Raja Jasti’s Blog - Renaissance Thinking

March 8, 2010

Pandora Story

Filed under: Entrepreneurship — Raja @ 3:59 pm

Building startups takes a lot of patience and preseverence. There may be times when a startup comes perilously close to death. But an entrepreneur’s belief and fight can singlehandedly will the company to success (providing the company’s vision has merit which is not always clear, but that’s another story).

Pandora, a online music startup is a case in point. NYTimes has a fascinating story on Pandora’s near death experiences and its eventual success.

OAKLAND, Calif. — Tim Westergren recently sat in a Las Vegas penthouse suite, a glass of red wine in one hand and a truffle-infused Kobe beef burger in the other, courtesy of the investment bankers who were throwing a party to court him.

It was a surreal moment for Mr. Westergren, who founded Pandora, the Internet radio station. For most of its 10 years, it has been on the verge of death, struggling to find investors and battling record labels over royalties.

Had Pandora died, it would have joined myriad music start-ups in the tech company graveyard, like SpiralFrog and the original Napster. Instead, with a successful iPhone app fueling interest, Pandora is attracting attention from investment bankers who think it could go public, the pinnacle of success for a start-up.

Pandora’s 48 million users tune in an average 11.6 hours a month. That could increase as Pandora strikes deals with the makers of cars, televisions and stereos that could one day, Pandora hopes, make it as ubiquitous as AM/FM radio.

“We were in a pretty deep dark hole for a long time,” said Mr. Westergren, who is now the company’s chief strategy officer.. “But now it’s a pretty out-of-body experience.”

At the end of 2009, Pandora reported its first profitable quarter and $50 million in annual revenue — mostly from ads and the rest from subscriptions and payments from iTunes and Amazon.com when people buy music. Revenue will probably be $100 million this year, said Ralph Schackart, a digital media analyst at William Blair.

Pandora’s success can be credited to old-fashioned perseverance, its ability to harness intense loyalty from users and a willingness to shift directions — from business to consumer, from subscription to free, from computer to mobile — when its fortunes flagged.

February 16, 2010

The magic of viral growth

Filed under: Entrepreneurship — Raja @ 10:36 am

Hot mail discovered it. Paypal has it. Facebook has it. Twitter has it. It is the magic of viral growth. You all know what it means. Your customers are your best marketers. If your product usage invloves users bringing in more new users, it can give you exponential growth (if each user brings in 2 or more users).

Seth godin says viral growth trumps lots of faux followers. This is a great insight if understood properly can improve the effectivenss of your marketing.

Viralgrowth Many brands and idea promoters are in a hurry to rack up as many Facebook fans and Twitter followers as they possibly can. Hundreds of thousands if possible.

A lot of these fans and followers are faux. Sunny day friends. In one experiment I did, 200,000 followers led to 25 clickthroughs. Ouch.

Check out the graph on the left. The curves represent different ideas and different starting points. If you start with 10,000 fans and have an idea that on average nets .8 new people per generation, that means that 10,000 people will pass it on to 8000 people, and then 6400 people, etc. That’s yellow on the graph. Pretty soon, it dies out.

On the other hand, if you start with 100 people (99% less!) and the idea is twice as good (1.5 net passalong) it doesn’t take long before you overtake the other plan.  (the green). That’s not even including the compounding of new people getting you people.

But wait! If your idea is just a little more viral, a 1.7 passalong, wow, huge results. Infinity, here we come. That’s the purple (of course.)

A slightly better idea defeats a much bigger but disconnected user base every time.

The lesson: spend your time coming up with better ideas, not with more (faux) followers.

February 14, 2010

Chartroulette founder is a rock star

Filed under: Entrepreneurship, Internet, Media — Raja @ 10:13 am

I love the story of Chartroulette. It is the classic story of a teenager doing something for fun to see it become a web sensation. It reminds of napster (without the copyright issues) and facebook. It has other issues such as profanity and vulgarity everywhere (so if can be ofensive to most people). But the concept is intriguing (and a subset of its current community, not all of it).

Fre Wilson, one of the noted tech VCs, wants to invite him to NYC.

