From student hacker to start-up mogul – an audience with Jonathan Teo

“The man with the Midas touch…”

Jonathan Teo, tech VC with a Midas touch, has been back in Australia recently, and found time to stop by Lean Startup Melbourne for a Q&A with Michelle Bourke in front of an audience of 350 members of the local startup scene.

With a track record that includes Twitter, Instagram and Snapchat in his portfolio of start-up investments, Teo is obviously someone who deserves to be taken seriously, but the candour and humility with which he talked about his experience made for a very down-to-earth evening with such a high-profile investor.

As usual, the event was hosted by Inspire9, with generous support from Kussowski Brothers, Startup Victoria, Products Are Hard, BlueChilli, Investors’ Organisation, Startup Weekend and National Australia Bank.

Teo’s backstory has been told elsewhere (childhood in Singapore, college in Sydney, post-grad at Stanford, Google engineer, venture capitalist…) but the combination of having a great mentor, working in the (then) emerging technology of cloud computing, and some “right time, right place” good fortune has provided him with a powerful platform from which to join the upper echelons of silicon valley VCs.

“The Secrets of My Success”

Naturally, people wanted to know the key to his investing success. Rather than referring to some “special sauce”, Teo pointed to some simple principles:

  • Relationships – strong relationships are essential, both within the founding team, and across the right networks and insiders
  • Self awareness – many founders don’t see their own capability gaps, and therefore can overlook inherent weaknesses in their business
  • Key metrics – know what run-rates the business needs to achieve to meet its performance goals (cash burn rate, retention levels, acquisition costs, daily and consecutive customer usage)

In particular, Teo stressed that new distribution models form the lens for assessing new investment opportunities.

“Show me the money!”

During a discussion about bringing in investors, Teo was pretty sanguine – what works for some start-ups, won’t work for others. If you can self-fund, then do so; if you do need to tap external funding, start with friends and family (who will generally be more patient than professional investors); and if you have to bring in VC’s, make sure you know the trade-offs. He also suggested that crowdfunding is great for consumer plays, but ultimately valuations are determined by demand.

“New Thang”

When asked where “the next big thing” was going to come from, Teo was understandably coy (or simply discreet), and politely suggested it could emerge from somewhere in the audience. What he did offer were some thoughts on emerging trends that will influence future start-ups:

  • Fewer mass-market consumer products – according to Teo, “only China can support a purely domestic consumer play”
  • Less focus on patents, more emphasis on survival – not that IP isn’t important, just that the cost and effort of securing patents mustn’t outweigh the need to generate revenue in the early stages
  • Content niches – unique content is key to attracting advertisers and subscribers, and when combined with rich user data makes for compelling communication and network apps
  • The human touch – products that bring a more human digital experience will gain traction

Finally, Teo predicted the growth of disposable hardware – not sure I agree with this one, but I understand what he is getting at. Personally, I’d be more interested in recyclable hardware, and greater user-serviceable and customisable components.

Declaration: Thanks to the hosts and sponsors, I along with everyone else enjoyed the bounteous gift of free pizza laid on by the organisers.

10 Rules for Effective Blogging

Here are 10 useful rules for effective blogging. These are my personal rules, and they work for me. Yours may differ, but that’s OK:

  1. Maintain a regular publishing schedule
  2. Say what you mean …. and mean what you say
  3. Use opinion to establish your argument
  4. Deploy relevant facts to support your case
  5. Draw on personal experience to make it real
  6. Credit your sources
  7. Sometimes, less is more
  8. Declare any vested interest
  9. Find your own voice
  10. Keep it interesting and original

Note: This post is a tribute to the late Elmore Leonard, whose recent passing has prompted many writers to revisit his 10 Rules of Writing

Whose content is it anyway?

Faust 2.0

Every social media and digital publishing platform is engaged in a continuous battle to acquire content, in order to attract audiences and bolster advertising revenues.

Content ownership is becoming increasingly contentious, and I wonder if we truly appreciate the near-Faustian pact we have entered into as we willingly contribute original material and our personal data in return for continued “free” access to Facebook, YouTube, Google, Flickr, LinkedIn, Pinterest, Twitter, MySpace, etc.

Even if we knowingly surrender legal rights over our own content because this is the acceptable price to pay for using social media, are we actually getting a fair deal in return? The fact is that more users and more content means more advertisers – but are we being adequately compensated for the privilege of posting our stuff on-line? Even if we are prepared to go along with the deal, are our rights being adequately protected and respected?

In late 2012, Instagram faced intense public backlash against suggestions it would embark upon the commercial exploitation of users’ photographs. While appearing to backtrack, and conceding that users retain copyright in their photographs, there is nothing to say that Instagram and others won’t seek to amend their end-user license agreements in future to claim certain rights over contributed content. For example, while users might retain copyright in their individual content, social media platforms may assert other intellectual property rights over derived content (e.g., compiling directories of aggregated data, licensing the metadata associated with user content, or controlling the embedded design features associated with the way content is rendered and arranged).

Even if a social media site is “free” to use (and as we all know, we “pay” for it by allowing ourselves to be used as advertising and marketing bait), I would still expect to retain full ownership, control and use of my own content – otherwise, in some ways it’s rather like a typesetter or printer trying to claim ownership of an author’s work….

