Guest Lecturers at USC

Clearstone Venture Partners – Intro to Online Communities

Clearstone Venture Partners – Intro to Online Communities

Today we met one of my favorite speakers to date, William Quigley, Managing Partner of Clearstone Venture Partners.  Quigley concentrates on its Internet and communications related investments, and gave our class a priceless education about how VC’s work, the stages involved in building a startup, how to select an industry to invest in, and how to pitch our companies to a VC.

Clearstone borrows ¾ of a billion dollars from large corporate investors to invest, and Clearstone gets to keep 25% of the profits. Quigley’s investment strategy is to invest in cold sectors because even if you have a great company, competition is what erodes profit margins; you want to be in the hot space two years before it’s hot.

He recommends using a VC because it’s really hard to go public or get acquired if there was no VC on board throughout a company’s growth to clean it up. The companies Clearstone incubates have always done much better than the people who just ask for money. A startup should always think about who would be a natural acquirer of this business; and think of others besides the usual suspects, Google, Microsoft and Yahoo. Companies tend to get acquired if they specialize greatly in one thing, especially if the firm does a lot of R&D, which big firms buy from startups with increasing frequency. Play in large markets because they’re very forgiving, and don’t depend on advertising revenue.

There is no shortage of money for good ideas, and you’ll need $10-100 million to build a successful company. No idea is too big to fun. For example, a WiMax business plan earned an entrepreneur $900 million of VC funding before a company was even formed! The downside to taking money from a VC is that they take control of your company. That’s not the end of the world though because the founder retains 50% ownership, no matter how much the VC puts in. That means an entrepreneur should shoot for as big an investment as possible. The pace at which you can raise capital will decide whether you’re the best in the biz or a lagger because there are always 10 other people right by you with the same idea.

The most valuable knowledge imparted on us is what a VC is looking for in a proposal, something all entrepreneurs want to know. First get their attention with a teaser PowerPoint presentation, and it’s a bonus if you already have a product or some customers. If you’re seeking less than a million dollars, go to an Angel instead of a VC. Guess market sizes and predictions when you have to because it’s a great problem when there’s no info about a market because no one’s capturing its future value yet. The CEO likes taking a modest salary so he can lead the team and say everyone’s bootstrapping together. Raise a lot of money but spend it as if you’ll never see another dime. Project revenues of years 1, 2 and 3. It takes about a month for the VC money to come through, but that’s a lot better than Angel investment time frames, where you’ll have to badger the investor for the check constantly. If one VC doesn’t like the idea, try pitching it to others. One of Quigley’s companies recently went public after getting rejected by 140 VC’s early on.

Quigley wants to believe in an entrepreneur’s vision about how the market will look in 3 years. I was surprised to hear that 75% of presenting to a VC is its entertainment value. My classmate Blake and I joked later that we ought to take up some acting classes before we approach a VC, but we will probably actually do it. The futurist must use 2-3 interesting trends or ideas about market evolution, convince the VC in his ability to recruit great talent, be informed and excited, be a great spokesman for the business, be capable of dealing with setback, and be willing to fight above his weight class. When you advertise yourself as a deep thinking in the space it becomes a self-fulfilling prophecy. Disciplined hard work will get you there: Spend months thinking about an idea, and package it in a way that’s easy to understand; have a really novel take on a new business model; capture the economics of your business in a chart or two. VC’s only want to play with ideas in which the visionary is right and everyone else is wrong.

The most startling fact of the day is that only 1 out of 1,000 pitches actually get funding, but there are many sources of money out there and if you have a great vision, stick it out and make it happen.

