BY PETER LEVINE
The last few years have seen the incredible growth of cloud computing. Applications and services that were developed for on-premise use have all found a new home in the cloud. As with most technology transformations, early adoption often occurs around a hobbyist developer community that then expands into more mainstream adoption and use. The cloud is no exception; as it grows it continues to empower developers to shape technology and change the world.
What started as a primitive, manual, and cumbersome infrastructure service, has evolved into a variety of cloud vendors offering vast collections of services targeted at a number of different audiences –perhaps too vast. We have Database-as-a-Service, Compute-as-a-Service, Analytics-as-a-Service, Storage-as-a-Service, as well as deployment and network environments, and everything in between. It has left the developer community with more options, functionality, and cost than it needs or wants.
It’s time for the cloud to once again focus on developers, and that is where DigitalOcean comes in. MORE
People say I’m crippled, but that’s a lie
They’re just mad ‘cause I’m so fly
Being handicapped is a state of mind
I’m not disabled I’m just blind
—The Blind MC, “Blind and Def”
BY BEN HOROWITZ
People often ask me why I feature Hip Hop so much in my blog posts. In the past, I have given short and incomplete answers, but here is the full story. It probably belongs in The Hard Thing About Hard Things, but I did not know how to tell it without Rap Genius.
In 1986, I was 20 years old and attending Columbia University in the City of New York. I received a phone call from my mother on the shared dorm room phone … MORE
BY MICHAEL V. COPELAND
Fast & Furious 6 is not in the race for Best Picture in the upcoming Oscars. All five of the preceding movies were similarly snubbed. If you are a fan of muscle cars or Vin Diesel (sometimes hard to distinguish between the two), this ongoing insult may seem unfair. But according to analysis of past Best Picture nominees by data jockey Benn Stancil, it’s not the mumbled lines or wooden acting that is preventing the Fast & Furious crew from getting a shot at mumbling through an acceptance speech – it’s that it has virtually none of the elements required for a shot at a Best Picture win. The participation of the actor Daniel Day-Lewis for starters. Or that it not be a sequel, which, as the sixth in a series it certainly is.
In an attempt to engineer the perfect Best Picture, at least by Academy of Motion Picture standards, Stancil, who is the chief data analyst at San Francisco-based startup Mode Analytics, sifted through mountains of data collected from entertainment information outfit Rovi and the Academy Awards database. The result, Stancil says with a laugh, “is the ultimate Frankensteinian Oscar-bait.” And like Frankenstein, it could be a triumph or an abomination. MORE
The pace of electronics miniaturization has been relentless. Today’s palm-sized smartphones dwarf the fastest supercomputers of only a couple decades ago. Low-powered computers equipped with an array of finely tuned sensors are already being incorporated into real-world objects that can communicate autonomously, creating a so-called Internet of Things that promises to bring revolutionary opportunities—and challenges—for every aspect of society and industry. The next phase of miniaturization could be even more transformational; embedding computational technology directly onto and into our bodies. MOREBY STUART LUMAN
There is a woman in Somalia
Scraping for pearls on the roadside
There’s a force stronger than nature
Keeps her will alive
This is how she’s dying
She’s dying to survive
Don’t know what she’s made of
I would like to be that brave.
Never believe that a few caring people can’t change the world. For, indeed, that’s all who ever have.
I will donate all of my proceeds from The Hard Thing About Hard Things to American Jewish World Service to support their efforts to help women fight for their basic rights throughout the world. Since there are many important causes, I thought that it would be worth explaining why I am supporting this one. MORE
BY MARC ANDREESSEN
I am more bullish about the future of the news industry over the next 20 years than almost anyone I know. You are going to see it grow 10X to 100X from where it is today. That is my starting point for any discussion about the future of journalism. Here’s why I believe it, and how we will get there. MORE
The ability to plan for the moment, and to and capitalize on it, is now possible thanks to live-platforms like Twitter. Adam Bain, who heads up global revenue at Twitter, describes the changes he see coming for companies who can shift their planning and thinking around marketing from a 12-month-cycle to something that embraces the moment to moment.
