A few weeks back I wrote a post asking where are the Facebook startup deals.  Laura Beck, renowned Austin PR maven and “stripepreneur,” called my hand on that with a story about last week’s $500K funding of Lujure.  That funding included prominent Central Texans Pat Matthews and Bill Boebel, who sold their company Webmail.us to San Antonio based Rackspace.  The funding was taken not out of necessity but out of opportunity and partially out of “old school ties.”   Nathan Latka, the CEO of Lujure, dropped out of Virginia Tech to start the company, and both Matthews and Boebel are Hokies as well.

By the numbers, the company in 15 months has attracted 65,000 customers that have created more than 100,000 Facebook tabs reaching 50 million fans.  It’s growing 20% monthly on a reported revenue run rate of $1.5M.  All this is built on a very easy to use drag ‘n drop product for building Facebook tabs – no programming required.   There are numerous easy-build website tools out there, and Lujure is leading a similar charge in the Fb arena. 

What’s really cool about this is that the company remains in Blacksburg, VA, home of Virginia Tech.   You drive there by going to Roanoke and then on up into the Appalachian mountains.  My one trip there was by charter to the local airport for the opening of Michael Vick’s sophomore and final season as a college QB.  Those of you who are into extreme football trivia will recall that game against Georgia Tech was halted at the opening whistle by a lightening bolt that vaporized Lee Corso’s (ESPN) rental car.  The airport is within walking distance of the stadium, and we got back to our King Air after a couple of hours under the stands where we were sheltered from a deluge.  I to pilot:  “Can we get out of here.”  Pilot: “Let’s load up fast, go to the end of the runway, and see what it looks like.”  Radar screen showed 100% storm.  Pilot: “Here we go.”  #livedtotell and #$500tailgatepartynofootball

But I digress, although I know many of my readers sometimes prefer my digressions.  The Mercury News, the very bastion of Valley journalism covered the general topic of the Fb ecosystem in an article last week.  They list the top 20 Bay Area companies thriving in this space and reckon that probably a quarter of the Fb related businesses are in that region.  They also cite a University of Maryland study which finds that all the Fb businesses employ directly 53,000 people and indirectly perhaps another 180,000.  The Fb offering is going to generate taxes that appear likely to save the California state budget, and who knows where national unemployment would stand in the absence of all this job creation.

A friend of mine who has about 600 SMB clients actually asked me this weekend whether Fb is something his clients should pay attention to or is just a passing fad.  I gave him my opinion that Fb advertising is proving to be very effective and that one can hardly ignore 900 million users.   And, the hype is just beginning as the IPO occurs.   The one Achilles heel of Fb – mobile advertising – is something that I think will be solved by location-based, time-sensitive, and click-to-call deals as people access Fb on the go.  This is just me talking, but I believe Fb is the exit strategy for all the deals companies not named Groupon.   We’ve run out of real estate on the phone for ads, and people won’t be keen to use their data allotments to see video promos, but you have the Holy Grail of targeting when your combine Fb data with location, time and instant voice connection.  As a consumer you’re about as exposed as you would be in a TSA millimeter wave scanner.

Students are applying now for the 1 Semester Startup Class at UT, and I know there are uncountable startup events, competitions, and summer programs across the country.  How many of them will add to the Facebook ecosystem and prove, like Lujure, that they don’t have to be in the Valley to do very well at that?

And, if as is probably likely the case, you can’t buy Fb shares at the IPO price, nothing is keeping you from cranking up a venture that shares in the wealth creation.   You’ll have even more “friends.”

Thanks to our sustaining sponsors MailChimp and TriNet.

<photo of King Air 200 we chartered from Epps Aviation, Atlanta>

While activities are in a lull this week and UT students are heads-down in final exams, the topic that comes to the fore is the family aspect of entrepreneurship.  One who chooses to pursue an entrepreneurial endeavor is making a choice not only for herself or himself but for others in the immediate family.   And, the dynamics of that have changed considerably in recent times.

Sometimes the entire family takes the plunge together.  My greatest success story with a husband-and-wife team was at King Hardware, an aged but well-known Atlanta retail hardware chain that I turned around in the early 70’s, before I migrated to software, in the literal sense of both terms. (Knowing how to cut glass, demonstrate a Shopsmith, and make keys may be useful trade skills if times get tough.)  I hired to run one of our stores a former Georgia Tech student body president, who brought along his wife, also a GT grad, and they blossomed in that role.   Mom once worked a full day at the store, went to the hospital to deliver their first child, and was back on duty by noon the next day.  When we sold King Hardware, they opened their own store and built a thriving business that exists today and became in addition to general hardware the purveyor of the finest woods to regular customers like Jimmy Carter.  The couple perfectly complemented each other’s talents and got along great as co-workers.

Occasionally the plunge is forced by layoffs in the corporate world.  Many comfortable jobs in mid life have disappeared and forced individuals to become entrepreneurs.   If they’ve accumulated a little nest egg to cushion the ups and downs or perhaps to buy a franchise, all the better.  Often the former stay-at-home spouse has to return to the work force to provide some predictable cash flow.  These situations can turn out very well if one finds a new career that is indeed enjoyable and fulfilling while providing relief from the pressures and politics of the corporate grind.  On the other hand, if a person is used to structure and not a true self-starter, the skill sets may not translate very well “into the wild.”

An added complication in this scenario is the current residential real estate climate.  One can no longer easily sell a home and relocate for a business opportunity.  The mortgage may be underwater, and even if that is not the case an interested buyer who can’t come up with all cash faces a lot of uncertainties with the new draconian rules of underwriting.   Much of the talent force in the US has been immobilized and forced to find or create their own jobs wherever they are stuck.

