It seems to me that he doesn’t know how crowd funding without selling equity (e.g. Kickstarter and IndieGoGo) works – or deliberately wants to discredit the incredibly powerful new tool available to entrepreneurs for validating ideas and product – or perhaps more likely he just lost track of the evolution of entrepreneurial methodologies since graduating.
(Kudos to him on the polemic page impressions link bait material, though.)
These are my highly opinionated thoughts on his three outrageous claims in the Inc. article.
Claim 1. “It [Crowd Funding] makes it too easy to kid yourself”
– In which he argues for the writing of a business plan (!) instead.
1. Crowd Funding without selling equity is bootstrapping.
There’s nothing more sobering and honest feedback than direct contact with the market. Crowd funding WITHOUT selling equity can be used as a valid MVP (Minimal Viable Product) that will help you validate your thesis that if you build it, they will indeed come – AND buy.
Just don’t build and produce anything until you’ve received pre-orders that will cover the production at cost or better. Obviously. Crowd Funding without equity IS a valid bootstrapping strategy. Make no mistake about it.
Who cares about business plans? No business plan ever survives first contact with a customer anyways. Business plans can only work if you are executing a known and validated business model. That’s the polar opposite of a startup which sole purpose it is to search for a scalable and repeatable business model. No magical business plan is ever going to help you find it. Validating your product in the market will.
I do personally recommend writing a very basic business plan as an educational exercise to arrive at an back of the envelope estimate of how much money is going to come in and go out and where – and then burn it! It’s not an operational guide nor a road map. It’s a work of fiction, a fantasy, a guess.
Isn’t it a no-brainer that as long as you can sell your shizzle, you should try to make as many pre-orders as you can before production and shipping, at least enough to make it cover your cost and perhaps contain some profit to channel into marketing of the second batch? Isn’t crowd funding a perfect viable channel for facilitating such pre-orders?
If you can’t sell enough to just break even, isn’t that a clear sign that maybe you’re not solving a problem that the market cares enough about to pay you? Or that you are doing a crappy job at describing the problem you’re solving and the solution you’re offering? That you should probably be doing something differently?
Isn’t crowd funding an awesome low-risk, low-cost channel to test the viability of your business idea, to help the market find you and fail or succeed faster?
And so frigging what if you don’t make your funding goals? At least you failed before you committed significant amounts of your or other friends, fools or family’s money – let alone an investor’s – bet the barn and lost your life partner.
At least with crowdfunding, you had the sense to save all of that money and maybe even invest some of it into mutual funds or stocks (more here on that if you’re still stock hunting). By now you probably have a pretty diverse portfolio that gives you decent if not great returns and can use that money to fuel the business this time around!
And hopefully you learned more about what you should be selling instead by getting invaluable feedback directly from the market. Consider your time spent raising crowd funding a considerable investment in your personal entrepreneurial education.
And consider this: Every time you fail at crowd funding, you get to play again and again and again ad nauseam, ad infinitum – without going bankrupt or having to beg private equity funds for the privilege to play.
Claim 2: “It [Crowd Funding] isolates you from people who can actually help you”
– In wich he argues you need feedback, permission and validation from investors, not the actual market and your actual potential customers.
2. An investor is a commodity, an outstanding entrepreneur is the prize.
If you as an entrepreneur can show a VC or an angel how you already validated your business and how you’re already making money, you can pretty much shop around for the investor you want to a price advantageous to you.
Basically, you’ll have the best bargaining chip available to any entrepreneur in your pocket. In fact, you might even find out that you don’t need an investor at all to scale your business, that you can build on actual pre-orders and sales yourself.
I call hot steaming bullshit on the ridiculous assumption that savvy VCs and Angels would be less interested in you if you crowd fund (read: bootstrap) your startup at an early stage.
In fact I’ll claim the polar opposite: Crowd funding provides you with a new channel to get found. If you’re able to show traction and sales – they’ll come knocking, or at least it will help get you through most doors.
As an anecdotal proof, I myself have been approached by tier one Silicon Valley investors as a direct consequence of crowd funding projects.
I think that speaks for itself how qualified Ari Zoldan is to give startup entrepreneurs advice on how to get funded – or not.
DISCLAIMER: 1. Here’s my past crowd funding failure. 2. I’m an instructor with NEXT and I preach teach Customer Discovery, Business Model Generation, Lean, MVP-ing, Metrics and Innovation Accounting.
