1. TweetTV (http://tweettv.com)

They’ve collecting information from Tweets about TV programs, and doing some kind of analysis to provide people with recommendations.

The business model appears to be “be useful so that somebody acquires us”. That might actually work in this case.

Risks include the fact that they’re tied to Twitter. This means that if anything happens to the Twitter API, they’re out of business too. In addition, at some level of traffic, Twitter is going to start charging them, which might have cashflow implications. Never the less, this looks like a promising startup, and it might be one of the shorter term ones in terms of a potential buyout.

2. Valu Valu (http://valuvalu.com)

Not really a startup – they’ve been around since 2008, although it looks like they refocused their business model in 2010.

Valu Valu is essentially a web-traded hedge fund that specializes in ETFs. They have both fee-less and per-month-fee funds (obviously people need to put their own money in first), and use an algorithm that determines market sentiment from social media (there’s a number of companies doing that).

Not sure what their internal profitability looks like, nor do I have any idea whether they have a particular exit plan in mind. The nice graph says their funds are making money for their customers though.

3. Cull.TV (http://cull.tv)

An online music video channel. Looks pretty. I suspect somebody has put a fair bit of money into building this one. Not sure how they’re planning on making money (ads perhaps?) or what their timeline is for their exit strategy. Judging by sites like justin.tv, the model has “legs” though. Music videos aren’t my thing, but I’ll keep tuned here.

4. RAVN (http://ravn.com/beta/splash)

This one is coming later this week. RAVN is a local activity site that is in Beta (invite required). The “outside” interface is attractive – and cheeky – they allow users to play an arcade game for a chance to win an invite code. I don’t have enough info from the about content to work out exactly how the site functions, or what their business model is. Kudos to their design team though, and I’ll keep an eye out once I can get in.

Wahooly is launching on Tuesday. More on them below. Then the Facebook IPO will apparently be happening on Wednesday, which could potentially start off another big round of startup frothiness.

The overall level of excitement in tech is as boisterous as I’ve seen it in a number of years. Whether it has “legs” remains to be seen, but there appears to be a definite shortage of qualified people to go around. Over the past few months, the number of resumes sent my way has slowly dropped, and instead I’ve been receiving calls from head hunters and startups (although typically they haven’t bothered actually checking what I actually DO). It will be interesting to see whether things actually pick up economically (or even just in the tech world) over the course of the year.

Wahooly is an interesting riff on startup incubators, crowd-funding and viral marketing. The amount of attention that they’ve achieved in the past couple of months is larger than anything I’ve personally encountered. The basic idea is that startups give them a small amount of equity, which they then “share” among their users, in exchange for which the users promote the startup. The amount of “equity” given to each user depends on how effective the users are in helping to market the company in question, according to some internal formula. To avoid market regulations, it looks like they’re giving some kind of virtual equity to the users, rather than actual shares, and the users will only profit directly if there is some kind of liquidity event. Remains to be seen whether it will work (and whether they can keep it on the right side of legality), but there’s already a large number of users who have registered, and approximately 50 to 60 startups to begin with. My approach is to view it as a combination of an interesting source to find out about new startups (i.e. pure entertainment value), a possible deal flow source, and maybe, just maybe a couple of bucks on the side, somewhere down the road. In the meantime, I’ve been chatting with other users on two groups (here and here) that have been started on Facebook, and its been fun.

I’ll be posting regular updates with regards to Wahooly (and particularly the startups that are launching via their system) over the next few months. Also, two startups I’ve been working with are gradually getting closer to Beta launch, and I will have more to say about them as that time approaches.

International Pile of Money - Flickr Creative Commons - epSos.de

One standard piece of advice given to startups is to pick an industry that will permit scale, so that it is at least feasible that somebody in that industry at some point in time could build a large company doing it.

I saw a video on Yahoo Finance a while back where somebody claimed that Apple will be the first trillion dollar company (barring a brief stint by Cisco during DotCom).

Obviously it is hard to tell right now whether that’s true or not, but an industry that can support a trillion dollar company sounds like a good place to start, doesn’t it?

We know that this is possible in consumer electronics then, but what other industries would make this feasible? The goal here is to list industries that are big enough to support large companies (possibly even trillion dollar ones), and yet are still at least somewhat feasible for startups (potentially requiring substantial – but not unfeasible – capital).

I’m going to start with some of the obvious ones, just to get them out of the way. Then I’ll move on to extensions of existing industries that look like they could be large markets, and lastly I’ll throw in some speculative possibilities.

Please feel free to comment if I’ve missed any.

