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Time to Go

Mar 24

Late in May, my wife and I will be leaving home with nothing but 2 carry-on bags to travel the world for an indefinite period of time. Below I’ll talk through a few of the reasons for “jumping ship” and talk through a few of the frequently asked questions, including what the heck I’ll be doing professionally.

Why long term travel?

The obvious reason to do this is because it will be amazing. Almost everyone I know loves travel, but at best manages to do it for a few weeks a year. Americans suck at traveling. Our average trip is a paltry 4.3 days. We receive 13 vacation days a year, but leave an average of 3 days on the table. 4 in 10 of us take 1 week-long vacation per year and use the rest here and there. 75% of us check in with work during our vacations. Short trips are fun, but tend to be challenging for exotic travel and certainly make it difficult to dig deep into a country/culture.

But there are a few non-obvious reasons to do this. A big one is that my recent career shenanigans have distracted me a bit from my lovely wife. When we leave, I will have spent 7 of the last previous 12 months in different cities than Alex. This thankfully included near-weekly visits, but that’s obviously not ideal. A year of travel will be an opportunity to spend time together that very few couples get.

And I really want to “de-screen”. For the last 5 years, I’ve been waking up and grabbing at the first screen I could get my hands on. After a quick morning routine, I hop on a laptop. I head to work and sit in front of a computer. I come home and often surf the web or watch a show. I fill in the gaps with a smartphone, catching up on Twitter, Facebook, and Hacker News. I won’t lie– when I break this routine, I feel pangs of withdrawal. World travel will force me back into the real world.

And finally, as one of my favorite travel bloggers puts it in a post about magical berries, I’m a little sad about the death of wonderment in my adult years. She puts it better than I could:

“The other day, I was lamenting to myself (and by extension, to my long-suffering husband) about the death of wonderment in my adult years. How there were now so many known variables in our lives, so many answered questions. There were very few decisions to make. Very little was new.”

This trip is going to generate a lot of unanswered questions. It’s going to add a mess of delightful variables. It’s going to force dozens of decisions per day. And it’s going to positively bury us in new experiences.

What about your career?

… The number one question asked by mothers everywhere.

I’ve been lucky to find myself in one of the few growth industries left in the states– software. I’ve done Y Combinator, raised a series A, run a few profitable companies, sold a few projects and have recently been running a new product initiative for an amazing company. I don’t have a concern that this trip will keep me from starting my next company, or make me less appealing if I decide to “go legit” and jump on with an existing company. For this, I feel insanely lucky. The only thing the separates me from the other unlucky folks with psychology degrees are my wonderful parents who kept me buried in bleeding edge technology at an early age. That’s LUCK, people. I was too daft when I was young to consider how special that was.

What will you *do*?

I’m not sure if I’ll work at all on the road. I have a few offers for some light consulting and could also help out a few non-profits. I’ve got some projects I’d like to monkey around with. I’d love to work on learning new languages (both wetware and software), to improve my memory, and more. I’ve got stacks of (digital) books I’m itching to read. I’ve committed to blogging throughout the trip and taking lots of pictures. I’m honestly not sure how much I’ll feel the itch to be productive on the road. We’ve got income from a few rental properties we own (we’ll be renting out our furnished Seattle house, too). Between that and savings, we won’t need to make any more money on the road, though it wouldn’t break my heart if we did. I’m interested to see how much of my identity is tied up in my output and whether that hole needs to be filled or not. Stay tuned on that front.

What about your life/friends?

To be honest, this is my biggest concern. I have a great life with great friends. I play pickup sports. I host huge potluck dinners. I love geeking out with folks (friends and strangers) at startup events in Seattle. It’s really weird to leave all of that behind. We’re hoping friends, acquaintances, and even strangers will meet up with us on the road to say hello. And we’re hoping to meet new ones. But I worry about “breadth versus depth” with friendships on the road.

Speaking of the road, where are you going, exactly? And for how long?

We’re not committing to a set amount of time. If we’re loving it, it could stretch to a year or beyond. If we’re itching to come back to the real world, we could cut it short.

Here’s our rough itinerary. Seriously, if you’re a friend, acquaintance, or just strange reader of this blog and would like to meet up, please drop me a note. Also, if you’ve got advice for long term travel, a destination that you think is life-changing, or otherwise want to geek out on travel, don’t be shy.

