(Image via CC, a-m-photo @ flickr)

Don’t be a clone! At least, if you want to get any attention from customers or investors.

I frequently run into companies which (deliberately or not) are essentially a clone of another, existing startup out there in the world. It’s often not intentional, but I find frequently I get pitches from companies who are talking about doing something which someone has already done, or is well ahead of them in executing upon. Now, being first doesn’t mean you’ll be the most successful, but it’s usually way too late after someone has already staked out a credible presence in the market. (I’m just waiting for the rash of the “We’re the next Facebook” startups to emerge in the next few months, after their IPO filing this week).

Why shouldn’t you start up a company that is a nearly direct clone of a service already out there? There’s a million reasons, but among them are: 1. They’re out there already with their service, and you’re not. 2. If there’s an established competitor, unless you add something significantly (and I emphasize, significantly) better, people are unlikely to switch 3. If you intend to get financing, investors are very, very reluctant to fund something which is a direct clone of a market leader.

How to avoid becoming a clone?

1. Do your research. Look around at technology news websites. Do some searching on the Internet. Conduct market research. Understand what the competitive environment is, and who is doing things similar to what you are doing, what success they are having (or not!), whether what you are bringing to the table is adding value in some way. A cursory search of sites such as ours for keywords related to your business may turn up dozens of startups doing similar things.

2. Lend your own unique twist to the market. Develop your own unique twist to the market, figuring out a better, faster, cheaper way to accomplish something. Think like your end users/customers, and develop a solution to solve their problems. Don’t just add a feature because some other website has that feature; don’t make your site behave just like another one to follow their lead. Understand why you’d want to do something some way, and add value to your business.

3. Talk to your customers. Talk to customers, and understand your market by interacting with the people you are serving. Understand and response to their needs, rather than just following the leader in the market. You might find that the so-called “leader” in the market doens’t understand what users truly want and need. You might find a unique niche that the companies you had thought about cloning are ignoring.

4. Ask would-be investors for feedback. Talk to investors (both angels and venture investors) — not to ask them for money, but for advice. Ask them if they’ve seen folks working on something similar. Usually, investors will tip you off if they’ve seen a dozen people trying to do what you are doing–they might not tell you who, but they might say “that idea is not original” or “you’re too simliar to what others are doing”. Entrepreneurs often are devastated by the idea that other people might have the same ideas they have, but if you’ve been in this business long enough you find there are always 2 or 3 companies thinking the same kinds of things. They key is–that’s fine, if you are ahead of the curve, know how to execute, and bring a unique twist to the market. But, if you’re behind in execution, aren’t offering anything new, and are just a “new and improved XYZ”, you’re going to need to rethink your plans.

5. Be original. The best way to avoid becoming a clone, is don’t define your startup as being the next-best-evolution-of-something-big. Very infrequently are the evolutionary advances of a competitor going to make a company successful. Most successful companies I talk with have something different and unique, fill a gap in the market that isn’t being filled, provide a service people need and can’t find anywhere else. Really, if you just want to clone a business, you should be opening a franchise, not a technology startup!

Being a clone (at least in the startup-company sense) is really a dead end, and rarely do clones get funding or traction. So, don’t be a clone!

Filed under:
Advice by Benjamin Kuo

An interesting debate has been bouncing around the Internet over the last week about “Killing Hollywood”–where not a few folks in Silicon Valley (spurred by SOPA) have called for Silicon Valley doing its best to put “Hollywood” out of business. The problem, I think, is that there is a clear delineation between “Hollywood”–the old business model–and “Hollywood”–the creative talent, and one does not equal the other.

As Miles Beckett of EQAL describes well in his post Hollywood is Dead. Long Live Hollywood today, part of Silicon Beach’s momentum is driven by a new generation of companies who are taking the business of Hollywood (creating entertainment and content), and applying it to the online world. What’s significant — and which has not been noted before in the bid to “Kill Hollywood“–is that local innovators are already turning the model around, and instead of the heavyweight, expensive, insular, and obsolete models of the old Tinseltown, are already figuring out how to work outside of the Hollywood model, and instead, setting up shop in Silicon Beach and creating content and entertainment without the licensing, overhead, and cumbersome issues related to the old studio model.