 Existing Industries

1. Resources. There’s few companies in the world that are as large as big mining or petroleum companies. The barriers to entry are significant for startups, but Glencore did it. I also want to thank @EzraSedek for pointing out that wood products (particularly as used in construction) are a huge percentage of GDP in many countries.
2. Pharmaceuticals. Developing a new consumer drug is an expensive proposition. There are lots of other entry points into the pharma industry though, and the technology needed gets cheaper and more accessible every year. A related industry that is still just forming is genetics, which has the potential to be huge.
3. Consumer hardware. The success of several companies in the Maker community seems to indicate that it is feasible to enter this industry as a startup. And its certainly a large (if fickle) market. The primary barrier to entry is probably marketing – selling a few hundred million gizmos is harder than making them.
4. Consumer products. Somewhere in the world, somebody is baking the cookie that will eventually lead to the next P&G.
5. Agriculture. There are any number of reasons why traditional agriculture is frequently a marginal business. There are a number of large-scale companies making money making food though. Everybody has to eat, right? A friend of mine tried a startup in this area a few years back. He had the right idea, but it didn’t succeed. There’s plenty of room for small but scalable ventures here though. Small greenhouses that are close to niche markets are one plausible entry point.
6. Construction. As many management consultants have pointed out, boring, stable industries are the best ones to disrupt. There are a number of companies working on ways to automate the building process, or to invent new and improved construction materials. Process improvements are another potential entry point for startups – there’s a lot of different steps involved in building, starting from design, to the permit process etc. Finding new ways to integrate or separate these steps may be profitable.
7. Financials. They’re not doing so well right now, but will eventually recover. Its easy to overlook how much innovation occurs in the financial sector – a few decades ago, there was no mutual fund industry, for example. Regulation is a major barrier to entry, but can be overcome. Several interesting areas include the “final mile” problem (i.e. how transactions between customers and merchants occur), digital wallets, and digital currency.
8. Robotics. The consumer robotics industry is still fairly small (vacuum cleaners aside), and its hard to say how large it will be. On an industrial level though, robots are already a huge industry (think: Japanese auto industry). Several million new industrial robots per year = scale. Competition and technical skill are the primary barriers to entry.
9. Chemicals. As part of the industrial sector, this is a highly cyclical, generally low margin, high startup cost industry. Could be ripe for innovation? One area that is starting to take off in parts of the world is to locate chemical plants in clusters, such that the waste products of one become the inputs of another. Chemical production through biotech is another.
10. Water filtration and environmental reclamation. Delivery of clean drinking water is already a huge industry (although nationalized in many places). Many countries in drier climes are investing huge sums of money to build saltwater reclamation plants or closed cycle systems for their cities. Startups would probably best focus on better and cheaper ways to filter water. Environmental reclamation, particularly brownfield reclamation is a large and growing sector. Again, finding ways to reduce cost is a good place to start.
11. Marketing/sales/advertising. Its a question whether this should be on the list – this is a large industry, but its total size worldwide is probably less than a trillion dollars, and it is highly fragmented. On the other hand, there isn’t a large barrier to entry.
12. Education. I’m not certain about market size, but world-wide there are still many places with literacy rates under 50%, so this is going to be a growth industry for a long time. In developed nations, there is a competitive battle to become more educated, in order to secure better jobs. Delivery of education is a hot area for startups right now (I’m working with one company in this area).
13. Software / IT. I’ve got this down at the bottom of the list because there is so much overlap between software and virtually any other business model. As a certain well-known individual has claimed, software is eating the world. Or large chunks of it, anyhow.
14. Other: Feel free to let me know!

Extensions of Existing Industries

Most of the following exist to some extent already. In most cases, the size of the market is still relatively small, but they have huge potential.

1. Micro-scale manufacturing. There are a number of cheap 3D printers on the market already (RepRap, MakerBot and many others), but this is still a very new industry. The potential is here to completely revolutionize the manufacturing of virtually all consumer products though.
2. Next-gen telecom. Ad-hoc wireless mesh networks are rapidly becoming feasible. When they appear, the traditional telecom companies will need to adapt or die.
3. Social everything. We think of social media as being fairly established, but it is really still in its infancy. Right now it has a firm foothold in how people talk to each other, and how they share and comment on content. Two areas that have barely been touched yet:
• Business processes. Yes, SalesForce has a nice P/E ratio. What I’m thinking of is a situation where your accounting software and ERP are integrated into Facebook; where you and your supplier’s supply chains are completely integrated through social media, such that your staff and theirs, and your customers can all collaborate transparently to build your product. Right now the only efforts I’m aware of in this area are job hunting and rudimentary business networking (done by people who only understand job hunting).
• Creativity. I’m working on several projects in this area right now, so I have to be careful what I discuss online! Current social media is great for sharing content, but lousy for working together to make it.

