Books

The Innovator’s Dilemma (Incredibly important)
The Lean Startup
Delivering Happiness
The Four Steps to the Epiphany
The Long Tail (Especially relevant for Tech Entrepreneurs)
Gamification by Design (Especially relevant for Tech Entrepreneurs)

Blogs

Both Sides of the Table
AVC
Chris Dixon
Venture Hacks
Startup Lawyer
Ask the VC

Select useful readings
Convertible notes financing
Relaxing to be productive
How you should hire for your startup
Employee options and raising funds
Employee Equity
Employee and cofounder equity
Understanding equity distributions in startups
When to sell your company

You can also access an excel template you can use if you want to in order to keep track of your VC/Angel pipeline.

http://www.scribd.com/doc/114328793/VC-Scanning-tool

There’s another category of useless activities entrepreneurs could engage in and I only mention them because I personally find myself trapped in them; Dopamine Tasks. They are these lists of to-dos that an entrepreneur creates for himself, his co-founders or his team at large that are not the team’s most pressing priority. The key difference between those and what Eric ries was referring to is that Dopamine Tasks are more on a day-to-day basis and thus can be very dangerous. Time is the founder’s most valuable resource and his/her most scarce one too.

While in the “building the product phase” you might find yourself wasting half a day designing your business cards, well, you’re not really meeting customers yet until you have something to discuss. While there is a big deadline on delivering some designs you might find yourself sweating on building your AngelList profile and trying to make it perfect, well, you ain’t raising for another 3 months! And the examples can go on forever. Small tasks that make you feel you’ve been productive today but aren’t really your priority now.

Sometimes as a founder you could find yourself creating all these small tasks on a day-to-day basis to make you feel that your day was productive. Furthermore, because being a founder is a very unique situation where you have to define your own work vs having it defined for you in a big corporation, you sometimes wake up wondering “ok, what should I do today”. 99.99% of the time there is more than your day can fit but it is always what to prioritize that is the problem. These 2 factors combined with trying not to waste a lot of time thinking about what to do can lead to creating laundry lists of non-important items.

I’m trying to watch out for those because I’ve been trapped in them often lately and I recommend you become aware of them too.

It is very clear that Wall Street money –not only Silicon Valley money- still believes that the web and mobile technological revolution can still yield prolonged periods of high growth for select companies. Amazon is obviously among the top ones believed to be positioned to benefit from the tech revolution. Amazon is a technology driven company thus benefits from the perks that come with that; low distribution costs, fast-to-market innovation, etc. Contrary to many other technology companies that do not have a transactional revenue model and rely predominantly on ad revenue (ex: Facebook) Amazon has a very valid revenue model. In fact, Amazon has multiple. That probably drives a lot of the Wall Street optimism about Amazon. Companies with transactional revenue models have enjoyed healthier valuations (compare LinkedIn’s performance to Facebook).

On the other hand Jeff Bezos has managed to create a company that is very secretive and at the same time spends on expansion into every possible direction. This has made Amazon very hard to analyze and understand by investors and analysts alike. The assumption that many are making nowadays is that Bezos is investing in the future and that all these investments in all kinds of platforms will eventually pay off. These investments have significantly taken their toll on Amazon’s profitability. This wishful thinking is significantly driving Amazon’s share price. I’m not saying this is wrong wishful thinking or that Amazon is making bad investments. To the contrary I think Amazon is investing in the right platforms.

Is the share overvalued? I don’t know but I would not buy it.

Equity is compensation for risk taking and sacrifice. If you want to put 10-20 hours then why would an entrepreneur hire your vs a free-lancer who would cost him/her a fraction? The decision to jump in the deep end of the pool and believe in a startup vision is not easy. But it also cannot be “half done”.

Entrepreneurs who started companies should also try to avoid such situation as much as possible. It creates more problems than benefits.

