As the TEC program is unfortunately getting closer to its end, we had another great group of speakers come in to talk to us at the True headquarters at Pier 38. This week’s speakers included SocialCast founder Tim Young, GigaOM CEO Paul Walborsky, and True Partner Puneet Agarwal. Although quite different in style, all three had some great presentations for us and gave us some of their best insights into startup culture, recent trends in the valley, and how to be a successful entrepreneur.
Starting off, Tim impressed everybody with his unique presentation which included a number of very interesting photographs. Tim only briefly talked about his ventures in the entertainment industry and gave us a short description of how Socialcast has grown to be used by some of the largest US institutions such as NASA. Instead, most of his time was focused more on personal lessons that he wanted to share with us. Here are the two that I found the most remarkable:
- FOCUS – Tim passionately emphasized the importance of focusing on one thing at a time instead of trying to accomplish too many things at once. This was great to hear especially since I myself have always found it very hard to do even only two things at the same time: talking on the phone and chatting on AIM, checking facebook while also paying attention in class etc..
- RUNNING & READING – In line with this idea of focusing on one thing at a time, Tim told us about his passion for reading which he also views as a source of competitive advantage. Although I am quite positive I will never be able to read what he reads in just one year (12.5ft worth of books stacked up!), I still agree that reading gives you actual depth. Blogs might be good to get a quick snapshot but real knowledge of a topic comes from further research…
Next, Paul talked to us about his company’s business model and why he believes that GigaOm can still charge its users for their content although distribution costs are approaching 0. By using the example of the New York Times, Paul showed us that the key to value lies in the actual relationship value and no longer just in control over distribution. His presentation included a number of interesting graphs such as the one showing the marginal relationship value of users for the various GigaOm products. Paul also addressed the issue of GigaOm’s dependence on founder Om Malik and used this to emphasize the importance of having a diversified and constant revenue stream. Paul is clearly the right person for his job as he is somebody that can execute an idea and make money from it. Among the best advice he gave us was to figure out what kind of service you want people to come to you for and to directly go for what you are passionate about early on your career. I am sure many of us were struck by this as unusual as it has become fairly common to push off such a decision until after graduate school.
Last but not least, Puneet spoke to us in a very open conversation about cloud computing. Although many of us had certainly received an overdose of the buzzword at Structure 09, it was great to be able to ask some simple questions. Puneet clearly emphasized being able to scale up and down virtually on demand as the cloud’s biggest advantage and it was great to hear his opinion on the divergence of the new standards. Cloud computing will certainly play an even greater role in our lives as the technology evolves and it feels good to learn about it in its still relatively early stages.
Like the prior weeks, week six had a number of highlights for me. First of all, I finally discovered the usefulness of Twitter when I came across a tweet by fellow TECster Stephanie Parker mentioning a very interesting article from Business Week’s Sarah Lacy about SendMe’s recent success. Forwarding the link to John and the founders while giving credit to Stephanie earned me my first “Extra Brownie points” in a company-wide email from Russ – definitely a good way to start the week!
Like with any startup, one of the main issues for SendMe remains scalability. After having discovered firsthand the joys of processing the thousands of refund checks that SendMe has come to issue each month due to its rapidly growing revenues, I spent some time looking into ways to outsource this. By looking at the cost of buying the checks, envelopes, ink and paying for labor, postage and clearing from the bank, I first determined the cost per check that we currently pay for handling the process in house. This gave me an idea of how much we would be willing to spend on outsourcing or acquiring new material such as a check printer. I also looked for various outsourcing providers that could help us with this service and learned interesting facts such as that you can save up to $0.10 (nearly 25%) on postage if you presort the checks by zip code (given a large enough volume). Yesterday, John and I spent a half an hour talking to a provider from Connecticut that seems to fulfill all our requirements including checking for duplicates and validating addresses with data from the post office. Hopefully, the times of handling the checks in-house will soon be over.
Due to True’s offsite this week, we were meeting at the headquarters in Palo Alto on Friday for the first time. Although I prefer the more open office space by the water in San Francisco, I can see why having an office in the heart of all the successful tech startups and VCs of Silicon Valley can be important to a venture capital firm. Our speakers for this week included former Kleiner EIR and current Kwedit founder Danny Shader as well as True Partner John Burke who was on the West Coast due to the offsite. By describing his own career which included both successful exits and a few less rewarding experiences such as being the new CEO of a startup that never really understood his goals and motivation, Danny emphasized the importance of maintaining your integrity and having a good character as key parts to being successful in the Valley. I found this very accurate especially in regards to True’s motto of the people coming first in any of their investments. In a small community that interacts with each other on such a close and regular basis, taking unfair advantage of someone else might work once but you better do not expect to receive any help again afterwards.