New Industries / Blue-sky

1. Nanotechnology. The last few years have seen the first “real” nanotech products, primarily focused on new materials (fabrics, paints etc). Right now the startup costs are unfeasibly high, but eventually the relevant equipment will become cheap off-the-shelf commodities, and then the real boom will begin.
2. Space mining. Currently it is economically unfeasible to mine asteroids for resources. The key to bear in mind though is that an average sized asteroid contains several trillion dollars worth of minerals. The first company to succeed will essentially have complete control over the price of virtually all metals, to the extent that they can then create a “moat” around their business by undercutting the profit margins of any potential competitors. Once space hardware becomes off-the-shelf, expect this industry to become hot.
3. Replacement for existing marketing methods. There are two current methods for letting potential customers know about your business: broadcast (i.e. a newspaper ad, a TV spot, or a banner ad) and targeted (i.e. Google AdWords, YellowPages etc). Eventually somebody will come out with a better model for matching up businesses with customers. What that will look like is anybody’s guess.
4. The next “X”. Be it Google or Facebook or any other big web company, eventually something will come along that is more interesting or works better. The Next Facebook could be Facebook itself in a future iteration, or it could be something else entirely.

Have I missed any industries? Am I completely off-base about some of the ones I’ve listed? Please let me know!

Flickr Creative Commons - daveschappell

The startup community has lately been enamored with the concept of “fail often, fail fast”.

The underlying notion is that companies whose business models aren’t functioning properly should “pivot” as quickly as possible, in order to minimize the potential cost of failure. In doing so, they hopefully eventually establish a business model that is market tested (if things work right).

The issue is that “fail fast” is a business aphorism, and like all such statements, it doesn’t always apply, and even where it does, there are subtleties.

What I’ve been noticing lately with startups that I’ve been working with are some troubling problems that result from blind adherence to this concept:

• It saps drive – i.e. people aren’t really working as hard as they should be in order to succeed, because “they can always pivot”.
• It causes impatience – it takes a few years to build a decent business (even something prone to networking effects, like an internet startup). Pivoting too quickly (I’ve seen this happen over days or weeks, never mind months) means that a company doesn’t really know whether what they’re doing would eventually have succeeded.
• It burns bridges – there’s only so many times you can scrap things and start over without severely damaging relationships with staff, customers and investors.
• It wastes resources – in the world I inhabit, most startups are starved for cash, and don’t have ready access to outside capital. A “pivot” can eat up significant resources that aren’t easily replenished.

As we all know, some failures can be extremely costly (not just cash, but also time and opportunity cost). If things aren’t working, closing the door quickly can be an effective way to cauterize the bleeding. I know this personally from hard earned experience. That doesn’t mean that entrepreneurs should romanticize business failures, eagerly seek pivot points, or precipitously act in ways that will hurt the people around them. The usual rules apply: caution and common sense!

We’ve put together a calculator (opens in new window) to try and assist anyone considering a group coupon campaign. Feel free to play around with its parameters to get a feel for when a coupon would be profitable – or not.

There’s also a new tools page that links to this calculator, as well as the previous CPC/PPC one. We’re open to suggestions regarding other tools that may be useful to businesses.

Over the years, I put together a spreadsheet that I send them when asked.

Not that I have any interest in running ad campaigns for my customers (or SEO work for that matter), but I have a vested interest in making sure that my customers are happy long term, and that often includes educating them with regards to topics like marketing their business online.

I’ve now built a web version of the calculator – hopefully this will be something that people find useful. The idea is that you can punch in some numbers regarding your market size and profit margin, and the calculator will output general recommendations regarding whether your business is a good fit for CPC campaigns.

Disclaimer: there’s a lot of variables involved in making a decision whether to emphasize CPC in your marketing mix. This calculator can’t factor in everything, and you shouldn’t rely on it to make your decisions for you!

You can access the calculator here.

The two companies are roughly the same size, so this would be a merger of equals.

It provides some temporary bandaid solutions for both companies executive teams and boards (I think there’s enough talent at the top between the two companies to address some of the gaps).

Yahoo! (correct me if I’m wrong) was part of the team that bought Nortel’s patents, so there’s already some kind of mobile intent. And RIM looks like it could use some bolstering.

The real rationale is fairly simple though – the combined company would have a number of options for strategic direction, and would be large enough to stand on its own if it so chose.

If it decided to sell out (hint: Microsoft), the combined patent portfolio (in addition to Y!’s advertising business) would ensure a far more equitable price.

SpaceX's Dragon Capsule - Flickr Creative Commons - Copyright Steve Jurvetson

I freely admit to pumping my fists in the air and yelling out loud when SpaceX has successful launches.

The first truly successful private space venture, what they’re doing is the start, the very beginning of the future of everything.

Now that they have a robust launch platform, and their Dragon capsule is already undergoing the testing regime to become human-rated by NASA, what will they do next?

