Music, Technology, Art, Economy

Backstory on the Umair Haque hang, plus: why social media is underhyped

I had the distinct pleasure of spending a few hours with Umair Haque last week while he was in town for the Supernova conference.  This was pretty exciting for me as he has been a core inspiration for my intellectual and professional pursuits of the last 3+ years.

I was first turned on to Umair’s work via Fred Wilson.  Once I read a few of Umair’s pieces on Bubblegeneration, I was immediately blown away by his combination of writing skill, extreme econogeekery, and keen insight into pop culture and the human condition.  He presented a really compelling framework for how to make sense out of the media and technology environments I had been working in (and continue to), so it struck a chord, to say the least.

A good bit of what he was writing about (network economics, game theory, social capital, etc) was just over my head enough to get me obsessed with understanding it.  Over the course of a several months, I went through and read every single thing he had ever posted to Bubblegeneration, along the way buying and reading books about the above-mentioned subjects, reading everything he linked to, and scouring Wikipedia for definitions of things I wasn’t familiar with.

I sometimes refer to this as my self-directed MBA.  It was the perfect way and perfect timing for me to study some forward-looking business economics after finishing my MFA, which was extremely self-directed as well.  I had learned how to apply and discipline my curiosity at CalArts, so my broadband connection + these influences = a total field day for many months.

Around the same time, another major intellectual/professional influence in my life had turned me on to Yochai Benkler’s work and also Bruce Sterling.  So this was a period of really intense learning as you can imagine.

Fast forwarding to this week, the actual hang (also featuring Chris Golda, Jonathan Strauss, and Jonathan’s friend Loren) met my [wild] expectations: some drinks, some analysis of various agreed-upon douchebags, some discussion of solutions to some problems, and plenty of jokes.  Everyone involved was super hilarious (Umair included) so that was key to the fun.

I’ll get into some more details later, but of the things that I was reminded of was, ironically, tied to the ever-present “social media” phenomenon.  Typically I try to stay away from talking about social media in the abstract as those conversations (occurring online especially) in the aggregate have not changed at all in years.

The thing that I was reminded of is that there are many things that these new media technologies can do to make people better off, but they require specific application to specific problems…not just the meta-problem of media itself.  That’s why I think social media is “under hyped”, because few have really executed strategies that take advantage of the broader implications and opportunities of hyperconnectivity (also note The Shift Index).

What I mean by that is: things like StockTwits and Hello Health and Lend4Health and eduFire and awe.sm and Topspin are about 80 billion times more valuable and interesting than, say, AdMob (here’s a nice post from Umair explaining why).

A lot of people are spending their time figuring out how new ways to connect buyers and vendors so they can engage in the same old transaction.  But what we really need are new kinds of transactions and new roles for economic actors (check out Doc Searls VRM project for an example and Eric von Hippel generally).

Social media tools are just that: tools.  Here’s hoping more people start using them to build a better plane/train/couch/IRA/classroom, instead of wringing their hands over advertising*.

(**note that social media conversations are a substitute for advertising. But you knew that, because read this incredibly on-point paper by Umair, right? ;-)

The New York Times is at least 4 different papers combined

cdixon:

- commodity AP style news

- bad summary reports on tech, finance, other topics by people who don’t seem to understand what they are talking about.

- hit (krugman) or miss (dowd) Op-Ed

- incredible actual reporting, like today’s article on how obama decided on his plan in afganistan

+ 1,000,000 points!!!!

Worried About the Googlenet

continuations:

Yesterday, I tweeted “welcome to the googlenet” and was asked to explain what I meant by that.  My tweet was about the announcement of Google DNS.  With Google DNS, you can now run pretty much entirely on a Google stack.  You fire up Chrome OS (or maybe just the Chrome browser), point DNS to Google, get your content from Google (e.g., music integrated into search results or driving directions), work with Google apps and other applications run of Google servers via Google AppEngine, and so forth.  Potentially, even doing so with new Google developed protocols.  This is a totally vertically integrated single source solution to the Internet.

Now in theory, at no point are you actually boxed in and everything is supposed to be open and standards compliant.  But the temptation to cross the line and give Google owned properties an unfair leg up and start pushing aside rivals and startups is huge.  It will take so little to go from “creating the best possible Internet experience” to “creating the best possible Google experience.” The company itself is publicly traded and a lot of employees wealth correlates directly to the price of Google stock.  On the margin, I believe that drives behavior more than any corporate commitment to not be evil.