Late Spring/early summer 2013 – Morocco / Southern Spain
Summer 2013 – Czech Republic / Germany / Hungary / Croatia
Late Summer / Fall 2013 – Turkey
Fall 2013 – Nepal / Myanmar / Northern India
Late Fall 2013 – Indonesia / Malaysia
Winter 2013 – Southeast Asia (Thailand, Vietnam, Cambodia)
Late Winter 2014 – Central America (details TBD)
Spring 2014 – South America (details TBD)

Anyhoo, for those of you who follow me on Twitter or Facebook, expect less (but more exotic!) activity. For those of you who read the semi-annual posts on this blog, you might be out of luck for a while.

A Grand Experiment: 4 months in Silicon Valley

May 08

This is a bittersweet post to write. I love Seattle. I love the people. I love the scenery. I love the startup scene and the underdog mentality. I’ve actually written data-driven posts trying to justify this entrepreneur’s choice to live here. I’ve cheered on as Glenn Kelman valiantly defended our soggy brand of entrepreneurship. I actually kinda love the weather. But over and over again, very smart people tell me that the best thing for my company is to move it to the Valley (see this & this). The logic is pretty compelling. Being a founder requires a mix of determination and flexibility. As I wade into my next company and as I hear stories from my friends down south, I think now is a time to be flexible. So we’re going to go try the Valley on for size.

As I’ve started to tell people, I’ve had plenty of Seattle folks tell me that I don’t need to go to the Valley to succeed. Empirically, they are right. There are obviously successes in Seattle both big and small. But here’s how I look at it. Startups are like a big formula. Maybe it’s “(10 * market) + (7 * product) + (5 * team) + (3 * distribution) + (3 * fundraising) + (10 * blind-ass luck)”. I suspect that it’s different for each startup. But I firmly believe that having strong relationships in the Valley adds a meaningful multiplier to important parts of that formula (especially on the fundraising side of things– more on that in a minute).

There are some great investors in Seattle. We’ll be working with a few (hi guys!). But as I look forward in my company’s future, I know we’ll be raising more money. I believe (I hope!) that we’ll be raising based on a “line“. Whatever trajectory we’re on, it’s nigh-impossible to argue with this fact– any fundraising effort is easier, faster, and more likely to close with better terms in the Valley. The key there for me is faster. Fundraising is expensive. It saps attention from your product and it takes time/money. The other key is “more likely”. I’m pretty confident that I can raise money anywhere in today’s market. But I don’t know where the market is going to be in 12-24 months. I *DO* know, that if the market goes south, my odds will be strongest in the Valley. And, while I don’t want to be a “douchey deal optimizer”, the best Seattle terms I’ve heard of are merely adequate in the Valley… And terms that are good in the Valley are virtually unheard of in Seattle.

Of course, you can raise remotely. A flight south is a few hundred bucks and kills the better part of a day. But it’s hard to build relationships when you only fly down once every month or two.

Blind-ass luck is worth talking about, too. While you can’t force luck, you can increase your “luck surface area”– do low-cost things that increase your shot at something fortuitous happening. The obvious example here is: be nice. Help other people and you increase the chance that they run across an opportunity that they drop in your lap.

While it’s not entirely low-cost to move to the Valley, I think it dramatically increases our luck surface-area. Reporters and bloggers are constantly sniffing around in the Valley. Well-armed/high-imagination bizdev folks wander around looking for creative deals to strike. There are investors and portfolio companies wandering around at every event/party. There are world-class startup geeks in the Valley on every corner (of course, there are a thousand startups all vying for the same talent, too).

A final consideration is optimism. I’ve often said that startups only die from 1 thing. They run out of optimism. They no longer believe in the opportunity (or they believe in a different one). You can run out of money, but if you believe, you’ll find a way to soldier on. You’ll raise money, max your credit cards, eat ramen, or otherwise do whatever it takes. Strangely, I think it’s easier to keep your optimism tank full in the Valley… In the church of startups (with miracles on display for every sermon), you can’t help but believe.

It’s going to be an interesting ride. Some of my favorite entrepreneurs from Seattle have blazed a trail southward and, despite their apparent love for Seattle, they haven’t felt compelled to return. I’m going to head south with an open mind and see how it goes.

Why is Apple Building “Yahoo Directories for Mobile”?

Feb 29

In the early days of the App Store, search wasn’t really that important. With relatively few apps (and very few good apps), the directory/browse experience was ideal. For those of you who were around/pubescent during dotcom #1, that might remind you of a nimble upstart at the time– Yahoo. They proposed to categorize and organize all of the worthwhile content on the internet and did a truly outstanding job– for a while. Eventually, the web got too big and Yahoo Directory collapsed under it.

Enter: Apple. Proposing to categorize and organize all of the world’s apps. You can see the cracks forming. So what will Google do?

Mark my words, Google will onebox mobile app results. Hell, it might (should?) add an “Apps” vertical. If it did, it’d almost instant eclipse the App store in importance for most developers.

