Insights from Giggster Co-founder Hank Leber on building a location marketplace for creators & content production | E1196

Top Insights

  • Building a business on top of another platform is risky, as revenue can go to $0 overnight by no fault of your own
  • Adding simple and easy solutions to archaic industries and business processes can result in rapid adoption
  • Giggster filled their marketplace supply-side first: once there was a large volume of high-quality supply, demand generation was much faster and mostly organic
  • When all sources of revenue are on the line, even archaic industries like film production can adapt quickly
  • Since Giggster has been operating successfully before raising money, they know their unit economics and are comfortable putting together an aggressive growth plan

Intro / Problems with building on other platforms

Guest: Hank Leber | @hankleber

  • Co-Founder & Head of Growth, Giggster (April 2019-Present)
  • Website:
  • Hank previously was CEO of GonnaBE a planning social media app (they presented at LAUNCH Festival). The concept of planning socially wasn’t embraced by users.
    • Lesson learned: if you put out your plans publicly and no one comes you look like a loser.

“You have an idea that everybody thinks sounds great, then there’s an ugly cultural truth somewhere that makes it not a real thing.”

Hank Leber
  • Hank also had a company called Vytmn which was a “growth as a service” tool built on top of Twitter
  • Twitter shut down one of their key features, the ability for to automate actions like DMs, which killed their revenue ($1M ARR at peak)

“… do not build on the back of another platform, if they can kill you, they will, it’s not your money. That’s their money that you’re stealing.”

Hank Leber

Giggster’s founding story

  • Hank and his Co-Founder Yuri Baranov were not from the film industry, they are tech entrepreneurs
  • How they discovered the market opportunity with Giggster:
    • Yuri is LA-based and lives in a nice house near the water
    • One day, a production scout knocked on his door and offered him $70K to shoot at his house over two days for CSI: Miami
    • The process included door knocking, clipboards, paper contracts and excel spreadsheets
      • this “business flow” was terrible for a $70K transaction, so Yuri told Hank about it and they started doing some research on the production location industry
      • After realizing the location industry had been run this way for decades, they started Giggster
  • Giggster is a two-sided marketplace for video production, meetings, weddings & events. Think Airbnb for production locations and events.
    • Larger clients would be Netflix, HBO, Hulu, large production companies, etc.
    • Smaller clients would be TikTokers, YouTubers, Vloggers, etc.
  • How Giggster differs from Airbnb and VRBO:
    • Short-term rental platforms do not allow production shoots because they require more overhead: insurance, more people per location then allowed, production parking, waivers, etc.
  • Giggster added a services element because some film production teams need higher-touch support (above $2500-$3000 a day) these services include:
    • Logistics
    • Permiting
    • Power
  • In California, you can rent your home for up to 14 days per year tax free
    • Giggster has some client who shut down their listing after being booked for 14 days for this reason

Creating the marketplace supply-side first

“What we’ve found is, chicken and the egg, locations matter first. As long as we have the supply we can generate the demand.”

Hank Leber on starting a marketplace

Giggster has almost 10,000 locations on the platform

  • In the early days, they filled the supply-side inventory by:
    • partnering with Hollywood agencies, who already had direct relationships with private property owners
    • they also knocked on doors for early customers
    • filling the supply-side first turned out to be a good decision, as it created an immediate flywheels with renters
  • Customers needed a lot of education, so Giggster built out detailed FAQs and comprehensive signup flows
  • Demand has been strong and scouts are now loading their locations onto Giggster
  • If a major client (Netflix, HBO, etc.) needs a location that does not exist on Giggster, they will hire location scouts to go find and matching location and on-board them
  • Giggster saw an opportunity to expand with cheap inventory from pandemic disruption (commercial real estate, restaurants, etc.)

Pitching at Remote Demo Day, raising via Jason’s Syndicate

” (Regarding Jason’s Syndicate), the money is actually secondary to the quality of the network.”

