The difference between a real burger vs. a fast food burger

There’s a fine line that we need to walk in the Burger Model (a company built to flip) way of life. You can get a little too cheesy (no pun intended) and end up creating an el-cheapo McDonalds burger, or you can really put your heart and soul into building a burger to die for.

I picked up Russell Beattie’s blog post by reading Mark Pincus’ blog and Russell has done a very nice job of pointing out a lot of wannabe companies that are looking for a quick way out instead of really innovating something that will change the world. If what you’re doing is on this list, I’d take a long, hard look at it.

P.S. Jeff Clavier responds with a little more balance. The message is still the same: do something significant as opposed to going for a quick hit that you pray will be gained by adding a feature to something that another company is already doing quite well.

A nice burger story

I use the term “Burger Model” to mean a company that is “built to flip”. The IP licensing/selling model, of which I’m a huge fan, works particularly well if you can envision the end in sight as you start the company.

Here’s a good story about a simple Web site ( that ended up getting bought by apparently some close friends over at for an undisclosed amount.

Certainly worth examination.

The Opportunity for BBitv

I just read this CNet article, “The Internet and the future of TV” and hope my friends over at Honolulu-based BBiTV read it too.

There’s an interesting future evolving for TV. Is interactive/on-demand TV programming going to be delivered over the Internet (IP) or via cable TV? Thinking about this very briefly, I’d say “both”.

When I watch TV, I like sitting back in my couch, remote in-hand, flipping through the channels until I find something I like. Sometimes we watch the show as a family, sometimes its just me and my bowl of Haagen daz.

When I watch video on my computer, I’m sitting at my desk, I pretty much know what I’m going to click on and then I expect it to come up within a few minutes. It’s short, sweet, and then I’m off to something else.

These two scenarios seem quite different to me. There may be a more converged future where your TiVo’s net connection downloads shows until you want to see them. That kind of a world seems a likely place for satellite providers to go and allows them to offer something like on-demand video currently provided by the cablecos.

If I were BBiTV, I’d come up with an architecture that supports both methods and be prepared to fluidly develop a platform for either one.

HVCA Presentation

I had the great honor of presenting to the Hawaii Venture Capital Association last week Thursday. I was so focused on the event that I forgot to bring my recording equipment so I don’t have the event live, but I do have a printout of the slide presentation.

There were serveral very cool moments in that presentation, one of my favorites was from local VC Jeff Au of PacificCap Group, LLC who essentially agreed that Hawaii companies are best suited to small, quick wins. Thanks Jeff!

Writeup in PBN

Thanks goes out to Clynton Namuo of PBN for writing up this nice story on us, “Peter Kay’s 6th company focuses on next-generation startups ” . We’re really excited about the potential and so far the response has been fantastic.

Facebook vs. HotU: Web 2.0 in action

HotU was a Hawaii VC-funded startup that tried to build a Web application targeted to college students. I never really completely understood what they were trying to do. They followed the classic bubble model: millions in cash, no real revenue, followed by a crash and burn. Today it looks like someone’s demo site.

Fast forward to Facebook, a college-focused social networking site. It was started in a “dorm room” by a Harvard student Mark Zuckerberg with essentially no money and was cash-flow positive almost from the start. They got funded by Accel Partners and now have some amazing statistics that I found on Jeff Clavier’s blog:

  • 5M+ registered users
  • coverage of 45% of US colleges
  • 80% penetration among students of colleges that are on the platform
  • 10th most visited Internet site in the US
  • 5.5B page/views a month (230M page/views a day)
  • signing 20,000 new users a day
  • repeat usage: daily 70%, weekly 85%, monthly 93% – can you think of another site that sees 93% of its registered users coming back every month ?

I dug around to find out what all the fuss was about and this article “Students Taken with Facebook Frenzy” pretty much spelled out the compelling reason:

“Facebook is taking over the world. Facebook is a way to keep in touch with friends, a gossiper, a dating service and a way to find out about the boy in your History class,” University of North Texas sophomore Ashley Wright said. “What is this world coming to?”

