Back in July, I wrote a piece called “Why Yelp (…and every single retail establishment) Should Support Foursquare”.  Whitney McNamara referred to as the “post that launched 1000 VCs”, but it was really meant to open up a dialogue between an innovative little company hyperfocused on an important piece of data—when people show up to venues—and a bigger company dependent on relationships with venues. 

Apparently, Yelp misread the most.

In a direct rip off of Foursquare, they added check-in functionality.

As Wired’s John Abell puts it:

“Yelp isn’t even bothering to hide its direct aping of FourSquare with version 4.0.0 of its iPhone app, which allows you to “‘Check-in’ to businesses when you are out to tell your friends where you are.” That’s the exact same language Foursquare uses to encourage users to report their location.”

What that does is to signal to the market that if you have a good idea in local, Yelp will eat you without even so much as giving you the courtesy of reviewing you after.  The hilarious thing is that Yelp actually thinks it can beat Foursquare at its own game—and it is a game, one that founder Dennis Crowley has been thinking about for at least 8 years.  Gaming dynamics is not the core competency of Yelp, so why bother?  In the long history of bigger companies thinking they can beat out the small guy that only thinks about this one thing, the small guy just about always wins.

If I were using the Yelp API for anything important now, I’d be unplugging faster than that gooey scene in the Matrix where the tubes start popping off of Neo.  Good luck hiring anyone innovative, too.  If Yelp proves this startup unfriendly, how long before they start going after its own engineers who undoubtedly have their own side projects?  If I were thinking about a startup or participating in any kind of startup activity, like classes or an incubator, and I worked at Yelp fulltime, I’d go take a look at the assignment of IP rights in my employment contract.  Yelp just showed its true colors:  It’s not a startup anymore, and it will try to crush anyone that gets in its way—Microsoft 90’s style.  That’s not the kind of place innovators tend to like to work.

Undoubtedly, that kind of strategy will actually work against Yelp in today’s ecology.  As we learned from Fred’s post, an innovation friendly approach to working with other companies around it, like Twitter does, can actually create a reach up to 5x that of it’s core service.  Given that the people that actually pay Yelp, venues, only care about reach—by scaring off innovative partners who might want to work with the company, Yelp is doing a disservice to its long term value creation strategy for itself and its customers. 

On top of that, news broke that the company is taking $50 million from Elevation Partners—which includes a secondary offering for long-time employees as well.  That’s key, because it means that the core DNA of the company—the key folks who have been there for years and built it into what it is today, just took money off the table.  Count on that money going to a lot of mortgage down payments and moves to the suburbs—and count on the startup hunger of the little social reviews company that could to fall off the table.  Yelp missed its chance to exit at a nice valuation after six years of hard work.  With money off the table and big company bad behavior in the innovation community, look for the mass exodus soon—I’m sure the recruiters are already circling. 

You can get posts like these e-mailed to you once a week on Mondays by going here.

Am I the only one that thinks that perhaps Steve Jobs will be introducing two Apple tablets next week... made of stone...  from a mountain?  Seems like anything less would be a letdown.

Oh, and btw...  big miss on someone not doing a diversity hack-a-thon on Monday.  That would have been awesomesauce.  Next year!

Tuesday, January 19th
5:00PM Jan #140conf NYC Meetup

An opportunity to discuss the emerging Real-Time Internet and the effects on business. A monthly gathering for friends of #140conf to get together and discuss issues of the day.

RSVP: http://www.meetup.com/140conf/calendar/11989892/

Fashion 2.0 and FashInvest invite the online fashion community to present their startups to the audience and special feedback panel consisting of leading investors in the space.

RSVP: http://www.meetup.com/fashion20/calendar/12126247/

6:30PM Ultra Light Legal Series: January 2010

The Ultra Light Roundtable features a set of short talks on related topics of interest to entrepreneurs and business owners.  This month's talk is about corporate formation, investor visas and and tax accounting for startups.

RSVP: http://www.eventbrite.com/event/498815972
6:30PM Digital Media MBA January '10 Happy Hour w/Foursquare Co-Founder

Please join other MBA grads from top tier schools for our Happy Hour this month when we will be joined by our latest "Featured Guest", Naveen Selvadurai, who is the co-founder of Foursquare, one of the most talked about startups in the mobile social networking industry.

RSVP: http://dmmbajanuary10hh.eventbrite.com/

Wednesday, January 20th
EVENT OF THE WEEK: 7PM Kevin Ryan & Henry Blodget: NYTech -10 +10 @ 92Y Tribecca

The city's enhancement-free version of the "Bash Brothers" talk NYC Tech in 2000, 2010, and 2020... what is changing/what isn't -- what are we willing to bet on, and where are the wildcards.

RSVP:  http://www.meetup.com/BLKNY30/calendar/12226340/


Thursday, January 21st

At this Entrepreneurs Roundtable, we will have pitches from students and first-time entrepreneurs who are being mentored by highly-experienced VCs, investors and entrepreneurs.
Get updated on future Entrepreneurs Roundtable events: http://www.eroundtable.net/

7:00PM: Etsy Speaker Series: Douglas Rushkoff

Douglas Rushkoff is an award-winning writer, documentary filmmaker and scholar. He made the PBS Frontline documentaries Merchants of Cool, The Persuaders, and the upcoming Digital Nationpremiering February 2. 
RSVP: http://www.eventbrite.com/event/529092530

I’ll admit it: Everytime I hear that familiar “Ra-ra, ah-ah ah-ah, Ra-ma ra ma-ma, Ga-ga ooh la-la”, I crank up the volume.  The outlandishly costumed fellow former Upper East Side prep schooler has garnered some serious mass appeal over the last two years.  But what can you attribute Ms. Germanotta’s success to, and moreover, what can the average tech startup learn from it?

