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Insights from the week

From Connie (Edmodo)

  • the key to consulting is to organize data into high level mutually exclusive buckets to allow easy defeating by decision makers

From Tim (Edmodo)

  • Kano model

From Val (Totango)

  • Company is concerned with increasing revenue and profitability. This will drive higher valuation during further exit

From Yip (ATT)

  • Analytics from Facebook page comments and twitter hashtag
  • need to balance customer support demand and cost of running department:
    • customer support hotline
    • Direct comments from influencers  which trigger negative sentiment to support staff
  • Business analyst reads comments manually to get qualitative needs and understands business needs
  • Data scientist explores data might not know the business needs
  • business analyst have problems working with data scientist
  • tools to help business analyst get directly at the insight instead of via data scientist
  • build model to predict call support volume by category
  • build model to quantify feature demand level needs
  • correlation of weather and commodity prices
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Insights on managing Big Data from meet up with Dean and Ved

From Dean (Reputation.com)

  • Enterprise sales as an acquisition strategy is feasible because revenue per account ranges in the USD millions – e.g. 70 million USD
  • Once an auto company like Ford or GM signs up, they will start bringing their dealerships in
  • The infrastructure needs to be able to support the size of the data which can be up to billions of rows
  • Scaling of infrastructure to handle load ever increasing data becomes critical for the continued growth of the data company
  • Data Product will appear broken when user attempts generate report while the data is still being written into the database
  • The key challenge is that different solution is suitable for different operation
  • Types of data operation include
    • writing into the database
    • reading from the database
    • map reduce to generate custom view for data in the database to support different types of reporting for different departments in the client companies.
  • Successful data companies will create different layers of data management solutions to cater to the different data needs
    • MongoDB
      • good for storing relatively unstructured data
      • querying is slow
      • writing is slow
      • good for performing map reduce
    • Elastic Search
      • good for custom querying for data
  • Dev ops become a very important role
    • migration of data between different systems can extend up to weeks before completion
    • bad map-reduce query in codes while start causing bottlenecks in reading and writing causing the data product to fail
    • dev ops familiar with infrastructure might on occasion have to flush out all queries to reset
    • The key challenge is the inability to find bandwidth for flushing out bad queries within the codebase
  • Mistakes in hindsight
    • In hindsight lumping all the data from different companies into the same index on MongoDB does not scale very well
    • Might make better sense to create separate database clusters for different clients
  • Day to day operations
    • Hired a very large 100 strong Web Scraping company in India to make sure web-scrapers for customer reviews are constantly up
    • Clients occasionally will provide data which internal engineer (Austin) will need to look through before importing into relevant database
  • Need to increase revenue volume to gear up for IPO
  • The Catholic church has 10 times more money than Apple and owns a lot of health care companies.

From Dan (Dharma.AI), the classmate of Ved

  • Currently has 15 customers for their company
  • Customers prefer using their solution versus open source software because they can scale the volume of data to be digested and solution comes with SLA
  • Company provides web, mobile and table solutions which client companies’ staff can use in the field to collect demographic and research data in developing countries
  • The key challenge is balancing between building features for the platform and building features specific verticals:
    • Fields differ between industry: fields in the survey document for healthcare company will be very different for fields in the survey document for an auto company
    • Fields differ between across company size: survey format for one company might be different as compared to another in the same industry but of different size
    • Interface required is differs between companies
  • Original CEO has been forced to leave the company, new CEO was hired by PE firm to increase revenue volume to gear up for IPO

From Ved

  • As number of layers increase in the hierarchy, it becomes increasingly challenging for management to keep up to date on the actual situation in the market
  • New entrant of large establish competitor might sometime serve as an opportunity to ride the wave
  • when Google decided to repackage Google Docs for Education, it was a perfect opportunity for Edmodo to more tightly integrate into Google and ride that trend rather than being left behind
  • Failure to ride the wave will result in significant loss of market shares
  • It takes a lot of discipline to decide on just focusing on the core use case and constantly double down on it.
  • Knowing that a critical problem, which could potentially kill the company, exists versus successfully convincing everyone in the company that it is important to address it are two different things.
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Insights from house party at Qyunh’s

On Crypto-currency

  • Major institutions like hedge funds and banks are trying to figure out how to increase exposure to this currency type while mitigating against volatility
  • Governments are exploring into how this new  form of currency can be regulated
  • Companies in this space are increasingly gearing towards providing missing infrastructure like secure wallet as opposed to creating new Token
  • Transaction throughput
    • Visa gateway allows for 50,000 transactions per second
    • Lightning networks as well as off chain transaction provide ability to temporarily by-pass bottleneck
  • Promising candidates
    • EOS (Chinese currency) supports up to 1,200 transactions per second
    • TRON (Chinese currency)
    • Ethereum

On Data API

  • New travel portals need to be able to prove traction before existing providers like Viator is willing to become partners
  • Normal affiliates get 7% commission while partners get 18% commission
  • This is a missing step in this eco-system that startups will need to gap before they can reach partner status.

