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Netflix and Software
Sky used tech as a crowbar, and the crowbar had to be good, but it’s actually a TV company.

Like Sky, Netflix has used technology as a crowbar to build a new TV business. Everything about how it executed that technology has to be good. The apps are good, the streaming and compression are good, the UI is good, the recommendation engine is good, and the customer service and experience are good. Unlike American cable subscribers, Netflix subscribers are generally pretty happy with the tech. The tech has to be good - but, it’s still all about the TV. If Netflix was only showing reruns of Frasier and Ally McBeal no-one would have signed up. It used tech as a crowbar, and the crowbar had to be good, but it’s actually a TV company.

I think this framing is important - ‘what kind of questions matter for this business?’ The questions that mattered for Hulu were all TV questions - ‘what rights will it get?’ The same for Sky - ‘what happens to football and movie rights?’ - and the same for Netflix. As I look at discussions of Netflix today, all of the questions that matter are TV industry questions. How many shows, in what genres, at what quality level? What budgets? What do the stars earn? Do you go for awards or breadth? What happens when this incumbent pulls its shows? When and why would they give them back? How do you interact with Disney? These are not Silicon Valley questions - they’re LA and New York questions. I don’t know the answers - indeed, I don’t even know the questions.

The more that we see new companies using software to create new businesses in industries outside of technology, the more generally this applies.

But the only important question for the upcoming ‘TV Plus’ is whether Apple plans to spend $1bn a year buying content from people in LA, and produce another nice incremental service with some marketing and retention value, or spend $15bn buying content from people in LA, to take on Netflix. But of course, that’s a TV question, not a tech question.
business  entrepeneur 
18 days ago by bjr
How to Raise Money From a VC On whether to raise venture capital, how much to target, and how to spread it out -Scott Kupor
Just as with product-market fit — where VCs care about how well your product satisfies a specific market need — you need to determine whether your company is appropriate for venture capital.

But, as a general rule of thumb, you should be able to credibly convince yourself (and your potential VC partners) that the market opportunity for your business is sufficiently large to be able to generate a profitable, high-growth, several-hundred-million-dollar-revenue business over a seven-to-ten-year period.

VCs are people, too, and they respond to the incentives that are created for them. Those incentives, simply put (and boiled down to financial ones only), are:
1. To build a portfolio of investments, with the understanding that many will not work... and a small number will generate the lion’s share of the financial returns for a given fund; and
2. To further turn those large financial returners into cash within a 10-to-12-year period so that the cash can be paid back to their limited partners....

And even if your business is appropriate for VC (because of the ultimate market size opportunity and other factors), you still need to decide whether you want to play by the rules of the road that venture capital entails. That means sharing equity ownership with a VC, sharing board control and governance, and ultimately entering into a marriage that is likely to last for about the same time as the average “real” marriage. (It turns out that eight to 10 years is about the average length of real marriages in the U.S. …make of that what you will.)

Now, assuming you made the decision to raise venture capital in the first place, how much money should you raise? The answer is to raise as much money as you can that enables you to safely achieve the key milestones you will need for the next fundraising.

In general, most entrepreneurs at the early stages of their business raise new capital every 12 to 24 months.

The Series B investor is likely to want to see that at least the initial version of the product is built (not the beta version, but the first commercially available product, even though the feature set will, of course, be incomplete). They will want to see that you have some demonstrated proof in the form of customer engagement and contracts that companies are in fact willing to pay money for the product you have built.

Well, first, a successful enterprise software company that makes it to an IPO is probably going to raise at least $100 million (and, in some cases, a few multiples of that), so there aren’t too many VCs who are going to write that size check up front.

Spreading out your capital raises allows you, as the entrepreneur, the ability to get the benefit of increases in the valuation of the company as you de-risk the opportunity, and provides the VC the ability to right-size their total capital exposure to the business based on the achievement of these milestones.