Yes…  I’m totally writing this post, and you can’t stop me.  There will be no more stops on this trainwreck, so you’re on until the end of the line.

1) Be remarkable.  People forget what that word actually means—to Two words: bubble dress.  It’s so outlandish that you can’t help but notice.  “Is she really wearing… a bubble dress?”  You want to force your users to stop for a moment and actually take note of something you did for them.  “Was it really that easy?”  “How did they figure that out?”  You want them to turn to the next person and say “Hey, check this out.”  I think too often people add “share on Twitter” buttons to their apps without first adding something that people would actually want to share.  What is it about your service that will make people stop and notice?

2) Repeat the message as often as possible: “Pa-pa-pa-Poker Face”, “Ra-ma ra ma-ma”, “Papa-paparazzi”, “Let’s play a love game, play a love game”…   Many of Gaga’s lyrics and sounds are repeated one right after another—simple, but memorable when listened to over and over again.  Figuring out what your simple message is and repeating it across your site, your marketing copy, PR, and in business development meetings is a way to build brand awareness and clarity.  Too often, I hear from startups all the things they could possibly be instead of hearing the one simple thing they want to be, over and over again.   Your audience looks at a million brand messages a day and to cut through, you can’t be a different thing everytime someone experiences you—or worse yet, everything to everyone.  Sometimes, broken records aren’t so bad.

3) Be relentless.  Startups, like a lot of music acts, are often one hit wonders.  They make a big splash upon launch, everyone fusses over them, and then they have no follow up.  They quickly lose momentum.  On the other hand, just when one Lady Gaga song starts losing steam—BOOM—here comes another tune that you just can’t get out of your head, seemingly once every couple of months.  Startups need to do this more with both their product and their public relations strategy.  You might be the new new thing now, but what’s going to be your next hit?  A big business development deal?  A killer new feature?  Rarely are startups ever made on their launch, and neither are lasting music careers.  You can’t ever rest on your laurels in either game.  Always be raising the bar.

4) Create something bigger than just the individual.  At some point, you go from two developers in an apartment to a real company—and things take on a life of its own that is over and above the individual identities of the founders.  Lady Gaga did this by creating a persona separate from her real self.  I’m pretty sure her family still calls her Stefani, but Gaga has become larger than life.  For a startup, this happens when a company actually starts to act like a real company—getting outside board members to regularly report to, taking strategy and process seriously, maintaining consistent corporate identities.  It also means delegation of duty and responsibility, adherence of procedure.  The earlier the founders of a company act like they’ve created something bigger than themselves, the sooner they actually get there.    

5) Respect success.  Lady Gaga has clearly been influenced by Madonna, Michael Jackson, David Bowie, and others—and she seamlessly and subtlety incorporates little homages to these superstars into her performance.  On the other hand, some stars pick fights with those who have come before them or portray themselves as a replacement instead of recognizing that there’s a reason why others are successful, even if they aren’t always the most innovative.  This is something I wish more startups would do—see what’s working for other companies way more successful than you are and adopt well executed strategies used by others.  Too many times I ask a company about some feature or strategy that the industry leader has, and the startup is quick to dismiss it.  They mistake different for new and better.  It’s as if they think I won’t be interested in an investment unless they’re going to crush the leader feature by feature with a whole new approach.  If you can’t recognize greatness, and build off of it, then you’re going to be unlikely to be great on your own. 

If you need to replicate yourself to attend any of these events, remember:  Don't make a copy of a copy!

Tuesday, January 12th

6:30PM Agile UX at the Economist (Waitlist only)

The Economist online will share their experiences, successes and lessons learned around practicing user-centered design in an Agile development process. This includes user research and testing, Drupal-based surveys, collaborative design tools using Google docs and a Drupal-based site called Good Ideas that supports collaboration around internal bottom-up (grass-roots) innovation.

RSVP for waitlist: http://www.meetup.com/Agile-Experience-Design/calendar/11903449/

Wednesday, January 13th

6PM Digital Somethings: 2010 and Beyond

WHO: @JennyDeluxe (Jenna Wortham, NY Times, Bits Blog), @AdamOstrow (Editor in Chief, Mashable), @DanPatterson (ABC News Radio, Blog), @RSHotel (Blog, Website), @PRNewswire (Jim King, SVP, Audience)

WHAT 2010 and Beyond - The Trends That Will Alter Media and Technology As We Know It (Open Bar from 8-9 p.m.)

RSVP:  http://ds3.eventbrite.com/

6:30PM Health 2.0 NYC Chapter January 2010 Meetup

January meetup is dedicated to " enabling better care by enabling clinical staff" and we have just the presenters for that.

January 2010 Presenters:

1. YourNurseIsOn - Matthew Browning, CEO

2. OmniPACS - Francisco Parin, President & CEO

RSVP:  http://www.health20nyc.com/calendar/12172752/

Thursday, January 14th

This month, we'll be hosting a special format of "lightning demos" at Dogpatch Labs in Union Square before usual beer and burgers.