Here are some interesting facts from the NY Times piece: 

  • The founder, Andrey Ternovskiy, is a 17 year old high school student who lives in Moscow
  • He created the site for “fun” and had no “business goals” for it
  • It was inspired by his extensive use of Skype web chat with his friends
  • It spread entirely by word of mouth
  • He’s had to rewrite the code several times in order to allow it to scale
  • His relatives invested some “funds” so he could buy more servers
  • Right now, he’s doing it all himself
  • Chatroulette runs on seven servers in Frankfurt, Germany
  • He is planning to add more servers in new geographic locations
  • Andrey has never been to the USA but would love to visit
  • He has ideas for more “weird in a good sense” features
  • He’s not sure what Chatroulette is any more
  • He thinks it would be best to “found Chatroulette” as a US-based company

I think we’ll reach out to Andrey and offer him a visit to NYC. I’m still not sure if this is something we should invest it, but I’d sure like to meet this guy. He reminds me of many great young entrepreneurs we’ve worked with and his story sounds so familiar.

I think it would be a great experience for Andrey to get exposed to the US tech scene. But I hope he doesn’t get too comericalized and  lose the curoisty and innocence. People love stories like this and it is only natural to hang out with sensations. I just hope that Andrey keeps his eyes on the ball. He seems like a mature teenager and reminds me of Mark Zuckerberg. I wish him the same success as Mark.

One of the commenters on Fred’s blog, Aviah Lor, says it well.

but he shouldn’t be institutionalized (yet). keep the artist side.

Amen.

February 13, 2010

Chatroulette

Filed under: Entrepreneurship, Internet, Media — Raja @ 7:00 pm

Andrey Ternovskiy, a 17 year old school kid from moscow, started a fast growing video site called Chartroulette. It is a real-time p2p video site that connects people over their webcam. It has been a mystery as to who is behind the site until today. This is a perfect example of the power and beauty of viral distribution pioneered by Hotmail. This is how facebook and twitter became popular. If you have products that has viral loops as integral part of the service (not tacked on as an after thought), then you have a good chance to grow exponentially wothout any marketing.

Andrey Ternovskiy

The site, which gets about 20,000 users on a typical night, generates one-on-one Webcam connections between you and another randomly chosen user. The results are occasionally serendipitous, putting you face to face with an interesting person from another corner of the planet. More often though, the site is reminiscent of those old anything-goes AOL chat rooms, only with video. Let’s put it this way: Parents, keep your children far, far away. The site was well described in a New York magazine article recently and, oddly enough, was featured on “Good Morning America” on Saturday.

The lingering mystery, though, was who was behind the site. The question was answered on Saturday when Andrey Ternovskiy responded to the questions we sent to an e-mail address on Chatroulette. Mr. Ternovskiy said he was a 17-year-old high school student in Moscow.

“I was not sure whether I should tell the world who I am mainly because of the fact that I am under age. Now I think that it would be better to reveal myself,” Mr. Ternovskiy wrote.

Here are his e-mailed responses, slightly edited and condensed:

I created this project for fun. Initially, I had no business goals with it. I created this project recently. I was and still am a teenager myself, that is why I had a certain feeling of what other teenagers would want to see on the Internet. I myself enjoyed talking to friends with Skype using a microphone and webcam. But we got tired of talking to each other eventually. So I decided to create a little site for me and my friends where we could connect randomly with other people.

It wasn’t so easy to create it for me, but I have been coding since 11 (thanks to my father who introduced me to the Internet early – most of my knowledge comes from it).

I didn’t advertise my site or post it anywhere, but somehow, people started to talk to each other about the site. And the word started to spread. That’s how the simultaneous user count grew from 10 to 50, then from 50 to 100 and so on. Each time the user count grew, I had to rewrite my code completely, because my software and hardware couldn’t handle it all. I never thought that handling the heavy user load would be the most difficult part of my project.

As the user base grew, bandwidth and hosting bills started to show bigger sums. I am glad that my relatives helped me with it by ‘investing’ some money in my idea.

