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Tuesday Night Poll

Chess, Clouds, Startups, and Other Things

If you thought the reason I haven't been doing a Daily Reading post lately was because I didn't feel like adding more to the endless stream of political noise, global economic crisis, and the impending extinction of arctic wolves, you'd be wrong.  I simply forgot I was doing it.  Oops.  Here are a few good ones from today.

• Chess Move Simulator:  If you are a chess player, you must check this out.  Awesome.  Thanks Bruce.
• Microsoft’s Azure cloud platform: A guide for the perplexed: Mary Jo Foley tries to explain Azure. 
• If you notice a bunch of software engineers wandering around Boulder, that's because the Boulder Colorado Job Fair is in full swing.  If you run into someone from out of Boulder, be nice and make sure you tell them it's never actually cold in Boulder.
• Seth Godin speaks up on some of his failures in Failure as an event.  As is typical of Seth, he has concise, brilliant advice.  His biggest lesson of all - "Persist. Do the next one."
• Bill Flagg has a great contrarian post on Startup Valuations.  Actually, it's not contrarian.  It's just good old bootstrapping common sense.
• Ho Nam at Altos Ventures has the real contrarian post of the day (he even uses the word contrarian in it).  RIP Good Times? A Different Perspective.

Off to spend the day with a top secret group of VCs discussing what we think of the future.

Glue: A Social Net That Lives In Your Browser

We’re Open For Business

Last week I met with the talented CEO of a growing company. His first question: “Are you still investing?”

Yes. We’re open for business.

The irony was that I had specifically stopped off to see him. I clearly had interest. But after watching the public markets and reading all the associated news, he felt compelled to ask. And rightly so, because a lot of investors have stopped investing altogether.

As reported in Private Equity week (September, 2007), MDV is currently investing out of our $580 million ninth fund. The firm has been working with entrepreneurs through thick and thin for nearly 25 years.

When I started my first company, I found it very hard to raise money. The market was grim and I had little startup experience. My two co-founders and I boot-strapped the business. The path was never easy. But we did it.

When I formed my second company in 2002, the market was just as grim. I was fortunate enough to have venture investors who believed in me and were open for business. As you have no doubt read elsewhere, some of the best tech companies were started during recessions.

There is no one-size-fits-all message we are delivering to our portfolio companies. With a diversified portfolio across sectors and within tech itself, no one message would fit them, nor would they want to be treated as numbers rather than as individuals. We’ve sat down with each portfolio company to take a hard look at their operating budgets, sales plans, and market approach.

Many of our entrepreneurs have seen it before. Coming from cash efficient or boot strapped backgrounds, they have been running lean and mean operations all along. Others see the current market as an opportunity to consolidate. They have a product that is selling well and they are going to keep on selling it, some even more aggressively than before.

Some rightly worry that customers will buy less. But some areas are selling better than ever before. Which ones? Those delivering peace of mind, such as security, compliance, or better customer service; cost savings; or incremental revenue.

Many have highly evolved sales models that don’t require customers to buy in big to get started. They have pricing models that align with the customer - no huge up front investment, but rather, pay as you go. Customers of companies like PBWiki and Ironkey, to name just two, are able to get started with a small purchase and then grow their spending as their needs grow. The result is large per customer revenue even with a small initial start.

Tech companies, especially those with SaaS models, are finding innovative ways to increase their runway. They are giving customers a discount for paying a full year up front. They’re incenting their sales forces to close one year deals with up front payments. And they’re charging for incremental usage such as bandwidth, storage, or transactions.

The bottom line is, great companies are still being built. They are doing it lean and mean, and they are doing it with the pain of experience under their belts. These days, there’s clearly no more security working for a large company than in running your own shop. If anything, doing a startup gives you more control.

Great entrepreneurs are continuing to invest their own time and energy, and we’re continuing to invest in great entrepreneurs.

We’re open for business.

Applying game design to building apps (and games!)

Dan Cook has posted the slides of his recent talk, “The Rescuing Princess Application“:

My talk was on building an application that rescued princesses. The goal was to give interaction designers some insight into how game design might be applied to the domain of more utilitarian applications.

The notes fields are heavily annotated with more details about each visual. For those of you who attended, this deck also includes a third section on game design patterns that I didn’t have time to cover in the time allotted.

This is a terrific presentation for product managers and designers, as well as for people building web games. Read it - it will take you about 10 minutes

Also, check out Dan’s list of recommended reading:

Dan’s blog
Chemistry of Game Design
What activities can be turned into games?
A Theory of Fun, Raph Koster
Shufflebrain: Putting the Fun in Functional

Dan particularly recommends the Shufflebrain presentation. The Shufflebrain team recently launched Photograb*, their first game of their own, that applies many of their principles of game design. Check it out on Facebook.

* Lightspeed provided the seed round of financing for Shufflebrain.

      

On my way to Jordan to speak at the Talal Abu Ghazaleh College of Business

I'm in Toronto on my way to Amman, Jordan.

I'll be speaking at 11 AM on Wednesday the 29th of October, 2008 at the Talal Abu Ghazaleh College of Business / Jordanian German University. I'll be talking about Creative Commons followed by a panel discussing including our Jordanian CC country lead Ziad.

Look forward to seeing everyone there and thanks to everyone on the Abu Ghazaleh team for organizing this.

