SEO Werkt!

You’re a start-up dude with carefully mussed hair. Your AWS is waiting. You’ve paid the designer. You and your family have created accounts. It’s been a mad dash. You’ve maxed out your credit cards. Your service is done. Now you wait.

And wait.

And wait.

Lots of people have ideas, but very few ideas gain much traction, and in those first few months it’s disheartening to see your subscriber numbers inch up far too slowly for anyone’s good. Every little bit of encouragement helps. That’s why the guys at ZipWhip (a service that basically lets you sync your text messages with your desktop) created an Arduino-powered flag to alert them when they got a new customer. The service itself is ready to go and waiting, they just wanted a way to celebrate when somebody created an account. And celebrate they do, cheering wildly as the flag slowly raises like the arm of Victory high above the bloodbath that is modern start-up creation.

“It’s a ton of fun to see something visual happen each time we get a new user,” they wrote on their blog. They’ve also released the plans and source code in their blog post so you and yours can build a flag, say, for celebrating new Twitter followers or to signal when it’s time to change your shirt (once a day is customary, but I’ve seen once a week work fine for many start-up founders).

Excelsior, ZipWhip, and may your flag fly off the freaking wall once people see this post.

What a week! In the past seven days I’ve watched the fact that an iOS app was uploading your Address Book tear our industry a new one. Path’s “Find your Friends” feature has now ripped apart friendships, driven apart investors and founders and made Robin Wauters leave TechCrunch (okay, just kidding on that one).

Jokes aside, until Arrington wrote this counterpoint about Foursquare this morning, Path was hung out to to dry by the tech press despite everyone vaguely knowing that tons of apps did this, and then the tech press were hung out to dry by the former tech press and then finally Jennifer Bruin, the voice of reason over at VentureBeat, was like, “But guys, guys other big iOS apps like FoodSpotting, Facebook, Twitter and Instagram also upload your contacts to their servers on some level!” — Beating all us navel-gazers else to writing the story we should have been.

For the record Beluga and Gowalla also uploaded your Address Book to their servers, not like that matters now.

Throughout this blog bloodbath, Apple has been quiet, as app after app gets thrown under the Address Book-gate bus and the tech press jostles for power defending or degrading their respective honor. Enough is enough.

The reality here is that most of the fault here lies with Apple; A solution exists in plain sight — And it’s primarily Apple’s responsibility, not an individual developer one.

Step 1) Apple should add a mandatory Permissions Dialogue for apps that want to use your Address Book information.

Much like Apple requires a notification for apps that want to use your location information and send you push notifications, and Android does for, well funnily enough, apps that want to use your Address Book information among a million other things.

Sure some argue that even more notifications would make the user experience ugly. You know what else is ugly? This mess.

@sdw That will only work if the user is presented with a 2nd dialog to confirm that they did in fact chose the correct privacy permission.—
Jason Rutherford (@jasonrutherford) February 15, 2012

Step 2) Apple should mandate “hash and match” encryption of any Address Book data that apps upload.

You think this would be impossible to scale? It’s not — If a humble app like BrightKite can hash and match emails with their “Find Friends” feature (described in detail here) you can too!

Okay, there might be some debate about how useful Step 2 is. Fine. Can we all agree that number one at least a step in the right direction?

“With regards to prompting for permission, this one just seems plain silly,” writes BrightKite and Forkly founder Brady Becker in a blog post about app best practices, ”Apple prompts you if an app wants to use your location, or wants to send you push notifications, but not if it wants to access your Address Book. Even my old Nokia 6620 did that, in 2004 mind you.”

If this latest tech drama has taught us anything, it’s that the data on your Address Book is as sensitive as your location. And should be subject to platform-level standards and best practices at the least.

In what may, in a couple years, be remembered as a telltale remark of overconfidence, Samsung’s AV product manager said today in an interview “TVs are ultimately about picture quality. Ultimately. How smart they are…great, but let’s face it that’s a secondary consideration.” Pride goeth before a fall, Samsung!

It’s true in a way. But only in the dumbest possible way. Yes, TVs are about picture quality. Because that’s all Samsung and Sony and Sharp have been willing to improve for the last half a century. As soon as someone comes along and changes what TVs are “ultimately about,” it’s going to be a bloodbath. Will it be Apple? I don’t know. But it sure as hell doesn’t look like it’s going to be Samsung.