For the very young, say 25 and under, with perhaps no obligations other than some student loans, low overhead, and continuing access to parental support, anything that seems convincing to Mom or Dad is OK.  That’s why you see so many in this age category in the Y Combinator type programs, along with a surge of activity in graduate and undergraduate entrepreneurship programs at universities across the country.  It’s cool to do a startup, and when Dad is hanging out in the club, he’s never going to bashful about supporting Junior’s efforts in that direction.  That attitude might change if Junior moves back in with the family, but that’s another story.

It’s the group from say 25-55 that has the greatest challenges.  I was involved in he founding of Peachtree Software at age 29, when my wife was in medical school, and my exit was at age 33, shortly after the birth of son Jesse.   We had pretty low overhead at the time and were able to downsize from a house to a condo to reduce that even more.  If I needed personal cash, I had friendly community bankers (now an archaic term I’m afraid) who would help me.  One actually said something like:  “I don’t understand microcomputers, but I know his wife’s going to be an MD, so I’m not worried about getting repaid sooner or later.”  There was in the era when banks were a source of some very early capital, as evidenced by Jim Truchard’s contemporaneous $10,000 loan to start National Instruments here in Austin.  There also used to be generous home equity lines when home prices were always rising, but those too are gone now that, for example, Atlanta prices are reset to 1996 levels. 

Thus there is the financial risk associated when one of the breadwinners sacrifices or is forced to sacrifice short-term income in favor of a dream of creating real wealth in a few years.   Getting to the very top of the corporate ladder where real fortunes can be accumulated has about the same odds as making it to the NFL as a football player, and one has to be in the right company and the right industry and have quite a bit of luck along the political pathways to the top.  If that is not in sight, jumping off that ladder and taking a bit more control of one’s own financial destiny can be a very wise choice.   And, in the end a career is not so much about the money as about the personal enjoyment.   I can name way too many 50-somethings who grit it out every day in various professions or executive roles but are far from happy in their work lives.  

More consequential than the financial issues is the family’s emotional tolerance for uncertainty.  Becoming an entrepreneur, especially in the tech world, comes with one uncertainty after another.  There are constant ups and downs, good and bad surprises, delays, and things beyond control.  You may be in charge of the business, but you can’t command the ball to bounce your way every day.  There will be enough good days to keep you motivated, just like there are always the few really great shots you hit in any one round of golf that keep you coming back.  The nonparticipating family members have to accept that, not necessarily like it.   When the deal works out and there is a big payday, all those trying moments will be viewed as badges of honor, and chances are high that you’ll become a repeat offender in the entrepreneurial game.

There’s one piece of advice I would like to emphasize.  It’s critical to maintain forward momentum in your venture.  To use another golf analogy, when you hit one OB, just tee up another and keep playing.  The worst of all possible outcomes for an entrepreneurial endeavor is to spend 5 years and be stuck in a situation where you can’t afford to close it and it’s never going to be more than a lifestyle income generator.   You can never recover the lost time in your career, and you won’t have ready alternatives.   As they say, it’s better to fail fast and restart than create a Zombie business that never creates wealth for you and your family.   Don’t hesitate to change direction as many times as needed along the way to be sure you are pointed toward a great outcome and not a dead end.  That’s one sure way ultimately to make the family happy: succeed fast!

Thanks to our sustaining sponsors MailChimp and TriNet.

<image from Chevrolet 1958 ad>

The Texas Venture Labs Investment Competition provided the shirt you see above as one of the tchotchkes for those of us who were invited to help with the coaching and/or judging.  I plan to wear it often.  TVL was officially renamed as of Thursday May 3 the Jon Brumley Texas Venture Labs, thanks to a generous $6M gift by the Ft. Worth Brumleys of oil and gas fame.  That was a timely kickoff to a weekend of competition among 40 teams from 13 countries.   These teams had all advanced through various university-hosted competitions, kind of a Spring Madness for graduate students with entrepreneurial aspirations.

In only 2 years since its formation, TVL itself has worked with 40 companies that have raised over $25M in investment capital.   The competitors on hand were competing for a grand prize package valued at $135,000 plus some additional sponsored rewards in various categories.   They were showcased in a Venture Expo Thursday afternoon along with current members of the TVL Practicum under the direction of Rob Adams.  The real prizes to be had were more likely the discussions with the many investors in attendance at the Expo and participating through the various rounds of judging.

With a view to simulating real-world investor presentations, the format was a 30-minute running clock in which judges could interrupt the flow with questions anywhere along the way.  However there were some nuances in the rules -- all of the team members were required to have a speaking role, and their presentations were mandated to include projected ROI calculations.  Most were based on hard science of university origin, so this was not a forum for Instagram-like deals where you round up 30 million free users and then hope to get lucky when looking for a business model.

My round included four teams from U Kentucky, Colorado State, Carnegie-Mellon, and Purdue.  Their concepts were, in order, chia-based horse feed, fortified porridge for malnourished Kenyans, health IT software for monitoring hygiene and safety compliance, and the first non-invasive glucose measurement device for those suffering from Type 2 Diabetes.  All had strong IP underpinnings, and in addition to their diversity of subjects, they had rather diverse scaling expectations.   The Purdue guys could shoot the moon for hundreds of $millions if their device passes all the certifications, but the Colorado state team was more a social capital play aimed at neighborhood distribution of foodstuffs to needy African children.  The UK team was making the biggest personal sacrifice – missing the Derby to be in Austin on Saturday. The CMU team had made considerable progress in real-world alpha testing in hospitals.

The results as of this writing have not yet been posted on TVL’s Tumblr, but you should be able to see them there if you are interested.  The purpose of my session was to provide a round of preliminary feedback to the teams.  Our 5-judge panel was on hand for one last bit of honing before the actual voting rounds.  We submitted scores and comments, but for the benefit of the teams to see how they might expect to play in Austin. 

