Brad Hargreaves | startup adventures in nyc

The more time I spend working with startups, the more I find useful lessons for growing companies in random places. Take my gaming (industry) meetup, for instance. I’ve been running it for over a year, but only recently has it begun to “hockey stick”, in industry parlance.

NY Gaming Meetup RSVPs

The Opportunity: After running a gaming company in New York City for six months, I realized that there wasn’t a good place for people in the gaming industry to meet others in the gaming industry in an open, cross-pollinated environment. The International Game Developers’ Association’s New York chapter held regular events, but they were primarily focused on software developers, not the entire game creation ecosystem.

The Tactic: Create the New York Gaming Meetup, a (monthly) event where game developers can freely interact with others in the gaming industry as well as those outside the industry. Events would be regularly attended by investors, marketers, designers and others with a big role in making successful games. Meetups would be oriented around a series of demos of games built in the NYC area with networking before and after the demos.

Challenges:

(1) The NY gaming industry is highly fragmented with a focus on small (1-3 person) indie development shops. This isn’t Seattle or LA; there are only a handful of mid-sized gaming studios in NYC. It was critical to recognize that New York is a very different place and build a program that caters to those differences.

(2) There are few potential sponsors of such a meetup in NYC. This event would have to take root with minimal budget.

(3) Space in New York is hard to come by. The event would have to be structured and timed to let us take advantage of free space in bars and restaurants.

(4) As I’ve previously written, the New York tech landscape is very siloed, with little cross-pollination between verticals. In Silicon Valley, anyone working on a tech-enabled solution considers themselves part of the tech industry. In New York, we frame ourselves in terms of the particular vertical we are tackling — the “advertising industry”, the “gaming industry” or the “fashion industry”, for instance. This makes it difficult for events to reach across the social graph, and to this day I rarely see any Gaming Meetup regulars at other big tech events like the NY Tech Meetup or the Y+30.

Execution: For its first year, the event took place at Gallery Bar in the Lower East Side on Tuesday nights. On a scale of 1 to 10, I would give the location a 2, the venue a 7 and the cost a 10 — it was a free (but good) space with AV equipment in a out-of-the-way Manhattan neighborhood. Don’t get me wrong, I love the LES, but it’s a suboptimal place to host an after-work event.

Initial Results: The Gaming Meetup got a decent but not overwhelming response. We had a fairly predictable number of attendees — 55 to 75 per meetup — over our first ten months. The event wasn’t really gaining traction, but it was establishing a good core of game developers and people who loved what we created. The content (demos from local game developers and entrepreneurs) was hit or miss. There weren’t enough games being developed in New York City for us to be truly selective, and for every awesomely cool and instructive game that took the stage we had one guy just trying to sell something to the audience.

Iteration: A few months after starting the meetup, I started iterating on the model. Here are some things we tried and the results we got. Since metrics are important, changes were evaluated on (a) the number of attendees we got, (b) how long those attendees stayed and (c) how people reviewed the event.

Moving it later: Most people would show up at 7:30 anyway, so our 6:30 start time didn’t make any sense — especially since attendees had to travel to the Lower East Side. Good change, kept it.

Focusing on networking rather than demos: The demos started to get stale after a while, so I created one networking-only meetup to see how people would react. Bad idea; many people will only travel for content.

Fewer Demos: This was partially out of necessity, but ultimately it proved to be a good call. Six demos is simply too many. Four is much better.

Themed Meetups: We ran our first themed meetup (on Mobile Gaming) in March, and it was a tipping point of sorts. As it turns out, there is a certain “optimal specificity” in this kind of stuff — make it too general (“Game Demos”) and people aren’t sure what they’ll get. Make it too specific (“Android Development Best Practices”) and most people won’t care. Something in the middle (“Social Games”, “Mobile Gaming”, “Innovation in Consoles”) is ideal.

Higher-profile speakers: Last month, Kenny Rosenblatt (CEO, Arkadium) came and spoke on the topic of social games, and our meetup got 2x the number of people we’ve ever gotten. I’m a bit surprised that I hadn’t gone the high-profile-keynote-speaker route before. I’m certainly capable of sourcing them, and they give me far fewer logistical headaches than half a dozen demoers (one of which will inevitably bring a mac without the right VGA adapter).

