Category Archives: Technology

Why These Frothy Times for Angel Investing are Actually Good

I’m going to play contrarian for a post.  There is so much talk right now of the angel investment scene going bananas from venture capitalists, angel investors, entrepreneurs, journalists, academics, and even lolcats.  I agree that it’s going bananas, but where I don’t agree with many people (and many people who I respect) is that it’s a terrible thing.

I believe it’s actually a good thing.

I’m an occasional angel investor.  Back in ’00-’01, I lost a lot of money in early stage investments.  Too much money.  I vowed never to do early stage financing again.  But I’ve had enough toes in the water over the past 7 years here in New York to understand where we were and where we are now.

If you are an entrepreneur, this is a great time to raise capital.  There is a ton of capital for many different reasons and access to it has never been easier.  It used to be that you had to have a top lawyer who knew people, or was asked to pitch at an angel group.  The web has fundamentally changed this.  I receive 3-4 deals a day on AngelList of companies I’ve never heard of but have demonstrable traction and already have hundreds of thousands committed.

Since there is a capital supply glut, simple economics say that it’s in favor of the entrepreneur.  Valuations are higher than a few years ago which is not in favor of the investor.  You need to put more money to work from an investment standpoint to have the same ownership percentages than just 365 days ago.

So as an entrepreneur, times are great.  If you are on the fence about raising capital, go and do it.  Cost of capital is cheap so take advantage of the opportunity.

As for angel investors, it sucks to be us.  But then again, it’s great to be us.

I spent a few hours in a board meeting today with angel investor and friend Jerry Neumann and he mentioned that the best part of being an angel means that you don’t have to do deals that you don’t want to do.  So lets use some simple logic:  if the deal terms are atrocious right now yet money is getting poured into early stage investments, then who is being ridiculous?  Us, – the angels!  No one is forcing us to put money to work in angel investing.  If the deal terms are so ridiculous, shouldn’t we be looking at other investment vehicles to generate wealth?

So why isn’t the well running dry in the angel investing ecosystem?

These frothy times will weed out the morons, or more importantly, the people who deserve to be weeded out.  Maybe the term moron is way too harsh, but it’ll weed out angels who are either a) way too green, b) investing on ego (I see quite a bit of this), c) people with no sense of simple math.  Is that a bad thing for the angel ecosystem?  Not if you ask me.

So, in 365 days from now, hopefully the froth has died down, angels who have no business being angels run out of capital earmarked for angel investments (but hopefully they saved for their children’s 529s), and more entrepreneurs than ever have startups and are dominating the world.

Quantitative Analysis: Fantasy Football

As most of you know, I’m a huge fantasy football junkie.  I spend a disproportionate amount of my time on Sunday mornings getting my lineups ready based on research I’ve done during the week thru various forms:  XM Radio Fantasy Football Channel, FFLibrarian, Rotowire (Subscription), The Huddle (Subscription), and even simply talking to players.

I stumbled across Numberfire (I hate the name) from a friend of mine and did some research and saw that they were recently written up on TechCrunch.  Numberfire applies data mining and statistical analysis to determine which fantasy football players to sit and/or start each week… they accomplish this by looking at many different data points that affect a players outcome such as the player itself, his team, his competition, and other factors.

They just released their Week 1 analysis of performance and it turns out:

The two key metrics are that I beat both ESPN (59%) and Yahoo! (77%). There’s not much analysis that needs to be derived from that statistic. All of made projections; I was right more often and in the case of Yahoo!, almost embarrassingly so.

The smaller, but equally interesting metrics are the deltas, or the difference between a projection and the actual result. My deltas were lower than both (ie: were more accurate), and the difference between the projections themselves would have caused a 10.8 point difference over Yahoo! and a staggering 16.2 point difference over ESPN.

Not bad.  I’m thinking of converting one of my teams (out of 3) to be based on the numberfire analysis system and seeing how I perform this season.

What I don’t like about numberfire (maybe because I haven’t found it) is that the algorithm they use to score the players is a black box.  I hate black boxes.  Maybe this will change over time.

Needless to say, quantitative analysis can help make decisions, especially when there are lots of data points.  We obviously used this thesis when creating Varick Media Management and we’re seeing similar awesome results.

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Talent Needs: Job Opportunities

One of the most amazing things about starting a business is being able to provide career opportunities for people at all stages of their life.  I’ve listed a few opportunities below and if  you or someone you know is interested in one of these, please do not hesitate to reach out.  The company is Varick Media Management which is the demand side platform and infrastructure for MDC Partners agencies and brands directly.  The team is located at 160 Varick Street in New York City.  I will refer all qualified candidates to the HR coordinator and the respective designee at VMM.

