A VC - Latest Comments in Capital Efficiency Finds It's Moment

Re: Capital Efficiency Finds It's Moment

furniture stores — Thu, 01 Oct 2009 16:34:01 -0000

With very little money these days entrepreneurs can develop and launch products with room for several small, follow-up experiments.

Re: Capital Efficiency Finds It's Moment

Lloyd Fassett — Mon, 03 Nov 2008 13:12:16 -0000

I seems to me that 'Capital Efficiency' needs more off setting, goal setting...some kind of expresion of output for capital input to really be an effective phrase. For example, Tublr has a lot of visitors for expense, and I wouldn't be surprised if Twitter was in the same ratio, so if users is the key metric then they are effecient. Why not look at Craig's List, PlentyofFish and HotorNot though as companies that have a lot of profit for the expense?

Re: Capital Efficiency Finds It's Moment

Andy Freeman — Thu, 16 Oct 2008 20:44:42 -0000

I did and sent my comments to fred@unionsquareventures.com a couple of days ago. Did you get them?

Re: Capital Efficiency Finds It's Moment

infoarbitrage — Mon, 13 Oct 2008 22:22:21 -0000

Totally agree about the direct sales momentum. This is generally garnered by the Founder/CEO and perhaps the Co-Founder. Once they crack a few key accounts, they can train a few super bright, consultative sales types to push the ball forward. If the accounts selected are rich, multi-seat accounts with lots of expansion possibilities, such a small team can make a lot of hay in a very short period. After these successes and learning how to sell the channel can be engaged.

Re: Capital Efficiency Finds It's Moment

fredwilson — Sat, 11 Oct 2008 09:59:08 -0000

That's right, but I have found you have to get some direct sales momentum
before you can get channel sales. And direct sales momentum takes time and
salespeople are expensive. I've always thought one super great sales guy
(maybe a founder) and a bunch of young hungry right out of college kids who
the top guy trains and manages might be a good model. I've seen that work
once.

Re: Capital Efficiency Finds It's Moment

infoarbitrage — Fri, 10 Oct 2008 22:44:03 -0000

i guess i think of it two different ways: using a small, targeted force of sales engineers who crack a single enterprise vertical in a siloed organization (e.g., equity research at a wall street firm), and use that win to leverage the sale into other verticals at the same firm (e.g., private wealth management, investment banking, etc.). this provides maximum leverage by spending lots of time on the initial win, and that win then makes the subsequent wins much easier. The second way is to work with channel sales partners, where you use really good documentation, materials and training to get a channel partner to help you scale without adding lots of heads (e.g, IBM WebSphere working with a mobile data collection company, where the mobile company doesn't need lets of people to service IBM). These were my thoughts.

Re: Capital Efficiency Finds It's Moment

fredwilson — Fri, 10 Oct 2008 20:43:14 -0000

³nothing's changed² is just not right

The VCs will probably be supportive

But that doesn't mean ³nothing's changed²

Re: Capital Efficiency Finds It's Moment

fredwilson — Fri, 10 Oct 2008 20:38:07 -0000

Not sure which company you are referring to

But each company is unique and has its own set of issues

No two companies are exactly alike or face the same set of issues

Re: Capital Efficiency Finds It's Moment

John Pollock — Fri, 10 Oct 2008 06:46:39 -0000

I went to school in the town where E.F. Schumacher lived and we'd occasionally see him wondering around, a seemingly serene old man. Having more interesting things to do, I only registered the title of his masterwork, "Small Is Beautiful" (something self-evident when you're young, small yourself, and closer to the small whether it's the grass, something under the microscope or the way someone knotted his tie). The subtitle - Economics As If People Mattered seems deeply pertinent at the moment.

As ever, a fine blog entry Mr Wilson: but I've taken as much pleasure from your tweets about showing your kids where you went to school and so on (though some of the American sports stuff passes me by!) as your thoughtful economic insights - obiter dicta, perhaps, but a reminder of what really matters...

http://en.wikipedia.org/wik...

Re: Capital Efficiency Finds It's Moment

fredwilson — Fri, 10 Oct 2008 06:44:07 -0000

I think so

Re: Capital Efficiency Finds It's Moment

SophisticatedD — Thu, 09 Oct 2008 23:00:19 -0000

Hmm. I am a developer for a recently funded (01/08, by a well known group) SaaS company. Our revenue depends on our customers making money by investments. 6 months ago we were a company of 17, we now are a company of 27, with two more hires hopefully coming soon. Company meeting today and CEO says nothings changed, and in fact were told by the vc's not to worry, there is plenty more cash.

Re: Capital Efficiency Finds It's Moment

Ben — Thu, 09 Oct 2008 21:42:16 -0000

it's "Salary Efficiency Finds Its Moment". Meaning, VCs will invest in founders taking home less than $100K post A round. All those CEOs who are in the +$250K mark don't seem like a good idea these days. Hence, the type of businesses one will invest in are very low in terms of business development intensiveness, and are not aimed at IPO whatsoever.
There are many deals like that, yet I believe that at least one of your portfolio companies (in the financial services space) can't survive without serious management , i.e. the +$250K guys. Hence, you either kill those companies, or make very big bets.