Hank Leber
  • Self-funded for 3.5 years while they figured out the business
    • Took ~3 years to build a solid base and infrastructure, and now they are seeing rapid growth
  • Yuri (Hank’s Co-Founder) told him to go try and land Jason Calacanis as an investor, so Hank started reaching out to mutual contacts and eventually got a slot in a Remote Demo Day session over the summer
  • Remote Demo Day format:
    • Seven founders pitch thousands of investors over Zoom
    • Pitches are three minutes each, with a two minute Q&A with judges after
    • After all pitches are finished, the judges vote on their top three and the audience members (accredited investors) vote for their #1 company in a poll
    • One day later, all 7000+ members of Jason’s Syndicate get an email with the recording and a sheet where they can pre-commit a dollar amount to invest
    • Any companies that receive over $200K in interest are syndicated!
  • Giggster was The Syndicate’s largest investment ever
    • According to Hank, the quality of the network of investors created additional value beyond the capital invested

Giggster’s use cases and emerging content business models

  • Giggster collects 15% from the final host payout as a service fee
  • Daily rates for a shoot range $2-30K per day depending on how high-end the location is
    • the average is around $8-10K
    • Larger long-term deals will hit 7 figures
      • example: ABC renting a mansion for The Bachelor for three months
  • Production came back online quickly during the pandemic, the film industry was really aggressive and inventive about their protocols
    • Even in an industry resistant to change, all of the money drying up overnight caused people to change their minds FAST
  • Giggster holds production companies accountable and cares a lot about reputation.
    • Location marketplaces need to maintain a good relationship with cities & neighborhoods so they can continue to operate
    • Typically the professional production companies have outstanding reputations for taking care of properties, however, a new potential business model is more uncertain…

TikTok content houses are a new media business model

  • Sway & Hypehouse are the most famous TikTok houses
    • These are new media operations that have very different needs and filming styles than traditional production.
    • They don’t have big camera crews but are also notoriously crazier than a film studio.
    • It’s not cut and dry how to service these creators yet, so that’s where Giggster is attacking the opportunity:
      • They are working to pick the right locations (areas with more space and fewer neighbors), and figuring out the insurance needs to service these new smaller-scale customers

Scaling Giggster

  • The importance of network relationships and trust is key for B2B. Cold emails work worse in this category.
  • Since Giggster has been operating successfully before raising money, they know their unit economics and are comfortable putting together an aggressive growth plan

” [once] you get dollars in the door and deliver real value with product-market fit, adding money to scale is a math equation instead of trying to paint a picture and tricking people into buying your vision of the future.”

Hank Leber

We recently launched a curated list of the most generous software discounts for startup founders. View all deals at

Chrome OS is the ultimate productivity hack & will exceed Mac OS marketshare — but can it challenge Windows?

The Acer Chromebox CXI3

I recently replaced all but three of the Macs in our office (the ones used for video editing), with ~$800 ACER Chromeboxes and the stunning, ~$900, USB-C powered Dell 38″ monitors (model: U3818DW).

[ Click to Tweet (can edit before sending): ]

Google’s Chrome OS is an absurdly fast, stable and distraction-free operating system. Over the past seven years of its short existence, it has become world-class.

Here’s why Google has nailed it:

  1. As the world has moved to cloud-based software, running inside of browsers, the need to download client software has disappeared for almost every task. This means software startups don’t have to build clients for every desktop operating system anymore (some do, most don’t).
  2. The Chrome Browser has become the standard for cloud-based apps to be built on — because it has massive market share.
  3. Chrome Extensions are available for everything you need to do, from password management, Grammarly and advanced email with Superhuman (email jason@ with “superhuman” in the subject line and I will help you jump the line).
  4. ChromeOS doesn’t have all the Mac and Microsoft cruft like iMessage, Apple Photos, iTunes and all the rest. It’s basically just a browser with a desktop.
  5. Chrome OS is an open source project, which is allowing folks to do insane things like making a version of ChromeOS you can install on your old iMac and MacBook Air, and because the OS is so light it makes those computers seem new again.
  6. Chrome OS now supports Google Play, so if you insist on using an App like Spotify, Instagram or Slack, you have the option of doing it in the browser AND in the app. It’s kind of mind-blowing to Instagram on your huge desktop.
  7. Hardware vendors are loving and investing in Chrome OS. The fact that Acer is making a machine that is, literally, the size of a ham sandwich with 16 Gigs of ram, 64 GIG SSD, Bluetooth, six USB ports, an Intel Core i7 processor, USB-C, ethernet, HDMI and an SD reader is bonkers.
  8. For bonus points, you can power the ChromeBox from the USB-C port on your Dell Monitor — which then acts as a USB hub, giving you another four USB ports. This means the whole setup requires one power plug (to the monitor, NOT the computer), which is really strange.
  9. The chrome box powers 3840 x 1600 resolution on the Dell Monitor — which is nuts. You can put three giant chrome browser windows side by side, which will make you and your team 10-20% more efficient.
  10. ChromeBooks are all over schools today.
  11. Google’s login system and browser sync let you log in to ANY ChromeOS device — so sharing a ChromeBook or ChromeBox is as simple as logging on and off.
  12. ChromeOS is so light that it updates and boots blazingly fast — like seconds.
The back of acer chromebox

For $1,700 you can give everyone in your startup a machine that is absurdly fast and a monitor that is just amazing.

The Chromeboxes actually start at around $200, and you can get a decent widescreen for $400… so in truth you can test this setup out at like $600 total and have your mind blown.

Prediction: Chrome OS, which had < 1% market share at the start of 2015 and is currently at 4.35% marketing share of all operating systems (desktops, tablets, and mobile phones) will catch up and surpass Mac OS in the next five years. [ Source: StatCounter, slicker chart by Statista. ]

Comparing just MacOSX and Chrome OS

Big Question: Will Chrome OS eventually dominate the Windows operating system juggernaut, at 60%+? Google did with browsers, which take minutes to switch, but can they do it with computers which commonly get switched every three to five years?

The Chrome browser has taken over the world.

Finally, the Google Pixelbook is a fantastic machine to pair with the Dell 38 monitor. You simply plug in the USB port and, again, the monitor will charge your laptop and sync up in seconds. The Pixelbook, and Chromebox setup above, are half the price of an equivalent mac.

Bottom Line: Google’s brilliant long game: Chrome, Android and ChromeOS (aka the Chromium Project) are all open source and free, driving consumers to give their data to precious data for Google to — essentially — resell to advertisers. This builds a massive moat around Google’s ad business while putting massive pressure on Apple and Microsoft’s franchises.

How do you get an angel investor’s attention?

Don’t say everything

Got asked this question on Quora. The answer for me, and for most angels, is easy: send a short email with a link to the product or a product video.

[ Click to Tweet (can edit before sending):  ]

Protip: Do not email your life story or 3,000+ words on why you built your product. This will make you look deranged.

The goal of your email is to get the investor to a) understand what you’re doing and to b) respond.

You want to send just the most important thing, which is one of the following things 99% of the time:

  1. your product
  2. your traction
  3. your market
  4. your technology
  5. you

What you don’t want to do is send an angel EVERYTHING in the first email. Get them on the hook with the best thing (perhaps two things) and try and get them to ask you more questions.

As an example, Henry from Cafe X sent me a video of the prototype of the Cafe X machine, along with two sentences, while based in Hong Kong. Since then, I’ve invested millions in the company, I’m on the board and they have three locations rocking in San Francisco. Mission accomplished.

Note: I don’t respond to all my emails, I get around 300–500 per day… but I do open most of them, and I do click on links often.

PS – I’m going to try and write a blog post every day in 2019 and set them to publish at 7AM… consider this day one of 365.

Email newsletters might save journalism — here’s why

[ Tl;dr: Today we’re launching the new – a network of high-quality email newsletters. We have eight live newsletters, and we’re launching an exciting system that allows intelligent readers like yourself to decide which newsletter we launch next. Thanks to Rocketship for building the new platform. ]


When I started Inside as an app, our idea was that if we could do an exceptional job curating the news, then millions of people would download our product and use it daily.