Charles Porch from Ning – Intro to Online Communities

Charles Porch from Ning – Intro to Online Communities

Ning Strategic Relationships Manager, Charles Porch, spoke to the class today (2/8/2010). I’d never heard of Ning before so I was surprised to discover this social networking platform with 42 million users. It’s a web service that allows anyone to build a social networking with sections for videos, photos, chat, music, groups, events, forums, and blogs. Members of the network can do just about anything they can do on Facebook but they’re within the confines of your own social network. In 6 Ways to Use Ning for Business, Mashable describes how business owners can use Ning to quickly and easily collect feedback, facilitate discussions, present content & media, inspire customers like Martha Stewart, participate in existing communities like Travel Blog Exchange, and engage your evangelists.

Charles describes Ning as a place where users can meet people with similar interests who you don’t already know. It contains searchable web pages that will last and create a community around them. He offered some general advice on website development and what to avoid: slow loading pages, abuse of Flash, and clutter. Instead, tell people why they’re there and have a hook. 50 Cent for example has one of the most popular Ning networks because his is about hip-hop news rather than just a fan page.

Roger Jackson gave us some website design tips, advising us to design for the lowest common denominator, generally an 80 year-old grandma. Liz Burr graduated from APOC in ’06 and now works for herself as a new media consultant. She spends her time advising which platform to use for a website concept. Eddie North-Hagar graduated from APOC in ’09 and co-founded Citilista, which networks separate aspects of a local community into a neighborhood hub, enabling conversation between residents.

Heath Row from Google – Intro to Online Communities

Heath Row from Google – Intro to Online Communities

Today (2/1/2010) we met Micki Krimmel, founder of NeighborGoods.net. I created a profile at the website and was immediately impressed by the professional design, Google Maps API integration and the overall utility of the site. Right now I’m trying to pick up a free bean bag chair I found listed near my home. Micki acts as the Community Manager (CM) at NeighborGoods and offered some advice for the class. She has done consulting for many companies and the most common pitfall she discovered is that the CM doesn’t hold enough power in the firm. The CM is very important and needs to advocate for the users and have the authority to make big changes when necessary. They should always use their real names, which I noticed Micki does on her own site. Her model is to serve the community rather than just moderate them; she even goes so far as to call the users on the phone to ask how to improve. I would be shocked if a CM called me to discuss one of my posts – but flattered and empowered at the same time.

Heath Row is a Research Manager at Google. His general insight into online communities is that they police themselves if the users have a strong connection to one another, like within a circle of friends on Facebook. A community is fragile when the core group of users don’t know each other. He also emphasizes the significance of consistent community managers. People get upset or stop participating when the CM changes, and this fact contributed to Squidoo’s growth struggles.

Alex Asselin just graduated from APOC last year. She’s now a CM at NBC and manages EchoParkOnline. She advised us on keeping community moderators happy. She says they often work 60+ hours a week for free, just for recognition or the love of the community. The owner ought to provide cool stuff to unpaid admins who have assisted the most, so they feel like part of the management rather than a competitor with other members. I can certainly relate, as I got promoted to an OP in a few hubs on the Direct Connect network and found myself representing the hubs and helping members considerably more than before I achieved the elevated status.

Erika Shen moved from managing a CBS.com community to product development at Disney.com. She works to resolve struggles unique to Disney, including cleaning up the users’ “dirty chatter,” empowering moderators to advocate for the users to management, and balancing the demands of company execs with the reality of the self-engendered community.

Today’s speakers agreed that CMs should always admit their affiliation with the company, and gently nudge conversations to the direction you want them to go, working with them along the way. In order to scale, a website should empower users to answer one another in order to minimize employee time spent answering questions. In order to survive in the new media world, old school companies need to let relax their outbound communication model and allow themselves to learn from users to better serve them.

Josh Spector from Comedy.com – Intro to Online Communities

Josh Spector from Comedy.com – Intro to Online Communities

Josh Spector is Senior VP of Content and Marketing for Comedy.com. His start-up, whipitoutcomedy.com, was getting so much action that development executives began using his blog as a talent search site. Eventually Comedy.com bought the site and took Josh with it.

