Everybody wants to be special here (In praise of pseudonymity)

In real life I am who I am. As Boon and Watt once wrote: "Real names be proof."

But does a name, a real name, an identity, capture the full richness of personal self-expression? I'm not sure it does - indeed I believe that one of the promises of the Internet is that online social networks can allow for different personas - ones for different times or different subjects or different modes of expression. And this is an amazing thing, for one identity does not fit all. It's also amazing because it allows for the full spectrum of human expression.

Identity, like most things, is not monolithic. It's rich, varied and textured. And our online modes of expression should allow for that texture, particularly in what we name ourselves while expressing.

I use tumblr to express myself through music - songs, photos, quotes, randomalia. I go by the pseudonym newspeedwayboogie - not using my real name - because, well because I don't want to be Andy Weissman over there. I want to be someone else, the part of me that is obsessive compulsive and ridiculous about another subject matter.

So over there I chose to use that pseudonym, and not be anonymous, but instead to have a persona that reflects that subject and my expression of it - and nothing more. Sure, that expression may have resulted from late night dorm room shenanigans, but so what? And as a service tumblr makes it easy - and in fact I think encourages - the use of pseudonyms as personas. I've met some fantastic friends who use pseudonyms - Miles Smiles, Vast and Grand,Further From Age. Most of the time I have no idea of the real identity of these people, and I don't really care, because I can tell you so much about them and who they are as people. Their identity is secondary - their expressive persona is primary.

Certain services in fact thrive in creativity in proportion to their embrace of pseudonymity. Examples include tumblr, but also many more - Live Journal, Twitter, Canvas.

Chris Poole - Moot - says that anonymity enables users to express uninhibited creativity in a completely unvarnished, unfiltered way. "Anonymity is authenticity" is how he puts it. I think he is really talking about pseudonymity here - as Jyri Engstrom recently wrote: "A service that aims to become the default arena for online social exchange globally should allow pseudonymity (which is really what we're talking about when we talk about anonymity) and, in some cases, even encourage it."

Or, as Jyri also puts it: "Were you ever the nail that sticks out, at some point in your life?" To which I would add, that nail reemerges in life, often and always. People need places to express how they stick out while being able to assume other personas, for whatever reason they think is appropriate.

Paul Westerberg (in perhaps his greatest song) wrote that "Everybody wants to be special here" - which has always struck me as the most astute observation about human nature. The best online services are the ones that allow us to be special there, and name ourselves whatever we want in the process of expressing how special we are.

How I Get Excited About New Ideas

My friend Anthony recently wrote about a six step process he uses to determine whether a new idea he finds out about, or a new company someone is starting, or a new product being released, is interesting to him.

He emailed and asked me how new ideas catch my attention. For me, it's not a methodical list, but there are certain aspects of ideas, or companies, that always seem to grab me:

1. Can I relate to the problem being solved: does it solve some rather large problem that I, or someone close to me, has experienced and that I (or we) have explicitly acknowledged how the solution would make our lives (and the lives of many others) easier or better. In other words, does it matter to me? Similarly, if it doesn't matter to me specifically, does it look like it may matter to alot of other people. Did the inventor of this new idea create it to solve a problem of their own.

2. Can I relate to the pleasure being induced: does it make me happy, smile, laugh or cry? Do I feel an urgent need to call my wife asap and tell her about it? Is this something I'll mention at the dinner table that night ("guess what I saw today"). Did the inventor of this new idea create it to produce a pleasure they wanted to experience themselves.

3. Does it do something in a new and unusual way? Does it make me think (or say, upon initial glance) "Oh shit that is really cool." Does it let me experience something in a completely novel way.

4. Does it look pretty? If it is a web service do I remark to myself how amazing the things that can be done in the browser these days are? Am I sure that there is no way that I - who can barely draw stick figures - could ever conceive of something that looked and worked like that.

5. If I am thinking about something as a business, does it seem like it could be a company and business that captures and exchanges value in a new way; is there some business model whereby it can generate revenues and profits in novel and unusual ways - in ways that are consistent with the grain or fabric of the use cases it engenders, and not simply as bolt-ons.

6. Is it something that I could not imagine being done five years ago? Does it feel like something that can remain unusual or unique five years hence.

