DROdio http://danielodio.com A Sanctuary for Founders and Entrepreneurs en-us Mon, 20 Oct 2014 16:14:04 +0000 http://sett.com Sett RSS Generator Zuck in 2005: No plans for world domination, but the product/market fit to get there. http://danielodio.com/zuck-in-2005-no-plans-for-world-domination-but-the-product-market-fit-to-get-there The best part: Zuck describes Facebook in minute 1 as an "online directory for co]]> I absolutely love this video of Zuck talking about Facebook back in 2005. If I had been in that room, I wouldn't have been able to guess that Facebook would become a $180+ billion company.

The best part: Zuck describes Facebook in minute 1 as an "online directory for colleges." Not only does that not like a billion dollar business, but it also sounds like a terrible startup idea.

The lesson: The key nugget is "I launched it in Harvard in early Feb 2004, and within a couple of weeks, 2/3 of the school had signed up". That is an incredibly strong signal that there's a really good initial product/market fit. This is a recurring theme that also permeated Y Combinator's recent Startup School, which talks about the importance of finding product/market fit above all else.

The kicker: I love how, in minute 3:55 Zuck is asked "And where are you taking Facebook?" He responds with "I mean, there doesn't necessarily have to be more."

Indeed... there didn't have to be, but there was. You don't need world domination planning if you can create world domination product/market fit. The rest takes care of itself.

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Sun, 19 Oct 2014 21:47:48 +0000 http://danielodio.com/zuck-in-2005-no-plans-for-world-domination-but-the-product-market-fit-to-get-there
Betterment vs. Wealthfront: Which One Will Maximize Your Wealth More? http://danielodio.com/betterment-vs-wealthfront-which-one-will-maximize-your-wealth-more The richest 1% of Americans have access to great financial tools and advice: Firms like Goldman Sachs provide them with (legal) tricks like Tax Loss Harvesting (TLH). Never heard of TLH? Neither had I until my buddy Andrew Dumas, after reading my post titled "Show Me The]]>

The richest 1% of Americans have access to great financial tools and advice: Firms like Goldman Sachs provide them with (legal) tricks like Tax Loss Harvesting (TLH). Never heard of TLH? Neither had I until my buddy Andrew Dumas, after reading my post titled "Show Me The Money: Six Strategies to Put Your Cash to Work," mentioned a new startup called Weathfront that was on the cutting edge of ETF fund-based portfolio management. This opened a whole new world of investing up to me, which I'd like to share with you.

But first some background: In my past blog post I talked about ETFs, or Exchange Traded Funds, which are a class of funds that create a basket of stocks based on a particular segment of the market. For example, in the past if you wanted to invest in technology companies you basically had two options: You could pick the companies you thought would be the winners, like Google and Yahoo and buy stock in those directly, or you could invest in a mutual fund that has an expert who picks the companies, and you'd pay a management fee for his or her expertise. But ETFs offer a third choice, and it's worth really understanding how they work. Here's a description from Wikipedia:

"ETFs generally provide the easy diversification, low expense ratios, and tax efficiency of index funds, while still maintaining all the features of ordinary stock, such as limit orders, short selling, and options. Because ETFs can be economically acquired, held, and disposed of, some investors invest in ETF shares as a long-term investment for asset allocation purposes, while other investors trade ETF shares frequently to implement market timing investment strategies. Among the advantages of ETFs are the following:

• Lower costs – ETFs generally have lower costs than other investment products because most ETFs are not actively managed and because ETFs are insulated from the costs of having to buy and sell securities to accommodate shareholder purchases and redemptions. ETFs typically have lower marketing, distribution and accounting expenses, and most ETFs do not have 12b-1 fees.

• Buying and selling flexibility – ETFs can be bought and sold at current market prices at any time during the trading day, unlike mutual funds and unit investment trusts, which can only be traded at the end of the trading day. As publicly traded securities, their shares can be purchased on margin and sold short, enabling the use of hedging strategies, and traded using stop orders and limit orders, which allow investors to specify the price points at which they are willing to trade.

• Tax efficiency – ETFs generally generate relatively low capital gains, because they typically have low turnover of their portfolio securities. While this is an advantage they share with other index funds, their tax efficiency is further enhanced because they do not have to sell securities to meet investor redemptions.

