Posts Tagged ‘Start-Ups’


The Class That Built Apps, and Fortunes

May 7, 2011

ALL right, class, here’s your homework assignment: Devise an app. Get people to use it. Repeat.
That was the task for some Stanford students in the fall of 2007, in what became known here as the “Facebook Class.”
No one expected what happened next.
The students ended up getting millions of users for free apps that they designed to run on Facebook. And, as advertising rolled in, some of those students started making far more money than their professors.
Almost overnight, the Facebook Class fired up the careers and fortunes of more than two dozen students and teachers here. It also helped to pioneer a new model of entrepreneurship that has upturned the tech establishment: the lean start-up.
“Everything was happening so fast,” recalls Joachim De Lombaert, now 23. His team’s app netted $3,000 a day and morphed into a company that later sold for a six-figure sum.
“I almost didn’t realize what it all meant,” he says.
Neither did many of his classmates. Back then, Facebook apps were a novelty. The iPhone had just arrived, and the first Android phone was a year off.
But by teaching students to build no-frills apps, distribute them quickly and worry about perfecting them later, the Facebook Class stumbled upon what has become standard operating procedure for a new generation of entrepreneurs and investors in Silicon Valley and beyond. For many, the long trek from idea to product to company has turned into a sprint.
Start-ups once required a lot of money, time and people. But over the past decade, free, open-source software and “cloud” services have brought costs down, while ad networks help bring in revenue quickly.
The app phenomenon has accentuated the trend and helped unleash what some call a new wave of technology innovation — and what others call a bubble.
Early on, the Facebook Class became a microcosm of Silicon Valley. Working in teams of three, the 75 students created apps that collectively had 16 million users in just 10 weeks. Many of those apps were sort of silly: Mr. De Lombaert’s, for example, allowed users to send “hotness” points to Facebook friends. Yet during the term, the apps, free for users, generated roughly $1 million in advertising revenue.
Such successes helped inspire entrepreneurs to ditch business plans and work on apps. Not all succeeded, but those that did helped to fuel the expansion of Facebook, which now has nearly 700 million users.
Venture capitalists also began rethinking their approach. Some created investment funds tailored to the new, bare-bones start-ups.
“A lot of the concepts and ideas that came out of the class influenced the structure of the fund that I am working on now,” says Dave McClure, one of the class instructors and founder of 500 Startups, which invests in lean start-ups. “The class was the realization that this stuff really works.”
Nearly four years later, many of the students have learned that building a business is a lot harder than creating an app — even an app worthy of an A+.
“Starting a company is definitely more work,” says Edward Baker, who was Mr. De Lombaert’s partner in the class and later in business. The two have founded, a social networking start-up.
Still, many students were richly rewarded. Some turned their homework into companies. A few have since sold those businesses to the likes of Zynga. Others joined hot start-ups like RockYou, a gaming site that at the time was among the most successful Facebook apps.
The Facebook Class changed Mr. De Lombaert’s life. His team’s app, Send Hotness, brought in more users and more money faster than any other in the class. And its success attracted the attention of venture capitalists.
“The class, more than anything, set the tone for us to try to start something big,” says Mr. Baker, 32,’s C.E.O.
When the Send Hotness app began to take off, Mr. Baker encouraged Mr. De Lombaert to treat himself to a new car. Mr. De Lombaert settled for a laptop. (He also put some money aside to help to pay his Stanford tuition.) They eventually sold the app to a dating Web site.
Facebook did not actively participate in the Stanford class. But some of its engineers attended sessions, and it benefited from the success of the students’ apps. “It really felt like an incubator,” says David Fetterman, a Facebook engineer who helped develop the applications platform.
The startling success of some of the class’s projects got Silicon Valley buzzing. The final session, held in an auditorium in December 2007, was attended by more than 500 people, including many investors.
“The Facebook platform was taking off, and there was this feeling of a gold rush,” said Mike Maples Jr., an investor who attended some of the classes and ended up backing one of the start-ups.
THE Facebook Class was the brainchild of B. J. Fogg, who runs the Persuasive Technology Lab at Stanford. An energetic academic and an innovation guru, he focuses on how to harness technology and human psychology to influence people’s behavior.
Mr. Fogg thought that the Facebook platform would be a good way to test some of his theories. Creating a new model of entrepreneurship was far from his mind.
At first, university administrators pushed back. “Facebook was not taken so seriously in academic circles back then,” Mr. Fogg recalls.
But there was no hesitation among students — from undergraduates in computer science to M.B.A. candidates — who were spending much of their lives immersed in Facebook.
From the start, many approached the class from a business angle. Mr. Baker, for instance, was a graduate business student but lacked technical skills, so he spent his first week interviewing engineers. “I wanted a technical co-founder,” he says.
He settled on Mr. De Lombaert, and the two, along with a third student, Alex Onsager, created Send Hotness. It let users send points to friends they considered “hot” and to compare “hotness” rankings.
Soon they found themselves in a proverbial “the dog ate my homework” situation. Three days before a presentation was due, Mr. De Lombaert accidentally deleted the computer code he was tinkering with. “We kind of freaked out,” he recalls.
Rebuilding the app would take too long. So, working around the clock over a weekend, they built another version, with a more rudimentary algorithm.
The stripped-down app took off. In five weeks, five million people signed up. When the team began placing ads on the app, the money poured in.
They had stumbled upon one of the themes of the class: make things simple, and perfect them later.
“The students did an amazing job of getting stuff into the market very quickly,” says Michael Dearing, a consulting associate professor at theInstitute of Design at Stanford, who now teaches a class based on similar, rapid prototyping ideas. “It was a huge success.”
DAN GREENBERG was sitting at the kitchen table one night when he and another teaching assistant decided to get into the app game. Mr. Greenberg, a graduate student who had done research for Mr. Fogg, hadn’t planned to get app-happy. But the students’ success whetted his appetite.
Four weeks into the quarter, he and his colleague, Rob Fan, set out to create an app that would let Facebook users send “hugs” to one another.
It took them all of five hours.
The app took off. So they moved on to apps for “kisses,” “pillow fights” and other digital interactions — 70 in all.
Their apps caught on with millions of people and were soon bringing in nearly $100,000 a month in ads. After the class ended, the two started a company, 750 Industries, named after the 750 Pub at Stanford where Mr. Greenberg and Mr. Fan where drinking when they decided to become business partners.
But juggling the business and schoolwork was too much for Mr. Greenberg, then 22. So he called his father.
“I said, ‘Dad, it is 10 p.m., and I’ve got so much stuff to do,’ ” Mr. Greenberg recalls. “ ‘We’re running this business, and I’ve got customers, and we are earning money, and we got financing and we have people to hire. But I have to write a paper tonight, and I just don’t have time for it.’ ”
His father advised him to pull a Mark Zuckerberg and drop out. The next day, Mr. Greenberg did just that.
Now 25, he works out of a glass-walled corner office in San Francisco. He is C.E.O. of his company, now called Sharethrough, which uses social media to distribute videos across the Web for companies. It employs 30 people and has raised about $6 million in venture capital. “It feels like a fairy tale when you look back on it,” he says of the class.
He has upgraded his lifestyle somewhat, but still doesn’t own a car. “I have a Vespa and skateboard,” he says.
“LOVE CHILD.” It sounds like an unlikely name for an app. But Johnny Hwin and his Stanford class team set out to build an app of that name, one that would let two users create and raise a virtual child. It never took off.
“We were overly ambitious,” Mr. Hwin says.
Seeing his classmates strike gold with simpler ideas proved to be a valuable lesson. In 2009, he began working on, a Facebook marketing tool that helped bands and musicians connect with fans online.
It opened last June and was acquired in January by FanBridge, where Mr. Hwin is now a vice president, for a few million dollars, he says.
Mr. Hwin, who is 26 and also a musician, now lives in a loft space in the Mission neighborhood in San Francisco. He uses his place as a kind of salon for late-night art shows and concerts.
“With Love Child, we wanted it to be perfect,” he says. With Damntheradio, he found his first clients by showing mockups of the product. “We were able to launch within weeks,” he says.
Another class member, Robert Cezar Matei, says he had only modest success with his projects. One, he said, allowed users to send “cheesy pickup lines” to friends; another encouraged people to reveal something about themselves. After graduating from Stanford, he wanted to earn some money to go traveling, but instead of getting a job, he decided to write Facebook apps. “I’d seen my peers being so successful with apps,” he says. “If they could do it, I could do it.”
After a few false starts, he created an app that let people send points and “kisses” to friends. It struggled until Mr. Matei, who speaks several languages, translated the app. The next day, traffic jumped fivefold. He added games, and employees, and the app became one of the most popular Facebook programs in Europe. In late 2009, he sold to Zynga for an undisclosed sum.
Also in the class was Joshua Reeves, who built an app that created animations that Facebook members would send to one another as birthday greetings or other messages. It made enough money for him to quit his job in 2008 to start Buzzeo, a content management system for Facebook. A year ago, Buzzeo was acquired by Context Optional, where Mr. Reeves, 28, is now a vice president. Last week, Efficient Frontier, a digital marketing company, acquired Context Optional for an undisclosed sum.
ONE recent afternoon at the headquarters of in Mountain View, Calif., 10 engineers worked away as two employees turned their attention to a companywide project: a 24,000-piece jigsaw puzzle.
For much of the past year, has worked on developing its service, a social network for meeting new people, without much success. A few weeks ago, the work appeared to pay off: traffic took off, growing to nearly five million monthly users.
Mr. Baker says the Facebook platform is a magnet for young developers, even though the kind of simple apps that were the focus of his Stanford class now face bigger hurdles. Facebook has made it harder to develop big-hit apps by controlling how apps spread virally.

