SocialStartups.com

A couple of days ago, I had a phone call with a partner of an early stage VC firm whose portfolio is filled with successful startups you've heard of. Halfway through our conversation, they told me: "We only invest in companies that believe they can be worth $1 billion dollars. If you think you'd be happy with $50-100 million, you're not the right company for us. The companies we invest in generate $100,000 per month in revenue within 6-12 months of launch, and $1 million per month in revenue by 1 year after that. How do you plan to do that?"

What?

I was shocked. I can't think of a single non-ecommerce startup that can boast $100k in monthly revenues within 6-12 months of launch AND were creating a new market. Not Google. Not Facebook. Not Twitter. Not Yahoo. Maybe Apple? Microsoft?

As Steve Blank so eloquently says, when you are creating a new market, you have no idea how long the flat part of the hockey stick really is. That's because you are creating a new product that people don't even know they want, because they've never seen anything like it before. And you are creating something based on a mountain of assumptions, because you don't know what people will want once they know they want something. 

This is all to say, choose your investors wisely. 

(NB — This partner, by the way, has never started their own company or worked at a startup.)

A couple of days ago, I had a phone call with a partner of an early stage VC firm whose portfolio is filled with successful startups you've heard of. Halfway through our conversation, they told me: "We only invest in companies that believe they can be worth $1 billion dollars. If you think you'd be happy with $50-100 million, you're not the right company for us. The companies we invest in generate $100,000 per month in revenue within 6-12 months of launch, and $1 million per month in revenue by 1 year after that. How do you plan to do that?"

What?

I was shocked. I can't think of a single non-ecommerce startup that can boast $100k in monthly revenues within 6-12 months of launch AND were creating a new market. Not Google. Not Facebook. Not Twitter. Not Yahoo. Maybe Apple? Microsoft?

As Steve Blank so eloquently says, when you are creating a new market, you have no idea how long the flat part of the hockey stick really is. That's because you are creating a new product that people don't even know they want, because they've never seen anything like it before. And you are creating something based on a mountain of assumptions, because you don't know what people will want once they know they want something. 

This is all to say, choose your investors wisely. 

(NB — This partner, by the way, has never started their own company or worked at a startup.)

For the first time since November 2008, I'm getting a paycheck today. It's not much ($930.46) and 1/5th of what I used to be paid, but I'll take it. Needless to say, I have no money left and credit card bills to pay, so it's coming at a good time.

Being an entrepreneur means sacrifice. I gave up my $3000/month beautiful Brooklyn loft for splitting a 2 bedroom with 3 people in Bayonne, NJ for $300/month. I was without health insurance for 15 months. And I can't tell you just how much I appreciate J for putting up with living in Bayonne when I know she misses NYC and hates the commute.

Being an entrepreneur means being comfortable living on the edge. Last March, when I was still in Brooklyn, I had a $3000 rent check due in 2 weeks, and I didn't have the money to pay it. And yet, you find a way. I was able to secure an investor and pay my rent on time.

Being an entrepreneur means riding a rollercoaster. One day in December, we're celebrating because an angel investor told us he wanted to put in $200,000. Over the following weeks, we agree to a price and terms, and then he pulls out. From what Chris Dixon writes, this is more common than it should be. In the end, though, I think it was the best thing that could have happened to us.

Being an entrepreneur means compromise. Having no money means you can't buy what you want, go out to eat whenever you want, travel wherever you want. But in return, you get to create something meaningful, be your own boss, and love what you do.

I wouldn't have it any other way.

Tumblr recently redesigned their dashboard and added a spot that showcases one post from the Tumblr Radar, which is Tumblr's editorial selection of the most interesting / popular posts on Tumblr right now.

I suspect they are using the spot to collect data on how engaged Tumblr users are with the spot in order to entice advertisers. Let's say that on average, posts in that spot get 1 million unique views per day and 700 million impressions. Furthermore, you could say that posts in that spot get thousands of likes and reblogs and followers.

That would be a pretty compelling reason to convince a business to become a paying Tumblr user. Sure, you get the free blog (and Tumblr will help you design it all pretty), but you also get the super sekret analytics that will tell you how many people are reading your posts via the Tumblr dashboard. And, you'll get the opportunity to PAY to have your posts be featured in that spot. (Only genuine, value-added posts will be approved of course. You don't want to obviously be an ad. The Newsweek Tumblr is a positive example.)

I love it. I think it's a great idea, and I expect Tumblr will make a nice amount of money off of it. I don't know if they'll make enough millions though… but it might be enough to get them acquired by AOL or News Corp.

What do you think?

Here are my predictions for 2010:

1. Badges and game mechanics – Driven by the success of foursquare and Farmville, everyone is going to want badges and game mechanics embedded in their apps. Hell, we might do it, too. Not only do well-tuned game mechanics increase engagement, it also increases user exploration and education. Of course, it's easy to do it badly, and the results are not pleasant (see: Digg's leaderboard). Josh Porter has a good post on leaderboards.
2. Social media spreads deep within organizations – This is one of the bets we're making at Postling. The idea is that representing your organization on social media sites like Twitter will spread beyond the marketing department or the corporate communications / PR department. What if your salesperson at Bergdorf Goodman or Topshop had a twitter account and could provide fashion advice or tell you about sales? What if the chef at your local gourmet restaurant shared photos on his flickr account in addition to the blog and twitter account the restaurant manager may use? What if your local car mechanic posted short videos explaining what he was fixing and how it all works while the car dealership posts news about events, sales, and recalls?
3. A brief tech bubble – I think the financial markets are going to tick up a bit (although temporarily, as consumers still have more debt than they can manage) and VCs are going to be pushing for returns since their funds have done horribly over the last decade. You'll see some M&A and a couple IPOs (Facebook, Yelp, or Zynga, anyone?) in the rush to get liquidity before the window snaps shut. Also, some smart deals made by early stage firms like First Round and USV are going to see some sizable follow-on rounds.
4. Social media content as advertising – This one might not happen until 2011, but it's starting with HuffPo and VentureHacks. Basically, social media content – created to educate and inform – is the next form of brand / display advertising. Banner ads don't work, but how about blog posts or tweets? Bloggers have known that their content builds their brand reputation for years now, but I predict in 2010 we will finally see serious ad spend shifted into content creation. Next up: social media content ad networks. Postling will be there.
5. Rise of incubators and early stage funds by giant firms - In an effort to save themselves from almost certain death thanks to the sheer size of their funds ($1 Billion) coupled with the tiny amounts of capital needed to fund internet startups (< $1 million), the big funds will shrink in half and try to invest in early stage startups. Related to #3, this means it will be easier for new startups to get funding, but many won't get the support they need because the big funds simply do not have enough time / manpower to give their full attention to each of their investments. Why? Because to satisfy their investors, they need to return a huge amount of money, and they need to invest in hundreds of early stage startups (at $500k a pop) to have a chance. Eventually the big funds will give up and either shrink down to <$200 million or turn their focus to pharma, cleantech, and other life sciences investments. 

So that's my tech and startups predictions for 2010. What are yours?