Congrats to Chris Rodde and Jay Goldstein, two fellow Seattle entrepreneurs and friends for launching http://seniorhomes.com/ today. If you’re looking for a great resource forassisted living, memory care, nursing homes and independent living homes for an elderly relative or friend, be sure to visit the site.
Category: Startups
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7 Reasons why it's a great time to be a Tech Entrepreneur!
In 2002 Warren Buffet sent this stark warning to his investors:
“In our view […] derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
Bill Gross was rumbling about the looming crisis in November last year.
Marc Andreessen predicted the “oncoming nuclear winter” on April 18th in Ning’s D round announcement when they raised $60 Million.
And here we are. Our biggest banks are failing. California (the worlds 5th largest economy) is running out of money. Two weeks ago our economy did almost collapse. Valley layoffs are starting. And every entrepreneur I know has that thousand yard stare.
All is not lost. If you, like me, run a technology startup, then you are in a better position than most to weather, and even profit, from the coming recession. Here’s why:
1. No more false economy!
For years there has been a false economy created by VC backed companies giving their services away for free to “go for growth”. The money gets consumed, the company goes away. But ten other promising startups in the same sector didn’t have the same runway and could not generate revenue to survive because the VC backed startup had forced everyone to give away the service for free.
As Wall St profits dry up and losses are incurred, many VC fund partners are unable to deliver the money they committed to their funds. So the amount of money sloshing around the Valley and other tech hotbeds will decrease.
With the venture capital glut removed we now have something closer to a free market among tech startups. Bad ideas will be given less runway. Good ideas will get their just profits because pricing will be market driven by realistic supply and demand curves. At the end of the day the same number of startups may actually make more money.
2. Efficiency of execution will matter again
This false economy has caused an entire skill set to be ignored. There are many folks out there who are very good at running a high traffic website or a complex business with very little money, people and resources. In the false economy their skill has counted for diddlysquat. If you are one of these people, your time has come. If you’re competing in the same business side-by-side with an old school false economy entrepreneur who needs his team of 50 and and his 200 server cluster just to get off the ground, you’re going to eat them for breakfast and ask for seconds.
3. The relative risk of investing in a startup has decreased
The problem on Wall St and the global banking industry right now is one of trust. An economist will tell you that asymmetric information has led to adverse selection. That means that people lied so people got screwed and now no one trusts anyone lest they too get screwed.
If you’d like to know exactly how bad this problem is in real-time, check out the TED spread on Bloomberg. It tracks the inter-bank lending rate. It’s the closest way of tracking the credit crisis in real-time. Notice how the “bailout” has had zero effect on the bank lending rate. It did nothing to improve trust. In the week before the bailout the Fed injected roughly an additional $300 Billion into the global economy and that also had zero effect. Apparently you can’t buy trust.
Startups were just as risky before and after the credit crisis. Investors are still investing in a great idea and a great team and nothing more. In our world we don’t have credit rating agencies who have lied about bad CDO’s in order to drum up more business from other banks. Our credit worthiness started of as really bad and it’s still just as bad. And our potential return on investment is still just as enormous as it was.
While VC funds may have less money sloshing around from sources they’re accustomed to, this relative decrease in risk may attract new investors who now see us as far less risky since the alternatives are so much more risky.
4. It’s going to become easier to recruit great talent
Large companies are already shedding huge numbers of staff and many of them are talented people who were simply underutilized. With jobs being scarce and now that even large established companies aren’t a sure bet, it may also persuade risk averse folks who would not normally work for a startup that we’re not such a bad bet.
5. We don’t need credit anyway!
The commercial paper market is a huge credit marketplace that very stable, well capitalized companies with huge asset bases use to borrow money for short periods of time. They use the money to pay their staff and for their day to day operations. Unfortunately the commercial paper market has just about frozen. It’s become very difficult for even reliable companies to borrow the money they’re accustomed to have access to. Even the state of California is going to have to borrow from the government because they can’t raise money for their regular operations from the commercial paper market.
If you’ve ever tried to get a line of credit as a loss making startup with no history, you’ll know it’s near impossible. We didn’t survive on credit then and we don’t need credit now. And anything that causes the incumbents to struggle when we don’t have to is a competitive advantage for us.