The Hockey Stick: As you can see from my chart of RSVPs, I’ve started to figure this thing out. Popularity, of course, is self-reinforcing — now that we’re getting real traction, we’ve landed a great venue at AOL Ventures in the Union Square neighborhood. And our May meetup already has 90+ RSVPs, which is well beyond what any previous NY Gaming Meetup has gotten by this point. Most excitingly, we’re lining up partnerships with other Meetup groups for this summer — for example, we’re getting together with the Y+30 to host a panel on the future of gaming.

During World War II, many remote Pacific islanders received their first taste of modern goods when Allied or Japanese armies showed up and took over. Soldiers built airstrips, control towers and barracks, and planes regularly flew in and out. To avoid conflict, the islanders were bribed with food, alcohol and amenities. Then, the war was over and the soldiers left, tearing up their bases and taking their planes with them.

When these remote islands were visited again by anthropologists years (or even decades) later, some islanders had created “cargo cults” mimicking the soldiers’ activities. By building landing strips, wooden control towers and straw planes, islanders hoped to re-create the bounties of cargo. That is, they were copying the process without understanding the underlying principles.

As the idea of building game mechanisms into everything becomes the next new hot thing, I’m seeing a lot more cargo cult game design, or “let’s stick a leaderboard on it”. Lots of companies are copying the games they see others build without really understanding what they’re building or why they’re building it.

Don’t get me wrong — the people who are thinking today about building game mechanics into their non-game products are way ahead of the curve and should be commended. But good game design is hard – look at how long it took some of the smartest game designers in the world to figure out how to create really compelling, blockbuster games on Facebook. The Facebook platform was lost in the wilderness for over a year before anyone started figuring it out — but when they did, they revolutionized an industry.

I get a couple emails a week from people interested in making their company’s products more game-like. The person tasked with this is typically in product development, product management or marketing. They’re all pretty smart people, so they look around to see what else is working. Sadly, examples of good games built into non-game products after a product release are few and far between. So they find something that May Be Kinda Similar But May Also Be Different In Some Fundamental Ways (really, that just means foursquare) and co-opt it to their company’s product development plan while changing as little of the original game as possible.

But this doesn’t really work. In fact, it’s not that much different than building a plane from sticks and bamboo and expecting to receive wondrous gifts from the heavens in return. Games are fun when they fit organically into the theme around them. If everything has its own standardized leaderboard of people who have generated points doing X, I’m going to get tired of leaderboards pretty quickly. Game design isn’t black magic (that’s SEO), but it does have to be tailored — or even re-engineered — to fit its environment, audience and purpose. And often, the fundamental questions that need to be answered in these companies can’t be addressed by game design. Game design must come after there are answers to core questions like who are the users? and what do we want them to do? In other words, it’s not a cure-all for core business issues.

So when friends ask me how to wrap a game around whatever they’re doing, I point them in the direction of some fundamental game design writings by guys like Raph Koster and Greg Costikyan. Ultimately, you’re better served by building something from the ground up. Start with the basic principles of psychology and game design and build them into your product at a fundamental level. Otherwise, it’s just an elaborate cargo cult ritual that mimics the process but fails to understand the underlying truths.

Editor’s Note: This piece was originally published by Greg Costikyan on November 28th, 2007 and dealt with his experiences raising funding for Manifesto Games. I think it’s a wonderful piece that still rings true today, and I’m reblogging it with his permission here.

As a teenager, my subculture wasn’t “punk rockers” or “hippies” or “young Republicans,” but science fiction fandom. I tend to view other subcultures, therefore, from a sort of anthropological standpoint, noting similarities and differences from my own “native” culture. I understand “the science convention” as one of the cultural practices of my own tribe, and therefore perceive other similar cultural practices–such as the trade show, the industry conference, the acadamic conclave, or, in the case of today’s post, the venture conference–as interesting cultural variations on that basic motif.

Earlier this week, I attended the New England Venture Summit–my fifth conference of the venture-investing tribe as an attendee, my third in a money-raising capacity, and the second at which I presented.

As with conferences in other cultures, the focus of the event, which takes place typically over one or two days, is the agenda, a series of speeches and panel discussions. Unlike most other such events (e.g., the science fiction convention or the industry conference), the Dionysian aspect is downplayed–there may perhaps be private dinners sponsored by one VC firm or another after the day’s event itself, but the conceit of the participants is that they are there purely in the Calvinist pursuit of worldly wealth, so that open partying would diminish their own respectability in the eyes of the participants with whom they most desire to build social credit.