RSVP:  http://anyvite.com/rafgiuegjc

6:30PM: DigitalFlashNYC Networking Event on E-Readers

Kindle, Nook, Sony E-Reader, the Apple tablet (maybe?). Electronic “books” are rapidly changing the way we read information. Popular Science Magazine is developing a revolutionary way to view magazines and they want you to tell them what you think. Is this a good idea? How does this effect digital marketing? Just as the internet changed the way we could market, will e-books do the same?

Come see what the Popular Science guys have to say and give your 2 cents – trust us, they want your feedback!

RSVP: http://digitalflashnyc.com/index.php?option=com_registrationpro&view=event&Itemid=2&did=2


6:30PM: What the RDF? ... Firsthand perspectives from Semantic Technology in action

Semantic technologies promise to change the landscape of the web and enhance the user experience. Like many evolving technologies, there remains a gap between theory and practice.

We’ll share our experience developing enterprise and consumer facing semantic search applications from three perspectives: Content and user experience, knowledge engineering and technology.

RSVP: http://semweb.meetup.com/25/calendar/11294754/

Being in China right now I am more convinced than ever that when historians look back at the end of the first decade of the 21st century, they will say that the most important thing to happen was not the Great Recession, but China’s Green Leap Forward. The Beijing leadership clearly understands that the E.T. — Energy Technology — revolution is both a necessity and an opportunity, and they do not intend to miss it.

We, by contrast, intend to fix Afghanistan. Have a nice day.

via www.nytimes.com

I still want to know where all the Green jobs are.

There’s been a lot of movement lately in the “stuff I buy” area—and there has been for some time.  Starting perhaps with Amazon’s recommendation tools, we’ve got Mint.com helping us figure out where our income goes, Facebook’s attempts at Beacon, and now Blippy letting me post my purchases to my friends. 

Still, we’re not at the point where every single purchase, down to the bar of soap, what brand of razor I use, and what kind of cheese I eat, is captured.  Point of sale systems have all this data—hell, those that control the POS even share it with mass marketers like Catalina, who actually know more about what I buy than I do.  The rest of us are stuck with the “Fresh Direct - $89.53” we pull out of Mint or check out in our credit card statement online. 

So when and why does that change?  Seems to me that Square is going to do this, but will that be enough to move the industry?  This could really break open recommendations and also innovation around deals & savings, but at the same time give the user greater control.  Perhaps one day I’ll have a Catalina login where I can indicate that I purchased that wine for a party and that I don’t actually drink, so take it off my profile, just like taking things out of the Last.fm queue or Tivo. 

Who’s thinking about this?  

Physical activity has long been known to bestow such benefits as helping to maintain a healthy weight and reduce stress, not to mention tightening those abs. Now, a growing body of research is showing that regular exercise—as simple as a brisk 30- to 45-minute walk five times a week—can boost the body's immune system, increasing the circulation of natural killer cells that fight off viruses and bacteria. And exercise has been shown to improve the body's response to the influenza vaccine, making it more effective at keeping the virus at bay.

"No pill or nutritional supplement has the power of near-daily moderate activity in lowering the number of sick days people take," says David Nieman, director of Appalachian State University's Human Performance Lab in Kannapolis, N.C.

via online.wsj.com

Tuesday, I joined Howard Morgan, Josh Kopelman, Chris Fralic, Phin Barnes, and our GC Doug Bernstein on First Round Capital’s tour of NYC startup spaces—temp offices and incubators where there were critical masses of companies doing innovative things.  We went to two Sunshine Suites locations, all three TechSpaces, the Incubator at RoseTech, the NYU/Poly Incubator, and New Work City.  Our goals were twofold—one, of course, to meet new and interesting companies at an early stage and two, to let people know that we’re an active NYC investor willing to look at companies at such an early stage that the whole company is two people, two desks, and a whiteboard.  At the same time, we pride ourselves on being a hustling, customer focused business—like the companies that we invest in—so showing people that we’re willing to come to them versus being an “ivory tower” VC that waits for you to go to them.

Miko Mercer at LaunchSquad helped us with some of the PR event, which included a great piece in the WSJ and awesome coverage in CenterNetworks.  She collaborated with Ben Kessler on a great video record of the days events as well:

I learned quite a lot about the startup ecology during the walk:

1) First off, every space like this needs an advocate—not just someone to call when the toilet overflows but someone who not only knows the companies in their space, the residents by their first name, the potential synergies, but who is also tapped into the outside world that these companies live in.  I was struck by the shepard-like position that Bruce Niswander holds at NYU/Poly and how much Paula Hughes at Techspace Chelsea was tapped into the local startup community and paying attention to that world through social media. 

2) Some spaces are more tech-y than others—and one thing we learned is that there’s a big difference between a startup incubator and a temp office space.  I thought we were going to run into more bootstrapped companies like Yipit than we did—two guys putting out the money to work in a small office because they found themselves to be more productive outside of their house.  What’s clear is that most entpreneurs are not spending their own money on desk space—but perhaps to their own detriment.  Some of the facilities here were really impressive—and clearly there was a sense of collaboration among the teams we met that you don’t necessarily find when everyone is working remotely.