With respect to Aaron Levie of Box.net (a fellow USC alum), who talks about having companies in Silicon Valley create something where “the creative and cultural influences of LA are amplified by the innovations of SF” - What most people do not realize is that even within the Los Angeles area, this is already happening. We’re not waiting for a “Silicon Valley” startup to make this happen, we’re already doing it ourselves. There is a huge split between traditional Hollywood studios, and the innovators and startups who are already upending the industry here. Unlike our Silicon Valley brethren, companies here indeed do have the advantage of access to the talent, content creators, and creativity. As much as Silicon Valley tends to attract technical talent and startups, does Hollywood still attract the best actors, filmmakers, and creative folks. However, our advantage in Los Angeles is that we also–like Silicon Valley–have a healthy dose of technology in our veins, from a long legacy of our own technology startups and companies. How soon we forget that our own “Valley” spawned many a company in the electronics, telecommunications equipment, disk drive, and other high tech industry, and of a huge talent pool in more traditional technology industries across the region. Or how many technology heavy videogame makers and studios make their home here. Or  even, how many technology (not content) startups reside locally.

It’s very similar to how social gaming and casual games have turned over the videogame industry (itself, creating an entertainment industry nearly as large as Hollywood, with its own multimillion dollar budgets for a game) — which means changing how you play the game, how  you get to market, and what models you follow (or don’t follow). Just as page layout software, fonts, and graphics created the revolution in desktop publishing, the tools of today are already creating a revolution in the content creation business.

A quick glance at the YouTube top channels list is a who’s who of Los Angeles, content startups — very few of whom are part of the old guard of Hollywood studios –including  Machinima, Maker Studios, and Demand Media. But even beyond the traditional, long form content, you have folks like Break Media — which has built a healthy business on funny videos, “fails”, and even its own content — who aren’t using the traditional models of studios but are arguably still part of the creative, Hollywood machine. You have  JibJab.com, which creates immensely entertaining content, but monetizes through e-cards and other premium features. You have WEMO Media, with The Blu, tapping the creative talent of the video game industry, Hollywood, and technology to create an online world. You have iStoryTime, using the iPhone and creating entertainment content for children. None of these startups rely on the old fashioned world of Hollywood studios, licensing, and hierarchy which annoys the technology world so much.

Filed under:
Hollywood, Silicon Valley by Benjamin Kuo

The folks over at the Technology Council of Southern California (TCOSC) have passed on a discount to their upcoming, January 31st event for anyone reading this blog. If you use the code BOD12, you’ll gain entry to the event for $35, a $20 discount from the normal registration fee. Info below, and you can register online:

Digital Media Society

“The Digital Data Revolution”

January 31 , 2012

Location:
Sheraton Four Points
5990 Green Valley Circle
Culver City, CA 90230

The Digital Data Revolution

The amount of data available to businesses has been increasing exponentially. Data mining and analyzing large data sets-so-called big data-is becoming a competitive advantage, creating productivity growth, innovation, and consumer value in both B2B and B2C worlds. In addition, there are more places to mine data– think of the millions of consumers using social networks–and increasingly sophisticated tools for doing so. The data revolution has important financial, social and legal implications. All business leaders need to understand the implications of big data, not just line managers or analytics geeks. The increasing availability and granularity of information about customers will create opportunities, but is also disruptive and raises privacy concerns.
Join us for an evening where we bring local leaders in this emerging area together to discuss all of these issues.

Speakers:

Marc Crandall, Senior Manager, Global Compliance, Enterprise, Google
David Bakula, SVP, Analytics, Nielsen/SoundScan
Craig Benner, VP Sales, SpecificMedia
Tom Larkin, CEO, Share Magnet
Richard Neff, President, Neff Law Firm
Jeff Zwelling, CEO, Convertro

Moderator:

Ned Sherman, CEO, Publisher & Executive Editor, Digital Media Wire

Filed under:
Advertising, Conferences by Benjamin Kuo

For any entrepreneurs looking to get some visibility for their company, the folks over at DOMAINfest Global, the domain name conference run by Oversee.net, have extended the deadline for their PitchFest competition. The PitchFest competition will be judged by such folks as John Morris of the Tech Coast Angels, Jeff Cohn (DeadCellZones.com,PhotoEnforced.com) Scott Jarus (j2 Global, Oversee.net), and myself. The deadline is now January 24th. You can apply on the DOMAINfest Pitchfest site.