We learned that, while a dedicated base of fans couldn’t get enough of it, most folks didn’t have space for another app in their lives. This is a lesson that has been hard-learned by a whole crop of “news-reader” style apps – from tiny startups like Circa to mega-brands like Facebook, both of which folded their news apps.

The facts are simple: people are adding an average of ZERO new apps to their phones each month, and most modern news consumption happens in social media) places like Facebook, Twitter, Snapchat, Reddit, and, of course, email).

Meanwhile, publishers increasingly rely on viral traffic – which incentivizes silly clickbait, or worse they focus on writing headlines that rank in Google (best iPhone cases FTW!).

Email incentivizes the opposite — it drives us to build a lasting relationship with our readers who demand we deliver massive value. If we don’t they click unsubscribe.

I love that newsletters are held to such a high standard — it makes our writers focused on what matters most.

When it comes to news curation, here’s what we think matters:

1) Content selected by real-world relevance, not catchy titles or more-searched terms.

2) Content selected and presented in a fair way without obvious bias or added commentary.

3) Transparency. No hidden agendas. Literally email us and ask us why we ran a story and we’ll tell you.

We’re going all in with email newsletters because I think we can save journalism by putting 99 cents of every dollar we spend on writers. Our business has close to zero infrastructure costs and massive consumer feedback.

Nine months ago, we started with the Inside Daily Brief, a twice-daily roundup of the most interesting news in the world, which had 10,000 subscribers and just one writer/editor. Now, we have an audience of 100,000 subscribers across eight newsletters, with six people on our editorial team (and it’s growing!).

We’re just getting started.

In addition to letting you subscribe to our existing newsletters, the new site also lets you vote for which newsletters we’ll launch next. Do you want us to hire a top notch writer and launch Inside Golf or Inside Space or Inside Video Games?

Cast your vote, and tell your friends – when we hit 5,000 “early adopters” we’ll launch it.

So, here’s my ask:

  • Head over to and subscribe/vote for all the newsletters you find most interesting
  • Check out our post today on Product Hunt and leave some feedback
  • Tell your friends! If we can keep growing the readership of these newsletters, we can keep improving and launching new ones. That starts with you spreading the word.
  • Hit reply to the emails we send and tell us what you love, if we make a mistake and share an intelligent response to the question of the day. I read every email reply!

– @jason


PS – Here’s our subscriber growth in the past few months:


If you have a newsletter and you want to join our network, please email We’re looking to not only launch our own newsletters, but host and sell the advertising in other ones too.

Lynda Weinman on how she stayed profitable on $25 monthly subscriptions

Lynda Weinman bought the domain in the mid 90s, when she was teaching herself web design. Fast forward through writing how-to books, and a classroom education program in Ojai, California. Today is an online resource with video-based courses, millions of registered users, and over $100m in late stage investment. The videos aren’t free, but Lynda has never raised prices above $25 per month. And the company has been profitable every year. From her garage to a 12 acre campus with a 100 person sales team, Weinman shared her journey at LAUNCH Education & Kids.

Never miss an episode! Subscribe in iTunes: Audio ( || Video (

Show Lynda some love!

Thanks to our sponsors. Scott Walker of Walker Corporate Law specializes in startups and provides flat-rate services. Call him directly at 415-979-9998, or email scott at walkercorporatelaw dot com.

And to Audible. My Audible picks of the week are One of Kind: The Story of Stuey “The Kid” Unger, the World’s Greatest Poker Player, and a bonus pick: Wheat Belly. To get your free audiobook, go to

Follow on Twitter:

Launch Ticker:
Launch Events (Festival, Mobile, Hackathon):

Special thanks to the members of the TWiST Backchannel Program!

Yves Behar on smart locks, and why great design matters

A good product needs great design, as Yves Behar knows all too well. The August smart lock is just his latest in a long line of projects. He designed One Laptop per Child’s XO Laptop, Jawbone’s iconic bluetooth headset, and the dance party-starting Jambox. This is must-watch on the huge role that design plays in your company, your product, and innovation.

