Brad Burnham at Union Square Ventures recently wrote an excellent blog post about the value of openness, and shares his empirical observation that there is great value in being open about your business plans as a startup. This is not a new meme, and in fact New York entrepreneur Charlie O’Donnell from Path 101, and former Union Square Ventures associate, coined the term “anti-stealth” to describe the concept of total openness when launching a new company. The idea of anti-stealth is that you tell people everything you are doing and that this will benefit your ability to execute.
Brad suggests that every time you share something about you business you will learn more than you will be giving away. In other words, in conversations about what you are doing, the informational trade balance will always be in your favor.
I generally agree with this thesis, but I do believe that, as with everything in life, there is room for nuance.
Some of the nuance I am addressing relates to level of detail. I think if you have a real estate web site idea, or an idea for how to sell books online, that there is little benefit to keeping that secret. In fact I would go as far as to say that there are very few market related ideas that are worthy of stealth. I would never say that there are no such ideas, but there certainly aren’t many. Of course the problem here is that everyone thinks *their* idea is the one idea that needs to be kept secret, so let me clarify.
The one thing I think you want to consider keeping secret are special “executional” techniques. These are often key technical or “technical-ish” insights that are hard won but easily copied. For example, imagine it has taken you 6 months to figure out the secret to building something that will cut your cost of operation by a factor of 10, or perhaps will lead to a 10x growth rate over your competitors.
Lets assume it will take you another 6 months to finish the rest of your product, but it might take an already in-market, or coming-to-market competitor a month to build it into their product. In that situation, I think you might very well be wise to keep your insight to yourself to give you a maximal opportunity to leverage it.
Admittedly, this is tricky if this insight is the key to making people interested in your business. So even in this situation it might be wise to share, but in a more cautious way. For example there is a significant difference between sharing verbally and sharing in writing where someone can pore over your every word. Providing an overview of your insight verbally might be just as beneficial as writing it down, and less risky.
For example there are certain aspects of and a certain level of detail about my current efforts that I will talk about, but will not blog about. Another technique is what I call casual compartmentalization, which is total openness, but with different people about different aspects. In many respects this is a natural behavior and not a strategy since you can’t tell everything to everybody if you don’t write it down publicly.
On another front, if your idea is something that benefits the functionality of your product but cannot be specifically observed, there may be no reason to ever share that. For example, we know Google provides great search results, but we don’t know all of their algorithms. Another example Brad uses is that we don’t know Coke’s secret recipe. There are some companies that could be appropriately described as having “secret recipe” technology, and that is indeed worthy of keeping secret.
The bottom line is I generally agree with the concept of being open and sharing. But I don’t think every single “ah ha” moment needs to be laid out in a detailed written roadmap for your existing or would be competitors. So go ahead. I agree with being open. But I don’t think that means you can’t keep a few secrets.
We’ve talked a lot about the anti-stealth movement here and on the nextNY list, and the topic has resurfaced again recently thanks to Brad Burnham’s post about the advantages of being open.
I noticed that, at least anecdotally, there was a correlation between how open entrepreneurs were with us and their ultimate success. Simply put the entrepreneurs who are aggressively open in describing their plans seem to do better than the ones who are cagey. There is absolutely no data underneath this observation. It is just my sense after meeting hundreds of entrepreneurs over 15 years as a VC. If it is true, it could be for lots of reasons. The more experienced an entrepreneur, the more likely they are to understand that ideas are rarely unique, but the ability to assemble a team and execute against that idea is rare. Perhaps they are just more confident, and it is confidence that is correlated with success. But recently, I have started to think that there might be something more going on.
Brad concludes,
[In] the markets we invest in, there seems to be a real advantage to being open. The best entrepreneurs in those markets cultivate huge networks of knowledgeable people and engage them actively to refine their ideas. The companies they build seem to share this characteristic, opening themselves by publishing source code and APIs: betting that they can thrive in an open ecosystem by being able to absorb, process, and capitalize on relevant information better than their competitors.
