Ah – the joy of a meme. Today’s meme is “The Web Is Dead.” Whatever. My favorite article about this in the past 24 hours is The Tragic Death of Practically Everything – this is basically what I would have written if I’d had time today.
This latest round apparently started with the new Wired cover story “The Web is Dead.” Yeah, I read it. My reaction to it was “whatever.” Are books dead? Is email dead? Are memes dead?
Whatever.
My partner Seth Levine has an outstanding post up today about the freemium model. It’s titled Pricing models, the freemium myth and why you may not be charging enough for your product and is worth going and reading right now.
He covers a bunch of stuff, nicely divided into the following topics:
Seth has become “the pricing model guy” at Foundry Group – we’ve been dragging him into every pricing conversation whenever they come up.
I have one counterintuitive thing to add – it’s often easier to raise prices early on than lower them. While many pricing curves assume a decay curve toward lower prices over time, early in the life of your business you should consider gradually raising prices until you hit a natural price ceiling. Grandfather your early customers into the old pricing for a period of time (three months to a year) – they’ll feel like they’ve gotten a great deal for being an early adopter. Don’t forget to thank your early customers for their support.
Interestingly, this is the opposite of some very popular (and successful) pricing strategies, such as Apple’s for the iPod and the iPhone. High early prices for premium demand followed by steady price reductions over time as new products are introduced. If you are an established premium provider of a high demand product, especially for a physical good (e.g. a phone) vs. a digital good (e.g. software), this approach makes sense, both from a manufacturing supply perspective as well as a volume manufacturing perspective. But, if you are a digital good, you have a lot more variable manufacturing capacity (as long as you know how to quickly scale) and more margin to play with (ahem – usually 99.9%.)
Seth makes an important balancing point that you shouldn’t start out with too low a price point. This is especially true if you aren’t willing to raise prices to their natural ceiling over time. But, if you have no idea where to start, and have the courage to increase price quickly as you find early demand, consider a relatively low price point “guess” and then move it up until you find a ceiling.
On Wednesday I did two interviews with Mark Suster – one for This Week and Venture Capital and then one before the LaunchPad LA event. TechZulu recorded and broadcasted the second one. The first three minutes are kind of funny as we didn’t know they were recording so we were horsing around talking about funny drinks and the legalization of a particular type of medicine.
The actual investor that happens over the next 45 minutes is about TechStars, entrepreneurial communities, and some of the stuff I invest in. Mark does a good interview – he can have me back anytime.
Now that my complete and total infatuation with my Mac has worn off and shifted into delight and love, I’m starting to explore the weaknesses of the Mac for not other reason than I’m trying to figure out where the real rough edges are.
So – if you are a Mac user, I’m very interested in the things you don’t like about the Mac, especially the things you hate. I offered up the Address Book as a burnt offering the other day. Anything else out there that blows?
I’m totally wiped out after a full day in LA that included a board meeting at Oblong, a 75 minute interview on This Week in VC, strange drinks at Volcano Tea with some LA entrepreneurs, another interview on TechZulu before the Launchpad LA event, and then a Launchpad LA event. Mark Suster – who is everywhere on the LA entrepreneurial scene – was my gracious host, interviewer, and master of ceremonies for the day. I predict he sleeps well tonight.
I’ve got nothing left to say since I’ve already said it at least twice today. So – I’ll leave you with the This Week in VC interview.
I’ve been all Mac for the past six weeks and in general I’m loving everything about it. I am, however, starting to bump into a few things that are stinky.
The Mac Address Book is one of them. Mail and iCal are good, but Address Book just sucks. I’m constrained by an Exchange server on the back end which is nicely abstracted away across all my devices (multiple computers, iPad, iPhone). My actual contact database is just fine, it’s just that the Address Book app is incredible weak.
Is there a known alternative out there other than using an entirely different mail client such as Entourage, Thunderbird, or Zimbra? I just want a better Address Book – I don’t want to change Mail and Calendar.
No, Ross, you can’t have your $100 back.
I’m on a six week rhythm in Seattle for the three boards I’m on up here – Gist, BigDoor, and Impinj. While I don’t have them perfectly synced up, I’m hopeful that I will in 2011. In the mean time, today full of BigDoor and Gist.
