No VC Required

There’s a depressing story on TechCrunch about a little startup called 5min.com who gave away 50% of their company in an angel round. This is the worst deal I’ve ever heard of.

The expression “you could own a piece of something big or a big chunk of nothing” applies equally well to Angel investors. When angels behave this way, they leave the founders completely unmotivated and feeling like employees. Right now they’re spending half their time thinking about the next business they’re going to start and they’ve probably already written their first few lines of code.

Here’s the capitalization table from TC. The founders are the first three on the list.

Marc Andreessen is blogging about serial entrepreneurs. I haven’t read it yet, but there it is.

Read/Write Web has an article about how PlentyOfFish could be worth $1 Billion. Whether or not you agree, it’s incredible what Markus Frind has built on his own. Last I heard he was still serving 1.2 Billion page views per month from 2 web servers.

Markus will have a hard time finding a buyer for POF at that valuation because many of the old school business types who make these deals happen see ‘companies’ as collections of staff and infrastructure rather than products or services that huge numbers of customers love and that generate cash.

That perception will change over the next few years as more developers realize they don’t need all the usual business fluff like office space, leased lines, venture capitalists, staff fresh out of MBA school who play with Excel all day, mature business ‘leaders’ who don’t really get your business but sure know how to talk up its valuation - that sort of thing.

Expect to see plenty-more-fishes built over the next few years.

One of my all time favorite books is “Good to Great” by Jim Collins. In it he describes the concept of a “Level 5 Leader”. These are CEO’s or leaders of companies that have had sustained success over a period of 15 years or more. Their success started at a clear point in time.

Here’s a level 5 leader summarized:

• Embody a paradoxical mix of personal humility and professional will.
• Ambitions for the company, not for themselves.
• Set up their successors for even greater success. Level 4 leaders set up their successors for failure to boost their egos even more.
• Level 5 leaders display modesty and are self-effacing and understated. In contrast level 4 leaders have gargantuan personal egos that contribute to the demise or continued mediocrity of their companies.
• Level 5 leaders are fanatically driven, infected with an incurable need to produce sustained results.
• Level 5 leaders display a workman-like diligence - more plow horse than show horse.

Collins analyzes public companies, but this is very applicable to early stage startups. The only difference is scale.

What’s also interesting is that most of the succesful level 5 leaders in Collin’s companies are promoted from within the company. These are people who are used to being hands on and they know exactly what needs to be done to make the company successful.

As a developer/entrepreneur I find Collin’s research very inspiring. It means that the best CEO’s are not the ‘more mature’ MBA types that are picked for you by your venture capitalist. They are bred with the company.

CraigsList CEO Jim Buckmaster is a shining example of this. Jim was a developer at CraigsList and he understands the customer, why they use the service and the job that needs to be done daily and long term to make the company successful.

John Carmack, the founder of id software is another example of a great founder/CEO who grew his early stage tech company through hands on dillegence and a clear understanding of the company, the team and the market.

A fellow Seattle entrepreneur and someone who is a great contributor to the startup community in Seattle, Andy Sack, is shutting down his company Judy’s Book. Andy is doing an incredible job handling the situation and every business founder and CEO should grab a keyboard and take notes.

One thing I found intriguing is how quickly the news spread on the day of his announcement last week. Within 20 minutes the news was wide-spread and within 6 hours it was in the mainstream press.

Launches work the same way. On the day of your launch your story usually gets picked up within an hour on mainstream blogs like Techcrunch. If you post to Digg or Reddit, you’ll know if you’re going to be on the front page within 10 minutes. When John Cook has interviewed me, he usually publishes the story on his blog within an hour. When the nytimes covered me it took 24 hours to get into print. Usually by the time print media gets hold of the story, it’s all ready been told and re-told and all relevant opinions have already been formed.

Dribbling out information like a Whitehouse press leak can get very ugly. Whatever your announcement, you’d better stay completely quiet until you launch, and when you do announce, provide all the information and, as Andy says, get out in front of it.

