Category Archives: Startup & Venture Capital

Big Companies Can Be Fun & Educating Too

I’ve spent more time in my working career in venture backed startups of less than 100 people than in companies of hundreds.  But for the past few years, I’ve worked in a mature organization of hundreds of employees, positioned in the marketing & technology services business.

One of the invisible badges that people are starting to wear in NYC (similar to Silicon Valley) is a “startup badge.”  The “in” thing to do is to work in a startup.   And there are many good reasons for that of which I won’t go into but on any given day, Charlie, Fred, Chris, Roger, and others are evangelizing (sometimes even myself!).

I’m going to play the contrarian tonight and say that while startups are fun and educational rollercoasters, there are many mature companies here in New York that have great opportunities.  Take a deep breathe and hear me out.

There are many stereotypes of working within a mature organization:

  • Lots of politics
  • Talent gaps (warm body syndrome)
  • Lack of creativity around compensation
  • Slow to move

You get the idea.

First:  do your due diligence and stay away from these.  If you can’t research companies and know how they operate before or during your interview process, you deserve to be in one of the above stereotypical companies.

While these stereotypes are for good reason in many cases, there are many reasons to join a mature organization in your young career, mid career, and/or executive career.

While each career stage has pros/cons and I don’t have the time to go into each and every one of them, I will highlight some things I’ve found over the past 2.5 years to be extremely helpful beyond early stage startups.

  1. Talent:  If you are into reading books, especially non-fiction business books, it’s fairly easy to align yourself with some of the authors you might love.  In the advertising industry it’s especially easy since it seems that every major advertising guru has written a book.  If there is a story/book you love and the person is still working, go work for them, you can learn a lot…
  2. Infrastructure:  Bigger companies generally have the resources to subscribe to services that normal startups can’t.  How many early startups do you know that subscribe to Nielsen, Comscore, MRI, Simmons, etc?  Access to these services can inspire big and new ideas which maybe is what you tackle down the road with a future startup.
  3. Compensation:  Spend less time worrying about if you are getting paid and more time solving strategic and tactical issues and opportunities.  How many pay-periods has your startup missed and what types of issues has this created?
  4. Access to Senior “People”:  The “people” is in quotes as it could mean a lot of different things such as clients, holding company execs, Wall Street, etc.  Big Companies generally have extremely tight relationships with very senior clients and exposure to them to learn about how they think, operate, and make decisions is priceless.
  5. Resource:  If you are in a company who has some free cash flow or wants to invest in a certain project or idea, it’s much easier to pull off in a larger company.

While the 5 reasons above are not bulletproof nor complete, big companies (mature) can provide a great opportunity for many in the advertising, media, and technology ecosystems.  While you don’t have to spend your entire career within a mature entity, there are many reasons to get your feet wet and to dive a little deep which could really benefit any startup you might build.

While startups are sexy, don’t underestimate the power of working for/with a mature entity.

Financial War: The Nimble vs. the Titans

A much smarter man than I said that competing with big companies is much easier than small companies.  Big companies are hard to pivot and change; so they either acquire you (good for investors) or you bring them down.  Actually, he said that today at the TechCrunch Disrupt Conference today in New York City.  His name, Michael Bloomberg.

Bloomberg is a trifecta for this post:  his quote, his background in finance, and his track record as an entrepreneur.

In the office, I’m responsible for digital marketing strategies for a few financial companies (no conflicts) that we’ve all heard of.  But a funny thing is happening on the way to the office.  Thru email and through introductions, I’m being introduced to about a half dozen startups that are tackling the financial sector.

Now is the perfect time.

You do not need to read another rant about Wall Street, as I’ll leave that to more financially-minded folks than myself.

When in a fight, you want to knock your opponent down when he’s hurt.  The bigger they are, the harder they fall.  During a professional boxing match, the fighters are trained to wait/observe for weakness and then attack.

Right now, banks are hurt and they are ginormous.  It’s the perfect time to go after them and attack.

2 financial companies are presenting at the Disrupt conference this week:  Plantly and Betterment (I’m assuming a play off the words “better investment”).  The third made press waves last week and is called Banksimple.  There’s even a fourth that I’m seeing ads for:  Ally Bank.

I don’t know the intricacies of each of their business plans, but they are certainly positioning themselves in a market where the nimble can out maneuver the biggies.  Also, being big these days in finance may not resonate with consumers so well.

This is an area that I’m watching.  If you are part of the senior team at any of these companies (or others), I’d love to chat.

