Private/Public Company Too Polar, Need a New Option

Posted October 20, 2009 by Elia Freedman
Categories: Business/Economy

There was a great spitting contest a few weeks ago that I greatly enjoyed. It went something like this: a company named Mint, a web-based personal financial manager a la Quicken, was purchased by Intuit for $170 million. Jason Fried, a well-known bootstrap proponent who runs 37 Signals, said that it’s too bad that the investors would force Mint to sell as here was a chance for a lasting brand. A few people then shot back calling Jason bad names and saying there was no way the investors forced Mint to sell, which is true (straight from the mouth of one of the lead investors). (read here and then here)

The reality is the founder is young (under 30) and saw a chance to cash out and wanted to do it. The investors had no choice but to back him up, even though they saw much greater returns if the company waited into the future.

Tough problem, of course, for the entrepreneur. A chance to live a life without worrying about cash! (My assumption on his feelings.)

And that’s why, as has been suggested in the past, it’s time for a national exchange outside of the stock market. We need middle ground between private and public companies, a market where only qualified investors can participate, meaning that you’d have to be in an asset class to participate in angel and VC rounds of funding.

This would have allowed the Mint founder (or the investors) to pull some value out of the investment and allow a company a chance to be the enduring brand it might be destined to be.

Sidekick Disaster: Bad for Users; Great for Web Apps

Posted October 13, 2009 by Elia Freedman
Categories: Mobile/Smartphone

At heart, I’m a contrarian. When someone says it can’t be done, my overwhelming urge is to prove it can. So when I heard the news that Microsoft or T-Mobile lost user data for as many as 1 million Sidekick users over the weekend, I thought while that’s horrible for all those Sidekick users who were affected, it’s great news for all of us who are working on web apps/mobile web.

Here’s the summation: the Sidekick does no desktop backup like the iPhone and BlackBerry, it only backs up to a web service (the “cloud”) and all those servers reside at Microsoft. Microsoft screwed up and lost all that server data and then, when devices connected to the server, it wiped the device clean.

Now this has created an avalanche of controversy about web apps and people are starting to ask whether web apps can be trusted. After all, this makes it possible for one company to screw everyone.

And this, I think, is perfect. Controversy! For those of us creating web apps, we need some controversy because it means web apps have gone mainstream!

With every generation of the web, we’ve had controversy. In the early days of the web it was fear of entering a credit card on the web. Copious amounts of film and paper were wasted discussing this lunacy. (That’s right: you’ll hand your card to a stranger in a restaurant who walks into a back room with it, who enters it into a machine that transmits the data across a telephone line to the… wait for it… servers of some bank.)

Then came Web 2.0 and the fear-mongering of online predators and putting your drunken pictures in plain view of your boss received copious amounts of press, except this time it was digital so all we wasted was electricity.

I’ve been feeling like the mobile web and web apps were left out. Where was the controversy? Finally it’s happened!

For the record, this is just more fear mongering and like all fear mongering, it has a hint of truth to it. The truth is that the risk of trusting someone else with your data means you are at their mercy. The problem is this has always been the problem! How many times has Word ate my documents? Photoshop crashed half way through editing? My PalmPilot screwed something up and wiped contacts off my device? Had a hard drive crash? Too often to count!

So has web apps/mobile web hit the mainstream? Not yet — this controversy isn’t loud enough. But we are getting closer. And that’s a good thing for everyone.

BlackBerry Alliance Program An Insult To Developers

Posted September 30, 2009 by Elia Freedman
Categories: Mobile/Smartphone

RIM rolled out their new Alliance Partnership program this week and it’s just another sign, to me anyway, that RIM is missing the boat. Before I could write my own blog post, though, Ronen Halevy over at wrote everything I was thinking (here and here).

Here it is in short: RIM’s historical focus on enterprises has caused short-sightedness on the part of consumer efforts (and by consumers I’m referring to everyone not in Fortune 2000 companies and government). Instead of developing the software to cater to consumers, it seems, they completely defer any consumer relationship to the carriers and hope for the best. The examples are everywhere:

  • Why do OS updates come from the carrier instead of RIM, and why do we have to go find them rather than those updates being pushed to us?
  • Why isn’t BlackBerry’s App World pre-installed on devices and why doesn’t this service work over wifi on the devices that support it?
  • Why do enterprises get RIM’s impressive BES software for syncing with mail, contacts and calendars but consumers get the poorly created and implemented BIS implementation which doesn’t even support push email?

