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Craigslist

When I spoke with Amit Elisha of OutBrain a few weeks ago, we discussed the company’s software release strategy.

OutBrain operates under what’s considered the new Gospel of product development: get a basic version out there with a minimum number of features and maybe even a few known bugs, make it free, then let your users flood you with feedback so you can iterate and build your next version better.

Continue this process until you climb out of alpha into beta and eventually to a fully functional product (which, to follow Google’s prolonged beta label example, could take many years).

Jason Cohen

Jason Cohen

An interesting article by Jason Cohen, the founder of Smart Bear Software, on the On Startups blog challenges this methodology. Releasing too early and relying on the power of the crowd, he suggests, can potentially harm your reputation and potentially kill your product.

He uses the iPod as an example. Apple designed its game changing music device far away from the public eye. If it had been part of a release-and-iterate cycle, he says, could Apple possibly have gotten away with building a battery-powered device where you can’t change the battery! Or one without an FM radio (which was already included in many early iPod competitors – it’s finally been added to the new iPod Nano years later).

“Disruptive products by definition cannot be built by consensus,” he writes. “’’Design by committee’ is a sure-fire way to get mediocre design.”

Cohen presents additional points to back up his hypothesis.

  • Startups often invoke the 80/20 rule that says you can implement just 20% of your features because that’s what 80% of your users want anyway. But Cohen says that doesn’t apply the way you think it does. The truth is that 80% of your customers use a different 20% from each other. So you need to push out more features, not less, to satisfy a larger cross-section.
  • Twitter is often trotted out as a classic example of “get it out fast,” but it’s a bad one. While the service quickly gained a large and rabid following, it has been suffering from backend scalability problems ever since. Twitter has sufficient capital and some super-smart engineers who can work around the clock to fix what ails it, but your two-person startup may not be so lucky if you release before you’re ready.
  • Customers don’t actually know what they want. “They’re much better at describing what’s difficult in their life, what frustrates them, or what takes up a lot of their time,” Cohen writes. But did anyone ever say “gee, I wish that I could send a video ringtone to my friends” (this is an idea that only a couple of smart entrepreneurs could think up).

Over the last 20 years, I’ve built or been a part of a team building a number of products. When I was working at CD-ROM developer Mindscape, I got into a huge fight with my boss over when to release a product that I had been toiling over for the better part of a year. The company had sales orders from its distributors, but I knew the product was still buggy and wasn’t ready.

Even worse, this was in the pre-Internet days; once the CD was shipped, it would take a new budget allocation to fix it, which I knew would be hard to obtain. When I was essentially given a choice – ship the product or pack your bags – I opted for prudence.

More recently, though, I fell victim to my own emotional involvement with a product that would have done better to release early and iterate. I got so caught up in getting it right, I didn’t realize that the business model was wrong, something that would have become apparent if users had a chance to kick the tires.

Two other examples from opposite poles:

1) Craigslist – if ever there was a bottom up, build it fast and they will come approach to web development, Craigslist would be the poster child. Of course, Craigslist got stuck after the first round of iteration – the site hasn’t been functionally updated for years, but it works and no one’s complaining.

2) The Apple Newton – this is not so much an example of slapped together product development, but it nevertheless demonstrates how a bad start can sink a product. The world’s first PDA came out in the early 1990s. It was a revolutionary product but “the handwriting recognition sucked and there weren’t a lot of apps,” Cohen explains. The public’s response: “it doesn’t do a lot and what it does do doesn’t work well.” By the time Apple addressed its myriad problems, it was too late.

Ultimately, there’s no clear-cut approach. I tend to lean towards the “you’ve got only one chance to make a first impression” direction but, as a number of comments on Cohen’s blog post argued, not every company is Apple.

“They have the money and market control needed to focus on building a complete product at the expense of time to market,” writes Paul May. “Few startups have this luxury.”

What do you think? Which direction is more likely to lead to success…or kill a company? I’d love to hear from you in the comments to this post.