But Mr. Fogg, says that for those who were at the right place at the right time — in late 2007 — things were different. “There was a period of time when you could walk in and collect gold,” he says. “It was landscape that was ready to be harvested.”


The New York Times

October 30, 2010

Why Twitter’s C.E.O. Demoted Himself

San Francisco

AT the annual South by Southwest gathering of techies in Austin, Tex., in March, conference organizers had chosen a hangar-size room to accommodate their star speaker: Evan Williams, the co-founder of Twitter, the messaging and social networking site that had become a digital phenomenon.

In a private moment before the doors opened, Mr. Williams, who is famously deliberate and cautious, snapped a photograph of the endless rows of chairs facing the stage and posted it on Twitter.

“Gulp,” he wrote.

Later, as Mr. Williams talked with the interviewer about building a 21st-century business, keeping to Twitter’s foundational principle (the Google-like “be a force for good”) and fostering corporate experimentation, members of his audience started groaning — and leaving, one by one.

“They wanted Ev Williams; they got Ev Williams,” a Twitter staff member said later.

It is no small irony, of course, that a man so ill at ease on the big stage is a pivotal force in a communications revolution, one that has made it easier for people to chat, disseminate information and mobilize locally and globally with almost anyone who has a cellphone or an Internet connection.

And Twitter has become one of the rare but fabled Web companies with a growth rate that resembles the shape of a hockey stick. It has 175 million registered users, up from 503,000 three years ago and 58 million just last year. It is adding about 370,000 new users a day.

It has helped transform the way that news is gathered and distributed, reshaped how public figures from celebrities to political leaders communicate, and played a role in popular protests in Iran, China and Moldova. It has become so muscular and ubiquitous that it now competes with the likes of Google and Facebook for users — and is beginning to compete with them for advertising dollars.

Yet for all its astonishing growth, Twitter has succeeded in spite of itself — the enviable product of a great idea and lightning-in-a-bottle viral success rather than a disciplined approach to how it’s managed.

