Back in January, we raised about $150,000 from friends & family – my mentor from DreamIt Ventures, my old Amazon VP, my parents, a friend from college, Jeremy Arnon (a bizdev guy I met at NYTM) and his twin brother, and a Wall St. banker who is the best friend of Josh (my new business development guy). We considered doing convertible debt, but ended up pricing the round. (Happy to explain that in a future post if anyone is interested).

Our excellent lawyer (Jay Rand, Manatt) put a clause in the term sheet that gave us 60 days after the close to fill out the round, which officially closed February 4th. Smart move, considering we just filled up the round today, 57 days later. 

Then, Venturehacks launched AngelList, which changed everything.

AngelList is a collection of amazing angel investors, all waiting for your brilliant idea. You fill out an application and, if you're awesome enough, your application will be sent out to everyone on the list. You'll then be introduced personally over email to anyone who is interested.

As reported by Venturehacks, we sent out our application once, touting our idea of "social media management for businesses", got 8 fantastic introductions, and were ultimately funded by David Rose and Chris Yeh. The Venturehacks guys came back to us and said, "We want to send your application back out onto AngelList with the added social proof of being invested." 

To give you some context, over the last 3 months, we followed the Customer Development methodology and went outside of the building. And we found that the social media management tools space was commoditizing quickly, with everyone concentrating on selling to a small sliver at the top (media companies, PR, agency, etc). We also met with VCs, who gave us the same feedback. So it was time to pivot.

So we pivoted (explained in the GigaOm post, but I'll say more soon), and sent the new direction to AngelList. And this is where the craziness started.

My first phone call was with Tom McInerney, 3 hours before I was flying out to SXSW. After about a 30 minute phone call, Tom was in. He then introduced me to his friend Paige Craig, who would also be at SXSW. I met Paige in Austin, and after meeting, he told me he was in. The next day, at a Venturehacks meetup at the Four Seasons hotel, he pulled over Dave McClure. We went out to the balcony (he wanted a cigarette) and I pitched him. He was in. The following day, I spoke with Thomas Korte, who moved up our scheduled phone call a couple days once he heard Dave was investing, and he was in. I also got an email introduction via my friend Russ (founder of SeatGeek) about his investor Kal Vepuri, who was also at SXSW. Kal and I spoke on the balcony of the Austin Convention Center, and I was blown away by his intelligence and humility. So Kal was in. Finally, my friend Michael Galpert of Aviary connected me with Gary Vaynerchuk, who is a perfect investor for us given what he is passionate about (social media for businesses). David Cohen finished off our round not too long after that.

So that's it. Through a combination of a great team (Chris & Haim founded Etsy), customer development, responding to feedback, AngelList, networking, and being able to articulate a compelling vision backed by domain expertise, I was able to raise $200k in the 6 days of SXSW! 

If you have any questions, leave a comment or email me at david.lifson@gmail.com. Thanks!

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.)

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.)

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?

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? 

I was chatting with my friend Dan Nelson today after bumping into him at the Cornell Music Department library. He’s currently a Ph.D student at UPenn studying musical composition. He threw an idea at me and, after some collaboration, we came up with something akin to a Flickr for composed music.

It would work like this:

Everyone who registers gets a tumblog. (Side note: I love Tumblr. I thought about apologizing to everyone who keeps hearing me implement ideas with Tumblr, but I’m not going to. They deserve it for a job well done.)

Composers will use their tumblogs to publish 2 things. One, an mp3 of their composition. Two, a PDF of the score. Composers are encouraged to tag their content for improved discovery.

Everyone can use their tumblr dashboard to follow composers they like and heart music they like. Everyone can also use their tumblogs to re-blog music they particularly like and post about their experience with the music they’ve discovered.

Like Flickr, people can search for music or composers. Like Flickr, you can explore the most interesting compositions. And most importantly, like Flickr, you can pay to have a hard copy printed, bound, and mailed directly to you.

Your market is anyone who buys sheet music – basically every school and private music teacher in the country (and internationally). Sure, some people would just print out the PDFs for free, but I bet enough schools and teachers would pay for the nicely published and bound parts and score to make a profit. Like Chris Anderson has been saying since he wrote the Long Tail, you can be successful even if only a minority of your users pay.

If successful, what we will have done is broken the pre-Internet strangehold of the major publishing houses and academic elitism on composed music, similar to what Vimeo is doing for video and Etsy is doing for handmade goods. Something I thought about when I was at Etsy that applies here is, “An audience for every artist.” We can create a forum for quality composed music with a long tail. We can use social aggregation instead of editorial fiat to discovery great music. We can empower people to try their hand at composition even if they are a one-hit-wonder.

If anyone is interested in helping Dan build this company, please contact me – david.lifson at gmail – and I’ll pass your name along. It’s super simple, engineering-wise; Tumblr’s API is free and easy to use, storing the data and metadata is easy, slap a search index on the data, and you’re done. All that would be left is to set up a business partnership with a printing company like Subito Music, and the task of getting the word out and building up a community. And really, how many startups these days come with a business model, not to mention a highly targeted audience and a trove of user preference data.

But wait – there is a way out. Bonus – it works with any social network that lets you programmatically get a user’s friend list, like Facebook does.

The way out requires 3 steps.

1. Build a compelling application that gets even more compelling if the user registers with your web site. (Really, this should always be step 1, no matter what you are trying to do.)

2. When the user registers, record their social network user ID.

3. See if any of that user’s friends have already installed your application. If so, invite them to connect on your site.

The linchpin is, of course, nailing step 1. Once you’ve got that one down, make your #1 metric application adoption. The more adoption of your application, the more times you can ask your users to connect with their friends.

Message them with something like this: “We’ve just discovered that your friend Joe is a Foo.com customer/user/member. We know this because you are friends with Joe on Facebook/MySpace/LinkedIn. Would you like to connect with Joe?”

Now you’re on your way to building a modified copy of that user’s social network on your site – modified in that the connections she chooses to create are relevant to her experience on your site. Plus, it works for any site, not just Facebook, so the more sites that offer what Facebook offers, the better off you are.

There seem to be some dismal lessons in these stories. It appears the ideal startup will give away something that used to cost money for free (preferably copyright material and porn), use other people’s content and resources, appeal to the baser human instincts (especially vanity and sex), and spam massive e-mail lists at launch.

He uses Skype, YouTube, Facebook, HotOrNot and MySpace as examples.

I think there is something to this – give away something that used to cost money and do it using other people’s content and resources. Brilliant! The second half (appealing to vanity/sex and spam) is just about getting traffic.

P2P television is the next thing that fits this bill, in my opinion. Provide cable TV for free, using other people’s machines to distribute it.