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Saturday, June 12, 2010

The Latest from TechCrunch

The Latest from TechCrunch

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Is Entrepreneurship Just About the Exit?

Posted: 12 Jun 2010 06:33 AM PDT

David Park and Eric Bahn are earning more at their startup, called Beat The GMAT, than they ever did in the corporate world. Every penny of profit from the business goes directly into their bank accounts. They enjoy being their own bosses; have become experts in sales, marketing, customer support, computer programming and graphic design; feel good about helping students gain admission to business school; and are grateful that they can spend their time doing things rather than discussing things—because they don't answer to anyone. Why should they sell their business and be back to working for companies like Intuit or McKinsey & Co., they ask?

Ryan Sit, who runs a website called Picclick.com, feels the same way. His visual sales site attracts 300,000 unique visitors per month and generates millions in product sales for eBay and Etsy sellers—netting him a healthy six-figure income. He works from home and spends as much time as he wants to with his two small children and wife.  Ryan cherishes the freedom to do anything he wants—like experimenting with new website ideas. The last thing he wants to do is to raise capital or merge with a bigger company. "You become a slave when you are funded, and having lots of employees is just a pain", Ryan says.

What business schools teach, and the conventional wisdom in Silicon Valley, is that a tech startup must have a clearly defined exit strategy and focus all of its energy on reaching this final goal. In other words, entrepreneurship is all about the exit—wealth needs to be built by taking the company public or selling it to a larger player. Before any Angel or VC invests in a business, he evaluates its exit strategies and cross-examines the entrepreneur to make sure that he/she isn't even thinking of building a "lifestyle business" (the ultimate sin). VCs include terms like "demand registration rights" in their funding contracts. These terms give the right to force a company to go public, in case the founder succumbs to the temptation to live off the profits of the company rather than exit. So growth becomes more important than profit; the destination—an exit—becomes more important than the journey; and the employees are simply a means to an end.

But must this be so?  Technology entrepreneur and strategy consultant Sramana Mitra asks a great question: "What if the idea of exit was removed from the equation… what if the investor and entrepreneur agreed to a different model—the model of sharing dividends"? She says the mathematics is simple: if a $500,000 investment helped in building a $10 million-a-year company with 20% profit year after year—which is entirely possible—angel investors would collect several million dollars in dividends. And entrepreneurs would build companies that they can nurture over a longer period, and "enjoy".

This makes a lot of sense for many of the entrepreneurs that I know. Yes, some of my friends are highly ambitious and need to try to build a Google or a Zynga. But most will be happy to build a lifestyle business that pays the bills and lets them learn, grow, and "enjoy" the entrepreneurial journey. They would rather build wealth slowly and steadily than live in fear of investors’ forcing them to bring in another CEO, or to take the company down the wrong path. This revealing interview with Tony Hsieh of Zappos shows the pressure that even the most competent company founders face.

Sramana has started a program called 1M/1M—which aims to help 1 million entrepreneurs reach 1 million dollars in revenue by teaching them the fundamentals of bootstrapping, customer validation, and positioning. This is done through a series of online strategy roundtables—a reality show of sorts, where she coaches five entrepreneurs per session, with up to a thousand others listening. And Sramana is trying to persuade Angel investors to look more closely at companies that can be profitable and produce dividends but will never scale to be the next Google

Do all "enjoyable" business have to be small, like the ones that Sramana is nurturing? Certainly not. Take the example of Hannon Hill, which develops a web-content-management system called Cascade Server. David Cummings started the company as an undergrad at Duke in late 2000, and has grown it and the spin-offs to over six million dollars in revenue. It employs 51 people. He says his company has grown every year since inception; he has no co-founders, no investors, and no desire to exit. David is investing a major part of his profits in growth because he sees the potential to build a hundred-million-dollar business.  And he gets to build a company with an “awesome corporate culture”, pay himself a “nice” salary, and work on fun projects.

And then there is SAS Institute, of Cary, NC. Founded by Jim Goodnight and John Sall in 1976, the business-intelligence and customer-relationship-management software company has grown to be a highly profitable $2.3 billion-dollar business. When Jim showed me around his campus a few years ago, he took great pride in the rare artwork that his company had accumulated, as well as the benefits SAS provides its employees—like two on-site childcare centers; an employee-health-care center; wellness programs, which include a 58,000-square-foot recreation and fitness center; "eldercare" programs for parents of employees; and soda fountains and snacks in every break room. No wonder SAS is always rated as one of the best places to work in America. Jim doesn't have to apologize to anyone for putting the needs and welfare of his employees ahead of profits. In turn, his employees reciprocate with hard work and dedication: SAS's turnover rates are the lowest in the industry.