3)  Much more needs to be done to bridge the gap between the communites inside these spaces and the community outside.  Most of us at First Round hadn’t seen all of these spaces, and many of the residents I spoke to didn’t necessarily know about things like nextNY or any of the more focused meetups that have been going on.  I talked to a few of the spaces about hosting more events for outsiders to bridge that gap and help advertise what they have.

4) VCs are much more resiliant than I thought they’d be.  While not all of them made it the whole length of the trip, I was pretty impressed with the walking speed and general resistance to the 20-degree temps shown by the First Round Capital team.

5) A place where the innovation community could use a little more glue is among service providers, consultants, and investors.  I ran into two PR firms that had done work for First Round portfolio companies that I didn’t know too much about—and a graphic design and user experience shop that had built some of the largest ecommerce sites in the world.  These are important resources for an invester to be able to share with companies—and they also see a fair number of companies themselves.

6) Startups generally suck at “wide open networking”—where the purpose of a meeting isn’t specifically stated.  There were a bunch of companies that I met that didn’t initially come out to see us who hesitated because they weren’t sure if they were supposed to be pitching, if there was a signup, or they had already raised money.  As an entrepreneur, you need to be out there building a huge network.  Even if you raised money, as a feeder fund for larger VC firms, we probably have better relationships with most of the top tier funds than anyone else—and if you’re not right for us, we’re happy to pass you on.  At the same time, with more than 60 companies in our portfolio, it would be really surprising to me if there wasn’t someone you couldn’t strike a biz dev deal with, get bought by, etc.  Startups need to do a better job of realizing the opportunity that arises when someone with a big network just wants to shoot the shit and talk shop. 

I’ve been thinking a lot about areas I’m interested in from an investment standpoint—and there are a few problems I’m fascinated by, or ones I continuously go back to.  I’d love to see people working on these or talk to people with interesting ideas around them.

1) Social CRM/CMS/Plugging into my profession: Right now, I’m “tapped in” to my career in a very high maintenance way.  I blog and tweet, hoping that relevant people will find my posts, and then I maintain relationships with the people that interact with my content through email and DMs.  Some of those folks wind up on LinkedIn, some don’t… while others show up on my TwitterRemote page, or tag it, Digg it, RT it, and if I don’t notice it, they just fall by the wayside.

What I want to know is how I can a) capture and organize all of the inbound new professionals in my life as per their *total web presence* (like telling me when a NYC entrepreneur reads my blog or follows me on Twitter), b) make sure my content finds it’s way to relevant professionals and c) make sure that I’m reading the content of all the relevant people in my field.  Also, I want to understand trends and topics of things being published and read in my networks.

To some degree, this is what should be going on at the Wall Street Journal online, LinkedIn, TheLadders or Tracked.  The WSJ and these other sites should be places I go not just to consume content, but to meet people also interested in the same content—and to promote myself among that crowd.  As it is, the media sites have no good access to people and LinkedIn’s attempts at getting me to read and share articles on the site have been kind of lame.

2) Line item purchases and my personal inventory.  I just started using GDGT and I don’t think it’s really doing the most basic things it needs to to be successful—and that is to give me a compelling reason to want to put my items on there. Why?  To show friends?  To compare?  It needs to build simple tools to poll my friends, my blog, my twitter followers and ask “What phone do you have?”  That would be kind of fun and interesting.

But what I really want to get at is my total personal inventory.  I mean, I know what it is, but when is a startup going to come along and make it really simple and compelling for me to load that data.  That data is the key to what I’ll need to buy in the future, what I like, and also could instigate compelling relationships with consumer product companies. 

3) Events What should I do with my time?  Plancast is doing interesting things, but it’s really amazing that the web, after years and years, still does a horrific job at helping me figure out how to spend my weekend and what’s going on in the city.  There’s no Google for events the way that there’s a Google for jobs, and even if there was, it’s not just about the data.  Event search needs to realize that sometimes I start with knowing that I want to hangout with a particular friend, or a particular day first, or that I know what I want to do—and if should be able to figure out how to match the other pieces.  It would help answer the question, “If I’m free Friday, what is there to do, who should I go with, and are they free?”

4) Local retail marketing I have an issue with the fact that getting my local pizzeria to participate in the social web or to to advertise on the web requires a salesforce of 1000 people in the trenches just making cold calls.  How does a local establishment get bodies in the door—now?  How do people find them?  Anything that could form a relationship with local storefronts w/o needing the on the ground salesforce is interesting to me, especially if it improves their ability to drive traffic and revenues.  If I owned a website, I could drive traffic to my company—how does the local pizzeria do it?

5) Breaking open the cloud.  How do you get families uploading all their home video somewhere and feeling safe about it, for example?  (That probably means it needs to be a physical box… to take VHS tapes and DVDs alike?)  How can you get businesses moving off of enterprise software apps?  How do you break through the walls of data lock-in (ie letting me pickup and walk away with my Salesforce data and moving it to Zoho, or moving from Flickr to Facebook, etc)   There are predictions of cloud computing becoming huge, but it hasn’t answered some basic questions yet about continuity and portability. 

This is just a starter list…. I’ll have more…   If you’re thinking about this stuff, drop me a line.  Also, and hopefully obviously, this list is meant to be about my particular curiousities and interests.  Obviously, I’ll look at a wide variety of early stage technology deals and so will the rest of the team at First Round.

To subscribe to this list by e-mail each Monday, go here.