Because of that, Twitter is on the cusp of becoming the next big, independent Internet company — or the next start-up to be swallowed whole by a giant like Google or, possibly, the next start-up to run out of steam.

Now the company is trying to instill some of the rigor and sense of purpose it needs to ensure that it is, indeed, the next big thing.

“The thing I’ve learned that’s much different than any other time in my life is I have a team that is really, really great,” says Mr. Williams, 38. “I’ve been studying this stuff for a really long time, and I’ve screwed up in many, many, many ways in terms of managing people and product decisions and business, so I feel fairly confident at this point that it could scale pretty well.”

Last month, he unexpectedly announced that he had decided to step down as chief executive and give the job to Dick Costolo, who had been Twitter’s chief operating officer.

Mr. Williams, who remains on the company’s board, now focuses on product strategy. He made the decision after conceiving and spending months working on the recent redesign of the Twitter Web site. People who have worked with him say he excels at understanding what Internet users want and contemplating Twitter’s future, but isn’t a detail-oriented task manager.

“He takes these things that everyone thinks are as big as they can get, these geeky things, and he makes them mainstream,” says Philip Kaplan, a co-founder of the review site Blippy and one of Mr. Williams’s close friends.

Mr. Costolo, meanwhile, is all about the details of making money and getting things done. This has been his third time running a company; he sold his last one, the Web subscription service FeedBurner, to Google in 2007.

For his part, Mr. Williams may embody a classic Silicon Valley type — the inspired, talented start-up guy with good ideas, but not the one to execute a sophisticated business strategy once things get rolling, says Steve Blank, an entrepreneurship teacher at Stanford.

And Mr. Williams may have also earned the self-awareness and confidence to recognize exactly who he is.

“Evan Williams is the type of entrepreneur who knows when to pivot,” says Mr. Blank, “and what we may be seeing is wonderful signs of entrepreneurial wisdom.”

TWITTER was born in 2006 as a side project.

At the time, it was an appendage of a podcasting service named Odeo, another company that Mr. Williams co-founded that had millions of dollars from investors.

Even the founders, though, were having a hard time getting excited about Odeo, and Mr. Williams told everyone who worked there to hatch new ideas. While sitting on a children’s slide at a park eating Mexican food one day, an engineer, Jack Dorsey, suggested to colleagues a simple way to send status updates by using text messages.

Mr. Dorsey and Twitter’s third co-founder, Biz Stone, built a prototype in two weeks. During that time, Mr. Stone was ripping up the carpet at his Berkeley home when his cellphone vibrated in his pocket. It was Mr. Williams sending a message on Twitter: “Sipping pinot noir after a massage in Napa Valley.”

Twitter was a unique entrant on the social media scene. People could follow others without being followed back, and all posts were public by default — and limited to 140 characters so they could fit inside cellphone text messages.

The founders likened Twitter to ice cream: not that useful, but “a fun thing for family and friends when they are not in the same place,” Mr. Williams says.

That is a far cry from his vision today, an about-face that is typical of Twitter’s evolution. For a long time, Twitter’s founders talked about it with awe, as if it had a life of its own and they were mere bystanders. They freely acknowledged that they had no idea how people would use it or how it would make money.

But they thought it had potential, and in 2007 they spun it off as a separate company from Odeo, with Mr. Dorsey serving as Twitter’s first chief executive, Mr. Stone as creative director and Mr. Williams as chairman.

Mr. Williams had dipped into his own funds to cash out Odeo’s investors and subsequently gained a controlling stake in Twitter — but he was spending his days running yet another company, Obvious, an incubator for start-ups, and wasn’t focused on managing Twitter.

While Mr. Stone, an outgoing showman, was friends with both Mr. Williams and Mr. Dorsey and socialized with them, Mr. Williams and Mr. Dorsey are much quieter men whose only bond was their work. When Mr. Williams decided to join Twitter full time in the spring of 2008, his relationship with Mr. Dorsey quickly became strained as the two men competed for power.

By the end of 2008, Twitter’s growth was exploding — and things inside the company were beginning to break down. Mr. Williams suggested to Twitter’s board that it push Mr. Dorsey out. With the exception of Mr. Dorsey, the board unanimously agreed, according to several people involved in the discussions. Mr. Williams had run three companies, directors reasoned, so they figured that he would do a better job.

Upon Mr. Williams’s ascent, Mr. Dorsey became Twitter’s chairman. Although that move was potentially fraught with problems, the board wanted to ensure that Mr. Dorsey remained close to the company because he still owned a large stake in Twitter and he had originally come up with the idea for it, according to two board members.

The change shocked employees and further frayed relations between Mr. Dorsey and Mr. Williams. Mr. Dorsey declined to comment for this article, but people close to him say he felt betrayed by Mr. Williams.

“There was a feeling that Ev wanted to take control after he realized the potential importance of Twitter,” says a Twitter employee who was there during the transition and requested anonymity to protect business relationships.

“It’s hard and confusing,” Mr. Williams says of Mr. Dorsey’s departure. “I think there’s few cases in history where the C.E.O. steps down and is also the founder and reports to someone and that works.”

Directors say Twitter’s board meetings are amicable, and in the last couple weeks, Mr. Dorsey has been spotted around the offices more and has taken on a greater role in long-term strategy.

Even with Mr. Williams as C.E.O., Twitter was growing faster than he or anyone else at the company could handle. In 2009, Twitter ballooned to 71.3 million registered users from 5 million. The Web site crashed often, and the “fail whale” — an image of a whale that appears on the site whenever Twitter falters — became the butt of jokes.

Twitter was fielding dozens of calls a week from big companies, celebrities and politicians. Among the callers were CNN, “The Oprah Winfrey Show” and the State Department, which asked Twitter to delay maintenance so that Iranians protesting an election in 2009 could continue using the service.