One point this drove home is that you can’t practice your pitch too many times.  Our panel picked up some obvious holes in some of the presentations, and I think we earned our keep.  I developed myself a deck with a colleague last week, and the first person that reacted made us realize we had in our mind’s eye exactly how our product will be used, but we didn’t exactly spell that out.  One additional slide was needed to be sure that vision was correctly communicated, and we quickly fixed that.  I will say that all four of my TVL teams did remarkably well in communicating the problems they were addressing and how they were going to solve them.  It’s not easy transitioning the attention of a group of judges from horse feed to medical devices, but I think we all had pretty darn clear pictures after the session.

Unlike most events in Austin, this was not jeans and tee shirts.   All the presenters had on their Sunday finest.  One team of four apparently had three men’s suits and one woman’s made from the same bolt of solid gray fabric, no flamboyance there but no risk taking either.  Another team had two gentlemen with earrings.   Whether that’s my style or not, I would think that after achieving this level in a very tough competition, the students would leave nothing to chance.  I got the least out of that particular presentation because the earrings were just plain distracting when the microphone was handed to those two for their portions of the pitch.  (And I noted that on my form.)  I’m no judge of style, but I was there to help judge risk.

As to the business models, we didn’t attempt to deconstruct those.  I gather the final rounds of judging are where the math comes to be more important.  None of the teams would have made it this far if they had major shortcomings there.  

And, one final thought.  Part of the evaluation is how good these teams are at handling questions on the fly. Across the board I’d say they were outstanding in that.  The Purdue guys with the Diabetes device were both mid-20’s Ph. D.’s backed by a prestigious scientific board.  Not many investors are qualified to call plays in that type of game.  As an aside, I was at company review meeting at the ATI last week, and one prominent local investor made the most memorable statement of the hour:  “These guys have all the answers, and usually that’s not good.”   He sees that generally as an indicator of potential coachability issues, but in that particular case he was quick to point out that he believed the presenting team was exempt from that maxim.  

On a personal note, it was especially heart-warming to see James Vinson and Thomas Sweeney of V-Chain Solutions at the Expo.  After this event last year I wrote about their amazing story of perseverance, and they’re now moving forward in Austin as part of TVL.  

Special thanks to our sustaining sponsors Mailchimp and TriNet.

Arbor Day is celebrated at various times around the country depending on planting cycles, and last week generally marked the observance in Texas.  As a sower of seeds, so to speak, the 1 Semester Startup class fittingly held its Demo Day Thursday April 26 in the Lady Bird Johnson Auditorium, Mrs. Johnson herself also known for her wildflower plantings to beautify the state’s highways.

The design of 1SS is to have student teams, primarily undergraduates, work on real businesses for a semester.  We’ve recent covered a number of 3-day and weekend startup events, and this might be considered the long-form version.  There’s enough time in a semester-length program to form a team, do some market validation, and make considerable progress in product development and business planning.  Students are exposed to the wisdom of their primary faculty – Bob Metcalfe, John Butler, and Josh Baer – and are also treated to an all-star lineup of guest speakers, support by a wide range of mentors, and, for this particular semester, a superb co-working space just south of the main campus.

The Arbor Day analogy is applicable here in that in my view it’s less important whether the ten presenting companies are long-term creations than whether from the class there grow some mighty entrepreneurs from the saplings planted in this format.

The fact that Ron Paul was just a few yards away on the adjacent lawn rallying several thousand enthusiastic followers was just coincidental.  What might “change the world” as goes the UT slogan, was inside, not outside, on that particular evening.  

You can find all the company details in the Silicon Hills blog, so I’ll provide my usual color commentary.

Equally fitting with the Arbor Day theme was the keynote interview of Dr. James Truchard, who founded National Instruments in 1976 literally in a garage in Austin and to this day remains its CEO.  From a small start trying to solve a particular research problem, the company now has more than 6000 employees and a $3B market cap and continues to provide tools to solve engineering and science problems.

Dr. T, as he is known, started his company with a $10,000 loan in order to create a job for himself.  He admits his first sale was getting two co-founders to join him.  The company remains vision driven and is an admired place to work.  It’s rare in the days of “instawealth Instagrams” to think about companies prospering over 4 ½ decades under their original leadership, and, as best I can tell, without even having to pivot along the way.   Dr. T talked about how he relied on books to help him manage through the major growth stages of NI, but he was also quick to acknowledge the value of serendipity and luck along the way.  He remains very unassuming and quite approachable, and I know all appreciated seeing him on stage and getting a chance to chat with him at the break.

The ten company pitches all displayed the polish that is common in generally well-coached and heavily mentored Austin startup programs.  This class is always at the top of that category.  And, for this second outing the logistics performed like clockwork and even the rather short-notice appearance of a presidential candidate on the grounds created not a blip.  (I vaguely recall that Ron Paul declined Secret Service protection; I went outside during a break to take in the scene, and I’ve been around many Presidents, VP’s or candidates and never seen any with so little protection.  I had fears we’d all get frisked on the way into our event.)  

One company, PhotoWhoa, actually will have $40K in revenue this month and has made astonishing progress in the brass tacks of creating a company.   (Its cofounders had a prior successful photo software company, and that experience shows.)   Among the others there were some pretty ambitious ideas as well, and it will be interesting to see where the teams that remain together have gotten in another year or so.

The investors I sampled seemed to think at least three of the companies held potential interest for them, but, per my notes, not one really made a plea for immediate money.  They asked for various forms of help, e.g. introductions, recruiting, and guidance, and some alluded to possible future financings. This was a major distinguishing factor between this class group and hypothetically a similar crop of graduates already out on their own.  Those already in the alumni category will likely have higher overhead and either a spouse, significant other, or a parent leaning on them to show some financial progress and bring home a salary.  They will have much more of a “my hair’s on fire” sense of urgency and be shaking every tree for investor dollars.   (See how I worked that Arbor Day analogy back into the flow here.)   