BY MICHAEL V. COPELAND
In 1968, the same year Jimi Hendrix released Electric Ladyland, Doug Engelbart, an engineer from the Stanford Research Institute, sat poised in front of a computer terminal in San Francisco facing an audience of 1,000 fellow engineers. As words began to scroll across the fuzzy screen, Engelbart described his actions to the crowd. Though you couldn’t have known it then, we’ve been replaying that performance ever since. MORE
Yet, with all that momentum, there’s a vocal segment of software insiders that preach the looming failure of open source software against competition from proprietary software vendors. The future for open source, they argue, is as also-ran software, relegated to niche projects. It’s proprietary software vendors that will handle the really critical stuff.
So which is it? The success of technology companies using open source, and the apparent failure of open source is a head scratcher. Yet both are true, but not for the reasons some would have you believe. The success or failure of open source is not the software itself – it’s definitely up to the tasks required of it – but in the underlying business model. MORE
Capital One is a credit card provider and bank with a business increasingly based on data. That evolution has required CIO Robert Alexander to rethink how marketing and IT work together. In doing so, he’s redefining the skills necessary for marketers and tech experts to tackle the problems and opportunities facing data-driven companies.
BY ZAL BILIMORIA
Back in 2011, I was having an all-consuming love affair with tablets. At the time, I was the first-ever head of mobile at Netflix. I saw tablets in my sleep, running apps that would control homes, entertain billions and dutifully chug away at work. Tablets, I was convinced, were a third device category, a tweener that would fill the vacuum between a phone and a laptop. I knew that was asking a lot — at the time, however, I didn’t know just how much.
BY BEN HOROWITZ
A lot of people have been asking me what my upcoming book, The Hard Thing About Hard Things, will be like. Here’s a piece that I wrote for the book that did not make the cut. I still think it’s a pretty good story and gives you a flavor.
I just tell the truth so I’m cool in every hood spot
21 years and I ain’t ever met a good cop
—Drake, “I’m Goin In”
After we transitioned the business from Loudcloud to Opsware, we needed a head of finance. Therefore, when the CFO from one of the best-run enterprise software companies became available, I jumped at the chance to hire her.
Michelle (note: her name has been changed) comprehensively understood software accounting, business models, and best practices, and she was beloved by Wall Street in no small part due to her honest and straightforward reporting of her previous company’s business. In my reference checking, at least a dozen investors told me that they made far more money when the numbers disappointed than when the company outperformed, because they trusted Michelle when she said that things were not worse than they appeared and bought on the dips. MORE
BY SCOTT WEISS
In many of the old war movies, every elite unit has at least one member that has the critical talent to make something out of nothing: the scrounge. You know this guy: when everyone is out of rations or ammunition and the truck is broken down, he quietly heads out. The next day, when all hope of completing the mission seems lost, the scrounge comes rolling up in a freshly repainted jeep, full rations, ammo, and, stereotypically, a case of cold beer. How did he do that? Where did it all come from? “Don’t ask,” he growls, “Let’s get movin’.”
Harvey Keitel’s Winston “The Wolf” Wolfe in Pulp Fiction is another iconic fix-it guy. He comes directly from a party in his tux to “clean up” the situation. I love his “Can I get some coffee?” calm demeanor as he carefully assesses the situation, starts prioritizing, and then takes swift action to get Jules and Vincent out of their blood-soaked jam.
During a crux scene in Apollo 13, the engineers in Houston realize they have to somehow fit the Command Module’s square carbon dioxide filter in the Lunar Module’s round receptacles if they want everyone to keep breathing. They got together in a room, dumped the box of materials available to the astronauts on the table and said, “Here’s what we have to work with…” After working for a tense few hours, they cobbled together a solution with step-by-step instructions for the oxygen-starved astronauts. That scene always gives me goose bumps.
All of the successful entrepreneurs I know are part-scrounge, part-Wolf, with a good dose of calm-under-pressure space jockey thrown in. In other words, they are ridiculously resourceful. It’s this magical combination of wicked-smart, tenacious as hell, works harder and longer than most people think is humanly possible, thinks way outside the box and is also unbelievably passionate and compelling. In short, they have special tools to just get shit done.
Special, but not unobtainable.