I know, I know. It’s a bold prediction. Hear me out.

Google has been working on search innovation for a decade and they’re getting damn good at ferreting out intent from your search queries. In recent years, they’ve done what’s called oneboxing. If they can confidently guess what information you want (or at least what search vertical you’re interested in), they tack it onto the top of the search results. You’ve seen it thousands of time now. Search for “weather seattle”, a stock ticker symbol like AAPL, or append the word “video” to any search. Despite their brutal campaign against the folks in the world of SEO, Google is still better at search than anybody.

If you’re searching in a mobile browser for “Angry Birds”, there’s a pretty good chance that you’re looking to download it– and Google can trivially know what platform you’re searching on and which version might be best for you. If you search for “currency converter” from your mobile phone are you well-served with a JavaScript-driven converter on an ad-infested web page (or worse yet, a non-functioning Flash/Java applet)? Or would you be better served with a link to the best native app for the job?

You’re probably as disgusted with App Store search as I am– it’s fine for brand searches (like “Angry Birds”) but painfully bad for category searches. The App Store is using ridiculous algorithms, forcing developers to stuff keywords into titles and giving us the equivalent of meta-keywords to help our cause. Hell, the App Store even uses the developer’s company name as a meaningful factor (congratulations, Currency Converter, Inc., your shot at ranking for that search term just went up!).

What it should do (which would require a Google-sized index of the web) is the same thing that Google does– rank based on number of links (to the app store page), the quality of those links, and the anchor text used for those links. It could also layer in social data, ratings, active usage data, and other things that only Apple has at their fingertips. But they probably won’t– Apple is not a search company.

But Google is. They could be a better way to find/buy apps almost overnight. And it’d be a huge boon to app developers for all platforms.

The Rub

The big problem here, of course, is that Google will be helping Apple sell more apps (at least when people are viewing onebox results on an iPhone). And Apple will still be hauling in their rapacious 30% (a fair fee if Apple is bringing the customer to the table– less so if all they are doing is handling the purchase/update process). So even if Google includes a paid spot or two in their onebox, is there enough revenue room for Google make a buck? With game developers paying $3-5 per install on the marketing front, I think so. Outside of games, it’s a little less clear.

So what do you think. Will Google do this? If they do, would it be the right move? If Apple manages to do something productive with their Chomp acquisition, will it matter?

How to Evaluate a (paid) iPhone App Idea

Feb 16

As I mentioned in my first post in this series, we dove into the App Store with a ($2.99) Productivity App called TouchBase Calender. It was a part-time effort as we were wrapping up other commitments, with the goal of learning about the App Store, getting up to speed on the iOS SDK and Objective-C, etc. This post details what we learned about the paid apps market and it contains data that I don’t believe exists anywhere else.

First off– let me say that the paid side of the App Store is not where the real money is being made. While you can churn out paid apps and make a handsome living, it’s not where you want to be if you want to impact the highest number of people and it’s (paradoxically) not where you want to be if you want to build a big business. Let me explain with a handy screenshot of the top grossing apps in the App Store today (courtesy of App Annie).

Apps with a blue-ish background are free apps. Apps with a green dollar sign have in-app purchases. So there are *3* paid apps in the Top 20 Grossing List. Things are only going to get worse for the world of paid apps. Here’s a snip from a really awesome infographic from App Annie:

So why are free apps outperforming paid apps? That deserves its own post. In brief, it comes down to ARPU (average revenue per user). Farmville-style games can pull in an ARPU $5 or more per month. In fact, there are reports of $13 ARPUs. Per month! Per user! Average!

How is this possible? Virtual goods elegantly fill up the demand curve for an offering. In other words, they accommodate customers who can happily spend hundreds or thousands of dollars (“Whales”, in Vegas parlance) without having to give up mainstream users (who can still be valuable as evangelists beyond the fact that they give the whales someone to play with).

With all of this revenue comes tremendous marketing power. If you’re pulling in $5-10 per user, you can afford to “buy” a download via CPA or CPM marketing campaigns (which can cost $2-5 for a free user and a helluva lot more for a paid user). With more users comes higher rankings in the app store, which brings more organic users. All of the pros in this world buy their way up the Top 25 Lists until the next rank gets a bit too expensive and then float back down slowly, milking the free downloads while they are there. Rinse, repeat.

It’s no wonder paid apps can’t compete. How many users do you think you can buy at a $1.99 price point after Apple’s 30% cut? (hint: the answer is zero).

Okay, okay– back to paid apps, which is what this post is supposed to be about.