It has also become a common refrain that ideas are nothing without execution. As Evan put it on the AngelSoft blog,
Anyone can have an idea, but it takes a lot of effort, commitment, ability to execute, and brute force optimism to launch a company and succeed. People in a position to compete with you are few and far between, so if you're the right entrepreneur for investors to bet on, then have confidence and don't waste time worrying about who steals your idea. Its very likely that many other people already had the idea, but just didn't have the skill to act on it.
There may be more to it than just that, however. Malcolm Gladwell had an interesting article in the New Yorker that suggested that not only are ideas not unique, but showed that they are often “discovered” simultaneously by multiple parties (emphasis my own).
This phenomenon of simultaneous discovery—what science historians call “multiples”—turns out to be extremely common. One of the first comprehensive lists of multiples was put together by William Ogburn and Dorothy Thomas, in 1922, and they found a hundred and forty-eight major scientific discoveries that fit the multiple pattern. Newton and Leibniz both discovered calculus. Charles Darwin and Alfred Russel Wallace both discovered evolution. Three mathematicians “invented” decimal fractions. Oxygen was discovered by Joseph Priestley, in Wiltshire, in 1774, and by Carl Wilhelm Scheele, in Uppsala, a year earlier. Color photography was invented at the same time by Charles Cros and by Louis Ducos du Hauron, in France. Logarithms were invented by John Napier and Henry Briggs in Britain, and by Joost Bürgi in Switzerland.
…
For Ogburn and Thomas, the sheer number of multiples could mean only one thing: scientific discoveries must, in some sense, be inevitable. They must be in the air, products of the intellectual climate of a specific time and place.
Curiously, Corey and I had this exact situation about Notches. Only days I met him to discuss his idea, I was sitting around with Alex and we had the exact same idea. On the nextNY list, David Rose also gave more evidence of this phenomenon:
Indeed, at New York Angels we've seen that things tend to come in waves: one month we'll get THREE plans for premium rums, then then next month will be two real estate sales web sites and four social networks for creative professionals, and so forth.
Think about what this means this for a second: Not only are your ideas not unique and special, but it is likely that others had the same idea. Even if you hoard the idea, your competitive advantage is tenuous at best. Brad theorized that successful entrepreneurs are open (or open entrepreneurs are successful) because “every time they describe their ideas, they learn more than they reveal, no matter how much they reveal. And, as a result, they are able to concentrate insight in a way that creates a defensible advantage for them.”
Perhaps there is another element at play. When determining whether an invention satisfies the obviousness requirement of patent law, one of the key tests is whether it has been done before. One reason for this is that, by and large, nearly every invention seems obvious once revealed – so the argument is that if it were truly obvious, someone would have done it before.
So, if you operate under the assumption that the idea itself is not unique, then making it freely available may in fact discourage others from executing on it because it creates the impression that the idea itself is in fact nothing special.
Thinking back on when I laid out the reasons that we were not anti-stealth with Notches, I think this was a big part of it. We never though of the idea as the key asset, but we didn’t want to make the idea freely available until we were in a position to be able to execute on it. We weren’t quite ready in November when I wrote that, but we are now – and thus we’ve been a lot more open about the vision.
In just a few short months, the online music show LIVE@FYI has quickly become the destination for both established and up-and-coming artists. Launched in January, the show has featured some of music’s best and brightest including Josh Kelley, Backyard Tire Fire and The Wood Brothers. Today, New York City based online media company For Your Imagination announced several new artists set to appear in June in what it sure to be the start of a great summer of live music.
On June 4th, LIVE@FYI will showcase red hot independent hip-hop artist Blitz the Ambassador at 7:00 p.m. It will be the music show’s second foray into the world of hip-hop, having just recently hosted Chicago native Soulstice.
Singer-songwriter Jake Walden follows a week later on June 11th for a mid-day performance slated for 12:00 noon. The California based Walden will be in New York for appearances on Sirius Satellite Radio as well as a performance at the Rockwood Music Hall in addition to his LIVE@FYI appearance.
