I often enjoy the Entrepreneurial Thought Leaders podcasts, which deliver talks from the Stanford Technology Ventures Program.  In particular, it is often useful to glean an idea or moral from the war stories told by some of the weathered entrepreneurs that the STVP invites to talk about their past or current companies.

Every now and then, though, a podcast lands in my iPod that involves a roundtable of venture capitalists.  VCs are often very dynamic, engaging people that are entertaining to listen to, but just as often, they say the most amazingly absurd things.  A recent roundtable podcast (entitled What is the Next Big Thing) really pegged the absurdity meter, though.

Addressing a gathering of Stanford students, alumni, and associates, three venture capitalists, Tony Perkins, Tim Draper, and Michael Moediscussed the recent economic conditions, with the bottom-line message that it is in “times like these”, when markets and economies look their bleakest, that the most successful and impactful businesses are often forged.  That’s an oldie but goodie — so far, so good.

Things go off the rails around the 13:20 mark, though.  One of the three speakers — I believe it was Tony Perkins, but these things are hard to be sure of in an ensemble podcast — relayed how Marc Andreessen (former founder of Netscape and now also a part-time investor) was talking with Charlie Rose about how the New York Times should just kill their paper version.  That’s no huge new idea, but that got Tony off on a slight tangent that led him straight into the weeds (bold emphasis mine):

A lot of the whole [dot-com] bubble period was based upon a vision of the Internet steamrolling the way people do business and creating what was then called the “New Economy”.  My theory right now is that all of those things we talked about that were going to happen, like the end of television, the end of newspapers, all that stuff that we poured a bunch of money in because we thought it was going to happen ten years ago is actually happening now.

So a lot of the destruction in the market, a lot of the jobs that are being destroyed, are jobs that are being steamrolled — a lot by the Internet — but increasingly by the “green tech” movement because entrepreneurs are looking at how we do everything, and they’re saying “how can I do that same thing in a way that is better for the environment?”.  That’s bringing the Silicon Valley mentality into the whole green space, which is super-exciting.

The reason I share your optimism is because we are the future.  Silicon Valley is the future; a lot of the jobs we’re seeing being destroyed are never going to come back, but it is our world that is causing the destruction, and therefore is going to be the one that creates the jobs.

Hey, I’m essentially a nobody, so maybe Tony’s really got the inside track, and I’m not seeing the forest for the trees.  But wow, the U.S. economy lost 598,000 jobs in January, including:

• 22,000 cut from Caterpillar
• 4,500 from Kodak
• 19,800 cut from Pfizer
• 5,000 cut from Microsoft (the first mass layoff in that company’s history)
• 2,400 cut from EMC
• 13,500 cut from Alcoa

Etc., etc.  Sorry Tony, these job losses aren’t due to Silicon Valley and VC-backed internet and green-tech companies owning the world and replacing Caterpillar’s earth movers and minimizing the need for Alcoa’s aluminum.  There are a lot of theories about why the economy is what it is of late (lending practices, creative derivative strategies, poor Federal Reserve policy, etc.), but honestly it never occurred to me that I’d come across anyone with the chutzpah to say that recent shrinkage (and reversal) of economic growth and the attendant job losses are due to internet and green-tech companies “steamrolling” the Old Economy¹.

Even more crazy to me is the notion that Silicon Valley is going to be singularly responsible for reinvigorating the economy.  It certainly has a role to play, and has had tremendous impact in the past, but from where I sit, Silicon Valley has been far too busy over the past couple of years building Web 2.0 trinkets to be ready with any kind of game-saver anytime in the near future.  Thinking (and saying) otherwise is good marketing within that particular echo-chamber, but it likely sounds like simple self-aggrandizement anywhere else.  (Hopefully there’s a stealth-mode clean energy startup that will prove me wrong on this point.)

I don’t mean to pick on Tony here.  Lots of other VCs have said similar things — it’s just that in this case, the usual VC rhetoric happens to bump up pretty hard into real-world facts and real-world struggle.  Big-picture notions about how entrepreneurship and innovation are the keys to building a stronger economy and a better world are good, but watch out for the odd notions that are borne out of the VC bubble (which seems to have its effect upon almost everyone that steps inside for a time).