Crunchbase Profile:  Plantly
Crunchbase Profile:  Betterment
Crunchbase Profile:  Banksimple

SEO for Television

A short and sweet thought inspired by Mark Cuban‘s latest posting on Google TV.

If we are finally in the early days of television/digital convergence, then Google is going to want to leverage their PageRank (probably needs a new name) algorithm to help TV viewers find content.

If you are thinking of getting into SEO, figuring out how TV will play a role will be extremely important; after all, there are $70 billion dollars in the US alone of TV advertising.

This is certainly an interesting area for entrepreneurial opportunity, investment, and understanding.

The Personal CTO

I think society is trained to equate CTO (Chief Technology Officer) with the formal corporation.  In many corporations, CTO’s are certainly needed and they play a vital role.

In your personal life (outside the office), who is your CTO?   In many cases, the CTO is yourself or a trusted friend.   Choosing technology is almost a self service ritual around research on sites like cnet, gdgt, google, tekzilla, and others to help you make decisions.  The amount of time you have to research your technology challenge determines what sources you use and the quantity of them.

But what if you didn’t want to use self-service to find technology recommendations/answers?  Can you call Ghostbusters, err, a personal CTO to help you make decisions?  As personal technology expenditures rise, I’d imagine that people would invest more time (and money) into the decision making process.

Two Types of Investing: Important for Entrepreneurs

While I haven’t quite been in the early stage entrepreneurial scene lately from an entrepreneurs point of view, I’ve been working with many early stage startups on both their marketing/go-to-market strategy and corporate strategies (fundraising, biz strategy).

On the way into the city this morning, I was listening to Squawk Box on XM Radio and they had on air Elizabeth Warren who is the chairman of the congressional oversight panel on TARP. You can watch the interview here.

Elizabeth broke down investing into two main categories:  relationship & numbers.  Very simple:  relationship as a category and numbers based as another category.

I’m not an economist and I certainly lack knowledge of the US Government (or any government for that matter) but let me try to explain something that she illustrated.  The government has cut back on relationship lending, or lending to early stage businesses:  loans, credit facilities, etc.  The cut back on early stage lending is DOUBLE the cut to overall lending.  Meaning, if you are a medium or large corporation, you have double better chance of getting money from the government than a early stage company right now.  This hurts us in the long term:  while many of these early stage companies may die, many will go on to be the big corporations tomorrow, and if we’re not funding them today, what will happen tomorrow?

The point of my post is not that of above but rather this:

Relationship lending is pretty much early stage investing.  While I’m taking liberties and equating this to venture capital:  early stage investors really have no numbers to look at… it’s all based on an idea and your relationship (either new or old) with a particular venture investor or angel.  Relationship lending in the public markets is drying up as illustrated above (for now) but it seems that the angel scene and venture capital scene is hot right now.  The most important thing for entrepreneurs to do right now is get out and meet/mingle with as many angels/connectors/venture folks as possible.  Without a relationship, folks like Chris Dixon, Josh Stylman, Ron Conway, and Chris Sacca are not going to take a peek at you.  Relationships are key.

Numbers based investing is where balance sheets are key.  Strong numbers mean great leverage for the company when raising money.  Because of the early stage nature of most venture capital/angel deals, numbers based investing is pretty much rare until you get on to Series B, C, D, and Mezzanine rounds.   The public markets is all about numbers based investing.

So, if you are early stage and your raising money based on relationship lending my word of advice is to get out as MUCH as possible and meet/talk/mingle/get to know people and build a relationship.  It’s not enough to be a “friend” on Facebook.  Earn people’s respect.

The Marketplace Appreciates Obfuscation in Pricing

OpenPricingPricing is defined as the property of having material worth. Pricing though does not dictate individual value, but rather the value of a good for the average.  Let me illustrate by an example:

Sherri walks into CVS to purchase some shampoo for the Herman household.  She sees Pantene for $6.45/bottle or Sunsilk for $9.99/bottle (totally made up numbers).  Sherri has a specific price in mind she wants to pay for Shampoo based on her proprietary valuation system (special needs, bottle shape, accessibility, etc) and based on this specific value, she is able to decide between Pantene and Sunsilk.

Pantene and Sunsilk are offering (pricing) their products at these price levels because they have done a comprehensive supply/demand curve and have optimized where they should price their product for the optimal (not always most) amount of buyers.  This is done through market and competitive research as well, as, historical sales scenario planning data.