To be fair, the AV product manager (his name is Chris Moseley) isn’t paid to have a lateral point of view. But his orders do come from on high, and if they say they want twice the contrast ratio of the competition and that’s what they’re selling on, well by god that’s what the AV product manager will arrange. And that’s what on high has been ordering since the TV was invented: make it look better. That’s starting to change a bit now, as we saw at CES, but it’s going to take a while to turn this ship around. The experimental stuff they’re showing off is going to be years behind anything put out by a big, UX-heavy company like Apple or a smaller, more agile one like Boxee.

Not that there’s anything wrong with a good picture. But LCD-based TVs, which will probably remain the standard for at least five or ten more years, are kind of peaking right now. You can buy a TV for under five hundred bucks that’s 90% as good as the five-thousand-dollar one. And furthermore, it’s already ten times better than what you could get for the same price a few years ago.

And add to this the fact that many people don’t understand, recognize, or even care about the difference between 720p and 1080p, to say nothing of 4K or HDR or local dimming or what have you. Moseley teases Apple, saying “they don’t have 10,000 people in R&D in the vision category.” And what have those 10,000 researchers, and their counterparts at Sharp and Toshiba and the rest, done for them lately? TV sales are down, nobody cares about 3D, and everybody wonders why it’s so hard to get content for their big screen.

People are curious about Roku and Boxee Box. Netflix Streaming has reinvented home movies. And the big TV companies are, contrary to Mosely’s suggestion, realizing that the way you interact with the content is becoming as important as the content itself.

And it’s here that Apple (and Google, and Netflix, and Hulu) have a leg up on Samsung. Sure, Samsung has 10,000 researchers putting together slightly better TVs every year. But TVs aren’t ultimately about picture quality, they’re about what that great picture quality is showing. The other guys have been working on that piece for years.

Picture quality is going to take a much-needed break while more important things take its place among the yearly updates and spec points. And as long as Samsung is of the opinion that how things look is the only metric worth considering, they’re going to be paying someone else for those new features.

Editor’s note: Guest contributor Paul Lee is a Partner at Lightbank Capital.  You can follow him @iPaulLee.

A lot has been written about the Series A Crunch.  The gist of the argument is that the number of seed financings have gone up (with the advent of incubators such as Y-Combinator, TechStars, and Excelerate, as well as a new generation of Super Angels, who may or may not be hanging out at Bin 38), but the number of Series A financings have remained relatively steady.  Ergo, the percentage of companies that can’t raise a Series A must be going up.

Rob Go, from Nextview Ventures, does a nice job explaining what’s happening from his perspective.  His theory is that this is somewhat cyclical, and that there will be a bit of a bloodbath but people should expect it and smart investors have been preparing for this day.

Dave McClure, that swashbuckler (Hi Dave!), is less diplomatic.

So what the hell is really going on?  While a lot has been written about the subject, I think the reality is the Series A Crunch is bullshit and people are misreading the signals here.

There is no Series A Crunch.  There is a huge supply of seed capital but a significantly larger percentage of angel-funded startups are not needing significant capital and thus not seeking Series A financing.

There are two factors driving this development—the supply and demand of venture capital.  First, the supply of venture capital has fundamentally changed.  Angels from the last generation of startups such as Google, PayPal, Facebook, and soon, Groupon, are starting to dabble in venture, doing investments of $50-$500K.

On the institutional side, total fundraising from Limited Partners (LP’s) in the asset class has gone up in the last year, but interestingly, fewer firms are actually receiving these funds.  You’re seeing the rich get richer.  LP’s are flocking to well known funds with great track records and the net result is that several mega funds have raised $1B+.

So what?

Well the reality is that $10 million exit on a seed investment (which may yield a $1-2 million return for the investor) is not going to mean squat for a billion dollar fund in terms of performance or impact on the firm’s ability to raise their next fund (this is classic ROI vs. Cash on Cash returns).