“We were just hanging on by our fingernails to a rocket ship,” Mr. Williams recalls.

What the company needed was simple: people to do all the work. Yet it moved painfully slowly in hiring, with just 110 employees by the end of 2009, even though it had raised $150 million in venture capital by then.

“The mistake I made was definitely underhiring, both in quantity and in experience, in several areas, for a long time,” Mr. Williams says now. He attributes that mistake to the daily distractions of running Twitter and not anticipating how big it would become.

Twitter’s first office in San Francisco was classic start-up: dorm-room décor, complete with a keg in the kitchen, a couple of big, green concrete deer and a communal table where employees ate take-out burritos together.

Big-name chief executives would visit the company and sit on frumpy couches because there wasn’t an adequate conference room. A video crew once walked in through Twitter’s unlocked front door without permission and began recording employees.

The company’s offices today have locked doors and a receptionist in a sunlit lobby, where the green deer now stand. Trendy furniture includes plentiful conference tables, and while there is still a keg, a chef prepares lunch for the 300 employees.

Sixty percent of those people are engineers, who have spent the last year methodically rebuilding the software that runs Twitter and developing a system to monitor downtime.

The fail whale still appears, but not nearly as often, an important change now that Twitter sells ads to companies like Starbucks, Ford and Microsoft. The ads can appear on the Twitter feed as sponsored posts, or in Twitter’s list of trending topics or among the suggested accounts that Twitter recommends that its users follow. Mr. Costolo spearheaded all of these initiatives.

Twitter finally hired a recruiter, as well as people to handle mundane but important big-company tasks like human resources, payroll and ensuring that all of Twitter’s partners use the same blue bird logo. A whiteboard near the executives’ desks lists headings like “commit,” “invest” and “leverage.”

Mr. Williams and his colleagues no longer liken Twitter to ice cream. They now describe it as an information network, not a social tool, and see it as an essential way for people to communicate and get information in real time.

Yet even though Twitter’s executives say their heads are finally above water, Mr. Williams still describes the company as “a 6-foot-tall sixth grader — there’s a lack of maturity, despite size and the perception of outsiders.”

He says Twitter now has a team that can realize the company’s ambitions — a revelation coming from someone who arrived in Silicon Valley with something to prove and volumes to learn about working with others.

EVAN WILLIAMS grew up on a farm in Nebraska, “90 miles and an eternity” from Lincoln, he says. And he didn’t fit in.

“My brother was the consummate Nebraska boy — the football star who went to the university, was president of his fraternity, hunted with my dad all the time,” he says. “I just didn’t feel at home there.

“I had a fierce desire to create things, to be independent and prove myself, which caused me to reject authority, but never in a sort of rebellious way,” he adds. “It was more like, ‘I’m going to show you by doing it all myself.’ ”

Mr. Williams dropped out of the University of Nebraska and started a business in Lincoln, financed by his father, designing Web sites for local businesses and making CD-ROMs about Nebraska football and the Internet.

But it turned out that, among other problems, football fans weren’t using CD-ROMs. The business ended up being Mr. Williams’s first failure, and he couldn’t repay his father.

Mr. Williams had devoured the early issues of Wired magazine, and California loomed in his imagination as a place where he could truly carve out his own niche as an entrepreneur. He made his first move west in 1997, with a marketing job at O’Reilly Media, the technology publisher in Sebastopol, Calif.

“Ev was just very frustrated, and he had ideas for how we could do things differently and better,” recalls Tim O’Reilly, the publisher’s founder. “He had a little bit of attitude, a chip on his shoulder, but always with good spirit.”

Mr. Williams left O’Reilly after seven months — “I was bad at working for people,” he says. And in January 1999, at the height of the dot-com bubble, he started his second company, Pyra Labs, with his former girlfriend, Meg Hourihan. Paul Bausch, a friend from high school, soon joined.

Pyra made a Web-based project management tool but soon saw a different opportunity: a tool that allowed users to easily post articles and photographs to personal blogs. That became Blogger, one of the first Web services that automated blog publishing.

Soon after, the tech bubble burst, and Blogger was running out of money. Mr. Williams told his five employees, including Ms. Hourihan and Mr. Bausch, that he could no longer pay them and that he would run the company alone.

But six months later, in June 2001, Blogger started making money by charging for added features, and Mr. Williams had a budget that allowed him to hire new workers. In 2003, Google acquired Blogger.

Several people who once worked at the company said they didn’t make money on the sale because Mr. Williams had never submitted the paperwork needed to allocate stock options. Mr. Williams says that this group hadn’t worked at the company long enough for their stock options to vest.

Others have a different view of Mr. Williams’s tenure at Blogger.

“I don’t think he took care of the people who got him to where he was,” says Ms. Hourihan, who earned millions of dollars from the sale. “It was bitter, horrible and tough. He’s not C.E.O. material. It doesn’t play to his strengths. He’s a better inventor; he’s better at coming up with ideas.”

Mr. Williams says that all successful businesspeople make enemies along the way. Yet he also says he learned from the Blogger experience. “I was trying to do everything myself when we were going through hard times,” he says. “When it was just me, I was happier, which I think is a sign of failure of working with people.”

In 2004, Mr. Williams left Google, where he was still running Blogger, and planned to take time off. Instead, he started working on Odeo with his neighbor Noah Glass. A year later, he again found himself running a company.

MR. WILLIAMS doesn’t fit the Silicon Valley stereotype. He is neither a back-slapping former frat boy nor a socially awkward programmer most content behind a computer screen.

He is at ease with himself, and convivial and dryly funny in small settings, but he tends to be quiet in large groups and is ambivalent about his newfound celebrity. Recently, with invitations to Davos and the Grammys, he traded in his uniform of jeans, a bird T-shirt and a hoodie for a suit — only to lose his luggage on the flight to Switzerland.

