VC's + Record Labels = Failure

It's astounding to me that VC's are set up just like record labels are - To fail "most of the time". What kind of business does that? Build themselves in a way that it's expected you will fail 90% of the time? People with money, as I've said before, crack me up because they set the rules. You show up with a business plan and a 90% chance of failure and see how far you get.

I don't really hate the Brittany's and NSync's (Microsoft's and Google's) of the world - they help fund good artist who would otherwise not get a shot at doing much. But I can't help but think if labels (and by extension VC's) would stop signing non-winners to begin with and throwing something out there to see 'if it sticks', the industry as a whole might be better off. Start with a Winner. Start with Talent.

I understand you have to invest in a diverse way, but for crying out loud, minimize your risk! Search for the home runs. I'm surprised VC's just don't invest in record labels - seems they both like to lose money.

I propose those with a true plan, get financed by VC's and those with true talent get signed by Record Labels. Let's cut out the waste.

By offsetting publishing, I can make money for any record label with enough money to invest properly. Hey, that gives me an idea... but then, it just might be successful (and we couldn't have that!)

Bubble, Bubble,...Geez.

Michael Arrington over at TechCrunch has a post entitled "Bubble, Bubble, Bubble" in which he says he believes we're not in a bubble with Web 2.0. I agree, and disagee. This isn't a bubble, this is an extention of Web 1.0 with much cooler heads at the helm and cheaper infrastructure. But still... things could change fast. 1.0 and 2.0 have a lot of similarities.

One example he gave for not being in a bubble is Digg, that ever popular site where you can submit your articles and they are voted up or down depending on how much you're willing to game the system. Arrington says Digg was started for $2,000 and that could be proof we're not in a bubble. But in 1.0 we had Napster which was started in a dorm for what I think, was less than that. Both Digg and Napster ended up taking millions of dollars in VC funding. Could Digg fail? Yes.

1.0 saw copious amounts of "copycat jump-on-the-bandwagon services" started. If something was popular another was started. 2.0 is no different.

Back in 1.0 we had "The Blair Witch Project". In 2.0 it's "Snakes on a Plane". In 1.0 somehow or someway people heard the buzz and went to the site. Today we're led to believe something like "Snakes" could never have happened were it not for blogs. Memories are short, hype last longer - and most of the hype in both cases came from radio and TV telling us how popular these movies had become online, despite not being released in theatres. Does that make "Blair" 2.0?

Back in 1.0 we had buzzwords like "sticky", "network effects", "eyeballs"... that sounds familiar, it's called 2.0.

1.0 was monetized by ads. 2.0? You guessed it.

As noted, it used to take a ton of money just to have the bandwidth to support customers. Nowadays we have places like Amazon helping to subsidize Web 2.0 with their S3 service. Cheap, efficient, worth every cent. That's a big difference.

Today we have new languages everyone has become familiar with, PHP, Ajax, Ruby (and platforms like Rails). We have new tools, RSS and readers. There's 'new' stuff poping up all the time. Or is it old?

Ultimately 2.0 won't ever be a bubble simply by the numbers. It can't because it's primarily online, a huge difference to 1.0 when, as noted in an earlier post, VC's sank $300 million in places like webvan (that could fund 300 Web 2.0 companies and your return would be 100 times webvan. They folded.)

I think really the debate between 1.0 and 2.0 depends on who gets hurt most when a company fails. VC's got slammed in 1.0, as did regular Joe investors. In 2.0, regular Joe's aren't going to get that shot.

Links That Don't Suck

Here's a pretty good site for a list of the various new and old SN sites. It has a list of 380 current sites. Look for your idea for a SN, if you don't find it, good luck - hopefully noone has beat you to it.

Noah Kagan's blog is pretty interesting. He's a VC type - but he writes about a little of everything.

I read this little nugget on his blog, courtesy of Adam Jusko:

Ever heard the advice “Just be yourself?” If yourself is a stammering fool when the pressure’s on, like I often am, do not follow this advice. Instead, pretend.
When faced with a fear you can’t get past, think, “What would Richard Branson do?”

The reason I like this so much as it subscribes to a strong belief of mine, "fake it till you make it - and learn the difference in the meantime".

Adam is a really good blogger - and thanks to him I found some more really good information: First time entrepreneurs get to keep 7-8% of their company when all is said and done? 18-25% should be a minimum. A founder should retain no less than equal the amount of the largest investor. (I'm sure I'll be told this is only being naive and in real life, "things just don't work that way")

And last would be this which shows that some people have way too much money.

Web 2.0 Bites the Big One (someday)

It's funny to look back on your life.

This page was a political page where I wrote all manor of prognostications (over 150) on the heavy subjects of the day, and quickly grew bored. I deleted every one of those post when I decided to utilize this space for something else. Well, every post but two.

Jan 1, 2004. Looking back so much has changed, and so much hasn't. My love of writing has led me to start one of the more popular weblogs in Nashville - NashvilleHype! - it's also led me to want to start this one again, only this time, no politics!

The other thing that hasn't changed; I'm still an 'idea' guy. I have one right now. It's a Social Network and it's in Alpha (meaning it sits in my head). That's what got me interested in what will be the current subject of this blog - all the hip new 'web 2.0' stuff. /turn buzzword off.

Can you still make a billion dollars by starting a SN? I think so. I'm not inclined to believe it's impossible - I think the key now is to do something novel. I know, apparently that's pretty hard to do as places like mashable point out - one copycat after another doing what they were born to do - fail.

How many YouTubes, Digg's, Photobuckets, Slides, et.al. do we really need? Once one goes to the top it's kindof hard to knock it off unless the value proposition is better for the customer - hence the rise of MySpace and the fall of Friendster. MySpace, for all its flaws, turned out to be something people wanted in a User Interface (UI). Go figure. Snap Preview is cool - love that utility - and what (to me) embodies a winner.

One place I like to visit is CNET's Top Ten Dot Bombs. This is where you can find out how much money was spent on loser ideas like Webvan ($300 million), Boo ($160 million), and Go ($790 million) - holy shit! It's a good thing to remember when pitching your idea. The people you're pitching to might be powerful, and they might control the purse strings, but they are far from infalible.

What will happen with my idea for a SN? Well, it's doubtful that anyone will do it. Everyone is looking for riches in a different direction. So it's entirely possible I could make a billion dollars for someone and a little pocket change for myself.