So how does that fund play in this space?  They sprinkle a few hundred thousand to as many of the small deals as possible for the option value (of getting to know the entrepreneur loosely) and if there’s traction, they bid early and aggressively (hence the run up on these valuations).  At the end of the day, to the venture firm, the most important thing is ownership in the deal.  If they have to pay a premium on the valuation, it’s not a big deal because they have a large fund that can absorb the extra money paid for the “hot” company.   The net net for seed stage deals however is that there is even more capital funding more companies and the takeaway for Series A deals is higher valuations (which require more investment for the target 20% ownership for the venture firm).

In addition to the trends on the supply side, the demand for venture capital has fundamentally changed.  We’re seeing a lot of two and three person startups that raise $500,000-$1 million in angel funding (for anywhere between 10-20% of the company). Back in the day, that would allow you to buy some servers and equipment, rent some space, and take you to the point of the initial iterations of a product.  With the advent of Amazon web services, communal working space, and an increased skill set of product development (at a younger age—we’re seeing founders as young as 18), today’s team’s are cranking out products that can start generating traction and even revenue.  Modular services such as Braintree, Twilio, and Recurly allow teams to bolt on functionality that would have taken months, if not years, to develop on their own.

As a result of these lowered costs and rapid development, you’re seeing businesses that have either scaled quickly to cash flow positive or to a point where they are $10 million acquisitions for larger players like Facebook, Google, and Groupon.  If the founders did one angel round and still own 80% of the business, the net payout would be $8 million to be split evenly between 2-3 founders. Certainly nice scratch.  If you think about that option versus the pain of going out to raise significant venture capital and getting diluted along the way, you can see why it would be an attractive alternative.

So what does all this mean?

It means that a larger than historical percentage of companies are getting seed funding (and we’ve been seeing companies that, in my opinion, shouldn’t be funded—but then again, I’ve been wrong a lot).  However, the assumption that a huge percentage of these companies are getting screwed since the same number of Series A deals are getting done is just flat out wrong. A significant percentage of these firms don’t need to raise a Series A.

The actionable advice I would give to founders is to think about what you want from your startup (and be real with yourself even if not reflected in your investment pitch).  Would you be happy with a small, yet attractive exit?  Or are you looking to build the next great business?

If the former, raise money from angels (who they are matters to a significant degree, but I’ll save that for a future post) and iterate and strive for a business that can sustain itself.

If the latter, think hard and choose wisely.  In particular, I would be careful about large 10-investor syndicates that include participation from large mega funds.  Realize that the seed investment is an “option” for these mega funds.  They may not be committed to the business in a real way (getting the partners’ time, advice, and network) until you can show meaningful traction.  Because it’s effectively an “option”, they are more apt to walk away from the investment if it is not going well and send a strong signal to the investment community.

In any event, it’s a great time to be a founder.  Take advantage of all the money out there to build your business.

Image credit: Shutterstock/olly

In markets like China and India, which are showing explosive growth in the connectivity and tech sectors, there’s a bit of a gap between supply and demand. Not that the two are ever at parity even under the best of conditions — but the very thing that makes these markets volatile is what makes them harder to grow: the lack of infrastructure.

When it comes to mobile and broadband, you can sell it as fast as you can make it, but nobody ever said making it would be easy — or cheap. The government of India has just gotten a vague estimate of “tens of billions” of dollars in order to take the next step in rolling out their broadband network. What happens next? A bloodbath, as corporations worldwide compete to get their foot in the door.

It’s times like these when the foundation is laid for the whole next period of the sector. Like the AT&T-T-Mobile merger, the game being played is a long one, and while however expensive some billions may in 2011, these things have a way of snowballing down the line.

The Telecom Regulatory Authority in India issued a report saying that only 12-13% of the demand for growth is being met by domestic production. That leaves plenty of room for foreign companies with deep pockets and 15-year plans to step in. Lots of the cost is simple things like labor, common parts, and licenses. But the technologies and methods adopted are far from universally agreed-upon, and should, say, Mitsubishi supply the flux capacitors instead of Qualcomm, the die is weighted in their favor for both future hardware and future licensing agreements, and it sets the stage for carrier and OEM decisions for years to come. They’ll be willing to shell out billions, or borrow it from whatever government is feeling lucky and pay it back when the investment matures.

But that’s all business 101: India’s broadband push is just another chance to buy low. The familiar faces here in the US no doubt have their fingers in the pie somehow, but the connections are too tortuous to follow. But when there are a billion phone numbers at stake, it’s a safe bet that they’re watching closely.