One interesting thing I’ve learned over the years watching Oversee.net grow, and interacting with the domain name folks at their conference, is how surprisingly lucrative the domain business can be–and how savvy they are on what does and does not make money on the Internet. Although the industry is pretty hush-hush about the fortunes made in domain names, there are many angel investors and high net worth angels involved in the industry.

btw, the keynote this year at DomainFest is by Twitter’s Biz Stone.

Filed under:
Angel Investing, Conferences by Benjamin Kuo

It sounds like the National Venture Capital Association is looking to start a campaign to try to straighten out the mess which has come out as Republican candidate Mitt Romney has started to be referred to as a venture capitalist (or to his fellow Republican candidates, “vulture capitalist”). All politics aside, for anyone who regularly covers venture capital and private equity, they are not the same thing. It brings to mind a great line in Mel Brooks’ Robin Hood, with Mel Brooks (as Rabbi Tuckman) and Patrick Stewart (King Richard):

King Richard: Hold this, Father.
Rabbi Tuckman: Rabbi.
King Richard: Whatever.
Rabbi Tuckman: It’s good to be the king.
King Richard: Now you may marry them
Rabbi Tuckman: Thank you. Here’s your knife.
King Richard: Sword.
Rabbi Tuckman: Whatever.

We track both private equity and venture capital deals, and although the general public might have some confusion between the two (hey, those guys just have lots of money and invest in companies, don’t they?) It’s pretty much night and day on how they operate and at what level. A quick (simple minded) primer, for the uninitiated (ignoring some subtleties and details, of course):

A venture capitalist:

1. Generally invests in brand new, startup businesses, with little revenue (and often only an idea).

2. Only puts a small amount of money to work (ie from a few hundred thousand to a few million dollars).

3. Focuses almost exclusively on technology areas, on new markets or startups revolutionizing a market.

4. Usually invests the dollars of private investors (LPs), such as pension funds, wealthy individuals, etc.

5. Do not, generally, used debt and leverage to finance firms.

A private equity firm usually:

1. Invests in growing, established businesses (or in some cases, struggling, established businesses.)

2. Usually invests multi millions of dollars (sometimes hundreds of millions)

3. Invests across all kinds of industries (technology, grocery stores, consumer products, manufacturers, importers, retail companies, youname it).

4. Usually invests their own money or those of wealth individuals.

5. Often (though not exclusively) will leverage debt to buy those companies (those when that fails, or when companies end up saddled with debt, tends to drive people crazy – ie LBOs).

Both venture capitalists and private equity firms — when they are successful — can create jobs, and often very effectively. They also, if their companies do not succeed, can also destroy jobs (though that’s not their intent). Yes, private equity does sometimes result in layoffs, as they restructure their portfolio companies, but there are very few I know in the industry who are doing this because they salivate over cutting jobs–everyone I know is interested in instead building and making those companies bigger and better.

Filed under:
Finance by Benjamin Kuo

There’s an infographic floating around this morning where the folks in New York (Silicon Alley) compare and contrast their list of startups with Silicon Valley. (yeah, we’ve been there before).

It is, with great amusement, that I see one of the highly touted “Silicon Valley” companies on the infographic: Hulu

I suppose, to those East of the Mississipi, that Los Angeles is “out there somewhere” in California, and thus, part of Silicon Valley. But, I suspect if you ask anyone at Hulu they wouldn’t consider themselves part of Silicon Valley. (they might, however, consider themselves to not only be part of the LA tech ecosystem, but part of the technology corridor in the Pacific Northwest–given they have some presence in Seattle).