My general point is simply that VCs say the darnedest things, and especially as it’s become clear that venture capital isn’t at all required (or even desirable) in many situations, one needs to be careful about how much of the VC worldview one takes to heart.

Footnotes:

¹Wow, typing “Old Economy” right there reminded me of back-in-the-day when Wired was raving on and on about the new economy and introduced The Wired Index consisting of 40 New Economy companies.  That’s classic entertainment.

View Online | Add Comment

Talk to anyone outside of the software world, and you'll quickly realize that one of the most gut-wrenching, anxiety-inducing acts is buying software. Even if one has evaluated the product in question top to bottom, past experience of bugs, botched updates, missing features, and outright failures and crashes has tempered any enthusiasm or confidence that might be felt when the time comes to pull out the credit card or write the purchase order.

Of course, the blame for this lies squarely with the software industry itself – the failures in software quality are well known, both discrete instances as well as in aggregate. Those of us whose business and livelihood are tied to the sale of software (whether sent out the door or delivered as a service) must do whatever we can to reverse this zeitgeist.

Given that, we've decided to adopt a very simple, no-nonsense "Satisfaction Guaranteed" policy for PDFTextStream. Hopefully this will help take the anxiety out of someone's day, somewhere.

This isn't a new idea, of course. Lots of software companies have had guarantees of some sort or another for ages, but I think my first encounter with the concept as a business owner was Joel Spolsky's post from a couple of years ago:

I think that our customers are nice because they’re not worried. They’re not worried because we have a ridiculously liberal return policy: “We don’t want your money if you’re not amazingly happy.”

Joel raised the issue again on a recent StackOverflow podcast, which prompted me to think about our own approach...

What do we do about unhappy customers?

To be honest, our customers are pretty happy. Of course, we occasionally receive a bug report, but we generally knock out patches within a couple of days, and sometimes faster. In the 5 years we've been selling PDFTextStream, we've never had a single request for a refund. Part of that is offering up a very liberal evaluation version, but I'd like to think it's because what we sell does the job it's meant to do very well.

Given that, I've never thought to make a big stink about a refund policy – it just never came up. But hearing Joel and Jeff talk about the ire that they felt towards various companies that refused to issue refunds when they weren't happy with something motivated me to make our de facto policy explicit. Thus, the new "Satisfaction Guaranteed" statement.

Part II: the Open Source Influence

An elephant in the room is the influence of open source software on customers' attitudes towards buying software, and the assessment of risk that goes along with it. As more and more users of technology (just to spread the net as widely as possible) are exposed and become accustomed to the value associated with open source software (which, in simple terms, is generally high because of its zero or near-zero price), it increases pressure on commercial vendors (like us) to up our game along the same vector.

But, the impact of open source software on pricing is a pretty stale story. The real impact is derivative, in that a zero or near-zero price means that the apparent risk associated with using open source software is zero or near-zero. The promise of proprietary, commercial software is that, if it does what the vendor claims (whatever that is), then that software will deliver benefits far in excess of its cost and far in excess of the aggregate benefit provided by the open source alternatives, even given the price differential.

The problem is that a lot of people only turn towards commercial options as a last resort because of the aforementioned historical failures of the software industry vis á vis quality: the apparent risk of commercial options is higher than that associated with open source options, simply because the latter's super-low price is a psychological antidote to any anxiety about quality issues. So, there's flight towards low-priced options, rather than a thorough search for optimal solutions. Injecting an explicit guarantee of performance and reliability (like our new "Satisfaction Guarantee") might be enough to tip the relative apparent risk in favor of the commercial option – or, at the very least, minimize the imbalance so that it's more likely that price won't dominate other factors (which are potentially more relevant to overall benefits).

Of course, this can only work if one's product is actually better than the open source alternatives, and by a good stretch to boot so as to compensate for the price differential. In any case, it's a win-win for the formerly-anxious software user and buyer: they should feel like they have more choice overall, and therefore have a better chance of discovering and adopting the best solution for any given problem, regardless of software licenses and distribution models.

View Online | Add Comment