Welcome to the future...2010.  If you peek out your window, you'll see everything is different.  There are flying cars and you'll notice that you have a crystal embedded in your hand that will change color when you're 30.  Crime has been eliminated and disease is a thing of the past.

Ok, maybe not...  but you'll have a better shot at building Utopia if you attend these tech events:

Monday, January 4th

6:30PM Androids Dream of Monadic Sheep - New York Scala Enthusiasts (WAITLIST ONLY)

Even though this event is sold out, I had to include it based on the name alone--and to support the local Android developer community, given that I've got an HTC Hero in my pocket.
What's cool about this Meetup is that they'll actually be building an Android photo app during the meetup, so if you're a dev into Scala, sign up for the waitlist and maybe you'll get lucky, or just get in next time.

RSVP for waitlist: http://www.meetup.com/New-York-Scala-Enthusiasts/calendar/12057029/

Tuesday, January 5th

Special All Day Event: The First Round Capital Startup Trek

Are you and your co-founder renting temporary desks at Sunshine Suites, TechSpace or one of the city's new incubators?  Then the East Coast partners of seed stage venture fund First Round Capital may be coming to see you!  They'll be on an all day trek to 8 of the city's top startup locations visiting companies, answering questions, and talking shop. 

See when they'll be in your neighborhood:  http://www.frcstartuptreknyc.com/

6:30PM: MediaBistro AgencySpy Party

Because there's nothing agency professionals love better than drinks and feather boas--for agency folks only.  Undoubtedly the most gender balanced event on our list this week.

The Bubble Lounge
228 West Broadway
(between Franklin and Moore)

RSVP: http://www.mediabistro.com/events/view_event.asp?id=13996

7PM: EVENT OF THE WEEK: NY Tech Meetup

The mainstay event of the NY innovation community, the NY Tech Meetup brings together over 500 professionals to watch pitches and connect with up and coming startups.  This month features SpeakerText, Udorse, and drop.io's new Presslift product among others.

FIT - Haft Auditorium
27th St & 7th Ave

RSVP:  http://www.meetup.com/ny-tech/calendar/11998028/

Thursday, January 7th

6:30PM: Ultralight Startups presents: PR Branding, and Buzz

Why is brand important to tech startups? How can buzz be generated?  What is the purpose of PR for a startup? Do all startups need to do PR? When in a startups lifecycle should it become a priority?   All these questions and more answered by experienced PR professionals.

Sun Microsystems
101 Park Avenue

RSVP: http://ultralightstartups.eventbrite.com/

If I wasn’t convinced already, the events surrounding Foursquare’s venture capital raise this summer solidified for me the fact that fundraising is a momentum game.  After tirelessly trying to raise venture capital for months, and having been launched since SXSW, founder Dennis Crowley had nearly given up on trying to get outside capital.  In fact, that was the reason I called out Yelp in my original post about it—we were hoping that maybe Yelp would shell out a few hundred grand to get him on his feet and at least keep him within arm’s reach.  That’s how bleak things had looked before it suddenly became one of the hottest and most competitive venture deals of the year. 

At the same time, this is happening right now with a company I’m working on a deal with.  Very obviously the new presence of a couple of investors in particular has lit a fire under this fundraising round and now all of the sudden there’s momentum in it.

So how does that happen?   Here are five tips:

1)  Most importantly, keep moving and hitting your business metrics.  VCs and angels love a business that doesn’t need them.  I’m certainly guilty myself of building a product roadmap that depended on venture capital investment to hit product milestones, and when it takes months and months to raise interest in a round, the appearance of stagnation is a death sentence.  You want to be hitting milestone after milestone on both the product and the business side so quickly that someone wants to give you money quickly just so you can get back to work. 

2)  Understand the social graph of investors.  Every investor has a circle of co-conspirators that they tend to either do deals with or just talk with on a regular basis—and thanks to social networking and Twitter, it’s pretty easy to figure out who that is.  Getting momentum within that concentrated group is important for a number of reasons.  When angels invest, no one is looking at the company fulltime, so they really depend on others not only to vet deals, but to help get that company where it needs to be.  So, if I know that there are other smart people with big networks and industry experience around the table, I’m going to be more comfortable taking a risk.  It also helps when I hear about a company a number of times.  If you’re talking to a bunch of people I know and they’re asking me about a company, maybe it’s about time that I look at it, too.  However, the key there is that you want to understand the dynamics of my social graph.  Are you just talking to everyone I know willy nilly, or are you talking to my best and most trusted contacts—people that wouldn’t show me a deal unless it was pretty awesome.

The important thing here is not only to just get a bunch of people who know a deal to show it to each other, but to get them talking about exactly why they should be investing.  You don’t want to lie and say people are in when they weren’t, but make sure the people you talk to are exactly “on message” about why you’re awesome.  They’re going to play a big game of telephone and so you need the right message circulating around.  Sometimes, positioning a company in the right way among a circle of investors can get them more excited then if they just start forwarding a deck around.