7. Did I encounter this idea, service, business, in a completely random, unexpected and serendipitous way.

8. If its about music I will sine qua non be interested ;-)

How do new ideas catch your attention?

The Fitness Function of a Venture Capitalist

"The fitness function of a venture capitalist — meaning the metrics of performance, the report card — is pretty pure. You show up with money, and one way or another more money has to come back than goes in." Bing Gordon

Oftentimes it's best to reduce things to the base elements, in order to really understand things. I am fascinated by the transformation that has occurred over the last five years in the funding of early stage technology companies, and the resulting transparency around this process. Angel investors, seed investors, micro-VCs, angel lists, secondary markets, no-cap convertible notes, liquidation preferences, etc - these terms and concepts, once arcane, are now discussed and debated openly and with vigor. And this transparency leads to efficiency.

But it can also lead to a form of confusion. For the job of a professional investor is simple - to gain a return on money. To deliver outsized returns relative to the risk - some level of returns greater than can be achieved by, say, investing in public liquid markets.

A venture investor can achieve this with numerous tactics: stage focus, sector focus, geographical focus. Expertise in financial matters, marketing, relationships. Friendly, fair terms. Incubation. Doubling down. All these matter, but they are merely tactics.

The strategy, in turn, always remains the same - "more money has to come back than goes in." I like to say it as "own large pieces of very big companies." Either way, the spread between the money that has gone out and that which has come back is the measure of success, and it is the only measure of success for a venture investor.

What's Old is New

The folks at the Tribeca Film festival were kind (or silly) enough to ask me to write something for their Future of Film blog.

Which I did - entitled "The Faster We Go, The Rounder We Get."

I'd been thinking alot about how users are getting content, how they are experiencing it. It seems that in an on-demand video world (which if we are not there yet, we will be soon), the problem that is being solved is "what can people watch." But the real challenge, however, is not what can people watch, but what should they watch. I think that social media will solve this, to me much more interesting, problem. My thesis that I wrote about over there is that:

Social media changes everything – at least it should. So how can it change the way catalog content is distributed and experienced?

And the solution may just be that social media can make events out of the back library of content that comprises our experiences, our passions and our lives.

Between Thought and Expression Lies A Lifetime

Lou Reed wrote this line (my favorite lyric ever) in the context of relationships (I think). But it's much more applicable than that.

Ideas for new businesses are amazing, wonderful, creative things. What makes ideas so interesting is that they are unbounded by limits - they operate solely in the realm and palette of a person's mind. As far and wide as one can imagine, one can develop an idea for a new business that solves a huge problem, that scales infinitely, that is wildly profitable. The possibilities are limitless.

And therein lies the problem with new application ideas and expressions - they have no limits. They are too broad, too creative. Ideas are too good.

It's what comes next that is so much more interesting - the point (the "lifetime") between taking that idea for a new application or service and actually expressing it in a real form. Building it. Prototyping it. That's when your ideas are subject to limits (technical, execution, market, financial) and those limits actually test your theses and tenets. Prototyping shows you where your assumptions were wrong, maybe, and how your idea may be even better than you thought. Most importantly, it subjects your idea to numerous unanticipated constraints.

I was with a friend the other day who is planning to build an awesome new service that I would use and pay for - it solves a real problem, it scales, the market is right for it. I desperately want him to prototype that service - I want him to see where his thinking is off, how some user/testers will actually use it, how web technology can't scale to this problem. I want him to know where he is right and wrong in his thinking.

This step - the expression step - is just that, a step. It's interim, it's likely to never see the light of day. But it is the most important, and the hardest one.

Because it takes something limitless and subjects it to real life constraints, the point between idea and execution can last a lifetime. But without moving onto the expression, there is nothing.

Get Up, Shower

Tim Devane - who we luckily hired last year - wrote an essay about how he, a kid right out of college with little work experience, landed a job. Tim is a wonderful writer, but his top line tips are so insightful. I am summarizing below, but please read the whole thing:

1) Get Up, Shower

2) E-mail Constantly

3) Move Where You Want To Work

4) Don’t Stop Believing

5) Can’t Knock The Hustle

Maximizing Serendipity

The title of this online space is "Maximizing the serendipity around you" which comes from Nassim Nicholas Taleb's The Black Swan, and is as much of a universal business rule I've ever heard and followed.