And now we have the new Alliance Program, as if the old one wasn’t bad enough. The old program was pay $2,000 per year to get pre-release software, a couple of devices, a cheap BES system, and access to the BIS-B wireless sync protocols. It also included tech support with your own technical guru.

For two grand, I thought we would get marketing, too, but every time RIM had a chance to help us out, they passed on the opportunity.

Now comes the new program. For the price of $2,000 plus thousands more to buy 45 participation points, we get the same benefits we had before. So the price is higher and we have to jump through more hoops than writing a check. We get points by getting people to buy BlackBerry’s, sending company reps to RIM’s dev conferences, and writing case studies.

Personally, I’m insulted. This program isn’t about us, the developer and what we can bring to RIM and how RIM can help us be more successful. It’s about what RIM can get out of us. Instead of rolling out a program that gives us better placement on the web site, elevates our standing in the App World Store, and helps us promote to the vertical markets that buy our software, we get no additional benefit for more cost.

To me, it’s just another shining example of how focused on enterprise RIM really is. The $2,000 badge of honor from RIM and access to technical support means something to enterprise developers. For consumer markets, it’s no help.

I really hope RIM gets their act together. They really have developed amazing devices for those who care more about communication than infotainment. And given their dominance in enterprises and government, they have a great opportunity to win the prosumer markets that a product like FastFigures is focused on.

A Weekend Without the Internet

Posted September 16, 2009 by Elia Freedman
Categories: Other

My wife’s father and aunt grew up in Northeast California, almost at the Nevada border. It’s high desert country, lots of cattle and farming. The largest town in the area, Alturis, has a population of 3000. The nearest McDonald’s is in Klamath Falls or Susanville, each one and a half or two hours away.

We drive down every year over the Labor Day weekend. My wife, her brother and her aunt still own some property in a private area there and over that weekend is the property owners meeting. It’s a very pretty area. We saw deer running down Main Street. Lots of birds and pine trees.

But what we didn’t have was an Internet connection. My cell phone had EDGE network access, so I kept up to speed on the rest of the world, but I couldn’t get my laptop to connect to the motel’s wifi.

I intended to get some work done while we were there but almost everything I do depends on the web now. I write apps for the web, I write documents and do spreadsheets on the web. I’m used to being able to do a search when I need to, check email, Tweet and read news.

I did plan ahead, just in case, bringing a business book to read. At least in my work life, I’m really dependent on the Internet. Back home in Portland, Oregon, I never have a problem. I have some connection the entire time. But in the country it’s a different matter entirely.

Oh well. It’s good to check out occasionally.

A New Perspective on Fund Raising

Posted September 2, 2009 by Elia Freedman
Categories: Success Factors

Starting a company is a giant science experiment. We develop a series of hypotheses and test them in as controlled a way as possible, making changes to the hypotheses as we go.

Generally, those hypotheses fall under a number of basic categories:

  • Product X solves ______ problem.
  • Product X has ________ customers.
  • Product X will make money by ______.
  • and so on.

If a company is successful in answering these questions, they tend to grow big. And those that can’t answer the basic ones don’t grow at all (or very little).

In the 12+ years I’ve run Infinity Softworks, I’ve observed more than a few stupid ideas get a ridiculous amount of money. I thought large amounts of funding at an early stage of a company’s life — even $500,000-$2 million — was the wrong approach. Too many companies spent beyond their means or used it to grow a business before they knew what business they were in.

But I now believe I was wrong. Early stage funding is not intended to grow the business; it’s intended to answer the hypotheses. And by focusing on answering the hypotheses, it positions the company for growth.

So how much money does a company need? The answer is enough money to run the hypotheses and prove that there’s a business that deserves more funding (or can grow from revenues). I underfunded Infinity Softworks with our latest endeavor with web, iPhone and FastFigures, and put ourselves in an interesting position as our first hypotheses proved false.

This leads to obvious second question: where does the money come from? Is it internally funded or does a company raise capital from angels and VCs and others? That answer is it depends. I have a good friend who runs Creative Algorithms, a husband and wife team creating apps for smartphones. They’re able to run their hypotheses out of their own pocket and, given the size of the business they are trying to grow, it wouldn’t make sense to raise funds. I, on the other hand, raised funds. The size of the experiments — coupled with the business potential — required it.