3)  Start out with the people who know you best and get them to commit.  I’ve seen two deals lately where we’d essentially be nudging out other less sophisticated “friends and family investors” to make room for us or we’d be slightly expanding the size of the round.  Either way, the round was going to get done without us and that’s important.  You never want the company’s life to hang in the balance based on your money—that just makes the startup seem that much closer to death and this round seem like kind of a mercy bet or a last minute save.  You want your train leaving the station right now and the one last “All aboard!!” call to go out.  Not only that, but if the people that know you best aren’t already in and committed, why should I bet on you?  Don’t tell me about the money you “could” get if you needed.  Tell me that your Dear Aunt Sally is going to give you her retirement money and show me the check she already wrote so that I can tell you how she’ll never add any strategic value and that you’d rather have First Round in the deal.

4)  PR still works.  Success is very much about perception, and if you get a lot of people to hear about how you’re the greatest thing since sliced bread, you just might very well be the next sliced bread killer.  Don’t just depend on a bunch of Retweets about your launch.  Get some real old school mainstream media press.  It doesn’t drive users, but it does drive interested investors to see what’s going on with your companies.  Plus, people will more likely retweet an awesome Mashable story on you than your own story about your launch.  Conferences, too.  Speak on a panel or get showcased somewhere.

Understand the dynamics around your space, too.  Is everyone talking about it lately?  This is why you also need strong relationships with your competitors and cohorts.  I’m more likely to start looking at a particular space on the whole—and so is a reporter—if there’s a perception that a space is heating up.  This is why you need to pay attention to other fundraising rounds that get done, because at some point, every investor is going to decide they need a geolocal dating play that involves genetic testing—so when FindMy23Mate and GeoDNADate get funded, you need to position yourself as better, but also next in line.  This can be a small window, too, because you don’t want people to think that the space is already too crowded.

5) Don’t fundraise for too long or in too many places.  Pick your spots and figure out exactly who you want to target and why.  If I see you a few times around the circuit, I’m going to assume that I was right when I turned you down because everyone else seems to be turning you down as well.  Venture capital isn’t easy and the best bets aren’t always the obvious ones—so I know I could be wrong with any decision.  If I see you on a pitch event panel three months after I said no, I’m going to mentally take some solace that I made the right choice and that your company isn’t going anywhere.  That’s why it’s important to have backup plans like friends and family or even better, actual customer revenues in your back pocket so that you don’t need to wait for some white knight to come save your company. 

If you fold at the first un-returned email what hope do you have as an entrepreneur? As an entrepreneur, people aren’t going to respond to you and it’s your responsibility to politely and assertively stay on people’s radar screen. You no longer work for Google, Oracle, Salesforce.com or McKinsey where everybody calls you back. You had no idea how important that brand name was until you left it behind. Your customers don’t care that you went to Standford, Harvard or MIT. It’s just you now. And frankly if you went to a state college in Florida you’re at no disadvantage in the tenacity column. Persistence will pay off.

via venturehacks.com

The major reason we have high insurance costs in this country is because we have hgh use. Period. That is the single biggest problem. We have patients in their 20s, 30s and 40s that have chronic diseases that have never existed before in these age groups. Chronic disease contributes to an increase in consistent doctor visits, medication usage and hospitalizations. High use is expensive. I don't care if its free or not, its expensive. Its strictly numbers. If you want to cut the cost of healthcare in this country, its not the insurance you have to address, its the lifestyle of the American population.

via www.huffingtonpost.com

When you’re an early stage startup, you often have to make a choice early on about what products you’re going to offer what markets.  You might have a lot of different directions that you could go in, but at some point, you have to close the doors to some and commit to others.

Sometimes—actually, a lot of times—opportunities present themselves after you’ve already started.  You get lots of customer demand from an unexpected place, or business development conversations reveal an untapped part of the market.  You realize there’s something there and you decide to go after it.

Unfortunately, you only gassed up the engine with enough angel capital to go after the first thing that you had set out to do—so before you can really prove out this new opportunity, you find yourself running out.  

Then where are you?

You realized that your first market wasn’t as big as you thought—or maybe it still was but you just didn’t go after it as hard because the much bigger opportunity was something else.  So you’re halfway to something really interesting, but don’t have killer provable results for either—but you’re quite sure you made the right strategic move. 

Try fundraising based on half a pivot with a new set of investors.  If your original angels can’t follow on and weren’t around to be on board with the strategy shift, then a new set of angels will probably have a hard time buying it.  They might look at your recent results as a function of your inability to execute.

Sometimes folks warn against having VCs in your deal early, because they might pass later and give you a black mark.  But,  if you don’t have *anyone* who can follow on, you run the risk of not having anyone who can give you addition room to run just in case there was a strategy shift.  Oh, and guess what:  In an early stage startup there is almost always a strategy shift.  I think it is to your benefit to have a set of investors who gets on board with a new strategy, sees that you’re still making good progress on it, and who can give you the extra runway to see something through that you all agreed on.  That’s often going to be a problem if all you have around the table are one shot angels.

You might say “Why pivot at all” then.  Why not prove out your ability to execute on one thing, nail it, and then move onto something else.  Well, proving that you can win in a less interesting market isn’t really that interesting to folks for one—and two, you discount how market momentum can actually improve your chances of winning.  If you try to “move to where the puck is” and you’re pivoting to a space that is much more interesting to biz dev partners, you actually increase the chances that good fortune will befall you—versus trying to innovate in a static market.  (Trust me, I know what that’s like.)

So, while you’re planning out world domination, make sure you’ve got at least one deep pocket in your angel round.  Whether it’s First Round or someone else is up to you, but the last thing you want to do is get caught in mid-pivot.  It’s an ugly place to be.