• Market exposure and diversification – ETFs provide an economical way to rebalance portfolio allocations and to "equitize" cash by investing it quickly. An index ETF inherently provides diversification across an entire index. ETFs offer exposure to a diverse variety of markets, including broad-based indices, broad-based international and country-specific indices, industry sector-specific indices, bond indices, and commodities.

• Transparency – ETFs, whether index funds or actively managed, have transparent portfolios and are priced at frequent intervals throughout the trading day.

Some of these advantages derive from the status of most ETFs as index funds."

So, ETFs are a great way to place bets on, say, "technology" or "healthcare" if you believe in those industries, or classes of companies like "Large Cap," "Small Cap," "Domestic Market" or "Emerging Market" stocks without having to pick specific stocks.

But back to Dumas' suggestion: There's also another way to get into ETFs -- via two startups that have created an investment management service around ETFs. Think of it as a "financial advisor 2.0," offering much lower fees (as low as 0.15%) than traditional mutual funds. One of these startups is called WealthFront, and the other is called Betterment. My wife and I have put money in both of them, at the same time, and we're going to compare which one is more effective at maximizing wealth, as well as being the most usable of the two. It's the "battle of the automated investment services."

These two services both offer access to things like Tax Loss Harvesting that once was reserved for the richest 1% of Americans. TLH is explained by Betterment here, but at a high level, it basically consists of selling assets that have depreciated in value to create a loss, then re-buying in that same asset class, and using the loss to offset your other gains. Think of it as making the bset of a bad situation -- and it typically adds 0.77% to a typical customer’s after-tax returns, annually.

This blog will be a running post with updates as we experience the two services. Let the Games begin! See the comments on this post for running comparisons between the two services.

PS -- as I wrote in my "Show Me The Money" blog, anyone can start investing with as little as $25 -- seriously. Being an investor is a mindset more than anything. So if you don't think you have enough money to start investing, put down that Venti Starbucks Frappuccino, scrape together $25, and get started.

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Sat, 02 Aug 2014 19:48:21 +0000 http://danielodio.com/betterment-vs-wealthfront-which-one-will-maximize-your-wealth-more
Hey Managers: Show Me The Last Thing You Created http://danielodio.com/hey-managers-show-me-the-last-thing-you-created I'm the SVP of Strategic Partnerships at ShareThis. It's my job to find the right strategic partners for us to work with. This morning, in the shower, I thought "I'd like to have a simple combo slide deck + narrated screencast to show to prospective partners." So, I just]]>

I'm the SVP of Strategic Partnerships at ShareThis. It's my job to find the right strategic partners for us to work with. This morning, in the shower, I thought "I'd like to have a simple combo slide deck + narrated screencast to show to prospective partners."

So, I just finished hacking together a simple site that explains our business. It's something I did in just under an hour using a combination of HTML, Google App Engine, Google Slides, HelloBar, Vimeo, iShowU, Google Labs' ShortLinks and AdRoll. It was fun to make it and I expect it'll prove useful.

That activity, of taking an idea I had in the shower this morning and hacking it together in an hour today, got me thinking about the difference between makers and managers, and about how few managers really appreciate (or are able to participate in) the creation process -- especially when it involves some amount of hacking.

I find that managers who are also makers have an ability to key in on opportunities that non-maker managers miss. They have a better ability to connect with their teams. They can go a level deeper into projects than non-maker managers. They can ask more intelligent questions. They can conceptualize and create efficient processes much more quickly and easily. Or to put it another way, they can be much better managers by also being makers.

So if you're a manager, I'd ask you this question: Show me the last thing you created.

If you have a hard time answering that question, I'd cringe, and then encourage you to focus some percentage of your time on honing your 'making' skills. That can take many forms -- from the simple stuff like:

  • Be more curious: It sounds dumb, but it isn't. When someone sends you a tool or a site, or something they just made, spend even just 5 minutes poking around trying it out. Don't just say "great job!" but actually try to provide some constructive feedback. Why does something work like it does? Can you find a bug? What else would you like to see it do? What will it change in your daily flow? Asking questions like these show that you are curious enough to care and have a much bigger impact than an empty "great job".
  • Learn to code in some language, even if it's just basic HTML: HTML can be surprisingly useful. By combining it with a dropbox account, you can create and host pages in a snap -- a great way to test an MVP. You can also go a level deeper by using Google App Engine, which is insanely easy to use. (here's an example of the same site as above, but hosted on Dropbox instead of Google App Engine -- something I did just by dropping the HTML page into my "public" folder in Dropbox: https://dl.dropboxusercontent.com/u/1096184/about-sharethis.html)
  • Create a culture where you hire hackers: Some companies have this idea that "hackers" are only computer nerds who do the heavy lifting. I couldn't disagree more. Ensuring that every single employee has some hacking ability, however light, completely changes the company's culture. And yes, by 'every employee' I mean the salespeople, the general counsel, the bizdev guy (or gal), etc. Everyone. Having a culture of hiring "makers" and not just "managers" is what's made companies like Facebook, Stripe and Dropbox so successful.