The organizers of these event are profit-making enterprises, who charge fairly stiff fees for participation, and target three sorts of potential attendees: entrepreneurs seeking capital; venture investors; and service firms. Under the rubric of “service firms” are included lawyers, accountants, headhunters, providers of outsourced HR services for small businesses, and the like. My impression, in fact, is that half or more of the revenues that such events produce are derived from service firms, both from the (higher) attendance fees they are charged, and through sponsorships.

The events on the agenda are of two types: panel discussions, usually among VCs, and usually moderated by someone from a service firm (who presumably has paid for a sponsorship in another context); and investor presentations.

Panel discussions are common to the conferences of all of the subcultures considered in our current study, but (in all cultures) they vary enormously in how interesting they are. In the worst case, you have as a topic for discussion something that has already been thrashed to death repeatedly at previous events, and a moderator who poses excruciatingly dull questions, eliciting rote answers from the panelists. Whatever your subculture, I’m sure you can bring to mind any number of these, from events you’ve attended. In an SF convention context, I would be very happy never to attend another panel on “Gender in Science Fiction” or “Breaking Into Print.” (Although even in these cases, creative panel members can overturn the conventions; I am unlikely ever to forget Michael Swanwick [writer] on a “Breaking Into Print” panel discussing his relationship with Gardner Dozois [editor], and saying “There’s a reason they call it ‘submission.’”)

The basic problem with the venture conference panel is that the conditions under which they are created mitigate against anything of the slightest interest ever being said. They exist to motivate the attendance of VCs, who may be flattered to participate; to reward service firms for contributing money (by allowing them to provide the moderators); and to attract the interest of entrepreneurs, who may reasonably be expected to find what potential investors say of interest. But the choice of topic is inevitably anodyne (“Emerging Trends” — can’t pass that one up!), and since the moderator is from a service firm, which has an interest in sucking up to both investors and entreprenuers, he is extremely unlikely to ask challenging questions, and is likely to stick to the equally anodyne. E.g., “Which is more important when you’re looking at a company–the finances or the team?” — a question at this actual conference, to which the only honest response is “Which are you, a moron or an idiot?”

(Oh, if you care –So let’s do a gedankenexperiment. 1. My team is Bill Gates, Thomas Alva Edison, and Henry Ford, and my business models is, we sell hot dogs at a loss and make it up on volume. PASS!

(2. My team is three heroin addicts who haven’t bathed in a week — but — wait! Billion dollar oppor… PASS!

( You tell me. Which is more important? The finances or the team?)

So from an entrepreneur’s perspective, there’s only one reason ever to attend these things: To put a face with a name, and know who to button-hole later.

The company pitches are the real meat of this kind of event. Typically, over the course of an hour or ninety minutes, a series of entrepreneurs get up, each allocated something between 6 and ten minutes, to pitch their company. The inevitable tool is the Powerpoint presentation (occasionally you’ll see someone using OpenOffice Impress, and good for them); this is jejune in its own right, and some day I’ll have the guts to do something completely offbeat, like hire a team of mimes and jugglers to provide visual representations of what I’m pitching.

There’s usually a ‘mandatory’ training session the day before, in which entrepreneurs give their pitch to a handful of venture-experienced people and get advice and feedback; this is actually useful, in many cases, since it’s surprising how many entrepreneurs show up under prepared, and quite often advice like “nobody’s going to be able to read 12 point type on your slide, no more than 4 bullets per, thanks” or “I still don’t have a clear idea what you do” is just what they need. For your ultimate six minutes of exposure, it’s a bit of a pain to take half a day off to watch painfully amateurish presentations from other entrepreneurs, but it’s still almost always worth it, even if you’re pretty polished. It never hurts to rehearse before a critical audience. (I didn’t take advantage of that this time, and it was a mistake not to do so.)