As always, I enjoyed what part I played in mentoring a couple of teams and congratulate all involved on the considerable progress made in Semester Two of this endeavor. As Bob Metcalfe often says in his Facebook notes to the class:  “Onward.”

Thanks to our sustaining sponsors MailChimp and TriNet.

<photo from Houston Chronicle web site>

The International Symposium on Online Journalism at the University of Texas April 20-12 drew a worldwide audience and provided a great view of an industry that is currently the very model of Disruption.  Whether you are a devotee of journalism or not, this symposium provided some insights as to how severely traditional businesses can be affected by the Internet, and this is part II of my report from the event.

My previous post contrasted the presentations by the head of Google News and the publisher of the Dallas Morning News – a classic pairing of disrupter and disruptee.

The image at the top is the back of my latest business card, and it alone is an example of the multiple sources of social information that have now become part of the daily routine of many of us and are part of “journalism” in the modern sense.

Dr. Bob Metcalfe delivered the wake-up keynote to begin Saturday morning’s agenda, and it was a wake-up in more ways than one.  His assigned topic was how to monetize journalism, and he admitted to me beforehand that after a night preparing for this he had concluded that he doesn’t have that answer.  This industry has been disrupted, and, in his view next on the agenda are energy, education, and healthcare.

He recalled for the audience his days at InfoWorld, where he surveyed his readers to see how much they would pay for his regular closing-page column.  Their answers averaged to about 20 cents per column; and with 1M readers per week in that publication’s heyday, that wouldn’t have been too bad if it had been possible to collect.  By another measure, the rack rate for a page of advertising was $32,000, so that was the opportunity cost of the space his column consumed.

Now Bob’s journalistic forum is Twitter, and he passed the 10,000-follower mark during his presentation.  He had some help from new followers in the audience who took a break from staring at their Facebook screens to move on over to Twitter for a couple of minutes.  (See yesterday’s post on that point.)  He commented that he had monetized that only once, by being invited to review a book for the WSJ and getting a surprise gratuity of $500, which he calculated to be worth about $31 per hour based on the time spent on that project. (I bought the book based solely on his review, so the WSJ got some immediate return.)

He relies on Google News during the day.  He mentioned the “dignity” of traditional journalism -- checking facts, protecting sources, etc. – that is no longer that important.  Startup blogs don't care and have become respectable journalism nonetheless.  (Thank you, Bob.)  Until there’s some way for frictionless micropayments, it’s hard to collect that aforementioned 20 cents per column as a monetization strategy.  And, advertising alone will no longer carry the freight. 

Of particular interest were his comments on Education having the same problem as Journalism.  Both are based on creating and disseminating knowledge and informing audiences.  He referenced the former Stanford professor who has now awarded more than 20,000 certificates of completion for an online engineering course that he previously taught in the classroom to 42 students at a time, and with those students paying rather generously for that privilege.  The University of Texas at Austin is massive, with 51,000 students, but it’s now only 1/10 the size of the University of Phoenix, and more surprising, it’s not even the largest college in Austin – that rank is held by Austin Community College.  Except for the courses that genuinely require “learning by doing,” much of the core curriculum of universities is at risk against online substitutes at far lower costs. 

(I personally have always believed the value of the social experience of college is as important as the academics.  Kids need to mature somewhere.  Until hazing can be delivered online, I’m not expecting brick-and-mortar institutions to lose their place in society.)

At the conclusion of his remarks, Bob tossed the question back to the chair of his session, Dan Gillmoor, a prominent journalist with a long Silicon Valley history at the San Jose Mercury News.   (He’s in 672,565 Google circles.  Since Facebook limits you to 5000 friends, he’d have long overpowered that medium.)  Gillmoor picked up on a theme from some of the previous day’s sessions, that monetizing a journalistic endeavor often comes less from the core and more from the businesses that surround it, e.g. events and professional services.

On that note, allow me to conclude with some random and creative ideas I heard in the sessions I attended:

The Rio-based O Globo follows that theory that web sites are read during the day (“lean in”) and that tablets are read in the evening (“lean back”). To that end, O Globo produces for the iPad a PM edition that only goes live at 6 PM, and the average time spent on it is 1:17.  That’s pretty amazing.  This particular speaker noted that pictures are cheap but look expensive on the iPad – true.

In developing areas like Africa, where 3 minutes of talk time equals the cost of 1 liter of cooking oil, SMS is the method of distribution of online news to the masses.  Facebook 0 and Wikipedia, which have no airtime cost, are hugely important as well.  It was mentioned that a downloaded video may be shared in person to hundreds of others to spread the cost. Only the elites have access to tablets, and there are very few iPhones. Nokia is not going away anytime soon.

Louis Gump of CNN Mobile showed a timeline of the oscillation over time between the popularity of apps and the mobile web and discussed the need to have both. He said it’s important to harmonize the generalized experience across platforms but also to differentiate according to the advantages of each.  CNN has dedicated mobile professionals and makes a point to use mobile devices in its content gathering.

JV Rufino of the Philippines’ Inquirer Group is in a market with 92 million people where his newspaper with 866K circulation is a prime influencer in a television oriented market.   Interestingly, there is 90% mobile penetration there, and it is not at all uncommon for people to have 4 phones – business, public, family, and “significant other.”  Apparently swapping SIM cards is a favorite but dangerous prank there.  Along that line, sort of, his company is monetizing its scale by producing romance novels.

Many of the aforementioned comments apply to many aspects of mobile product development, not just journalistic endeavors.   If you find this trail of ideas particularly interesting, you can get deep coverage from the gathered journalists at ISOJ12.

Thanks as always to our sustaining sponsors MailChimp and TriNet.

