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Google kills another industry with Google Places

Google released a new product last week called Google Places, which aggregates onto a single page all the information you’d need to evaluated a business — address, phone number, map, photos, reviews from Yelp and Zagat and 500 other authoritative sources, and user contributed content.

Smart companies like Yelp who have built in a strong community to their product will be fine. The real threat is to straight Web 1.0 directory plays like Bedandbreakfast.com.

Thanks to the time we spent building out waffl, we learned a fair bit about the Bed & Breakfast industry. Here’s how it works:

1. The innkeepers contract their local web shop to make them a static website. Usually they look terrible. Some are 100% flash, which destroys their SEO and is a bad user experience.
2. Innkeepers then pay hundreds or thousands of dollars a year to various directory services ranging from their local chamber of commerce to directory sites like bedandbreakfast.com. It’s a Yellow Pages-like business model — you pay to have a listing on the site in hopes that you’ll get some incremental reservations as a result. You can pay extra for more prominent listings. You also pay extra if you want a link back to your own site. These directory sites spend most of their energy optimizing their site for search engines.
3. Innkeepers can sell into aggregated travel sites like Expedia and Travelocity at huge commissions, usually 25-35%.

So you can see why we decided to build waffl: we’d give innkeepers an easy self-service model to generate their own web presence, aggregate them together into a marketplace, build a community of innkeepers and B&B lovers around it, and charge a small commission on any reservations booked through waffl.

The reason why Bedandbreakfast.com and it’s ilk should be terrified of Google Places is because it basically renders them obsolete. Google is going to do a better job of organizing and presenting content from around the web, it’s closer to users (they’re already on Google searching for a B&B in North Carolina), and it’s free. Why pay $1000 a year when Google will send you more traffic at no cost? As a user, why click through to the Bedandbreakfast.com version of a page when you could stay on Google (a brand you know and trust) and get even more information?

A healthy and vibrant community is the best defense against Google. Any else can be copied and improved thanks to their scale and talent.

Part 3 is a bit boring, so posting on a Sunday morning.

This document is intended to describe all the different aspects involved with creating a Y-Combinator style startup incubator, sometimes called a startup accelerator. This should be considered a living document, to be shared and improved upon by anyone reading it. Edit the document here. I’ve attempted to break things down into discrete buckets: Sponsors and Investors, Investment Thesis, Application and Interviews, Founding Team, Investment Terms, Office Requirements, Mentorship, Partners and Advisors, Speakers, Demo Day, Post-incubator experience, Community Building, and When Things Go Wrong.

Read Part 1.

Read Part 2.

Application, Interviews, and Founding Team

What are the most important questions to ask on an application and during an interview? Many VCs say that the founding team is more important than the idea, and many strong founding teams bounce from one idea to another before settling on a winner. So what makes a strong founding team?

For Internet companies, the two most important roles are product design and engineering. The product person needs to know how to understand customers, see opportunities, build a fantastic solution, and respond to feedback. The engineer needs to know how to do everything, from network infrastructure to database administration to HTML, Javascript, and CSS. This person needs to understand scaling and system architecture. And most importantly, these people must be willing to iterate, pivot, and understand that "perfection is the enemy of good". There needs to be a clear CEO, usually the product person. And that’s it. 2-3 people is the ideal size. Teams that are larger have higher coordination costs (more meetings), higher capital requirements, and can be slower to react and execute. 

Investment Terms

The standard terms for startup incubators are $5000 per founder plus $5000 for the company for a 3 month program. The startups also receive free legal and accounting services for the duration of the program, although certain requests like patent applications are not covered. In return, the program receives 6% common stock (no preferential or voting rights).

Two questions come to mind: Is $5000 the right amount, given the cost of living? Is a duration of 3 months optimal, given the program’s business model?

I would also recommend providing design services (or consulting) in addition to legal and accounting services. Design is a crucial part of making great first impressions and creating lasting passionate users. It’s not something the Y-Combinator model offers, but I think it’s just as important.