I may be glorifying lifestyle businesses a little more than I should. It is never easy to build a profitable business, and there are many risks. Without input from shrewd investors who keep their ears to the ground, a company risks rapid obsolescence. Technology changes very fast, and you can go from boom to bust overnight. If David Park and Eric Bahn were to get a respectable purchase offer from rival GMAT test-prep companies like Kaplan or The Princeton Review, I would advise them to sell. With a few million dollars in the bank, they will have the luxury of starting a new business without fear of having their families suffer in case they fail. They can follow Jim Goodnight's path when they have financial security.

I also don't want to discourage entrepreneurs from being ambitious. I say they should shoot for the moon. The point I want to make is that if you build a company with the right values, you are more likely to be successful and enjoy the journey than if you just focus on the exit—and that it is okay trade a little bit of ambition for happiness.

Editor's note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com.

Facebook: Calacanis Is Lying

Posted: 11 Jun 2010 11:02 PM PDT

Well, this is getting more interesting. This morning, we reported that Jason Calacanis’ Facebook account was still active, despite his very public deletion of the account about 20 days ago. When he found out about this, Calacanis sent an angry email to Facebook CEO Mark Zuckerberg, COO Sheryl Sandberg (and copied us on it). According to him, third party sites were keeping this account active — a move which seems pretty sketchy. We reached out to Facebook to get a statement, and they’ve finally responded. According to them, basically, Calacanis is lying.

Facebook engineer Mike Vernal left a comment on our original post this morning. Facebook VP of Communications Elliot Schrage then emailed us, pointing us to the comment. I’ll copy of those messages below, but first let’s recap what Calacanis said.

In his email (to Zuckerberg and Sandberg) Calacanis wrote, “Seems my personal Facebook got turned back on by a 3rd party service that logged into it.” After we printed that (with his permission), he later clarified, “the third party sites didn't turn it back on… i needed to login to a 3rd party site that i used FB connect on (i think last week)… might have been an iphone app, i can't remember. so then my account goes back on and all the connected services start flooding it.

Obviously, the second statement contradicts the first, but this is sort of confusing stuff for any user. Maybe Calacanis just stated it poorly the first time. But both explanations are impossible according to Facebook. According to them, the only way Calacanis’ profile was still active was if he logged into his account and explicitly asked for it not to be deleted.

Here’s what Vernal wrote in the comment (I’ve highlighted the key parts):

Greetings, all. I’m an engineer at Facebook who wanted to offer up a little bit of context on this post.

With account deletion, we wait 14 days between receiving the request and deleting the account. This is based on extensive feedback from people who contact us shortly after deleting their account asking for a way to recover their accounts. Since deletion is irreversible, this allows people to log back in and proactively cancel their deletion request within the 14 day window. This timeframe also gives us time to ensure people are able to be notified of their deletion request in the event that the request was made maliciously by someone who has access to the person’s login credentials.

In this situation, we've investigated and concluded that all of our policies were followed. We don't get into specifics about individual users but in theory, the only way someone would be able to log back in to Facebook or another website with their Facebook information is if they had cancelled their deletion request before the 14 day window expired.

In other words, Facebook is saying that the only way a user would be able to log in to another site with Facebook information is if they actually cancelled their deletion request. This directly contradicts what Calacanis said to us in his clarification.

Meanwhile, Schrage wrote to us (I’ve highlighted the key parts):

I think it merits an update to your post.  Just to repeat — the only way someone would be able to log back in to Facebook or another website with their Facebook information is if they had cancelled their deletion request before the 14 day window expired.   This would NOT happen if some third party site automatically pings your profile.

This last sentence directly contradicts Calacanis’ original statement. So either way, Facebook is effectively saying that Calacanis is lying. They’re saying that there’s no way a third-party site could have kept his account active. And there’s no way he could have kept it active by logging into a third-party site (through Connect) without him explicitly canceling his deletion request first.

Just to make sure, we understood exactly what they were saying, we wrote back to Schrage, “wow. you sure about this? once this is out it can’t go back in.” He has yet to respond — and he’s usually very good about that. So we’ll take that as a “yes.”

The key part of this is: “In this situation, we've investigated” — so Facebook specifically looked into what happened with Calacanis’ account before making that statement. They humorously (and for legal purposes, no doubt) say “in theory” — but they’re actually saying that they looked into it, and Calacanis (or someone with access to his account) cancelled the deletion process.

We’ve notified Calacanis of Facebook’s statement and will obviously update when if hear back.