These things will also help you identify much more deeply with makers, which they'll really appreciate, even if you don't become a maker yourself.

If I'm asking too much of you as a manager, then at least do this: Read Paul Graham's "Makers's Schedule, Manager's Schedule" to learn about how you're probably wrecking at least some level of havoc in your makers' lives with meetings.

=================

PS thanks to Sean Seadmand for showing me and the entire team at ShareThis how to easily deploy sites via Google App Engine. I'd never tried it before that demo, and it was really valuable today (vs. spooling up a Heroku or AWS instance or something else more involved). Sean, you're a maker of makers! :)

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Fri, 20 Jun 2014 21:18:03 +0000 http://danielodio.com/hey-managers-show-me-the-last-thing-you-created
A Startup's Perspective on Time http://danielodio.com/a-startups-perspective-on-time Startups feel like a race against the clock, because they are. The trick is to extend a startup's runway (or as one of my investors put it, "oxygen in the the scuba tank") long enough to become successful. This means creating the right team, finding product/market fit, executing flawlessly, and either becoming profitable or raising enough money to keep oxygen in the tank until you do (or until you get acquired trying).

One thing I've firmly come to believe after doing several startups is that a startup doesn't die until its founder(s) give up. By that I mean, there's always one more thing that the founding team can do to eek a bit more oxygen from the tank, even when things look hopeless. But when a founder gives up, there can still be money in the bank and it won't matter; the startup is done. It kind of feels like the tail wagging the dog, in a way -- startups succeed from pure, raw determination of the founders as they race against time.

What got me thinking about writing this post, though, is an awesome blog post I read about putting time in perspective. So often in startups it can feel like time's running out that it's refreshing to think about time on a grander scale. Here's an infographic from that article that really does put things into perspective. A great quote from that article is:

"Humans are good at a lot of things, but putting time in perspective is not one of them."

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Sun, 15 Jun 2014 22:43:12 +0000 http://danielodio.com/a-startups-perspective-on-time
Musings on the State of the (App) Developer Nation http://danielodio.com/musings-on-the-state-of-the-developer-nation Vision Mobile just created a fantastic report called "State of the Developer Nation." Here are some highlights and thoughts: There's no question that apps are here to stay (and that was a big question, even just 24 months ago). Over half of all phones sold worldwide are ]]>

Vision Mobile just created a fantastic report called "State of the Developer Nation." Here are some highlights and thoughts:

There's no question that apps are here to stay (and that was a big question, even just 24 months ago). Over half of all phones sold worldwide are now smartphones:

With lots of app growth already and doubling in the next 24 months:

"The global app economy was worth $68 billion in 2013 and is projected to grow to $143 billion in 2016"

It's, unsurprisingly, a two-horse game between iOS and Android, with HTML5 rounding out the top three. Android is dominating the global developer mindshare, although iOS still dominates in non third-world countries and iOS still commands the most loyalty among its developers. So, some interesting tension there. One way to cast it is "Andorid is everywhere, but iOS is more meaningful."

"Android and iOS capturing over 94% of smartphone sales in Q4 2013. Android continues to dominate Developer Mindshare with 71% of developers that target mobile platforms, developing for Android.

Apple's iOS comes as a distant second at 55% of global app Developer Mindshare. iOS is strong in Europe and North America, but takes third position behind HTML5 in South Asia, South America and Middle East & Africa."

"iOS commands the most loyal developers with 59% of developers that target iOS prioritising it over any other platform. For many developers the question is now about which platform to prioritise, not which platform to develop for."

Windows Phone continues to be a dark horse third player, with developers saying they intend to adopt the platform, but usage still a distant fourth in actual usage.

Turns out, tablet-first may have just been a fad, and are actually companion devices more than primary devices. I've seen this trend really accelerating after tablet mania in 2011-2012.

