DISQUS

Thanks for the piece Anthony! The entire team here at PBworks is very jazzed about the release. Tired, but jazzed.

Even better, our customers have reacted very enthusiastically. Hopefully this new product will make their lives a lot easier.

I love Australians, and I love what these guys do.

Very cool! Let's meet up while you're in the Valley.

The question is, could a moron in a hurry mix up TWiT with some sort of Twitter TV show? My guess is, yes.

Any added transparency is almost always helpful. But I'm guessing that being on the "suspicious reviews" list is unlikely to discourage entrepreneurs from pitching to Matrix, Kleiner, Benchmark, USVP, Clearstone, et al. Heck, I'd love to be listed with those firms on just about any list.

It may very well be that startups stratify into two layers--those which have a shot at outsized returns, and those that don't. Entrepreneurship doesn't always have to follow the traditional Silicon Valley model...think of "The Millionaire Next Door." Most millionaires are owner/proprietors of low-tech businesses like dry cleaners and car washes.

It may be that we'll see a split between "car wash" startups and "change the world" startups. Which would reflect a natural maturation, though I must admit, I too prefer the "change the world"-style returns!

Everything ultimately depends on the outputs. The old model worked because the ultimate outcomes (widely adopted products, big-money IPOs and M&A) were large enough to pay for the front end of the process.

Right now, no one knows whether the ultimate outcomes for web services and SaaS will be large enough to pay for the front end investment.

Yet at the same time, the old model no longer works either; consumers and businesses are no longer willing to fork over the dough for an upgrade cycle or for perpetual licenses.

My guess is that the front end will have to be reengineered, with bootstrapping having to suffice until the entrepreneur has built a scalable business with a clear path to profitability (which, by the way, Digg and Twitter have not).

I would argue that the Hulu commercial should be considered the most successful, since it generated the most voting. There's no such thing as bad publicity!

When you're just starting out, PBwiki (http://pbwiki.com) is a good way to document what you're doing and collaborate with any co-founders. The business version with all the bells and whistles is free for 3 or fewer people, so you don't have to pay anything until you start to grow.

There's also a more basic free plan that you can use, but most companies prefer the extras on the business package.

Disclosure: I am an investor in and currently an employee of PBwiki

Could not agree more, Fred. The main reason people have these anti-retention policies is because it's so difficult to conduct a discovery production in most companies. But if you can produce the requested documents in 5 minutes of time, that reason doesn't hold water.

Hopefully, you don't get sued. But if you do, it pays to keep everything.

Great post, Fred. I added my own corollary:

"If you always treat money like it is your own, other people are more likely to trust you with their money."

People know that I am so cheap that I cannot bear to waste money, even if it isn't my own. And when people invest in one of my startups, they know I'll do my best not to spend their money unless it's absolutely necessary, even if it doesn't always make me the most popular guy in the office.

http://chrisyeh.blogspot.com/2009/01/always-tre...

I predict that a theme entitled "Flat Broke" would do well. Or my personal favorite, "Unemployed Bum."

On the plus side, your lifetime revenues of $92.44 put you ahead of many companies!

Best commentary ever!

I'm glad you had the stomach to watch the whole thing so I didn't have to. The parts I listened to in the car were cringeworthy, though I agree that Obama won.

Actually, I think it's the glasses. I showed your picture to a friend who is an afficianado, and he swears he remembers seeing you in some films during the early 90s....

I believe that $1MM comes from the practice of using "M" to stand for 1,000. That's why we use the term "CPM" for cost per thousand.

My guess is that "M" actually comes from the Roman numeral.

Fantastic post, Fred! I've been working with the venture industry since 1999 (and investing alongside VCs since 2003), and I've never seen anyone better explain the model behind one of their funds. Thank you.

The most shocking stat was that carried interest only ended up being about 2X the management fees. I always thought the ratio was much higher. Given this fact, isn't it important to the VC model to be able to make some money off the management fees?

It also emphasizes what a good deal the hedge fund guys get.

I blame the classic fundamental error of online advertising: Failing to understand that the value of advertising depends ultimately on its ability to influence consumer purchasing.

When the economy goes in the toilet, advertising should follow. Just because there are more impressions to go around, doesn't mean there are more advertiser dollars chasing them. For advertising spend to rise, so does purchasing.

Public market issues inevitably impact the venture market, though there is a definite lag. During previous downturns, venture investing has always been impacted. Those who deny this fact are like the real estate economists who repeatedly and loudly proclaimed, "Housing prices never decline."

However, this doesn't mean that we should stop making investments. Many of the best investments are made during bad times, when bold investors have less competition and can get better terms, and when portfolio companies don't have to worry about scores of me-too competitors getting funded.

The issue is that when investing during a downturn, it becomes even more essential to have a plan for raising subsequent rounds of funding. The "Field of Dreams" approach no longer suffices, and high valuations from the good times may turn into dangerous millstones when trying to raise more.

While I agree with your analysis, I don't think that the shift to the digital world means the end of the old media world.

As fragmentation increases, there is a countervailing desire for the simple, even the pre-processed.

Note how the rates for advertising on the few remaining "universal" outlets like the Superbowl, or overseas, Premier League Football continue to rise despite declining audiences, simply because they are now the only vehicles that can deliver a mass audience.

There is a place for lowest-common-denominator entertainment, simply because people are lazy and like to belong.

That being said, those who deny that a shift is underway have their heads in the sand.

Love it Zoli! I have tons of albums dating back to my childhood. This is phenomenal.

Good analysis, but I don't think it fully explains the situation. After all, things like Hotmail and LinkedIn are utilities, but seem to have achieved widespread usage regardless.

While you point out that the rise of so many recreational apps has a tendency to crowd out utility apps, it seems like you can get around it by using the email invitation systems of Hotmail and LinkedIn.

It just seems to me that folks are in a recreational mood when they use Facebook. This may change in the future (as our perception of the Internet has changed over time).

Andrew,

It seems like only yesterday that we met for the first time. You'd done a phenomenal job of establishing yourself in the Valley. Now it's time for me to learn some lessons from you on viral marketing!

What I've seen at PBwiki is that enterprise sales is still very much alive and well. While self-service revenue continues to rise, we get the bulk of our revenues from our enterprise sales group.

Andrew,

It's great to see someone actually break out realistic CPMs. I can't tell you how many entrepreneurs I've met who quote $20 CPMs in their business plans. A sure sign they've unfamiliar with online advertising.