Thoughts in Time

Came across a really interesting company - Multiverse. They are building a MMOG platform that they propose will make it easy for independent game developers to develop MMOG’s… MMOG stands for Massive Multi-Player Online Game. These are the digital worlds that people play in (usually for some monthly subscription fee). This type of business is very interesting as they are creating a platform where developers can create digital assets that create value for the developer adn the user. I’ve had an interest in this since I was 10…. it’s nice to see it becoming a reality. The idea of a common platform for these games is also very powerful.

I received an email from a friend that many people have probably received. “Is this true? I really hope not…”It asked. Below was a forwarded email talking about how Osama Bin Laden was identified by Ollie North at his hearings as being evil and that north had suggested the US assasinate Bin Laden. With about 20 seconds of research I was able to ascertain that the email was not even close to true. North did not mention Bin Laden, but rather Abu Nidal, and certainly did not suggest an assasination. Further the email claimed that the questioner was Al Gore - again, not true at all. But here was someone I know is smart forwarding me this message, very willing, in fact kind of wanting to believe that it was true.

This got me thinking more about the power of word of mouth and star wars. This will sound funny, but if WOM is “the force” that is the most powerful persuader of people to believe in a cause, buy a product, or choose one service over another, then there are certainly is a dark and light side to “the force”. Because we are much more willing to accept, and trust information that we receive from a friend, colleague, or contact WOM is a powerful engine for spreading false rumors. Fast Company, in their cover article on blogging really honed in on this fact. When a rumor is circulated and spread from person to person, blog to blog, people are willing to accept it with almost no research. When an authority (newspaper, company the rumor is about, person who it’s about, expert) refutes the rumors, they are almost universally questioned. The information that comes from a friend is accepted as true with little or no fact checking while the information from a source that has everything to lose if they lie is questioned… This leads to an interesting dicotomy. Companies like Higher One use WOM in our advertising, work with an organization like WOMMA to define a code of ethics, and use it and promte it to others. Individuals do not have this code, or any sort of governing mechanism. There is the essence of an idea here - at least for blogs. Perhaps what we need is better self regulation. We need a “personal WOM” code of ethics, and then an enforcement mechanism. Since blogs seem to be a way that the dark side of WOM gains a lot of power, perhaps a plug-in / truth / community rating tool is what’s needed. There is more here, but understanding how powerful WOM and it’s dark side is a good start.

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Here’s an idea that I have had that I haven’t seen expressed clearly. WOMMA had the “word of mouth vs. advertising” conference in New York, and there has been debate amongst advertisers and agencies about how to weigh one versus the other. My idea is that advertising and marketing function at different parts of the buy cycle. Consider a very simple buy cycle for a consumer and simple hi-tech product - say a digital camera.

1. The consumer sees an article in a magazine, a print ad, or an ad on TV
2. The consumer decides that they would like to purchase a digital camera
3. The consumer starts to research their purchse
4. The consumer talks to a friend or trusted source who they think is knowledgable about the product to get recommendations
5. The consumer buys the recommended product (he or she might or might not confirm the friend’s recommendation).

Of course, the 1. could also be initiated by a friend talking about a product, or seeing a friend or colleague use a product.

The key point is that advertising creates interest in a product or product segment, but WOM will have a greater impact on the exact product that the consumer ultimately chooses. It’s about where you want to create leverage. It’s also a great way that entrepreneurs can use WOM to enter established markets and gain market share. Make a product that consumers love - and you’ve essentially taken the market created through the mainstream players advertising spend, and then captured the consumers desire and converted them to a customer through your happy customer’s advocacy.

So I posted two days ago about my podcasting experience and it got me thinking about doctors and a transcription service… then yesterday I got a business plan from one of our angel investors for exactly that business. They’re already profitable and are just starting their growth curve….Guess I’ll have to seriously consider putting some money where my mouth is. More to come…

On Thursday of last week Mark and I presented at the Tech Com III - a venture capital / entrepreneurship event hosted by the Connecticut Venture Group . We talked about Higher One - from idea to profitibility, or, as I think I’ll talk about it from now on - From Olive Garden to Olives….

It was fun. Frank Marco - who’s been such a wonderful friend and resource as one of our attorneys for Higher One was the moderator for the panel. One of the questions he asked was about seed capital, and what he we thought Connecticut could do to help….

As I’ve been involved in the entrepreneurial scene in CT for more than 7 years, I’ve come to realize that there is one large misconception that is shared by a lot of people. Connecticut, as most people know, and Geico likes to remind us, is the richest state in the union. Since we’re not the most populous state, one can surmise that there must be many wealthy people in CT. The thinking then goes - aha - if we can get these wealthy individuals interested in angel investing, we’ll help stimulate connecticut’s technology economy - right?

In my opinion, that’s wrong. Angel investing, and more importantly, succesful angel investing, is not about having money (ok - if you don’t have money you can’t do it - but just because you do have money doesn’t mean you can or will). It’s about having an understanding of what you’re investing in, and how to best help that investment become a full fledged enterprise. First, there is a problem with what most folks in CT see as angel investing. When the company has revenue, a product on the market, and is looking for money to grow, that’s early stage investing. Angel investing is funding a team, or individual with a product, a business plan, and a compelling vision. Usually there should be a demo, or other forms of proof of concept. Perhaps they have letters of intent from potential customers… If it’s a web based business, perhaps a beta of the software has been scrapped together and there are usage and business model milestones that have been met (but without significant revenue).

Now there are some people in CT who do this sort of investing(AIF has some good people) - most are succesful entrepreneurs who understand that once they’ve invested they need to contribute their network and ideas to the founding team to help it move forward (the network is probably the biggest way to assist). Overall, however, people in CT have made their money through conservative businesses such as banking and insurance. How do you make money in those businesses - this is an over simplification - but generally you have a lot of money, invest it and make a little bit on a lot. These are very risk averse businesses (far from hi-tech companies) and thus people who have become accreditted through wealth they’ve created through their careers are not the most likely to jump into angel investing in hi tech startups.

Ok - so that’ s the problem. What can CT do. Here are some ideas
1. Create incentives to bring entrepreneurs to CT (tax credits for capital gains related to new businesses), free or cheap space (the incubator network is a good start)
2. Create incentives for angel investors to invest or also move to CT (again I’m sure certain tax incentives could be created)
3. Woo technology companies to base in CT where potential entrepreneurs may emerge from (look at how many software businesses have sprung out of Microsoft - also, San Diego’s whole biotech economy can pretty much be traced back to my acquaintance Tim Wollaeger and the folks at Hybritech.

There are probably more ideas - but the basic idea is that the best angel investors are entrepreneurs who created wealth through creating new businesses. They understand the risks, the work, and the potential rewards. Rather than trying to convert CT’s wealth to this type of early stage investor, I think the state should try to focus on how to create this type of person, keep him or her here, or woo him or her from other environs… after all, CT is a great place to live - why shouldn’t it be a great place to start-up.

At dinner the other night, Dean suggested an interesting idea. The idea of “the perfect post”. What is a perfect post? Basically it’s a post that ends a string of comments on a blog or message board, essentially killing the thread. We dubbed this “threadkilling”…. seems like a challenge, and kind of a fun game. Why not turn it into an idea and share it with the blogosphere….So here it is, and I’m going to launch www.ThreadKill.com to focus on that idea and share the gossible of stopping stupid conversations on the internet… If you want to participate, let me know.