Last year, when his wife, Sara Morishige Williams, went into labor and wrote about it on Twitter, CNN published the news and her photo while she was still in the hospital. But Mr. Williams rarely posts personal messages to the 1.3 million people who follow him.

His fingers move constantly while he talks, whether fiddling with his keychain or shredding toothpicks at a bar, and staff members give him a drink and an espresso to loosen him up before big public appearances.

“Often there will be a room with five people having a conversation and he says the least, but when he does talk, everyone listens intently, and it’s a gem,” says Mr. Kaplan, his friend.

In business, that trait can be beneficial. In 2008, Facebook tried to buy Twitter, and financiers asked Mr. Williams if he wanted to sell. He said he wanted to sleep on it, and the next day sent them a long e-mail about why he wanted Twitter to stay independent.

“He’s got this ability to be patient in this very productive way,” says Bijan Sabet, who is on Twitter’s board and is a partner at Spark Capital, which invested in the company. “It was not just this flip e-mail but very thoughtful — what we could accomplish by when, why there’s still so much we have left to do. It was pretty inspiring.”

But others say Mr. Williams’s methodical approach can get in the way. “Ev is very difficult to work with because he has a tough time making a final decision on products,” says the C.E.O. of a Silicon Valley social networking company who requested anonymity because the company works with Twitter. “This all changed when Dick took over. He’s very logical and knows how to make things happen.”

From Mr. Williams’s point of view, his division of labor with Mr. Costolo, a wiry and restless counterpoint to Mr. Williams’s reserve, is a sign of success. After failing early on to work with others, Mr. Williams says he has figured out how to be part of a team.

“Dick is hard-charging and very focused on urgency and executing now, and I tend to be very contemplative,” he says. “My weakness is probably taking too long to make a decision, and his is being too hasty.”

THE cumbersome details of running Twitter now fall to Mr. Costolo. He says his biggest challenge is ensuring that in other countries, like Japan, South Korea and Brazil, where Twitter is growing by leaps and bounds, the company avoids the managerial mistakes it made in the United States.

That means marketing Twitter as an information network, not a social one, from the get-go; buying enough computing power; and hiring people to sell ads in those countries. Twitter also has to prove that it can build an advertising business in the United States.

The company, meanwhile, is trying to avoid the bureaucracy that plagues larger businesses. The topic is important to Mr. Williams, who says he started companies because he didn’t believe in aligning himself with institutions.

Twitter’s executives talk about the “Dunbar number” — the maximum number of people, generally believed to be 150, with whom one person can have strong relationships. This effort, mind you, comes from a company with a business model that fosters a multitude of ever-growing — and largely glancing — interactions among Twitter’s users.

“I’ve never seen a company so focused on avoiding the Dunbar number,” says Adam Bain, who recently joined Twitter from the News Corporation as head of global revenue. “You can tell Ev planned it out.”

Each time employees log on to their computers, for instance, they see a photo of a colleague, with clues and a list of the person’s hobbies, and must identify the person. And notes from every meeting are posted for all employees to read.

Speaking to a group of new hires at an orientation session last spring, Mr. Williams said Twitter had three goals: to change the world, to build a business and to have fun.

“You can succeed by only building a business, and many companies do,” he said. “We won’t consider it success unless it’s all three.”

Nick Bilton contributed reporting from New York.

Why Evan Williams of Twitter Demoted Himself –

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10 Types of Employees (or Partners) to Avoid

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Choose wisely among the people and positions that should be hired to preserve the efficiency of a project or startup.

The success of a business or a project is very often dependent on whether it can sustain itself financially or not. Sometimes that is a matter of having sufficient revenue to cover the costs, but it is also often a matter of directly controlling the costs and keeping them low. A great way to control costs is to hire slowly or forego hiring for a position completely.

Another benefit of not adding personnel is that smaller teams tend to have a higher per-person productivity and efficiency. In this article I will outline ten ways to control costs and raise efficiency within a project by going over ten types of people or types of positions that should not be hired in order to preserve the efficiency of a small team.

1) Someone Who Will Turn You into a Lawyer

Most people with good work ethics tend to be thrilled to get their hands dirty and start being productive when embarking on a new project. When people aren’t as excited about the project, but more about what is in it for them, they tend to focus on peripheral issues like, for example, details of legal implications of their involvement. There are some people who will wonder what happens to the intellectual property they will create in case the company ceases to exist, in case they want to leave, and ten other different potential events which will never happen. Not only will you spend your time and possibly incurring legal fees while answering these questions, but quite importantly, you may want to ask yourself why this person isn’t asking as many questions about the actual work and how they can quickly start getting their hands dirty.

2) General Business People

There is a bevy of skills a “business” person may have. They might excel at product vision, be good at business development and getting the right connections for your business, be talented at inside sales, and yet others may be good at marketing. Even within marketing there are a tremendous number of sub-specializations. A marketer can be great at creating promotional material, guerilla marketing, SEO or social media marketing. Even within social media marketing there are still many different options like being a Twitter expert or a Digg expert, or a StumbleUpon expert.

While many people can cross-task and excel at a number of business specializations, they tend to be better at some specializations than others so you must be specific in knowing what you need them to do, and make sure they excel at that. If you don’t first figure out what skills you may absolutely need, you may find yourself needing a few different business people to fill your business-side needs. Instead, try to have a great sense of exactly the skills you will need, and look for those skills. Or just look for brilliant team-oriented people who are thirsty to learn all the skills necessary for the team to get ahead.

Plus, if someone actually says they are a business person without being able to specify their strengths specifically, that is likely a great red flag. Another red flag is when someone describes themselves as “idea person.” Just ideas are worthless. Only people who can do the leg work to help an idea turn into reality are priceless.