Over the years, I’ve noticed some patterns and methods that explain how great people manage to pull off the impossible. And with Mr. Wolfe’s permission, here they are: MORE
BY MICHAEL V. COPELAND
Bill Krause admits his career plan sounds a bit more orderly now than it really was. An electrical engineering graduate from The Citadel in 1963, Krause figured he’d break down his work life into 15-year blocks. The first was learning about business, which Krause did under the tutelage of none other than Bill Hewlett at (naturally) Hewlett Packard. The second was building a business. With his partner Bob Metcalfe, Krause founded networking pioneer 3Com in 1981 and brought Ethernet to the world. He ran the company as CEO for 12 years, and executive chairman for another three.
Which puts Krause into the third part of his career. He describes it as his giving back phase. It’s in that capacity that Krause is joining the a16z team as a Special Advisor.
Krause has been a part of Silicon Valley since the earliest days of the computer. He was the first “digital sales engineer” at HP, before they dared call what they were selling a computer. Thanks to 3Com, PCs became much more than isolated islands of transistors. And Ethernet? You know you love it, especially when the Wi-Fi goes sideways.
As a CEO Krause has seen it all – the glory, and the glorious mistakes – many, many times. After years of sitting on the boards of large public companies, Krause had a hankering to also get back into startups and help the next generation of entrepreneurs achieve their dreams of building great companies.
That is what he will be doing for Andreessen Horowitz. “Nothing would be more satisfying to me then to be able to contribute to a young entrepreneur’s success over time,” Krause says. “Consider me a startup CEO’s sidekick.” Sure, if Batman’s sidekick was another Batman.
If you have Krause around you can’t help but dig into some of the formative companies and characters of Silicon Valley. In an environment that too often looks only a few months ahead, it’s invaluable to involve Krause, who brings the long-view into the conversation.
So we sat down with Krause, and did just that. MORE
When GitHub Co-founder Tom Preston-Werner had a chance to pick the brain of a big company CEO, he went straight to GE and Jeffrey Immelt. During their conversation, Preston-Werner dug into how Immelt keeps a 130-year-old company innovating and attacking massive markets. Immelt turned to Preston-Werner for his thoughts on the velocity of ideas, and the feedback loops between customers and the company that keep GitHub cranking.
BY SCOTT WEISS
At Andreessen Horowitz, we talk about the notion of being “too hungry to eat.” That’s to say, we often see startups that are so entrenched in the product that the founders forget they need muscle to grow. Without the right people in place, it’s not easy to get to where you want to be as a company. And since recruiting the very best talent is extremely competitive, it’s important to pay maniacal attention to the entire process, and that doesn’t stop with the offer letter. What follows are some important elements to keep in mind. MORE
Follow the leader is a title, theme, task
Now you know, you don’t have to ask
– Rakim, “Follow the Leader”
BY BEN HOROWITZ AND STEN TAMKIVI
Being someone reasonably well-known in technology, I have been getting a lot of questions lately about Healthcare.gov. People want to know why it cost between 2 and 4 times as much money to create a broken website than to build the original iPhone. This is an excellent question. However, in my experience, understanding why a project went wrong tends to be far less valuable than understanding why a project went right. So, rather than explaining why paying anywhere between $300M and $600M to build the first iteration of healthcare.gov was a bad idea, I would like to focus attention on a model for software-enabled government that works. In doing so, perhaps this will be a step toward a better understanding of how technology might make the US government better and not worse. MORE
BY SCOTT KUPOR
With private tech companies pulling down billion-dollar-plus valuations with seeming ease, and shares of some newly public tech outfits soaring, talk of a tech bubble is on the rise again. Financial market prognosticators have declared that technology valuations defy logic and that Silicon Valley needs to be institutionalized before it becomes a danger to itself and investors everywhere.
All of this bubble-mongering encourages headlines, but it makes little sense if we look beyond the run-up in valuations of tech startups. Before we can say a bubble is brewing, we need to consider what’s causing the value of tech companies to soar. MORE
BY MARC ANDREESSEN
A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers.
Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it.
On the other hand, technologists – nerds – are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it.
Eventually mainstream products, companies and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start.