Watching entrepreneurs pitch is painful, because each of them has taken months of work and passionate dreams and a universe of ideas and tried to distill them down to six tight minutes. And it’s painful, because so much of what they’re pitching is jejune or just dumb; a minor tweak on the delivery of mobile content, a better way to sell real estate, a mechanism for making mobile games even less interesting than they are already by making them “free” and advertising supported. (Advertising supported inevitably means “dumbed down to the lowest common denominator.”) “Secure DRM,” hah. A mechanism for reducing cigarette theft at convenience stores.

All the kinds of things that maybe might make money, but my god; it makes you despair of capitalism. Is this the best that the Promethean creativity of the market can produce?

But to get back to the anthropological analysis, all conferences, of whatever type, have three purposes, though they vary on which they emphasize: to impart information; to build social ties; and to do business. For me as a teenager, the science fiction convention was first about information; it was an enormous thrill to hear the writers I admired speak, and I learned a great deal about writing, and the business practices of publishing. Later, it served a business purpose; promoting my work in the field, and establishing relationships with editors. And these days, on the rare times I attend one, it’s primarily social–catching up with old friends.

In terms of imparting information, I would suggest that “the venture conference” is a poor medium, except for very naive entrepreneurs. If it has any value as a social event, it is for venture investors (who often cluster and talk shop with each other, even as the entrepreneurs scan badges and try to figure out how to start a conversation with them–the entrepreneurs have little to say to one another). Which leaves the business function, and since these are events built around a business subculture, that is, or ought to be, their main purpose, redeeming the fact that they don’t do so well on the first two scores.

I would argue, however, that they don’t work particularly well in a business context, either.

Let’s start with venture investors. A typical venture capitalist spends the bulk of his days listening to pitches from entrepreneurs. Just as fiction editors are up to their eyeballs in slush, a VC has seen so many Powerpoints he has trouble remembering which is which, and probably has nightmares in which “the opportunity” and “go-to-market strategy” chase him screaming off a cliff, the jaws of negative EBITDA spreading threatening below.

Now let us say that you are, to pull things more or less at random, a VC who invests in, oh, the enterprise software space, specializing in expansion capital to already-established firms, located in Boston and almost never investing in companies farther than drive-distance.

Your expectation–and a reasonable one–is that anyone who has a company dealing with enterprise software, with some solid base of revenues, and within drive distance of Boston either knows you, or knows of you, or will ask around until he finds someone who does know you, and you will eventually see his business plan. Or if not, he can’t be a very competent entrepreneur, because he damn well should be able to find you.

So you learn of some venture conference, in the Boston area, where umpty-dozen companies will given a six minute pitch.

The basic thesis behind the venture conference is that you should be all excited to attend, because here you’ll get quick exposure to umpty-dozen potential investment opportunities, and all in the space of a day! Efficient use of time, yes?

No.

Out of those umpty-dozen, maybe two will fit your investment criteria, and if they were semi-competent, they’d find you anyway.

So… Maybe you send an associate. You certainly don’t go.

From an entrepreneur’s perspective, the supposed appeal to the venture conference is this: I’m pitching to a room containing maybe 200 people, all interested in venture investing, and even though there’s a fee attached (and maybe travel and a hotel room), and even though it’s a couple of days out of my (and maybe my senior staff’s) life, it’s a more efficient way to reach a lot of potential investors at once!

Right?

Well–no. That room of 200 people is maybe 25% other entrepreneurs waiting their turn or listening to other pitches to get a better sense of how to polish their own, and maybe 50% service folks who actually want to sell you stuff, and maybe the other 25% are investors of one kind or another. Of whom the vast majority would never invest in whatever it is you’re pitching. And of the handful who remain, almost all are so junior that unless they go back foaming at the mouth with excitement, it doesn’t really help.

You would be far better off staying at home, figuring out the right VC firm and the right person there, and figuring out how to network to them, so your submission doesn’t fly over the transom and land in the “slush”, but gets a sympathetic read.

As Michael Swanwick said, “there’s a reason they call it submission.”

***

Which is a nice pat way to end it, but leaves two obvious questions, I think. I’ll take them in order.

1. “So… How did you do?”

Ehn. I think the Powerpoint itself was pretty strong, but this is the first time I’ve tried to do this with a partner; Nathan took half the slides, and I the other half. We both floundered a bit, and were not as crisp, clean, and confident as you want to be in this context. We could have used another few hours of rehearsal to get it down pat. We didn’t, for two reasons; one, Nathan and I live in different cities, and our time for rehearsal was three hours the night before. And second, perhaps, I’m skeptical enough about the value of the whole enterprise that I didn’t make it enough of a priority for us to get together with time to do the work we needed to do. Penny wise and pound foolish; if you invest in the money and time to do this at all, you ought to do it well. I take responsibility.