3) Social Media Experts

Just as you should not randomly hire generalist business people without specifically knowing what their specific strengths should be ahead of time, you should probably also not bring on board people with overly specific skills. An example of that are people who claim to be social media experts. Social media is great and good social media marketers are quite good at getting tens of thousands Twitter followers or large spikes of traffic from StumbleUpon, but those audiences are often just browsing and are not well targeted, so the large number of visitors are likely to turn into disappointingly small numbers of actual customers.

The same holds true for business development people. When the time will come to promote your site, they will not have as much savvy doing that as you may wish or had thought they did, because the expertise they have is in deal-making.

4) UX Designers

There is usually never enough work for a full-time usability designer and they tend to command a pretty high hourly rate when hired on a contract basis. They will also take up a lot of the manager’s time as they get up to speed in learning about the particular usability needs of a project. If you have a product manager, usability design should just be a part of his or her skill set.

If you are struggling with usability, just try to be clearer about every page’s message. If you want a user to do something on a page, make it big and apparent. Also, use a number of free a/b testing tools out there. That will take care of 70% of the entire job of a UX designer. Additionally, it is often helpful to look at your competitor’s sites because chances are they might have hired a UX designer, so that will get you a free glimpse of what your competitors paid a lot of money for. In some cases, a business or project needs to have outstanding usability, but in very many cases the need for better usability is a defense mechanisms that tries to cover up for a product’s other shortcomings. So make sure you aren’t over-exaggerating your UX needs to cover up for another shortcoming of the product.

5) People Who Aren’t Genuinely Excited About the Project

People not genuinely excited about the goals, direction, technology or other aspects of the project tend to be mercenaries who are there to collect a paycheck. They tend to add little excitement to the project and tend to jump ship to the next project that offers larger material compensation. They tend to be the first to leave during tough times when they are needed the most. That can really cripple a project and it is better to pass on that hire because the common result of the hire is usually below a 110% effort which the modern business environment requires.

6) Flakes and Talkers

The old expression that time is money never ceases to be literally true. You must protect yourself from having your time wasted with great vigilance. In order to protect yourself, a good practice is to give people little “test” tasks to test their dependability in order to make sure they aren’t going to be frivolous with your time. If someone wants to chat over coffee and you are not certain whether this will be great use of your time, ask them to put together a little agenda. Surprisingly many people will just back out of the meeting suggestion. If you are thinking about bringing people on board, to make sure they will not end up being flakes. Try to give them assignments and see how much effort they are willing to put into the task. If they don’t complete the task, then you got your answer early and before this person were able to waste your time.

7) People Unwilling to Learn or Step Out of Comfort Zone

In the modern Web business world, the speed of innovation is accelerating and people have to be more and more nimble and flexible. As an example, today Java is hot and tomorrow it is Ruby on Rails. And by the way, that was true a few years ago and today Java is becoming the C++ of 1995, Java is giving way to newer languages, and Ruby is competing with more and more languages that are springing up each year. This is true in engineering, databases, marketing and businesses environments, and nearly every imaginable space across the board. So if the person you are looking to work with isn’t innovative or open to new technologies, the current business environment will just swallow them whole and obsolete their skill sets quite rapidly, leaving you with a lagging person on your team.

8) Big Shots

People who are accomplished in their field come with lofty resumes, impressive degrees and shiny armor. It is a good idea to be respectful, but not be overly impressed by someone’s credentials. You were not there to see the real history of these credentials, and your concern is with the future instead of the past.

People with lofty credentials sometimes tend to be averse to dirty and scrappy work. They are fabled to come with inflated egos that make it difficult for them to fit into a team and be team players. Also, it goes without mentioning that they tend to be the most expensive members of your team.

9) People Who Will Not Benefit From Working For You

People who do not truly benefit from working for/with you are usually people who are taken advantage of by you or the organization. They are either grossly underpaid or are made to do menial jobs where they learn nothing they want to learn. Such employees will not only drag you down and have that be your fault, but over time they will inevitably feel cheated and begin to bare resentment towards the way you handled the situations. It might at first make sense to get the better part of the deal in terms of bringing someone on board, but if the situation isn’t fundamentally fair or well-intentioned, it will backfire.

10) Actual Lawyers

This is a controversial point so take it with a grain of salt. Hiring lawyers or legal firms to help your startups can not be avoided if you wish to raise investment, create a multi-million dollar company, or even go public one day. Yet if you are a startup or a young project, the chances of your company ever fitting into any of the aforementioned categories are probably equivalent to the chances of winning the lottery, so there are a few types of legal procedures and documents that you are probably better off avoiding as they all cost money and time if you want to create them.

There is a strong anti-patent movement that is currently led by some of the premier VC’s like Brad Feld. So think twice before trying to get a patent. Non-Disclosure agreements are also becoming a thing of the past because they offer almost no real protection and are usually a way to waste time. If you want to drive a good person away from your project, ask them to sign an NDA and will do the trick. Additionally, trademarks or copyright documents tend to be quite easy and can be often done DIY (Do-It-Yourself) so often, a lawyer is not needed for that.

Alex Genadinik is the founder of San Francisco Hiking Community and a Startup Consultancy. Please say hello and continue the conversation on this topic on Twitter @genadinik

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10 Types of Employees (or Partners) to Avoid

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Security Startups Become Hot Acquisiton Targets

Security startups have become hot acquisition targets for bigger companies that are trying to protect themselves or their customers from an endless stream of cyberattacks, according to Bob Ackerman, the founder of Allegis Capital in San Francisco.

Ackerman cites 16 acquisitions in the last 100 days with a total value of more than $10 billion, although two of those deals — Intel’s $7.7 billion acquisition of the anti-virus vendor McAfee in August, and HP’s $1.5 billion acquisition of ArcSight, which protects against company-wide digital threats like intellectual property theft, in September – account for over 90 percent of that value.

Still, the need for good security technology is pressing. Intel disclosed in its annual report in February that its IT systems were regularly attacked, that Intel didn’t always know about the attacks, and that sometimes, intruders were able to gain access.