What technology am I talking about? Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014. MORE
BY SCOTT WEISS
One of the differences between being a CEO and a venture capitalist is that I obviously meet with many more CEOs now than I did then. As such, it has become more apparent that many of my struggles as a CEO are surprisingly common. One observation that stands out, probably because it is rarely discussed, is how many founder/CEOs have relationship struggles with their significant others and families. For me, the brightest years at IronPort were without a doubt the darkest years at home. While I was focused, motivating, articulate, and decisive at work, I was inconsiderate, preoccupied, self-centered, and lazy at home.
Now, having worked through that time with my family, I’m in a much better place to reflect on what happened, how I could have handled things differently, and offer some advice to other founders who may be caught up in a similar dynamic.
BY STEN TAMKIVI
Go to Europe these days – to Berlin, London, Helsinki – drop in on any of the regional tech confabs and you will quickly see that the European startup scene is in the most bustling, vibrant shape it’s ever been. The potential is everywhere, and the energy is undeniable. Then you return Stateside, in my case to Palo Alto, and Europe isn’t just irrelevant among the tech industry power-set. It has virtually ceased to exist.
BY JEFF JORDAN
The news around shopping during the holiday season was dominated by two separate stories. One talked about how traffic to brick-and-mortar stores was well below expectations, and that these retailers were forced to discount tremendously to drive sales. The other talked about how an enormous late surge in packages coming from e-commerce companies overwhelmed the capacity of UPS and, to a lesser extent, FedEx, and caused many of these packages to arrive after Christmas.
But, to me, these two stories are not at all separate, they simply reflect different sides of the same narrative: We’re in the midst of a profound structural shift from physical to digital retail.
BY STEVEN SINOFSKY
I love the Consumer Electronics Show. Maybe I’m numb from decades of attending it. Maybe I’m just too much of a fan of watching stuff get made. Maybe I just like long lines and the potential for airborne illness. Really what I love is the technology industry and that every year we get together and demo new products, share works in progress, and take chances on offering products people don’t yet (or ever) know they want. CES 2014 was an exceptionally unique year and one that I think will be remembered as the start of a new era, much how the 1970 show changed TV with the introduction of the VCR or the 1981 show changed music with the CD player.
“God, body and mind, food for the soul
When you feeding on hate, you empty, my n!*$a, it shows.”
– Rick Ross
“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”
–George Bernard Shaw
BY BEN HOROWITZ
Lately, it’s become in vogue to write articles, comments and tweets about everything that’s wrong with young technology companies. Hardly a day goes by where I don’t find something in my Twitter feed crowing about how a startup that’s hit a bump in the road is “fu&%@d” or what an as*h%le a successful founder is or what an utterly idiotic idea somebody’s company is. It seems like there is a movement to replace today’s startup culture of hope and curiosity with one of smug superiority.
Why does this matter? Why should we care that the tone is tilting in the wrong direction? Why is it more important to find out what’s right about somebody’s company than what’s wrong?
Innovation and disruption are the hallmarks of the technology world, and hardly a moment passes when we are not thinking, doing, or talking about these topics. While I was speaking with some entrepreneurs recently on the topic, the question kept coming up: “If we’re so aware of disruption, then why do successful products (or companies) keep getting disrupted?”
Good question, and here’s how I think about answering it.
Some people assume that all Bitcoin advocates are motivated by a libertarian political agenda. That is certainly not my agenda. I’m a lifelong Democrat who supported Obama in the last two elections. I think the Federal Reserve plays an important function, and I don’t agree with people who think inflation should be our nation’s primary economic concern.
It is true that many early Bitcoin proponents were libertarians. But it is also true that almost every significant computing movement had early proponents who were ideologically motivated.
Mobile devices have put supercomputers in our hands, and—along with their first cousin—the tablet, represent the largest shift in computing since the PC era. The capacity and power of these devices are in its infancy, and all expectations lead to a doubling of capability every 18 months. In the same way that the PC era unlocked the imagination and innovation of an entire generation, we are seeing a repeat pattern with mobile devices at unprecedented scale.