Not that I think we made idiots of ourselves, but we could certainly have been better.

2. “Would you do it again?”

I think I’ve just made a strong argument for why this kind of thing is useless. But… Yes. And probably will. For two reasons.

First, the discipline of trying to distill what you want to do down to six minutes and a handful of slides of worthwhile–and refreshing, in its own way. More than that, distilling it down to a business case; it’s obvious, I think that I’m doing what I’m doing for a slew of reasons, many of which have nothing to do with a business case, and if I were doing a six-minute presentation for an audience of, say, game developers, it would look very different. But if I can’t make a strong business case, I shouldn’t be trying to do this as a business–an art project, perhaps, or a non-profit enterprise. But if I can persuade myself that this makes sense in a business context, that’s self-motivating–and an excellent framework to make a case to people–beyond the context of the venture conference–who are utterly motivated by monetary return, and don’t care as passionately as I about the larger issues.

Second… Even if, as I’ve argued, the venture conference is not an efficient fund-raisng tool, if you’re out looking for money… Well, it’s just one of the things you have to do.

Part of the subculture, you know.

Greg’s original writing can be found here.

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.

Red is work, Green is fun

I like data, especially when I find it in unexpected places. Our favorite urban bureaucracy the MTA has a wealth of data on subway and bus ridership just waiting to be parsed here. I suck at graphic design, but I’m just going to throw something out here in hope that it inspires someone with actual Adobe Fireworks skills.

While playing with this data, I came up with one interesting metric in particular — something I call the “Fun Index,” which you can see below. It’s simply a comparison of ridership per subway station on weekdays versus weekends. Initially, the outcome seems obvious: stations that serve offices will be heavily trafficked during weekdays, with a substantial drop-off during weekends.

But what about other stations that don’t serve Midtown East or the Financial District? It may be reasonable to expect those stations’ traffic to be reasonably smooth, as residents use the subway to go to work on weekdays and to fun places on weekends. Since most people go to work every weekday but may not go out every weekend day, you’d expect a slight decrease in traffic on weekends. And that’s exactly what you see in stops in the UES, UWS, Chelsea, Murray Hill and other heavily-residential areas.

But if not to work, where are people going on weekends? Interestingly, two subway stops in Manhattan actually show an increase in traffic on Saturday over an average weekday: Canal Street JMZNQRW6 and Prince Street NRW. If you view this data across all subway stations, you can create a “Fun Index” of sorts that compares New Yorkers’ destinations during weekdays versus weekends. On weekdays, we go to Midtown and the Financial District. On weekends, we go to TriBeCa and SoHo. Those places are simply more fun.

Would love to see what others can do with the MTA’s data.

I’ve always subscribed to the YCombinator / Paul Graham ideal that the best companies are built by founding teams of hackers, with perhaps a business guy or two (for example, someone with a strong business development, user flow or marketing background) thrown into the mix. But this often isn’t the way things turn out. Many capable founders aren’t developers, and I frequently meet with entrepreneurs that have taken a very different path. Most disturbingly, I’ve occasionally found myself agreeing with an entrepreneur’s decision to hire a development shop to build their product. Sometimes, it just makes sense.

But for every entrepreneur who has seriously considered the pluses and minuses of working with a dev shop in the context of the specificities of their business model, there are five who are hiring a dev shop because (a) they are lazy, (b) they don’t know any better, or (c) all of the above.

The reasons why I am not a big fan of development shops are too numerous to go into here. In brief, startups succeed because there is strong alignment of interests among all parties, especially with the people who are actually building the product. Development shops who work for $100+/hour and take no equity are poor partners in a startup. They have zero incentive to create a quality product or understand the nuances needed to capture a market and please end users. But all that is for another post.

For you entrepreneurs who are considering working with a dev shop to build your beta, I’ve written a handy guide to help you decide whether or not to pull the trigger. Read the scenarios and give yourself points accordingly:

3 Points: You actually do not know any software developers. I doubt this is the case for anyone who is reading this blog, but if you really can’t think of a single person to go to for introductions or advice, you may need to pay for it.