Intel spokesman Chuck Mulloy said then that Intel disclosed the attacks because Google had disclosed attacks on its systems (which Google blamed on China). Intel has now elevated security to a top priority for all of its products, alongside connectivity and energy-efficient performance.

“Today’s security approach does not fully address the billions of new Internet-ready devices connecting, including mobile and wireless devices, TVs, cars, medical devices and ATM machines as well as the accompanying surge in cyber threats,” Intel said in a statement announcing the McAfee deal. “Providing protection to a diverse online world requires a fundamentally new approach involving software, hardware and services.”

Other security companies that have been acquired recently include Arbor Networks, Arcot, BigFix, Enable Software, Narus, SMobile Systems, Sunbelt Software, tenCube and TriCipher.

The technologies offered by these companies are all over the map, Ackerman says, because “nobody’s designed the solution to the problem. It’s a compendium of problems…Security will be pervasive at every level, in every component of the IT stack and data stack.

It’s early days now – there are point solutions to point problems – but over time they’ll be integrated, and there will be multilayered defenses…,” he says. “Everything will be redesigned with IT security as a core parameter.”

Sometimes a security company is so valuable that the buyer will take both the technology and all of the employees. That happened with Ironport, an e-mail security company backed by Allegis, and ScanSafe, a Web security company backed by ScaleVP. Both companies were acquired by Cisco.

“We have 150 people and everyone is staying, which is very unusual,” ScanSafe co-founder and president Roy Tuvey said at the time. “But one of the major drivers of the acquisition is the people. We’ve built a reputation for cloud-based security services, and our (and Cisco’s) joint vision will enable additional security apps in the cloud. We have the people and the expertise.”

Venture investing in security companies has actually dropped for the last couple of years, according to data from Thomson Reuters, although that may reflect the number of me-too companies that were created and funded during the dot-com boom.

But Ackerman says technical innovation and opportunities for IT people who know security will only grow.

In August, meanwhile, Gartner said that revenue for software security companies would jump over 11 percent this year to $16.5 billion, despite the economic downturn, because IT security has become such a serious problem and because security products are maturing.

Security is also expected to be one of the fastest growing areas of enterprise software for the next few years, according to principal analyst Ruggero Contu.

Security Startups Become Hot Acquisiton Targets

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The Value of a Piece of Facebook

September 28, 2010, 3:00 am

Mark Zuckerberg’s donation of $100 million to the troubled schools of Newark made waves last week, but now it’s time to look a gift horse in the mouth, The New York Times’s Andrew Ross Sorkin writes in his latest DealBook column.
The $100 million is coming as shares in Facebook, a company that has yet to go public, whose books aren’t open for the world to see, and whose stock can only be traded on the obscure secondary market. So Mr. Zuckerberg’s noble act has prompted another round of that cherished parlor game of the tech world: How much is Facebook worth? And how many shares will it take to make $100 million?
While recent transactions in Facebook shares suggest a market value of $33 billion, judging by minority stakes can skew estimates of a company’s total worth, Mr. Sorkin writes.
Read the column here, or after the jump.
The Value of a Piece of Facebook
Yep, it was another deal hatched in Sun Valley.
During Allen & Company’s annual mogul-fest in the Idaho mountains in July, Mark Zuckerberg, the founder of Facebook, devised a plan with Mayor Cory A. Booker of Newark to donate a $100 million challenge grant for the city’s troubled schools.
The gift, announced with much fanfare Friday on “The Oprah Winfrey Show” (with all the requisite swooning over the 26-year-old Mr. Zuckerberg’s desire to give anonymously), attracted $40 million in matching gifts so far by Monday from the likes of William A. Ackman, the hedge fund manager, and John Doerr, the venture capitalist.
But Mr. Zuckerberg’s donation has some scratching their heads.
How is he going to pay for it? After all, Facebook has yet to go public. In Silicon Valley’s parlance, Mr. Zuckerberg is “paper-rich, cash-poor.”
While Mr. Ackman and Mr. Doerr are probably making their charitable gifts in cold hard cash, Mr. Zuckerberg is doing something different. He’s giving away $100 million worth of Facebook shares to Startup: Education, a new foundation he has started and on whose board he will sit. The foundation, in turn, will sell the shares for cash in what’s known as the “secondary market,” a nebulous world where big-time investors buy into companies before they go public — through the back door.
It turns out that there is a robust market for Facebook shares, even though most people can’t buy them. The going price has been about $76 a share, The Financial Times reported last month, implying a market value of $33 billion. Dozens of employees have sold their shares in the secondary market.
Elevation Partners, the buyout firm that counts Bono of U2 as a partner, paid $120 million for Facebook shares in June at an implied valuation of $23 billion. If the secondary market is accurate, Elevation has already made a pretty penny.
And Yuri Milner, a Russian entrepreneur, has managed to amass a 10 percent stake in Facebook largely through the secondary market. His Digital Sky Technologies paid $200 million for a 2 percent stake, then raised that amount by buying up shares from employees.
The party may soon be ending. Once more than 500 individuals or institutions own shares in Facebook, securities laws mandate that the company go public. Google staged an I.P.O. in part because it hit that same threshold.
But all this share counting raises a new question: Is Mr. Zuckerberg’s $100 million donation really worth just that?
Facebook isn’t saying how Mr. Zuckerberg, or the New Jersey school system, plan to value his shares. (Cynics have suggested that the donation is a publicity stunt to polish Mr. Zuckerberg’s image ahead of Friday when “The Social Network,” a fictionalized story of Facebook’s founding, opens in theaters. Give the guy some credit, he just gave $100 million to a needy school system.)
People involved in the donation process say that the Facebook shares pledged will be worth $100 million based on the company’s own internal valuation, not the value assigned by the secondary market.
It’s probable that Mr. Zuckerberg’s valuation of the shares will be much lower than that of the secondary market. As a result, the donation might ultimately be worth even more than his initial pledge once the foundation seeks to sell those shares, possibly over a period as long as five years.
And indeed, a look at the secondary market suggests that shares frequently trade at a premium to their real value — because there are so few of them.
The topic has ignited quite a bit of debate on the Internet, including on sites like GigaOm.
“Minority investment evaluations aren’t real,” David Heinemeier Hansson, a partner in the software developer 37Signals, contended on his blog, adding that Facebook’s secondary market valuation was “entirely based on what starstruck minority investors have paid for a tiny slice of the company.”
That prompted Joel Spolsky, another software developer, to reply that Mr. Hansson’s post was “so economically bizarre and incorrect that I don’t even know where to start. It’s like you wrote a blog post arguing that it is incorrect to refer to a five-foot-tall boy as five feet tall because he’s often sitting down. Every single day every single public company in the world is valued by the last share traded, usually for a tiny fraction of the company.”
In truth, Mr. Hansson is probably right. With so few shares available, it’s hard to extrapolate Facebook’s real market value. Microsoft directly invested $240 million for a slice of Facebook two years ago, valuing the social network at $15 billion. That might have been accurate — or might not have been. After all, Microsoft’s deal was partly a defensive move meant to block Google from forming a strategic alliance with the company.
Of course, one of the secondary market’s great disadvantages is that a company like Facebook doesn’t have to disclose its financials, so all these valuations are a bit of a guessing game.
But every stock sale in the secondary market has to be blessed by Facebook: it has the right of first refusal to buy the shares itself, and has used that provision to prevent shares from getting in the wrong hands, according to a person briefed on one such transaction.
What Facebook will ultimately be worth — $23 billion? $33 billion? $3 billion? — is anyone’s guess. But given the immense interest in the company, it’s hard to imagine that Mr. Zuckerberg wouldn’t be able to find $100 million in cash for some of his shares. The question is, how many will he have to give up?
Go to Column from The New York Times »