A neon sign sits on the floor of Coinbase’s loft-style office in San Francisco. The curving orange and white tubes depict the distinctive B-symbol for the digital currency bitcoin, with the words “Accepted Here” beneath it. The joke, of course, is that the sign is reminiscent of something that could be a regular part of the landscape, as commonplace as any “Bud” sign. And bitcoin at present is anything but commonplace.
One of the interesting things about bitcoin is the contrast between how it is portrayed in the press and how it is understood by technologists. The press tends to portray bitcoin as either a speculative bubble or a scheme for supporting criminal activity. In Silicon Valley, by contrast, bitcoin is generally viewed as a profound technological breakthrough.
The Internet is based on a set of core protocols that specify how information such as text, photos, and code should be transmitted. The designers of the Web built placeholders for a system that moved money, but never successfully completed it. Bitcoin is the first plausible proposal for an economic protocol for the Internet.
Exactly what do you do? This has been a persistent question since I started my Entrepreneur in Residence gig at Andreessen Horowitz, and one that I have had to both figure out for myself and explain over and over again. If you explicitly search for it, you can find an occasional article or Quora thread on the topic – but as people rightfully point out, it is a rather vague role that varies in each case and from VC firm to firm. So, once-and-for-all, here’s what it’s like for me.
Before a crowd of folks who know a fair bit about leadership, military veterans, eBay CEO John Donahoe and a16z General Partner Peter Levine discussed the type of leader Donahoe has become as he’s spearheaded a turnaround at eBay. The conversation also tackled Silicon Valley’s obsession with “hot,” and why, for Donahoe, not taking enough risk is a mistake.
Marc Andreessen sat down with Fortune Managing Editor Andy Serwer to discuss the future of jobs, education and your favorite ride. What follows is an edited version of the conversation.
Andy Serwer: We all understand that the Internet revolution is inevitable at this point, but it’s also kind of controversial. There are scads of new jobs at Facebook and Twitter and other places, but what about the ones that are destroyed by the inroads of technology into every industry? Are you actually creating more than you’re destroying?
Marc Andreessen: Jobs are critically important, but looking at economic change through the impact on jobs has always been a difficult way to think about economic progress. Let’s take a historical example. Once upon a time, 100 percent of the United States effectively was in agriculture, right? Now it’s down to 3 percent. Productivity in agriculture has exploded. Output has never been higher. The same thing happened in manufacturing 150 years ago or so. It would have been very easy to say, “Stop economic progress because what are all the farmers going to do if they can’t farm?” And of course we didn’t stop the progress of mechanization and manufacturing, and our answer instead was the creation of new industries.
On our last platform safari, we explored how incentives designed to prevent lion hunting in Kenya are surprisingly akin to policies designed to encourage free shipping on eBay. From the king of the jungle and the flow of packages, we turn to the dog of the savanna – the African wild dog – the unfortunate victim of the tradeoffs involved in ecosystem management.
It ain’t what you know, it’s what you feel
Don’t worry about being right, just be for real
—Parliament, “Ride On”
Today we are announcing Shana Fisher as a new board partner at Andreessen Horowitz. Although she keeps a low profile, people in high tech investing know all about Shana. They know about her because she is so good at what she does. As an early stage investor, she has invested in a broad set of outstanding companies including MakerBot, Pinterest, Vine, FiftyThree, Refinery29 and Stripe. In addition, she is our kind of investor—one who combines the street smarts of how to build companies with the book smarts of how to invest in them.
In March 2012, I left the suburban enclaves of San Jose and went on safari to Kenya. Early in the trip I toured the Ngorongoro crater, filled with African lions, rhinos, hippos and giraffes.
But my favorites were the monkeys. I loved Curious George as a boy. Seeing George’s real cousins, I asked our tour guide, “Can I give a banana to the monkey?” I had become the real-life Man with the Yellow Hat.
The tour guide responded with an immediate and stern refusal, “Absolutely not.”
He explained with a calm voice, “If you give a banana to a monkey you will destroy our ecosystem. You will teach monkeys to beg, and not forage, for food. You will pose danger to your fellow safari goers who might not have bananas to offer. And your action will cause other actions, for the plants, the wolves, the trees and everything else. You must not give a banana to the monkey.”