"Tablets are very much a “companion” development option; tablets attract 83% of app developers but just 12% of developers target tablets as their primary development screen."

It's still a feast or famine world for app developers, with very few feasting. We're seeing a big rise in e-commerce via apps although the overall number is still low. iOS dominates monetization, with 10x the revenues of the average Android app that monetizes.

"60% of developers are below the “app poverty line”, i.e. earn less than $500 per app per month, according to the latest Developer Economics survey.

iOS has a larger “middle class” than Android. Among developers that generate $500 - $10K per app per month, 37% prioritise iOS vs. 25% Android.

In-app advertising remains one of most popular revenue models at 26% of app developers, particularly strong on platforms where demand for direct purchases is weak, such as Windows Phone and Android."

"Use of e-Commerce as a revenue model for apps grew significantly, from 5% of app developers in Q3 2013 to 8% in Q1 2014."

"In terms of developer revenues per capita, iOS maintains its momentous gap with median revenues between $500 and $1000 per app / month, much higher than the median revenues of Android developers ($100 - $200 per app / month). As Android continues to grow in mid- and low-end handset segments, we don’t see the revenues for Android developers catching up with iOS anytime soon."

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Tue, 29 Apr 2014 15:37:50 +0000 http://danielodio.com/musings-on-the-state-of-the-developer-nation
Finally: Making Advertising Relevant http://danielodio.com/finally-making-advertising-relevant I never thought I'd say this, and I'm not sure how I feel about myself for saying it, but it's an exciting time to be in advertising. There's a famous quote attributed to John Wanamaker, a pioneer in marketing from the late 1800's that goes: "Half the money I spend on ad]]>

I never thought I'd say this, and I'm not sure how I feel about myself for saying it, but it's an exciting time to be in advertising.

There's a famous quote attributed to John Wanamaker, a pioneer in marketing from the late 1800's that goes:

"Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Indeed, it's almost certainly way more than half. But the lack of quantifiability has always been the elephant in the room, even now, 150 years later.

As a startup product guy, my attitude has always been that advertising is a tax on a brand for having an unremarkable product. Or to put it another way, why put money into advertising when you could plow those funds into being innovative instead?

But the reality is that there's something about the human psyche that really responds to advertising, especially when it's done right -- which it often isn't. Consumers want to identify with brands they care about, and advertising is an effective way to craft and strengthen those connections. So although I'd still recommend that a fast-moving startup focus on creating a world-class product, I've come to believe that larger brands, which simply can't move as fast as startups, are indeed effectively counteracting this slower pace of innovation via effective advertising. A good analogy is that while a startup is building its castle by creating superior products, a large brand is defending its existing castle with effective advertising. And to those who would say "the answer is actually for the brand to innovate faster" I would counter that while in a vacuum that may be true, in the real world that is effectively impossible. Larger companies cannot innovate as fast as small companies because they have the "baggage" of a successful product that's bringing in revenue, which they don't want to cannibalize. It's human nature: When you have something that's working, you're going to put your effort into optimizing that thing. You're not going to throw it away to find something new. It's the classic Innovator's Dilemma.

And sometimes, brands are able to create experiences that really resonate, and if I'm being honest with myself, it absolutely influences my perception and affinity to the brand. That's the thing: I, like most consumers, have an aversion to most advertising. But I've realized it's actually not advertising I dislike -- it's non-relevant advertising. When a brand connects with me in a relevant way, it's very powerful and I welcome it.

One of the first brands to really connect with me in a relevant way was BMW via a series of ads from 2001 called "The Hire," starring Clive Owen and a host of well known directors. Here's one of the ads, called Hostage, directed by Jon Woo:

Hostage ! BMW short film by John Woo with Clive Owen

I was in my mid 20's at the time and a huge fan of BMW cars already. These ads really cemented my relationship with the brand.

The problem is that that's been the exception, not the rule. I don't find most advertising to be relevant, and so I generally find it distracting, annoying and non-value add to my day.

But this is where the power of social media comes in, and specifically, mobile as the channel. I'm not referring to social in the traditional sense, like FB posts. Rather, I'm talking about the power of brands tapping into our digital identities.

A mobile phone isn't really a phone so much as it's the container that holds my digital identity. It's the vehicle with which I interact with the world, largely via social media channels (and especially, "dark social" which is a more intimate & meaningful form of social interaction).

And now, for the very first time, all of this data from my phone is allowing brands to craft their interactions with me in more meaningful ways.

Now, this is a very exciting and very scary thing. There was a powerful 60 Minutes piece that slammed data brokers, and it's worth watching, because these are very real issues. But as a consumer, I'm willing to pony up for a value exchange: I'll let brands know more about me -- especially if my identity is anonymized -- in exchange for having a more relevant, personalized experience. I'm willing to make that trade, and I think most of us are as well, because advertising isn't going away, and the alternative is a world full of noise and annoyance.

The advertising world is full of jargon. PII. DSP. SSP. RTB. RTM. DMP. XDevice. Native ads. Programmatic. Private Exchanges. The list goes on. And while these terms are meaningless to consumers, what they signify is a seismic shift in the structural foundation around how advertising reaches us. And it's all focused on one core metric: To solve the problem that John Wanamaker identified 150 years ago -- to make advertising the most relevant to each of us, individually.

This won't happen overnight, but the next decade of advertising will be very transformational. If you're an entrepreneur interested in this space, here are a few specific areas of opportunity:

  • At large media brands, linear advertising (i.e., TV ads) typically compromise 90% of revenue, with digital pegged at 10%. But audience engagement patterns are shifting, and we are now largely accessing content on mobile & other digital devices instead of TVs. There is already a huge shift underway to capitalize on this shift and a lot of dollars will be flowing into digital over the next decade.
  • Connecting brands to consumers' digital identities via their interests, in a personalized, relevant way, at scale, and via a privacy-friendly approach, is a huge opportunity -- one that's just now really getting significant traction. People do want to interact with brands they care about, in ways that are meaningful to them. The challenge, typically, is that brands want scale. Helping a brand re-think an individualized approach with a level of scale that moves the needle in a meaningful way is still a problem that needs solving.
  • Brands are starting to create content in an attempt to craft meaningful experiences for their customer bases. A leading example is Red Bull Media House, which produces viral and engaging videos like this one. But not every brand is ready to create its own production house. Helping a brand achieve this level of relevance with an audience, say, as a SaaS service, is a huge opportunity.

There are already many, many startups tackling these problems. But then again, AltaVista was the search engine to beat when Google came on the scene. We're in a similar environment now, with huge problems that still need to be solved, and a gigantic brand market awaiting to shower the victor(s) with advertising dollars.

=================

The picture above is a shot of Aaron Magness at the Digiday conference talking about the brand he evangelizes for, Betabrand, which is what got me thinking about this post -- because their branding is awesome.

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Mon, 28 Apr 2014 16:53:46 +0000 http://danielodio.com/finally-making-advertising-relevant
Should Gurbaksh Chahal have been fired by his board? http://danielodio.com/should-gurbaksh-chahal-have-been-fired A crazy story is unfolding in Silicon Valley right now: RadiumOne CEO Gurbaksh Chahal was fired by his board after he pleaded guilty to two misdemeanors of battery and domestic violence against his then-girlfriend, who he accused of having sex for money and allegedly assaulted. He says it was just an argument. She called 911.

But while that is crazy, that's not the really crazy part to me: Watching the reactions of those of us in the blogosphere who don't know all the facts of the case is the really crazy part.

With so many contradictions out in public, someone must be lying, and those contradictions are whipping social media into a frenzy. Here are a few examples:

• On his blog, Chahal says there was no abuse, just a "normal argument." The police say they have a video of him assaulting his then-girlfriend 117 times in 30 minutes, that she was taken to the hospital and that, according to BizJournals, the officer testified that the girlfriend told him "that Chahal grabbed her by the hair, threw her on the bed, hit her many times about the head with his palm, threw her back on the floor and also spit in her face and rubbed it in to her face and chest" and, according to TechCrunch, that she suffered a hematoma after the attack.

• On his blog, Chahal says the supposed security video footage wasn't used in court because "If anything, it actually made the SFPD look bad because they violently assaulted me as I opened my door despite my being fully cooperative.". According to Re/Code, the video -- if it exists-- could not be presented in court because it was seized from his home security system without his consent. The police argued they were afraid he would erase it; the judge didn't accept that argument, so it was thrown out.

• On his blog, Chahal says he only accepted the misdemeanor plea deal instead of fighting 45 felony counts because "after a lot of soul searching I believed I was acting in the best interest of my company, my employees, my customers, my family, my friends and my investors." The board likley fired him-- technically-- due to those convictions, although it seems like there was tremendous public pressure -- especially in the blogosphere-- on them to do so, according to this article by Re/Code.

- On his blog, Chahal says he's being targeted because he's a high profile individual: "Celebrities in sports, entertainment and business, and high net worth individuals in general are all potential targets. It was only a matter of time when I would fall prey." Is that true? Was he forced into accepting a plea deal due to a high profile status? Was his right to be presumed innocent until proven guilty marred by his status as a successful entrepreneur?

As I wrote in a previous blog post a while back, there are only two things I know to be true: 1) That family is more important than anything else. 2) And that some of the other things I think to be true, probably aren't true. If I use that lens to approach a situation like this, it gets very murky: Would a well known tech CEO fighting to maintain his role resort to lying in order to protect his interests? But on the other hand, would the police resort to lying about a video and trumped up charges that were not true, just to target him? Where is the truth in all of this frenzy?

For me, it really comes down to this: Is the guilt of which he was proven (well, pleaded to)-- misdemeanor counts of domestic violence and battery-- enough on its own to justify the board's decision to fire him?

If I try to just stick to the known facts -- and not the blogosphere's rabid reaction -- I would say that yes, the board was right to fire Chahal. As a VC I respect once said to me, A CEO only has three responsibilities in a company: 1) To set the long-term vision of the company. 2) To make sure there is enough cash in the bank to realize that vision. And 3) to hire the very best people to execute on that vision. Any blocker that stands in the way of a CEO being able to achieve those three things-- emotions aside-- means a responsible CEO must step down. And misdemeanor domestic violence and battery charges would be enough to adversely affect #3, and likely #2 as well.

But to to the broader point, I'm reminded by a saying from longtime sailor Cap'n Fatty Goodlander, where he once wrote (paraphrasing) "There are no excuses on the open ocean. If you're the captain of the boat, and it gets hit by an asteroid, then you should have been looking up. You are responsible."

Well said, Fatty, well said. Chahal most certainly was not looking up.

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Sun, 27 Apr 2014 22:06:59 +0000 http://danielodio.com/should-gurbaksh-chahal-have-been-fired
Show Me The Money: Six Strategies to Put Your Cash to Work http://danielodio.com/show-me-the-money-six-strategies-to-put-your-cash-to-work

"Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones." - Benjamin Franklin

My wife Sue and I have been mulling over how to most effectively deploy cash in the current economic climate to generate decent returns without taking outsize risks. We've honed in on six main strategies, which I outline below in descending order of risk.

Since everyone has a varying amount of cash to invest, I'm going to specifically call out ways to deploy small amounts of cash in some of these strategies, as I want this post to be really actionable for anyone. The most important part is to just get started, and the biggest barrier to doing that is you thinking "I don't have any money to invest." So get yourself out of that mindset and jump into the world of being an investor, even if it's just with $25 (yes it's possible, below), $100, or $1,000 or $10,000, or whatever. I also recommend putting money aside every month to invest; that's a great way to get started.

Riskiest: Angel Investing

We've made a couple of angel investments, mainly in tech startups, including one in AngelList itself. And as I previously mentioned, I'm mulling over the idea of creating an AngelList syndicate. Syndicates allow backers to make investments as small as $2,500. The key here is to back a syndicate of someone you really trust, as they'll be the ones with their ear to the ground, picking the startups to invest your dollars in. But even then, it's incredibly risky. I wouldn't recommend investing in startups unless you're ready to plan on never seeing that money again. It's a feast or famine return structure, and your cash is typically locked up for years at a time and isn't at all liquid. If you think you want to try angel investing via a syndicate, then I invite you to back mine by reading this blog post and then registering on AngelList as a "backer." If I get enough interest, I'll spool it up. If you want to try investing on your own, play with this new AngelList fundraising filter that allows you to sort by amount raising, valuation, and even "signal" (screenshot above).

Just a Wee Bit Less Risky: Investing in Real Estate

Sue and I are very comfortable investing in real estate because we founded and ran a real estate brokerage years ago. Even so, we still tread carefully in this market. Real estate is typically a leveraged investment (since you're usually putting a down payment down with your own cash, but taking a loan out for the rest), which magnifies both the upside and downside. One option that we've just started looking into is diversifying under a Tenants In Common (TIC) model via sites like RealtyMogul. They call it "real estate crowdfunding," and it's an interesting approach. But generally, I'd recommend you avoid real estate investing unless you're ready to deal with 'toilets, tenants & trash' on a regular basis.

Risky: Betting on specific companies on the stock market

The level of risk here will depend on which stocks you choose. We made a big bet on TSLA and it's turned out well (so far). If you bet on a company like GE, it'll likely be much less risky, but conversely, you may not see much of a return (I held GE stock that was basically unchanged in value for a decade. Bummer.) The good news is that you can get started with ridiculously little cash. Buying a couple shares of a stock might run you $100, depending on the stock. And think about it this way: Owning just one share of a stock is infinitely different than owning zero shares, because just one share a) will still provide you a return on that cash if the stock does well and b) gets you into the mentality of being an investor.

Less Risky (but aggressive): Stock Market ETFs

There's a newish class of securities called ETFs (Exchange Traded Funds) that my wife recently schooled me on (thanks, wife!) and I've really been jazzed about. At a high level, an ETF is like an unmanaged mutual fund. It's just a basket of stocks that tracks a particular segment of the market. There are technology ETFs, biotech ETFs, manufacturing ETFs, etc. You buy an ETF just like a stock, by purchasing a share in it, which you can do via your online brokerage. But the beauty is that the risk is being diversified across many companies in the ETF's portfolio. And since it's unmanaged, the fees are typically much lower than for mutual funds (0.5% vs. 1.5% or more), and its goal is simply to track how well the stocks in that category do. The trick with ETFs is really in picking the right vertical. Do you think the biotech sector is going to outperform the market in general over the next 10 years? Then buy PJP, the PowerShares Dynamic Pharmaceuticals ETF (on NYSE), or IBB, the iShares NASDAQ Biotechnology Index ETF or any of the other biotech ETFs. Think tech is going to keep killing it? Then buy FDN, the First Trust DJ Internet Index Fund (on NYSE) or PNQI, the PowerShares Nasdaq Internet Portfolio. Each ETF takes a varying approach to a similar goal of tracking the vertical with a unique mix of companies in the portfolio. I love the idea of just picking a vertical I believe in, and then letting the ETFs find the next hot company in that space for me. Just like stocks, you can get into this for under $100, so give it a shot.

Even Less Risky (but by no means 'playing it safe'): Lendingclub

I was at a VatorSplash startup event where I heard the CEO of LendingClub, a peer-to-peer investing platform, talking about his company's growth. It was impressive. They've funded over $3.5 billion in loans (including over $250 million in the past month) and they've paid over $345 million out to investors in interest. Although there's a lot of talk about the sharing economy generally (think AirBnb, Getaround, Lyft, etc.), LendingClub might just be the giant of them all: Sharing your hard earned dollars with those who need them, and are willing to compensate you for loaning them out.

The idea behind LendingClub is this: Banks return a paltry, sub 1% return in checking & savings accounts. But credit cards often have a 15%+ interest rate. There's a huge spread there. If a lending platform could use technology to efficiently help investors get a higher return on their money than a bank's offering, while letting borrowers get a lower interest rate (on, say, their credit card debt), then everybody wins. That's exactly what they've done, and it's awesome.

But it gets even better. LendingClub lets you customize the level of return you want to get based on the amount of risk you're willing to take. Every borrower is scored between A1 (best) to G5 (worst). You can pick which types of loans you want to fund. The riskier borrowers will pay higher interest, but there will be more charge-offs. My wife and I created a fairly aggressive portfolio that is projecting a 10.15% annual return. Here's a screenshot:

You can see that the effective interest rate predicted is 18.51% based on our chosen mix of A through G notes we're funding, but 7.65% of that return is expected to be charged off, netting out to 10.15%.

The beauty of LendingClub is that your investment is divided into $25 chunks and is then diversified over hundreds or thousands of loans, which really mitigates your exposure. Think of it as your own personalized CDO :) LendingClub also has a service called "PRIME" which will invest the money for you based on the risk & return profile you specify (that's what the screenshot above is showing). The minimum investment amount for that service is $5k, and I recommend using it so you don't have to try picking the loans you want to fund manually. But if you don't want to put $5k into it, then you can get started with as little as $25, and it's the same story as stocks -- putting just a little money here is infinitely better than zero, if only to get you in the mindset of being an investor. Or conversely, if you have, say, $1MM to deploy and you're willing to put it to work at the risk level we chose above to achieve a projected 10.15% return, you could potentially earn $101k a year in interest income; enough to basically not have to work (don't forget about taxes, though; interest income is typically taxed at ordinary income rates, so cut 35%-ish off the top). You can learn more about peer-to-peer lending here.

Pretty Safe: GE Interest+

GE Interest+ is a great place to park cash if you don't want to invest it in any of the places above. Although it's not FDIC insured, it is backed by the General Electric corporation. It tends to perform as well as a 24 month CD (it's returning 1.05% right now if you have at least $50k there. Even at smaller amounts you're still getting about a 1% return. When interest rates go up, the returns can rise to 3% to 4% or more), but with a very important difference: It's liquid. You can write checks against it, like a checking account, so long as the check is for at least $250. You can get started with just $500, so if you have cash sitting in a checking account, or a savings account, or just under your mattress, I'd recommend moving it over here so at least you're earning the best possible return on it you can while still protecting it.

Really Safe: FDIC Insured account / Bank CD / US Treasuries, etc.

I'm not going to spend any time going over these options, as they're plentiful and you probably already know about them.

And it goes without saying, but I'll say it anyway: I'm not a financial advisor, and by following any of these tips you could end up penniless, living under a bridge for the rest of your life, so proceed at your own risk!

Do you have any other great suggestions? I'd love to get your pro-tips on ways to deploy cash effectively, especially in this market.

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Sat, 01 Mar 2014 09:20:42 +0000 http://danielodio.com/show-me-the-money-six-strategies-to-put-your-cash-to-work
WhatsApp's Journey From Being Ignored To a $19 Billion Exit http://danielodio.com/whatsapps-journey-from-being-ignored-to-a-19-billion-exit Unless you've been living in a cave, you've probably heard that WhatsApp was purchased by Facebook for $16 billion in cash plus $3 billion in RSUs.

But what you may not know is that originally, WhatsApp was not solving a problem that people had. In fact, originally, WhatsApp was completely ignored.

It's a great lesson for startups: WhatsApp kept at it and iterated from zero traction, to the fastest growing messaging platform of all time (in fact, some might say the fastest growing platform as calculated by monthly active users of all time). Here's what that growth looks like:

But the original concept for WhatsApp was more of a status update app. This Forbes article articulates it well:

“Jan was showing me his address book,” recalls Fishman. “His thinking was it would be really cool to have statuses next to individual names of the people.” The statuses would show if you were on a call, your battery was low, or you were at the gym."

Even more revealing is this forum post that Jan, the CEO, wrote on the FlyerTalk forum back in May of 2009:

"i spent a couple of months and developed a little tool called WhatsApp - it can let you set a status like "On the flight to munich, send email instead of calling me"or "In Japan for two weeks, my cell there is +81 829 282718"

But here's the kicker: Nobody responded to his post. Nobody wanted a status update app. Well, almost nobody. The only response was from someone pointing out the classic catch-22 of platforms: Distribution woes.

"It appears that this requires the other party to also have the app installed, right?"

Ha! Indeed. Here's what WhatsApps usage looked like for three full years -- very low:

But Jan and team kept iterating on it and kept making WhatsApp better. And that's what matters. That's how they succeeded. They focused on one thing and knocked the ball out of the park.

The best part of this story? In Sept of 2013 Jan posted an update to the FlyerTalk forum:

"so i was looking on this forum for something else (trying to use my M&M miles) and remembered i posted this thread 4 years ago. i am thinking some of you might be using WhatsApp now."

Indeed.

So if you're an entrepreneur frustrated with your lack of traction, just remember that it took Jan three full years to get usage on his platform to really start taking off -- and that's after he pivoted from a status update app to a messaging app. Your startup doesn't fail until you give up. So instead of giving up, keep iterating until you find something that people want.

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Sun, 23 Feb 2014 19:48:49 +0000 http://danielodio.com/whatsapps-journey-from-being-ignored-to-a-19-billion-exit
"Product Prioritization System" at Pandora by JeremyCee http://danielodio.com/uid/108963 Note from JeremyCee:

Based on your recommendation of First Round's "Review" blog, I've been reading all the posts. AWESOME one today on how Pandora managed an engineering resource crunch to get to where they are today!

“This is incredible, because someone very smart at one point thought, ‘We would be absolutely stupid not to do this thing.’ But really, when viewed in context of all the opportunities for the business, half of the things people thought were important immediately fall away," says Conrad.

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Tue, 04 Feb 2014 21:24:36 +0000 http://danielodio.com/uid/108963