giving your headline company five minutes to speak in front of a captive audience with a laptop and projector is ample time; the next tier of sponsorship can have three minutes with a laptop and projector. Non-sponsors are allowed a one-minute pitch with a microphone, and can host non-mandatory demos and workshops during hacking hours instead.

Part II – hack demos:

  • …Clearly establish time limits (yes, it’s important enough to mention twice.) – Unlike sponsors, each team of developers gets an equal amount of time to present. Two minutes is standard and a well-planned presentation can cover the high-level ins and outs of a hack in that much time.
  • Ban PowerPoint if you have to – This is also worth mentioning twice, because too many teams continue to try to use it. It may even be worth an explicit ban. It’s a waste of time and they can’t effectively showcase an app or service’s functionality.
  • If companies are providing their own sponsored prizes, supply a list of hacks (and, if possible, the demo order) that can be filtered by API usage - This enables them to know who to look out for; shareable spreadsheets on Google Docs are perfect for this.
  • When s#*t breaks — and trust me, it will — have multiple spares on hand - During Photo Hack Day 2’s Demo Day, we destroyed General Assembly’s two HDMI and VGA cables (they were taped to the floor underneath the audience chairs, so when people moved around, the cables were yanked from the wall and damaged). So, keep two or three spares of everything to keep the party going: electricity, Wi-Fi, presentation tools, dongles, cables, power strips, extension cords and even a projector! (Pro Tip: keep your receipts!)
  • Prepare any relevant material for the judging panel - Provide all judging criteria ahead of time and make this publicly available for attendees and hackers alike. Provide plenty of writing materials and judging templates (usually a list of hacks; this falls under the category of things you’ll need to create on the fly). Encourage judges to ask questions and push back on developer ideas – for instance, “Why did you do it like x when you could have done it like y?” If hackers can consolidate important development points in ten seconds or less, that will definitely win over technical judges.

To-do on the fly

Remember the aforementioned caveat? This is it, and it’s the trickiest, most stressful portion of the event.

  • Demo order – Consolidate signups into one place. Categorizing demos based on requisite equipment (i.e. live websites, locally-hosted applications, mobile apps), will prevent you from having to scramble to find the appropriate cables / dongles every time a new person comes on deck. Test your platforms thoroughly; you’ll need to be very familiar with the sign-up procedure that your hackers will be relying upon.
  • If you’re using social media to post updates, create incentives for people to follow relevant feeds - During Photo Hack Day 2, we posted most of the updates via Twitter with the #PHD2 hashtag. Everything seemed fine until the demo sign-up process was announced, both over the microphone and via Twitter — Not everyone could hear us, nor were they checking Twitter.

By creating incentives (i.e. sponsor giveaways to those who follow the feed, tweet about the event, or retweet any official posts), you gain a stronger following while making sure that hackers stay in the loop. This translates to a less chaotic process of organizing demos.

  • Voting process – Whether you choose a web or mobile service, it helps to have SMS voting enabled. I say this because (1) I have yet to find a platform that I love to use on mobile browsers, and (2) most Demo Day attendees are not going to bring a laptop with them. Be sure to test it ahead of time to avoid hiccups.
  • Prize ceremony - If there are only official event prizes, the process should be easy enough: emcee as necessary, but allow judges to briefly talk the audience through some of their thoughts before delivering the verdict. For company prizes, be sure representatives know when to be onstage. Keep timeliness and brevity in mind. Feel free to relax now.


Here’s what I still haven’t figured out

Should there be a cap to the number of demos?

This has some very obvious pitfalls, but after four hours of demos, the judges and audience at Photo Hack Day 2 were equally exhausted. This translated to a rushed prize ceremony: it was getting dark, everyone had been at General Assembly since lunch, and hackers were beginning to shut down after a night without sleep.

If judges and attendees are only interested in the high quality hacks, should there be some sort of screening process? The tradeoff for a large turnout is a long Demo Day, and you’d hate to end the event on a poor note (read: tired, grumpy hackers and attendees.)

What alternatives exist to the monotony of demos? Is it worth dividing hack submissions into categories?

After the hackathon (and a much-needed day off), our team broke down the areas where we thought there was room for improvement – and there were plenty. Though the demo tech mishaps were the most glaring, the actual process of demoing needed work.

The consensus was to encourage (and more importantly, reward) creative and entertaining presentations with prizes; they provided a much-needed relief to the spell of monotonous ones. Good demos – especially those that are funny – make the entire afternoon worthwhile. In terms of condensing the block of time required for participants to demo, the jury is still out.

