EarlyStageVC

A Special Interest in Targeting the Blogosphere

One of the more interesting aspects of being a VC is the seeing the change in the entrepreneurial zeitgeist as it flows through our deal funnel. Startup activity is a form of collective consciousness.  I am repeatedly surprised by the co-occurrence of similar ideas from startup teams who have no connection to each other.   

This vantage point also provides a perspective on the go to market process as seen by entrepreneurs.  I’d like to discuss one pattern I have seen played out repeatedly over the past year.  It is summarized in the following exchange:

VC: So tell me, what’s your go to market strategy?
Entrepreneur: We are going to target bloggers, because they are early adopters.

I have heard this from prospective business partners as well as my own portfolio companies.

• This was an insightful answer in 2003. 
• It was an adequate first step in early 2005.
• But it is meaningless in 2007.

Today there are over 57M blogs (including spam). That makes the blogosphere the 24th largest country in the world, ahead of South Korea and only slightly behind France, the U.K., and Italy.

Consider the following substitution:

VC: So tell me, what’s your go to market strategy?
Entrepreneur: We are going to target [the entire population of South Korea – every man, woman, and child] because they are early adopters.

That’s not a target; that’s a universe. The only person who should be taken seriously when they say targeting a population of 57M is Kim Jong-Il.   Everyone else needs more focus. So let me offer a way to focus the answer. The target is the pivotal fraction of that universe that is critical in achieving your goals.  Even if it’s 0.1% of the blogosphere, that’s still 114,000 bloggers!

What is really a target in the context of this go-to-market question? A target has at least the following properties:

• - It is relatively homogenous in its perception of and response to Newco’s product (that’s why it’s a target and not a set of targets)
• - It is addressable by a limited number of actionable sales or marketing decisions (that’s why you can focus on them)
• - It offers some strategic or operational advantage over alternative choices (they are the most relevant population.)

How should we think about bloggers in this context?  Are they the media? Are they customers? Perhaps.  But bloggers are also just another form of indirect distribution.  They are the value-added resellers of the 21st Century, taking a widget here and a gadget there, to differentiate what they have to offer to their ‘customers.’ Your challenge is to be that widget or gadget in their blog – to have them integrate you into their online product.

So how will you define, attract, motivate and retain your online channel?  That’s the question that is running through my head when I hear “target the blogosphere.”

Fortunately, value-added reselling is a time-honored method of building a business.  There are even some parallels from the recent past. Return with us now to the thrilling days of yesteryear.  There used to be interesting organizations called software companies and, they, too, used indirect distribution.  They roamed the earth freely, devouring budgets with abandon, until the comet hit in the year 2000.  We can learn lessons about successful methods of indirect distribution from the fossilized records they left for us.

Lesson One:
Match the channel with the product. Understand what skills, motivations, reputation, resources, and reach a reseller must have to deliver your product to their customer.
Webspeak: Segment the blogosphere and profile your intended community.

Lesson Two:
Segmentation only matters if you can actually figure out how to attract, qualify, recruit the right partners.
Webspeak: Know how to find these people on the Web; what they read, what search terms they use, etc.

Lesson Three:
Try to get adopted by some existing network of resellers, rather than build your own.
Webspeak: Find existing communities of interest or purpose.

Lesson Four:
Indirect distributors don’t do missionary work for you.  They piggyback on your initial success and amplify it.   
Webspeak:  Use guerilla efforts to lead to (what usually only in retrospect appears to have become) viral marketing or network effects, i.e. success.

Lesson Five:
Give the channel a real ROI.  Demonstrate how they can achieve their goals through you. 
Webspeak: Affiliates.

A lot of the Web 2.0 conversation (and the echo) is about democratization and access.  It is mostly applied to content and media.  Perhaps a more important consequence is that it is the democratization of distribution.  As we have learned all too well, small, homogeneous, and motivated communities called special interest groups can drive democracies.

What’s your go-to-market? How will you find your special interest group in the democratized world of online distribution?

My Second Job

A few weeks ago I wrote a long post about our recent investment in Abgenial.  One thing I didn't mention is that I am the Interim CEO of Abgenial.  The cash comp is lousy, but the karmic compensation is great. 

Rafael launched the blog today in which he blew my cover. So I felt compelled to add a commentary as a company perspective.  Don't look there for an explanation of Abgenial, yet.  It's more of a statement of what Abgenial is not.  Most of all, Abgenial is not a YAMP - Yet Another Mashup Platform. 

