Communication & Collaboration Solutions—Lynda Ting

Startup Economics or “Startonomics”

Lynda Ting — Wed, 13 Aug 2008 19:23:00 GMT

I attended a great panel hosted by Sierra Ventures on the subject of startup metrics last night. Dave McClure, 500Hats was the moderator and Chief Slide Officer with panelists from Sierra Ventures, RockYou, Zoho and Forrester. Thanks to Anand Iyer for co-hosting on behalf of Microsoft.

The target audience was internet startups and the theme was identifying the correct metrics for instrumenting their business. Since I focus predominantly on enterprise collaborative technologies, I took away some key points that could translate nicely into the enterprise market as these types of companies set out to define and evolve their business models.

There are 3 revenue models that could apply in the enterprise:

1) Ad-supported - someone else pays for the user;

2) Subscriptions – the user pays for the product; and

3) Services – the product is free, but the user pays for peace of mind

Whichever model is chosen, the panelists all agreed that it must be decided upfront. Why? Because the metrics for success are quite different under each scenario: From product development and testing cycles and methodologies, to marketing and channel development strategies. They are all driven off of how the customer will be acquired, retained and monetized. For more depth on startup economics checkout: Startup Metrics

Collaboration and the Groundswell: What VCs are doing about it.

Lynda Ting — Wed, 13 Aug 2008 00:06:00 GMT

Over the past couple months, I have literally been bombarded with requests from venture capitalists to provide insight into the collaboration space. Prior to that, there was modest proactive interest in my sector. Needless to say in the first half of 2008, VC funding more than doubled in the collaboration sector when compared to the second half of 2007. A number of enterprise 2.0 companies received funding as well as companies who could be regarded as direct SharePoint and Office competitors.

What is the cause of this sudden interest in the collaboration sector?

Could it be that the returns on social networking technologies at large in the consumer space simply aren’t proving out, and that VCs are now setting their sights on the deep pockets of enterprise customers? Or, that the natural spillover of those technologies into the enterprise is simply inevitable as workers opt for work/life blend over work/life balance? Have the demands of the Facebook generation spurred the cultural transformation of the workplace to adopt these Web 2.0 tools? I think it’s even more simpler than that….it’s what our friends at Forrester have coined as Groundswell.

Released in May of this year, Groundswell is a book that reveals the hidden opportunity of how companies are using Web 2.0 technologies and showing demonstrable ROI. The evidence is not new, nor is the concept, but it took a well-packaged, well-researched book to capture the interest of many of silicon valley’s finest venture capitalists. I only hope that this groundswell is not the beginning of a nearby earthquake that destroys and devastates, but one that is far away in the middle of the Pacific that results in a big, smooth rolling wave that creates bountiful returns for its riders.

Beating the Mashup Drum

Lynda Ting — Fri, 13 Jun 2008 04:34:00 GMT

I am going to continue to beat the mashup drum because I believe this is the year of the data.

Well, at the heart of most business problems lies an answer in the data. This is not new. For years, we’ve tried to get at this data and have been partially successful, but not efficient, nor completely satisfied. Along comes the mashup. The tool that unlocks this data, makes it relevant and accessible to the average business user. No longer do we need to think of data as buried in some legacy back end system, siloed, or randomly sprawled across the Internet. Mashups are not a new concept either, only their acceptance has been limited. Security concerns have been at the forefront of most IT departments, hence slowing mashup adoption. However, web services have taken mainstream in the enterprise thereby giving mashups consumable data sources. As data storage shifts to the cloud, mashups will become even more important, since there will be no IT department to create my query or write my application.

As ATOM feeds replace RSS, and RESTful interfaces get built into applications, the IT band will begin marching to the mashup tune.

The Three Rs of Enterprise 2.0: Reputation, Recommendations and Ranking

Lynda Ting — Fri, 13 Jun 2008 04:32:00 GMT

While attending Enterprise 2.0 in Boston this week, it was easy to get caught up in the enterprise blogging and wiki frenzy.After all, these tools give the unsung voice a stage. They truly flatten organizations. The CEO posts a blog, the technical writer, who sits umpteen layers below him corrects a misstated fact by posting a comment. Truly amazing.

Truly amazing, yet these tools are more akin to weapons. In the wrong hands, while unintended may result in more harm than good. For those who use blogging as a self-promotion tool often neglect basic protocols that one might employ over email or in a face to face conversation. Since the audience is anyone in the enterprise, better filters need to be applied to content that is just thrown up on a blog in haste. No, I am not suggesting censorship. In fact, the exact opposite. Let the readers, colleagues and fellow experts decide via ranking and reputation engines. Have these ratings apply to the specific subject matter and not generally to the individual. Incorporate published documents, previous work experience, projects and other tangible evidence in the rating. Et voilà, you get a balanced view of how much of a trusted source this person is on a particular subject in relation to others.