6. Times of change create a greater need for innovators
As costs increase and spending decreases the incentives to find a way to do something better or cheaper become huge. If you can give Coca Cola a way to figure out that only 10,000 of their 30,000 people who have Microsoft Office licenses actually use the product, then you’re in the money. And if, because of inflation, the price of MS Office has gone up from $300 to $400 then you’re saving them an extra $100 per user and you can charge more for your service.
7. A weaker dollar means you make more money
If the US economy truly is toast, that probably means the value of the dollar will fall. That means that every Pound, Yen and Euro your website earns either in direct payments or via ad clicks will be worth more. If 25% of your website traffic is from the USA, that means the net result is more money without you lifting a finger.
Now that you know how good you’ve really got it, and while everyone else is still crying down at the bar, go get caffeinated up and grab yourself a piece of this great opportunity!
~Mark
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7 Songs
Alan Steele just tagged me to write 7 songs I like and then tag 7 people I know to do the same – kind of a blog chain letter. I don’t actually know 7 bloggers – and yes, I don’t get out much at all – in fact I’m pretty much an uber nerd who just fishes and writes code and both don’t require much interaction with humans. But I’ll give it a shot….
I’m tagging Jason Goldberg, Tony Wright, Joe Heitzeberg (can’t remember your blog url) and the Shy Guevaras (Sergio specifically!).
Please note that the first song has explicit lyrics and is not safe for work or kids.
1. NWA – Straight outta Compton
This is the original gangsta rap song. Pretty much launched the entire genre. The album has special meaning to me. I was in high school in 1991 in South Africa during apartheid. The school I was in was a private one and therefore one of the very few multi-racial schools in the country. A black friend (Natasha) was into NWA and black culture at the time and gave me a tape of their music. We used to spend hours having political debates at school. I ended up dating her friend (Claudette) and a white boy dating a black girl in apartheid South Africa was an interesting time of my life. This album captures that time.
2. Pearl Jam – Alive (Ten album)
Right after high school I joined a band doing half covers and half originals. We used to gig to a packed room at the local lifesaving club in Milnerton. The first gig we ever did was at the University of Cape Town and I was scared shitless. We covered Alive and it has an almost 2 minute guitar solo at the end that I totally pulled off. Good times!
3. Mother Love Bone – Come Bite the Apple
I left South Africa when I was 23 and went to live in London for 5 years. I was working for Credit Suisse after 6 months for about 1.5 years and living in Canary Wharf. I would walk to work with a Sony Minidisc player (where did they go?!) and listen to this song repeatedly whenever I was having a bad day and it would cheer me up. The lead guitar work in this song is just unbelievable – I love the whiny slow sound he gets. I never got into Mother Love Bone until after Andrew Wood died and it kills me that I’ll never see them live. Ah well – at least we have Pearl Jam.
4. Massive Attack – Three (from the protection album and City of Industry soundtrack)
My good friend Antonio Separovic has an eye for the artful and he told me one day that the movie City of Industry has the most amazing opening scene and soundtrack. I have slow moral and aesthetic reflexes, so it took me a while to catch on, but one day I was watching it for the 2nd time and it clicked. I was still living in London and Massive Attack had finally gone mainstream and the visuals and the song captured London beautifully even though it’s set in LA. Massive attack’s music reminds me of London and I had the pleasure of seeing them live at the London Arena.
5. Paul van Dyk’s Ministry of Sound session on friday night on Radio1 in London
There’s a session that Paul van Dyk did that was rebroadcast on Radio1 (who I worked for in 2003 but this was recorded in 2000 I think) and that my friend Marco Stichini and I used to listen to before a workout or a cycle to get psyched. It’s the most incredible 1 hour of Trance/Techno you’ll ever hear. It’s still floating around on the peer to peer file sharing networks today.
6. Rammstein – Du Hast
One night at 4am in 2004 after a rather harrowing experience (Atlanta – my friends know what I’m referring to) I walked into a bar in Table View in Cape Town and they were blasting Du Hast over this amazing sound system. I ended up drinking tequila with the barman and blowing off some steam. Du Hast captures that time.
7. Heart – Crazy on You
My amazing wife introduced me to Heart and the song Crazy on You is a great one for the stage I’m at in my life right now. Nancy Wilson’s guitar gives me chills and Anne Wilson is IMHO one of the best vocalists in the history of history. Heart came out of Bellevue, Washington and I’m very much into their music right now so I’ll have them as my 7th choice. Here’s the video of Crazy on You. There’s a 2 and a half minute acoustic guitar solo at the beginning. Enjoy!!