It wasn’t very much money, so I couldn’t just buy new servers just like that, I had to optimize my code as much as possible instead. I must say that lots of people have helped and still are helping me when I have questions about coding. I am very thankful to them. I still code everything myself, though. I’d love to share work with someone else, but I am not in the USA, and most of the interested people are located far away from me, because I live in Moscow. So I still have to do all the things myself. But I am not worried.

I enjoy what I do. It is like a game for me. I discover new things and solve interesting problems.

I am aware that Chatroulette is popular in USA.  It is interesting, but I have never been to the USA myself. Yet most of my site users come from it. I would love to visit the United States.

I actually think that it would be best to found Chatroulette as a U.S.-based company. But this is just an idea.

I have always wanted Chatroulette to be an international thing. That’s why I chose Germany for hosting, because it is in the middle between Russia and U.S.A. It is also at the center of various backbone European networks. I think this is a good place for hosting a project which connects people around the world with each other.

However, I am planning to get other servers in other countries soon. With it I will add more interesting and “weird” (in a good sense) features which will make my site even more entertaining.

What is currently stopping me from adding other features which have been suggested by many and have been in my mind is that I am not even sure what Chatroulette is now.

Everyone finds his own way of using the site. Some think it is a game, others think it is a whole unknown world, others think it is a dating service.

January 1, 2010

Mobile Commerce

Filed under: Entrepreneurship, Mobile, Technology, Trends — Raja @ 12:39 pm

Om Malik shares his thoughts and ideas on iphone apps transforming e-commerce.

iphone-gets-credit-card-reader.jpeg

The Mophie Credit Card Reader

Jack Dorsey’s Square, Incase, Verifone and now Mophie — these companies’ credit card readers are turning the iPhone/iPod touch platform into an e-commerce engine.

Mophie, a Los Angeles-based company that makes accessories for the iPod/iPhone devices will release a credit card reader at CES in January 2010. The device is going to have a reader and a software that would allow small businesses to take credit cards. No more details are available just yet.

I, for one, would like to see Mophie or one of these other startups come up with a way for me to scan my own credit card to enter it into an app or web site. Even better, I’d love it if they married their hardware with the functionality of something like 1Password. In doing so, they could enable e-commerce via the iPhone apps. Think of it as iEconomy.

By focusing on the consumers, these companies can also overcome two things: somewhat finite number of likely small business customers and get scale, which would allow them to get cheaper. And this would also help them overcome the slower adoption rates normally encountered when chasing the small business market. In fact, companies such as Visa, MasterCard and large banks should be trying hard to figure out how they can put these kind of readers in the hands of both merchants and consumers, thus shifting even more transactions into the electronic realm.

OK, you can see I am just way too excited about this stuff. Why not? I am encouraged to see such experimentation. It ties in with my big belief: the marriage of computing and connectivity without the shackles of being tethered to a location is the the biggest disruptive force of our times, and it will redefine business models for decades. 

Bringing the ability to accept electronic payments using your mobile phone is a powerful concept. It siginifcantly reduces the friction of conducting digital commerce.

December 22, 2009

Secret History of Silicon Valley

Filed under: Entrepreneurship — Raja @ 3:10 pm

as told by Steve Blank, a great story teller. This is long video so watch at your leisure.

December 13, 2009

Startup Lessons: How to Achieve Failure

Filed under: Entrepreneurship — Raja @ 1:39 pm

Eric Riles talks at Stanford about 3 prevalent myths (aka reality distortion field) that contribute to spectacular startup failures:

1. We know what customers want

2. We can accurately predict the future

3. Advancing the plan is progress

If you are an entrepreneur and working on a startup, please do your self a favor an watch and grok the lessons from this video clip. You will save a lot time and money and hopefully avoid failure from any existing reality distortin field.

December 12, 2009

How do innovators think?

Filed under: Entrepreneurship — Raja @ 1:33 pm

From Harvard Business Review editor’s blog (via Rajesh Jain):

Fryer: You conducted a six-year study surveying 3,000 creative executives and conducting an additional 500 individual interviews. During this study you found five “discovery skills” that distinguish them. What are these skills?

