BetaBeat's "The Pitch" web series is smart marketing that should cloned for Silicon Valley

I've really been enjoying the pitch videos that BetaBeat has made available as part of its "The Pitch" webisodes.

From what I can tell, "The Pitch" applies the classic webisode model (short <5 a="" br="" case="" episodes="" fedex="" fundraising="" in="" major="" minute="" new="" process="" sponsor--in="" the="" this="" to="" vc="" york.="">
I just watched a video that showed the founders of Silver Living, a super-Yelp for retirement homes, pitch to Steve Schlafman of Lerer and Nikhil Kalghatgi of Softbank:
Watch thevideo

The video is highly professional and tightly edited, and gives you a great sense of the founders and the business. It even includes dramatic tension, as it becomes apparent that the founders haven't thought enough about virality (though other than that, they came across as smart and well-prepared).

Interestingly enough, FedEx's participation appears limited to a preroll ad; it's not intrusive, nor is there awkward product placement as I would have feared.

I would love to see someone do something similar here in Silicon Valley. These 5-minute pitch videos would be an awesome addition to Angel List profiles, for example.

And if FedEx wants to pay me to be one of the investor stars, that wouldn't be too bad either!

Consumer loyalty comes from listening, not lock-in

Here in Silicon Valley, we love to focus on "sustainable competitive advantage."  We talk of moats, barriers to entry, and lock-in.  If a product is "addictive," that's considered a good thing.  The highest praise is to be compared with crack cocaine.

It's not a pretty picture.

I would argue that loyalty comes from listening, not lock-in.  I was struck by this recent post, which cited the ideas of political theorist Albert Hirschman:

"Against the backdrop of civil strife and war in the late 1960s, Hirschman wrote that when faced with declining institutions, consumers have two choices: Exit and go elsewhere with their support or dollars, or use the power of voice to generate change from within. These two choices are mediated, he explains, by members' loyalty to the institution. Loyalty makes people more likely to stay and work for change from inside. But loyalty is also a product of how effective a consumer's voice is likely to be; it does not stem from feeling locked-in or having no possibility of exit."

I've experienced the power of loyalty in my own startup life.  Time and time again, I found that my willingness to engage my users/customers and listen and act on their concerns produced much greater loyalty than strictly cost/benefit analysis would dictate.  This includes loyal TargetFirst users like Mike Feury, early Ustream broadcasters who helped us shape the service, as well as the businesspeople who first began helping us transform a simple consumer wiki service called PBwiki into an enterprise-grade service called PBworks,

Just today, I saw a story about how 94% of teens use Facebook, but the majority of those users dislike the service.

Are those teens loyal to Facebook?  They might be locked-in, but they're definitely not loyal.

As you build your own base of users for your startup, make sure you spare some time for really listening, rather than simply trying to engineer lock-in.

The Lesson of Tumblr: Product Uber Alles

The best coverage I've read about Yahoo's massive acquisition of Tumblr comes from Tumblr co-founder Marco Arment (who went on to create Instapaper):

"Intense focus requires neglecting almost everything else. David’s focus on pushing the product forward meant that he didn’t want to think about boring stuff: support, scaling, paperwork, and money. Every time we’d get close to needing more funding, I’d try to convince David to hold out a bit longer or try to become profitable, and he’d convince me that everyone was better off if we’d focus on the product instead. And every time, he was right."

Many of the entrepreneurs I work with are probably tired of my constant emphasis on product and its flipside, traction.  It's probably pretty boring to hear the same questions over and over: "How much are customers using the product?  What evidence do we have that we've got traction in the market?"  But just because it's boring, doesn't mean it's unimportant.

For startups, product is all-important.  This doesn't mean that the actual blocking and tackling are meaningless--the #1 job of a CEO is to avoid running out of money.  But the best way to get money is to demonstrate traction.  And the best way to get traction is to build an awesome product.

Tumblr is the uber-example of this principle.  By all accounts, Tumblr founder/CEO David Karp didn't give a damn about monetization.  He avoided advertising of all kinds because it would worsen the user experience.  Yet Yahoo! paid $1.1 billion for his company.  Why?  Because his product was a) beloved, and b) widely used.  Tumblr claims to have 300 million users.  You can get away without figuring out your long-term business model if you have 300 million users!

Build a startup that produces a great product.  The ultimate goal is to build a great business, but it's almost impossible to build a great business around a mediocre product.

