Arrington's keynote at FOWA

The future Of Web Apps started with a session from TechCrunch‘s Mike Arrington.  I have heard him speak before and he moderated a panel I was on.  I am glad to say he kept his content pretty fresh and interesting.

Mike (RSS feed up to 260,000 now :-)) starts with apologising to the crowd for closing TechCrunchUK and not covering the market properly.  Remember the vaudeville ?

His talk is entitled “The Magic Formula” i.e. what’s the right formula for creating a great startup … noting immediately and rightly that most great entrepreneurs ignore these rules, alluding to Kevin Rose who seems to be sleeping late.  This feeds nicely into the recent post by Saul Klein, his “statement of intent” as it were upon joining Index (more on this later).

Mike starts with a discussion of the Bubble2.0 ($600M invested by VC in Web2) but immediately counteracting with the $1.65bn paid for YouTube (3x the overall money) and the $1bn+ reported bid on Facebook.  Bradley Horowitz, who is in the room, “can neither confirm nor deny”.  I think comparing numbers is missing the point: there aren’t enough exits.

He moves on to make the point I most agree with: the endgame is really not or flickr, the best is yet to come and is starting to emerge.

For entrepreneurs, the focus for him should be on:

  1. invent a market / destroy a market / remove friction
  2. have a business plan (he put that in to place Carson but thinks … really not)
  3. have a revenue model
  4. build it cheap, test the waters (it’s really ok if it does not scale in the early days)
  5. avoid a high burn rate (stay hungry, pretend you don’t have any money)

However… YouTube

  1. threw away their original business plan
  2. lost a founder
  3. flounted copyright law
  4. had no obvious revenue model

It worked because (a) the removed friction by providing a much needed service – IPTV (and not user generated videos) (b) first to market (c) so much growth that everything esle became irrelevant and money poured in to cover the burn rate.

Some great case studies:

  • MyBlogLog: launched October 06, acquired Jan 07, never raised a venture round, grew purely virally
  • AmieStreet: could this be the Digg of Music ?  Launched mid 2006.  Artists upload, users download, creating demand.  The price per download increase based on how many times they get downloaded, up to $0.99.  Here is a free market based pricing system for new music.  Fantastic.
  • 1800-Free-411: Free business information, place an ad before you get the phone number (highly relevant of course).  Has taken over 3% of the US market. 

Moves on to shared attributes of winners.  I’ll pass on these.  But shared attributes of losers:

  • poor founder / team choices (the early C player)
  • lifestyle / ego entrepreneurs
  • raising or spending too much money
  • over-business-plannning
  • forgot to scale (don’t be a friendster)

Opportunities identified by Mike:

  1. Online / Offline
    • Adobe Appollo (run apps offline and online seamlessly) opens so many opportunities … incredibly easy to develop (you can now do Flickr and Picasa with the same app)
    • Firefox 3.0 is working on this
    • File system + html / flash / ajax
  2. DRM and Music/Movies/TV
  3. Data and service portability (teqlo, nings, pipes) … very important for freeing user’s data, even tough no one has found a way to make money off this yet
  4. Mobile (yawn) preferably#@ going around the carriers

Some new ideas for me, some oversimplifications (raising too much money is a primary reason why people fail — I will argue that one in a separate post), overall a great session.  The guy  deserves everything  that is happening to him.

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