A final note

This is the summary of everything I’ve seen and experienced from the two hackathons I’ve organized, and the three cumulative months I’ve spent planning. There are certainly alternatives to all of these “methods” and a better way of approaching these things is to consider them variables. Trust that you understand the nature of your hackathon well enough to know what will work and what won’t.

Yes, demos are time consuming, and yes, they are stressful, but I absolutely wouldn’t mind doing it all over again. For the developers who appreciate cool APIs, for anyone who loves observing the creative process, and for the many people out there concerned with building community: organizing these type of events is so gosh darn rewarding. Awesome people should meet awesome people, and awesome products beget even more awesome products.

This, in a nutshell, is why we put on hackathons in the first place.



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May 5th

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If Facebook Could Enter China, Here Are Some Of The Hurdles

greatfirewall1

Editor’s note: Henry Fong is CEO of Yodo1. Yodo1 is a market entry specialist and full service technology provider helping Western game developers successfully gain traction in the China mobile games market.

Mark Zuckerberg’s visit to China back in December 2011 created a storm of speculation on whether Facebook was preparing for a full scale entry into the most populous country in the world. Photos of Zuckerberg visiting Sina’s headquarters in Beijing, leaked by a Sina employee and reports of him meeting with other major Chinese Internet companies such as Baidu and Alibaba have further fueled rumors that Facebook is looking for a local partner to facilitate its China entry.

Putting aside the rumors and speculation, there is little doubt that Facebook is looking for a way to enter the China market and the real questions lie not in the “if,” but rather the “how,” “when” and whether Facebook will be able to make a success of their China market entry when countless other western Internet juggernauts have bruised and battered themselves against the Great firewall of China.

License and Registration Number Please…

For Internet companies, the “rules” for playing in the China market are many and varied, the most basic of which includes the acquisition of an ICP (Internet Content Provider) license which only a local Chinese company can obtain. There are many ways and mechanisms via which Western companies can obtain this license, or at least obtain the rights to use it, the most popular of which is in the form of a set of Variable Interest Entity (VIE) agreements and structures. This mechanism is used by most of the local Chinese Internet companies that are listed overseas (hence making them non-local companies) and a good article explaining how VIE’s work in detail can be found here, compliments of the China Accounting Blog.

Besides the ICP, a broad based Social Network platform such as Facebook will require a whole bundle of other licenses based on different core functionality including but not limited to a Network Culture Operation License, which is required for all gaming platform operators. Also needed, an Internet Publication License, a requirement for video and photo sharing services, Payment Service Operator license required for Facebook’s credits service and likely dozens of other licenses from a multitude of different government departments including:

  • General Administration of Press and Publication (GAPP)
  • People’s Bank of China (PBoC)
  • Ministry of Culture of the PRC
  • The Information Office of the State Council of PRC
  • The State Administration of Radio Film and Television
  • The Ministry of Information Industry

To put things into perspective, here’s an example of the licenses that were obtained by a video broadcasting company operating in China and the scope of services provided by them is but a fraction of the services available on the Facebook platform.

Rewriting the Book of China Entry or Same Book Different Chapter?

Facebook’s formidable war chest of cash and equity value from their impending IPO provides alternatives for obtaining the relevant operating licenses through acquisition of local Chinese companies that already have them. However, this seemingly obvious path to a quicker China entry poses many other challenges, and one look at the trail of failed market entries by other leading Western Internet companies certainly paints an unfavorable picture.

To provide perspective, let’s take a look at the China eCommerce space to get a feel of the challenges for leading Western players entering into China. eBay and Amazon have both tried their hand at the buy vs build approach to enter the market thru their respective acquisitions of Eachnet and Joyo.  Amazon’s entry into China though unimpressive, can be categorized as a “success” on relative measures if you compare them against that of eBay, arguably the most high profile and widely published “failed” China entry in the Internet space. After eBay’s 2003 acquisition of EachNet, then the leading B2C provider in China, eBay successfully eroded EachNet’s user base and leadership position into a blip on the radar screen and handed China’s B2C market to Jack Ma’s Taobao. This market has now grown over 100 times in transaction volume since eBay’s initial entry in 2003.