Show Yves some love!

Never miss an episode! Subscribe in iTunes: Audio ( || Video (

The Age of Excellence

The Age of Excellence Handgun Rating
The Age of Excellence "Handgun Rating"

Two months ago I wrote a piece calle The Age of Excellence over at (the website/blog associated with the LAUNCH Festival/TechCrunch50 conference I’ve been running for the past five years or so).

If you haven’t read it you can do so here:

I’m working on two follow up pieces:

  1. Enforcing Excellence (or ‘Techniques for Reaching Excellence’)
  2. The Age of Efficacy

If you have any thoughts on this go ahead and email me jason AT


The Future of Startups

A lot of folks have been asking for yesterday’s email newsletter. Now, this is a one time thing… if you want to get these in the future you have to signup for Jason’s email list:


Location: Mahalo HQ, Santa Monica, CA
Monday, November 5th, 6:27PM PST.
Word Count: 3,267
Jason’s List Subscriber Count: 10,282
List management:
Message type: Startups
Forwarding instructions: startups, VCs

The Future of Startups (or “The Opportunity: Experiences over Expenses”)
In the last e-mail, we discussed the “group belt tightening” effect.
I’m not sure if I like that term, but it was the best one I could come
up with to describe the psychological phenomenon that occurs in times
of mass financial panic. The impact is being felt everywhere and the
reaction has been strong across the board. Many of you e-mailed me and
said that you’re tightening your belts even though you don’t have to.
It’s safe to say the 10,000+ folks on this list are way above the
median when it comes to net worth.

In other words, many of you are penny-pinching for no reason other
than it “doesn’t feel right” to spend.

This is totally understandable, and as I mentioned, it’s part of
coming to grips with the fracked up balance sheet of not only the
United States, but the entire world. (Note: about 20% of the
subscribers on Jason’s list are not from the US, from what I can

Two quick proof points:

1. “Dim Days for Luxury Hotels,” New York Times
“Since mid-September, almost in parallel with the stock market
turmoil, demand for fancy hotel rooms has plummeted…[with travelers
becoming] more defensive about conspicuous consumption. Public
indignation over big paydays and the lavish expenses of top executives
has also hurt the luxury hotel business. Companies are now concerned
about perceptions — worried about how it looks to others when
employees stay in hotels whose very names evoke images of opulence. In
part because of those concerns, there has been a sudden rash of
cancellations of corporate meetings.”

2. “Rich tighten purse strings on luxury goods,” Financial Times
Milton Pedraza, chief executive of the Luxury Institute, a research
group that tracks the luxury market, says the financial crisis has had
a “paralysing effect” on the US luxury market [the world’s biggest
single luxury market] during the past few months and sales were likely
to fall more sharply than they did in the past two recessions. “Jets,
jewellery or apparel – everyone has seen declines,” he says.
“Consumers are going back to classics and price is very important.”

Bottom line: The death spiral has made it to the super-rich already.
This is a good sign in some ways. It means that everyone is trying to
correct their bum balance sheets–even if it’s just for show and out
of guilt.

The Future of Startups
As many of you know, I spent the better part of August preparing for,
and co-hosting, the event, which has become known as
“Sundance for the technology industry.” The conference featured 52
presenting companies as well as 130 “demo pit” companies. The 52
companies presented their products for up to eight minutes in front of
an in-person audience of 1,000, as well as 5,000 folks watching the
live video remotely.

In order to select these ~180 companies, our team sifted through
1,000+ applications in July and August. I did 250 phone interviews of
10-15 minutes each personally, followed by 2-3 rehearsals with each of
the 52 companies. These rehearsals were 20-45 minutes on average. As a
result, I’m in the unique position of seeing where our industry is
headed. Being pitched by this many people in this short a period of
time is, frankly, dizzying. My brain has been filled with so many
ideas, inspirations and trends that I’m quite literally overwhelmed by

Beyond the technology trends, we all witnessed some trends for startup
companies. I’d like to use this e-mail to discuss emerging trends for
startups in a recession-to-depression environment.