Social media and the apotheosis of opinion

As I browse both social media and traditional media, I, like many others, get the definite impression that opinions are both more divergent and strongly held than ever.

If television produced the soundbite world, social media has made the soundbite seem like a Montaigne essay.

This struck me when I read about a recent New York Times Op Ed:

(Note that I didn't actually read the Op Ed; I avoid the NYTimes because of the paywall.  I want to save my free articles for when I really really need it.  How's that working for you, NYTimes?)

"There seems to be a widespread presumption that writing is prescriptive (or proscriptive) rather than simply observational or meditative.  Confident authority is an appropriate tone for straight reportage, but it’s become the default of columnists, essayists and bloggers, one that’s so reflexive that some of them seem to forget it’s a pose. To some extent this is a deformative effect of the space restrictions within which most of us work; in a thousand-word essay you can’t include every qualification or second thought that occurs to you or you’d expend your allotted space refuting your own argument instead of making it."

Substitute "140 characters" for "1,000 word essay," and you'll get a sense of the scale of the problem.

A second order issue is the feedback/reward mechanism associated with social media.  Each comment, reply or retweet is another hit of sweet, sweet dopamine.  Yet what I found is that I rarely got a lot of comments on carefully reasoned posts.  When I asked my readers why, they said that when I presented a clear, cogent, and reasonable argument, people didn't feel like they had anything to add.  On the other hand, a controversial opinion provides plenty of opportunities for support and rebuttal.

Sadly, I don't have any solutions to these problems.  All I can do is alert you to the issue and hope that being forewarned helps make you forearmed.

When you sell your startup, you can't expect to retain "ownership"

The venerable Dave Winer (a guy I respect a lot) recently wrote about Marissa Mayer and Yahoo's acquisition of Tumblr.  I don't have a lot of insights to add about that deal, but I did want to comment on what Dave had to say about selling your company in general:

"All this is to say that the promises execs make on acquisitions are meaningless. They own the thing, they will do what they want to with it. It doesn't matter how many nice sounds Mayer makes on the deal. At the core she cares not one bit what the users of Tumblr think. She's saying what she needs to say to make the deal happen.

I have some intuition about this myself, because I sold a company. We were bought because we had a presence in the Mac market, which was highly coveted at the time. I negotiated for myself a role as the "Chief Architect of Symantec's Mac strategy." A few weeks after the deal I made a presentation to the exec staff about what our Mac strategy would be. Only one person showed up, the president of the company, Gordon Eubanks. He watched a couple of slides and thanked me for the input. I asked What about my chief architect role? He told me that was something they told me to get me to do the deal.

He left the room. What was I going to do? What could I do? Nothing, that's what. :-)

Moral of the story: When you sell your company, no matter what promises were made, you sold it. It's theirs now. They will do what they want to with it. Promises don't matter."

In my experience, Dave is 100% correct.  Just think of all the companies that the Yahoos and Google of the world have bought and killed.  It's happened to some of my investments as well.

I don't begrudge my founders the opportunity to make a ton of money.  I'm as greedy as the next guy.  But you need to recognize that the only way to retain real "ownership" over the business (not just a financial interest) is to stay independent.

Until the deal closes, you're being recruited.  But once you sign, you lose all your leverage.  Keep that in mind when you're negotiating to sell your company.

Mental toughness at your startup

Bill Belichek is one of the most successful American football coaches of all time.  After helping the New York Giants win two Superbowls as an assistant coach, he led the New England Patriots to three more Superbowl victories (along with two other appearances in the big game).

Along the way, Belichek has become famous for his systematic, hard-nosed approach to coaching football, including a willingess to cut or trade high-priced veterans when he no longer felt that they were worth their salary.

That's why it's interesting that he focuses on mental toughness and togetherness as the source of his success:

"We use the term ‘mental toughness’ a lot, and to me that term means doing the right thing for the team when things aren’t right for you — maybe a guy that’s not getting the playing time he hoped for, maybe he isn’t getting as many opportunities to do whatever it is he’d like to do. We all have to give up a little bit of something in this sport, and mental toughness is going out there and doing what’s best for the team even though everything isn’t going exactly the way you want it to. The way we try to handle that, or manage it, is that your individual performance is critical for us to win, and your mental toughness is doing what’s best for the team in every situation. So being solid and doing your job, and if you’re prepared and everybody around you knows that you are prepared and they can count on you, and you’re dependable to go out and do your job, then it makes it a lot easier for the person beside you to go out and do theirs."