The reasons for eBay’s China failure are many and varied, but there are a number of relevant chapters from “eBay’s book of disasters” that Facebook can learn from in hopes of avoiding a similar fate. Chief among eBay’s fatal errors is that they failed to understand what the Chinese consumer really wanted from a B2C service, focusing instead on replicating their global model that had proven successful in Western markets to the Chinese community who’s shopping behavior, culture, product needs and purchasing power were extremely different to that of their Western counterparts.  Concurrently, Jack Ma launched his B2C offensive with Taobao, a services that provided free listings with content and navigation tailored to the tastes of the local consumer. Today, Taobao is by far the dominant player in the B2C space and processes 79% of China’s online transaction value.

Fight for Past or Fight for the Future?  Some Food for thought for Zuckerberg.

Some would argue that the war for dominance of Social Networking in China has already been fought and won, with major players such as Tencent, Sina and RenRen each claiming a significant slice of the Social Networking market, each leading in terms of specific demographics, features or access methods. The challenge for Facebook is that its broad platform of functionality competes directly and extensively with each of the above existing leaders in the market, though less so with Sina whose primary social asset is the Sina weibo services which is more competitive to a Twitter offering than a Facebook.

Before deciding how Facebook should enter the Chinese market, a more relevant consideration for Zuckerberg is what markets does Facebook want to compete on in China. Given the plethora of regulatory challenges and the steep learning curve that the company is likely to face, it might make more sense for Facebook to choose a new battle ground that has yet to see an entrenched player in the market, but is significant enough that success in this area would provide a significant footprint for Facebook to leverage its other services into the region.

One such market that might make sense for Facebook to target is the market for smartphone services. China already has the largest install base of smartphone handsets in the world with an estimated 100m units and projected doubling of unit shipments by the end of 2012. The battle for this rapidly growing access method has already started with Sina and Tencent duking it out via their respective mobile Weibo (microblogging) services and RenRen’s initiative to expand their traditional Social and gaming services onto the smartphone platforms.  Facebook’s recent acquisition of Instagram provides an opportunity to leverage the app’s popularity among Chinese users as a potential route for a broader Facebook market entry in a way that is relatively non-threatening to Instagram’s Chinese partners such as Sina, whose social features are well integrated into the Chinese version of the app.

At a macro level, the opportunity to dominant China’s smartphone market is HUGE, much bigger than what Instagram can provide today and potentially dwarfing the existing web-based social networking market in the coming years. Facebook and other players in the market have an opportunity against a limited time window to make a significant impact in this space where mobile social networking, smartphone payment methods, gaming and a number of other billion dollar plus markets are still in its infancy. What’s more, the smartphone platform war is an area that Facebook has yet to make a significant impact on in its home markets. The Chinese market can be a great way to experiment with new mobile services and business models quickly and cheaply in a market where there is only upside potential for Facebook.

 



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Contributor

May 5th

Uncategorized

If Facebook Could Enter China, Here Are Some Of The Hurdles

greatfirewall1

Editor’s note: Henry Fong is CEO of Yodo1. Yodo1 is a market entry specialist and full service technology provider helping Western game developers successfully gain traction in the China mobile games market.

Mark Zuckerberg’s visit to China back in December 2011 created a storm of speculation on whether Facebook was preparing for a full scale entry into the most populous country in the world. Photos of Zuckerberg visiting Sina’s headquarters in Beijing, leaked by a Sina employee and reports of him meeting with other major Chinese Internet companies such as Baidu and Alibaba have further fueled rumors that Facebook is looking for a local partner to facilitate its China entry.

Putting aside the rumors and speculation, there is little doubt that Facebook is looking for a way to enter the China market and the real questions lie not in the “if,” but rather the “how,” “when” and whether Facebook will be able to make a success of their China market entry when countless other western Internet juggernauts have bruised and battered themselves against the Great firewall of China.

License and Registration Number Please…

For Internet companies, the “rules” for playing in the China market are many and varied, the most basic of which includes the acquisition of an ICP (Internet Content Provider) license which only a local Chinese company can obtain. There are many ways and mechanisms via which Western companies can obtain this license, or at least obtain the rights to use it, the most popular of which is in the form of a set of Variable Interest Entity (VIE) agreements and structures. This mechanism is used by most of the local Chinese Internet companies that are listed overseas (hence making them non-local companies) and a good article explaining how VIE’s work in detail can be found here, compliments of the China Accounting Blog.