A couple of months ago I met a new acquaintance that had some interesting business ideas. As luck would have it, they happened to correlate in part with some ancient ideas of my own and we instantly hit it off. Since then, a little voice in the back of my head has been telling me that I might have a record of the original brainstorming back in 2003. It’s not quite what we’re up to these days, but it is in many ways related. At least it was sort of the spore for me. More on that for a future post, perhaps.
Lo’ behold: I actually managed to find the original IM chat log between me and a good friend sometime first half of 2003 after some searching of archived CD-ROMs [sic], translated in parts from Norwegian. It’s a fun time capsule if nothing more and it’s interesting to see how the assessments and predictions for mobile devices, services and business models we had back in 2003 relate to the mobile reality of 2010 – or not. We even considered launching a few mobile apps, although we never got as far as discussing details, such as the mobile app advertising we would use to generate a successful business.
If you’re of an overly sensitive nature, be warned that this post contains colourful language. I would also state for the record that my references to Nipponese people and Nipponese culture are not meant to be derogatory, defamatory or otherwise insulting. Far from it. I find Japanese people and culture most fascinating and inspiring.
To all telcos that might find statements, opinions and ideas in this post unprofessional – well life just ain’t fair, is it?
My friend’s IM nickname has been changed to protect the guilty. He knows who he is and what he has done. ;)
So with no further ado I’ll let it all hang out here in the open for posterity. What can I say. We were angry young men of low moral fiber young and needed the money:
BlackTar says:
http://www.twincities.com/mld/pioneerpress/business/technology/5987828.htm [link no longer active – nice argument for permalinks – and I was not able to find it on wayback machine. Anyway, I seem to remember the article was about some new dating and geolocation thingy]
BlackTar says:
new? no
BlackTar says:
I’ve had an idea about the perfect Japanese mobile phone along those lines for a long time.. .
BlackTar says:
it’s gotta happen sooner or later – would bee nice to cash in ourselves
Friend says:
I thought this was cool when I read about it back in the tamagotchi days
BlackTar says:
yeah, but think about the possibility to cash in real money on perv nipponese (and the rest of the world for that matters)
Friend says:
I think that would be pretty kick-ass, actually…
BlackTar says:
there once was this Japanese hightech product that would let you plot in sexual and partner preference and it would indicate when someone with the same gizmo and matching profile would be in your vicinity
BlackTar says:
it never took off
Friend says:
not necessarily for perv purposes
BlackTar says:
no, true – but it’s more fun if you think about perverted nipponese
BlackTar says:
well.. . my idea is to enable each and every mobile phone with the same capabilities
Friend says:
separate the crap, sort of
BlackTar says:
either with a Java app together with a server based solution
BlackTar says:
low threshold
BlackTar says:
or just the server solution
BlackTar says:
ref. NetCom Buddy [early Norwegian geolocation service that you could set up in a web interface to have it report by sms where your friends were, based on opt-in consent and triangulation]
BlackTar says:
you can already receive notifications about where your friends are
Friend says:
hmm.. it cannot work other than server side.. or else you need new hardware
BlackTar says:
true, but the interface could be Java
BlackTar says:
instead of sending sms – but sms is a proven business model by now
Friend says:
if it can’t run piggyback on the standard mobile server traffic
BlackTar says:
it is a prerequisite that it can
BlackTar says:
(must)
Friend says:
but you can like request a ‘proximity check’ from the server, anyway.
BlackTar says:
yeah, but you do it via SMS!!!
BlackTar says:
that’s the genious part!
BlackTar says:
you constantly need to BUY services!!
Friend says:
yeahyeah, of course.. just thinking out aloud here
BlackTar says:
I think this is ripe for bigggg bucks
Friend says:
piggybucks!
BlackTar says:
piggy, piggy can’t you see.. .
BlackTar says:
imagine you are about to go out for a night on the town – then you just set up what you are looking for today/tonight – either via sms or web – then you can request proximity checks via sms afterwards
BlackTar says:
I believe and think this is worth insane amounts of money
BlackTar says:
after all – the human sex drive is probably the most proven business model of them all
Friend says:
the nipponese are probably working on this already.. better sleuth for some industrial espionage on the net
BlackTar says:
you are the only one I’ve told
BlackTar says:
no! I don’t think the nipponese even use sms
BlackTar says:
do they?
BlackTar says:
they probably have some sort of micropayment system
BlackTar says:
but.. . I picture this being just as big in the us of a
Friend says:
are they making money on devices or services or both.. sort of
BlackTar says:
both I think
BlackTar says:
they do have a completely different network
Friend says:
yeah well, usa have discovered sms and teletext only in the recent year or so
BlackTar says:
with 489587347598759 more features and bandwidth
Friend says:
hmm.. but they can’t launch a network just for this? .. probably radio
Friend says:
isn’t it only short distance that is of interest?