Investment Manager (Top Line Revenue Growth Driver):  Looking for someone with 1-3 years of experience to evangelize and drive top line growth of VMM to agencies and brands.  We are looking for someone who has experience in making the complex very simple; someone who is extremely personable; and who can present themselves well to a group.  Compensation is based off of a package of competitive base salary + performance + benefits.  If you are interested, please contact me.

Chief Marketing Officer (Strategic Sales):  We are looking for someone with 10-25 years in the business who has sold into strategic accounts ($10MM+/yr) for the past 5+ years.  Will be responsible for driving the direction of the Strategic Accounts as well, as, overall company marketing and identity.  Candidate may have an immediate open-to-hire for junior marketing coordinator to help with internal and external marketing efforts.  Responsibilities will be to drive top line revenue growth for the direct to brand channel and will have a new client goal quota.  Re-iterating that this person will be responsible for targeting specific clients (directly) and signing a specific number each year. Compensation is based off of a package of competitive base salary + performance + benefits.  If you are interested, please contact me.  Looking for someone who has played a similar role at former ad agencies, research firms, ad networks, and top tier publishers.

Infographer: We are looking for someone who is a master of data manipulation and visualization.  We’d like to bring someone on board who can tell stories once given a data set.  The ideal candidate will be able to recognize patterns within data, illustrate complex scenarios in simplistic forms, and create visuals that are easy to comprehend.  Visuals will be used both internally and also sent to clients to illustrate a particular problem or solution.  This role with support marketing, account, trading, and investment management.  Compensation is based off of a package of competitive base salary + performance + benefits.  If you are interested, please contact me.   Ideal background would be a mathematician + design.

VP Client Services (title to be figured out): We are looking for someone who wants to run the Client Services team and work closely with Investment Management.  Should have 10+ years experience within market research firms, agency brand planning or account management, or account management at complex advertising technology solution houses (ad networks, exchanges, etc).  Must be unbelievably personable, academic curiosity, a born leader, and detail oriented. If you are interested, please contact me.

Data Driven Platforms: Search & Display

Using data to make better business decisions is nothing new but since 2008, it’s been a very hot topic.  It’s been covered in almost every issue of Advertising Age, a whole new web destination now exists: AdExchanger, and agencies spun up new trading desks that are essentially high powered SWAT teams that combine rich data-sets with media for exceptional results.

Google has built a $154 billion company based on the use of lots of data to make the right decisions for it’s advertisers.  The data sets that Google are using are based off of search queries, which one can argue is one of the most powerful data sets that exist as it’s pure “hand raising.”  Over the past ten years, the big search engines have integrated with search engine marketing platforms such as Marin and Kenshoo to provide access to that marketers and agencies can use these tools to make better decisions which should improve performance and create workflow efficiencies (amongst many other reasons).

The trend we are going to see in 2H2010 and certainly in FY2011 is the emergence of these tools within the display, video, and mobile world and combining SEM with them.  While I can’t speak for any one tool directly due to confidentiality reasons, we are going to see many of these once SEM-only players move upstream to capture additional ad dollars and to use all-data (search+display+video+mobile, etc) to make better decisions.

As illustrated below, agencies such as Efficient Frontier are moving into this space as well, as well as, tools/platforms are integrating into biddable display sources.  These are not the only companies moving into the space but are illustrative of the trend.

What does this mean for the standalone display side platforms?  For the standalone SEM platforms?

An operational hurdle that will have to be addressed within the media agency world is that search and display is generally bought from two separate groups so either a) these groups will need to be combined or b) we need to provide clear roles and rules for each group.  I think option (a) is a much better choice as I’m all for integration.

SEM Platforms

The Conflict Free Ad Exchange

Picture 9Today’s ad exchange landscape is fairly complex but most people know who the big players are:  Google’s AdX, Yahoo!’s RMX, Pubmatic, Adnexus, Admeld’s MeldX, Adsdaq, Adbrite, and maybe, Microsoft AdECN.

With the majority of the above players including the big two (AdX, RMX), there is a major conflict.  They also sell media.

It’s like the Nasdaq also selling/providing liquidity for their shareholders.  Isn’t this a conflict of interest?

I know it’s early days within this space and most people are gravitating to where the money is.  For good reason.   Keeping the lights on and making a market today is better than being out of business in 12 months with only a dream.

When will we see a truly independent ad exchange emerge that can generate enough revenue to actually make it an attractive business for some group to start?  Behind closed doors, we talk about this all the time but everyone would rather be Goldman Sachs than the actual plumbing/exchange itself.  … and potentially for good reason.

I’d like to see a conflict free exchange emerge.  I’m sure many others would to.

Tangentially related posts:

This post was written by Darren Herman (@dherman76) who is the Chief Digital Media Officer of kbs+p/The Media Kitchen and the founder of Varick Media Management.  This post represents personal opinions and views, not necessarily reflected of his employer.

My Communications Preference & Schematic

I decided to do an audit of how I use different communications “devices” and their responsiveness/effectiveness for me.  This is a focus group of one and is purely subjective.