Thanks to guest writer Jesse Dyer for this post:

Got the love bug or like WTF buttons, Apps galore and everybody’s favorite monetization cure-all “targeted advertising”?  The pitch finals for Atlanta Startup Weekend 2012 had all this and more including a pretty good bunch of ideas worked up in 3 days of a sleep-deprived frenzy.   Aside from suffering from vertigo with the onslaught of rotating slides, the audience and judges all seemed impressed with the quality of ideas and presenters.  The judges asked some tough, if obvious, questions that stumped a good bit of the presenters.   The most common was “tell me about the team” which was most often answered: “oh, it’s me, Allen and Jane.”   The judges were looking for a bit more insight.

The other judge favorite of “how do you make money” was almost always answered with “targeted advertising.” I was surprised how many teams were looking to sell targeted Groupons to their users.   I believe the Facebook IPO will bring this customer dilemma of free vs. privacy to a tipping point, and with it the hopes of many targeted advertising business plans might be flushed down the drain.  Folks will get less and less comfortable with an app like LoveBug monitoring their love life for “free” with the purpose of selling them a half-off flowers Groupon whenever your “Dog House Meter” spikes.  Ten out of the fifteen presenters were based on a revenue stream theory of maximizing their user base’s information after hooking them with a free product.   The big problem here (I’m speaking from personal experience.) is even if users remain comfortable with this free versus privacy trade-off, for this business model to succeed it takes a lot more start-up capital then most realize.  You have to have users in the first place to attract advertisers but you have to have marketing dollars to attract users.  So even it you build your app for peanuts over a weekend, where do you get the $1 per user marketing budget needed to get it off the ground?   It takes far more money to make money in the App world than most founders realize.

The best answer to “what problem are you solving” was given by SayRoom, a HeyTell clone, with “we’re not solving a problem per-se.” People who like shouting at each other don’t usually need an excuse to be outspoken, but now with SayRoom they have an app to shout at each other remotely with 10-second audio bursts.   That question always intrigues me when consumer-facing start-ups get grilled over it.  Does Instagram really solve a problem?  If consumers like it then it could easily solve an investor’s problem of how to get a quick return.  I think “because it’s fun” can be reason enough to justify an app given how low risk, low capital intensive, and easy these weekend App dreams can be brought to market.

Quitfor, a smoking cessation app, placed 3^rd. It might have won 1^st prize if their 9-person team had been comprised entirely of chain smokers all looking to quit simultaneously. Second place and the best Atlanta geared idea went to RealVision, a commercial real estate analysis platform attacking ARGUS.  If ARGUS is anything like the rest of the pathetic banking software in use today, that team has a great niche opportunity perfect for the Atlanta economy.

The best idea I thought was Leave.im, a location based file-sharing product that was deceptively obvious but really smart.  I think the founder would have been in the running to win except he was the only solo team in the bunch.  Ironically, I believe that was directly related to his narrow focus of tying the idea to daily deals (maybe he was protecting his good job at a local daily deals company). Most memorable was OnSlyde, a real-time presentation aid that brought the house down.  The screens flashed a red slide with “WTF” whenever an audience member pushed their WTF button.  If you want a brief recap of all the presenting companies check out David Cummings’ Blog.

The Twitterati seemed divided on what should matter more, quality of demo or presentation?  The Facebook dating app “Wink” won first prize for being by far the best effort at nailing both.   It will be interesting to see if and how their team of 12 moves forward with their oft-copied idea.  Their concept of linking friends of friends on Facebook for dating introductions is the exact opposite of one of this year’s SXSWi Accelerator finalist that had engineered a reverse social graph to help singles break out of their existing dating pool.   What’s more depressing in today’s social dating scene? Having your friends and their friends know you’re dateless or coming to the realization that you’ve got 700 friends and not a one is interested in you. I’m glad I’m not single.  Which reminds me I should probably redeem that flower Groupon to make up to my wife for spending part of the weekend at Startup Atlanta.

Thanks to our sustaining sponsors MailChimp and TriNet.

<Image from Startup Weekend judge Stephen Fleming's Posterous>

The International Symposium on Online Journalism at the University of Texas April 20-21 drew a worldwide audience and provided a great view of an industry that is currently the very model of Disruption.  Whether you are a devotee of journalism or not, this symposium provided some insights as to how traditional businesses can be severely affected by the Internet.

As a quick aside, it also was a prime example of the newly disrupted challenge of speaking before a live audience.  This group of 300, seated in a steeply tiered auditorium, all had screens in front of them, laptops to tablets to iPhones, and rarely looked up from them.  A few of us, myself included, were actually taking notes or perhaps checking relevant sites, but from my vantage point I estimate 90% of the audience was on Facebook and maybe 5% on Twitter.  At least the latter might have been Tweeting to the conference hash tag, which itself was quickly hacked by a stream of porn.  Panelist Whurley of Chaotic Moon deployed his customary creative answer to this: ask for 5 questions from the audience, put them on PPT slides real time, and discuss them.  He had a few more people actually looking up than most.  I’m wondering how many in the audience could actually pick any of the speakers out of a lineup.

The opening speaker was Richard Gingras, the head of news products for Google, who comes from a journalistic background at Salon and the Well. He said the current wave of disruption in this realm is not the first and will not be the last.  Television caused consolidation and gave local papers monopolies for a golden age that lasted many decades.  Now the open distribution of news on the Internet has eradicated all that print leverage.  In his words, the content economy is less about demographics and more about content and relevance.  The notion of a portal, like the general interest local newspaper, is being replaced by stables of more focused brands.  He sees that audience flows are now 75% search and social direct to an article and only 25% to a home page.  Content needs to be a real time, living resource, possibly adapted to each reader; the challenges go up with the length of a story, and the right form must be matched to the right medium.  

Computational journalism is a new arrival on the scene – the use of big data, programming and visualization to multiply reporting efforts and to allow investigations to continue beyond the original work.  Gingras acknowledged that there is too much news, that there is no longer a basis for trust as when we relied on our hometown newspaper, and than any opinion right or wrong can achieve volume.  Google curates its news, and that does include many valid 1-person sources, but the company has to guard against being gamed.  He flatly said that pay walls on general interest newspapers do not work in this era when there are too many competing sources.