Matt Cutts from Google’s quality team emailed search engine journal and confirmed that Google is now penalizing websites for selling links based on their PageRank. This was going to come around sooner or later because selling link juice not only breaks the PageRank algorithm, but it breaks usability on the web.

Path 101 hasn’t closed their first angel round yet and they’ve only just inc’d themselves, but they’re live-blogging every step of the way. They’re disclosing their product ideas, who’s angeling them (Fred Wilson) before he’s even invested, and how they got free office space from Return Path.

My guess is they’ll do a VC round because a VC is angeling them. It’s interesting watching someone else go through the early stage routine of setting up a Delaware corp, getting the checking account, getting stock certs, signing shareholder agreements, etc…etc. Sounds like they have a law firm to take care of all that for them. We’ve always done that stuff ourselves (and haven’t regretted it).

After running a job search engine for a few years I can’t say I’m jealous about the space they’re in. Recruitment is a tough business and many folks have tried and done, ahem, not-so-good. But when someone does get it right I’ll be happy because it’s a broken sector.

Good luck to Charlie and Alex!

Google has updated the PageRank of every website in their index. There are many high profile websites who have lost pagerank bigtime. Changes from 9 to 5 are not uncommon. SEOMoz has a great summary of some of the affected websites.

The rumor is that Google is penalizing folks who have been selling links from high pagerank sites.

WW has a discussion thread on what it means for you.

Many are saying PageRank is irrelevant. Some of those are people who have lost pagerank. The data I’m seeing says PageRank is still somewhat proportional to the amount of Google traffic you get.

I do know of several sites who have gained PageRank in a very big way. No names mentioned.

Google’s algorithm has changed during the last 2 years and is now weighted heavily toward new content on ‘respected’ websites.

A ton of new startups have launched during the last year. Many of those have generated a lot of publicity which translates into backlinks - new backlinks from new content on respected sites.

If a new startup has more backlinks from new content on high quality sites and lots of new content of it’s own generating lots of internal pagerank to, say, the home page, then they get higher pagerank.

The good news is that this change looks very very good for folks starting a new business. You can compete with the incumbents on a level PageRank playing field.

If it’s Monday morning and you’re hunting around for your next big business idea, look for an industry that’s undergoing radical change for big opportunities.

There is some buzz in the blogsphere about the future of journalism students and the future of news jobs. Read these articles and for a moment put yourself in the shoes of a journalism student about to graduate or a 12 year journalism ‘veteran’. Scary isn’t it?

There are many very big and very rich traditional media incumbents who would very much like to talk to you if you solve some of their problems. Digg has supposedly “changed the face of traditional media” and gets over 100 million page impressions per month, but think about how much pure garbage gets ranked as #1 on Digg. It’s geek porn.

Here’s some interesting data from the 57th Annual World Newspaper Congress:

A report at the gathering indicated that China tops total newspaper circulation, with more than 85 million copies of papers sold every day, followed by India with 72 million—China and India are the two most populous countries in the world—followed by Japan with 70 million and the United States with 55 million.

There are massive opportunities in the India, Chinese and Japanese markets. Japan reads more newspapers than the USA and there are more Japanese bloggers than English bloggers - according to Technorati.

I don’t speak Japanese and I’ll bet neither do you. But internationalizing an app isn’t hard. I have more Japanese and Chinese users using LineBuzz than I do English, by far. And I worked closely with a few very friendly Chinese bloggers to help internationalize my app and debug it.

…and with the falling $$, International markets are looking a lot more interesting these days.

Update: I’m a paid member of webmasterworld and I just realized you have to pay to access the content I’ve linked to. It used to be free.

The best introduction to SEO I’ve ever read was written by Brett Tabke on his excellent webmasterworld.com in 2002. It’s a guide to plain old white hat SEO and if you can meet the challenge of generating enough content, it will easily get you 15K pageviews per day.

The only modification I’d make is the time period. Google updates their index much more frequently and they also recognize popular websites in their index much quicker now. So if you follow the guide, manage to generate a lot of content and get enough high quality back-links, you’ll get traffic a lot sooner than 12 months.