Sorkin: The Value of a Piece of Facebook –


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Eric Schmidt tells FP what makes a city smart, how not to lose $1 trillion — and the one place he’s never been.


Can there ever be another Silicon Valley, in the United States or anywhere else? What makes it so special?
One thing is the weather. You think I’m joking, but the weather is certainly a part of it.
There can be many Silicon Valleys. It is absolutely a reproducible model; it’s not something in the water. You know, the history starts in the ’50s. What basically happened in Silicon Valley is that you had strong research universities, a relatively liberal and creative culture, lots of reasons for young people to stay in the area — and young people are the ones with the new ideas. Then you had the development of the venture capital industry.
What’s interesting is that every 10 years someone writes an article about how Silicon Valley was responsible for the last innovation wave, but it will miss the next wave. Yet Silicon Valley has now been at the forefront of four or five successive tech waves and has proved itself remarkably resilient because of the combination of the universities, the culture, the climate, the capital. My point is that if you have all of those elements, you can have your own Silicon Valley wherever you want.
If Google weren’t located in Silicon Valley, is there anywhere else you’ve visited that you can imagine it could be located in — or any places that remind you of Silicon Valley around the world?
That’s a very hard question to answer. Most would argue that Cambridge, England has a lot of the criteria — there’s been an explosion of start-ups there. Another scenario would be New York City. Obviously it does not have the weather, but it has the draw for young people and certainly the financial sophistication; plenty of smart people and the sense of globalization are very important. It’s unlikely that would occur in a place that does not see itself in a global context. The Bay Area, because it’s a gateway to Asia, has always seen itself in a global context.
What about a place like Shanghai or Beijing?
Shanghai could do it, although in China the universities are strongest in Beijing. Shanghai isn’t quite the New York of China, but it could be. Bangalore emerged as a tech hub in India in part because of favorable weather, a strong university system, and concerted support by the state government. So there are partial versions of that happening.
How is information technology changing the world?
When I was growing up, an elite controlled the media. And the majority of the world was very, very poor, both in a resource sense and an information sense. Since then, a set of things have occurred: the digital revolution, the mobile revolution, and so forth — of which I am enormously proud because they are roughly the equivalent of lifting people from abject poverty and ignorance to a reasonable ability to communicate and participate in the conversation.
Information empowers individuals. And it has a huge and overwhelmingly positive impact on society. Think of someone who can now get information about finance or technology, or they’re in school and they can’t afford textbooks but access information online. Or imagine medicine — I mean there’s just issue after issue.
Globalization has clearly been responsible for lifting at least 2 billion people from abject poverty to extremely low levels of middle class. As a result, they have greater access to education and opportunity; they are much less likely to attack you, and they’re busy trying to fulfill their low-cost version of the American Dream. They’re trying to buy a car.
Is there a downside to hyper-information access?
I am worried about the decline of what I call deep reading. In other words, the sort of “here I am on the airplane, there’s no Internet connection, I am reading a book thoroughly” reading. You do less of that in a world where everything is a snippet, everything is an instant message, everything is an alert.
What are you reading right now?
Steve Coll’s Ghost Wars.
What is one place in the world that you have never visited but you would like to?
What’s a good risk?
You cannot eliminate all risk, but you can certainly put yourself into situations where the failures are not horrific. In other words, fail early. Fail early in a small team before you have devoted $20 billion to something. If 10 people fail, maybe you have lost their time and a couple million dollars, but if a space shuttle blows up and the whole thing is a disaster, you have lost a trillion dollars.
How does innovation happen?
Real insights don’t come out of linear plans; they come from collecting ideas and thinking about things and then all of the sudden — creativity occurs on Saturday morning when you least expect it.
Illustration by Joe Ciardiello for FP

Illustration By Joe Ciardiello for FP
Eric E. Schmidt is CEO of Google.

Interview by Foreign Policy contributing editor Christina Larson.

Googlopolis – Interview by Christina Larson | Foreign Policy


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