A bit later we heard from Jim Moroney, CEO and publisher of the Dallas Morning News.  In contrast to Gingras the disrupter, Moroney gave a very candid assessment of being the disruptee.  The goal of journalism is unchanged:  An informed public can make better decisions to govern itself.  But, newspaper print advertising revenue fell more than 50% in just the 2007-2011 period.  City newspapers have lost to the Web the highly profitably classified business and no longer have a mass audience.  Moroney described his goal for the DMN as seeking the “mass intelligence audience” – the segment between the mass audience and elite media.  The elite category includes a select few publications that have such high quality that they are thriving in the digital realm, e.g. the WSJ and the Economist.  I would add to that Automobile Magazine; check it out.  Also TechDrawl; you are part of an elite and focused readership, and I apologize that I have no virtual badges to send you to denote that.  The DMN and its peers have such scale for reporting, curating, aggregating and distributing news that they have to find different ways to leverage that scale.  They can no longer win at breaking news; who, what and when are commodities.  Now they have to focus on how, why, and what does it mean to me?  That means going deep and owning subjects in their local markets, and he and his team are trying to pick those subjects now.  He acknowledged that print advertising revenue will no longer support high-end journalism, and even that digital ads for local media will not pay for relevant and differentiated content.  Therefore he has to cross-subsidize journalism beyond advertising, i.e. by getting people to pay for content and by creating ancillary businesses.

Moroney spent some time talking about his company’s plans to develop content worth paying for on the iPad.  It has 330 thousand subscribers in the DFW Metroplex, but he estimates there are 6 million tablets in his market.  He’s working on “Lean back 2.0” content.  (You lean forward into your computer all day, then in the evenings you lean back on the couch with your iPad.)  He says that 42% of tablet readers read in depth, and more particularly that they are 3X more likely to read long-form articles than watch news videos.  (In a separate panel, the former web editor for the New Yorker said he had seen 1 in 6 of their readers download a 27,000-word article on a mobile device.)  Rather than reducing our daily reading time, the tablet/mobile medium is helping expand it by 30%.  The trick for the DMN will be finding, as Moroney described, a readership that is involved in the affairs of the city to the extent of really caring about depth on the right topics.  He did note, however, that no general interest newspaper has had much luck with digital only subs.  I read the AJC iPad edition, or more often get all the Atlanta news through the AJC’s Tweets, but I’d hardly pay for that.

Interestingly, Moroney mentioned three other possible revenue streams he is considering in a plan to reduce dependence on ad dollars from 52% today to a goal of 40%:

• Social media marketing services for local companies and local decision makers of national companies
• Event marketing
• Trading ads for equity in small, fast growing ventures

The challenge with these will be scale.  Moroney believes that his paper will have more credibility than smaller social media marketing agencies, and that it can go after their Facebook and Twitter advertising dollars.  That’s a tough go in the generic SMB marketplace, and it’s built on an assumption of basically monetizing trust. The event marketing idea, in which ad space is traded for upside in the event’s revenues, is pretty straightforward. Trading ads generally for equity stakes requires a VC mindset, and that seems to be a stretch for a traditional news organization.

So, if your great grandfather left you and your cousins the local flagship newspaper, that used to be a guarantee of lifelong leisure.  It’s safe to say that it’s anything but that now.

Next up on TechDrawl:  one more report from ISOJ, in which Bob Metcalfe explains how you can, or perhaps cannot, monetize journalism.

Thanks to our sustaining sponsors MailChimp and TriNet.

<photo by author at ISOJ>

Austin based HomeAway (NASDAQ: AWAY) operates an online marketplace for vacation rental properties worldwide.  This fast-growing company is continuing its pattern of making acquisitions in its space.  The process creates many interesting technical challenges as it integrates disparate IT systems into the mother ship’s architecture, and it also gives rise to countless creative product and marketing opportunities as newly acquired units are brought into the fold.

CTO Ross Buhrdorf and his team have for some time been actively supporting Austin’s 3 Day Startup (3DS), a nonprofit based in the ATI which is holding 20 events this year across multiple countries, and this past weekend they did so with a new twist.  HomeAway actually hosted a 3DS event in its offices, with student entrepreneurs provided suitably branded sleeping bags, all the comforts of living in an office (albeit a very nice space), and copious engineering, design, research and marketing support by HomeAway staffers with a goal of creating startups for the vacation rental sector.  It’s important to note that the goal was not limited to HomeAway-specific applications but to concepts that could lead to real companies with multiple customers and partners.

Just a few weeks earlier a generic 3DS was held at the ATI, and I reported earlier on the finalists there.  Student teams working in that format without overarching guidance tend to come up with mobile apps that solve needs in their demographic, like how to I find a good Italian beer in Austin at 5 AM?  Should I choose Moretti or Peroni?  3DS has resulted in about $6M in funding across 20+ companies, but its primary goal in my opinion is to equip potential entrepreneurs with the fervor and the skillsets to get into the startup game.  There are many similar events around the country under various titles, including a Startup Weekend in just a few days in Atlanta, and I believe there was actually a 1 Day Startup in Austin last Saturday.  

The results of the HomeAway hosted event were much more immediate and more tangible.  Of the seven companies that presented at Sunday night’s finals, where I served as a panelist, in my view not one was a discard.  I would rate at least two as having very high potential, and three were complementary enough to be mashed up into one, so by my count a net of 5 plausible businesses were on view.   Not one was a mobile app.   Amazing but true.

These student teams had the advantage of being introduced to the functioning of HomeAway, a company with hundreds of thousands of both rental customers and properties available for them to rent.  They learned about some of the issues of being in that business and were cut loose to come up with ideas, conceive of businesses, and develop prototypes.  There was built-in scale in the problems being addressed, and, as mentioned above, plenty of expertise on hand to help shape their visions into functioning demos.  The students, as is customary with 3DS, did some independent market research by talking with potential customers, and they all had some level of validation for their plans by Sunday evening. 