On AR/VR

  • Much of efforts is done on AR right now as opposed to VR. Where there is actual industrial application

On Reality

  • Accurate interpretation of signals provided by reality requires the ability to set aside predisposed lens
  • Morality is one of the hardest lens to set aside when interpreting signals
  • Morality derived construct like the Good and Evil dichotomy is inherently subjective, while useful for marketing, branding and messaging purposes, is not useful for analytical purposes.
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Book Summary: Lost and Founder

Radical Candor/Transparency

It is hard but it works – needs to be tampered with empathy

On being product focused

  • Consulting is limited by time and people – not scalable
  • Effective Product-focused business
    • reach
    • scalability
  • Start with a product informed by your consulting – real life problems others face

Impediment to shifting focus

  • Too comfortable
  • not enough time
  • difficulty finding the right customers for the product

On being a founder

  • Great founders enable a vision
  • forget about being hands on most of the time
  • job scope changes every six months – for any road block encountered focus on sufficing the requirements instead of perfecting it
  • you rarely get to do what you love to do
  • be cognizant on when to lead and when not to – have the specialist do the job
  • Cultivate self awareness in strength and weakness – structure company to work around them
  • Attribute of founder is instilled with near-permanence in the organization while those of supporting team fluctuates
  • the hardest parts of the business is less a reflection about the business than about the person experiencing them
  • Build expertise before building network, build network before building company
  • Focus on and reward the behavior, let the outcome take care of itself

On Values

  • Authentic values force hard decisions – held to be more important than money
  • have real costs: Impede certain behavior and strategy
  • Values are discovered instead of set
  • Used as a yard stick for recruiting new members to the cause. Helps get pass the competence versus cultural fit dilemma

On recruiting

  • CTO should be those that should be oriented towards education instead of shielding you from the nitty gritty details (black box)
  • Use your value system as a yard stick
  • Hiring for diversity will make the mental model of the organization more holistic
  • Great managers / coaches might not be great individual contributors

On markets and pivots

  • Pivots Are expensive don’t make it a habit – only resort to this tactic when the original hypothesis is not longer valid
  • focus on the market and then find a field ignored by others because it appears unsexy. From there craft a solution
  • Err on the side of execution

On investors

  • Need to take money for the right reason
  • Investors interest will tend to get out of alignment overtime (return multiples and investment horizons)
  • 80 percent of returns are by 20 percent of investments
  • They need at least a 10X to break even in a position for all the other losing positions they took
  • They don’t bring much value to the table
  • follow up with CEOs they invested in to understand how they react in a shit storm
  • Can help provide information on salary ranges

Choosing a market

  • If you can keep your ego in check you can chase after smaller markets and don’t need VC money
  • Great ideas are born of mediocre ideas that become better by
    • time spent iterating
    • humility learning
    • surviving
  • look for searches that indicate problems
    • Google Adwords
    • Moz’s keyword Explorer

Knowing your customers

Defining your user base

  • Call 3 different types of users
  • Find out why they subscribed and stayed
  • Craft messaging toward this group of people

Discounts are a doubled edged sword – while they might attract signups, these folks tend to have a higher churn rate

Schedule regular interactions with your user so that you can understand their habits. It helps you get to an empathetic position with them.

On Products

  • Feature set needs to be coherent enough to be able to deliver value
  • Early adopters
    • have very different expectation as compared to early majority –
    • hence more forgiving
    • ok accepting MVP
  • Retention triumphs acquisition any day

Marketing

  • Optimize for acquisition loops that reinforces the UVP instead of linear acquisition channels

Focused Execution

  • Practice the discipline of focus.
  • Important to Focus and not waver around unnecessarily. Its a waste of resources
  • A very focused and simplified product offering will help users to more easily understand and adopt it
  • Helps keep teams lean as a by-product
    • ROA improves dramatically
    • helps avoid future layoffs
  • Focus on what will not change in the next 10 years

Related references

  • Lean Startup, Eric Ries
  • Sprint, Jake Knapp
  • Venture Deals, Brad Feld
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Book Summary: Contagious

Contagious

On Word of mouth

  • versus advertising
    • it is more persuasive since the messenger has no monetary incentive and is a trusted person.
    • It is directed at the immediate context of the recipient
  • Only 7% of word of mouth happens online. Most still happens offline
  • Types of word of mouth
    • immediate word of mouth
    • ongoing word of mouth
  • Big forest fires aren’t caused by big sparks. Lots of individual trees have to catch fire and carry the flame