Unlike our other speakers, John only briefly talked about his own career and focused more on giving us a chance to talk about our experience with our companies this summer. Going from there, we received some great advice on how to build a successful career and we had an interesting discussion about the similarities and differences of working for a startup vs in IB. At this point, I have come to the conclusion that it is more of a question of what fits your personality better and doing an internship such as this one will hopefully help me to figure this out for myself. Either way, I really enjoyed spending the day in Palo Alto and thanks again to Stephanie for giving us a great tour of Stanford after our meeting at True.
As week five went by even faster than the prior four, I spent my days at SendMe learning more about the overall revenue model and how the payout rates from the carriers are determined by a number of compliance checks. Since revenues from ringtone and gaming subscriptions still only make up a small fraction of a carrier’s overall revenue while they can also cause a lot of negative publicity when customers do not understand what they are billed for, some carriers have become rather strict in their audits which are meant ensure that customers are not deceived when signing up for the service. As a result, SendMe has to spend a significant amount of time making sure that its marketing partners are running their campaigns using the right fonts and terms. Looking at the different penalty and bonus models of various carriers, I also learned more about how to estimate the lifetime value of a customer by analyzing past data and how it can be necessary to treat irregularities as statistical outliers that should not affect the overall model. These LTV estimates are very important in SendMe’s case since most marketing partners are paid upfront for customer acquisitions and profitability depends on how long the customers remain signed up.
On Thursday, we enjoyed another great afternoon at the True headquarters with some truly amazing speakers. Starting off, True Partner Phil Black gave us a very interesting lecture on the various aspects of a typical venture capital term sheet. Coming from a VC perspective, Phil deciphered rather ominous business and legal terms for us and explained the importance of certain key elements such as the options pool and founder vesting. I found it particularly interesting to learn more about which parts are more relevant in earlier rounds and what entrepreneurs need to look out for when it comes to liquidation procedures.
Next was Brad Garlinghouse representing later stage funding from the perspective of the large PE firm Silverlake. Going through the different steps in his career, Brad kept the discussion very informal which allowed us to ask many questions about his background as well as his opinion on current and past trends in the technology industry. With a number of hilarious anecdotes, Brad showed us how he had discovered that one should never be too proud to cold call and hearing about the Peanut Butter Manifesto from the author himself allowed me to better understand his motives after having read various opinions online. Coming from the University of Kansas and later receiving his MBA from HBS, Brad also emphasized the importance of keeping a focus on the broader market and not just Silicon Valley when it comes to analyzing the viability of a new idea. Finally, it was very interesting to hear how he is currently looking for opportunities for Silverlake by looking backwards rather than ahead and acquiring large technology companies that have fallen from grace. For us as college student spending their summers with startups, not looking for the next big thing might have seemed a bit counterintuitive at first but using the simple example of Mapquest, Brad showed us that there are great opportunities with less risk in these acquisitions considering they have a proven revenue stream and assets that are selling at a discount.
Last but not least, True partner and GigaOm founder Om Malik gave us a very interesting presentation covering his vision of the future of the media industry. With a number of impressive and partly even shocking numbers, Om showed to us that there are still many more opportunities to come and that the old media companies quickly need to find a way to monetize their online offerings as broadband has so abruptly lowered the information asymmetry that had made readers overpay for their services for so long. On a personal note, I was also very happy to hear about Om’s own background coming to the US as an immigrant ready with an idea and willing to work hard and being able to have a big success in a relatively short period of time. Although the border officials have certainly become stricter since the days that Om arrived, I still strongly believe that this country offers incomparable opportunities to young people coming from all over the world and this summer internship continues to serve as a great example for that.