Whether or not these students were engineering majors, they were confronted with real world problems to define and solve using the classical engineering method. They did not have to dream up problems or opportunities out of their personal experiences: they were literally in a candy store with many delicious choices.

Some of the presenting companies are live, some in stealth, so I will not identify any of them individually or describe their themes.  I figure HomeAway earned first crack at them by being such a gracious host, and I was honored to be invited as a guest panelist.   However, my main takeaway from this evening was that 3DS and its brethren ought to replicate this notion with all the progressive companies they can find.  With all due respect to the standard 3DS platform, this was a step above in all aspects and deserves to be repeated.  Any CTO would do well to follow Ross Buhrdorf’s lead and foster a highly energized R&D experiment of this nature.  I have to believe HomeAway feels its return on this investment of time, talent, food and sleeping bags will be repaid many times over.  And, the 3DS leadership has got to feel pretty darn good about the outcome as well.  

Thanks to our sustaining sponsors MailChimp and TriNet.

<image of author’s view of HomeAway Facebook page>

Both Ray Kurzweil and Stephen Wolfram concluded their presentations at SXSWi with comments on the importance of “learning by doing.”  Those involved in teaching the art and science of being an entrepreneur, or even of being an angel investor, are taking this to heart in a variety of venues around the country.

<Photo explained at end.>

The 1SS class here at the University of Texas is a prime example of that.   Undergraduate students are graded on creating real companies during the semester as opposed to crafting hypothetical business plans.  I’ve read of similar courses being explored even at the high school level.  The measure of success of these programs is not so much the number of companies that actually take flight, but the creation of entrepreneurial skills and mindsets that will persist throughout a career.  As a mentor in the class, I saw one of my more interesting teams melt away last semester when upon graduation the students had to get real jobs to pay the bills.  But, I’m sure those young men will return to the game as soon as they are able and will be well prepared to do so.

There are numerous seasonal challenges, competitions, and Y Combinator type programs as well.  Some of those provide considerable prize money, or, as in the case at YC, a parting investment of $150K to help launch your business to the next phase.   The Rice Business Plan Competition will culminate this Friday by awarding $1.3M in prizes, for which 42 teams from around the world are competing.   The recent Launch event in San Francisco also claims to have directly resulted in more than $2M in funding for the startups that presented on stage.   No wonder many of the 1SS student teams are busy applying for similar programs this summer.

Add to that mix the many 3-day-startup events where teams form around ideas and crank out rather fully developed plans and sometimes even products over a weekend.   (I’ve even seen a 1-day-startup suggested recently.)  Those require an added measure of Red Bull fueled stamina to keep up the around-the-clock regimen.

Most of these programs are well suited for entrepreneurs who are young, geographically portable, and enjoying a life stage with very low overhead and few entanglements or social responsibilities.  There was one notable exception in last year’s class at Capital Factory, a Chicago-based couple that sent their five children to the grandparents for the summer and came to Austin to pursue their dream.  

For this generally youthful crowd, the risks are low.  You are not likely to hurt your resume or your job potential, particularly if you have technology skills that are being honed in the process.   If idea A doesn’t work, you’ve probably gotten to know teams with ideas B through Z and may be able to jump to one of those.  You may also have the option of going back to graduate school to let your opportunities ferment for a few more years.  

On the other hand, your opportunities to get into the tech game as you advance in age bring along considerably greater risk, particularly when you have a spouse in tow and more particularly when you have children that command and deserve your primary attention.   A leap then from a corporate job to the unknown of a startup needs the full support of the family.  You probably won’t have many ready backups if your primary plan doesn’t work, and you’ll have some difficulty returning to the corporate grind where you left off unless you have a unique professional skill.  On the other hand, rarely will any angel investor provide funds for a startup being done “on the side.”  You’ve got to make a 100% commitment to be credible.

The economy of recent times has forced many to take this leap, and others have seen the handwriting on the wall in their industries and felt compelled to try an alternative.   We have here a crowd who may have really great concepts but likely need just as much education on the basics of entrepreneurship as do college students.  If you took a theoretical course on the subject when you were in college a while back, you have some advantage, but rules and technologies change so fast now that if you’re in your 30’s or 40’s you need more than a refresher.   I’ve met some entrepreneurs in this category recently and heard the very basic questions they are asking, so I know there is a need here.

I even spent some time thinking about a 3-day-startup weekend for Boomers.  You might want to hold it at a country club, begin Friday with a Scotch and cigars dinner, open Saturday with a golf tournament, allow for some rest time, invite the families to a Saturday poolside buffet, and then pick up again after church on Sunday before the concluding dinner and pitches.  Everyone would of course go home for a full night’s rest on Friday and Saturday.   Not that these entrepreneurs wouldn’t be as capable and creative as the youngsters, but by that age they’ve probably achieved some comfort and some standing commitments that are hard to set aside.   They’ll have a very different view of an intensive weekend project.

The good news is that some of these Boomers will have their own angel capital.   The old standbys of developing real estate and creating de novo banks are no longer viable in most areas of the country, and you will find individuals motivated to try new concepts.  The Colonel Sanders breed who famously started in their 60’s are anomalies.  But, you won’t see any of the Boomers at Rice or back in class or at the combinator programs.   You might ultimately see them at the more institutionalized incubators like the ATI and the ATDC, particularly if they can be matched up with academics and researchers who are bringing commercial ready technology out of affiliated universities.

Do we have an untapped resource as smart people mature, or are we developing a system that guarantees that startup ideas will come mostly from the 20ish set?   I’m just asking the question, and I certainly don’t have the answer.  Hence the title of this post.  Your opinions are welcome.

