Entrepreneur's VC Pitch

Brad Feld lists questions by Chris Wand that entrepreneurs seeking venture capital should answer:

1) WHAT IS YOUR VISION?
- What is your big vision?
- What problem are you solving and for whom?
- Where do you want to be in the future?

2) WHAT IS YOUR MARKET OPPORTUNITY AND HOW BIG IS IT?
- How big is the market opportunity you are pursuing and how fast is it growing?
- How established (or nascent) is the market?
- Do you have a credible claim on being one of the top two or three players in the market?

3) DESCRIBE YOUR PRODUCT/SERVICE
- What is your product/service?
- How does it solve your customer’s problem?
- What is unique about your product/service?

4) WHO IS YOUR CUSTOMER?
- Who are your existing customers?
- Who is your target customer?
- What defines an "ideal" customer prospect?
- Who actually writes you the check?
- Use specific customer examples where possible.

5) WHAT IS YOUR VALUE PROPOSITION?
- What is your value proposition to the customer?
- What kind of ROI can your customer expect by using buying your product/service?
- What pain are you eliminating?
- Are you selling vitamins, aspirin or antibiotics? (I.e. a luxury, a nice-to-have, or a need-to-have)

6) HOW ARE YOU SELLING?
- What does the sales process look like and how long is the sales cycle?
- How will you reach the target customer? What does it cost to "acquire" a customer?
- What is your sales, marketing and distribution strategy?
- What is the current sales pipeline?

7) HOW DO YOU ACQUIRE CUSTOMERS?
- What is your cost to acquire a customer?
- How will this acquisition cost change over time and why?
- What is the lifetime value of a customer?

8) WHO IS YOUR MANAGEMENT TEAM?
- Who is the management team?
- What is their experience?
- What pieces are missing and what is the plan for filling them?

9) WHAT IS YOUR REVENUE MODEL?
- How do you make money?
- What is your revenue model?
- What is required to become profitable?

10) WHAT STAGE OF DEVELOPMENT ARE YOU AT?
- What is your stage of development? Technology/product? Team? Financial metrics/revenue?
- What has been the progress to date (make reality and future clear)?
- What are your future milestones?

11) WHAT ARE YOUR PLANS FOR FUND RAISING?
- What funds have already been raised?
- How much money are you raising and at what valuation?
- How will the money be spent?
- How long will it last and where will the company "be" on its milestones progress at that time?
- How much additional funding do you anticipate raising & when?

12) WHO IS YOUR COMPETITION?
- Who is your existing & likely competition?
- Who is adjacent to you (in the market) that could enter your market (and compete) or could be a co-opted partner?
- What are their strengths/weaknesses?
- Why are you different?

13) WHAT PARTNERSHIPS DO YOU HAVE?
- Who are your key distribution and technology partners (current & future)?
- How dependent are you on these partners?

14) HOW DO YOU FIT WITH THE PROSPECTIVE INVESTOR?
- How does this fit w/ the investor’s portfolio and expertise?
- What synergies, competition exist with the investor’s existing portfolio?

15) OTHER
- What assumptions are key to the success of the business?
- What "gotchas" could change the business overnight? New technologies, new market entrants, change in standards or regulations?
- What are your company’s weak links?

Decentralisation

Fast Company blogs a talk by Thomas Malone at Supernova:

Decentralization is the next stage in a progression of human organization that's been going on for thousands of years.

New technologies allow us to have the economic benefits of large organizations as well as the human benefits of small organizations. The reason that's possible is that technology is reducing the cost of communication to such a level that everyone in even huge organizations can have all the information they need about the big picture to make decisions without waiting for someone above them to tell them what to do. What will change things, though, is not the technology. It's what people want. We need to think more deeply about what we humans really want.

Let me give you a couple of examples. The first example is the Wikipedia, an open content encyclopedia that anyone in the world can look at for free. But anyone in the world can also change it. How could that possibly work? The way it works is that there's a list of recent changes, and frequent contributors are always watching that list. If people think a change is wrong or questionable, they immediately flag that page. Over time, it gets better and better. It's probably not as good as the Encyclopedia Britannica, but it's very, very good. This illustrates the themes of freedom and scale. Freedom because anyone in the world can contribute, but there's also global scale in the pool of people contributors can draw upon.

You may be thinking, what does this strange little encyclopedia that's not a business and doesn't make money have to do with business? Let's look at another example: Ebay. What most people don't know is that 150,000 of its sellers make their full-time living on Ebay. If those people were employees of Ebay, it'd be one of the largest employers and retailers in the world. But they're not employees. They're independent store owners, and they have all the freedom independent store owners have. Coupled with that, they also have global scale.