Finally, layer in a recommendation engine that’s as effective as Amazon’s and the weapon has not only been disarmed, it’s been taken out of the enemy’s hands.

Network effect: Positive or Negative?

Lynda Ting — Fri, 13 Jun 2008 04:24:00 GMT

While we all understand and to some extent harness the power of the network, especially in our social lives, it dawned on me that there is an inherent conflict with one of the key value drivers of how social networks can be leveraged in the enterprise.

The network effect, as defined by Dion Hinchcliffe, Enterprise 2.0 luminary, “occurs when a good or service has more value the more that others have it too”. Think of email ,wikis, blogs and search in the context of enterprise 2.0 tools. This makes perfect sense to me in all these instances, except when you extend the concept to information discovery and finding the knowledge expert by exposing the social graph in the enterprise.

The social graph is predicated on the fact that as the number of connections between people and their social circles expands, the network increases in power. However, when in search of the carbon emissions expert in my organization, I use the network to identify a single expert. The rest is noise, in fact only a means to an end. If I followed the premise of the network effect, the best answer would come from an aggregation of all the extraneous and peripheral bits of information I picked up along the way, culminating into one giant ball of confusion. One could argue, that if it weren't for the expansive network, I would have never found the expert. Read my blog on the 3 Rs of Enterprise 2.0 and I'll explain why I don't completely agree with this.

Furthermore, the theory encourages bandwagon jumping, and lemming behavior, as unknowledgeable, unaccredited outsiders participate in the network. Thus, poor decision making and poor results ensue. The resulting effect? Negative, but not unsolvable.

How Startups Fail: Part Four

Lynda Ting — Fri, 23 May 2008 18:14:00 GMT

Part Four of a Four Part Series: The Four Syndromes of Startup Failure.

In his keynote to several budding entrepreneurs, Eric Benhamou, Chairman of 3Com, former Chairman and CEO of Palm, made some observations about how startups fail.

Numero Quatre: The Market Versus Marketing

Eric cited the classic problem of failing to assess market dynamics as the final failure syndrome. He used a camel’s dual humped profile to describe the curve along which a startup’s market traction can be mapped. Savvy marketing alone cannot rescue startups from this decline between the growth spurts. Recognizing early on that it will take partnerships to bring the product to market and making an investment in Business Development activities is necessary. The mature and consolidated software market leaves few partners for startups to choose from. While I agree that timing is everything and knowing when to go it alone or in a partnership can make or break a startup, Eric neglected to mention that the SaaS delivery model and cloud computing enabled market reach for young companies without the a channel partner. This will continue to be a disruptor to the traditional enterprise software distribution paradigm.

The key point to takeaway is that there is a significant distinction between the market and marketing.

How Startups Fail - Part Three

Lynda Ting — Fri, 23 May 2008 05:56:00 GMT

Part Three of a Four Part Series: The Four Syndromes of Startup Failure.

In his keynote to several budding entrepreneurs, Eric Benhamou, Chairman of 3Com, former Chairman and CEO of Palm, made some observations about how startups fail.

Numero Trois: Poor Operational Execution

Eric observed that while startups report on operational items, they fail to consistently monitor the results, look for or act on the warning signs. Peeling the operational onion back another layer, startups fail, from the beginning, to identify the correct core set of metrics upon which to measure their progress. These metrics need not only to be measured monthly, but are meaningless without analysis and interpretation. Without this comparative data and consistent interpretation, meaningful conclusions cannot be drawn, and hence no action is taken to set things back on course. Even if a startup wants to avert a looming crisis, Eric warns them not to seek advice from Board members who lack related operational experience. I would counter that this “operational experience”, does not necessarily qualify him or her as a subject matter expert. Was he/she instrumental to the success of past endeavors? What was learned? Without this resource, where does the startup turn? There are CEO support groups and Board Advisors who have the requisite knowledge and experience. Startups need to build these relationships early on.

To sum it all up, startups should plan for failure and have the systems in place to catch it early.

How Startups Fail - Part Two

Lynda Ting — Thu, 22 May 2008 22:18:00 GMT

Part Two of a Four Part Series: The Four Syndromes of Startup Failure.

In his keynote to several budding entrepreneurs, Eric Benhamou, Chairman of 3Com, former Chairman and CEO of Palm, made some observations about how startups fail.

