Can better design accelerate software startups?

3 12 2009

Bessemer Venture Partners seems to think so. The firm created a new “designer in residence” position for Jason Putorti, the design mastermind behind the personal financial website. (Note to Jason: love your work, man.)

As resources become constrained and the venture industry continues to face headwinds, Bessemer is taking a strategic step to infuse its software portfolio with genius design to make great software ideas intuitive and elegantly simple to users. This capability – to make complex systems simple and intuitive – has come to the forefront of business as design thinking proves its value beyond a physical product department and into software, organizational architecture, and strategic decision making.

VentureWire – Bessemer hires designer in residence


Cleantech needs sustainable business cases, not hype

1 12 2009

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Enjoy an Oprah moment with Vinod Khosla, perennial venture developer and powerhouse venture capitalist. While he wants the environmentally sustainable outcomes alternative energy and transportation systems are offering, he is very disappointed with the current status of business cases and the direction cleantech hype is currently pointing. Read the rest of this entry »

In acquisitions, it pays to remember the little guys

16 10 2009

If you’re in the market for acquisitions, consider maximizing your opportunity for transformation by making a set of small acquisitions that can be rapidly integrated, add growth power to your core business, and – for a bit of downside protection – be spun out or written off if unsuccessful.

Are you ready to acquire ahead of economic recovery?

Are you ready to acquire ahead of economic recovery?

Billion dollar mergers have laced the headlines recently, giving hope for a revitalized M&A market and indicating corporate growth expectations have indicated now is an opportune time to empty company treasuries while prices are low and growth is imminent.  Some of the largest acquisitions announced or publicly acknowledged include:

Dell desires Perot Systems for $3.9B

Xerox to buy Affiliated Computer Services (ACS) for $6.4B

Cisco buying Tandberg for $3B

These mega-deals are a boon to the economy, providing motivation for corporate activity and jobs for skilled practitioners in acquisition strategy and integration.  Deals of this size can certainly transform a company, but many mega-deals represent the purchase of an adjacency growth sector – not a growth of a core business.  Because of the specific difficulties of integrating a massive adjacency, these types of acquisitions are enormously challenging and fraught with failure.  Purchases of this type are likely to take two to ten years to fully integrate and reap the growth prospects of the combined firm, all while drawing key resources away from growth investments specific to each party’s core business.

If you’re in the market for acquisitions, consider maximizing your opportunity for transformation by making a set of small acquisitions that can be rapidly integrated, add growth power to your core business, and – for a bit of downside protection – be spun out or written off if unsuccessful.

Read the rest of this entry »

IPO momentum building on OpenTable

22 05 2009

Despite a broader market skid yesterday, OpenTable entered the public markets with a very respectable IPO that’s giving hope to the dozens of venture-backed companies hankering for an exit.  Good coverage by the San Francisco Chronicle points out that this is no flood-gate event, but it certainly wasn’t a failure.  Watch to see if OpenTable holds onto its 60% gains from yesterday; it closed at $31.89 and trades on the Nasdaq under symbol OPEN. The company will likely face difficulties growing revenue since it appeals largely to mid- and up-scale restaurants and diners – a market that is prone to heavy recession pullbacks.  (UPDATE 5/26: On a day when the tech markets were bullish, OPEN has stabilized and shed its value down to $26.80 or so.  While this is still a 30%+ return for IPO investors at $20, it’s a substantial decline off the opening day hype.)

Image from VentureBeat

The impetus for innovation at OpenTable has never been larger now; their revenue potential in servicing restaurant reservations is not the making of a billion dollar company.  As the company develops trusted relationships with restaurants however, look for OpenTable to extend online and mobile marketing services for its clients.  If management sees its core capabilities in the online reservation space, look for it to expand to golf courses, boutique hotels and villas, and private events to consolidate market share in those niches as well.