It was an absurdly beautiful day in Seattle. When the sun is out, this place shines. The day started out at the new Founders Co-op office where BigDoor is located. It’s about 33% full but that’s going to change next week when TechStars Seattle begins and fills out the place. It’s great space, in a great location (near the new Amazon campus), and is covered with IdeaPaint.
Everything about the BigDoor meeting was great. It was a tight, focused two hours. Since we invested about six weeks ago, over 300 companies have signed up to try BigDoor’s system and I expect 10 will be in full production by the end of the month. If you are looking to add game mechanics to your site, it’s the easiest and fastest way to do it. They’ve just rolled out a new website that explains it, along with a refreshed / simple pricing model that is free up to 100k API calls / month. Oh, and they served sushi for lunch which just rocked.
I got a ride across town to Gist where we spent most of our time on the August and September product rhythms (Gist is now on a monthly product focus – everyone in the company focuses on one specific area of the product and the next two months are filled with goodness.) Gist has also refreshed their site – if you haven’t ever tried it or haven’t looked at it in a while, go give it a shot – it’s grown up nicely.
I’m off to LA for an Oblong board meeting tomorrow and lunch by their amazing in house chef followed by an appearance with Mark Suster on This Week in Venture Capital live at 2pm PST followed by some LaunchPad LA stuff that Mark has pulled together.
All of these companies are doing well so its a fun action packed two days on the east coast. And yes, I’m way over stimulated after a month in Homer with just Amy.
The last two episodes of the Founders 2010 series are up.
Episode 11 is called Hard at Play. Special guests include Howard Lindzon (StockTwits CEO), David Brown (one of the co-founders of TechStars), Rob La Gesse from RackSpace (and the sponsor of this video series), Lewis Gersh (Metamorphic Partners), Josh Fraser (Eventvue co-founder – TechStars Boulder 2007), and scenes from the annual ping pong tournament.
“Hard at Play” The Founders | TechStars Boulder | Episode 11 from TechStars on Vimeo.
Episode 12 is called Demo Day. It’s a double episode as it’s the grand finale of the TechStars program and the beginning of the rest of the lives of the companies that participated in TechStars this summer. It’s a winner – just watch it.
“Demo Day” The Founders | TechStars Boulder | Episode 12 from TechStars on Vimeo.
My partner Seth Levine has a detailed post up today titled Trada – from the beginning that describes the creation and financing of Trada. Foundry Group is the seed investor in Trada and Seth’s post describes one example of what I think is effective VC seed investing.
The meat of the funding story follows:
“Of course coming up with the idea is the easy part. Executing against that idea is another matter. In this case neither Niel (nor I) had any interest in creating a traditional syndicate to fund the company. Instead we quickly put our heads together about a financing (we like to say it was over beers, but the truth is more mundane – we hammered out the details in a 10 minute conversation in the conference room of the Foundry office). We decided that we wanted to bring in some experts to help us with the business and together flew around pitching the business to a small handful of strategic angel investors to pull together a small syndicate that became the initial Trada investor base. Niel and I hammered out a second financing in similar fashion (again around the Foundry conference table, this time without the need for an angel roadshow). It’s a great example of how we like to work with entrepreneurs – especially those that we have a long history with. We like to be involved early (in this case before an idea for a business even existed) and we think of our angel investments as a down payment on a subsequent investment in the business (we’ realize that we need to give early businesses some time to develop).”
The short version is that the seed round was figured out in ten minutes – this was the “Series A”. A few strategic angels were added to this round. We did a second financing by ourselves at an increased valuation – this was the “Series B”. Recently Google Ventures led the a $5.75m “Series C” round.
The terms on the Series A and B were straightforward as Niel Robertson, the founder/CEO of Trada is a sophisticated entrepreneur (Trada is his third company) so he had no patience (nor did we) for silly, complex early stage terms. More importantly, the two key aspects of any deal – price and control – we able to be negotiated quickly between Seth and Niel, partly because of their long history working together which was built on mutual respect and trust.
When we funded the Series A (the seed round) of Trada, we fully expected we were at the beginning of a multi-round journey. Seth does a great job of explaining how it got started – I encourage you to read his post for an example of one of the financing cases where I think a VC can be an excellent seed investor.