Why do these examples mean this is going to happen in more places? This is the next logical stage in a very common pattern in the evolution of human organizations. This pattern happened first in the ways humans organized their societies. People made their living hunting and gathering, and they lived in small, decentralized, egalitarian groups called bands. Then we saw the rise of larger and larger human societies ruled by centralized leaders called emperors and kings. Then, 200 years ago, with the American Revolution and the French Revolution, we saw the emergence of democracy.

What explains this change? There are lots of factors involved, but surprisingly, a single factor can explain all three stages: the declining cost of communication. When communication was expensive, the only thing you could do was have small, face-to-face decision making groups. With the development of the first information technology, writing, it became possible to organize people in larger groups. It took another information technology, the printing press, to make the third way of organizing societies feasible.

There are three main ways large groups of people can make decentralized decisions: loose hierarchies, democracies, and markets.

Kevin Werbach adds: "We need to get back so people are in the center. The challenge of technology is to get to this end point, where people feel like they're in the center but they are always connected. Specifically, layers might be a model. They explain the deep structure of the content of this conference. At the bottom, you've got the communications infrastructure. Then there's a logical layer of directories and identity. Above that is software. Then an interface layer, the APIs and semantics. And then there's the content itself: Media and information. All of these layers are facing decentralization."

When Telephony Becomes Software

Fast Company blogs a speech by Niklas Zennstrom, CEO and co-founder of Skype:

One key factor is that when telephony becomes a software application, it will live on the edges of a network. There will be no centralized control. Telephony development cycles are still very long. But their carriers' services are very much commodities, and there isn't much differentiation.

When we can change telephony to an application, we'll be able to change the economics of it. That will increase software innovation, new products, services, features. And that will be in the hand of small, nimble, software development companies. There will be higher competition, and the services will live on the Internet.

Another issue is peer-to-peer vs. client-server-client. What you will see is that virtually all voice over IP systems will look alike. And there will be incremental costs for managing the networks. Computing will move to the users, and we will see several benefits. We will see different economic models. If we look at ourselves as software developers rather than carriers, our marginal costs will be close to zero and we can provide these services for free. In the future, we will not be able to charge for telephony over the Internet. You will have to find other revenue sources. That could be anything: value-added services or advertisement.

There will also be increased robustness. If you have a switch go down or a gatekeeper, that's not a problem to the end user. They can go to the Internet and find another route of communication. That will not be a problem for a decentralized network. A third benefit will be increased quality. If I can to call Germany using an American provider, it would go to a server in America and then one in Germany. That means there would be latency. If it's a decentralized system, the call would go a shorter path between end points.

And another benefit would be privacy. End users will feel more safe. If you call them up using a decentralized server, who provides the service will not be able to record the conversation or calling patterns for any reason.

What are the implications for the telecommunications market? Before, services were integrated in the network. Now they become a software application. Before, we have an "intelligent network" even though it's not that intelligent. After, the network would be dumb and all intelligence would be at the end points. In the telephony world, because services define the network, it becomes a commodity. Telecom companies acquiring customers need to spend a lot of money to convince people their services are better or cheaper. Decentralized systems bring low or no acquisition cost. It's very easy for users to recommend services to their friends. We don't spend anything on marketing.

In the old network, voice is the main traffic voice. Now, voice can be marginalized in terms of volume. There will be other kinds of traffic. Now, we have regional players. With a global network, there will be truly global competition. The players don't need to be like AT&T. They can be very companies with very few people. And the last thing, which is most important, is that it will move from a provider-driven market to a customer-driven market.

Economically, value will shift to more productive areas. Disruptive innovation has to be good for the economy. That does not mean that the segment you're operating in will grow. The market may shrink, but there may be other opportunities. Today, voice represents about half of the revenue. As voice becomes free, it could be good for telecom operators because we could grow broadband penetration. As a telco, you can provide new services. There are other segments that will develop. On top of all that, there is the voice over Internet segment, which is not part of the voice segment. You don't make money on minutes. Voice over IP will be significantly smaller. It has to be, or the innovation did not serve any purpose.

I want to talk a little about regulation. Decentralized voice over IP has an implication on regulation. The regulators have been trying to regulate this saying it's the same service, but it's not. You regulate a market that is subject to monopoly. You want to make sure consumers are protected. There is no such monopolist in voice over IP. Traditional telecom regulations will not help the market grow, will not help consumers, and will not drive regulation. You should not and you cannot apply regulations designed for network operators to software providers.

RSS Consumption

Steve Gillmor writes:

Where is an effective filter that will bubble useful information to the top of the RSS queue, where it has a chance to be read?

To begin with, we need to harness the information we already possess about who and what we read. Rather than relying on content creators to signal already consumed material, let's let the RSS aggregator (offline or online) filter out the links, but not the supporting commentary, to already consumed posts. Instrumenting the browser to record what is read, in what order, and for how long is trivial, says Adam Bosworth, in the context of his Alchemy caching architecture.