Sizing a Paid Market

Apple makes ranking numbers available, and a few great services (like App Annie) make it easy to look at historical performance of competitors on the app store… But only in terms of rankings, not in terms of revenue. Even though our first app was meant to be a part-time “fire and forget / learn the ropes” effort, we didn’t want to waste our time. In short, we didn’t want to limit ourselves to pennies by picking a crappy market. So we set out to understand the relationship between Top Grossing ranks and revenue.

First off, some category analysis. Let’s take the #5 Top Grossing App in each category and see how they fare in the overall Top Grossing list (note: I’m grabbing the #5 somewhat arbitrarily because it’s a better reflection of the category– #1 might be a mega-outlier like Camera+).

So, yeah. The App Store is really mostly a game store. And a free game store at that. But you still want to build paid apps? So did we! We had a nice tractable project we could build in our spare time, but we still wanted to be sure that it was worth our while.

Connecting the Dots – Ranks to Dollars

Our app was firmly in the Productivity category (good news– it sucks less than most of the other non-game categories). But it probably makes sense to dig a bit deeper than just category (Apple is notoriously lax about policing categories, by the way– expect to compete with “OMG FREE MUSIC DOWNLOADS” apps, whatever category you end up competing in). Our app was a calendar replacement app with a bit of a twist, so here was the big question. If we had a hit and were the mack-daddy of calendar replacement apps, what’s in the pot of gold at the end of the rainbow? We can see that Week Calendar is the top ranked calendar app in our category, with an overall grossing rank of #200 or so at the time (it’s more like 500 now). We all know that hanging around the #1 spot on the Top Grossing list can get you about $7M in revenue in one Christmas month (ho ho ho!), but how could we get a sense of what a rank of #200 or so means in terms of dollars? Google didn’t help much, so we started doing good old fashioned investigation. We combed the web for blog posts where people where transparent about their numbers (like this one). We asked friends and mailing lists for revenue/rank correlations for their apps. We got about 15 good data points, which allowed us to create a rough power curve that looks a bit like this.

(Y Axis is gross revenue from App store only, X axis is rank on the Top Overall Grossing List)

Big fat disclaimers on this graph. Many of these data points were received second-hand, were from old blog posts, etc. Also, consider that some apps could have alternative sources of revenue (ads, notably). And we’re correlating US App Store rankings with overall revenue– some of these folks might do well internationally and others might not translate so well. But it got us in the ballpark of understanding just how steep the power curve was and how long the tail of app success really was. Armed with our handy power curve, we drew a vertical line at Rank #200 and saw that we could, perhaps gross ~$70k/month in a best-case-scenario. Not a big enough opportunity for a protracted/full-time effort, and certainly it was unlikely that we’d “win” the market, but fine for a part-time project to learn the iOS ropes.

So, should you launch a paid app?

Maybe.

Every entrepreneur is different. If you want to build a big/impactful business, it’s not the right path (I explain why with a mess of data when I announced my newest venture to launch free travel apps for the iPhone). If what you want is a bootstrapped freedom-from-employment effort or are passionate about an idea that’s a lousy fit for in-app purchases, paid apps are a great path.

Mobile is What’s Next (for me)

Feb 10

Photo by John O’Nolan

In the nearly 1.5 years since leaving RescueTime (still growing and profitable– woot!), it could reasonably be said that I’ve flailed about with my career. I’ve done a few gigs at existing startups, ranging from discreet projects to try-before-you-buy gigs that could’ve led to leadership positions. I helped build Cubeduel.com (read about it on GeekWire or TechCrunch) with the eminent Adam Doppelt (it was a blast) and helped build TouchBase Calendar, a part-time effort to learn iOS development. As far as flailing goes, I suppose I’ve been pretty effective (in terms of learning and effective hourly rate), but I failed at what I was really shooting for: To find my muse. To find something BIG to really sink my teeth into.

I wanted to find my next startup mission– something I think that gets more difficult the smarter you get about startups (and the smarter you get about what drives you). I’ve learned that I’m mostly driven by “give-a-fuckness”– I get excited by software that I’m going to use, that’s going to make people happy, and that’s going to make the world (in some small way) a better place. If you think about it, that’s a pretty limiting litmus test by itself. But as a guy who has been around the startup block a few times, I have a few other tests that I care about. Here’s a quick list:

Tractability – I blogged about this years ago– I like business ideas where you run meaningful experiments in the first 6 months. There are great ideas out there that require 2 years of deep geekery before you can come in contact with the market. Not for me.
A Big idea – This is a new one for me. I’ve built and sold a mess of companies and projects. I’m pretty confident I can get a business off the ground and profitable. I want to aim bigger now.
Early & clear monetization – pure-consumer startups where you have to rely on ads (or “we’ll figure it out”) aren’t for me.
Cult-able – Besides me, are there a subset of people who dream of working in this market? If you can imagine a truly passionate core of users, it makes it easier to find users and employees (see Justin Kan’s epic TechCrunch post: Trouble Hiring? Create a Cult!)
Fundability – While I’m generally wary of early funding (I like to prove a thing or two first), I do believe that raising money makes sense for big opportunities. I’m honored to have a mess of people who have already expressed a desire to bet on me, but they wouldn’t if I was going to open a bakery or taxi company.