All this is great but there are 3 critical issues with digital and social media customer feedback loops so far:

• Most of customer feedback is very unstructured, usually qualitative text-based and very hard to analyze
• The vast majority of these customer feedback loops are reactive in nature i.e. the business proposes something and tests customer feedback
• Consumers act mostly individually even while being a part of a larger ecosystem like Facebook groups or Yelp reviews are not able to rally their social power towards their product needs

What is missing is a tool to:

• Allow customers to close the feedback loop in a very structured and actionable way that enables businesses to listen more smartly
• Incentivize consumers to be proactive
• Allows users to actively engage their social circles as well the relevant businesses

Basically we need an online platform that enables consumers to voice what they want when they feel the need/desire. This same platform will enable businesses to do something considered only a dream for marketers; connecting to the consumer who does not only want the product, not only realize that she does but also actively seek it. The Proactive Consumer!

I decided to start with Twitter because I frequently get into discussions about Twitter with friends and colleagues. The most frequent questions/points I hear are:

-       “Why would I use Twitter? I use Facebook status updates”

-       “I love Twitter but I actually can’t understand why I do, it’s just another status update”

-       “Is Twitter going to last? Facebook will eat it”

In this post I’ll try to analyze the following:

-       What social need does Twitter really address?

-       What are the different sides of Twitter’s social platform? And what is Twitter’s value proposition to each side?

-       Why I think Twitter is going to win in the long-term

What social need does Twitter really address?

Twitter is one of the prime points of Web 2.0 where users create almost all the content while the platform provides an architecture that facilitates the creation and sharing of this content.

In analyzing the social need that Twitter addresses one has to ask the questions “For whom? And in what situation?” The social need that Twitter satisfies for a user while tweeting is different from the social need it satisfies for the same user while browsing others’ tweets. For the first situation I believe that the key social need that Twitter addresses is defining a personality. This applies to individuals, brands, artists, public figures (politicians, famous business people), etc. All of those entities use Twitter to project a certain self-image even if they have different motives. These motives can range from seeking friendship (a college sharing an experience with her friends), proving a skill (a famous VC sharing an idea with his followers) or simply promoting sales (a movie broadcasting a trailer on Twitter). All of these users are trying to define a personality for themselves by sharing with “others” via Twitter.

On the flip side of that, the other social need that Twitter addresses is finding interests. Twitter’s architecture is around interests not personal relationships. It allows for one way following and through Twitter’s simple interface people follow what interests them rather people they have a certain relationship to. This could be anyone from a friend to The Economist.

So basically Twitter addresses:

-       Building one’s self image

-       Allowing everyone to build his/her own interest graph

What are the different sides of Twitter’s social platform? And what is Twitter’s value proposition to each side?

To assess the Twitter value proposition I will first try to map the different sides of the Twitter platform in order to assess its value proposition to each side. A summary of the different sides of the Twitter platform and the players in its ecosystem is in Figure 1.

(In case you can’t see the figure here’s a link:http://www.slideshare.net/adhamadel/twitters-platform-sides)

Figure 1

Definition: Third party developers that build applications on top of the Twitter platform

Value Proposition:

• Develop end-user applications/gadgets
• Support brands and content producers with analytics and Twitter management

Brands and marketing agencies

Definition: Marketers. Brands who want to communicate with consumers and use Twitter as a market research platform (through developers). Also agencies who need to master Twitter to provide services to brands they work with

Value Proposition:

• Communicate with consumers
• Market research

Public figures

Definition: Not only politicians and stars but also business figures etc. So not only Obama and Kim Kardashian but also Fred Wilson

Value Proposition:

• Communicate with the public/followers

Content producers and publishers

Definition: From The Economist to Puzzlish and everything in between

Value Proposition:

• Distribute content
• Communicate with consumers
• Market research

The value proposition to end-users is obvious from the previous part of the social need Twitter addresses. We can see that Twitter actually has a strong value proposition to each of its platform sides. Especially if Twitter is able in the long-term to build strong analytical packages (or let third party developers do that) that enable companies to better conduct market research and have customer feedback loops in real time.

Why I think Twitter is going to win in the long-term

Overall I believe Twitter has very strong long-term potential as a service that provides big value for all sides of its platform and that addresses a real-life process and makes it more efficient and easy to use.

Let’s look at Twitter’s overall competitive position:

Homing and switching costs

Users of social networks would incur high multi-homing costs both initial and ongoing if they adopt more than one social network. These costs include the time and hassle of figuring out how the network works, building a list of friends, logging into different networks, etc. Furthermore, switching costs are by definition also relatively high. If one thinks of Facebook as the primary social network (because of its user base size and high user engagement) Twitter has managed to mitigate these costs for its users by integrating with Facebook so now all what you do on Twitter can also show on your Facebook page if you want to. Users now can rest assured that even those who do not follow them on Twitter (or who do not use Twitter) but are in their social circle will also be updated indirectly through Facebook. In my opinion this significantly reduces the multi-homing costs for these users.