Anyway, it is just with some amusement that I point this out — it takes me back much one of the original reasons I started socalTECH, which was to highlight Southern California’s tech companies after reading a couple of articles  talking about how Southern California had no tech companies, and the in an article to it talking about the hugely successful, “Silicon Valley” company taking the world by storm, Broadcom. (Yes, Broadcom is in Irvine, which is in Orange County).

Filed under:
Silicon Valley by Benjamin Kuo

“You will be assimilated. “ The Borg, Star Trek

It fascinated me to see the move Google made today — announced in their blog — to further cram Google+, the firm’s social networking service, into its mainline search results. Google said that it would start using information from Google+ posts from your friends and circles to personalize results seen by users when they search directly from Google. Now, you might say–that’s a great idea! I trust the opinions of my friends/family much more than anyone else! I’d rather see photos of my buddy’s trip to Venezuela, than any tour guide out there! But my first thought was of The Borg in Star Trek, that alien race which used cybernetics to hyperconnect their entire race, turning any civilization they encountered into a collective, hive-connected organism.

Why would I say that? Perhaps its because I live in a world of entrepreneurs, who make their bread and butter not on thinking the same, but–as the Apple ad campaign so successfully proclaimed–to “Think Different.” Although some might prefer to lean on their friends for guidance on all parts of their life (I think many kids today can’t decide what socks to wear without texting or tweeting their friends for advice)–it’s amazingly easy to draw such a narrow view of the world, drawn from only your narrow scope of friends, that your understanding of the world is blotted out by a herd/hive mentality. Most (if not all) successful entrepreneurs I know were successful because they did NOT just do what all their friends did, that they went beyond what was expected of them and struck out on their own path, something completely unaccepted, in most cases, by their peers.

If, as Google appears to be encouraging, I leaned on the opinions of my original “social network” as I was growing up for all the answers to life (where to vacation, where to go to school, what to do as a job): 1. I never would have gone to college — it just wasn’t trendy, almost none of the people I knew thought highly of it, and I even had a middle school counseler highly discouraging me to attend college. 2. I’d never had left my home state and headed to California, hoping to become part of the tech industry — because everyone I knew in my “circles” said you shouldn’t leave the state or go to college. 3. I’d never, ever start a business — too risky — and I’d find a big company and not make too many waves, because that’s what all of my peers were doing.  My peers and friends were all great people, but leaning so heavily on their opinions would not get me very far. I think that’s the case with any entrepeneur, who–by definition–have taken a different path, one not seen by the “masses”, who are doing something that is just not what “everyone else” thinks.

The promise and wonder of the world of the original Internet search engines was the ability to pull up information, from across the world, about any subject, any time. Freed from the narrow realms of what books you might have on hand, the (often) inaccurate information of friends and co-workers, Google allowed users to instead go out to the wider world, expand their horizons, and broaden their knowledge of the world. Now, what Google has done, is it’s reversed that wonderful feature of Internet search, and instead–brought us back to the narrow world we started in.

Filed under:
Google by Benjamin Kuo

I don’t know about you, but the creeping “let’s make everything social” trend disappoints me. I was reminded on how everyone wants to make everything social today by both Google and Facebook–first, with Google jamming Google+ into its Google Contacts and Gmail services, and Facebook adding a “Subscribe” button so that readers of websites can “follow” contributors to the site.

In part, I think these are just Google-wanting-to-be-Facebook, and Facebook-wanting-to-be-everywhere, and maybe I’m just a curmudgeon, but really, does knowing what my venture capital friends are listening to on Spotify really going to help me land a round for my company? Do I really have to know what the hundreds of people I am connected to Facebook are reading at any particular moment? Do my readers really want to follow me on Facebook to know where I ate for lunch? Does everyone who gets our daily emails really want to see my mug every morning, in addition to their news?