Friend says:
or
BlackTar says:
no, it could probably work on the nipponese network too
Friend says:
e.g. sitting at home checking out where the most likeminded are in the city at the moment
BlackTar says:
exactly
BlackTar says:
you can do this today with GSM
BlackTar says:
and probably with anything that sends and receives waves
Friend says:
yeah, with people you know…. ok I know how this can work
BlackTar says:
trinangulation between base stations
Friend says:
yeahyeah
BlackTar says:
it’s going to get much more fun when gps becomes a natural part of a mobile phone
Friend says:
but it can work exactly like the “where are my friends” thing
BlackTar says:
triangulation is even more accurate as of now, tho afaik
Friend says:
you don’t have to send any extra information between phone and central either
BlackTar says:
yeah! and one should also be able to do the “where are my friends” thing too
BlackTar says:
no, it only takes that you opt-in to allow your geolocation to be published
BlackTar says:
you’ll send a simple or advanced query to the server via SMS – it returns what it finds
Friend says:
because the numbers are categorized on the central [server] into interests you’ve been filling out over the internet.. and when one does a “my friends search” it does not search for the numbers you’ve added, but any number they’ve flagged prerequisites
Friend says:
the technology is already there
BlackTar says:
after a proprietary – a la google – sorting
BlackTar says:
there has to be some flexibility in handling the query such as you risk to never get a match [sic]
Friend says:
that you not? or? huh+
BlackTar says:
a lot of the success factor lays thus in the algorithm(s) for handling the matching of criteria
BlackTar says:
understandably you could make this hyper simple too
BlackTar says:
with if/else functions, booleans
Friend says:
hmm.. I don’t really see a problem with this.. you get % numbers on matches and it’s left to the user to decide if that’s good enough, sort of..
Friend says:
a fixed number of hits every time
BlackTar says:
% match is meaningless – ref websearch
Friend says:
hmmm….. can one buy oneself upwards on the lists?
BlackTar says:
hehe
Friend says:
el corrupto
BlackTar says:
that doesn’t work either ref websearch
BlackTar says:
but it’s clear that you have to specify degree of match you want when you request query per sms
BlackTar says:
hihi
BlackTar says:
so you have to send more than 1
BlackTar says:
and it is clear that you need heaps of parameters and features that you can adjust per sms
Friend says:
mo’ money
BlackTar says:
but just enough so that it becomes, stays functional
Friend says:
one can request info on hits
BlackTar says:
so, you see.. . it’s in actual fact the sane as Trepia – only smarter
BlackTar says:
regular people don’t understand hits
BlackTar says:
info on hits? more info, click hear plz
Friend says:
duh
BlackTar says:
tell me more about info on hits
Friend says:
Once you’re a member of the service you can enter personal info about yourself, this can be bought with sms, when MMS gets common you can have images/videos, whatever, too
BlackTar says:
yeah
BlackTar says:
yes
BlackTar says:
info on hit == profiles
BlackTar says:
brb
[snip, snip, snip. Lunch break and a funny digression about Cottage Cheese, Procter & Gamble, Amway and the Church of Satan. It happens, you know.]
BlackTar says:
what’s neat & sweet about the mobile service is that it is remarkably compatible with the multi level marketing [MLM] scheme!!!
BlackTar says:
you have a product (that in addition to be low cost – initial investment only) that people consume and come back to consume
– then you ‘franchise’ the system to agents below you (distribution companies, telcos, etc) who then resell the service to other subcontractors. We collect from every party from the bottom up!!
BlackTar says:
People think this stuff is all pyramid schemes but it’s not – some people say Amway is bad but it’s still going alright
– that’s mlm bringing in the bucks
BlackTar says:
== daddy bigbucks
Friend says:
what’s the name of the friends search service thing from telenor?
BlackTar says:
no idea
BlackTar says:
[the service from] netcom is called ‘buddy’
[snip, snip, snip. A digression about SARS in China, ill friends and travel.]
Friend says:
if one does not find funding in a hurry, then it’s just to send a registered letter that explains the gig to telenor and netcom.. wait ca 1 year and then sue..
BlackTar says:
yup – file at lawyer and deposit box
BlackTar says:
stupid pages
BlackTar says:
ah! I got the buddy password right now
BlackTar says:
neat
BlackTar says:
can log in everywhere at netcom without being registered
Friend says:
yes, so get it theeeeeeeeeeeeeen
Friend says:
usually receives it immediately
BlackTar says:
yup
BlackTar says:
you got netcom?