Office Requirements

The following make an ideal office:

• Fast, reliable internet
• Easy access to lots of power outlets
• 24 hr access (or close to it)
• Tons of whiteboards and supplies
• Guaranteed access to conference rooms (with conference phones and whiteboards and internet)
• Printer, scanner, fax, phone

Mentorship

Having a great mentor can make or break a startup. A great mentor has serious dedication to the team: they can meet in person, once a week, they will travel to the team, and will always take emails and phone calls. A great mentor has relevant experience, especially in areas where the founding team is naturally weak. Generally, this will be in the business end of things: commercialization, marketing, sales, and biz-dev. The goal of the mentor is to provide perspective and pull teams "out of the weeds". Many product + engineering strong teams get so enamored with building the product that they forget to do marketing and sales. Mentors should not be compensated with cash, although it is interesting to consider a small equity grant.

Partners and Advisors

The culture of the program starts with the partners. The commitment and work ethic of the partners will rub off on the younger teams. If the partners are around, they can more easily answer questions and provide guidance. The partners can also more easily gauge the progress of the various teams. Are any in danger of failing? 

It can also be beneficial to have a pool of advisors, available to all teams, each with a different specialty and connections. While these advisors are not expected to put forward the same level of commitment as the mentors, they can have valuable domain expertise in areas like banking, community management, sales, fundraising, etc.

Memo to Start-ups: You’re Supposed to Be Changing the World, Remember?

Sarah Lacy asks where all of the billion dollar startups have gone and chastises entrepreneurs for playing it too safe.

I think what she’s seeing is an artifact of the TechCrunch50 requirements — you must launch at TC50 — and the fact that you can’t bootstrap a billion dollar business. 

The next huge idea, like Better Place, takes a lot of VC money. The kind of money that gets noticed and written about on TechCrunch. Which disqualifies you from TechCrunch50. Nobody raises $50 million dollars in stealth mode anymore. 

Bootstrapping it yourself or taking a $500k investment leaves you open to a Mint.com like exit – a life changing amount of money and no VC around to veto the deal because they aren’t seeing a big enough ROI. 

I’d like to see Sarah Lacy turn down $170 Million after 3 years of work.

Whitney had a post about his lack of enthusiasm for Twitter’s API and platform potential. I’m actually quite bullish on Twitter because of their decision to include geo data and expand their support for hyperlocal search. For the same reasons I’ll explain below, I’m also extremely bullish on foursquare.

Targeted hyperlocal advertising has been the holy grail for several years now. I think Twitter and foursquare finally have a successful model in reach. When you check in somewhere with foursquare, it’s the perfect opportunity for a store down the block to buy an ad that says "Come in and mention ‘foursquare’ to get 10% off". The same is true (with slightly different mechanics) if tweets can be individually coded with location data. 

The potential for local small businesses to be able to attract foot traffic in this way is huge. Interestingly, it does make Chris Dixon’s point about competition between complements even more appropriate.

Redbeacon wins TechCrunch50. Huh?

I admit, I’m surprised. The idea is that Redbeacon will amass a directory full of small businesses (gardeners, maids, and personal trainers to start, they say) and allow customers to book appointments online while reading reviews and whatnot. 

Great! The problem is, how are you going to get Joe the Plumber to sign up? By calling him and doing direct sales? How about the other 20 million small businesses in the US?

They plan on rolling out in San Francisco first, which is smart, because it will allow them to quickly realize how impossible it is to reach gardeners and maids and convince them to sign up for an internet service. Not to be crass or mean, but how many gardeners and maids do you think are internet savvy enough to discover a new internet startup? How many are proficient English speakers?

The company is founded by a bunch of ex-Googlers, which sounds nice until you think about how poorly Google tends to do community and small business plays. 

I wish them luck. If I were them, I would try and do a deal with YellowPages.com or something – someone who has already amassed hundreds of thousands of small businesses (using their 5000 person sales teams) – and do a revshare on the lead gen fees (if that’s the revenue model).