Last week I testified on entrepreneurship, for the third year in a row, in front of the NYC Council Technology Committee.  For my testimony, I responded to what some others had said during their testimony and basically said some of this and I’ll add more:

New York City is a *thriving* innovation community right now.  It is unquestionably the best place to build a web technology or digital media company on the east coast.  There are more and more experienced entrepreneurs launching their second and third companies, coming back as angel investors, and mentoring young startups.  Everyday and every night there are opportunities to network, collaborate, and learn from other startups—not just to party but to build lasting connections that drive real business value.  There is also more venture capital activity than their ever has been—and the amount of venture funding this year, in terms of companies funded, will wind up being nearly half that of the Valley.  That is, relatively, the best we have ever been.  Given the size of our startup community, utterly amazing.  In addition, Boston VCs are flocking to NYC in a big way (Polaris hiring Steinberg, Flybridge hiring Westheimer, Beim moving to NYC in March, etc).  There is a growing and tightly knit community—one that is, unlike the Valley, open and encouraging.  No one will ever look down on you for not having worked at Facebook, Google, or PayPal, and if you get venture funding, we don’t raise an eyebrow if it’s not from the right VC. 

What’s even more amazing is that we’ve gotten here largely in the absence of any kind of top-down, institutional support.  There’s no school here pumping out startup professionals en masse (ITP is relatively small).  There’s no city program we all came out of.  We built this ourselves, as a community, organically. 

After testifying, I then tried to put myself in the shoes of the average council member and digest what I heard from others, and what I would think of the NYC tech community if this was my vantage point.  Most of what people talked about was money and desks.  That’s when I realized that the city is getting *horriffically* bad data on what’s really going on with the NYC tech community and what it needs.  By failing to participate in this innovation community, the city and its affiliated entities lack firsthand knowledge of what’s going on, and instead depend on the often random, misguided hearsay of those who aren’t really in the trenches of the Big Apple’s recent success. 

Here’s an example.  Baruch College measured that the average city has about 19% of its population that identify as entrepreneurs.  NYC is down at 15%, so they conclude that we’re 4% behind.* 

This makes no sense whatsoever.  There’s no “steady state” for entrepreneurship—no systematic reason why that number is anything other than randomness—and it doesn’t apply here.  Every city is a unique mix of people and jobs, mostly due to underlying demographics, geography, and maybe even culture.  Is Kansas short on investment bankers because they don’t have 3% like the rest of the country?  Is NYC overweight people in the tourism and hospitality industry?  Guaranteed we have more people in that sector than other cities—simply because we take on more visitors.

Misguided statistical analysis without real world, in person feedback is why folks from the city keep asking “Why are we so behind other cities?”

The feedback they most often get is that we lack startup capital.  Probably 9 out of 10 entrepreneurs in this city say that access to capital is a problem.  Funny enough, 9 out of 10 startups don’t get outside financing at all—and that’s across the board.  Why?  Because most startups just aren’t based on great, well thought-out ideas.  In fact, many entrepreneurs that start out who fail to get access to funding are often forced to iterate on their models—usually revamping the entire idea.  Many folks would agree that their first iterations would not have worked out as equity investments and that they were better off going to market to try and generate revenues when they couldn’t get financing. 

Other startup ideas simply don’t have capable founders.  It’s not that they aren’t dedicated, but they may not have the right skillset or experience to lead a company. 

Think about it this way:  Would you put your own personal savings into any more than 1 out of 10 of all the ideas you’ve ever heard people come up with in your life?   I certainly wouldn’t—and I definitely don’t want the city moving that ratio up significantly either. 

Outside equity capital simply isn’t appropriate for most startups—sometimes because of their model, sometimes because of their expected size, and other times because of the lifestyle priorities of the entrepreneur.  If you don’t have the intention or capability of building at least a $50 million business, then equity capital is probably not for you.

I’ve said before we could use more smart, dedicated capital—and we’re getting that with the addition of a First Round Capital office in NYC.  No doubt other venture funds will follow.  The last thing we want to do is to compete with the city’s capital, raising the price of deals and distracting the market. 

So, if you work for the city, beware any entrepreneur who tells you they can’t raise money in NYC and that funding is a problem.  For every 9 of those people, there’s one who had no problem raising money from experienced investors because they had a big vision, exemplary skills, and a great execution plan—if not a great product already.  Many raise money from relatively unsophisticated investors—because NYC is full of money and it’s really not that hard to find someone with an extra few grand to put to work in what might sound like a promising idea to be the next big thing.

There’s another real downside to an increased percentage of startups getting funded.  There is, in fact, a limited supply of good talent—not just in NYC, but everywhere.  Great people are hard to come by in life, simple as that.  It’s hard here, it’s hard in the Valley and it’s hard in Boise, Idaho.  When ideas get funded that otherwise wouldn’t, those lower potential companies pull talent out of the market and get them working on less promising ideas—ideas less promising than those that already have customer and financing traction.  When less savvy money funds a company, you effectively raise the price of talent and distribute it inefficiently. 