Re: Capital Efficiency Finds It's Moment

fredwilson — Thu, 09 Oct 2008 17:23:20 -0000

Ugh, that was one badly written post

Re: Capital Efficiency Finds It's Moment

fredwilson — Thu, 09 Oct 2008 17:20:19 -0000

I fixed it but I don't want to delete comments. Thank your for your catch

Re: Capital Efficiency Finds It's Moment

fredwilson — Thu, 09 Oct 2008 17:17:21 -0000

Rent should be on the table, but many companies have locked into long term
leases that they can't just leave

Re: Capital Efficiency Finds It's Moment

fredwilson — Thu, 09 Oct 2008 17:14:17 -0000

Thanks for the correction. I fixed it

Re: Capital Efficiency Finds It's Moment

fredwilson — Thu, 09 Oct 2008 17:05:12 -0000

I'd love to understand better how you do enterprise sales capital
efficiently. That's the piece we haven't figured out.

Re: Capital Efficiency Finds It's Moment

fredwilson — Thu, 09 Oct 2008 17:02:20 -0000

Andy not to beat the drum too much, but check out 10gen and let me know
what you think. There's a link in the post

Re: Capital Efficiency Finds It's Moment

fredwilson — Thu, 09 Oct 2008 16:57:16 -0000

Chris you are right about AppEngine. That's why we funded 10gen which is a
completely open source cloud computing platform. Check it out and let me
know what you think.

Re: Capital Efficiency Finds It's Moment

rah33ls — Thu, 09 Oct 2008 14:47:58 -0000

a nice read. thank you.

Re: Capital Efficiency Finds It's Moment

Murat Aktihanoglu — Thu, 09 Oct 2008 14:34:47 -0000

I agree, the question now is if innovation will be 'the' competitive advantage. Yes, starting a tech company used to be hard. You needed lots of developers, lots of resources, lots of money and more money. Then web APIs made it easier to start companies. ProgrammableWeb has at last count 861 APIs available for use, and 3257 mashups created using these. Now instead of creating your own map application for your rock concert website, you can use one of 88 mapping APIs available and slap your concert listings on top of that.

In the meantime, there was still one big hurdle for startups: deploying and maintaining a backend that could scale if the startup actually indeed succeeded. Not all startups hit millions of users but still, every startup had to be ready for the onslaught or they could kiss their exits goodbye. This required buying/leasing servers, architecting, rearchitecting and then maintaining clusters of servers, replacing burnt hard drives, backing up, adding more hardware as more customers showed up and keeping an army of sysadmins fed and appropriately caffeinated during the process.

Google and Amazon’s big advantage was their infrastructure. Especially Google’s big competitive advantage was their MapReduce/BigTable-based seemingly-infinitely-scalable infrastructure that could support huge amounts of traffic and data, running on low-cost hardware.

Amazon opened the flood gates to offering this big competitive advantage to any company in the world by becoming the book store that sold cocaine out the back door. As Larry Dignan said “Books will be just a front to sell storage and cloud computing”.

Not a day goes by now without an announcement from another industry giant (Intel, HP, Yahoo, IBM, Verizon, AT&T) offering scalable compute clouds. Dell even tried to trademark the term ‘cloud computing’.

Now that cloud computing is going through what web APIs has gone through and capital efficiency is peaking, it will be interesting to see if the competitive advantage for startups will be purely innovation.

Re: Capital Efficiency Finds It's Moment

rah33ls — Thu, 09 Oct 2008 14:28:58 -0000

this is an important evolution and will become an important marking point in history for radical enterprise innovation (esp business model innovation).

such dramatic reduction in cost structures (partnering, outsourcing, new suppliers) is going to mean a tidal wave of experimentation of business models in all kinds of flavors - most of them coming from college kids bedrooms!

Re: Capital Efficiency Finds It's Moment

michels24 — Thu, 09 Oct 2008 14:19:11 -0000

Hey, no mention of Yahoo! BOSS in the list of platforms/services that dramatically drive down operating expenses. Open access to the entire Yahoo! Search index for web search, news, image and spelling correction is pretty dam cool.

http://zooie.wordpress.com/...

Re: Capital Efficiency Finds It's Moment

Mrinal — Thu, 09 Oct 2008 13:08:00 -0000

Having my student visa to come to the US rejected (95), then finally making it here in 99 for B-School with SGI experience and graduating in 01 to be "CEO, Vocationally Challenged, Inc." during the dot-com bust days for almost 3 years, I strongly believe that crisis or challenges, imho, is absolutely the best opportunities - competition withers away, it becomes less noisy and its a chance to stop being a commodity through creativity. Its definitely the time for the hungrier and to thrive for some!

Re: Capital Efficiency Finds It's Moment

vruz — Thu, 09 Oct 2008 12:44:35 -0000

where you said
"Open source software makes it less cheaper and easier to build an app."

you probably meant "less costly", right ?