3 Points: You are pretty sure a LAMP stack is the pile of books on your coffee table, and Rails are what the Acela runs on. You probably aren’t the best person to hire and manage a developer.

4 Points: Money is no object. Don’t laugh. We’ve all seen projects like this.

4 Points: You are an exceptionally poor manager. As in you’ve been in management situations in the past, and you’ve been removed for being so incredibly bad.

4 Points: The development firm in question has some sort of special knowledge that is hard to find. Examples could be (a) experience building Facebook games under the new notification rules or (b) knowledge of how to build exceptionally secure e-commerce sites.

5 Points: You are developing software for government or major corporate clients. Being able to point at a specific development firm as “taking the responsibility” for the quality of the software is often reassuring to many government and corporate clients. I don’t necessarily agree with this bias, but from an entrepreneur’s perspective, it is what it is. Plus, most decent dev shops can point to at least a couple names of well-known previous clients.

5 Points: You have a development shop that will work for equity. This can be a good or a bad thing, and I should probably clarify it by adding “… and will actually get the job done in a timely fashion.” But equity-based work solves the misalignment of interests — there are just few dev shops willing to do it.

6 Points: You have a ridiculous project timeframe. For example, you need a beta built in four weeks. In this case, going through a hiring process is not an option. First, question why you need to get a beta out that fast. Then, really question why you need to get a beta out that fast. If your reasoning still makes sense, go hire a dev shop with the understanding that very little if any of the code that’s written can be re-used.

-4 Points: You don’t know exactly what you want. This doesn’t necessarily mean that your spec is vague; typically, it just means that a product will likely have to go through several major modifications before the dog food starts getting eaten. Unless there’s already a successful product out there that looks very similar to yours, you probably fit in this category. Iterating on a beta is a critical part of the startup lifecycle, and it is where the dev shop / entrepreneur relationship typically starts to sour.

Add all your points up. If you have more than 10 points, you can use a dev shop. If you don’t, you should go hire a team of hackers and build it the right way.

I hate seeing startups make the same mistakes I’ve made. When I see it once, it sucks. When I see it over and over again, it’s worth a blog post.

When I started GoCrossCampus with a few college friends, we set out to build a simple strategy game that could engage any college student with at least a bit of campus pride. I’ll forgo an extended explanation of what GoCrossCampus was (you can check out the link above if you’re curious), but you could think of our intended market as two distinct audiences:

a) Strategy gamers
b) College students

Initially, we were able to capture the union of those groups — large (30%+) percentages of students at Ivy League and tech schools were playing the game. If you had pride in your campus, you played. We also had a big, dedicated group of strategy gamers not associated with any college that played the game because they liked the game.

But at many colleges, we ended up capturing the intersection of those groups. That is, college students with campus pride who also enjoyed playing strategy games. This wasn’t a terribly big group of people, especially for a company that had raised $1.6 million in venture capital. In other words, we ended up capturing the space on the diagram where the two circles intersect rather than any space covered by either circle.

This distinction cost me a company. While the union of the circles — gamers and college kids — was certainly big enough to justify raising venture money, the intersection — college kids who played games — wasn’t even big enough to build a lifestyle business without a radical change in business model.

So how do you know when you are aiming to capture the intersection rather than the union of two groups?

There’s probably no way to tell for sure, but that’s not going to prevent me from throwing a few things down on paper. Here are some questions you might want to ask yourself before committing to a two-audience strategy:

1) Is there a major psychographic disparity between your intended audiences? In woot.com, there isn’t. People who like consumer electronics also like deals. In theNethernet (formerly PMOG)? I’m not sure I see why Steampunk fans also want to play an ultra-casual game. But I don’t have their analytics at hand, so please correct me if I’m incorrectly throwing them under the brass-and-mahogany bus. In short, if it is hard to imagine that there are a lot of people that fit into both your audience categories, perhaps it is best to focus on one or the other.

2) Is my product compelling enough to wholly attract at least one of my targeted audiences on its own merit? GoCrossCampus would’ve succeeded if we had spent a bit more time creating a game that was compelling to strategy gamers on its own merit; that is, if the college rivalries element was just a gimmick to get people to play rather than a necessity.