To me it means that you have to increase the chances of something random happening to you, you have to increase your chances of being lucky. It fits in with another theory I have, which is that it takes alot of skill to be lucky. It takes alot of effort to get yourself into the right place so that when luck, or randomness, or serendipity strikes, you capitalize on it.

I suppose that means there is no such thing as luck, and we should all start instead adding "Good serendipity" to our salutations.

Adherence to this principle means you have to not only embrace randomness, but you have to increase your chances of randomness happening to you. But this is hard to do because it implies a lack of structure and form, and formlessness can be lethal. In another context Peter Coyote once wrote: “When you live without the limits of law or convention, you must supply your own. If you don’t, or can’t, formlessness becomes terminal.”

So how do you maximize serendipity?

I believe there are two main qualities that define a successful entrepreneur or investor. The first is pattern recognition. The ability to use experience or insight from past patterns to have a viewpoint on future markets. "I know how this movie ends."

The second quality is conviction. The gut, visceral belief that what you are doing is right regardless of what anyone else thinks (and indeed opposition often increases levels of conviction). "I don't care what anyone else thinks."

These two qualities are in tension and inconsistent with each other. But that's what makes the combination so powerful. Indeed that very tension can be the boundary line between success or failure, and it's a tightrope.

But if you get that balance right, you are in the best position to maximize serendipity. Which means you are in the best position to be successful.

Escapin' through the lily fields I came across an empty space

There has been much debate in the last week over platforms, holes, products and ecosystems.

All of it made me think back to my youth, the days of AOL, around 1995-1997. Back then, one of AOL's innovations was a publishing platform (Rainman - Remote Automated Information Manager) which allowed thousands of content producers - of all sizes and skills - to publish into AOL. As a result, back then the breadth of content on AOL was remarkable and filled every possible niche. It was a wonderful, rich, vibrant community of content. I joined AOL back then because Geoff Gould published his Grateful Dead forum on AOL (keyword: Grateful Dead, I recall) - one of the first online communities. Indeed you can still see today he uses the same modified AOL logo he used back then:


As a platform, this worked precisely because AOL provided the two key components every platform must deliver to create value: distribution, and monetization. AOL offered distribution through its thousands and then millions of users. It delivered monetization through its pricing scheme: users paid AOL for Internet access by the hour ($6.95 or $9.95, I can't recall) and content providers got paid a percentage of the hourly rate related to the time users spent on their AOL pages. It worked, it worked well, and literally thousands of flowers bloomed (think about the analogies to the Facebook platform, or iTunes store, or Windows OS - offering distribution and monetization always works). The platform succeeded . . . .

Until it didn't.

The Internet business changed, completely, in 1996 when the AT&T WorldNet Service began offering"all-you-eat" (unlimited access) pricing for Internet access. AOL (as an ISP) soon followed suit, as it had to do.

This destroyed AOL's original platform, as it could no longer share variable usage revenues with its content partners. We spent much of 1997 renegotiating thousands of these deals. The revenue stream for these guys ended. I can only imagine the outrage and headlines and hating if this happened today. But AOL too had to change its business.

A funny thing happened, however. Smart content providers realized they could - indeed had to - move to the nascent web. Over there - using HTML - much more rich content experiences and applications and commerce services could be launched. And over time more users would migrate to an open web entry point. The good ones created good businesses, even some iconic ones (early on we negotiated hard with the NY Times - an early AOL partner - as they considered moving their content off AOL - and onto the web!). Others failed. AOL had to flip its business model outside of access fees into advertising, commerce other services. Web browsers became the primary presentation layers, not the ISPs.

Innovation didn't die - instead it flourished into new, related and unrelated, spaces.

History tells us that markets get flushed, always and often. It doesn't matter what we call them - holes, ecosystems or whatever - but things change, business landscapes alter their foundations, and companies themselves are often the catalyst for those changes. But each time good execution survives, and more opportunities are created than those that are filled. It always happens this way.

Comin', comin' around, comin' around, in a circle, indeed.

Users Experiences

I was thinking this morning that one way to create a service of real value is to ensure that the way a user experiences that service is commensurate with the value you are trying to deliver to the user. Feels like a simple idea but harder in practice.