Below you can find a couple of pictures from the Giants game:
Qiyun, Andrew, Adam and Christiaan at the Giant’s Game
The two SendMe Interns – Cameron and Alex
Stephanie and Chris after the third Home-Run
At SendMe, I started off my fourth week by further working on a financial model and optimizing our forecasts by analyzing the Accounts Receivable aging. During this process I gained a better understanding of the net working capital involved in the daily operations of SendMe and how startups can finance this through Accounts Receivable borrowing. Since I have now fully taken over the daily marketing spend and revenue reporting, I also implemented a number of checks in my spreadsheets that help me avoid missing any abnormalities that might be touched on by the founders during the 11am meeting. As a result of constantly working with a number of complex formulas and new features such as Conditional Formatting, I have been getting a lot more comfortable with using Excel over the past couple of weeks and I am excited for today’s arrival of my own personal copy of the 800-page long Excel “Bible” by John Walkenbach!
Finally, I have done a good amount of research for my analysis of mobile payment technology. I chose this topic because I am very interested in the mobile industry in general and since it directly relates to my experience with SendMe this summer. On Thursday morning, I was fortunate to be able to talk to SendMe co-founder Markus Mullarkey about my findings and his opinion on the entire topic. What started off with a few questions on my part, ended up being an hour long conversation about SendMe’s plans for the future and the development of the overall mobile industry in the US. With some great insight, Markus explained to me why SendMe is currently using Premium SMS to deliver its content to customers, and how he sees this changing towards WAP payments and possible direct operator billing in the mid and long-term future. Eventually we even discussed different views on antitrust issues and how the wireless providers are slowly but surely turning into Internet Service Providers. I found this all very interesting especially in light of the recent news that the Department of Justice is now again looking into possible Sherman Act violations on behalf of AT&T and Verizon after being almost completely inactive throughout the Bush Administration. There will certainly be a lot of changes within the next couple of years happening in this industry and it is very exciting for me to be able to follow these trends from the inside of a company that is directly involved and impacted by all these developments.
Due to the holiday (this was my first Fourth of July in the US!), my working week ended early on Thursday afternoon with listening to two great speakers at the True headquarters. While both Jasper Malcolmson and Hiten Shah gave us some great insight through their own experiences as entrepreneurs, I found it particularly interesting to see both of them share their contrasting opinions on the advantages and disadvantages of working for a larger corporation in your respective field before starting your own company. Jasper gave us some great ideas such as how to stumble across an idea by simply writing down three things that have bothered you each day and Hiten struck me with his comment of regretting not to have learned programming in college (although he seems to have picked up an incredible amount of knowledge on his own afterwards). Before coming to the West Coast this summer, I have been successfully avoiding any programming classes myself since I graduated high school and was not planning on taking any more courses in the future. After talking to Christiaan about the benefits of having a basic understanding earlier in the week and then hearing this again from Hiten, however, I am now thinking about giving programming another shot when I return to BC in the Fall. I guess this is what Jon was talking about when he said that he hoped that this program reaches us while we are still in the position to make changes to our coursework in college that might benefit us in the future.
During my third week at SendMe, I have continued working on preparing a dashboard summary of the revenue and marketing cost data for the daily 11am meeting with all the executives and different members of the marketing group. Being allowed to sit in on all of these meetings, I found it rewarding to see how my work was used for important discussions on how to meet certain revenue and EBITDA goals for the month in spite of some issues with one of the biggest marketing partners. Together with John, I also worked on closing the books for May and learned more about the importance of keeping a strong cash position. Finally, I found myself reminded that I am interning with a startup company when I tried to update various spreadsheets on the latest revenue and cost data in order to create more precise forecasts for the future. After using a rather strictly mathematical approach including weighted averages with more emphasis on recent data (my statistics professor at BC would have been proud of me!), I eventually had to realize that my forecasts for the current month were still far off from their likely actuals. In the end, John showed me how to use a combination of different analytical methods to forecast the revenue since strong growth and constant changes such as a new overflow deal that lowers the initial customer acquisition cost in exchange for a share of the later revenue proceeds have made predictions with a conventional method very hard.