Friend says:
yes
BlackTar says:
okidoki
Friend says:
hmmm… does it cost anything, come to think of it?
BlackTar says:
probably per received message
BlackTar says:
with MAP and stuff!!!
BlackTar says:
‘It is free to use Buddy from mother.no in August and September!’
Det er gratis å bruke Buddy fra mother.no i hele august og september!
BlackTar says:
[mobile phone number]?
Friend says:
yes
Friend says:
HELL! Why don’t I get a passsssssssssword
BlackTar says:
took 3 tries before I got one
BlackTar says:
search (reception) SMS WAP* and WEB
1 person NOK 3,00
Group 2-5 persons NOK 5,00
Group 6-10 persons NOK 8,00
Friend says:
I’m not effing receiving one
Friend says:
maybe they canceled my subscription thingy?
Friend says:
haven’t tried to call lately…
BlackTar says:
wap & web per gprs.. . hmm whatwhat what
BlackTar says:
you need to invite people
BlackTar says:
so I’ll try to localize myself then
Friend says:
bah
[snip, snip, snip. Digression about HL2 screener, SMS gambling services, gen BS]
BlackTar says:
so
BlackTar says:
I’ve invited myself now
BlackTar says:
to netcom buddy
BlackTar says:
but now the html doesn’t work
BlackTar says:
damned stuff
BlackTar says:
part of the secret about the sms thing is that it shouldn’t be as committing and explicit as the classifieds
BlackTar says:
so that you can remain anonymous but still create a feeling of excitement and adventure
BlackTar says:
so that most people possible would use it
Friend says:
yup.. the [Norwegian data storage supervision department] would probably like it too
BlackTar says:
BUT then you can of course choose to make it explicit by way of our anonymous sms chat system!
BlackTar says:
and that costs money ™ per message
Friend says:
the problem is to beef up the user numbers…..’
BlackTar says:
yes – the secret to that is to place the bar as low as possible
BlackTar says:
once they’re ‘in’ they’ll have a lot of features to burn away the money on
BlackTar says:
or they can stick with the simple features – which cost money still
BlackTar says:
it mustn’t cost too much either
Friend says:
join for free.. increase 10 cents per use until fixed price of NOK 3 or whatever
BlackTar says:
I think a fixed price per received message is the way to go
BlackTar says:
some services [features] are of course more expensive than others
Friend says:
important: finding out how the triangulation thing works with the telcos.. if it is at all possible to buy this service [from them]
BlackTar says:
it is – if they make money on it
BlackTar says:
think about it this way – we would be doing the least amount of work possible : 1. Own the rights 2. Manage the concept 3. Harvest money
BlackTar says:
the best bit is that the telcos would be responsible for the integration and technical parts themselves
BlackTar says:
we just want money per license and share per received sms – we are only going to invest in the concept
BlackTar says:
see the presentation on rebel.as
Friend says:
the technical part is there.. it just needs to be hooked up with the Whoremonger ™ sms services
BlackTar says:
yes, and that’s not our responsibility
BlackTar says:
that costs money
BlackTar says:
and those interested in making money on their networks should carry those costs
BlackTar says:
if we only make something that talk in standard tongue [made with open standards]
BlackTar says:
then the rest should be fine
BlackTar says:
I think the essence is to create a concept with a low bar for participation, and at the same time offer flexible and advanced features
Friend says:
hmmm.. the input part in itself … registering … criteria .. must work on mobile .. have to be pretty vague? preformatted multiple choice?
BlackTar says:
that’s of the essence
BlackTar says:
creating something that WORKS here
BlackTar says:
that concept must be thoroughly thought and worked out
BlackTar says:
where the already proven technology bits only gets included as independent elements one takes for granted
BlackTar says:
the concept is really just a combination of existing technologies and a proven business model – combined in a new way with a kickass ‘frontend’ (if you catch my drift) on top of it all
Friend says:
Indeed! I’m just a bit busy — must get things done in a hurry!
BlackTar says:
oki
BlackTar says:
me too – really – but can’t be bothered to work :-\
Friend says:
I’m attending a meeting soon and need to have stuff finished :=
Friend says:
“but can’t be bothered to work” so true so true . it’s boring
Yeah, yeah, yeah. I know. You’ve heard it all week; Buzz, Buzz, Buzz. I’m very guilty of adding to the… well… Buzz. (Sorry. Bad pun.) and I’ve almost had enough myself.
I think nobody knows exactly what Google Buzz is right now and where it’s going to go, evolve into. I think most agree it has tremendous potential. However, a most provocative thought occured to me today; Could this be a Blog killer replacement?