In this scenario, the marketplace appreciates pricing obfuscation:  it’s simple for the consumer and it’s simple for the business.  The consumer never sees the profit margins (unless they are purchasing from a public company and even then, how many consumers read financial reports) and the business never knows how much the consumer was really willing to pay (potentially more).  There is not really a tension here – if a product’s price is not adequate for a consumer, they will move onto the next product on their list.

It’s simple.

For the media/advertising world, things are changing.  A once very opaque industry is changing.  Agencies and brands are becoming much more quantitative and are understanding how to value inventory for the first time (I took liberty for “first time”).  Most publishers do not appreciate this – and the obfuscation/opaqueness that once existed that provided healthy margins is dissipating.

Let me reprhase the last sentence:

Most publishers do not appreciate this in the short-term.  Historical obfuscation of pricing/valuation has lead to healthy margins that have existed for years (why do we have 3 Martini lunches? Why are media teams making custom nike sneakers with reps?) for the sell side.  The long-term opportunity is tremendous, if the sell side could get over the initial short-term shock.

Some say that the bigger they are, the harder they fall.  The problem with this is that the major media companies such as Conde Nast (Advance Publications), Hearst Corp, and Tribune are all very large private companies and are potentially going to fall very, very hard.  Note:  I’m not saying that they cannot get back up again… They can.  But they are going to have to fall first.

If/when major media buyers (marketers, agencies grouped together) have the ability to buy on value, not price en mass, this will be a major market shift.  Some of us are here today but when even more of us are here tomorrow, the sell side will become much more comfortable as more dollars move into the industry to satiate cash flow statements.

Since however the market appreciates obfuscation in pricing (it’s just plain simple!) we may never get to this efficient place, but it would help the actual buyers and sellers reap much longer term benefit that short-term margins.

Please comment below to continue the conversation or tweet @dherman76 with replies

New White Paper: Getting Real

Some of my friends over at DeSilva+Phillips a boutique investment bank (also known as MediaBankers) have just released a white paper (links to the PDF) entitled Getting Real.  I am always skeptical about investment bank led white papers (unless they are presentations by Mary Meeker which I love) but these guys pulled off a pretty solid document.

The goal of the paper was to talk about the marketplace of ad exchanges, RTB (real time bidding), and the future of online advertising.  I would say that the paper does a good job of setting up the history and current ecosystem that surrounds ad exchanges but lacks anything tangible about the future of online advertising other than saying that many media channels will become digital so a digital infrastructure today is required to service them, which I’m a big proponent of.

There is about $430MM invested in this ecosystem over the past 3 years which has attracted lots of attention from the press, marketing services companies, and of course, investors.  Figuring a venture capital fund wants to see some sort of liquidity within a funds lifespan (~10 years), the next 5-7 years are going to potentially be very “acquisitive.”  Thus probably the impetus for DeSilva+Phillips to release this document to establish themselves as leaders in this space.

Some of the main highlights of the paper:

  • A nice breakdown of what “ad exchanges” actually are including the great Online Advertising Ecosystem graphic from Matthew S. Goldstein that has been circling around some inner circles.
  • Discussions around Right Media’s decision to focus only on premium inventory
  • A solid definition around DSPs without over-hyping them
  • Accenture, which is not normally considered a player in this space is potentially moving in and could open up a new business within the space (has AdChemy partnership, owns a search bid management platform)
  • “Real-Time Bidding is the glue for melding display-ad marketing and search marketing”
  • Talk about SSP (supply-side platforms)
  • Yahoo vs. Google and the ultimate threat of Google (it is scary)
  • Neutrality around ad exchanges and how it’s not a long or even mid-term option (though I’d argue that is what this industry needs)
  • Adding two more acronyms to the vocabulary:  DBO (Dynamic Media Buying Optimization) and ARM (Audience Relationship Management)

You can download the paper here.

SXSW Opening Morning Thoughts

I’m writing this post about 2.5 hours before the first panel/session kicks off for SXSW 2010.  For those who are not familiar with SXSW, it’s a conference split into three areas: Interactive, Film, and Music.  I’m only down for the first few days of Interactive but in previous years, I’ve participated in the music portion as both the youngest speaker ever (at the time, 2002) for SXSW and was an exhibitor.