ASU students can form a study group by looking up other people who are taking the same classes. They then have the option of writing on someone’s “wall” or sending a message to their Facebook inbox.

Now, besides this being a very cool success story, I believe it underscores some elements of a Web 2.0 startup, which is definitely doable here in Hawaii:

  • Super low startup costs, near zero.
  • Initial site built by the founder.
  • Early profitability.
  • Built-in viral self-marketing.

Web 2.0 startups are a whole new breed, mainly because they essentially don’t need any money and they have positive cash flow early in the game. Think about developing something like this and you might have a hit.

The power of patents

Here’s an article, “Who Owns XML?” talking about Scientigo, a company that has patents (No. 5,842,213 and No. 6,393,426), which it believes cover the “Namespace” features of XML.

Just about any significant usage of XML uses Namespaces. If this patent is “solid”, and of course that’s yet to be determined, it will be worth many, many millions.

Looks like they’re already in discussion…

According to Bryant, the company so far has held talks with more than 40 companies about its patent claims, including Microsoft and Oracle, and this week Bryant says he’s finalizing an agreement with an IP licensing firm.

and this is not the first time that patents on XML have been valued:

…South Carolina-based e-business software developer Commerce One auctioned off a collection of their own XML-related patents last December for $15.5 million…

I know that most programmers (who have never filed or received a patent) really hate patents, but those of us that have painstakenly went through the process of innovating and protecting our intellectual property understand the power of the patent system and really appreciate how it gives the little guy a chance to make it big.

In today’s world of giant tech companies and easily-duplicatable intellectual property, a patent is one of the most powerful ways to protect a truly great idea. I love ’em!

Angels becoming more like VCs?

Just when I was figuring it was cool to be an Angel investor, I read this article, “Angel investors shifting away from startups” that makes some interesting observations:

Less than half, or 48 percent, of investments by “angels” — wealthy individuals willing to place bets on nascent businesses before anyone else — through the second quarter of this year went to companies at the seed or startup stage.

The figure has fallen from 59 percent in the same period of 2004, and from around 75 percent several years ago, and has been “dropping pretty steadily,” said Jeffrey Sohl, the center’s director.

Looks like what’s happening is that Angels are naturally creating more formalized groups and those groups have a tendency to be more conservative. Rob Robinson is starting up a “sidecar” fund here in Hawaii and I wonder if that won’t have a similar effect…hmmm…

Meanwhile, Sohl thinks the proliferation of organized angel groups — as opposed to angels acting individually or with a couple friends — may favor later-stage deals. By Sohl’s count, upwards of 140 formal angel groups now are active, compared with about a dozen a decade ago.

“When four or five or more people get together, conservatism often rules, and that could favor later-stage” deals, Bryant said. “The wheels of democracy don’t move as fast as the individual passions of an investor who has money.”

He’s right. In my own personal experience, when a bunch of angels start analyzing a deal, it can quickly get sour as they raise one objection after another. This is good because it helps quickly root out the dogs, but can have a bad effect of slapping down a winner before it has a chance to shine.

So what might this mean? It means that if you’re going to get in front of an Angel group, you better have your act together. I would suggest you present your plan to a bunch of independent Angels first, get your butt seriously kicked, fix it all up, then come back for more, perhaps in front of the “real” group.

You young? You like startup?

Here’s a pretty good article that might give you an idea of what other “Young Turks” like you are thinking about on the mainland.

Why we’re not like Silicon Valley

The next time you hear someone say, “Hey, software can be developed anywhere, so why not here? Why can’t we be like Silicon Valley”.

Your answer: “Because Hawaii doesn’t do $5.26 Billion (that’s with a B) of venture capital investing every 3 months to over 714 companies for an average of $7.4M per company.”

One day, we might get there. But today, we have to “get real” and realize that our deals are going to be much, MUCH smaller. And this is why our model of about $200k-$500k (TOPS) per company that brings a 10x return in <= 5 years is a winner.