The Survival Matrix

As Brad Stone and Claire Cain Miller talked about in the New York Times piece about startups slimming down to survive, we are seeing many companies looking at their cash balances and burn rates and deciding to cut burn to increase runway. We've done an exercise with our own portfolio that I wanted to share with all of you. I am calling it the survival matrix.

First we create a table of our entire portfolio and chart current cash balance, burn rate, and runway (cash/burn). We leave out the profitable companies from this analysis unless we think the downturn will cause them to start burning cash. Here's a look at a theoretical runway table:

We then do a scatter plot of burn rate versus runway with runway in months on the x-axis. It looks like this:

My excel graphing skills are lacking so this chart doesn't look exactly the way I want it to. I'd prefer that the x-axis numbers be at the bottom, not the top of the chart. And there should be four quadrants made via lines that run at a $200,000/month burn rate and at the 18 month line (those are subjective numbers, each fund would have their own views on where those lines go).

Thanks to Danny Moon, this chart now looks exactly the way I wanted it too. This blog post is now peer produced!

When you do that, you'll get to four quadrants.

Where you want your company to be is in the upper right quadrant, which I call "the comfort zone". The comfort zone is a low burn rate combined with a long runway.

The upper left quadrant is not a bad place to be as well. I call that the "too small to fail" quadrant. While your runway is not long, your burn rate is so small that your investors can fund your company for a while without any new money showing up to join the party.

The lower right quadrant is also not a bad place to be. I call that the "betting on revenue" quadrant. These are the companies that are carrying high burn rates but also have long runways. They are betting on revenues to start coming in and lower their burn rates over time. One thing about this quadrant though, you don't stay here forever. Your runway will come down and you'll either go into one of the upper quadrants because your burn has come down, or you will go into the lower left quadrant.

The lower left quadrant is the "danger zone" - high burn combined with short runway. You don't want to be there.

We've done this analysis on our portfolio recently and we came away from the exercise feeling very good about where things stand. We'll keep doing this every couple months as one of several "macro screens" we do on our overall portfolio health.

If you are an entrepreneur, you should know where your company fits on the survival matrix and if you are a VC, then you probably are already doing this kind of analysis on your portfolio as well.

Andrew Sullivan on Blogging

I regularly get the "why do you blog" question.  I also regularly get "thank you for blogging" notes (thank you for the thank you notes.)

I'm a fan on Andrew Sullivan - he has a magnificent article in The Atlantic titled Why I Blog.  He nails it.

Thanks for the link Dave.

Declaring A Jihad on My Weight

With a nod to a line given to me from a recent television show that I enjoy, I'm declaring a jihad on my weight.

I've struggled with my weight for the past 15 years.  I was a skinny person until I hit 28.  At that point, something happened and I gained about 60 pounds.  At my peak, some of my friends referred to me as fat.  Eek.

I started running about seven years ago.  I lost about 20 of the pounds.  Some them went into muscle, some of them went away.  But a bunch of them hung around - mostly my belly and my ass.

In 2003, when I was training for the Chicago marathon, I dropped another 30 pounds.  None of my clothes fit; that was very satisfying.  I ran my fastest marathon by a wide margin.  I'm sure my cholesterol was a lot lower.  No one called me fat anymore.

Five years later, I feel semi-fat again.  I'm still running marathons, but those 30 pounds are back.  I'm 20 pounds off my peak, but no where near where I want to be.

Enough.  Starting today the weight comes off.  If you are having a meal with me, help me help myself.  Send the bread back.  Ask me if I'm sure I want another drink (one is plenty).  Remind me that I only have to eat half my food.  Notice all the vegetables that I'm eating.  Pat me on the head when I skip dessert.

Weight - you are going away.

Random nature Oct 26 08 [Flickr]

jeffclavier posted a photo:

Random nature Oct 26 08 [Flickr]

jeffclavier posted a photo:

Random nature Oct 26 08 [Flickr]

jeffclavier posted a photo:

Random nature Oct 26 08 [Flickr]

jeffclavier posted a photo:

Random nature Oct 26 08 [Flickr]

jeffclavier posted a photo:

MacBook Pro Tradeoffs

A lot of people are talking about the new MacBook Pro battery life, or more specifically the lack thereof. It’s actually interesting to consider the design choices hardware manufacturers have to make when designing portable gear, in this case weight is probably a driving issue because the new MBP is slightly heavier than the model it replaced.

The 20% reduction in battery life that Mossberg references is easy to explain, the battery itself is almost 20% smaller… the new MBP has a 4,700mAh battery while the old MBP had a 5,600mAh battery. Less battery capacity, less battery life between charges and it means less weight which slimmed down the overall package to be in range for the older generation MBP.

Much worse is the loss of battery life. When used with its discrete graphics processor, the natural mode for the kind of audience at which the Pro is aimed, Apple claims it will get just 4 hours of battery life, versus the 5 hours it claimed for its predecessor, which also used a discrete graphics processor. That’s a whopping 20% reduction in battery life.

[From MacBook Pro Tradeoffs | Walt Mossberg | Mossblog | AllThingsD]

More troubling is that as the battery degrades over time you will be more affected by the lack of battery power meaning you can likely expect to be replacing it sooner than the old MBP.