In part, I think the problem is that I’ve got my worlds in life separated into compartments, and Google and Facebook think I don’t. I also like to use Google’s Gmail and Contacts as a utility, not as entertainment, and this “social” stuff is too much entertainment and not as much utility. Google is convinced I want to see a photo of all of the people emailing me and to interact with them on a real-time basis, and see their intimate thoughts and blog posts on everything. Facebook thinks every social detail of my contacts (hey, Joe just had lunch with Mary! Bill just flew to Dallas! Wanda and John are having a Christmas party! Sam just biked 10 miles! Jill just watched a funny video!) is worthy of my immediate attention. Maybe it’s the scale of things; I get hundreds of emails a day, have thousands of contacts, and there’s only so much attention someone can give to so many people.

Maybe it’s just Google and Facebook are trying to apply things you might care about on a close, social scale (ie best friends) to every darn person you’ve ever met. While it might be great for me to know your favorite vacation spots if you’re a good buddy, I can’t think of a reason why I need to know that about every entrepeneur I’ve ever met. While I might have a group I share music tastes with, I can almost guarantee you that my music tastes are neither relevant or useful to entrepreneurs, venture capitalists, attorneys, or my dentist. Maybe it just feels like all this social stuff is trying to lump me into a bucket with all of my contacts, where we aren’t (yes, some entrepreneurs hang out together, but not all entrepreneurs like the same music, wear the same fashions, support the same political candidates, or like the same beer!). I know Google+ is designed to let you dice/slice/cut/chop your contacts into different segments, but it feels more like Google is trying to use everything else it has (search, email, etc.)  and whacking it with a big Google+ hammer to try to wrench your social networking attention away from Facebook, no matter how useful it might be.

So how should this work instead? Let me decide how social I want an experience to be. If I want my Gmail to be just like Facebook, let me turn on all the social features. If I want it to be more like Outlook and not include any social features, so be it. If I really want to know the 150 tracks my business contacts are listening to at any moment in time, let me turn that on–or more likely, off. Let me have better controls to dampen out the kind of information I am getting from contacts (moving jobs, good; moving mouse, not good). Don’t mix business and pleasure. Favor useful information over raw data. Reduce, not increase, the amount of extraneous information flowing through the system. Automatically default to less social, not more social.

Where am I going with this? I don’t know, but I do know this: don’t make your app or website social just because you can, or because everyone else is doing it: make it social because it’s useful.

Filed under:
Random by Benjamin Kuo

We’ve had a few people inquire about discount codes to the upcoming Digital Family Reunion event happening in Santa Monica, so I thought I’d post it here in case you haven’t gotten one (of many floating around from lots of organizations). Our promo code for the discounted rate is DFR53.

Digital Family Reunion ’11 Holiday Party
Thursday, December 8th, 2011
Wokcano Restaurant, Santa Monica, CA
http://www.digitalfamilyinc.com/dfr/2011

We are all connected. Plug in. Celebrate.

For the fourth year running, we’ll celebrate the connectedness of our vibrant digital media industry in Southern California at the fourth annual Digital Family Reunion. Whether you were there at the beginning, lived through the dot-com era, emerged after the crash or started your career in digital yesterday, you are a part of the Digital Family.

And you are invited to participate in the industry’s holiday event of the season, where the most dynamic and well-connected media, entertainment, technology and finance professionals in Southern California gather each year in celebration of our industry and each other.

REGISTER NOW!
http://www.witi.com/regforms/digital_family_registration_form_DFR11.php?id=2768

Tickets $50, or $30 with industry association discount code

Passed appetizers, no-host bar, Entertainment

Tabletop demos $1,000 and other custom sponsorships are available: info@digitalfamilyinc.com

Associations and media partners, please contact us today: info@digitalfamilyinc.com

Our family is large. Please help us by inviting your clan via Facebook or follow us on Twitter.

http://www.facebook.com/pages/Digital-Family/72851853465

http://twitter.com/digitalfamily

For more information visit: http://www.digitalfamilyinc.com

Filed under:
Events by Benjamin Kuo

(photo courtesy Peter E. Lee @ Flickr)

I was on a panel last night with Nate Redmond of Rustic Canyon Ventures, and Alex Maleki of Idealab’s New Venture Group in Pasadena (thanks to Matthew DeBord at KPCC) and one of the audience members asked an interesting question, one that I hear often from MBA students, which is: how you become a venture capitalist? I told him (only half jokingly) that you can build a billion dollar business, sell it or take it to the public markets, and then you can become a venture capitalist.