I promise to keep my day job and my second job editorially separate.  I will continue to write here as EarlystageVC, with the same lengthy and infrequent posts on venture capital, entrepreneurship, and the Web as I always have.  The blog at Abgenial will be an advocacy blog -- speaking from an Abgenial POV  to whomever cares to listen.  Hopefully I will accomplish my #1 MBO at Abgenial and replace myself soon with a new, improved CEO.  Then I can stay back in my day job, watching others have all the fun, and swoop in once a month for a few hours and tell everyone how the run the business, i.e. be a VC. ;-)

Invited to Blog

Matt Marshall at the SJ Mercury's Siliconbeat invited me to offer my $0.02 on the passing of Knight Ridder today.  There are many more thoughtful commentators on the reconstruction of the media than me. Fred  Wilson's recent posts are especially good.  But I appreciate Matt giving me a larger microphone than my little blog.  Today Siliconbeat - Tomorrow the Wall Street Journal ... time for me to wake up now.

Infrequent and vague - Everything you want in a blog

Andrew Fife was kind enough to include me on a list of favorite bloggers.  In doing so, he also said

…I only wish he would post more often. Peter is sometimes a bit vague but he is a must read for early-stage entrepreneurs.

I also ran into someone at Supernova who said she had just read my blog and, she said “You write long posts.  That’s a lot work!"

So at the risk of this becoming another epic,  I thought maybe I should tell you why I blog and what my inner rules are. After all, it’s your attention you’re spending.  You should know what you’re buying…

First, I decided to start blogging initially as a promotional thing.  One of my CEOs told me about 18 months ago that the real attraction of a “name VC” was the reflected credibility for the new startup.  Startups need to recruit/partner/etc. and its harder when they have to explain why their backers are just as unknown as they are.  (Brand awareness is a proxy for quality in my business, though the correlation is actually quite low.)

I actually don’t think I’ve made much of a dent in this goal.  Yes, there are a few thousand people who now recognize the name that I was teased about mercilessly as a kid. And I am really glad that my “Peter+Rip” Google pagerank is finally higher than this guy. But the lack of an IPO market has made it much harder for VCs to build brand names these past 6 years and it’s the high visibility IPOs that bestow perceived Midas powers to VCs (and the exceptionally rare $B M&A).  In the grand scheme, the needle has barely twitched.

As my last post suggested, over time I have moved into using my blog as a form of thinking out loud about themes in my professional life.  This has three effects.  It forces me to be more structured, which is inherently good. Second, it opens me up to conversations with people who can help advance my thinking.  More on this in a second.  Third, it reinforces something that I think is important and missing in much of the VC/entrepreneur dialog  - transparency.   

Transparency and advancing thinking are somewhat at odds.  VCs traffic in ideas.  The worst will misappropriate insights and compete with companies they have seen.   I don’t personally know anyone who has done this, but I do know people who feel is has been done to them by VCs.  Many times I have declined or stopped a meeting when I thought it was too close to something I was already working on.  We had one such event last week. This is an inherent risk in a business whose premise is to sift through many possible futures to find the one that will actually occur.

When I say “traffic” in ideas, I mean we see and hear lots of things.  Like any creative process, sometimes 1+1+1=blue zebra.  The blue zebra is the insight that emerges from seeing enough pieces.  The challenge is to share something without giving away all the value.  So my compromise is to tell the world that 1+1+1=something equine.   What is vague to many, is sufficiently clear for a few to have them deduce it’s a zebra and it must be blue.   So I apologize if I sometimes seem too vague.  It’s my form of idea encryption and it arises from this tension between transparency and competitive insight.

Aside from these guidelines,  I have some editorial standards.  I don’t think the world needs another blogger starting a conversation about a conversation about a blog post.  So you rarely see me cite other blogs.  I only want to contribute what I think  is an original thought.  But this also leads me to blog (1) infrequently and (2) in fairly lengthy posts.

I guess the length could be shorter.  I probably need a good editor.  But I like to tell a story or follow a chain of logic when I can.  I also like to ‘fool around’ with the occasional wisecrack.  Hopefully they are clever enough not to seem insipid. 

Finally, I write with an awareness than everything on the Web is eternal – thanks to both Brewster Kahle and the Google cache.  So I want to be proud of what I say and how I say it. More people know the digital me than the analog me.  So the digital me is more me than I am. Plus my secret (no more) fantasy is that Fortune or Forbes or The Onion will ask me to become a regular contributor.  So, I really try to craft something that is worth the 3-7 minutes of your life than you have given me. 

Overall, I try to entertain and inform you, because I find it satisfies and improves me. 

Thanks for taking the time, again.

And, thanks again, Andrew.