So what makes the cut? First, it’s got to be Mobile.

We started with the “Mobile First” assumption. The mobile internet is going to make the old Internet look tiny by comparison– as Amir says, you’ve probably underestimated how big this is. If you’re a free-floating entrepreneur who is still flexible enough to learn new skills, throw yourself into the mobile maelstrom. Skate to where the puck is going to be.

But as you start sizing mobile markets, you learn a few ugly truths.

First, the App Store is dominated by games. Absolutely dominated. I have a post written about this that I’ll post in the next week, but here’s a tidbit of data: The #150 ranked top grossing game makes more money than the #5 top grossing app in any other category (if you want to catch the post when it comes out, subscribe via RSS or follow me on Twitter).
Second, the App Store is dominated by free apps. I’m not just saying that people prefer to download free apps. I’m saying that free apps are dominating the Top Grossing Charts (yep– free apps make more money!). As of this writing, 16 of the top 20 grossing apps on the App Store are free (19 of the top 20 are games).
Third, single-app strategies are extremely high risk. The best bet seems to be a “portfolio” strategy– plan on having a stable of apps. I’ve watched extremely high profile, venture-backed apps that were lauded by critics fall down the rankings charts into oblivion. The Top 25 charts are dominated by incumbents (who’ve spent months or years getting the marketing flywheel turning), web giants (who have massive traffic they can push towards their mobile apps), featured apps (Apple tries very hard to get new folks visibility, but that only gets you in the spotlight for a week or two), and “Unicorns” (new apps that catch fire entirely on a combination of merit and luck).
Winners have solid ARPUs (avg. revenue/user) to bolster customer acquisition. In almost any category, you are competing with people who are making real money from their users (again, with free apps) and are spending that money to buy more users (which artificially drives them up the charts). Unlike the web, you don’t have much in the way of SEO opportunities, viral channels are less open and users are more reticent to create most content (typing on the phone is a pain in the ass, right?). So unless you have an amazing customer acquisition hack that no one has thought of on mobile, you should expect to supplement your organic downloads with paid acquisition.
There are a few great apps that are making great revenue driving offline revenue. Look at Uber, Hotel Tonight, or Postagram. Their ARPUs can support paid acquisition (they are also all great apps who’ve earned organic downloads).

So, after a lot of hand-wringing, we settled into a belief that our mobile ideas should be limited to either games or driving offline revenue. We should have a credible story how our users could result in a sustainable ARPU. If possible, we should be able to imagine a stable of complementary apps. And most of all, we needed to actually give a fuck about what we were building.

Where did we land? Mobile Apps for On-the-ground Travelers!

Strangely, we landed on an idea that’s been bouncing around in my head for years. Like a lot of good ideas, it wasn’t really that good until it collided with our mobile thesis (bonus footage: I love the idea that great ideas come from the collision of lesser ideas– check out this video).

For more than a decade, I’ve been a voracious traveler. And I’ve watched startups grow up to help travelers with their efforts. But if you look at where startups have focused, it’s always on the holy trinity of pre-trip decisions– airfare, hotels, and rental cars. This actually makes a lot of sense. The internet actually sucks for helping you with decisions you have to make while on your trip– largely because you don’t have the internet with you. Normal people don’t, anyways. So we all dutifully buy a Lonely Planet guide ($20 for a book– which is probably the worst form factor I could imagine for what is largely a curated catalog and a series of maps). Or we rely in digging up local wisdom at our destinations. Or we sift through the SEO’d muck looking for credible information and print it out. We’re still printing web pages in 2012?

With the growing ubiquity of smartphones, there is a new opportunity for software to help the on-the-ground traveler (where, incidentally, more than 50% of travel spending occurs). And, while our focus is on being an awesome resource for travelers, we believe that mobile allows for elegant monetization beyond simply selling that content or slapping an ad on it. More on that soon. So here it is– a public declaration of intent. I haven’t been this excited about work in, well, forever. World, meet Tomo. Tomo, meet world.