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Angels
I was reminded again today of how incredibly important it is to team up with the right angels and how incredible the angels are that we teamed up with. One day when I’m not flying stealth I’ll write a book about this stuff. Until then you get the adventures of Ziggy my cat and other exciting stories.
😀
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Putting food in our Fords…
Update: I noticed on my Feedjit that I got a bunch of visitors from CNN.com today. I think the blogs section below the story linked to this page at some point today.
Maybe using corn to produce gas for our cars isn’t such a great idea. Check out CNN’s headline today. Personally I’m pro-nuclear power – and ultimately using electricity from nuclear to power our cars. I grew up a few miles from a nuclear power station in South Africa and it was by far the cleanest industrial site around – compared to things like an oil refinery a few miles away that gave many kids down-wind from it asthma attacks. Sure radioactive waste is scary, but only because it doesn’t leave the power plant via a smokestack and go somewhere else so we can pretend it doesn’t exist. France has 59 nuclear reactors and they have so much power that they export it. We’re stuck back in the stone age digging up coal and pumping it into the air to make electricity – that is when our corporations aren’t gaming the power grid and providing rolling blackouts.
CNN) — Riots from Haiti to Bangladesh to Egypt over the soaring costs of basic foods have brought the issue to a boiling point and catapulted it to the forefront of the world’s attention, the head of an agency focused on global development said Monday.
Bangladeshi demonstrators chant slogans against high food prices during weekend protests.
“This is the world’s big story,” said Jeffrey Sachs, director of Columbia University’s Earth Institute.
“The finance ministers were in shock, almost in panic this weekend,” he said on CNN’s “American Morning,” in a reference to top economic officials who gathered in Washington. “There are riots all over the world in the poor countries … and, of course, our own poor are feeling it in the United States.”
World Bank President Robert Zoellick has said the surging costs could mean “seven lost years” in the fight against worldwide poverty.
“While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs, and it is getting more and more difficult every day,” Zoellick said late last week in a speech opening meetings with finance ministers.
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Baidu hearts Obama
Chinese search engine Baidu.com has Obama on their home page today. Kerry (my wife, in case you’re new here) attended the second democratic caucuses as one of Obama’s delegates a few days ago in Issaquah. There were 36 Obama delegates to Clinton’s 12 – going on to the state caucuses. So WA is definitely Obamaland.
The NYTimes had an article this morning on how kids are being influential among their parents, some of whom are superdelegates.
A former Seattle CEO and friend thinks Obama would win among delegates but Clinton would win the popular vote. The last time I was in Houston and I spent time with around 70 members of my extended Texan family at a reunion, we had a few chats about Politics. What I found was that we had a lot of common ground. And I found that it’s not the democrats that Texas republicans hate, it’s the Clintons. There’s just something about Bill, and by association, Hillary, that gets republicans very riled up.
Can Hilary win the popular vote? No way. The fact that Obama recruits new voters to the caucuses speaks volumes.
But moving away from the negative…
The reason I’m an Obama supporter is because he brings people together behind a common cause.
Hillary’s message is: “I’m an experienced Washington insider who knows how to work the system to your advantage”
Obama’s message is: “Lets all come together around the common cause of making this country great again.”
As my wife says, when I walk away from an Obama speech I’m energized and I want to get out and do something to make things better.
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Obamagirl's latest
Nice touch getting Bill to play the sax. 🙂 [obamagirl video below] And in case you haven’t seen it, check out Hillary’s latest faux pas on youtube today. And now I need to go flagellate myself for an hour for violating my not-blogging-about-politics rule.
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Anycasting anyone?
[Thanks Sam for the idea for this entry] Ever heard of IP Anycasting? Thanks to my recent change from godaddy (frowny face and no link) to dnsmadeeasy (happy face and they get a link) I’m now using a DNS provider that provides anycasting. What is it and should you care?
IP Anycasting is assigning the same IP address to multiple instances of the same service on strategic points in the network. For example, if you are a DNS provider, you might have servers in New York, London and Los Angeles with the same IP address. Then when a surfer in San Diego (about 80 Miles South of Los Angeles) makes a request to your DNS system the server in Los Angeles answers and saves the network from having to route traffic to New York or London.
Anycasting is generally used to distribute load geographically and to mitigate the effect of distributed denial of service attacks. It’s been used by the F root server since November 2002 and has saved good ole F from getting taken down by several DDoS attacks.