1. Centimillionaires on JetBlue
Back in 2001 or 2002, when I was bi-coastal (living in New York and
LA), I was rocking out my $199 round trip ticket on JetBlue when I saw
something extremely odd. An extremely wealthy couple I knew were
queuing up to take the same flight. Now, this wouldn’t seem especially
odd, except for the fact that I knew they a) owned a jet and b) were
worth well north of $100m. They were older and they were never going
to spend all the money they had.

There was a wonderfully bizarre moment of discomfort as we exchanged
greetings. Neither of us said anything, but the statement was floating
out there above my head: “What they hell are you guys doing on JetBlue
when you own a plane?!?!” I didn’t have to ask. The women leaned over
and said, in my ear, as if we were both in on something amazing: “$199
round trip… and TVs…  amazing!”

JetBlue became the company it is today because of the down market.
Penny-pinching folks of all stripes were drawn to their deal, which
was, as my friend pointed out, “amazing!”

The Opportunity: What can we learn from this? In down markets, cheap,
stylish products are in, and carrying airs about you is out. Can you
build a product that appeals to the cheapskate in all of us?

2. The Zero Cost Startup
The major cost of a startup company today is very different today than
it was five short years ago. Five to ten years ago, the major costs
associated with a startup were servers, marketing, software,
infrastructure (i.e. office space, phones, etc) and, of course,
staffing. Today, many startups have little to no costs associated with
their servers because they are either hosting on cloud computing
platforms like EC2 and Google Apps or they are running commodity
hardware (i.e. $1,500 servers) at co-location locations (i.e. they buy
a rack for $2-5k a month). Previously, companies would fork over
$2,500 per server per month rental fees at “managed hosting” services.
That era of a $20-30k a year server is ending as folks realize they
are not getting full value from managed hosting services and that they
have cloud computing and co-location options.

Additionally, today’s startups don’t seem obsessed with office space
and associated infrastructure. This means the marginal cost of a
startup company is now, essentially, the time of the people involved.
Five folks can co-locate/co-work at a Starbucks or their homes, build
a full application on a cloud computing platform and market their
service on StumbleUpon or AdBrite and be done with it.

3. The Age of the Microstartup
The zero cost startup has led to the age of the “microstartup.” It’s
no longer two folks in a garage hoping to build a prototype in order
to land a huge VC round, then getting millions of dollars to build out
an office. Microstartups are sustainable from prototype to launch and
on to a core user base, all for around $5-10,000 in costs.

We first witnessed the microstartup in blogging: My second company,
Weblogs, Inc., was a great example of this. We had a couple of
full-time team members working from home, a couple of servers and a
lot of freelancers. We monetized with a virtual sales force for most
of our life. The result was a large business being built in 18 months,
and when we sold the business to AOL/TW, there were no long-term
contracts to unwind. There were no leases for office space, computer
equipment or servers. Today’s startups are even lighter!

Microstartups are amazing because they can try ten different things
over a year with very little pressure to “break out.” This leads to a
lot of people taking a lot more risk, stating a lot more crazy ideas.
Which leads me to my next trend.

4. The “Try Everything” Era
If the marginal cost of a business is people’s time, a lot more ideas
are going to be tested. There are a lot of technical people out there
who either have some free time after their day job, or who live on
Ramen noodles, having already quit their day job. The result of
everything being tried will be that every startup with any level of
traction will be copied. I’ve seen dozens of folks “riff off”–as
opposed to “rip off”–ideas from Twitter, digg, Mahalo and FriendFeed.

I’ve personally seen at least 20 folks trying to solve the noise
problem in FriendFeed, including TC50 presenting company Popego. Now,
the fact is, there is no guarantee that FriendFeed will work.
Startups “riffing off” FriendFeed could end u following FriendFeed
right off the waterfall–just like the Spanish mercenaries followed
the Guarani over the waterfall in “The Mission.”