On Thursday, all of us interns were very fortunate to be able to attend GigaOm’s Structure 09 conference on cloud computing. My roommate Andrew, who is currently interning with Om Malik’s company, had told me about this event before but once I took a closer look at the schedule with all the amazing panelists and keynote speakers I was very excited for this great opportunity. Throughout the day, all of us watched various panel discussions and heard more about cloud computing, infrastructure as a service, software as a service, management as a service, and finally everything as a service than anyone of us could have possibly comprehended. Nonetheless, I can certainly say that I have learned a lot even if I had to look up some of the rather technical terms that I was not immediately familiar with. What impressed me the most, however, was the overall great atmosphere at the conference. Although many of the participants were direct competitors of each other, I could not make out any unpleasant tension or hard feelings between any of them. A great example for this was a panel that was rightfully titled “On the shoulders of Giants” with some of the top ranked operations executives from Yahoo, MySpace, Facebook, Google, Microsoft and LinkedIn. Instead of just focusing on each other’s shortcomings or failures in the past, the panelists maintained a great discussion about future trends while also adding a good amount self irony (Vijay Gill, Google: “I really cannot talk about this”) and just a few minor jokes about the competitor (“You can just “bing” this when you get home”).
Looking back, getting up a bit earlier than usual was not a big sacrifice for this great experience and I would like to thank GigaOm’s CEO Paul, Om Malik and the entire True team for making this great opportunity happen for us!
This week, we got together at Pier 38 for our first afternoon at the True Headquarters. Although I have previously had the opportunity to study and meet with a number VCs as part of a field study course at BC, I was able to learn a lot from Jon who gave us some great insight into this rather opaque and secretive industry. I found it particularly interesting to find out how True’s advantage compared to larger funds from famous Sandhill Road lies in its rather small size. In times of rapidly shrinking costs to start a technology-based company, this has allowed True to invest smaller amounts of money into a larger number of seed and early stage companies of which only a few will have to pay off. It was also great to learn more about how True finds its investments in domains such as Media, Mobile and Software & Services that the partners are familiar with and how they then determine the right valuations based on how much capital the company requires and how much ownership the founders are willing to give up. Finally, I really liked how Jon pointed out to us that even though the Venture Capital and startup industry clearly have not remained untouched from the recent economic turmoil, there are still plenty of opportunities out there. For the past year, I have been reading almost nothing but negative news about the current state of the economy and in light of this it was very refreshing to hear that this time also offers a lot of great new opportunities especially for our age group. Although I do not quite share Jon’s more pessimistic views on the financial industry as a whole, I have to agree that many of these opportunities will certainly be found around Silicon Valley. This understanding is after all what has attracted me to come out here this summer.
Hearing from Tod Sacerdoti about how he founded Brightroll around the idea of online video advertising was very interesting as well. Coming from Plaxo, his story was certainly a great example for True’s network of individuals and companies that has and continues to bring forth new ideas for great startups.
At SendMe, I have been able to work more with the daily revenue reconciliation and the summary of costs for marketing. This has led to some collaboration of the interns – Cameron working with and providing the numbers for the new CPM campaigns and me trying to implement them into our daily reporting for the management team. On Wednesday, the highlight of our week was a company wide excursion to a San Francisco Giants baseball game. Although it was great to enjoy the game with snacks and drinks in a box right below the field, I am afraid that I have now reached the peak of my baseball fan career when it comes to the best seats during my first game ever.
Pictures of the two happy Sende Me interns with Russ and John will follow soon…
My name is Alex Mielke and I am a rising Junior at Boston College studying Finance and Info Systems. During this internship, I am working with SendMe Mobile splitting my time between Finance and Operations.
As this first week has gone by in no time, one of the things that I have noticed is that working for a startup has to match your personality. If you are someone that is easily frustrated if things do not work out as initially planned, working for a startup will not be the right thing for you. Because of the rapid growth especially of early stage companies, there is rarely any consistency in almost anything for a long time.
One of my tasks that has made me notice this was trying to optimize the way the company uses data analysis to detect variations in the cost per Net Successfully Billed Subscriber (NSBS, a customer that has confirmed his order for a ringtone or game by submitting a PIN and stayed past midnight Pacific Time) that directly impact whether the company is able to turn a profit. Getting all this data in order for the daily 11am meeting is currently still being done with the help of rather complex Excel spreadsheets that directly access an underlying SQL database. Since marketing campaigns are constantly added or changed, however, automating these tasks to decrease the amount of time necessary to update the spreadsheets has proven to be rather difficult. Some formulas that worked for yesterday’s spreadsheets often no longer work tomorrow when the underlying data has changed.
Apart from working on improving the data analysis, I was also able to look into the way Employee Stock Options are issued and how the company finances its daily operations through the use of an aggregator and Accounts Receivable borrowing. So far, I have really enjoyed my time at SendMe and I am looking forward to learning a lot more over the course of the next seven weeks.