As much as we depend on our gadgets and their accompanying software to do more of our daily tasks—from reminding us to go to meetings to crunching stats for our favorite sports players—human intelligence is far from obsolete. On the contrary, MIT computer science professor Rob Miller believes there will always be a margin between what humans understand and what computers can do.
As Americans, we love efficiency. In huge numbers, and with our wallets wide open, we rush toward anything that drives lower cost, highly liquid markets. Think about it. McDonald’s, Amazon and Costco dominate their industries with some combination of huge choice, overall lower prices and massive volume.
At scale, efficient markets can be great. Consumers get more for less, and producers profit from the combination of high volume at low cost. And efficiency begets even more efficiency – producers re-invest their profits to develop new products and to continue to lower production costs while consumer choice expands.
But sometimes the drive for efficiency goes too far.
I’ve had Amazon on my mind lately, part of which is due to my reading Brad Stone’s very interesting book, The Everything Store: Jeff Bezos and the Age of Amazon. I’ve described in earlier blog posts how Amazon is a brutal competitor for brick and mortar merchants due to their large and growing cost advantages and a maniacal commitment (at least most of the time) to having the lowest prices anywhere. (You can read more about it here.) These same drivers also make Amazon a heavyweight competitor for e-commerce companies as well.
One of the holy grails in the storage market has been to deliver a piece of software that could eliminate the need for an external storage array. The software would provide all the capabilities of an enterprise-class storage device, install on commodity servers alongside applications, eliminate the need for a storage network, and provide shared storage semantics, high availability, and scale-out. With Maxta, the search for such a holy grail ends here.
As a product manager at Google, Apple, and Wildfire, I’d at times spot a new breed of hacker in the wild. They lurked in the most sensitive areas of the business. They hunted for ways to manipulate, bend, and break our systems. I took to calling them Enterprise Hackers. If you’re smart, or just lucky, they are already inside your company – and they might just save your bacon.
In 2003, Kurt Dresner showed up late to a meeting he had with his advisor, Peter Stone, the director of the Learning Agents Research Group at the University of Texas at Austin. Dresner had been sitting idly at a red light waiting for the light to turn. No cars came through. He could have crossed the road safely and been punctual. It was a complete waste of time. “I can do better,” Stone remembers the tardy Dresner saying.
Langston Hughes, F. Scott Fitzgerald, Mos Def and DarkStar, those are the poets, authors and artists that swirl through the curly-haired head of Jeremy Dean. Dean is a self-described “humble school teacher,” and the education czar at online annotation site Rap Genius. For all his self-effacing talk, Dean has wildly ambitious plans that range from changing how every teacher gets students engrossed in literature, to championing a new kind of style guide more suited to our digital future than our Strunk and White past.
Wait ’til I get my money right
Then you can’t tell me nothing, right?
–Kanye West, “Can’t Tell Me Nothing”
If you are an entrepreneur, you have probably heard some crusty old CEO or investor say something like “cash is king.” You probably read the Twitter S-1 and though to yourself: “What the hell are those old guys talking about?” Twitter is still burning cash six years after founding and they, not cash, seem to be king.
In a situation such as this, I usually just say to myself: “That’s the problem with wisdom, you can get it, but you cannot share it.” But this particular nugget is so fundamentally important that I will attempt to represent the old guys in this imaginary conversation.
With all the recent innovations in flash storage design, you’d think we’d have a smooth path toward supporting storage requirements for new hyper-scale datacenters and cloud computing. However, nothing could be further from the truth! Existing storage architectures, despite taking advantage of flash, are doomed in the hyper-scale world. Simply put, storage has not evolved in 30 years, resulting in a huge disconnect between the requirements of the new datacenter and the capability of existing storage systems.
There is a perfect storm of three distinct disruptive forces that has the potential to topple nearly every major enterprise software incumbent. And the traditional approach of dealing with technology shifts – through acquisition – looks like it’s headed towards failure. As such, there is an unprecedented opportunity to create many, new multi-billion dollar enterprise franchises that are on the right side of these forces and are willing to go the distance in the face of ridiculously high acquisition offers.
Silicon Valley is supposed to be ahead of the curve. It’s where entrepreneurs, investors and the world at-large look for mind-blowing innovation – the next wave of companies and technologies that will reshape everything.