Word of mouth principles

  • Social currency
    • people want to feel special about themselves. When they get to share something extraordinary, they get the chance to Wow others.
    • Categories of currency
      • scarcity
      • exclusivity
  • Triggers
    • Ideas strongly associated with items frequently found the environment gets triggered more often. Pick common objects in a user’s environment that is not already laced with other meanings.
    • The more specific a trigger the higher the likelihood of triggered action.
    • Choose trigger right close to the proximity of the intended action
  • Emotions
    • Emotions that excites will be more likely to drive the recipient towards an action than those that.
      • Useful emotions: Awe, excitement, anger, fear
      • Not useful emotions: sadness, hopelessness
    • Associate the idea with emotions
  • Public
    • Monkey see, monkey do. Figure out how to make users activities more visible to those around them so that they could copy his action. A private action is unlikely to get copied
    • Choose stimulus that others can’t help but notice.
  • Practical Value
    • Useful things tends to get shared more frequently. While there might be less initial word of mouth, there will always be on going word of mouth.
  • Stories
    • help transfer huge amounts of contextual information to recipient
    • helps suspending judgement – using proof by analogy
    • story must be designed such that storyline falls apart when intended idea is removed from it
    • For dramatic purposes, interesting and novel points often get exaggerated as story pasts from one person. As such the story gets more and more remarkable as it is past along.

Related theories

  • Prospect theory: the WoW factor of an idea is often taken in association with the denominator its associated with
  • Rule of 100
    • for items below $100 present discount in percentage
    • for items above $100 present discount in absolute dollar figures
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Reflections on organizational observations

On the benefits of being under resourced

An organization that is under-resourced is similar to an individual who regularly practices intermittent fasting.

In the case of the individual, weaker cells are cannibalized by the body to produce new cells. Studies has shown decreased probability of developing cancer and Alzheimer, coupled in some cases with increased longevity.

In the case of the organization, operations are forced to be focused and only opportunities backed by stronger market signals prioritized and pursued. Wastage and distractions are structurally curtailed. ROI improves as a by product.

On organic growth

An organization that is organically grown tends to be happen-chance and exhibit somewhat illegible and opaque structure.

In contrast, an organization that is deliberately designed tends to exhibit a legible and transparent structure.

Counter intuitively, it is the former that exhibits more resilience in times of environmental stress. The observed illegibility and opaqueness is attributed to the process of organic adaption to its environment. Chief historical examples are:

  • Military of Carthage
  • Genghis Khan’s Mongolian horde

Related readings

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Key take aways from Trust me I am lying

Trust me I am lying

The publication eco-system

  • Every content creator within the publication ecosystem is under immense pressure to produce content under the tightest deadline.
    • renumeration is based on number of articles per period time
    • eye balls are converted to advertising revenue
    • lots of copying happens
  • Media was once about protecting a new, on the web it is about building one
    • well defined scope matters
    • content that dives deep into its vertical matters
  • Headlines are the most important
  • Tools of the trade
    • lavish pictures
    • impostors, frauds and fake interviews
    • support for the underdog causes
    • anonymous sources
    • prominent coverage of high society and events
    • different age but same old tricks
  • On monetization
    • Advertising is the main driver of revenue
    • Subscription model focus on trusted source as opposed to advertising source
    • RSS got killed because it went against the interest of Advertisers
  • On the online medium
    • The demands of the medium forces the bloggers to act they way they are
    • Tim Berners Lee stacked new content on the top and the rest of the internet thus follows
    • Thus the need to constantly create new content

On Virality

  • The most powerful predictor of virality is how much anger an article evokes.
  • The most powerful predictor of what spreads online is anger
    • sensationalism
    • extremism
    • sex
    • scandal
    • hatred
  • Things must be negative but not too negative so as to incite action
  • Media needs to get you feeling negative so that you are more likely to share
  • Empty vessels are incline to snark so as to feel unjustifiably good about themselves

On reality

  • Chris Hedges
    • is complicated and boring
    • the masses are incapable and unwilling to handle its confusion
    • In an age of images, entertainment and instant emotional gratification, no one seeks honesty and gratification
  • Cognitive biases
    • we are bad at being sketical
      • availability biases
      • narrative fallacy
    • we are worst at correcting our wrong beliefs
      • social proofing
      • consistency biases
  • First decide what you are intending to do with the information you collected

Related readings

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Key take aways from the Blockchain revolution

The Blockchain revolution
  • ensuring the integrity of data exchanged among these billions of devices without the need for a trusted third party
  • allow people that do not have access to the service of these third part into the digital economy
  • easier ability to get compensated for your work or ownership of digital property
  • Ronald Coase on types of costs
    • Searching cost
    • Coordination cost
    • Contracting cost
  • Dimensions of search
    • horizontal search – wide search across the web
    • vertical search – within a specific website
    • sequence – blockchain?
  • Innovation typically comes from the edge
    • monopolies have a lot of resources but lack the culture and will to explore, Yochai Benkler
    • This can be attributed to high levels of bureaucracy within the core