There are some interesting lessons for the startup world.  Belichek asks his players to sacrifice their own individual desires for the good of the team--despite the fact that he makes no bones about his lack of sentimentality and traditional "loyalty".  In the startup world, entrepreneurs face a similar challenge--how do you get people to sacrifice when they have so many other opportunities?

Belichek's answer is to focus on team achievement.  His message is that individual sacrifice leads to greater team success--a tradeoff that is credible because of his 5 Superbowl rings.

If your startup is killing it, its employees can expect to benefit (think of the credibility we still grant to ex-Googlers, even though most of them joined the company much later, and played little role in its initial success).  If your startup is failing, asking for loyalty and self-sacrifice is a fool's errand.

Tours of Duty: The Employer-Employee Compact

I'm delighted to share that I just had my very first article appear in Harvard Business Review.  I can't take much credit for it; it helps that my co-authors, ReidHoffman and Ben Casnocha are a world-famous billionaire and New York Times-bestselling author respectively.  But I still think it's pretty cool.

Thanks to all you loyal readers out there!

Politics shouldn't be a dirty word at your startup

My friend Ben Casnocha recently published a post about status and power:
http://bit.ly/12tq6eb

It's a good post, but what really struck me was one of the comments.  The commenter wrote:

"Sorry, I have to unsubscribe after reading this… Manipulation, office politics–whatever you want to call it, I don’t like it if it interferes with getting work done. Too many lives are wasted to preserve someone else’s ego. I left my regular job and started working for myself full-time in part because of this nonsense. Everyone should treat everyone else with respect but this does not need to be a game."

While this is a common feeling, it's also hopelessly naive.  There's a school of thought, especially prevalent among young technical founders, that "politics" is a bunch of BS that keeps you from getting work done.

It is true that internal politics can be an enormous waste of time and effort.  I've done consulting work for Fortune 500 companies where senior managers spent an entire 2 hour meeting making decisions without ever citing an actual customer!

But it's also true that things like building relationships and doing the work behind the scenes to generate consensus can help your startup achieve its goals.

In the end, politics is simply the art of influencing people.  While it can be abused, it's a tool that every entrepreneur should have in his or her toolkit.

It's the entrepreneur's responsibility to get people to do what they need to do

A lot of folks seem to have this notion that if they do what they're "supposed" to do, that's good enough.

That might be true in a big company, but it's definitely not true in a startup. The employees of a startup need to focus on achieving goals, not simply fulfilling roles.

This is even more true for entrepreneurs. It's the entrepreneur's responsibility to get people to do what they need to do.

I've heard entrepreneurs complaining about their employees. I call this the "imperfect tools" syndrome. Much like a hobbyist who insists that he/she would become more productive and produce better results if their tools were better, these entrepreneurs decry the imperfections in their team.

Tough.

You're the entrepreneur. It's your responsibility to do whatever is necessary to make the company successful.

It's hypocritical to reap the lion's share of credit and financial rewards in the event of success, but blame failure on others.

Moreover, saying that you did what you were "supposed" to do and that the lack of results was someone else's fault is lazy self-victimization.

Engineers blame Sales and Marketing for not selling. Sales and Marketing blame Engineering for not building a better product. Everyone blames the founder for not devising a better strategy. Guess what, folks--no one cares. All that matters is that you fail. And if you fail, you fail together.

If people don't get it the first time, try again. Try saying it differently. Try being more prepared. Try letting people speak their mind. Try anything, but remember, it's your responsibility.

Affirmative action is good, but it's also a cover for racial discrimination

Affirmative action is a highly controversial subject.  Its supporters and opponents are dead set in their positions, and it's nearly impossible to have a productive conversation about the topic.  Naturally, I'd like to add my two cents.

I hadn't thought about affirmative action for a long time.  Obviously, it might have affected me when I was applying to college at the beginning of the 90s, but since I ended up getting admitted to Stanford, my first choice school, I never really paid it much attention.