But, if you’re sitting on the New York City Council, how would you know?  All you hear in these testimonies is how hard it is to raise money.  It’s the same with office space and how expensive it is.  Meanwhile, I spent the day last Tuesday going around to Sunshine Suites and TechSpace and found huge communities of growing companies—probably over 2500 people working at startups in total across these places.  We’ll be visting them during the First Round Startup Trek on January 5th.  They’re loving life there and I don’t hear a single complaint that the rent is too high.  I mean, sure, if asked, would I love my rent to be lower?  Of course.  Do I still live here?  Yes.  The fact is, if you have the revenues or the investment capital to pay someone, you undoubtedly have the extra cash to put them in a desk somewhere.  People costs are always much higher than rent in a tech business. 

The problem is that when all these folks come to testify, you have policymakers that use these hearings as their sole source of information.  They have no way to vet the perspective of any of these entrepreneurs either.  I had a guy after me testify from the NY Tech Council.  Sounds pretty impressive, only…  who appointed them New York’s tech council?  Who do they represent?  Anyone can ask a law firm or a big company for a few sponsorship bucks these days, slap a few logos on your site, and make it seem like you speak for a mass audience.  Most of the work in the community these days is being done by people who aren’t asking for money, titles or any kind of recognition.  Not surprisingly, this person’s testimony about how NYC has failed to build an innovation community couldn’t have been further off the mark.  I wondered where he had been for the last five years and nearly fell out of my chair when he said it.

People from the city government and its related entities don’t know that because they simply DO NOT PARTICIPATE in the innovation community.  We’ve been inviting city council members to the NY Tech Meetup for years, same with nextNY.  At the hearing, they asked the NYCEDC who helps entrepreneurs with business and tech questions and got little in the wake of answers.  Meanwhile, Nate and I are smacking our heads in the crowd because we know where those questions are going—to us and the other visible entrepreneurs in the community.  The answers are on Twitter, and blogs, and listservs and events.   

As one attendee to the City Council’s talk put it, listening to all this random testimony—and also to other governmental orgs who couldn’t quite get all the data that was asked for or wasn’t at liberty to share—was like seeing through a cheesecloth.  I wondered if I was living in the same city as everyone else was.  Companies talked of the lack of places to ask about healthcare, compensation, technology issues… apparently they’ve never been on the nextNY listserv before. 

Here’s a sample of just a few recent questions asked about startups on the nextNY listserv:

Pre-Alpha Release Best Practices?

Best Bank for Startup Checking, Finances, etc?

S corp or LLC

Need Web dev shop experienced with Spanish mirror sites

So before the city goes and commits millions of dollars to reinventing the wheel for the startup community, maybe they would be better served pointing to all of the existing resources out there that some of the newbie entrepreneurs they talk to just can’t be bothered to find.

Over the next few years, the city is planning on running events, opening incubators, connecting professionals, and injecting more capital into the system just as the community and private enterprise is doing the exact same thing—and they’re doing so without the basic relationships, experience, and context to do this successfully.  For once, I’d like to see the city support the proven, existing efforts, rather than recreate the wheel:

>> They should give tax breaks and subsidies to Sunshine Suites and TechSpace rather than get into the real estate market themselves. 

>> They should be getting venues and focusing their PR efforts for nextNY and NY Tech Meetup events, rather than competing against us for the mindshare of the community. 

>> They should encourage public participation of key stakeholders in social media (and lead by example), getting local academics on blogs and Twitter, before spending money to build a big research database no one will ever use.

But they won’t do that, because they need to own everything and get credit for it come election time.  One of the city council folks wanted to hear about the next incubator to enter her district—and she didn’t care about the new one opening in Queens.  One NYCEDC rep told me that it was “off topic” when I brought up the EDC’s lack of participation in existing community activities during a small group breakout about their planned slate of events.  That’s so far from the norms of the great NYC innovation community already being built that it will prevent the city from gaining much traction in their efforts. 

In the end, does it really matter?  Regardless of the city’s activities, the startup community will continue to grow.  Dominos are falling and it’s doubtful that anyone can stop the chain reaction now.  Can they help?  Maybe the city can help existing efforts as it does seem to be good at getting PR for itself—but if all it does is listen without participating, reinventing wheels, and duplicating community and private sector efforts, I’m not particularly bullish on what it’s up to.

*I had mistakenly attributed this stat to the Center for Urban Future prior.”

One of the best things anyone can ever do to encourage the dissemination of ideas, collaboration, and innovation is to put all the relevant stakeholders in a room, provide some focus, and just get them talking.

A topical, relevant group discussion is a simple, but enormously effective tool when done right.  It’s something we’ve been doing with nextNY for nearly four years now and I want to ramp it up significantly in 2010.  We have over 2500 up and coming digital media entrepreneurs, designers, business people, investors—a great mix of up and comers that have come together to build a really inclusive and innovative community. 

At the same time, I know firsthand that various big companies, schools, professional organizations, and service providers want to connect with this community and get some mindshare on a lot of these topics.  I was just talking to someone last week about how a lot of big companies have great event spaces that basically go unused most of the time—and yet a lot of community groups struggle to find places to hold their events.

Therefore, I’m holding an “Event Space Drive”.  I’d like to connect to as many companies willing to commit to donating event space for 50-100 people as possible.  My goal is three spaces after work a month, each month for 2010.  This way, if I book the dates ahead of time, I can guarantee the best speakers, the most well thought out topics and the right amount of planning and prep ahead of time.

So if you have space to donate to the NYC innovation community and you’d like to host a discussion or networking event, even if you can just give away a couple of dates, or one every other month, please get in touch with me at charlie.odonnell@gmail.com.