The energy was high even before leaving Newark Airport.  @sparkle201 (wife) and I were on a direct flight down to Austin and I’d say of the 144 people on the plane, 50% were heading to the conference.  I ran into Foursquare’s @naveen in the airport who is celebrating their First Birthday at the conference- Foursquare was born a year ago and is now over 500k strong loyal fans.  Happy Birthday guys.

Four hours later, I ran into friend and colleague @jstylman while checking in to the conference and picking up my credentials.  For the first time in a LONG time, I’m not speaking on a panel or keynoting, so I’m flying totally under the radar screen as a listener.  I’ve been longing for this day to just sit back, relax, and soak everything in.

After getting back to the hotel, I digested all that was in the schwag bag and there was a consistent theme:  stickers, QR codes, and most important and utilitarian to me:  cellphone/computer/ipad/kindle screen fiber wipes.  Genius- thank you AOL and Newegg.

bibleThe SXSWi bible is thick.  It lists all the panels/sessions and speakers as well as everything else that is going on.  What stands out immediately is the use of QR codes on every single page.  The company providing the codes is QMCodes and they are exhibiting – I’ll stop by their booth to further my education around them.  I’ve used QR codes in previous ad campaigns but the adoption in the US was rather weak a few years ago.  Can the use of QR codes in the US break out this year?   My immediate thought is that print publishers need to push these hard and how many print publishers are down here at SXSW?

There is even a twitter account setup to help people with QR codes here at SXSW:  @sxswqr

An instant favorite of mine are the products of stickybits.  For those unfamiliar (I was previously) with stickybits, it’s a simple barcode sticker that you can append any type of information to (pics, text, video, etc).  You stick them wherever you want and if people find them, they use their iPod or Android stickybits app to see what’s been virtually appended to it.  A nice way to augment reality.  Downside:  you need the stickybits app – and this may be a serious downside for the company.  I’d love to see a Verizon or AT&T snap up this company and instantly build this reader into the phone’s capabilities.

Looking forward to what starts unfolding over the next week or so – come and follow me on the adventure @dherman76

In The Data Decade, There Should Be Data-Driven Acquisitions

I’ve been immersing myself into the world of data for the past few years at work, reading lots of books, and speaking to many gurus.  What interests me both personally and professionally is the application of large data sets and how to use them to gain a competitive advantage over the competition.  Call it data arbitrage, if you will.

During my commute this morning while driving down the West Side Highway, I was think that if I was a big corporation, which companies would I acquire and why – purely for their data assets.  Here are a few, I’ve obviously not thought of everything, so please chime in- in the comments section.

Also, please note that solid business strategy does not mean that these need to be acquisitions, but potential strategic relationships, tactical biz dev, and partnerships.  I have them listed as acquisitions but understand that not all of them should be.

Record Labels (Warner, EMI, Sony, Universal) acquire Pandora, MOG, and Spotify

I do not think that the labels need to acquire all of the above, but at least one.  The reason?  Why not own the data that shows what listeners are listening to around the world? (Audioscrobbling)  By having these, you can do a few things for the label:  cut down on A&R spend as you can find artists easier, view music consumption trends as you can see the types of music and their intricacies that are popular, and also, help with distribution of music/tours as you can see what artists/genres of music are popular in different market and make sure that the artist visits that region or sells their merch.

Professional Sports teams acquire fantasy sports research companies (The Huddle, FF Today) and/or leagues themselves (i.e. CBS Sports Fantasy Football)

If we believe that the wisdom of the crowd is smarter than a few humans, then why wouldn’t NFL Scouts want access to college football fantasy sports data – i.e. how many “fantasy GM’s” owned certain players, their value, etc.  I’m sure there is some value in all of the data that fantasy sports generate and the professional teams can really benefit as they are paying outrageous salaries to these particular players.

A Hedge Fund Acquires Wikipedia

Wikipedia has tons of research but what is probably most interesting to me (of which I do not have access to) is which articles/topics on Wikipedia are trending.  If someone knew which were the highest read articles and which articles were trending in near-real-time, then investors can make big decisions about where they should place their bets.  If articles about South African soccer balls are trending, then maybe an acquisition/investment can be made within the country of which these queries are being made from.

How about some others?  I know I had a few others in my head but forgot them by the time I sat down to write this.

2010 Predictions & Trends: Technology, Media & Marketing

I created an uber prediction list back in 2007 and it was a hit.  Here are some of the predictions already posted across the net re: technology, media, and marketing – three things I’m very interested in.  If I missed your post and you’d like to be listed, just leave a comment and I’ll add you.