Numero Deux: Rising to the Recruiting Challenge

Eric observed that startups fail to recruit consistently. The skills gap is not identified early enough. When it is acknowledged, inadequate thought and planning are put into the hiring decision. Often Board members are asked to interview candidates at the last minute and are ill-prepared to make a well-informed decision. I think we would all agree that people are a startup’s most valued resource. So, why does this breakdown occur?

I would argue that recruiting, beyond hiring the CEO, is a big part of what VCs should bring to the table. They are in a great position to maintain a “virtual bench” of talent. A roster of great executives who have succeeded in other portfolio companies, individuals they’ve worked with in the past, candidates from a vast partner network. More importantly, they provide an objective perspective of what the skill gaps are and have a comparison benchmark across all of their portfolio companies. Is the CEO a terrific strategist, but horrible manager? Is he or she a sales assassin, but lacks the vision to identify and create a new market category?

I’m not assigning blame to the VC for this failure syndrome, I view them as the solution.

How Startups Fail

Lynda Ting — Wed, 21 May 2008 18:45:00 GMT

Part One of a Four Part Series: The Four Syndromes of Startup Failure.

In his keynote to several budding entrepreneurs, Eric Benhamou, Chairman of 3Com, former Chairman and CEO of Palm, made some observations about how startups fail.

Numero Un: The Dysfunctional Board

Eric noted that Boards are dysfunctional because they lack collegiality. Often when Boards are built, they are underpinned by the Company’s investors. Investors who have personality clashes, no common value system, and those who represent firms who have vastly different return objectives. One who is risk averse, seeking an early exit at a modest return, while another is aiming for the fences. Are Boards really this way?

Are investors not mature enough to play nicely in the sandbox? Do egos get in the way of rational thinking? I’m not certain that I completely buy into this argument. Simply because the basic sense of fiduciary duty does not fly out the board room window. Doing what’s BEST for the Company as a going concern is the first and foremost governing principle that all Board members must adhere to. While individual motivations do influence behavior, as in any situation inside or outside the Board room, I am not willing to make the leap that a sophisticated venture investor would completely shirk this responsibility over a personality conflict. When it comes to investor misalignment, I argue that fault lies with the startup for not selecting investors who were not on the same return horizon in the first place. While Eric does not argue that there is a cause and effect relationship between “unfriendly” Boards and startup failure, I feel that there other far more critical issues with which startups must contend to put them on them path toward success.

Keep reading! This is only the First Startup Failure Syndrome in a Four Part Series.

How to get Sequoia and Kleiner Perkins to invest

Lynda Ting — Thu, 08 May 2008 04:26:00 GMT

Straight from the opening remarks at the NVCA AGM today, Mike Moritz and John Doerr interviewed one another on stage and discussed everything from how they snagged their wives to the dismal return outlook for VCs in Silicon Valley - if you are not one of the top tier firms. The one pearl of wisdom I took away was the secret behind what it takes to get your startup backed by the two kingpins of venture capital.

Of the 50 companies in which the two firms have co-invested, Moritz pointed out that they've covered most of the spectrum of the alphabet when it comes to the first letter of your company's name, with the exception of the letters HQUXYZ. So, when naming your company, simply have it begin with one of these 6 golden letters, and you'd be a shoe-in for a first meeting.

According to Doerr's observations, his most successful investments were founded by a "couple of Caucasian, nerdy, male, engineers". For those of you who don't fit this demographic, it's an easy fix. Recruit a couple of engineers that do fit this demographic, make them founders and you have just doubled your odds of funding.

Lastly, Eric Schmidt should be your mentor. Moritz cited that his subtle leadership style and his ability to create an environment in which the founders could thrive was the secret to being a great CEO.

And there you have it - how to get Sequoia and Kleiner Perkins to invest in your startup.

Xpree—wisdom of the crowds to a whole new level

Lynda Ting — Sat, 03 May 2008 19:32:00 GMT

I sat on a panel yesterday organized by Fountain Blue, a community that fosters entrepreneurial coaching and leadership in Silicon Valley.

This is how I came across Xpree. While I was given only a 60 second elevator pitch and a 3-minute Q&A session, I immediately took to the idea of using the wisdom of the crowds to create a predictive market in the enterprise. Specifically, in the areas of demand planning, forecasting and innovation management. What's even more interesting is the use of web 2.0 technologies and gaming principles to execute this idea.

At a very high level, you create a profile, bet on the outcome of an idea that a co-worker has posted, set the metrics and see what the crowd has to say. Top forecasters get ranked and if you use your imagination, there's a whole social community that can be built around forecasting. So, why would an enterprise customer care about this? Early proof points from Xpree customers show that these crowd-based forecasts, more closely align with actual outcomes than what the conventional planning tools offer today. Taking the idea one step further, this data could be fed back into existing product development and design management systems to improve products brought to market.