Below is the outline.  Net/net, short and rapid communications are what work for me as evidence by Text Message and Twitter DM’s.  What I also like about them is there is a “wall” around them – i.e. not everyone knows my cell and I can’t receive DM’s from everyone.

Email still ranks #1 for my preference because of the passive nature of it; I don’t respond to everything immediately so the buildup gets significant but with the addition of Sanebox, it should make my life easier.  I do claim “inbox zero” on a weekly basis however.

After reading below, are your preferences similar?  Leave a comment.

**Update** – after reading this over again, I noticed I didn’t include LinkedIn “In Mail” or Facebook messages.  I dislike both :)

Communications Schematic

Short vs. Long Term & Incentives

I’m taking que from Seth Godin and keeping my posts shorter and more succinct and hopefully this will spur more frequent updates.  Let me know your thoughts if you get a chance.

Anyway, I’ve been thinking about the issues around short vs. long term vision and incentives and the interplay between them.  Let me start out by stating my position:  I think we have really screwed this up.

What’s best for the business is relative to the time frame that you are speaking/inferring.  Employees may make really solid short term bets and sacrifice the long-term vs. passing on a great short term oppty to focus on the long term.

What spurs this?  Without any scientific proof or really any research, I’d have to assume that “incentives” play into this.

Let me play this out with a real world example that hits home to many readers of this blog.

At “work,” I’ve created the evolution of the data, targeting and media industry with the belief of demand side platforms and their role out within the big marketing & services holding companies.

In order for DSPs to work across biddable inventory, publishers have to put their inventory into an “exchange” of sorts (I use exchange loosely).  Because many of the exchanges are part of media companies that are also representing inventory and have direct sales team, there is inherent sales conflict.  This sales conflict makes the long-term vision of the industry harder to attain because people go for short-term gains.  The rationale?  I’m assuming that the sales staff of these organizations are incentivized to beat quotas; and looking-out for the long term does not put food on the table today.

So how do we fix long vs. short-term thinking and re-align incentives throughout entire organizations?

Right now, it’s screwed up.

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.

iPad Review: thumbs, screen, interface

iPad I’m probably a few weeks late for this review but thought I’d toss one out into cyberspace anyway.  Let me start out by saying that I absolutely love the vision of Apple and this product has the potential to create a new usage occasion.

To keep it short and brief, here are my thoughts:

Dislikes:  the typing experience.  I think the keyboard on the iPhone is much easier to use then the iPad in terms of spatial portions.  When in portrait mode or even landscape, it just doesn’t feel right when you type.  Not a fan.  Additionally, I think I should have waited until either the 3G version hits the stores or until there is ubiquitous wifi.   The iPad works perfectly in the office (b/c of wifi) but once I take it outside, the functionality becomes limited.

Example:  I have been bringing the iPad onto the train in the morning and evenings during my commute and have been catching up on RSS Feeds.  I haven’t done this in over a year!  While I am excited that I can read the feeds in transit on a great screen, I cannot comment on them nor read anyone else’s comments.  The lack of connectivity gives this iPad more of an iPod Touch feel.

Likes:  ability to take the web with me wherever I want without the hassle of having a laptop.  I’m thinking that if this had a better typing experience, this would be the ideal travel computer for airplanes.  If you do not have a Netbook and are trying to use a full size laptop on airplanes these days, it’s tough because of limited space.  The iPad is a perfect solve for that… but typing again, is a pain.

Overall, I love the experience and the product.  I think the 3G version probably is a better product due to mobility outside of Wifi zones for the person who wants to stay connected.

ESPN Will Lead Live TV into the Next Decade

It’s a bold statement in the title, but I believe that the only traditional television programming to exist in the future are based around live events.  Unless Ticketmaster/Livenation create a live concert channel which I would assume is not out of the realm of possibilities, I think ESPN and it’s associated brothers/sister channels will lead television into the next decade.

It’s just not fun to watch a time shifted sporting event.

Read this article in the Sports Business Journal about ESPN entitled, Industry Wonders Who Will Challenge ESPN?

Another great addition to live television is the use of social media and technology to enhance the experience.  Yes, you can use Hot Potato during an episode of The Hills, but watching a sporting event with updates via tweets/etc is much more enjoyable.  We’ve not even scratched the surface with what is avaialble here, but it’s an area I’m interested in and I’m sure we’ll see lots in the next two years.

In a recent article in Advertising Age, entitled Live TV is Alive as Ever, Boosted by Social Media, author Andrew Hampp talks about the undeniable link between social media buzz and TV ratings.

With a programming schedule dominated by live events, ESPN is in a nice position to win the television war into the next decade.

Note:  the TV war won’t just be on your beautiful 60″ LCD in your living room – it’ll be on multiple screens, including your mobile devices.