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Business Advice for Social Entrepreneurs

by Brian Blum on August 3, 2009

in Israel,Startups

As the 16 “social entrepreneurs” took to the stage last Thursday to present their 15-second “elevator pitch,” I was filled with anticipation. What would the next generation of hi-tech founders come up with?

Here were some of Israel’s best and brightest, hand selected by the Presentense organization which aims to arm young people who want to do good with solid business skills and knowledge.

And at first glance, the strategy has paid off handsomely. The participants in the Presentense “launch night” were confident and personable. The first ever publicly presented elevator pitches on their would-be companies – from subjects as diverse as fostering peace in the Middle East to making prayer more accessible – were polished and presentable; none would have been out of place in a corporate board room.

After the on-stage performance, each Presentense “fellow” manned a table equipped with a laptop, business cards and printed collateral material for the 500 or so guests to peruse and pocket.

As I weaved between the entrepreneurs’ pitches, I found myself enthralled by the creativity…but confused by the business models behind many of these pre-seed startups. It’s not that Presentense didn’t prepare its participants properly; it’s more the nature of social change-focused non-profits which have lofty goals but that all too often rely on philanthropy not profits.

But I’m feeling up to the challenge. So let me here present some of the projects that most stood out for me, and let’s brainstorm together on how each could, if not actually generate enough revenue to make its founders rich, at least sustain itself as a social entrepreneurial success.

CreaTV

As a media guy, I found CreaTV fascinating – a marketplace of sorts matching up amateur movie makers with professionals to develop quality products for YouTube or broadcast television. CreaTV is targeting the Israeli market initially and will reach out to students at Israel cinema schools. Founder Elad Kimelman describes himself as an “enthusiastic Zionist” who believes that Jewish-produced media can help bind together the Israeli and Diaspora Jewish communities.

Kimelman hopes that the company will generate projects that receive funding from Israeli production companies; CreaTV would then take a cut. That’s not a bad idea, but unless there are a lot of financed productions, it’s hard to see how the site will sustain itself in the interim. YouTube is drowning under bandwidth costs and parent Google still hasn’t figured out how to sufficiently monetize the site.

A Vimeo model, where CreaTV charges for video storage above a certain monthly file size and bandwidth limit might work (although rumors are that Vimeo is in financial trouble). CreaTV could also adopt the approach of recruitment classifieds, charging a fee when a match is made. But that seems to go against the company’s do-good goal of fostering partnerships.

MediaMidrash

MediaMidrash is another media startup that I liked a lot. Founders Russel Neiss, a librarian, and Charlie Schwartz, a rabbinic student at JTS, dream of creating a site where all of the Jewish videos in the world could be uploaded for teachers to use in school classes. Moreover, teachers could include curriculum to enhance the videos (from both the videomakers themselves and independent instructors who find the videos useful).

My first job back 20 years ago was as the at the San Francisco Bureau of Jewish Education’s media department. I was in charge of taking orders from teachers and sending out films, VHS tapes and even filmstrips (remember those?) I would have loved a computerized database like MediaMidrash.

Again the question: how will this make money? I spoke with Neiss who said it was a low cost operation and that he could run it while keeping his day job. I pointed out that, if MediaMidrash takes off, bandwidth and storage costs will quickly outstrip a volunteer job. The company’s documentation talks about offering premium services such as creating custom video and course material, staff training and websites.

In general, I think this “freemium” model – where you give away most of the content for free and upsell paid services – is the way to go. But creating new video and course content will require specialized staff – whether in-house or outsourced – and the mark-up in order to keep the company going (and pay its founders) may prove prohibitive to Jewish day schools already suffering in a post-Madoff era. Let’s hope that’s not the case.

JewTo

Jewto.com is a great name that founder Melissa Berg somehow snagged – finding a short and catchy URL like that is almost unheard of these days. Berg wants to create a mashup of Craigslist-like classifieds with a global guide to Jewish resources. Think every kosher restaurant in the world and mezuzas for sale.