Apple Hits 10,000 iPad Apps — Store Doubled In The Past Six Weeks

Posted: 11 Jun 2010 10:03 PM PDT

During his keynote address at WWDC on Monday, Apple CEO Steve Jobs rattled off some key statistics. Among them was that there are 8,500 native iPad apps. Actually, at the time, Apple had over 9,000, but we’ll let that slide. How do I know how many app there were? Because unlike other stores Apple oversees, they actually posts the number of apps available for the iPad. And that number just hit 10,000.

If you go to the App Store app on the iPad and click on the “Release Date” area, you can see the total for yourself. Along the top of that area, it will read “1 – 12 of xxxx” — “xxxx” being the current number of apps that are built to run on the iPad.

Back at the end of April, it was reported that Apple was approaching 5,000 iPad apps (actually, they were past that number at the time). That means that in about six weeks, the iPad App Store has doubled in size. Given the iPad’s stellar sales, this is hardly a surprise.

Recently though, a number of developers have noted a long-than-usual wait time for app approvals. One is Reeder, an awesome iPad feed reading app (which was just approved after waiting for a couple weeks). One reason for the delay is likely that Apple is trying to get iOS 4-compatible apps approved in time for the launch of that OS (and the new iPhone 4) in a couple of weeks.

Hulu Founding CTO Eric Feng Leaving For KPCB, Al Gore

Posted: 11 Jun 2010 03:51 PM PDT

Hulu’s founding CTO Eric Feng is leaving the streaming video company he helped turn into one of the web’s most popular video portals. Feng will be joining Kleiner Perkins Caufield & Byers as a Partner focusing on greentech, and will also start serving as former Vice President Al Gore’s tech advisor.  He will remain at Hulu until July 16, when he will be replaced by Rich Tom, who will take over Hulu’s technology platform, and Eugene Wei, who will take over the “audience business” including the Hulu.com website. Christina Lee, Hulu’s director of corporate communications (and Feng’s wife), will be leaving as well.

Feng and Hulu CEO Jason Kilar just announced the news on the Hulu blog.

The news comes at a time when the future of Hulu is uncertain. Reports increasingly point to the service turning to a premium subscription model, with an increased focus on providing content to devices like the iPad and Xbox. The messaging around the departure is that this was simply a great opportunity for Feng and didn’t have anything to do with Hulu’s current status, but it’s hard to take that entirely at face value.

Here’s an excerpt from the Hulu blog post:

It's with a jumble of feelings that I'm announcing I will be leaving Hulu this summer and joining the incredibly talented Kleiner Perkins Caufield & Byers team as a partner and technical advisor to former Vice President Al Gore. I've been able to share this news with many of you personally, but for others it may come as a surprise. For me, it's still a surprise, and I've known about this longer than anyone.

Leaving Hulu was a difficult decision. My time here has been the most exciting, challenging and rewarding professional experience of my life. I could not be more proud of all that we've accomplished from our inauspicious beginning in the summer of 2007, to becoming the PC World product of the year, a Fast Company most innovative company, a Time Magazine invention of the year, and, most importantly, a brand that millions of people are so passionate about. From two team members to two hundred, from Beijing to Los Angeles, from an idea to a real sustainable business, working at Hulu has truly been a once-in-a-lifetime privilege. However I've recently been blessed with a rare and unexpected thing in life: a *twice* in a lifetime privilege.

Through coincidence and good fortune that continues to humble me, I've been offered the chance to contribute to the amazing innovation Kleiner Perkins Caufield & Byers is helping pioneer, from new Internet and mobility ventures to life science breakthroughs to solutions for the Global Warming climate crisis. I'm eager to continue exploring my passion for digital technologies, and I've long aspired to become involved in the transformative solutions around greentech. I just never knew how or when that might happen until now. And I never thought now would come this soon.

Here’s an email Feng just sent to some friends who don’t work at Hulu:

Hi everyone,

The following email may come as a surprise to many of you — it’s been a surprise to me that I’m even writing it.

But after spending the past 3 years developing Hulu, testing Hulu, launching Hulu, growing Hulu, living Hulu, and breathing Hulu, I’m doing something I never thought I’d be doing — leaving Hulu.

Today we are announcing that I will be moving to San Francisco and joining the talented Kleiner, Perkins, Caulfield, and Byers team as a partner and technical advisor to Vice President Al Gore. Hulu has published a blog posting that has more info about this transition: http://blog.hulu.com/2010/06/11/a-thank-you-for-3-years-of-innovation/ .