Just to be clear, I am not suggesting that anyone at Google is actively setting out to take over and control the web.  I am, however, worried that the cumulative effect of all the initiatives, combined with economic incentives for decision makers, amounts to an important threat to the open Web.

When you go big, we go home

lifestylecap:

I’m part of crew assembling to fund Lifestyle Businesses with in-kind coding services. We’re electing to talk about it now due to a panel I’m on tonight at Web2. A few will make the changes necessary to scale beyond Lifestyle, some will throw off cash, and some will fail. We don’t have all the details worked out yet, but here’s the outline — just in time for my slot on Larry Chiang’s panel Tuesday evening at Web2 Expo.

The MyBlogLog tech founders — Steve, John, and Todd — are now out of Yahoo! and active at Cloudspace, their 12yo coding shop. Other than the those three, the rest of the gang is in Orlando. They’ve got ~10 agile pairs down there cranking away on contract, producing code for cool services like Awe.sm, StatusOverload, thingfo, Gnip, and more. Not surprisingly, they often get asked to code for equity instead of cash. Todd particularly wants to say yes but our group knows that doing so too easily leads to three scenarios:

Bad owning a pile of worthless stock in early stage deals that never happened.
Worse owning early stage stock in a phenomenal startup but not making any money because all the returns are derived from pro rata participation in later rounds.
Terrible making money solely via later pro rata participation as described in Worse, and therefore being an accomplice in crushing the Common, knocking down the Series A, and firing the Founder.

To make coding for stock both a founder-friendly and economic proposition, Cloudspace needs a tight set of startup selection, organizational development, and financial practices. They asked me to help create those practices not only because I’m picky, but also because Todd and I completely disagree on solo Product Founders. He’s got a fetish for them, and I’ve got a phobia. By Product Founder, I’m referring to one of the three startup exec archetypes that we believe are part-and-parcel of financial success. To scale a ‘net business that is likely to make real money for the founders and early employees, a startup team needs three discrete, authoritative, specialized executives before it gets funded: Product, Tech, and Commercial. Even when an individual is capable of doing more than one of those jobs, a scaling startup requires that they specialize.

We call a startup that without a complete kind of team a Lifestyle Business, hence Lifestyle Capital. We expect to get involved before the full team in place, which is before these startups have a hope of scaling. There are many successful exceptions to our full team before funding criteria, but we do not like the Bad, Worse and Terrible probabilities in that situation and do not want to participate. If we do your coding and you decide you raise money before we think you should, no problem. However, we need to be paid back in cash on closing. We’ll still love you, but we are not willing to own one single share of your stock.

If you meet all of our picky conditions (details below), then you have a good shot of scaling and owning your stock would thrill us. If you generate enough revenue to pay us back and own 100% of your startup again, we’ll be even happier.

We are all cloud services startup people, and Lifestyle Capital is intended to be a repeatable, near cookie-cutter services offering. It’s completely unclear if repeatability at that level is possible, but it’s the only way we’re willing to try it. Like any good cloud offering, our goal from here is to make the service cheaper, more modular, and stickier.

The v1 service offer and pricing, which is targeted at teams which include a Product-capable founder (or are a solo Product Founder) follows. We’ll evolve versions for Commercial or Tech founders if we get traction with this service. The features of Lifestyle Capital v1 will look a lot like:

• Incorporation and detailed service specification (optional);
• Eight weeks of pair sprints to get the first rev of the service live;
• Another half-dozen pair sprints over four months to handle user feedback; and
• One year of sysadmin and maintenance.

In return for the work above, payment will take the form of a ~$175,000 five-year convertible note whose main points are:

• 10% annual interest, compounded monthly;
• Fully amortizing monthly payments starting no later than Month 13;
• No prepayment penalty if note prepaid out of cash flow;
• Any fundraising triggers immediate repayment of the full balance plus a 25% prepayment penalty, if all of the conversion conditions (below) have not been met. We need to create some kind of friends-and-family exemption to this clause but don’t have the details worked out.
• Conversion into the Preferred Series A under certain very picky conditions, which are the full team as defined above, ramen profitability, three consecutive monthly note payments, a revenue growth rate that we haven’t settled on yet, and post-financing board composition of two Common seats, the Preferred lead, and optionally a Lifestyle seat; and
• $1,000,000 pre-money conversion ceiling.

We are perfectly aware that the prepayment and conversion conditions are an impediment to raising capital. That’s our design criteria. First-time founders can do well following paths other than Lifestyle’s, but those aren’t paths on which we wish to code for stock.

If you have a project and a perspective that fits, please drop a note to todd@lifestylecap.com.

@rafer