The other consideration regarding the amount of capital to raise is the desire to maintain focus for the company by forcing real economic trade-offs during the most formative stages of company development. Scarcity is indeed the mother of invention. Believe it or not, having too much money can be the death knell for early-stage startups.
entrepeneur  business  VC 
10 weeks ago by bjr
So You Wanna Build a Software Company in Healthcare?
Company building in healthcare is different than with other tech startups due to many factors, including complex incentives, information asymmetry, and regulatory dynamics.

Healthcare startups can have breakthroughs if they set clear strategies to tie together product & services, create the right team makeup, and execute a thoughtful go-to-market <- the last one is where most stumbles tend to occur.

Stack your customer-facing front line w/industry insiders who understand & appreciate the culture of your buyers & users. On eng side, hire for knowledge of latest and greatest tech, but w/the grit to deal with ossified legacy systems you’ll inevitably have to integrate with.

Healthcare SaaS needs high-touch services to deal w/variability across customers operational environments. Build enough product surface area (don’t be a point app) & transactional depth (eg scheduling) to show clear utility/ROI & make an airtight case to risk-averse buyers.

Be specific when defining target market segment, it has significant implications on sales+service delivery model (eg pricing, sales motion, rep profile). Most digital health solutions are novel categories of offering; anticipate long sales cycles & heavy buyer education needs.

Communicate a strong vision! But check your hubris and unverifiable claims at the door. If any industry can sniff out - and immediately reject - b.s., it’s healthcare. Stakes are higher when you’re dealing with patients’ lives.

If you can organically figure out solutions there's a lot of money flowing through.

Look for adjacent use cases that may not get me as far but give me a step forward to go without falling. Once you're in you're very sticky.

Understand if person suffering from the pain point can actually pay for your solution because there's a lot of misaligned incentives in the healthcare system.
business  startup  healthcare  entrepeneur 
april 2019 by bjr
Go to Market Strategies for Enterprise Startups: In Conversation with Martin Casado, GP, Andreessen Horowitz
Why Go to Market (GTM) matters:

The Number One mistake technical founders make is to think that whatever they have created has intrinsic value [and not pay enough attention to distribution]

On category creation:

A market category is when a) people know what you’re selling, it’s part of their everyday thought process, there’s a buyer and hopefully a budget for it; and b) they’ve assigned a value to it
When the category does not exist, the entrepreneur has two jobs: you need to a) “create the object in their head”, so that they start thinking about what you have built, which is a fundamentally hard thing to do, and b) attach a value (or price) to it
Traditionally, this was a direct sales-driven exercise, you had to show up and walk people through the thought process and product, but this is changing (see below)

-Has a buyer and a budget attached to it

On pricing:

Especially for enterprise startups, there’s no single decision that you make that is more important or more directly tied to your value than pricing (Ben Horowitz)

Entrepreneurs tend to think about pricing in terms of how much value is created (bottoms up) but they should also think in terms of margin for their business, or ensuring their business can be solvent (top down)

At Nicira, we realized that if we used services in a disciplined manner (to become strategic advisors to the customer, push for a higher sale, push for expansion), we built those very sticky relationships with our customers

So my view has changed… If you sell core, hard tech with lots of integrations, it’s great to have a services business, and in fact it’s a differentiator
But it is dangerous and you can get addicted to revenues… you should keep the services P&L separate (early on), and eventually the service providers should take it over
business  entrepeneur 
april 2019 by bjr
This researcher studied 400,000 knitters and discovaered what turns a hobby into a business
She analyzed almost 100 interviews and 403,168 profiles of knitters and crocheters in the United States. She found that even on one of the Internet’s great niche social networks, offline encouragement and feedback helped most talented hobbyists recognize their ability and take the first steps toward monetizing it. Success on the Internet was propelled by real-life interactions.

The transformation begins immediately, implying that knitters realized their talent soon after meeting their peers, comparing their work and receiving feedback and encouragement.

Kim found the effect was strongest among those who were already the most skilled knitters. That suggests that in many cases social networks such as stitch n’ bitch groups create entrepreneurs by encouraging those with the most talent, rather than educating those who lag behind.
economics  entrepeneur 
november 2018 by bjr

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