But according to Chris Schroeder, a long-time entrepreneur and author of Startup Rising, Silicon Valley is woefully behind the curve in recognizing one very bright hotspot of tech innovation: The Middle East.
In this final installment of the SaaS Manifesto, which has examined the rise of the departmental user as a major influencer of enterprise buying decisions, and how building a real sales team is integral to the process, the last critical consideration is the need to rethink the procurement process for SaaS.
The corporate one-size-fits-all process for procuring applications is broken. Many companies adopting SaaS are still using 85-page perpetual license agreements that were written years ago and designed for on-premise software purchases. It’s no wonder that SaaS companies want to avoid central IT and purchasing like the plague! Fortunately, the solution is simple: Every company needs to adopt a SaaS policy and treat SaaS software purchasing in an entirely different fashion from on-premise practices.
It may sound a bit ungrateful, especially coming from someone who invests in these things, but many early SaaS companies in many ways have been successful in spite of themselves. SaaS customers have had their pick of great software products, all available from the cloud, and without the long, tortured installation efforts of previous generations of software. On the back of these frictionless software deals, SaaS companies have been growing like mad, and often without any formal sales effort. But if they haven’t already, these up-and-to-the-right companies are about to hit a wall.
It doesn’t happen often, every 10 to 15 years or so, but we are in the throes of the reordering of the $4 trillion corporate IT market. And depending on which side of that transformation you sit, this is either the best time to be an enterprise technology company (see: renaissance in enterprise computing), or reason to start looking for a new line of work.
I certainly sit among the group that sees this as a huge opportunity, and it’s far from finished. If the first phase was to build replacement technologies for every part of the IT stack, the next phase—and the next golden opportunity—is to re-imagine the business side of the equation and change how buyers and vendors come together. That is where this SaaS Manifesto comes in. Think of it as a three-part field guide to the new way enterprise computing will be bought and sold.
Web products have followed a steady evolutionary path from the compound to the atomic. Today’s popular social sites are spin outs of behaviors that emerged from blogs and forums, the primordial soup of the early social web. Before there was Twitter, people were doing something similar to tweeting on so- called link blogs or micro blogs. Tumblr was a direct descendent of a particular strain of blogs known as tumble blogs.
The successful products took big meals and converted them to snacks. The Internet likes snacks– simple, focused products that capture an atomic behavior and become compound only by linking in and out to other services. This has become even more so with the shift to mobile. People check their phones frequently, in short bursts, looking for nuggets of information.
To me it’s kinda funny, the attitude showing a n***a driving
But don’t know where the fuck he’s going, just rolling
—Easy E, “Straight Outta Compton”
Recently, major shareholders and board members of the legendary, but now troubled, retail chain JCPenney have been fighting over the best direction of the company. 18% shareholder and hedge fund manager Bill Ackman proposes removing current CEO Mike Ullman and opening a search for a new CEO. Meanwhile, Starbuck’s founder Howard Schultz counters that suggesting such a thing is despicable, especially when the company’s current position is Ackman’s fault. Meanwhile, the spat climaxed with Ackman resigning from the JCPenney’s board of directors on August 12th and subsequently divesting his holdings.
While observing this, a friend of mine asked me a question: “Aren’t they both highly motivated to do what’s in the best interests of shareholders? Why are they pulling the company in different directions?” What an excellent question.
In much of the world’s urban areas, it can seem like there are more cars than people. In the U.S., there are nearly 800 cars per 1,000 people. With that comes increasing congestion, pollution, and resource consumption. Yet, surprisingly, the utilization of vehicles is at an all-time low—to put it simply, the more vehicles there are, the harder it is to keep them all in use. That’s a lot of waste.
War is Peace. Freedom is Slavery. Ignorance is Strength.
In his novel 1984, George Orwell forecasted a dystopian society 36 years in the future, in which an all-powerful state uses advanced technology to exert totalitarian control over the thoughts, words and actions of its citizens. Ubiquitous two-way “telescreens” watch the individual’s every move and emit an engless stream of sinister propaganda. Big Brother is watching you. The Ministry of Truth is the only source of information. The Though Police control what you think. As citizen Winston Smith learns to his cost, resistance is futile.