Elon Musk, SpaceX’s CEO has announced on several occasions that their ambition is to put people on Mars. The following is a three stage plan – with profitability in mind – that just might get them there.

The underlying notion is to build a set of standardized components for each step along the way – much like the way the automobile industry works (vehicles filling various niches, companies to service them, refueling stations, leasing etc). This isn’t a new concept, and all of the players in this industry already understand this strategy well.

1. Intra-orbit

There’s a need for a platform (i.e. vehicles, standard refueling methodology, expertise, price lists etc) for moving things around once they’re in orbit.

This could consist of a robotic space-taxi for moving and refueling satellites (cheaper than building an launching a new one, and also cheaper than sending a person to do the job), collecting space junk (to be determined: who pays? UPDATE: looks like there’s a customer for this), or potentially a human-rated version.

With Bigelow Aerospace (and other companies) planning private space stations, the ability to reliably move things around in orbit could be profitable, and given that SpaceX already has launch capabilities, they may be able to do this more cheaply than others.

2. Earth-Moon

Once there is a profitable space-taxi platform in operation, extending its range to service Earth-Moon traffic (approximately one week round trip) isn’t a stretch.

Other key components might – although not necessarily – include standardized vehicles for landing cargo on the lunar surface, or launching payloads back to lunar orbit. These are not particularly complex devices compared to similar ones for landing on Earth; the lack of a lunar atmosphere, and its much lower surface gravity simplify the technology required.

It looks like NASA (and others, including the Chinese) are planning permanent lunar bases at some point in the next couple of decades. There’s a business case for governments outsourcing the back-and-forth trucking to a third party, allowing them to focus on building a base (although even that could be outsourced) and research.

3. Long Haul

Dedicated deep space vehicles are still a stretch technically. There’s a number of issues that haven’t really been resolved when it comes to transporting people for extended periods of time in outer space. Closed loop ecosystems aren’t quite there yet, and both radiation and lack of gravity are issues.

However, even for space probes, there could be a business case for a dedicated, reusable transport vehicle that remains in space permanently.

The specific equipment for a probe could be launched into low Earth orbit and then dock with a long-range transport vehicle that would take it the rest of the way.

Somebody would need to crunch the numbers, but launching a simplified probe without the need for extended propulsion could reduce development costs, and allow for larger payloads.

Once a long-range deep space platform is in place (i.e. standardized vehicles, refueling depots, cargo routes etc), this can gradually (and hopefully profitably) be extended to moving people.

My immediate response is “what’s your exit plan?”.

Usually this is met with a blank stare, which is when I follow my question up with “what I mean is, how do I sell those shares, and when?”. At this point, in 90% of cases, the other party is already starting to look panicky. I then usually politely excuse myself and leave.

It isn’t that I’m opposed in general to holding equity in a project that I’m working on. Far from it. The lack of an exit plan, however, implies a number of things about the person doing the asking though:

• No business plan (if they had one, they would probably have an exit plan)
• No cash (this makes launching a business an uphill battle from the start – I know this from bitter personal experience)
• No idea of valuation (and in turn probable lack of general business know-how)
• Possible utter lack of respect for the developer (more on this bel0w)

By asking a developer to work – possibly for months, or years even – without cash, the person isn’t paying much attention to how the developer will pay their bills in the interim, and how the developer will ever get paid for the project (i.e. by selling their shares).

What they’re saying is that they want the developer to assume all of the project risk, in exchange – maybe – for some pieces of probably worthless paper. Even worse, if things go completely pear-shaped, the developer might even wind up on the hook for company debts or legal issues. Even with paper, the developer can also still wind up with their equity diluted or out and out taken away – contracts can be tricky things.

Aside from all of the above, they also clearly haven’t thought through what happens when the developer runs out of cash (i.e. they leave, or they become unmotivated).

The converse to this situation is one in which a business has a clearly defined plan, cash on hand to pay contracts or salaries, and wishes to align staff with the overall goal – this is the only time when I would ever want to be holding equity in somebody else’s company.

Assuming that regulators let it go through, some interesting things are likely to play out:

• I’m calling stalemate or ceasefire in the patent war. Motorola has a very large holding of patents – probably sufficient to make Apple and Microsoft rethink their strategy regarding Android.
• I’m guessing that they won’t try too hard to fully merge the two companies. The cultures are quite different, and probably incompatible (although they’re both very engineer-driven, so maybe I’m wrong here).
• This is not good news for RIM. I was discussing this this morning with somebody who has a lot of connections there, and he thinks that unless they get their new OS out soon (and it is very good), they’re dead in the water.
• I’m also guessing that some other big software players are going to get serious hardware envy. This could trigger a real wave of M&A in the near future (which would be good news for the markets, for a change).

Interesting times…