In my observation of the industry over the years, venture capitalists do not follow any specified career path to what they do; I would liken them more to an artist or musician in how they ended up where they are–it’s not the school you went to, what job you held, but often how you manage to manifest your talent as a VC. Yes, VCs typically have technical, engineering, and strong business and finance backgrounds; they’ve often worked in high tech companies in business development. But, they might have been a CEO, maybe a successful angel investor, maybe an attorney working on venture deals, or something else entirely. You can’t go to school and take a course and be a certified VC; venture capital firms rarely advertise positions. Unlike, say, private equity or Wall Street, there are not more traditional paths to join venture capital firms (a shrinking industry, mind you). Learning finance and the structure of deals is one thing; but picking the right companies, cultivating the right network of industry contacts; understanding the market opportunities are all “on the job” or maybe even instinctual things for successful VCs.

So, what do you do if you’re trying to break into the business? As an observer of the business (take my advice as you would the advice in golf of someone between a rabid fan and a caddy–with their own opinion which club to use on a particular shot), I think the biggest advice I’d give is that sometimes, the most direct route to your destination is not a straight line.

So, if you can’t just apply to become a venture capitalist, what do you do? If I were you, I would:

1. Get to know the technology. Venture capital and technology are synonymous, and so is a deep understanding of how technology works. A deep technical background helps — engineering backgrounds are highly valued — but a degree is not required, only very good understanding of what is and isn’t possible, how to ferret out what does and does not work, ability to judge if a technical team can or cannot execute, and if what they are trying to do is possible. Every successful VC I’ve ever met understands technology and how it works, and has a broad understanding of the underpinnings of venture backed companies. More folks with a technical background are in the business than not.

2. Become a deal broker and networker. In most cases, the VCs I meet are consummate networkers. They know how to meet people, how to establish and grow relationships, buy and sell companies, and broker deals. Some of them have undoubtedly done this since they were born, others honed their skills (often) doing business development for both large and small companies, and some picked it up through angel investing, or through working at a venture capital firm. This tends to be important because deal flow is the lifeblood of venture capital. It’s also important for selling or helping to sell your portfolio companies; and for raising money from LPs. Sure, not all venture capitalists are the strongest here — but it looks to be an important component of the job.

3. Be a part of something successful (or nearly successful). Many, many venture capitalists I run into were part of a successful exit (or exits) of venture backed companies before they were venture capitalists. Those VCs may not have been founders of those companies (though they often were), but were on the inside in making a venture backed company succeed, whether on the business, technical, or finance end of things. This is where you learn the nuts and bolts of what makes a successful venture backed company, a key skill if you want to be a venture capitalist. If you can be part of the deal team which sells or takes a company public, all the better. They key is understanding the dynamics of companies and how they interact with venture capital, and the  company building process.

4. Understand the mechanics of the venture capital. Start learning about the mechanics of venture capital, mergers and acquisitions, and other tools of the trade. Understand term sheets, valuation, stock options, and as much of the venture business as you can. You can do this through reading books, following blogs, and talking regularly with venture capitalists. The more of this you learn–before you enter the business–the better.

5. Work your way into the business. Because getting into venture capital does not have a clear path, you most likely will have to work your way into the business somehow via a nondirect route. The venture capitalists I’ve met have had very varied backgrounds; I’ve met a number who were in business development; a few engineers who gained MBAs and moved from doing due diligence for firms to doing actual deals; a few who had become recruiters for executives; many CEOs who had been successful in their prior companies and had moved to the venture deals side; successful angel investors who have parlayed that success into a real fund; and a number who were at high tech companies doing strategic investments, who made the leap into their own firm. What does seem mostly to be in common is they worked their way into the business along the way; they may have been an engineer at a high tech company, might have been doing marketing and business development,managed products for a startup;  but they always seemed to me doing something closer and closer to the skill set needed for venture capital.

If you’re interested in more on the panel last night, you can read Matthew DeBord’s article on it here, or listen to the full event audio.

Filed under:
Advice by Benjamin Kuo