A week or two ago, I ran across a Priceonomics blog post that asked, "Do Elite Colleges Discriminate Against Asians?"  A study by Princeton professor Thomas Espenshade and his collaborator Alexandria Radford looked at the topic using 1997 college admissions data and concluded that they did.  Among other things, Espenshade and Radford found that:

• For any given SAT score, Asian students have the lowest chance of being accepted
• Based on a statistical model, Asian applicants have 67% lower odds of admission than white applicants with comparable test scores
• Being Asian is the equivalent of a 140-point handicap on the SAT (based on the old 1600 point scale) in comparison to white student.  In contrast, Hispanic students got the equivalent of a 130-point bonus, while African-American students got a 310-point bonus

This data shows historical discrimination, but what about today?  Ron Unz, the founder of The American Conservative, compared admissions rates for Asians at the Ivy League colleges versus Caltech, an elite science and engineering institution that practices race-blind admissions.

In 1990, the Ivys had an Asian enrollment percentage between 7% (Dartmouth) and 17% (Yale).  Caltech was at 22%.  Fast-forward to 2011, and the numbers had radically diverged.  Caltech was now at 39%, while the Ivys were in a tight cluster between 13-18%.  Caltech admitted more than twice as many Asian students as any Ivy League university.

Many Asian Americans see this discrimination and blame affirmative action.  But they're wrong to do so.  Affirmative action doesn't cause discrimination against Asians.  Rather, affirmative action is the fig leaf used to justify anti-Asian discrimination in favor of whites.

In 1997, the University of California system was forced to abandon affirmative action because of Prop 209.  Here's what happened:

Here is a table, broken down by race and ethnicity, of the admission of California residents to the University of California from 1997 through 2007. (HatTip to Ed Chin) It shows that in 1997, the last freshman class admitted before the elimination of racial preferences by Prop. 209 in 1996, 18.6% of the admitted freshmen were “underrepresented minorities.” 3.8% of the admitted freshmen were black.

In the freshman class of 2007, “underrepresented minorities” made up 22.9% of those offered admission, and 3.6% were black.

In other words, even after the end of affirmative action, the proportion of underrepresented minorities actually increased.  The proportion of Asians also increased (there's a reason that UCLA's nickname is "University of Caucasians Lost among Asians").  The only group that saw a decrease was the white student population.

Here's my opinion:

Affirmative action, in the abstract, is a good thing.  While it may seem unfair to qualified white students to lose their place at certain colleges to underrepresented minorities, I'm sure that nearly 100% of those minority students would trade in their preference for a life free of racial discrimination against them.

It's not a perfect tool; one of the problems was that simply admitting underrepresented minorities without provide extra help mean that many failed to earn their degrees.  In fact, the end of affirmative action actually coincided with improved graduation rates for minorities.  On the other hand, if we so often tout college education as the key to a better life, it seems like rank hypocrisy to tell people that the same problems they're trying to escape by going to college are going to prevent them from getting admitted.

The danger with affirmative action is that it is implemented in an opaque and easily abused way.  Essentially, admissions offices can do whatever they want, so long as they don't set quotas.  Yet eliminating quotas actually makes the process less fair.  A quota is clear and something that can be discussed.  If a university sets an upper limit on minority students, at least it's being honest, and its policies can be debated based on evidence.  The same holds true for an explicity SAT penalty or bonus.

This kind of explicit discrimination would make the absurdity of anti-Asian discrimination more obvious.  No university admissions officer would say, "We're going to set a quota on the Asian kids because too many of them do well in school, and we want to make sure we keep their numbers down," yet that is exactly what they're doing.  It hardly seems possible that the Ivys would cluster so tightly in the 13-18% range without some kind of collusion.  Similarly, saying "We're going to penalize the Asian kids 140 points on the SAT" would be tantamount to admitting, "Those Asians do better on all the tests, the same tests we use to predict college success.  So we'll change the goalposts on them."

Moreover, portraying this discrimination as part of affirmative action directs Asian anger at Hispanics and African-Americans--even though those minorities are not the ones setting the policy or taking up most of the admissions slots.  Intentional or not, it is diabolical.

On a personal level, I'm going to start needing to think about this issue again in less than a decade.  I have two kids who will be in college by then.  When they apply, how should they categorize themselves on their applications?  They are half-Chinese, and half-Puerto Rican.  Does that make them Asian or Hispanic?  Are they attractive to Ivy League universities, or undesirables that need to be screened out?  What about my nephew, who is half-Caucasian and half-Puerto Rican?

There aren't any easy answers.  But finding the answers will be easier if universities are honest about the true nature of their policies.