Dyer: The first skill is what we call “associating.” It’s a cognitive skill that allows creative people to make connections across seemingly unrelated questions, problems, or ideas. The second skill is questioning — an ability to ask “what if”, “why”, and “why not” questions that challenge the status quo and open up the bigger picture. The third is the ability to closely observe details, particularly the details of people’s behavior. Another skill is the ability to experiment — the people we studied are always trying on new experiences and exploring new worlds. And finally, they are really good at networking with smart people who have little in common with them, but from whom they can learn.

Fryer: Which of these skills do you think is the most important?

Dyer: We’ve found that questioning turbo-charges observing, experimenting, and networking, but questioning on its own doesn’t have a direct effect without the others. Overall, associating is the key skill because new ideas aren’t created without connecting problems or ideas in ways that they haven’t been connected before. The other behaviors are inputs that trigger associating — so they are a means of getting to a creative end.

Gregersen: You might summarize all of the skills we’ve noted in one word: “inquisitiveness.” I spent 20 years studying great global leaders, and that was the big common denominator. It’s the same kind of inquisitiveness you see in small children.

Fryer: How else do you think the innovative entrepreneurs you studied differ from average executives?

Dyer: We asked all the executives in our study to tell us about how they came up with a strategic or innovative idea. That one was easy for the creative executives, but surprisingly difficult for the more traditional ones. Interestingly, all the innovative entrepreneurs also talked about being triggered, or having what you might call “eureka” moments. In describing how they came up with a product or business idea, they would use phrases like “I saw someone doing this, or I overheard someone say that, and that’s when it hit me.”

I can identify with the aha moments triggering big innovative ideas. I can remember exactly when and where I have those ideas. They ienvitably happen to me while talking with others, not when I am alone (though the thoughts get refined while I reflect on them alone). Most often they are triggered by ideas from totally unrelated areas and contexts. That is where asscoicating kicks in. I call it connecting the dots. That is the quality that people like Stve Jobs and Jeff Bezos have that many others do not.

So here is the short, one sentence answer to how innovators think :  ’they can connect the dots much much better than others’.

That is how I view my job description as the CEO of my startup. See the big picture, connects the dots, and make it rain.

Apple’s Game Changer

Filed under: Business, Entertainment, Entrepreneurship, Media, Mobile, Technology, Trends — Raja @ 11:32 am

NYT has long feature on how apple’s iphone appstore is changing the development and distrubution of games and other sfotware applications.

IAN LYNCH SMITH, a shaggy-haired ball of energy in his late 30s, beams as he ticks off some of the games that Freeverse, his little Brooklyn software company, has landed on the iPhone App Store’s coveted (and ever-changing) list of best-selling downloads: Moto Chaser, Flick Fishing, Flick Bowling and Skee-ball.

Skee-ball, Mr. Smith says, took about two months to develop and deploy and then raked in $181,000 for Freeverse in one month. The company’s latest bid for App Store fame? A game featuring a Jane Austen character in a lacy dress who karate-chops her way through hordes of advancing zombies.

“There’s never been anything like this experience for mobile software,” Mr. Smith says of the App Store boom. “This is the future of digital distribution for everything: software, games, entertainment, all kinds of content.”

As the App Store evolves from a kitschy catalog of novelty applications into what analysts and aficionados describe as a platform that is rapidly transforming mobile computing and telephony, it is changing the goals and testing the patience of developers, bolstering sales of the Apple motherships the applications ride upon — the iPhone and iPod Touch — and causing Apple’s competitors to overhaul their product lines and business models. It even threatens to open chinks in Apple’s own corporate armor.

Thanks in large part to the iPhone, introduced in 2007, and the App Store, which opened its doors last year, smartphones have become the Swiss Army knives of the digital age.

They provide a staggering arsenal of functions and tools at the swipe of a finger: e-mail and text messaging, video and photography, maps and turn-by-turn navigation, media and books, music and games, mobile shopping, and even wireless keys that remotely unlock cars.

“Apple changed the view of what you can do with that small phone in your back pocket,” says Katy Huberty, a Morgan Stanley analyst. “Applications make the smartphone trend a revolutionary trend — one we haven’t seen in consumer technology for many years.”