I was using dnspark.net a couple of years ago and we had a few hours of down-time while they were hit by a DDoS attack – so it’s not as uncommon as you think. [They obviously don’t use anycasting]
Anycasting is suitable for DNS because DNS uses a connectionless session layer protocol called UDP. One packet is sent, a response is received and hey, if the response isn’t received the client just tries another DNS server. [This occurs in the vast majority of DNS queries. There are a small number of exceptions where DNS uses TCP.]
Anycasting is not ideally suited for TCP connections like web browser-server communication because TCP is connection oriented. For example, TCP requires a 3 way handshake to establish the connection. If the network topology changes and one packet is sent to the Los Angeles server and another is sent to New York it breaks TCP because the New York server doesn’t know about the session that Los Angeles has started establishing.
That’s the theory anyway, but if the network topology stays reasonably stable and you don’t mind a few sessions breaking when the topology does change then perhaps you’ll consider using Anycasting with your web servers. But don’t get too creative and launch a content delivery network. Akamai might sue you and they’ll probably win. They own patent No. 6,108,703 which covers a “global hosting system” in which “a base HTML document portion of a Web page is served from the Content Provider’s site while one or more embedded objects for the page are served from the hosting servers, preferably, those hosting servers near the client machine.” Akamai just won a case against competitor Limelight for violating that patent and the case is now heading to the appeal courts.
There are other protocols that are connectionless and therefore well suited for Anycasting like SNTP and SNMP but there isn’t much demand for these because they’re network management protocols and don’t experience the massive load that more public protocols like DNS, SMTP and HTTP get.
Deploying an anycast network is not something you’re likely to consider in the near future unless you’re eBay or Google, but outsourcing some of your services like DNS to an anycast provider is something that’s worked well for me and might work for you.
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Phish Phood and the Mystery of the Dissapearing Kitty
I don’t feel so good. Last night I ate a pint of Ben and Jerry’s Phish Phood in a single sitting. It’s basically every decadent thing they could come up with shoved into a 1 pint cardboard container.
I think I made myself diabetic in an evening.
I had good reason though. My cat dissapeared two days ago. Ziggy – or ziggers as he has come to be known is my fat orange tabby. We share the same hair color so there’s a special bond.
Ziggy is quite the adventurer and – as it happens – a spectacular fighter. Don’t ever scratch his tummy because he’ll take your hand off. He’s a rescue and had a rough childhood, so there’s history there I’m sure.
Two evenings ago he decided to not come home. So we went looking for him clanking his bowl and calling and he never showed up. I had to get to work the next morning – big migration this weekend etc – but came home in the evening and still no ziggers. So last night I’m tramping the Sammamish trail (which has great mouse hunting if you’re that way inclined) and still no ziggers.
At around midnight last night I decided to give it one last shot. I was clanking his bowl and calling him and I kinda got into a routine so I never realized how far north I walked. Way further than I’d ever assume he’d adventure.
About half a mile up the trail I hear MEEEEOW and I recognize his hoarse litle meow immediatelly. He’s stuck in a tree in someone’s back yard about 3o ft up.
This is the second time he’s done this. I don’t know if he gets chased up there by critters or if he just loves the feel of bark beneath his paws.
So I sprint half a mile back to the house – we grab a huge piece of canvas, sprint back and assume the fireman pose underneath the tree holding the canvas between us like a trampoline trying to coax him to jump. Sound crazy? That’s what worked last time and it was much higher.
We must have stood out there for at least 90 minutes until he finally slipped, stayed in a pull-up position hanging from a branch for ages and then finally let go. He landed with a heavy thud and almost ripped the canvas from our hands – guess he’s put on a bit of weight.
We got him home – he’s was actually in great shape but I fed him some electrolytes and next thing he’s meowing at the door ready to go out again.
So to destress I had to eat a pint of Phish Phood.
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Mergelab
I had the great pleasure this morning of getting a surprise visit from Phil, Mark and Alan from Mergelab at our offices. We had an excellent chat and shared a little of what each of us is working on. It’s been great watching the rapid and early iterative approach they’ve taken to figuring out what business they’re in – many startups arrive at their C round still not knowing what they do – and it looks like they’ve hit on a very interesting space. They’re still in closed beta, but keep an eye on mergelab.com because they’re going public soon.