The AWS spend of a SaaS side-business

As someone who went through a whole pile of trying and error with Amazon AWS, I strongly recommend reading anything you can on the subject before you start moving your business to the cloud (not even necessarily Amazon, but any vendor), and while you have it running there.  “The AWS spend of a SaaS side-business” is a good one in that category.

Things I wish someone had told me before I started angel investing

Things I wish someone had told me before I started angel investing blog post shares some insight into what it takes to be an angel investor, and how much failure one will probably go through before getting any kind of success.  Like with everything, it takes time, money, and effort to learn the intricacies.

Actually, the needle-in-the-haystack is not quite the right metaphor.  There is a small cadre of people who actually have what it takes to successfully build an NBT, and experienced investors are pretty good at recognizing them.  Because of this, they don’t have trouble raising money.  As I mentioned earlier, one of the reasons people get into angel investing is because they think it’s more fun to be the beggee than the beggor.  But the cool kids don’t beg.  The cool kids — the ones who really know what they’re doing and have the best chances of succeeding — decide who they allow to invest in their companies.  And they want investors who have been around the block, who know what they are doing, who have a thick rolodex of potentially useful contacts, and most importantly, deep enough pockets to do follow-on investments, and thick enough hides not to complain if things go south.

If you want to make money angel investing, you really have to treat it as a full time job, not because it makes you more likely to pick the winners, but because it makes it more likely that the winners will pick you.

If you’re not ready for that, you will be much better off financially buying index funds.

Cyprus : startup visa proposal

CNA shares some interesting news:

A proposal promoting startups visa, aiming to attract entrepreneurs from non-EU countries will be submitted to the next meeting of the Council of Ministers for approval, Cyprus President Nicos Anastasiades has said.

Addressing a graduation ceremony of IDEA, a starup programme co-founded by Bank of Cyprus and CIIM, the President also announced that a proposal from the legal framework for university spinoffs, liking academic research with entrepreneurship will be tabled within the next three months.

“We believe that the Cypriot startup visa will be one of the most competitive and will bring multiple benefits in the medium-term both as regards new jobs as well as promoting innovation and research and the boosting the competitiveness of our economy,” the President said.

Of course, knowing how long things take in this country (especially if the government is involved) and how twisted they get by the implementation time, one shouldn’t hold one’s breath.  But there’s hope, if nothing else…

RethinkDB: why we failed

Startups are born and gone every single day.  Much more often so in technology sector.  Most of these just disappear into the ether.  RethinkDB at least leaves the useful trace of analysis of what happened and why they failed.

When we announced that RethinkDB is shutting down, I promised to write a post-mortem. I took some time to process the experience, and I can now write about it clearly.

In the HN discussion thread people proposed many reasons for why RethinkDB failed, from inexplicable perversity of human nature and clever machinations of MongoDB’s marketing people, to failure to build an experienced go-to-market team, to lack of numeric type support beyond 64-bit float. I aggregated the comments into a list of proposed failure reasons here.

Some of these reasons have a ring of truth to them, but they’re symptoms rather than causes. For example, saying that we failed to monetize is tautological. It doesn’t illuminate the reasons for why we failed.

In hindsight, two things went wrong – we picked a terrible market and optimized the product for the wrong metrics of goodness. Each mistake likely cut RethinkDB’s valuation by one to two orders of magnitude. So if we got either of these right, RethinkDB would have been the size of MongoDB, and if we got both of them right, we eventually could have been the size of Red Hat[1].

Thank you, guys.  There are valuable lessons in there.  And three points, of course:

If you remember anything about this post, remember these:

  • Pick a large market but build for specific users.
  • Learn to recognize the talents you’re missing, then work like hell to get them on your team.
  • Read The Economist religiously. It will make you better faster.

The Three Machines

It’s amazing how well-timed this article is for the things that go on around me right now.  But even if you are not spending most of your days, nights, and weekends building a company at this moment, have a go at it anyway.   Here’s a bit to get you started:

My current hypothesis is that if you are a CEO, focus your organization on the three machines. Product, Customer, and Company. Then, have a direct report own one of them. If you have a sub-scale leadership team (e.g. you are three founders and four other employees), as CEO you can own one, but not more than one. As you get bigger (probably greater than 20 employees), hopefully now you have enough leadership to have one person own each, but recognize that if someone is being ineffective as a leader of one of the machines, you will have to replace them in that role (either by firing them or re-assigning them).

 

Startup Metrics

The $4 billion venture capital firm Andreessen Horowitz is sharing some of the startup metrics that they use (part 1, part 2).  Here they are just for the overview, follow through to the blog posts for details:

  1. Bookings vs. Revenue
  2. Recurring Revenue vs. Total Revenue
  3. Gross Profit
  4. Total Contract Value vs. Annual Contract Value
  5. Life Time Value
  6. Gross Merchandise Value vs. Revenue
  7. Unearned or Deferred Revenue and Billings
  8. Customer Acquisition Cost (Blended vs. Paid, Organic vs. Inorganic)
  9. Active Users
  10. Month-on-Month Growth
  11. Churn
  12. Burn Rate
  13. Downloads
  14. Cumulative Charts vs. Growth Metics
  15. Order of Operations
  16. Total Addressable Market
  17. Annual Recurring Revenue
  18. Average Revenue Per User
  19. Gross Margins
  20. Sell-Through Rate and Inventory Turns
  21. Network Effects
  22. Virality
  23. Economies of Scale
  24. Net Promoter Score
  25. Cohort Analysis
  26. Registered Users
  27. Sources of Traffic
  28. Customer Concentration Risk

There are also some tips and tricks on charts and data presentation, like truncating the Y-axis.  Here is an example:

truncating y-axis

Overall, quite a bit of useful information for analysis of different startups.  No wonder their portfolio is so impressive!

P.S.: Love the creative approach to the domain name as well … a16z.com (16 letters between A and Z in the company name Andreessen Horowitz, minus a space).

Billion dollar club

billion dollar club

The Wall Street Journal compiles a list of venture-back private companies, valued at $1 billion or more.  There’s a table with the list of 120+ companies and an interactive chart to navigate it.

Note: This chart only includes companies that are privately held, have raised money in the past four years and have at least one venture-capital firm as an investor. Excluded from this list are companies that were majority-controlled by an institutional investment firm at one point. Only valuations confirmed by VentureSource or The Journal are included, based on direct investments, not secondary deals.

 

The next tech bubble is about to burst

Joe Kukura predicts the upcoming burst of the next tech bubble in his “The next tech bubble is about to burst“:

My timer for the bursting of this tech bubble currently stands at nine months. That’s when investors and venture capital markets will stop throwing around billions in Monopoly money, companies without any profits will lose their suspiciously optimistic valuations, and startups will crater. Unicorns will die, skies will fall, and parents’ basements will be resettled. We saw this with tech in 2000, with banks in 2008, and according to my Magic 8-Ball, we’re going to see it again very soon.

I don’t really know who he is, but he is linked to a selection of other people saying the same thing, with who I’m very well familiar – Mark Cuban, Andreessen Horowitz, Fred Wilson, and others.