I asked how a start-up could afford such a premium one-word domain name, and I was surprised to hear that it may be more of a detriment to the site than a boon. Josh informed us that domain names should include the terms your target audience are searching for. “Funny videos” is searched for 75 times more than “comedy” so Josh’s advice about domain names is to think about the way people say things, be specific and niche, and don’t count on domains to save your site.

Curtis Jewell is President & CEO for MyCypher Inc. He just graduated from APOC in 2008 and created a global social media site dedicated to the Hip Hop community. The website is very clean and well set up, and I love the promo video on the front page. Curtis’s tip for start-ups is to stay niche (also Karen’s mantra) but think big, and to follow your passion and nurture the passion in others.

Ben Gigli is an APOC ’07 grad. He gets 300-500k viewers a month on his start-up 5secondfilms.com. His advice for start-ups is to go where the community already exists and figure out what they’re going to like. Connect with people where the dialogue already exists, and engage bloggers and social networks while abiding by their unspoken community rules. You can tap into games the natural community likes to play so they’ll start playing with you when you inspire them. According to Karen Ben is a genius with side projects and his web stats and advice certainly back up her claim.

Sean Stevens graduated with Ben in ’07. He’s a pro web developer and has created multiple niche websites, including wheresmytaco.com, hotgirlsandexplosions.com, and a local music website in North Carolina. He argues that it’s better to have a smaller community site than a giant site. His main position right now is with JDate, though I’m not fully clear on his role at that site.

Other notes I found interesting this class included: Don’t build your business on a platform you can’t ultimately control. Use simple customizable message board software. Karen thinks building a site just to flip it is a bad idea that’s probably going to fail, and the best way to get bought out is to build something that doesn’t need to get sold. Take advantage of an opportunity in which big companies are wasting money. We also briefly discussed namechk.com and getsatisfaction.com.

Jeff Cole, Director of the Center for the Digital Future at USC

Jeff Cole, Director of the Center for the Digital Future at USC

Our first class (1/11/2010) kicked off with a fantastic speaker, Jeff Cole, Director of the Center for the Digital Future at USC Annenberg.

He communicated a lot of info in a relatively short period of time about the evolution of mainstream media and what to expect in the near- and mid-term future.

Topics included:

  • Traditional media falling apart due to its delayed schedule and lack of options
  • Music business changing greatly, from year’s most popular albums selling 30 million copies down to just 3 million today
  • Dying platforms requiring advertising changes
  • The effect internet penetration and bandwidth access have on TV and print media viewing
  • Evolution of popular social networks in the 2000’s
  • Impending consolidation of print media
  • Possible future of radio and education
  • Significance of branding, addressability and privacy in modern advertisement
  • The power of mass word-of-mouth through Twitter and other social networks

Interesting facts and questions included:

  • Consumers now demand updates every 30-60 seconds
  • Is a bundle of 12 tracks still the best way to market music?
  • Walter Annenberg sold TV Guide to Rupert Murdock in 1990 for $3 billion (and we in the class directly benefit)
  • In 1975 90% of viewing was on 3 TV channels
  • Now 90% of viewing is on 15 websites
  • Teens today are more interested in news than ever before
  • Indian internet penetration is only 9% so newspapers are still booming
  • When penetration reaches 30% newspaper sales will plummet
  • PVR (e.g. Tivo) is used by 30% of Americans; how can you still engage PVR users in advertisements?
  • Not much difference between internet use by dial-up users and people with no internet, but a huge difference between dial-up and broadband
  • Teens don’t want to be on the same social network as their parents
  • Biggest group of social network users are aged 60-70 (though I highly doubt this stat)
  • In 2008 55% of young people said their online communities are as important as ones IRL (in real life)
  • In the near future students will learn intro level college subjects from the best professors in the world via digital courses
  • If the digital advertising model fails we’ll have to pay for digital content in the future

We heard about clicker.com to find TV shows on the web and Telepresence for life-size video conferencing. We also heard from APOC grads about twiistup.com and kasamamedia.com.