Avoiding the hype

Technology media is very similar to fashion media. There’s a lot of hype, there’s a lot of noise and everybody follows whatever trends the media dictates. The “hot” startups set the trends, in the same way the “hot” labels dictate what we’re all gonna wear next year. The big difference is that deciding to start a daily-deal site because Groupon is the fastest growing company ever has much bigger implications than, say, deciding to wear pink.

Twelve months ago, Groupon was the sexiest thing in tech media. Analysts loved it, the media loved it, we all loved it. Six months ago, it was Facebook. Soon, it’s gonna be Square. And so on. Investors jump on these stocks at crazy revenue multiples, startup founders follow the trends and start companies in the sector hoping for the same crazy multiples, and the media praises them all. They’re all geniuses and billionaires before they’re 30.¬†It’s a SoLoMo world, after all. And then – the stocks don’t perform. Or better yet, they don’t perform at the crazy revenue multiples everybody was hoping. Which, by the way, is normal. No matter how sexy you are, it’s crazy to trade your stock at 15x revenue multiple. Even Apple, one of the most important companies of our time is trading at a mere 4.5x revenue multiple.

But the biggest implication of all this hype is much more painful than meets the eye. When sexy stocks fail to meet expectations, it’s relatively ok for them. They have enough cash to figure it out. But when the stock starts getting shorted and the media starts bashing the company, investors stop putting money in that industry. Which means that all the startups hoping to ride the wave and get crazy multiples in that space will find it much more difficult to raise money, so they run out of cash. Of course, this doesn’t mean that startups shouldn’t ride trends. They totally should. But they should also raise money at reasonable valuations, raise just enough to reach the next milestone rather than as much as they can, and make sure they focus on the fundamentals: product, revenue and margin. Everything else is hype.

It’s very easy to give up a pair of shoes because it’s been 12 months and they’re out of style. It’s much more difficult to shut down a company because you bought into the hype and didn’t think about the fundamentals.

Planning your startup’s objectives, the Steve Jobs way

Those of you who’ve read Steve Jobs’ biography may remember the stories about his annual “company retreats” – trips organised in a remote location where his entire (management) team could focus on product, strategy and stay away from the day-to-day operations. While reading the stories when the biography came out, it seemed an amazing way to align the whole team to one unified vision, brainstorm, and prepare the product roadmap and company strategy. So this year I decided to organise a company retreat for the entire Brainient team.

The outcome of the trip has exceeded all my expectations. After spending four days with the team deep in the Carpathian mountains, not only is everyone aware of and aligned to one big objective, but we’ve set goals for each member of the team and prepared a detailed product roadmap. In other words, we know where we’re going and how to get there. And we also had lots of fun along the way. I strongly recommend that you try it for your startup, regardless of whether you’re five people or fifty. And here are a few tips to help you get started:

Go somewhere remote. It will help the team mentally disconnect from the day-to-day stuff. We chose to rent an entire cottage up in the Carpathian mountains in Romania. All we had was an internet connection, our laptops and a whiteboard. Living and working under the same roof for a few days can create incredibly tight bonds within the team.

Set a clear outcome and keep a tight schedule. Each day, we had at least 4 hours of discussions on a predefined agenda. We had a different theme each day: strategy, BrainRolls, BrainAds and objective planning / product roadmap. Our plan was to align the whole team to the same objective and make sure everyone has defined their goals for the year and for the first quarter of 2012.

Use a planning methodology. It makes it a lot easier to plan things out and align everyone to one objective. At Brainient, we use OKRP (Objectives and Key Results Planning), a methodology used by the likes of Zynga, Facebook and Google. Here’s how Google does OKRs, for example.

Have fun. Product planning and brainstorming can be tiring, so we made sure we had lots of fun prepared. From trips to the mountains to barbecues, Texas Hold ‘em, four on the couch or pushing our cars out of the snow upon departure, it felt more like a fun camp in the mountains than an intense company planning trip.

It’s a very comforting thought for a founder / CEO to know that every single member of the team knows what they have to achieve, and I can’t thing of a better and faster way to do it than the Steve Jobs way.

How Justin Bieber almost ended up on my Facebook Wall

Oh my God. “This is scary”, she said while turning the laptop towards me so I can see the screen. I glanced at it and saw her Facebook Wall shouting:

Sabina and Peter Ward are now friends after both attending Langer & Wardy’s fancy dress & pool party birthday extravaganza.

Now, Sabina met Pete some time ago, but after seeing him at Langer’s party the night before she decided to connect online as well. Facebook very intelligently (albeit wrongly this time) guessed that they might have met at the party. Which is scary. Not because of this particular harmless association, but because it points towards how much effort Zuck and the team put into making use of every single bit of data they have about us.

I guess it’s all fine when you voluntarily decide what you’re going to share. The problem, however, is that Facebook’s newest open graph protocol enables app developers to share anything we do in their apps, automatically, in the background. For example, every now and then I entertain myself with a bit of Justin Bieber, which is what I wanted to do this morning on Spotify. Luckily, I remembered that everything I do in Spotify is now automatically posted on my Facebook Wall (and Timeline) – right before pressing play (so I didn’t). I wouldn’t have minded the banter and pokes I would’ve gotten from my friends for doing such an atrocity, but I would go crazy if¬†Facebook started inviting me to Justin Bieber concerts in London. Now THAT would be scary (not to mention stupid) so I’m starting to wonder if the new open graph protocol is such a good idea after all.

Sequoia Capital’s founder: We don’t choose people, we choose markets

If you look at the fastest growing companies in the world, especially in the technology sector, you can notice one common theme: they’re all riding a trend. Zuck realised that people will want to stay connected with their friends by spending the least amount of time possible, Andrew Mason spotted that people are willing to join other people in order to get massive discounts, Ev & Biz noticed there are a ton of girls who would like to stalk Ashton Kutcher. In theory, it sounds pretty simple.

However, I think trendspotting is incredibly difficult but pays off massively, if you manage to have the right team and the right product at the right time. Don Valentine, the founder of Sequoia Capital makes a similar point in a speech he had at Stanford a few months ago:

We have always focused on the market: the size, the dynamics and the nature of the competition. Because our objective always was to build big companies. If you don’t attack a big market, it’s highly unlikely you’re ever going to build a big company.

We don’t care if people went to school or how smart they are. We are interested in their idea about the market, the magnitude of the problem and what can happen if in fact the combination of Sequoia and the individuals are correct.

We don’t choose people, we choose markets. And once we choose a market, we choose the best product in the market.

I strongly recommend that you watch the entire speech (about 1hr long), when you get a chance:

My take on all that Facebook privacy drama

Whenever a company starts completely changing (or creating) an industry and massively capitalizes on that, people start talking. Press & media starts following its every step to see if they could get some drama (and traffic, therefore revenue) out of that.

Facebook is right in the midst of all this drama with its share-everything privacy policy and Zuckerberg’s recent “newly discovered” IM messages.

But here’s my take on it: Facebook will make $1 billion this year, and they’ll probably IPO in 2012. Right now, investors trust Zuck and his team and users need Facebook enough to be willing to go through the roller coaster together with the company. And Zuck knows that.

Think about the following scenario: Mark Zuckerberg’s IM message is discovered after their IPO. What happens to the stock? It goes down. Or, Facebook changes their privacy policies and makes tons of changes that users hate. What happens to the stock? It goes down. Or… well, you get the point.

Facebook has two more years to bang its head on the wall and try everything possible without that affecting their ‘market cap’. Once they float, they will have to be 100 times more careful. So it makes sense for them to try it and then ask for forgiveness. And Zuck’s doing just that.