The Instagram issue has resurfaced in recent months, with the UK’s Enterprise and Regulatory Reform Act. The Act amends UK copyright law in a number of ways, most contentiously around the treatment of “orphan” works (i.e., copyright content – photos, recordings, text – where the original author or owner cannot be identified). The stated intent of the Act is to bring orphan works into a formal copyright administration system, and similar reforms are under consideration in Australia.

Under the new UK legislation, a licensing and collection regime will be established to enable the commercial exploitation of orphan works, provided that the publisher has made a “diligent” effort to locate the copyright holder, and agrees to pay an appropriate license fee once permission to publish has been granted by the scheme’s administrator.

Such has been the outcry (especially among photographers), that the legislation has been referred to as “the Instagram Act”, and the UK government’s own Intellectual Property Office was moved to issue a clarification factsheet to mollify public concerns. However, those concerns continue to surface: in particular, the definition of “diligent” in this context; and the practice of some social media platforms to remove metadata from photos, making it harder to identify the owner or the original source.

Meanwhile, the long-running Google book scanning copyright lawsuit has taken another unexpected twist in the US courts. From the outset, Google tried to suggest it was providing some sort of public service in making long-out-of-print books available in the digital age. Others claim that it was part of a strategy to challenge Amazon.

Despite an earlier unfavourable ruling, a recent appeal has helped Google’s case in two ways: first, the previous decision to establish a class action comprising disgruntled authors and publishers has been set aside (on what looks like a technicality); second, the courts must now consider whether Google can claim its scanning activities (involving an estimated 20 million titles) constitute “fair use”, one of the few defences to allegations of breach of copyright.

Personally, I don’t think the “fair use” provisions were designed to cater for mass commercialization on the scale of Google, despite the latter saying it will restrict the amount of free content from each book that will be displayed in search results – ultimately, Google wants to generate a new revenue stream from 3rd party content that it neither owns nor originated, so let’s call it for what it is and if authors and publishers wish to grant Google permission to digitize their content, let them negotiate equitable licensing terms and royalties.

Finally, the upcoming release of Apple’s iOS7 has created consternation of its own. Certain developers with access to the beta version are concerned that Apple will force mobile device users to install app upgrades automatically. If this is true, then basically Apple is telling its customers they now have even less control over the devices and content that they pay for.

6 Melbourne Start-Ups to Watch…

LogoRecently, I blogged about Audiobus, and the success of its collaborative approach to app development. So last week, I attended a very entertaining “pitch’n’pizza” evening for start-ups, to see what other interesting things are going on in app and content development. The event was organised by Lean Startup Melbourne and hosted by inspire9. Other support came from BlueChilli, General Assembly, Startup Leadership, PlayFi and Kussowski Brothers.

The idea was a mix of Open Mic Night, and “Dragons’ Den” – 6 start-ups presented their pitch to a panel of VC’s and angel investors, in front of an audience of 300+ friends, colleagues, hangers-on and curious onlookers all fuelled by free beer and pizza.

Melbourne is something of a “Silicon Laneway” – not quite a valley, but more of an alley, given the city’s landscape of back streets and converted warehouses that are fostering a culture of start-ups, digital creatives and social media entrepreneurs.

On the night, the 6 hopefuls that presented were:

  • Tablo – a self-publishing platform for authors – sort of Bandcamp for books, but with even better content distribution
  • PetHomeStay – an on-line booking system for pet owners who want to leave their animals with a trusted pet lover while they are on holiday
  • CareMonkey – an app that shares childrens’ health care needs with relatives, schools and sporting clubs, so that teachers, coaches and carers have relevant support information at their fingertips
  • CoinJar – a platform that enables consumers and merchants to transact with Bitcoin
  • Fairshare – an app designed to take the hassle out of shared living (but not to be confused with FairShare….?)
  • SwatchMate – a combined app and smart phone device for matching colours, primarily for painting and decorating

Each presentation was of a very high quality, although some were more polished and rehearsed than others, and only a couple really shone through in terms of having both a great idea and a great commercial offering.

The questions asked by the panel of experts provided some helpful insights on what makes a successful or engaging pitch:

  1. Why? Having a personal experience resonates, and can avoid the awkward “is this a solution in search of a problem?”
  2. Competitors? What makes you different – smarter? cheaper? quicker? Are you truly disruptive or innovative? Or have you just designed a better mousetrap?
  3. Commercialisation? Show me the money! What’s the business model? Where is the revenue coming from? (“Simple is not always best, but best is always simple”)
  4. Customers vs Users? If the paying customer is actually different to the end-user, then make sure this is clear and you have a strategy to connect the dots and to monetize the key part of the transaction
  5. Real world vs On-line? Are you replicating something which already happens in the real world? Can real world transactions easily dis-intermediate your on-line business model?
  6. App or Website? Is it a dedicated app, or is it a website that works well on mobile devices? Going for a well-designed website may be cheaper, and lead to greater/faster customer adoption.

And in keeping with the spirit of this blog, I would add that the essence of all of these new businesses is having interesting content and a meaningful way for people to engage and transact with it.

At the end of the presentations, the panel selected their favourite pitch (the winner getting the chance of a meeting with the VC of their choice), while the audience voted for the people’s choice. Not surprisingly, the panel went with CoinJar, while the people went for Tablo (which also got my vote).

Disclosure: The author does not have any connection to or commercial relationship with the presenters or sponsors mentioned in this blog. He didn’t even get there in time for a free slice of pizza or bottle of beer.