Brad Feld

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My Newest Investment – Judy’s Book

Nov 22, 2005
Category Investments

Last week, Judy’s Book announced that Mobius led an $8 million Series B financing with existing investors Ignition Partners and Ackerley Partners and that I joined the board of directors.

The founder and CEO of Judy’s Book – Andy Sack – is a long time friend and colleague.  I was the lead investor in Andy’s first company Abuzz – which had a very successful outcome when it was acquired in 1999 by New York Times Digital.  Andy has been involved in several other projects with me, including successful ones like Quova and not-so-successful ones like BodyShop Digital (what were we thinking – two American guys who rarely to use deodorant and often wash our hair with bath gel investing in the dotcom spinoff of a UK-based health and beauty company?)  So – we’ve definitely had our ups and downs together.

When Andy founded Judy’s Book with his co-founder Chris DeVore, I didn’t really get what they were up to.  I understood CitySearch and the emerging / – so I thought I got local search.  I also understood the power of the lead fee model through my investment in ServiceMagic.  However, for whatever reason, I couldn’t synthesize these ideas into what Andy and Chris were thinking about.  So – I passed on investing in the first round, even though I hate to pass on investing in an entrepreneur that I’ve been successful with in the past.

Over the last year, I’ve paid attention to what Andy, Chris, and team have been up to.  I’d periodically go deep with them on their business and had a very productive day with them on a trip to Seattle several months ago.  We spent a lot of time talking about the challenge of user-generated content from a user-centric point of view (e.g. mine) and I described my fantasy world for creating content on the web.  As an active blogger, I obviously have a vehicle for generating content, but if I want this content to end up anywhere else (e.g. book reviews on Amazon or restaurant reviews on I’m reduced to a stupid cut-and-paste approach that typically loses all formatting and links.  I described a “write-once, publish-many” approach that I lusted after in my quest to populate Google’s carnivorous index with the word Feld.

During this same trip, Andy and Chris showed me two things – their traffic numbers and the v1 user-interface (Judy’s Book is currently in beta).  Both blew my socks off.  As a Judy’s Book beta user, I’d had plenty of complaints (and “constructive suggestions”) about the UI.  Even with the limitations, the traffic numbers – especially the growth – were stunning given the tiny investment that had been made in driving traffic to the site.  However, the v1 UI – which is coming out in Q106 – was spectacular and addressed many of the issues that I’d raised over the previous months of feedback.

As I pondered their progress and vision, I started thinking about what drove ServiceMagic’s success.  ServiceMagic started out in an unbelievably competitive market segment – with over $300 million of venture capital being invested in their competitors.  At some point, the founders of ServiceMagic turned their entire business into an algebra problem and became obsessed with figuring out the math.  At one point, one of my favorite partners referred to ServiceMagic as a “shitty little business” (at the time, they were loosing $500k / month, their revenue was anemic, and their projected revenue ramp was hard to believe).  Two years later they were profitable, growing 10% monthly, generating a prodigious amount of positive cash flow, and were the only company left standing as all their competitors has spent their money without any benefit, while ServiceMagic nailed the math.  We now regularly joke that we are always looking for “shitty little businesses” to invest in.

Judy’s Book is in the same position. “Local search” is trendy and overpopulated – both with older and newer players.  “Reviews” have been around forever.  The “lead fee” model isn’t new (although it is rarely mastered).  User-generated content is quickly overtaking Web 2.0 as an user-overused buzzword.  Data “at the core” vs. “at the edge” is entering into the debate.  Lots of VC money is getting poured into this type of problem. 

Fundamentally, whenever you are thinking about supply and demand on the Internet, you have a math problem to solve.  Effectively creating the drivers for both supply and demand – at the right price – and then figuring out how to turn it into money is hard – eBay, PayPal, and Google AdSense / AdWords are brilliant examples of getting this right.  Ironically, many new companies are focused on only one key variable (either supply or demand) with the expectation that “once we get big enough the other will take care of itself.”  One lesson I learned from ServiceMagic is that this is a fundamentally incorrect assumption.  Most of ServiceMagic’s competitors only focused on one of the variables (and most of them never actually sat down and figured out the equation that described their business premise.)  It’s not as simple as supply and demand needing to be equal – you have to start with the math problem, treat supply and demand as variables, and then iterate on the equation.  Not surprisingly, this isn’t a linear equation (especially when you add time into the mix), so you’ve actually got to put some thought into it.

While Judy’s Book is a long way from having things figured out, it’s a great start with a super-capable team that is now well-financed.  Enjoy the beta cycle for the next few months (and offer feedback) – when they launch v1 you’ll start to see what I’m talking about.