Thanks to our sustaining sponsors MailChimp and TriNet.

<Photo by the author at the Amon Carter Museum in Ft. Worth.  Frederic Remington's 1900 oil on canvas entitled: "The Right of the Road."  This is either a timely homage to an Instagram effect by a revered Western artist, a scene that represents the intrusion of technology change, or just something more entertaining than anything relevant to the topic.>

For many people there was a time in the 90’s when AOL was the Internet.  Now for 800M individuals Facebook has assumed that mantle.  It’s claiming more and more of our time on social media, and it’s growing rapidly across the full spectrum of generations.  With the IPO looming, there could hardly be a better time to latch onto the Facebook ecosystem with new business ideas, but where are they?  

Although not a Facebook play, per se, Instagram’s today turning $47.5M into $1B for a needy group of venture investors should signal plenty of opportunity in that direction.

Zynga seems to own the Fb social gaming space.  Searching for product oriented competitors yields few results.   One would expect more game developers, more ecommerce tools, and other categories.  Maybe they’re all in the Valley close to the Mother Ship, but in the 1000+ deals I’ve seen over the last year I can recall only two startups in Austin: PolyGraph Media, a data mining and analytics tool, and Hoot.me, which turns Facebook into a virtual study hall with tutors.  My overall deal flow seems still very heavily skewed toward mobile apps.  Yet those are easy to get lost in the sea of millions of apps, while it’s rather straightforward to target your product to Facebook users and/or advertisers.

The more heavily funded ventures I’ve seen tend to be focused on building enterprise tools and providing brand services to manage advertising and engagement on Facebook and other social platforms.  Spredfast and Dachis Group here in Austin and Vitrue in Atlanta are good examples.  There’s certainly plenty of opportunity in that sector.  With Facebook’s recent change to timeline, brands have a wonderful platform to showcase themselves and engage with an audience.   See a great example here for the Ford Mustang. 

For those of you who are not heavy users of Facebook, which is probably the majority of you in the southern investor network, I should describe some of the issues.  When you post a status update on Facebook, it has about a 10% chance of being seen by one of your friends.  Facebook uses a magic algorithm called EdgeRank to determine what is presented to you in your own status feed.  You’re much more likely to see updates from friends or brands with whom you have interacted in some form by “liking” something, or more so by actually making a comment.  Those types of “engagement” tell Facebook that you are more likely to want to see some particular information.  The EdgeRank formula favors affinity (how often you relate to someone), weight (the richness of that interaction, particularly if it includes media like photos) and time decay (how recently you’ve been in touch).   Furthermore, posts don’t hang around for more than a few hours as new ones push them out of the way.

For brands that want to bond with their customers via Facebook, a mixture of genuine engagement along with targeted ad spend can work wonders. Unlike placing a newspaper ad that appears in print to a large audience of which few may see it and even fewer may care, with Facebook you can target individuals according to the interests they have divulged either in their profiles or in other pages they have liked, including those of your direct competitors, a specific geographic target, and other factors.   If you’re selling to consumers, chances are they are on Facebook, and in theory you could scrap all your other ad spend in favor of such highly targeted prospects.  However, you have to be prepared to maintain engagement, respond to positive and negative comments, and keep your own content very interesting and relevant.  Unlike the static newspaper ad where you let it run and sit back to answer the phone, your messaging is just beginning when Facebook fans start paying attention to you.

That’s all easy enough to do yourself when you own a boutique business, but you can see the complexity that arises when you have 3,860,408 fans like the Ford Mustang site.  And you can see there the need for enterprise level tools and services.

From a heavy user perspective myself, I can report many things that work very well on Facebook for me.  I have 443 friends at the moment.  I wish I knew them all personally, but there are many I don’t.  I have, however, reconnected with a good number of my now far away Gainesville, GA hometown friends and relatives and enjoy seeing their updates.  One of them has me beat on corny one-liners; he seems to have an endless supply.   (Example from yesterday: “I can always tell when I meet a particularly smart person. They always have the same opinions as me.”)  And, I get an equal amount of interesting information about my local friends in Austin.  Checking Facebook and checking email are pretty much parallel activities now.

I even like the ads I see.  Because Facebook ads are so targeted, nearly everything that shows up on the right column of my page or in my status feed has some interest.  You do, however, have to be careful about your privacy settings.  Many of my friends post to Facebook every song they listen to on Spotify.  I’m discovering that things I read within Facebook, e.g. on the WSJ page, also show up in the upper right hand feed.  You probably aren’t interested if I read something about saddle sores from cycling (I’m 20,000 miles beyond that, just a hypothetical.), but if I did it would show up with some amusement and/or embarrassment.  And, because I’ve liked and engaged with a number of automobile and racing pages, EdgeRank is now giving my news feed a nice Speed slant.   (I keep up with golfers on Twitter, so #Masters was a very busy time for me there.  I followed Bubba long before he got his Green Jacket.)

Of particular value is the groups feature.   We have a closed group for the 1SS class, and all the important info is posted there.  One could not be an active mentor without participating in that.  And, I’ve got about a dozen more closed and even open groups where I effectively get fully curated news on topics of interest from people I respect. 

So, back on point, where are the opportunities?  One good thing about Facebook is that it is constantly changing.  There’s no end to the tinkering with the user experience and the types of ads available to businesses and brands, and Facebook has no hesitation about dropping features that didn’t meet expectations or otherwise fell out of favor.   When the rules are constantly changing, there’s good business to be had for those who keep up with the rules and adapt their products and services accordingly.   And, surely with all Facebook knows about me, there’s some product I NEED that is just waiting to be developed and that will find me when it’s ready.

All that said, it seems there’s a lot of untapped opportunity on the Facebook train for both entrepreneurs and investors.

Thanks to our sustaining sponsors MailChimp and TriNet.

<screen capture of my view of Ford Mustang site>