For example, Foursquare. Stated mission: find your friends. With the mobile app, iphone version at least, for a user to get that benefit - finding their friends - requires only two taps of the thumb. Nothing more. Which makes sense - simple user experience here not only works perfectly but is in fact consistent with the initial effort required for a user to have a successful interaction with the service. Of course, there is much more richness to the application - but the initial, baseline experience is in line with the benefit of the services' goal.

Which doesn't mean that simplicity in itself is the answer to the design of users experience. Contrast Hunch. Stated goal: customized recommendations that get smarter the more you use it. To get those recommendations requires some effort by the user - there are a number of user touch points - questions, search, likes/dislikes. As I see it, Hunch does not shy away from presenting to the user a bunch of inputs and experiences. Indeed, the services' value proposition (better recommendations) is of such high, personal value that it implicitly and explicitly requires a deep experience for the user to get that value. Again, an experience consistent with the stated mission.

Finally - Dailybooth. Really only two things to do over there - take a picture, or comment on a picture. But that's precisely the value proposition: document and share your life with others. The experience and functionality are consistent with the value a user gets.

So while I am able to check in to Foursquare while at breakfast and see who else is there, all in 5 seconds with only my thumb, I am going to spend 10 minutes back at my desk figuring out what pair of headphones to buy. And later on spend a few minutes catching up with Jon's life, in pictures and words.

To me, the key innovations of these three services, to use just a few examples, are simply in how they present user experiences (and the design that comes along with that) that are completely consistent with the value their users receive from experiencing the services that way.

Venture Innovation, or why the First Round Capital Entrepreneur's Exchange fund is good

There is an amazing wealth of innovation around early stage venture financing, most of which developed in just the past few years.

There are new models of creating companies out of innovation: Seed Camp, Y Combinator, Tech Stars are just three, all with different foci and core strengths.

Then there are new sources of financing - groups or people that literally didn't exist as early stage financiers just a few years ago: O'Reilly AlphaTech Ventures, True Ventures, Jeff Clavier, First Round, Ron Conway & Co., Roger Ehrenberg, Chris Sacca, Dave McClure, TAG/Saul and Robin Klein etc. I call these "quasi institutions" because while in some cases they are or have traditional ventures partnerships, they act very entrepreneurially - they move fast, they move often, they are heavily collaborative, they focus on the seed, they are very active, they have alot of fun. In many cases they are run by operational entrepreneurs themselves. Their existence alone is innovative.

Then there are new economic models - Founders Collective being the most prominent now, ("None of us have ever been bankers. We like products and building stuff. We show up on time and don't email during meetings").

On top of this framework First Round announced last week that they have set up an "exchange fund" for founders of companies they have invested in. Josh Kopelman writes that the fund will:

"allow First Round Capital entrepreneurs to contribute a small piece of the stock they own in their company -- and share in the upside of all the other companies."

I don't know any details of this "exchange fund" and absent those it's hard to know how it will work, but in any event I think this has the potential to be truly disruptive and innovative for at least five reasons:

(1) Removes some entrepreneurial stress. Again, Kopelman: "When I was an entrepreneur, I remember the feeling of having all my eggs in one basket -- and it is our hope that this fund will remove some of that stress." The idea being that removing some of this stress can lead to the companies these entrepreneurs run executing better and more efficiently.

(2) Promotes more effective sharing and collaboration amongst the First Round companies. I think FR is better than most at providing opportunities for their companies to collaborate, yet this now creates a framework for these activities. Of course you are going to work harder and help your neighborly First Round company - there are shared economic benefits. Every entrepreneur in the portfolio now acts as a part time EIR.

(3) Strengthens the First Round brand and reputation. Yes, they are a solid team. With a great set of companies. And track record. Now when they invest in your company you have an opportunity to share in the greater network. Competitive differentiation.

(4) Incentivizes (sic) the First Round team to continue to be great investors. For now not only their reputations and money are on the line, but they themselves need to work harder to ensure their portfolio is filled with great companies. If not, the value of the exchange fund is diluted. This it the most interesting to me - part of their business is now tied directly to their entrepreneurs' collective success. Josh writes that the fund is for the benefit of their companies - it is, of course - but FR just put into place a structure that I think will make the FR team work harder, and better. Brand equity is hard to build, and even easier to lose. They've now got a pool of founders' equity that they can enhance, or devalue. Talk about putting yourself on the line.