While I’m thrilled to be a part of the KPCB team and look forward to new adventures in the Bay, I’ll certainly miss the Hulu family, which has been a true privilege to be a part of. And a large part of that privilege has been the opportunity to meet, correspond, collaborate, and work with you during my time here. Thank you all for your great support over the years.

My last day at Hulu will be 7/16, and after that you can reach me anytime at ——-. Although my email will change, my appreciation and respect for you will not and I hope we’ll be able to work together again in the future.

Best wishes and my sincere thanks,


Join The TechCrunch Birthday Party NOW

Posted: 11 Jun 2010 03:22 PM PDT

Just in case you haven’t heard, TechCrunch is turning the big 5 today. In honor of this celebration there will be 363 meetups with more than 4,440 people across 79 countries, including Australia, China, Israel, Malaysia and Romania. Here, at the TechCrunch headquarters in our new San Francisco office, we will be holding our own birthday bash, complete with cakes, tacos, an assortment of beverages and of course, a livestream. We will stream our event from 5:35 pm to 7:00 pm, featuring interviews with our guests and members of the TechCrunch family. Watch here.

You can also check out our New York meetup here, featuring our co-editor Erick Schonfeld.

Update: Closing time. Birthday cake consumed, favorite TechCrunch stories exchanged, but alas, all good things must come to an end. We’ve taken down the feed. Until the 6th!

YouTube Teams With IGN To Broadcast E3, Continues To Ramp Up Live Streaming

Posted: 11 Jun 2010 02:35 PM PDT

Next week, the world’s leading video game makers and throngs of fans and press will unite for E3, which is generally regarded as the most prominent annual gaming-focused news event. And this year, fans will be able to watch live, thanks to a live stream that’s being broadcast through a partnership between YouTube and gaming portal IGN.

YouTube will be live streaming the main press conferences (Sony, Microsoft, Nintendo, EA, Ubisoft) and content from IGN’s E3 booth which will include game demos and interviews. All of this will be available on the channel YouTube.com/E3.

IGN has of course been covering E3 for as long as I can remember. But this is new territory for YouTube, which has been gradually ramping up its live streaming efforts in the last year or so. YouTube live streams used to primarily focus on political events, but it’s since streamed a handful of concerts, the Tiger Woods press conference, and the Indian Premier League’s cricket tournament.

We also recently found evidence of a live stream button available on some YouTube accounts, though the shot in question was of CitizenTube which regularly broadcasts livestreams. Still, Max Haot, the CEO of Livestream, felt that the button was “strong evidence” that YouTube was planning to launch a live streaming feature.

I’ll be surprised if YouTube launches a live streaming option for individuals in the near future (it would be a huge liability). But clearly the site isn’t afraid of working with trusted partners, and I expect we’ll continue to see more deals like this one.

Update: It’s also worth pointing out that Ustream will be broadcasting content from E3 through partnerships with G4 and 1UP. Their channel is ustream.tv/e3.

You Know Where Else It’s Hard To Delete Your Account? Mahalo

Posted: 11 Jun 2010 02:01 PM PDT

With regard to his recent spat with Facebook we don’t exactly see eye-to-eye with Mahalo CEO Jason Calacanis. But this morning, we did when an incident showed just how hard it is to delete your Facebook profile. But after reading that post, someone brought up a very good point. You know where else it’s hard to delete your account? Mahalo.

Seriously, try to figure it out. You won’t be able to because apparently there is no option to do it on the site itself. In fact, according to these two pages you have to email someone at Mahalo to do it. At least Facebook has a (albeit hidden) button!

You know what else you apparently can’t do from Mahalo? Get your data out. This is another thing Calacanis has been bitching about nonstop for the past several weeks. Though it’s undoubtedly much more complicated than he makes it out to be on Facebook, it shouldn’t be nearly as hard to get your social data out of Mahalo. And yet, unless I’m missing it, there is no big export button (which he has called for Facebook to create) there either.

While we’re on the subject, what’s with all the Facebook integration on Mahalo? There’s a giant Facebook Connect login at the top of every page — and each page features one-button sharing to Facebook. If Calacanis is so against it, shouldn’t he put his startup where his mouth is?

Dogster And Catster Go To The Groomer, Come Out With Freshly Curated Fur

Posted: 11 Jun 2010 01:28 PM PDT

When it comes to social sites on the Internet, Dogster and Catster have to be doing something right — they’ve been profitable for the past three years. But that doesn’t mean they should just sit back and not tweak the sites at all to offer a better user experience, and they know it. That’s why both sites have undergone a complete refresh. In what CEO Ted Rheingold is calling basically a “full reboot,” the logo, layout, taglines, and even the services have all been revamped.

