Top Ten Legal Mistakes Made by Entrepreneurs

Harvard Business School has written an excellent article about the top ten legal mistakes made by entrepreneurs.  It looks like an incredibly-valuable list.

The Case for Color

With Color's recent funding of $41 million, a lot of people are skeptical of whether that windfall of money can be justified for an infant startup.

While I share some of that general skepticism permeating the web, I've also thought of some justifications for such a large investment in these circumstances:

• There is a revolution happening in photo sharing. 
  Sure, the mobile app they cobbled together may seem vacant and useless, but the company's future will be much more than a simple app or website - they will control the entire photo sharing ecosystem, which transcends websites, apps, devices, etc...
• GPS technology will change how we share photos. 
  In the past, meta-properties of photo galleries were somewhat static (e.g. geographic coordinates, time taken, etc...).  The future holds much more - for example, say you want to see photos from an event at that took place at CU-Boulder on May 31st, 2010.  You can't really do that with Facebook or Picasa.  Will you be able to do so with Color? Perhaps.
• Social circles are becoming much more dynamic. 
  Color will further enable this change by allowing people to form fleeting social circles with people in their vicinity.
• Color will also revolutionize advertising - mobile, web-based, whatever.  Again, the possibilites here are pretty limitless.
• Color reminds me of Twitter. 
  Some of the earliest criticisms of Twitter surrounded the idea of "I don't care about the minutae of activities in which my friends are involved."  Criticisms of Color have mirrored those criticisms.  As people start tweeting more relevant items, those criticisms are disappearing.  I'm sure the similar criticisms of Color will disappear quickly as well, once it gains more adoption and relevance.
• Photo sharing is quickly becoming platform-independent. 
  There are already nice cameras that exist that can geotag and upload photos as you take them.  This technology will become even more prevalent in the future.
• There exists collateral (albeit, a small amount). 
  Color invested $500,000 in domain names.  Even if it completely fails, these domain names will still have value.
• Starting a revolution requires a good team. 
  Rather than wait for a group of no-names to get lucky with a product that gains traction, the VC's behind the deal have consciously decided to proactively fund a team that they know can get the job done.

Most of these justifications are purely my speculation at this point.  However, thinking about Color from a more generalized standpoint certainly opens up a lot of interesting justifications like these.

As a sidenote, here's an excellent deal-based justification of Color's funding.

Aggregation Addendum

In a previous post, I wrote about aggregator sites aggregating deals from the daily deal sites like Groupon.

As a matter of fact, it looks like CityPockets does just that!

Increased Competition Among VC's

My earlier post about technology bubbles underscored the fact that too many startups seem to have a acquisition-by-Google exit strategy.  I also pointed out that Google has its own venture capital group, Google Ventures.

Interestingly enough, Google just announced that it will provide $10,000 bonuses to employees that provide successful leads to Google Ventures.  A competitive threat to other VC's? Perhaps.

In the mean time, I've started learning django - now I just need a good idea, a good execution strategy, and a sucker at Google.

Ideas and Entrepreneurship

Scott Belsky, founder of Behance gives an excellent overview of ideas and avoiding the all-too-common "idea plateau."

He's also the author of the book Making Ideas Happen which is on my reading list.

I found this video through a string of surfing that originated from Hacker News, my new favorite website. (It's been real, reddit).

Technology Bubbles

Many venture capital firms are clamoring to invest in unproven beta technology with "thematic investing."

I'm all for synergy and such, but do they really expect Google to just buy all of their portfolio companies?

Perhaps Google will skip the busywork and just start buying the VC firms...

Aggregation (and Proprietary Platforms)

Aggregation businesses, when executed correctly, can provide large economic profits.

However, a successful aggregation business must develop proprietary standards and platforms in order to minimize the threat of becoming aggregated itself.

If iTunes were to have sold music files without setting up proprietary barriers and tools (e.g. iTunes software, iPods, etc...), there would be no competitive advantage. They would, instead, have to compete on price, rather than value.

You can buy music files from Amazon, Wal-Mart, and Napster, but none of them can compete with iTunes. They're all commodities. Aggregators aggregate the aggregators.

Some aggregation-based business models today see a lot of risk: Groupon.

While Groupon has seen quick success, its future success will diminish unless it can figure out a way to create more barriers to entry. Already, other sites like LivingSocial are giving Groupon a taste of real competition. Thousands of other sites with the same concept have emerged in the last year.

Once several big players have established themselves in the one-day-deal market, a host of other higher-level aggregators will emerge to aggregate the deals between the sites. Rather than subscribe to Groupon, users will subscribe to higher-level aggregators and see all the deals in one place. Higher level aggregators will eliminate the opportunity for differentiation, and incoming competitors to the one-day-deal market will give the store owners bargaining power.

Aggregators!

Organic Growth and Web Startups

From a strictly-competitive perspective, ideas and development are more-or-less free. Proper execution and marketing are what lead to real competitive advantages.

At least, that's my philosophy when it comes to web startups.

Obviously, a lot of this stuff is not free, but from a competitive perspective ideas and development are, indeed, free. In other words, you can't assume that coming up with a good idea, then paying someone to build it will bring success.

For real success in a web startup, the idea must be a "good" one, and it must have the proper execution and strategy behind it - specifically to create organic growth.

This all seems kind of vague, so I'll give an example to illustrate my point:

A few people I know recently started an online startup, which we'll call "FiveSquare."

I turned down the offer to help develop their site a long time ago, but I've since kept tabs on their progress.

Over a few years, they have been through several iterations.

At first, they started out with a full-blown implementation of their idea. They sponsored a fancy launch party at a bar with drinks and t-shirts and the whole package. The site launched and... nothing happened. Despite all the excited potential-users at the launch party, nobody used it.

Why? In this case, it was because the site didn't offer the user any immediate gratification. Being a new site, it hadn't yet reached any large amount of users, so critical mass was nonexistent (a barrier that would have existed regardless). Furthermore, users had to pay money in order to receive the full functionality of the site - hard to get people to do when the functionality depends on a large user base.

Even if the site were free, they would have had a lot of difficulty to get people to actually use it because it didn't really offer any immediate gratification.

The fully-developed site sat for several months with almost no content or users while the founders attempted to market it. Visiting it felt like walking into an empty grocery store.

The founders had developed and launched a site, but had failed to create or implement a plan to create organic growth.

Let's contrast this example with something more obvious and ubiquitous (perhaps even trite): Facebook.

Facebook didn't require launch parties or extensive marketing efforts to become a success. Rather, the founders strategically launched it in a way the caused people to want to use it - very little convincing required.

That's called organic growth, and it's one of the reasons why Facebook has achieved its success.

Successful web startups need to reach a point of organic growth to be successful. The sooner a startup can reach organic growth, the better - any time in between is money and time burned.

Time to Get Started

I'm probably just deluding myself when I think that I know a thing-or-two about entrepreneurship, user-centered design, venture capital, or technology. These subjects seem to come easy to me, so I ask myself: "self, why not write a blog?"

Not wanting to limit myself to those subjects, however, I'll proclaim this blog to be much more vague than that - really, just a hodgepodge of meta-banter.

Perhaps something interesting will happen...