(5) Venture funds by structure are money managers. They get paid to manage a pool of money and then get a piece of the upside on the returns of that money. Very simple, well known. As a result, there is no inherent value in a fund qua fund - it's a collection of assets the value of which is driven by the partner's track records and reputation. But with the exchange fund, First Round as an institution above and beyond the asset management has value. The decision a founder makes to take money from First Round may be driven in part by this exchange fund, and how well it may do.

There are undoubtedly issues with this exchange fund. But, it's a great example of a virtuous circle - each component of the program strengthens and enhances each other. Founders may want to take money from First Round because of the program; the companies in the portfolio have incentives to collaborate more efficiently; the First Round team has to work harder to ensure the collection of companies is quality; the whole brand is enhanced.

In short, innovative.

You Can't Make Word of Mouth Viral

"Virality is something that has to be engineered from the beginning…and it’s harder to create virality than it is to create a good product. That's why we often see good products with poor virality, and poor products with good virality. The reason that over $150 Billion is spent on US advertising each year is because virality is so hard. If virality was easy, there would be no advertising industry."

Josh Kopelman

This is self-evident, of course. But raises another issue, a common misconception, that bugs me.

Positive "word of mouth" - the passing of information person to person - is an important (maybe the most important) component to growing a service. However its not the same thing as service being viral. Virality at its purest and most scalable form means a service that through it's very usage advertises and spreads itself.

Word of mouth is casual, yet the active sharing of brand - positive or negative experience with a good or service. Virality is causal, yet the passive compound effect of interconnections being maxed out.

They are totally different things.

The Pay Pal service is viral. So is Venmo. As is bitly. A user's usage of those products - without anything more - markets the products themselves. This has nothing to do with word of mouth, which is not viral, and is also not directly trackable from the usage itself.

Viral is interesting because of the compounding network effects that result from the usage. With the right use case usage can explode, literally, and it can be measured.

In the past few years a newer, and potentially more interesting, type of virality is emerging - virality via API. Because the idea of virality is about interconnecting nodes, where a product or service is built using the API of another - the API providers service spreads, automatically. TweetDeck utilizes the Twitter API; TweetDeck's growth and usage thus increases Twitter's usage, without any explicit action by the user. The nodes interconnect. API sprawl enables virality (as Greg Battle once told me)

But this ain't word of mouth. Word of mouth doesn't scale. Virality does.

The Golden Road (to Online Distribution)

The technology industry has a seeming lack of institutional memory - the constant cycle of invention and reinvention while barely looking to the past. It's so optimistic in nature.

But we sometimes need to look to the past to sharpen our pattern recognition. We started betaworks by specifically looking at the past, and using that look back to come up not only with a specific and focused view of online media but also a corporate structure to enable us to optimize our participation in future innovation.

Don't yet know how fully right or wrong we are, but we believe we are in the very beginnings of the fourth major road (or phase) of online media distribution and innovation (where the words "online" "media" and "distribution" are each broadly defined). Each of these roads bleed into one another, to the point where its hard to tell when one is transforming into another, but generally each phase seems to last 10 years before the next emerges at scale:

1. The first phase was the ISP phase - where content and distribution were optimized (monopolized?) thru the ISP onramps. ISPs provided access and attempted to provide services and content.

2. The second phase was characterized by portals (AOL and the like) - the idea and philosophy that all your services and content are located under one roof ("come here for everything").

3. The third road IS search (characterized by the idea “you don't need to remember anything, you just need to know where to find it”). This is why the Google UI is so much more radical than given credit for, it represents a media philosophy that was materially different from everything that came before it.

4. And the fourth road - which is barely just beginning now - is real time social distribution. The idea that “if something is important it will find me” - a constant flow of content and ideas with applications and services supporting the distribution of content ("content" again broadly defined) from person to person initially and then with intelligence, filters and who knows what else. This represents the final breakdown of the traditional media content producer/distributor/consumer buckets, which now blend into one another. Indeed, there are no more consumers, there are only “users”. As a result, this transformation is utterly disruptive to the whole media value chain. Think Twitter and Facebook obviously, but also think Boxee, pubsubhubbub, Etsy, Kickstarter, 20x200, PostSecret, Dogster, and many more.