Next, let's incent that cache, mirrored on both server and client, to save posts that appear of interest or import not just to me but my peers on the network, as represented by the RSS feeds that I and they are subscribed to. If Jon Udell, Dave Winer, Doc Searls and 70% of their subscribers find the RSS BitTorrent thread compelling, then please send a message to my cache engine not to throw that post away, no matter whether I have ever heard of the poster or the horse they rode in on, the idea he or she is promoting.

Next, compare all the posts and posters and produce a weighted priority list that takes into account variables such as author, subject, updates, Technorati cosmos tracking, the amount of time I have before the next meeting on my calendar, and so on, producing a post rank based not just on my attention but the attention dynamics of those I choose to do my filtering with and for me.

It's at this point in the conversation where someone usually brings up the privacy problem. Let me be perfectly clear: I don't want to invade your privacy. I am completely uninterested in what you personally think about me or my ideas, or whether you are a Republican or a Vegan, or how much money you have or spend on what. In fact, I am adamant about not wanting any personal information of any kind.

Luckily, it's easy to filter that stuff out of the conversation. Remember, I am really only interested in the aggregated data, the attention metadata that models the group of like-minded people who are interested in some or many of the same things I am. There's safety, and power, in numbers. If I can identify the characteristics of a group of people who are interested in something, the chances improve that, if an investment were made to produce a solution to that need, the resulting product or service would prove successful if the affinity group were made aware of its existence.

Notice that I don't need to know anything about you personally--you could even insulate yourself through RSS brokers from identifying yourself as the purchaser of a product derived from this ecosystem, as a condition of your willingness to provide the attention data in the first place. Why would that benefit you and the seller? Because the company could save millions on image marketing and broadcast advertising, passing the savings along to you.

In essence, the contract is between the affinity group and the marketplace. The customer opts in to the RSS feed, and out if the relationship is abused. Privacy becomes a feature of the service, not a bug in the system. Trust becomes the coin of the realm in the RSS for Food ecosystem.

Metacritic

Fred Wilson writes about Metacritic: "The Internet is a great place to check out what people think of music, movies, books, DVDs, videogames, restaurants, hotels, etc. The best place I've found to do this kind of work is metacritic. They take real reviews, apply a numerical value to them, and then aggregate them into a single score that they call a metascore. They also show a short summary of the reviews sorted by the metascores. It's brilliant. You want to see the worst review. Just go read the review with the lowest metascore."

Would to good to build in this kind of feature into Contentrix, the next-generation content platform that we are thinking about.

TECH TALK: Tech Trends: India Action: Invest in Broadband and the Internet

India can be a big beneficiary from the commodisiting of IT. A combination of technologies has the potential to bring down the cost of computing down to Rs 700 ($15) or so a month for hardware, software, support and connectivity. This is the key to opening up access to tens of millions of Indian families, students and employees.

Investing in the Internet and broadband is as important as investments in roads, ports and airports. The digital infrastructure needs to be built to complement the physical infrastructure in India. One of the biggest missing factors in India is the availability of broadband. A recent TRAI report on recommendation for increasing the penetrating of the Internet and accelerating deployment of broadband in India says: “While internet growth rates in India have been flat, and at times declining over the past three years, other countries like Korea, China and Malaysia have been doubling and tripling the size of their internet and broadband subscriber base. India currently has 0.4 internet connections and 0.02 broadband connections per 100 persons, while Korea has 25 and China has 1.4 broadband connections per 100 persons, with its current level 50% higher than what it was just six months ago. Korea has achieved its success story in a span of less than five years, going from less than 1 broadband subscriber per 100 persons in 1999 to the levels it has reached today. By 2002, nearly 30% of their GDP was transacted on broadband. The lessons that India learns from these examples can be applied to our current situation to realize the same explosive success.”

India needs competition and investment in the newest broadband technologies to bring down the artificially high tariffs – estimated to be 1200 times more expensive as compared to South Korea on a GDP per capita comparison. A mix of technologies like DSL, wireless, cable and satellite can help in building out the broadband infrastructure in India. Having an affordable always-on connection will transform the way people use computers. This will provide the necessary fillip for the creation of local and relevant content and software.

As the broadband infrastructure comes into place, enterprises in India need to start thinking of 1:1 computing – a connected computer for every employee. This also necessitates rethinking of their business: how would workflows and processes be different with a computer on every desktop? Answering this question and putting in the right solutions internally will help boost productivity in India’s industrial sector, especially among the small- and medium-sized enterprises. Today, even email is not considered as a mission-critical application in many enterprises. This is the mindset that needs to change with the commoditisation of IT.

Tomorrow: TCO Focus

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