Market and network effects

On the other hand, I believe Twitter enjoys a winner takes it all” market. The reasons are first, Twitter’s product is highly differentiated from other social networks and second, it enjoys very positive network effects on multiple sides of its platform.

Twitter is different from the other social networks. Let’s use Facebook as the primary example (since it is the largest by far).

• Twitter’s architecture is around interests not personal friendships of relationships
• It enables one way following rather than 2-way friending
• Mostly public not private

The concept of being structured around interests which the user can follow whether these interests are his friends or a magazine or even Paris Hilton builds a very different graph from the one Facebook (and most social networks for that matter) is building.

In terms of network effects I believe Twitter enjoys positive and strong network effects for multiple sides of its platform mostly driven by the increase in the number of users. The value of Twitter as a platform increases for developers, brands, public figures and content producers with the number of users. It’s a multi-sided direct network effect. The opposite eventually happens where its value for users also increases with more and more of the other sides of the platform joining the ecosystem.

Twitter also enjoys a very strong brand network effect. Its own brand is being strengthened more and more by celebrities indirectly endorsing it by simply using it because of its vast number of users. From Obama to Ashton Kutcher, they are all leveraging the Twitter network and indirectly helping it build its brand. It’s essentially free celebrity endorsement

What is the long-tail phenomenon?

There are far more niches in the demand for any product than there are hits; this is the heart of the long-tail concept. The long-tail as a phenomenon is basically that for every product or service there are hits which are extremely popular and those are very few and there are also niches (the tail) which are so many in number but each enjoys a small size of demand. A classical example is top 40 songs versus indie rock.

A key assumption –which has been empirically proven in several markets- is that these niches when combined form a significant portion of the market.

What the internet did is it made the long-tail –as a market concept- possible to implement and monetize by providing a new marketing channel for niche products at a much lower distribution cost than the traditional brick and mortar channels. These niches suddenly became profitable due to this much lower cost. To illustrate, the main reason why a store like Wal-Mart does not have many indie movies on its shelves is simply the high cost of this shelf space compared to the small number each of these movies will sell. With the availability of the Internet and its unlimited shelf space (at say Netflix), the cost of distribution drops dramatically.

The above analogy of low distribution costs does not apply only to goods and services that can be digitally delivered like movies, music and content in general but also to physical goods. Thousands of items are sold through Amazon and eBay which the vast majority of retailers would have never carried in their stores. Regardless of whether the story of the broken laser pointer that was eBay’s first sold item is true or not it still clarifies that there is a market out there for almost everything even if it is a very small market.

What is fueling the long-tail?

The main forces behind the long-tail phenomenon are simply the democratization of production, powerful aggregators/distributors and filters than enable the consumers to find the niches they are looking for. Blogs are a classical example of democratized production while Amazon is a great aggregator for millions of items otherwise rarely found on retailers shelves and Google & the recommendations available on almost every website from Pandora to Netflix are exactly an example of filters. Without these three forces, niche products (again think Indie rock band whose album would sell only 1,000 copies) would not be easily produced, stocked for distribution nor found by you. If Pandora did not have this awesome recommendation engine you would not have found this random song for this random Indie band that actually liked a lot.

Some examples of the long tail

Netflix is arguably the greatest manifestation of the long-tail. The online video streaming and DVD rental service adds thousands of movies that only a handful would watch but since their cost of adding is almost negligible with the ever-falling cost of storage and bandwidth it is still worth it. This allows Netflix to attract all those consumers who are not necessarily interested in Batman or Lord of the Rings but interested in an emotionally quirky French movie that never made it to the theatres in the US because it would not have been profitable. The recommendation machine in Netflix works well to filter and suggest content to users driving even further demand.

Google is capturing the long-tail of advertising. Their AdWords program allows even the small advertisers to tailor an advertising campaign within their budget. With its targeting mechanisms (filters) Google can also offer better efficiency to those “tail” advertisers within a budget which was impossible before.