Ms. Huberty likens the advent of the App Store and the iPhone to AOL’s pioneering role in driving broad-based consumer adoption of the Internet in the 1990s. She also draws comparisons to ways in which laptops have upended industry assumptions about consumer preferences and desktop computing. But, she notes, something even more profound may now be afoot.

“The iPhone is something different. It’s changing our behavior,” she says. “The game that Apple is playing is to become the Microsoft of the smartphone market.”

The popularity of Apple’s app model has reached a fever pitch. Tens of thousands of independent developers are clamoring to write programs for it, and the App Store’s virtual shelves are stocked with more than 100,000 applications. Apple recently said that consumers had downloaded more than two billion applications from its store.

Major players like Research in Motion (maker of the BlackBerry), Palm (maker of the Pre), Google (maker of the Android mobile operating system) and Microsoft (maker of Windows Mobile) are taking note and scrambling to replicate the App Store frenzy.

App fever has even prompted cities like New York and San Francisco to open reservoirs of city data to the public to spur software developers to create hyperlocal applications for computers and phones.

One need not look further than the lobby of Apple’s headquarters in Cupertino, Calif., to see that the iPhone and applications that run on it are centerpieces of the company’s mobile strategy. Planted squarely in the lobby of the main office, at 1 Infinite Loop, is an impressive, 24-foot-wide array built out of 20 LED screens populated with 20,000 tiny, brightly colored icons.

As Philip W. Schiller, head of worldwide product marketing at Apple, describes how the wall works — each time an application is purchased, the corresponding icon on the electronic billboard jiggles, causing its neighbors to ripple in unison — he, too, becomes animated.

Normally reserved and on message, Mr. Schiller waves his hands back and forth and allows his voice to ascend into giddy registers as he speaks about the potential unleashed by the App Store.

“I absolutely think this is the future of great software development and distribution,” Mr. Schiller says. “The idea that anyone, all the way from an individual to a large company, can create software that is innovative and be carried around in a customer’s pocket is just exploding. It’s a breakthrough, and that is the future, and every software developer sees it.”

The App Store’s success — as much a surprise to Apple as it has been to competitors — has given rise to a new digital ecosystem. Today, hundreds of software aspirants, from individuals tinkering in their bedrooms late at night to established companies looking for lucrative new revenue streams, are jumping into the App Store fray.

And smartphone manufacturers across the board are trying to make their platforms more attractive and lucrative to bring in the kind of creativity and enthusiasm that Apple has.

It’s easy to see why: Although Apple doesn’t release specific financial figures for the App Store, analysts estimate that it generates as much as a billion dollars a year in revenue for Apple and its developers.

Mobile platfroms such as iphone and android are trunly game changers that will trasnform the economics and capabilities of many industries. None comes bigger than the healthcare sector that we are targeting.

December 2, 2009

Herd Mentality

Filed under: Entrepreneurship — Tags: — Raja @ 10:38 am

Fred writes about the herd instinct prevalent among the VC community.

One of things that always amazes me about investors is the way we move in herds. Developing markets are in, everyone invests in developing markets. Dubai blows up, everyone moves out of developing markets. Real-time is hot. Everyone invests in real-time.

I think there are two approaches that work in the venture business. One is the contrarian approach. When everyone wants to be a consumer web investor, do software as a service/enterprise. Go where the money isn’t.

Or you can just be earlier than everyone and anticipate where the herd is going to be next. That is really hard, maybe too hard to do well over a sustained period of time.

But I do believe that both of those approaches will get you top tier returns if you execute them well.

Following the herd, however, is not a recipe for good investment performance. And yet so many do it. That’s why they are called herds.

I think the same goes for the entrepreneurs. Contrarian approach can work well if you pick the opportuities smartly. There are large market opportunites out there that do not require a lot of money to get started and do not have flocks of startups running after. These are the blue oceans as described by Kim and Mauborgne in their seminal book Blue Ocean Strategy.  They are not easy to find else people will find them but they are out there. Smart entrepreneurs will find and go after them.

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