There are quite a few companies in the consumer space with only a few other competitors aimed at the enterprise space such as Consensus Point, Inkling Markets and NewsFutures, so it remains to be seen how Xpree can gain some ground.

SaaS: What the VCs are saying—part two

Lynda Ting — Sat, 03 May 2008 19:07:00 GMT

In case you missed the VC panel at Software2008, here's the second part of my debrief.

When asked: "How do you evaluate SaaS companies?"

Sanjay from Storm Ventures responded: "robust, reliability, scalability." While Glenn from Granite Global cited that metrics such as renewal rates and conversion rates from trial to paid were important. The panel agreed that low cost of customer acquisition was of paramount importance since M&A exit values are much lower than in the past.

This raised the question about the exit environment. All the VCs agreed that the amount of capitalization required to get a company to exit was down significantly. Gone are the days of $50M+ which is causing entrepreneurs to do more with less—$20M - $30M. In fact, Navin went so far as to say that the VC model is broken and rather than exiting through strategic M&A, the buyout market has become very active. VCs have learned to become very patient as they face 5-7 year exit horizons versus 3-4 years.

To sum it up, VCs have been large proponents of bring SaaS to bear and as the economic environment continues to look grim, expect to see more companies that sell into opex rather then capex while reducing TCO for the enterprise customer.

SaaS: What the VCs are saying—part one

Lynda Ting — Sat, 03 May 2008 18:31:00 GMT

In case you missed the enterprise software VC panel at Software2008, here's the debrief - part one.

When asked "What's a hot?" from an investing perspective:

Navin Chaddha of Mayfield immediately responded: "enterprise software is NOT hot;" companies catering to the needs of Internet 500 companies are hot and he is investing in business model innovation rather than technology. Sanjay Subhedar of Storm Ventures chimed in that data protection, application virtualization, risk and energy management were important investing themes. SaaS was still a theme across all panelists, with the exception of Glenn Solomon from Granite Global Ventures who takes the contrary view and prefers looking at traditional enterprise software opportunities.

When asked "Is there life for the licensing model in venture-backed companies?"

Prashant Shah responded: "in specific instances such as areas requiring deep integration in the messaging layer of applications. Sanjay added that is the application is mission critical, customers are still SaaS shy. Navin also noted that infrastructure software largely followed the licensing model

Continued in Part Two, SaaS - What the VCs are saying at Software2008

SOA, so what? The latest from Software2008

Lynda Ting — Sat, 03 May 2008 17:41:00 GMT

I attended a couple of the SOA tracks at Software2008. I was not surprised by the dismal success that SOA has demonstrated of over the years, but was left with a tiny kernel of hope.

All the promise that Service Oriented Architectures held for enterprise application development was largely unkept. Some anecdotal data points suggest that only 29 percent of all SOA implementations resulted in increased developer productivity; and 23% of all SOA interfaces were re-used. Solving the legacy data integration has been an extremely tough nut to crack. But wait, is there light at the end of the tunnel?

Enter—mashups. There is a synergy that exists for the SOA—mashup combo. They're like the fries you get with the burger. Sometimes you just want the fry high, but it's hard to just get the burger without the fries. At least, for me it is. Mashups are a great presentation tool for both web-based applications and interfaces to behind the firewall data. But, SOA will be required to govern, manage and secure them.

PaaS and the innovation opportunities

Lynda Ting — Thu, 01 May 2008 03:23:00 GMT

Unlike what the development world experienced with emergence of two leading platform vendors, and up until recently a third with the widespread adoption of open source, cloud-based platforms, or PaaS—platform as a service, has yet to be dominated by a single vendor. I characterize the situation as a land grab, while some at at Software 2008 this week, namely McKinsey called it an emerging war in the enterprise.

Because the landscape is still taking shape and there are no clear boundaries on what services a PaaS should be expected offer, it's going to take the biggest and most prominent stake to declare them. There are several well-known PaaS vendors such as those from Salesforce, Amazon, Coghead, Bungee Labs, Webex and OpSource, yet they all differ quite significantly from one another.

I like the framework McKinsey employs in the report released today. To sum it up, there are three market segments that PaaS vendors cater to: delivery, developer, and ISV.

With fears of captive lock-in, customers will need to see innovation and efficiency at any of these levels, and integration to existing on-premise data sources will be a key differentiator.

McKinsey report on the emerging PaaS war