The allegations that the NSA has apparently been collecting the cellphone and Internet records of everyone in the United States (if not the world) has catalyzed fears that Orwell’s terrifying future may finally be materializing twenty-nine years late. Sales of 1984 are up 9,500%. Was Orwell right? Is technology in the hands of the state enabling our subjugation as he predicted?
“Online is clearly taking share from brick and mortar…this is likely to continue”
–International Council of Shopping Centers
America has too many malls.
I’ve recently blogged that many traditional brick-and-mortar retailers are being threatened with “economic destruction” by their advantage online competition. In an interview with Bloomberg TC, anchorwoman Nicole Lapin asked about the implications of this dynamic on retail teal estate. I said I hadn’t studied it, but I thought the ramifications would be very big and very negative (I believe the phrase “apocalyptic” was used).
All great pitches have a few things in common: the founder/team is wicked smart, the idea is big and a breakthrough, and the market is potentially enormous.
But the best pitches are also usually non-obvious and unique to the particular entrepreneur’s story and background. “Founder/market fit” is important. Does the founder’s life story, educational background, personal struggles, Ph.D thesis, or prior work experience somehow qualify them to unfairly prosecute the opportunity they are pursuing? At our firm we always start off our meetings with a deep dive into the entrepreneur’s background, and the most convincing pitches literally pour out of them with some deep connection or “aha” that led them into the business they are explaining. By doing so, the idea is unique/original and is presented authentically versus a canned sales presentation.
It seems like there has been a veritable explosion of companies that are leveraging technology to build “people marketplaces” that provision various services. On one side of these marketplaces, consumers are afforded a new channel to procure needed services. On the other side, individuals are empowered to earn money performing the services.
These marketplaces come in two general flavors. There are horizontal platforms like Zaarly, TaskRabbit, Gigwalk and Fiverr that let consumers find providers of a wide variety of services. And there are vertical platforms that focus exclusively on one service vertical such as Lyft and SideCar for hopping a ride, Homejoy for house cleaning, Instacart for grocery deliveries and DogVacay for boarding your dog.
We are holding back the middle class in America. But it’s not for the reasons you think, and the culprits are not those most people think of. Rather, the US government has systematically cut the middle class out of the most important wealth creation opportunity for the next 50 years. Through a series of byzantine regulations, the government has made it virtually impossible for working Americans to enjoy the fruits of America’s greatest strength: innovation.
If I knew what I knew in the past
I would have been blacked out on your a**
–Kanye West, Black Skinhead
Because I am a prominent advocate for founders running their own companies,whenever a founder fails to scale or get replaced by a professional CEO,people send me lot of emails. What happened, Ben? I thought founders weresupposed to be better? Are you going to update your “Why We Prefer FoundingCEOs” post?
In repsonse to all of these emails: No, I am not going to rewrite that post, but I will write this post. There are three main reasons why founders fail to run the companies they created:
Ben Milne has a special relationship with transaction fees.
An entrepreneur with a design and manufacturing business in Iowa, Ben found himslef obsessed with one simple notion: transaction fees were eating into his profit margins. If you conside money as data, there had to be a better way with so much money sloshing around in the system when the marginal cost of actually transferring the money is practically zero. So why did it cost him $55,000 a year to access it? Why then did he have to wait seven days to get paid?
The pop culture view of startups is that they’re all about coming up with a great product idea. After the eureka moment, the outcome is preordained. This neglects the years of toil that entrepreneurs endure, and also the fact that the vast majority of startups change over time, often dramatically.
In response to this pop culture misconception, it has become popular in the startup community to say things like “execution is everything” and “ideas don’t matter”.
But the reality is that ideas do matter, just not in the narrow sense in which startup ideas are popularly defined. Good startup ideas are well developed, multi-year plans that contemplate many possible paths according to how the world changes.
The venture industry is awash with talk of the “Series A Crunch”, where it’s getting progressively more challenging for seed companies to land follow-on financing. In my short two-year tenure as a full-time investor, I’ve seen this crunch hit very hard at a number of quality early-stage consumer companies.
Why is this happening? A number of factors are coming together to create this crunch: