Brad Hargreaves | Building Things

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Archive for the ‘ideas’ tag

Graveyards

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I hear a lot of business ideas. The uninitiated may think that there’s a great diversity in thought here, and I’m constantly being exposed to new concepts. To some extent, this is true — I meet more smart people than I’ve ever met before, for instance. But I’m also exposed to a lot of the same business concepts over and over again.

Some — like group buying or fashion e-com — are simply trendy, and winners will emerge.

But some ideas have been brought to me for years, repeatedly, as new entrepreneurs encounter the same problems and come up with similar solutions. Yet none have succeeded. Those industries are graveyards, where many have entered and none have come out alive — yet.

This doesn’t mean these businesses can’t work. How many people stumbled around the idea of building a social network before Facebook blew it out of the park? But I thought I’d share a few examples of “graveyard” businesses I’ve encountered regularly. I’m sure there are more, and I’d love to see some in the comments.

Social/Management Tools for Conference Attendees. “Idea guys” love conferences, and conferences love idea guys. In my completely unscientific experience, one thing most idea guys have in common is a huge slate of conferences they travel around attending. This is a logistical challenge, but it is fairly unique to the type of person who goes to five or more conferences per year. A fairly small market that tends to attract novice entrepreneurs.

A Portal for College Students. Like the previous concept, this one meets the need of a lot of potential “idea” entrepreneurs — in this case, socially active college students — but few others. Growing a product college-by-college is extremely problematic due to the dramatic differences between colleges and the relatively small market in each college, problems I came to know well at GoCrossCampus. CollegeOnly probably has a better model, which can’t really be described as a “portal” as much as a network or set of tools.

Cash Tournaments on Console Games. Surprisingly few people realize that chance games (such as the games played in casinos) and skill games (such as pretty much everything else) are covered by a totally different set of rules, and it is completely legal to let users bet on their performance in skill-based contests. This seems like a gold mine to many entrepreneurs. Unfortunately, this business is fraught with non-legal issues. Skill balancing is a near-impossible challenge, and it is critical for gaining new players — if a user’s first experience with your product is being badly beaten at Madden and losing $10, you’ve probably lost that user forever.

I do like what some companies here are doing, especially Playhem. Would love to see someone get this right.

Honest Hetero “Hookup” Tools: Of all the businesses on this list, I have the least hope for these. Honest heterosexual hookup apps suffer from all the problems of a double-sided marketplace — one side is a lot easier to convince to join than others. If you make the app “honest” — that is, you report an accurate assessment of the market’s characteristics — you are unlikely to succeed. Here’s a rule of thumb: If you see a man on a hookup service, he’s real. If you see a woman, she’s fake. “Hookup” apps that make money follow the (dishonest) FriendFinder model — get the men to pay, fudge the women.

Anything in the Music Industry: A bit of hyperbole here, but not much.

Written by Brad Hargreaves

October 30th, 2010 at 1:08 pm

Analog’s Last Bastion

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Almost everything is digital. It started with simple stuff, like calculators, watches and measurements, and now the digital revolution totally owns cable television, video, music and photography. But there’s still one huge pile of valuable information that has yet to be captured and digitized: our conversations.

The conversations we have with other humans are one of — if not the — most valuable piles of information in the world. Far more valuable than video content (how much is taped versus just spoken?) or written content (how much information is actually written down versus simply spoken?) This information is not just valuable in the aggregate, but it is specifically valuable to the individual. If I were to have an easily searchable log of all my conversations, my productivity would increase by at least a third. Followups would be easier. Business opportunities wouldn’t drop by the wayside. I would pay good money for this.

The technology (lapel microphone, a mechanism to transmit streaming audio to a hard drive or the web, speech-to-text, search) is all out there in some form. Sure, some conversations — such as those in bars or on airplanes — would be lost. And I’d have to spend 5 to 10 minutes every evening tagging specific conversations with my contacts so I know who said what. (And perhaps with an evolution of technology, the app would learn to associate certain voices with certain contacts.) But the value proposition to the end user is huge. This is going to happen; it’s simply a matter of when and who does it.

There are a laundry list of potential uses. Some of them, privacy concerns notwithstanding:

– Early identification of “trending topics”, with particular relevance in finance
– Vastly improved real-time ad targeting. Possibly bigger than web search.
– A real-time gauge of public opinion and beliefs, with particular relevance to politics and brands
– A great data set to test theories of human interaction and sociology “in the wild”

That said, I’m not totally sure how this should be priced. On one hand, I am willing to pay upwards of $50 a month for a service like this — assuming I own the conversations and they won’t be used to serve me ads or packaged and re-sold to hedge funds. But I’m not sure this is the best revenue model; the business may be much more profitable by giving the voice-capturing service away for free and leveraging the aggregate data. What if Google had charged users a monthly fee in 1999?

Regardless of how it’s done, this is going to happen. It simply isn’t sustainable that the largest and most valuable medium of information in the world isn’t being captured.

Written by Brad Hargreaves

June 6th, 2010 at 11:43 am

What Kind of Business Are You Starting, Really?

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I meet a lot of entrepreneurs and hear a lot of ideas and business plans from all across the board. Most have — at the very least — a kernel of a good idea in them. But many don’t know what kind of business they are. There are an unbelievable number of entrepreneurs focused on technology when their entire business model is predicated on the success or failure of a marketing campaign, for instance.

This isn’t to say that technology isn’t important for those businesses, but rather that it isn’t the core differentiator that interests investors and makes or breaks the company. If you are running a sweepstakes business, for instance, I don’t want to hear about your awesome Rails architecture. I want to hear about how you are going to acquire users for $1.50 and monetize each for $3.00. Sweepstakes (in most forms) is a marketing business, and that is really what a potential investor or partner wants to hear about.

I like to put startups in three categories as defined by the core factors driving their success:

Technology Businesses: The core differentiator of your business is your technology. Generally, your company either (a) has real intellectual property around your technology and/or (b) is founded by leading engineers in the field.

Marketing Businesses: Your business is driven by its ability to acquire and retain users/customers more effectively than your competitors.

Relationship Businesses: Your business’s success or failure will be determined by your ability to forge lasting relationships with customers and/or strategic partners.

I’ve rarely found businesses that are truly driven by some combination of those factors. In most, one factor greatly outweighs all the others. And there are patterns behind misconceptions — most commonly, first-time entrepreneurs overweight the importance of technology as opposed to marketing or relationships. This makes sense, as an entrepreneur’s first goal is often to get a product up. But products are hard to build real differentiation around unless you are doing really innovative stuff, like building new database backends or search algorithms. In most consumer internet businesses, marketing is the most critical component. In B2B plays, relationship-building tends to make the biggest impact. And in general, progress on the core differentiator is what VCs mean when they talk about needing to “see traction.”

Want to generate awesome startup ideas? An interesting trick is to identify immature industries where the leading players are focused on the wrong differentiators. My own LabApp is an example of this — while the existing (immature) players are focused on relationship-building, I happen to believe that software commercialization is a marketing-differentiated business. As with all startups, time will tell if LabApp is on the right track, but looking at “differentiation-based” pivot points can be a great way to generate innovative and revolutionary products in immature industries. Some off-the-cuff ideas:

1) Take a relationship-based approach to marketing-driven social games to piggyback off of major brands’ name recognition. This is similar to what Arkadium is doing to much success with the social advergaming concept.

2) Use a marketing-driven model to gain independent adoption to a new CRM software product from the bottom up. Almost all SaaS CRM providers are currently relationship-driven, which leaves open a massive long tail of independent salespeople.

3) Use technology differentiation to pry government IT contracts out of the hands of bloated, relationship-driven contractors. Easier said than done, but someone’s gonna make a lot of money from this in the next 15 years.

Happy differentiating.

Written by Brad Hargreaves

March 22nd, 2010 at 6:05 pm