For those unaware of the obvious, Dogster is a social network for dog owners, while Catster is a social network for cat owners. But Rheingold started realizing that people weren’t just coming for the social aspects of the sites, they were coming for information and services. So this revamp puts an emphasis in those areas. It’s a mixture of community created content and professional content.

Community services are great for adding tons of content, but not for organizing it,” Rheingold says. And with so many people coming to the site from search engines, they often get confused when they get there. So the two sites are now much more curated. Those running the sites look for the best information provided from the community and mix it with the best professional information they have to put up. Rheingold feels this mixture is the best way to do it because, “people don’t like trusting what they read on the internet from other people — often, they like experts. But experts usually have an angle though so people don’t always trust them either.” In fact, he thinks this mixture will be the future of all community content sites.

On top of the refresh, Dogster and Catster have a few new partnerships they’ve entered into. The first is a long-term strategic partnership with Petfinder.com. You can now search for and bookmark adoptable dogs and cats via the adoption areas on Dogster and Catster. And those that decide to adopt will be pointed to Dogster and Catster as a way to keep getting information about their new pets.

Another relationship involves Yext, which allows Dogster and Catster members to find the best vets in their area. Rheingold notes that Yext does such a good job with services like this that it just made much more sense to partner with them rather than try to do their own thing.

Finally, Dogster and Catster are some of the first partners to use Hunch’s new decision-making widgets. “The goal here is to present the lowest barrier to engagement for a persone with questions while still offering someone customized help,” Rheingold says, noting that even users without profiles can get access to great information this way.

Another new thing Dogster and Catster are trying is engagement emails. Rheingold realizes that a lot of people visit sites but then don’t go back for whatever reason, so this is a way to keep them involved with information they may care about. For example, if Dogster/Catster knows you got a puppy or kitten six months ago, they might now send you an email to give you some information that you should know for animals that age. Rheingold notes that they have a million registered users but advertisers don’t care so much about that — they just care about engagement. And this is a way to keep people engaged.

Rheingold also notes that Dogster and Catster are seeing about 4 percent of all of their traffic coming from the iPhone now. That’s much more than he ever expected, and that was another reason why they wanted to redesign the site. Everything is much better suited for a smaller screen now, he notes. Mule Design were the ones who worked on the redesign.

Weekend Giveaway: An HTC Incredible from Skyfire

Posted: 11 Jun 2010 01:14 PM PDT

You know you want it. You know you need it: A Droid Incredible running on Verizon of your very own. How can you get one? Well, our friends at Skyfire totally want to give you one. Click through for more information.

Skyfire, the company that released the first Flash-video enabled Android browser last month want to celebrate the browsers success in style, watching some of their favorite videos on a mobile device. And, they’ll let you do the same thing, even for one lucky TechCrunch reader who might not be incredible enough to have an Android.

This is an international contest, so get cracking.

Read more…

Google Voice Desktop App Launch Delayed, May Be Scrapped

Posted: 11 Jun 2010 01:05 PM PDT

When Google acquired Gizmo5, a Skype competitor, in November Google Voice users rejoiced – presumably they’d be getting a much needed soft phone on the desktop for users to make and receive calls through Google Voice.

We confirmed that the application had been rewritten and was being tested internally at Google in April. Some Google employees continue to use the app, we’ve confirmed.

But don’t expect it to launch publicly any time soon, we’ve heard from multiple sources. Why? an internal religious debate about desktop software.

Google founders Larry Page and Sergey Brin don’t want Google to be in the business of creating software outside of the browser, say our sources. And that’s consistent with Google’s product launches over the last several years.

Of course it ignores the efforts that Google is putting into developing their own Chrome browser, Chrome operating system and Android operating system, as well as a variety of mobile apps – all are software that installs on computers or mobile devices.

But there may be a hard line when it comes to pure desktop apps like Google Voice. So the team has been sent back to the drawing board to try to make a workable soft phone that will work entirely within the browser using HTML 5.

Possible? Nope, not today, and not at scale, say our sources. Skype tried for years to create a browser based version of the service and never launched. The biggest problem is around proper integration with the microphone, it’s just really hard to get good sound quality with HTML 5 today.

In a year or two that may change. But users don’t want to wait a year. For now they can get a Skype phone number for €50/year and forward Google Voice to that. But you can’t call out of Skype using your Google Voice phone number (Update: strike that, see comments below – you can set Skype called ID to your Google Voice number), and that cost is fairly expensive for a soft phone.

I say rules are made to be broken, and this is one of them. Release the client, Google. We want it.


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