Besides the ICP, a broad based Social Network platform such as Facebook will require a whole bundle of other licenses based on different core functionality including but not limited to a Network Culture Operation License, which is required for all gaming platform operators. Also needed, an Internet Publication License, a requirement for video and photo sharing services, Payment Service Operator license required for Facebook’s credits service and likely dozens of other licenses from a multitude of different government departments including:

  • General Administration of Press and Publication (GAPP)
  • People’s Bank of China (PBoC)
  • Ministry of Culture of the PRC
  • The Information Office of the State Council of PRC
  • The State Administration of Radio Film and Television
  • The Ministry of Information Industry

To put things into perspective, here’s an example of the licenses that were obtained by a video broadcasting company operating in China and the scope of services provided by them is but a fraction of the services available on the Facebook platform.

Rewriting the Book of China Entry or Same Book Different Chapter?

Facebook’s formidable war chest of cash and equity value from their impending IPO provides alternatives for obtaining the relevant operating licenses through acquisition of local Chinese companies that already have them. However, this seemingly obvious path to a quicker China entry poses many other challenges, and one look at the trail of failed market entries by other leading Western Internet companies certainly paints an unfavorable picture.

To provide perspective, let’s take a look at the China eCommerce space to get a feel of the challenges for leading Western players entering into China. eBay and Amazon have both tried their hand at the buy vs build approach to enter the market thru their respective acquisitions of Eachnet and Joyo.  Amazon’s entry into China though unimpressive, can be categorized as a “success” on relative measures if you compare them against that of eBay, arguably the most high profile and widely published “failed” China entry in the Internet space. After eBay’s 2003 acquisition of EachNet, then the leading B2C provider in China, eBay successfully eroded EachNet’s user base and leadership position into a blip on the radar screen and handed China’s B2C market to Jack Ma’s Taobao. This market has now grown over 100 times in transaction volume since eBay’s initial entry in 2003.

The reasons for eBay’s China failure are many and varied, but there are a number of relevant chapters from “eBay’s book of disasters” that Facebook can learn from in hopes of avoiding a similar fate. Chief among eBay’s fatal errors is that they failed to understand what the Chinese consumer really wanted from a B2C service, focusing instead on replicating their global model that had proven successful in Western markets to the Chinese community who’s shopping behavior, culture, product needs and purchasing power were extremely different to that of their Western counterparts.  Concurrently, Jack Ma launched his B2C offensive with Taobao, a services that provided free listings with content and navigation tailored to the tastes of the local consumer. Today, Taobao is by far the dominant player in the B2C space and processes 79% of China’s online transaction value.

Fight for Past or Fight for the Future?  Some Food for thought for Zuckerberg.

Some would argue that the war for dominance of Social Networking in China has already been fought and won, with major players such as Tencent, Sina and RenRen each claiming a significant slice of the Social Networking market, each leading in terms of specific demographics, features or access methods. The challenge for Facebook is that its broad platform of functionality competes directly and extensively with each of the above existing leaders in the market, though less so with Sina whose primary social asset is the Sina weibo services which is more competitive to a Twitter offering than a Facebook.

Before deciding how Facebook should enter the Chinese market, a more relevant consideration for Zuckerberg is what markets does Facebook want to compete on in China. Given the plethora of regulatory challenges and the steep learning curve that the company is likely to face, it might make more sense for Facebook to choose a new battle ground that has yet to see an entrenched player in the market, but is significant enough that success in this area would provide a significant footprint for Facebook to leverage its other services into the region.

One such market that might make sense for Facebook to target is the market for smartphone services. China already has the largest install base of smartphone handsets in the world with an estimated 100m units and projected doubling of unit shipments by the end of 2012. The battle for this rapidly growing access method has already started with Sina and Tencent duking it out via their respective mobile Weibo (microblogging) services and RenRen’s initiative to expand their traditional Social and gaming services onto the smartphone platforms.  Facebook’s recent acquisition of Instagram provides an opportunity to leverage the app’s popularity among Chinese users as a potential route for a broader Facebook market entry in a way that is relatively non-threatening to Instagram’s Chinese partners such as Sina, whose social features are well integrated into the Chinese version of the app.

At a macro level, the opportunity to dominant China’s smartphone market is HUGE, much bigger than what Instagram can provide today and potentially dwarfing the existing web-based social networking market in the coming years. Facebook and other players in the market have an opportunity against a limited time window to make a significant impact in this space where mobile social networking, smartphone payment methods, gaming and a number of other billion dollar plus markets are still in its infancy. What’s more, the smartphone platform war is an area that Facebook has yet to make a significant impact on in its home markets. The Chinese market can be a great way to experiment with new mobile services and business models quickly and cheaply in a market where there is only upside potential for Facebook.

 



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May 5th

Uncategorized
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