Hip-hop producers and recording artist Christian Rich will be featured on June 12th at 5:00 p.m. With an impressive list of production credits including tracks by Lil’ Kim, Young Gunz and Foxy Brown, the twin brother duo will be performing tracks from their forthcoming EP The Decadence.
Roadrunner recording artist The Parlor Mob will be featured on June 17th at 5:00 p.m. Currently on the road with Earl Greyhound, the New Jersey rockers just released And You Were a Crow, their full-length debut.
Inspired at an early age by DJ Jazzy Jeff and The Fresh Prince, Homeboy Sandman began rhyming at the age of nine and has quickly grown into one of New York City’s hottest independent hip-hop artists. He is scheduled to take the LIVE@FYI stage on June 19th at 4:00 p.m.
Hailing from Wales, Arista Records newcomer Paul Freeman will join the impressive list of LIVE@FYI alumni after his solo acoustic performance on Friday, June 20th. Personally signed to the label by the legendary Clive Davis, Freeman will be appearing on the show following performances at both The Living Room and The Canal Room earlier in the week.
Finally, singer-songwriter Wil Deynes steps in front of the cameras on Wednesday, June 25th at 3:00 p.m. Having recently been featured in BLENDER magazine and on NPR’s Open Mic, Deynes is steadily building an impressive east coast following.
Each episode of LIVE@FYI will be streamed live over the Internet using the live online broadcasting platform Mogulus, and consists of both a live performance as well as intimate discussions with the artists and behind the scenes moments. The show is hosted by For Your Imagination’s own Jon Johnnidis. The show can be found at www.liveatfyi.com.
Lately Comcast and Time Warner have been considering charging users extra if they go over a set limit.
Here is why I think this is a very bad move for consumers, these ISPs and the progress of the functionality on the internet:
Last week, I’ve been using the internet in a location where there is a 4GB monthly limit. When I am in New York on my cable connection, I do not even pay attention to whether the website I am on is using Ajax to pull some data in the background or if it is refreshing its content every 2 minutes, or if the website I am about to go to has lots of heavy images or auto-start videos on it.
But here, using the internet has become a mental sport of pausing before every click and fighting with the websites that refresh their content automatically, constantly. I do not get into the flow of the applications that I am using, instead I am always thinking ‘how many bytes was that’.
This is bad news for the SaaS industry. If users have the option to use Photoshop locally, they will opt to do so instead of metering up a megabyte everytime they edit their photo.
This is bad news for (social) media. Suddenly all these auto-start videos and your friend’s 1088 photos from beautiful Faroe Islands will not be easy clicks.
This is bad news for advertisers, as even Google now is considering pushing display ads and youtube is considering video-ads. Where else do the ads cost you money to see?
As related to Unype, this is bad news for all virtual worlds and Google Earth and Microsoft Virtual Earth. Everytime you move, you are pulling down a whole new set of images/models.
The worst part is, all this pausing before clicking makes for a miserable internet experience and with all the existing friction out there already for customer acquisition, you don’t want another extra thick layer of ‘how much data will squibloo pull down when I go there’.
This is bad news for these ISPs as well. A lot of customers will definitely switch over to fiber or DSL even if the limits are very high (Comcast thinking 250GB and Bend Communications already applying 100GBs). It’s not the size of the allowance in this case, rather the complete mind-shift that destroys the joys of hours of clicking-through to find the end of the internet.
Last week I caught up with the founders of NY-based Sosauce. Sosauce offers a variety of content tools including a journal, photo suite and travel report tool. The travel report tool is quite powerful with the ability to recreate your trips and let your friends and family view your trip just as you did.
Check out Sosauce product reviews on Mashable and Profy.
Below is my interview with Sosauce founders Jamie Lin, Howard Tsao and Sean Pfitzenmaier at their office in NYC. We discuss the applications that make up the Sosauce suite, the team makeup (they have a team in Taiwan as well), the Sosauce virtual world, and what makes Sosauce different than the million other blogging and photo applications on the market. They also speak about future development which includes building out their virtual world and rounding out the travel and photo applications.
Note: I've provided a few hours of consulting to the Sosauce team.
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