This is where distribution - the linchpin of content - gets flattened, pushed to the edges.

I don't think information (content) wants to be free. I think it just wants to be distributed friction-free. Which is why this fourth road - social distribution - has so much potential. It opens up distribution in ways that never existed before.

I Want To Be A Platform

We all want to create or invest in platform businesses - those that enable other businesses or participants to add features, content, build other things into/onto the platform, extract associated but not directly related content therefrom, thereby creating infinite scale and value. And valuation.

But it doesn't work so easily. I submit that the best platform businesses evolve, they are not created sui generis. Further, they evolve from applications - applications as representative of specific pain points and use cases.

Applications can and do become platforms. It's extremely hard for platforms to begin as platforms and at the same time find the specific problem they are solving, in a way that encourages usage and enhances the users' experiences and leads to growth.

So another core betaworks philosophy: it is infinitely harder for a platform to spawn value added applications than it is for an application to evolve into being a platform.

We've seen this many many times before, for example:

AOL - began as chat/email application, then evolved into "portal" platform.

Yahoo - initial pain being solved was navigation - application was a directory, also later evolved into portal platform.

Twitter - application= messaging, now becoming a communications and media (news, links, more) platform.

Google - search application into media platform.

More specifics: we built switchabit as a content routing platform, a way to move any piece of content from its base format (mp3. jpg, blog post) and location to another service. Nice, decent usage, but too many and varied use cases (flickr to twitter, tumblr to blogger etc etc) which I believe got in the way of mass adoption. It did, however utilize a URL shortening service (bitly), which solved a very focused pain. Thus that application was born separate from the platform. Similarly, Twitterfeed does one thing - as a content routing application - moving one piece of content to one or two other places. Result: 350k publishers and about 600k feeds running through the service. Maybe it will now move to platform like attributes. Maybe not but it has proven it can solve a specific pain and scale.

In practice, then, for us when we build a service, or invest, we look closely at the use case to determine what kind of application it might become. We don't expect any evolution, though as dreamers we hope that there will be one. Show us an application, not a platform.

Don't Get High On Your Own Supply

"Lesson number two: don't get high on your own supply" -- Elvira Hancock

At betaworks we try to (over) simplify some key principles (no business development, for example) to operate our businesses, and look for inspiration for those ideas in disparate pockets.

One of our key learnings is that while it's really fun to live inside the startup bubble whereby your application is filling a huge problem and therefore is going to change the world, it's even more important to remember what happened to Tony Montana in Scarface when he didn't listen to the sage advice of his mentor Frank Lopez (Robert Loggia) and wife Elvira (Michelle Pfeiffer) - don't get high on your supply, i.e., don't believe your own bullshit; don't live in your own bubble; if you are going to use your own product do it as a user not as a supplier.

Innovation is happening at such a fast pace that if you can't step outside your own world you will not see it clearly. Stepping outside your own world can mean don't believe what other people say or write about your service - good or bad - it is the use case that matters, not the chatter. Experience your product as a user would - not as an insider. Don't believe that if you disappeared tomorrow anyone would care. Question the key assumptions you think are vital to your perceived success.

Most importantly, also don't forget Lopez's first rule, the corollary to the first:

Never underestimate... the other guy's greed

Your competition might be hungrier than you are, particularly if you are high on your own supply.

No Business Developement (or, Hackable Business Development)

We have a saying at betaworks - "no business development allowed."

Of course, it's tongue in check and we don't really mean it (well, maybe we do), but it represents the application of one of our core business scaling principles. Namely, find a way to scale usage of a service or application that doesn't rely on formal business deals. Those deals - "business development" as it were - take too many cycles relative to unknown value to be truly effective at the early stages. Too long to find the partner, get to know them, structure and paper a relationship, and then implement.

Instead, we focus on ways to work with other services, companies or applications at the data level. Where complementary data sets - utilized via API - can enhance or supplement or supercharge your service, and can be implemented quickly and without any company-company intervention or interaction (no human contact allowed). Jon Steinberg has an awesome piece called Hackable Business Development which is in some ways profound in its simplicity but represents something vitally important:

If you’re interested in a platform or service from an intellectual, career, or partnership prospective, you simply must build on it.

"You simply must build upon it." Just fucking do it.