3) Is “technically savvy” already one of my desired audiences? If it’s not, you better build a damn good UI. Many startups claim that they are going after one particular audience (say, “Soccer moms”), when in fact they are building a product that goes after the intersection of their core audience and “technically savvy people”. And that may be well and good for your beta, but if you’re throwing a third category out there — say, “People with an interest in crafts” or “Gamers”, you may be setting yourself up for a much smaller audience than you are anticipating.

4) If my audiences are X and Y, is there a disdain/revulsion/annoyance towards X by Y? If so, run, do not walk, to the nearest exit. College students with bucketfuls school pride tend to think poorly of gamers. It did not bode well for GXC.

That’s all for now. I’m sure this may warrant a follow-up post at some point, since I think it is one of the most under-appreciated mistakes that startups make.

We generally don’t think enough about how we should live as opposed to the minutiae of our lives. It’s like how many CEOs of startups get caught up in operational details and let their companies slide down a poor strategic path. But post this isn’t just about startups; it’s something I see in almost everyone (including myself).

Let me treat you to a story for a moment. I visited a friend today near Penn Station. I was heading from the 86th street area of Manhattan’s Upper East Side. There are two ways to get to Penn Station from there:

a) Take the M86 bus to Central Park West, then the C train to Penn Station

b) Take the 6 train to 51st Street, then the E train to Penn Station.

On a Sunday morning, either one will take about 35 to 40 minutes. But coming back is a different story — it’ll typically take 25 to 30 minutes. The actual trains and buses go just as fast. So why the difference? Option value.

Individually, C and E trains are fairly rare. But when I’m heading back uptown and waiting at Penn Station, I can take whichever train comes first. I don’t have to commit to a certain path until I have information about which train is coming first. I’ll just take the first one to show up and only then am I committed to a certain path — if a C train comes first, I’ll head across Central Park on the M86. If an E train comes first, I’ll take the 6 uptown.

When I’m heading downtown, I either go into the subway or wait for the bus. When I’m making that choice, I don’t have the same information I do when I’m heading uptown; I don’t know whether the train or bus will come first. I could very well go into the subway tunnel and wait 15 minutes before the next 6 train comes by.

Thus, the 10 minutes I save on average when heading uptown is the value of being able to retain that particular option.

So why am I rambling about the MTA? Because there are a lot of people who don’t understand the value of an option — when in reality, option value likely represents the single most precious asset we have. Especially while we’re under, say, 40.

I don’t know what our economy and culture is going to look like in 20 years any more than I know whether the C train is coming before the E train. I can gather hints — for example, if a lot of Indians and Pakistanis are on the platform, it probably means that we’re due for an E train, which goes through Jackson Heights, Queens — a major south Asian center. But that’s hardly a definitive analysis, and surely not one to base a career on.

Yet I see a bunch of people my age who can’t wait to commit to a path. And I’m not talking about people who have a passion for a particular field. I mean people who just want to have a have a nice job, make a lot of money and meet a nice husband/wife. And I’m possibly as guilty of this as anyone, what with being in the gaming industry since before I got a college degree. But it’s still something I think a lot about, especially when I see people my age self-deprecating their career paths as non-committal. “That’s great!”, I say. “Keep doing that as long as your budget and significant other allows!”

Let’s say born in 1960 wanted to have a high-paying job with limited risk (a common goal, if not among startup founders). The decision for that person would’ve been fairly obvious — become a doctor. At the time, finance was still the wild west, and doctors were at their peak profitability in the mid-80s. Yet had that person started practicing at, say, age 30 in 1990, they would have endured a lifetime of decreasing salaries, higher malpractice insurance and increased risk.

I think the same story can be told for a lot of people who have been sucked into finance over the last 15 years. Finance is hardly becoming a bad job. Neither, after all, is medicine. But it is definitely on the downward slope in terms of compensation, prestige and risk.

So what’s the point? You’ve got to make a decision at some point, right? Well, yes. But it’s probably worthwhile to spend the extra 5 or 10 years figuring out what you love to do rather than just jumping in to something because it is an “obvious” choice with good compensation. Of course, disregard this advice if you know what sectors will be hot when you reach your peak earning potential in 20 years — if you do, you should take the multi-million dollar offers you’re surely now getting from hedge funds. Maybe you’ll end up trading options.