Related references

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Key take aways from Exit Strategies for Entrepreneurs and Angel Investors

Early Exits
Early Exits

Key advice for Startups and emerging companies

  • Start small
  • Stay lean
  • Raise only the funding you really need and grow judiciously.
  • Alignment from all parties on exit strategy is extremely important
  • Best time to sell a company is when the future has never looked brighter

On VCs

  • Interest of VCs might not be aligned with interest of founders and angel investors
  • VCs need to satisfy the needs of their LPs
    • Need their successful companies to generate a minimum of 10-30X return for their fund to perform respectably, taking into account overall failure rates
    • They thus need to wait longer to exit and work their investments harder.
    • They are ok to accelerate the growth of their investments with their capital or blow it up quick for a capital right off. The latter helps minimize management overheads.
    • They will block a sale if the return multiples do not meet their expectation
  • VC return multiples of term sheet valuation
    • Series A – 10X return
    • Series B – 4-7X returns
    • SEries C – 2-4X returns
  • VC funds have been getting bigger overtime. The need to deploy their capital forces them to seek for opportunities where likelihoods are slim.
  • Companies with VC money tend to exit at year 16 on the average

On Angels

  • Invest much less money than VCs
    • USD10,000 to USD250,000
  • Happy to exit in a few years with a 3-5X return
  • In the 50s and 60s
  • prior successful entrepreneurs or senior executives
  • allocate around 5-10% for angel investing
  • has experience and inclination to be great mentors and valuable directors
  • Companies with angel only money tend to exit at year 4 on the average

Drivers of acquisition

  • trend has been dramatic shift towards earlier exits
  • huge amounts of cash on balance sheets of large corporation
  • growth in Private equity and buy out funds

Insights on Growth

  • The first USD10 to USD20 million valuation are the easiest and less challenge on the skills of the CEO
    • It is easy for young companies to maintain year on year compound annual growth rates of 100% or even 200%
  • Knowledge of how hard it is to be a CEO and lots of money in the bank is usually a huge deterrent for serial entrepreneurship.
  • VCs replace CEOs of 75% of companies within 18 months of their initial investments
    • Founder’s shares get trapped in an illiquid private company for another 5-10 years
  • Use a 2 year time horizon
    • year 1 develop technology
    • year 2 develop distribution

On valuation

  • A lot of factors that have the biggest impact on a company’s short term value fluctuation will be out of management’s control
  • The factors will also be unforeseen
  • General valuation multiples
    • SAAS companies are typically valued at 3-4 RR
    • Service body shops 0.5 of per staff revenue or PE ratio of 3-4

On sales process

  • Typically 4-5 months
  • CEOs must focus on the business to ensure metrics are at their best during the sales to maximize valuation
    • can add up to 10-20% more valuation
  • Until the very last phase of the sales, it is best to delegate the sales process to a professional
    • Business broker or M&A advisor – use them as the bad guy
      • big firms shoot for exit above USD100million
        • 2-3% of final value
      • boutique firms shoot for USD20-70 million
        • 4-6% of final exit value

Related references

  • Evolution and revolution as organizations grow, Larry Greiner Harvard Business School
  • Raising money: The canadian guide to successful business financing, Douglas Gray and Brian Nattrass
  • High Anxiety or Great Expectations, Bart Schachter and George Hoyem, Venture Capital Journal
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Key take way from the Truth Machine, Michael J.Casey

The Truth Machine, Michael J.Casey
  • Blockchains are decentralized ledger systems
  • trust is a vital social resource, the truth lubricant of human interaction
  • human social organization comes from our ability to craft meaningful stories that we all believe, Yuval Noah Harrari
  • Engineering talent is still in severe shortage

Three great power centers in US

  • Technology, Silicon Valley
  • Finance, New York
  • Government, Washington

Use cases

  • Refugees are thrust into statelessness. Easy for criminal exploitation
  • Removing the central silos such Uber, Facebook and Twitter and replacing them with
  • barter trade, double entry
  • Support the scaling internet of things while avoiding one central controlling big brother
  • Self-sovereign identity
    • priorly done by government,
    • now done by Facebook Google and Twitter

Types of blockchains

  • private permissioned block chain to protect sensitive information
    • gate keeping prone to monopolies and oligopolies
  • permissionless block chain where management of data is done by individual themselves

Most popular chains

  • Ethereum
  • BitCoint

Moon shot scenario

  • Technology has freed humans from work
  • Human free to focus on creativity instead of the drudgery of work
  • Getting paid for creativity instead of it being captured by Facebook