If other pre-IPO companies (and their VC investors) like what they see, there could be a sizable increase in IPO registrations as companies compete with new secondary offerings for investment dollars still sitting on the sidelines.

OpenTable IPO lifts hopes on stock exchange – San Francisco Chronicle

OpenTable IPO rises 59%; Critics sneer – Wall Street Journal

Holiday Price Discounts Reveal Shopping Psychology

16 12 2008

With so many retailers ostensibly competing on price during the holiday season of 2008, it’s hard to avoid seeing the 20%, 40%, even 70% off discount signs and commercials designed to bring your holiday spending to some store’s cash register.  But some retailers are being awfully creative in their price promotions to capture a pair of psychological effects: the buyer’s pride in finding a great bargain and the desire to give a high quality gift.

Advertising bargain discounts, not prices, should drive holiday sales

Advertising bargain discounts, not prices, should drive holiday sales

Most people aren’t hoping to give worse presents to their loved ones this year – they want to give the same high quality, aspirational items they’d give in a good economy.  Shoppers accustomed to shopping at mid-range and high-end retailers may not know the location of the nearest Marshall’s, Filene’s Basement, HomeGoods, Sierra Trading Post, or other quality discount retailer.  Here are some examples of premier retailers using holiday discounts to attract holiday spending.

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Anatomy of the Economic Crisis

1 10 2008

Much fuss has been made about the nature of the current economic crisis and the potential beneficiaries of a very likely federally-sponsored buyout (I don’t call it a bailout) of unmarketable assets.  Whether folks are pitting Wall Street against Main Street or lamenting the private profits and socialized losses suggested by the federal plan, I don’t think the average American going to work this morning yet understands how the situation came about and could get MUCH worse without intervention.

So I’ve diagrammed out this little sketch of how the money flows – and where it stopped.  Hopefully this is a simple way to wow your friends at this week’s happy hour.

Capital is needed to purchase large assets and finance regular business operations

Capital is needed to purchase large assets and finance regular business operations

To put a size on the increased demand for housing, I’ve heard that during the past five to eight years, the number of Americans owning their home (or at least owning the mortgage liability for it) grew from the long run average 50% to 60% of households – an increase of over 10 million families.

The constriction of lending isn’t just a Wall Street problem.  Businesses are going to have trouble when accounts receivable don’t get paid, inventory can’t get financed, and employees can’t get paid.  Main Street people are going to get shocked by rising unemployment, tighter credit standards, and no available cash to help make ends meet at the end of a month.  Folks will have greater difficulty financing car or home purchases and students (as well as those newly-unemployed seeking to advance their education in the downturn) may have trouble finding lenders to finance their tuition bills.  Drops in income – or even fear of future unemployment – will constrict charitable giving, putting essential non-profit services at risk as well.

This isn’t a problem just for Wall Street, and they’re certainly not the only ones who shared in the gains of home ownership.  I lament the transaction profits predatious mortgage brokers earned in the heat of the housing market and I hope for a better system (and better educated and protected buyers).  But let’s fix the liquidity problem that will affect everyone and not spend our breath pitting Americans against each other.

Innovation Value is in Business Models, Not Products

18 09 2008

BusinessWeek has some data in this week’s issue on revenue and profit growth for companies named to its Most Innovative Companies list, with some clear dominance from companies seen as innovating business models (in yellow below) – as opposed to customer experiences (green), business processes (purple), or products (blue).


Source: BusinessWeek

This is in line with research from innovation consultancy Doblin, which finds a bit of an 80-20 rule about innovation: ~80% of innovation is in products that account 20% of the value growth, while ~20% of innovation is in business models and other more lucrative areas that generate 80% of the growth.  Doblin’s reasoning: product innovation is often needed just to keep up, while business models can revolutionize value creation.

Business model innovation has led to a host of recent developments, including software-as-a-service (SaaS), fractional ownership, pay per use/rental/subscription services in music and movies, and even advertising (witness Microsoft’s cashback Search).