Berg talked to me about hiring staff to write about all things Jewish in your city, but a more scalable model would be ape Yelp, the popular U.S. reviews and rankings site, where regular readers like you and me write the reviews of restaurants, dentists, bars, beauty salons and more. No need to pay when users contribute for the fame and glory.

Jewto can then upsell premium placement – such as your restaurant at the top of the listings (clearly marked as sponsored of course) – along with tools such as table booking, menu listings and take out. Yelp also sells display advertising – so should Jewto.

Berg should also look into partnering with fellow Israeli startup Bite 2Eat for the restaurant booking functionality as well a to look into whether Yelp or a similar site licenses its engine to third parties.

Jewto is a huge project but the business model – if done right (and it will need VC financing to pull off) – has real potential.

Peula

Did you ever receive crappy service from a store or government office? Wanted to complain but didn’t know how? Peula.com is here to help. The company is building a system to automate letter writing and to gather support from similarly minded aggrieved individuals online. Peula then sends your complaint on the right person.

Peula’s secret sauce is that when the target of your complaint responds, the reply is sent to all of the people listed on your e-complaint which means the responsible party’s response is tracked publicly.

Peula hopes this will differentiate it from its already formidable competition. In Israel, there’s atzuma.co.il, tluna.co.il, and shout.co.il. In the U.S. and U.K., companies like PlanetFeedback and HowtoComplain, and even the Better Business Bureau provide similar services – all for free.

Since the competition doesn’t charge, neither can Peula. Ads and sponsorships on the site are the company’s main business prospects. Allowing users to print letters for a fee, as founder Romi Shamai suggested to me, doesn’t make a lot of sense – users could too easily just copy and paste. There are probably additional added value tools Peula could add that I haven’t thought of yet.

The Open Siddur Project

Perhaps my favorite entrepreneur of the evening was Aharon Varady who is trying to create an online siddur (prayer book) with versions and commentaries from every source imaginable – from Rashi to Jewish Renewal plus user-contributed content. Spiritual seekers could then mix and match how they want to pray and print out their own personal siddur. “Imagine if the first siddur presented to a day school student was actually crafted by that student over the course of a year while being introduced to the liturgy in class,” Varady says.

As someone who struggles with prayer myself, I would love to have a site like Open Siddur. Varady is committed to “keeping this resource completely free.” So how to make money? Varady hopes to charge for printed copies through partnerships with print-on-demand printers.

But what would keep someone from simply generating their on their home printer? Those of us in the Internet publishing business have all learned the hard way that users won’t pay for content online. The print-on-demand model could work, but since each siddur would be customized for the individual, the volume would be low and as a result any partnership revenue from the POD guys would be similarly small.

Selling services around the siddur project – Jewish designers, calligraphers, scholars and even freelance editors – and taking a cut might be a better direction.

The Israel-Asia Center

The Israel-Asia Center seems to be the most mature project in the 2009 Presentense fellows program. The company already has a working website – a news magazine focused on “promoting partnerships between Israel, the Jewish people and Asia, with a strong focus on China.”

The management team includes an Israeli professor in China, and founder Rebecca Zeffert, a PR specialist and Chinese Studies graduate. They’re backed by a 20-member volunteer team in Israel, China, the U.S. and India. The company also has an impressive advisory board.

The Israel-Asia Center’s business model also makes sense: use the website as a platform for selling services – course syllabi on Israel-China relations, speaking engagements, briefings and exchange programs.

Given the growth of China as the world’s second largest economy and Israel’s already existing ties with the Asian giant, I give a hearty thumbs up to Zeffert and crew.

There were a bunch of other entrepreneurs at the event that I didn’t get a chance to talk with. Will they all succeed? Certainly not. Do they deserve to? Absolutely. Do I have all the answers? Not a chance. But this is just a start; some friendly advice, and I have no doubt these fledgling startups will receive plenty more.

What do you think? Which directions would you point these worthwhile endeavors. Drop me a line or leave a comment on the blog.

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