The gist of my hypothetical argument is that Google Buzz could probably replace most blogs given the ability to take it out of Gmail, customize, widgetize and skin it a la iGoogle. The Google vehicle is already there in the form of the current Google profile page or embedded externally over the Buzz API. The vehicle for an standalone service is already there as Google owns Blogger. The quest for unified commenting could also have been solved by the advent of Buzz. Further more, Google’s proven efficiency at filtering SPAM in Gmail, it stands to reason that they’d do an excellent job at eliminating comment SPAM.
Please share your take with me – I’d really like to hear what you think.
For those of you who live under a stone actually live wholesome, meaningful livesBuzz is a new service launched by Google.
Think of Google Buzz as something like twitter with no character restrictions and with comments or Facebook without Farrmville and the other horrible wonderful stuff, like FriendFeed if you’re of a more adventerous inclination – or perhaps a Blog?
Currently I hate the (as of writing) lock-in of the service with Gmail, but I’ll keep that for future posts.
The service has improvement potential and, shall we say some rough edges?
Here’s a primer on what you should know about Google Buzz to get started.
To keep in the spirit of ‘the now’, I’ve embedded the original Google Buzz thread (as a grotesque kludge – do tell if you know of a better way) below.
UPDATE 2012: Below we have the answer to the question in the headline. It’s a resounding “no”. Buzz is scheduled to be killed and old content is not embedable anymore.
So I finally went to Silicon Valley and visited Google at the Googleplex in Mountain View. If working for Google already sounds attractive to you, chances are it may look even more so upon visiting the mother ship.
As I was in the area, I just had to stop by the legendary Xerox parc in Palo Alto and pay my dues. The home of the GUI and numerous other firsts. Obligatory geek homage.
Though not really an Applefanboi, I couldn’t pass up the opportunity aussie online casinos to pop by Infinite Loop 1 in Cupertino for a quick pose. On another note, it was also interesting to see the actual offices of the guys and gals I’d been previously only been talking on the phone with from across the Atlantic. (A work thing. Nothing exiting. Don’t ask – I’d have to kill you. ;)
UPDATE: Chris Anderson (@TEDchris) was right when he told me that this change would be for the better back in 2009. I accept now in hindsight that my initial reaction was perhaps mostly nostalgic about a future that couldn’t technically and socially exist. As the amount of my followers keept rising, it was becoming self-evident that the changes were needed. Nevertheless, I still feel some of the initial feeling of exciting serendipitous chaos that made Twitter very special back then is gone. I guess I’m still a bit nostalgic. What do you think?
Original post below:
This morning I read a blog post over at Read Write Web (RWW) that caught me by surprise. I recommend you read it too. It seems that twitter has removed what I consider an essential feature in their latest update.
I was so surprised that I wrote a comment in the emotional heat of the moment over at RWW and I decided to republish it here later on. My initial thoughts were as follows:
I’m quite appalled that twitter seems to me to be self confident – if not almost smirk – with removing a setting that potentially alters the mechanics of conversing and discovering on twitter on a fundamental level; In other words making twitter less like, well, twitter.
I find the idea of not listening to 2% of their user base quite grand. Did they do the maths? That’s not a tiny amount of people, is it? My guess is, that there are a lot of the early twitter adopters and evangelists in those 2% too.
Another bet of mine is that most of those 2% are most certainly not confused by the @ reply ‘system’. It’s inaccurate, not threaded and tracked – but who cares? It’s ‘the twitter way’ and some learned to live comfortably with it.
I’m also willing to bet that a much higher percentage was living under the illusion that they were getting every single public tweet from the people they were following and didn’t know that twitter was censoring and deciding what they could and could not see.
As to the topic of context, I personally find parts of the 2008 twitter blog post referred to in the comments over at RWW completely out of touch.
From the post:
“1) You should feel free to @reply people and not worry about it being out of context to some of your followers. In general, they won’t see it.”
To me, twitter is not instant messaging or email. To me, one of the most important aspects about twitter is enabling discovery, stumbling upon new interesting people, sparking curiosity, reading different perspectives. Why take all that away? I’m flabbergasted. Speechless.
Would it hurt too much to just leave the [promiscuous] setting as default OFF, but there to turn ON for the users who are comfortable with it?
Are there economical incentives involving either business plans or prohibitive cost-benefit ratios precluding it? If so, twitter should be up front and transparent about it.
Please bring ‘promiscuous’ back. I don’t want to have to subscribe to the RSS feed of every single user that I’m following in my reader of choice to get the complete unadulterated twitter stream (even from users that may have blocked me).