Everyone is “riffing off” Twitter today, including the winner of TC50,
Yammer. Yammer is, truth be told, a much more monetizable version of
Twitter, and that is the reason why we Michael and I selected them as
the winner of TC50. Yammer might be derivative of Twitter, but anyone
who has ten people from their company in Yammer right now can tell
you, it’s a MASSIVE game changer. Is it the most innovative of the
TC50? Of course not, but we give the award for the winner of TC50 to
the company we think will be the most successful. Last year, we
selected Mint, and they are clearly one of the two most successful
companies from the TC40 event (along with Powerset, which was bought
by Microsoft).

Bottom line: Everything will be tried, everything will be “riffed
off.” In this environment, your job as a startup founder is to monitor
as many products and feature sets in the marketplace as possible, in
order to figure out what is working–or could work.

5. Longevity is Innovative
Since everything will be tried, and everything tried will be riffed
off, then how will the market select a winner? The main factors in the
success of companies riffing on a common goal will be longevity and
innovation. Yammer will only win the “enterprise Twitter” race if they
exist for five years, innovating all the way.

If launching a microstartup is a sprint, building a business around a
brand is a marathon.

You’re going to see most of the “riff offs” get off to a big, splashy
start–typically with a Robert Scoble and TechCrunch post–then fizzle
out as they run out of steam. Steam in this metaphor is the passion
and interest of their founders–not just capital.

Bottom line: Longevity will be, perhaps, the biggest innovation a
startup can have over the next five years.

6. The Rising Feature Bar
Another undeniable trend at TechCrunch50 was the quality level of the
websites being produced. is one of the most beautiful and
complete websites I’ve ever seen. It’s got maps, photo sharing, custom
printouts and the obligatory iPhone application. All of this from a
tiny little startup. also had an amazing website, complete with SMS, fancy
charts, imported feeds and iPhone integration–and they build it 100%
on Google App Engine! That’s another trend we’ll talk about below.

The rising feature bar is based on one thing and one thing only: open
source. Almost everything you could want to do with your startup has
not only been done, it’s available as a service or with free code. You
want weather, maps, message boards or social software integrated into
your product? No problem, it’s all available to you in the form of
open source products or software as a service.

Microstartups are not creating code bases, they’re connecting them.
This is why and were such an important
part of TechCrunch50. is building a system for folks to
collaboratively code across APIs and is creating the
business infrastructure for microstartups.

7. Features Over Brands & Businesses
Microstartups and the “riff off” culture have created a new category
of startup based not on a brand or a revenue stream, but rather a
feature. Many of the startups at TC40 were features–kick-ass
features, but still features. I suspect that many of them will turn
into product over the next year, and at some point a brand.

Until you have 10,000 folks a day coming directly to your domain name,
you’re not a brand. has amazing charting features, but until 100,000 charts
are created with one million chart views a day, they are not a
brand–they’re a feature. has an amazing set of features
to track the sentiment around a stock, but until they have 10,000
return visitors a day, they’re just a feature waiting to be added to
Yahoo Finance. The same holds true of, which is
helping people understand international markets.

It’s going to be an amazing year for these companies as they take the
credibility, userbase and PR generated by their launches and translate
them into either brands or business–in some cases, hopefully, both! I
wish them all the best, and I know they all have a great chance of
doing so.

Bottom line: The difference between good entrepreneurs and great ones
is the ability to build a brand. Brands can’t be commoditized, and
features inevitably are.

8. Focus on Revenue or Rating?
There is a long-standing debate in the internet industry about where
you should focus your time: building traffic or building revenues.
This, of course, depends on many factors, including the amount of
funding you have, the competitive landscape and how the entrepreneur
likes to live his or her life.

If you’ve got a lot of runway (i.e. funds) and lots of competition,
you should probably focus on user adoption (think YouTube and
Facebook). If you have less funding and less competition, it’s clearly
virtuous–if not essential–to focus on revenues early.

Mark Cuban was focused on revenues during his talk at TechCrunch50,
while Roelof Botha of Sequoia Capital (and the Mahalo board) seemed to
focus on first building something that delighted users. They are both
right–it’s two different approaches. become a huge
business with $25m in quarterly revenue when they were bought, and
Roelof is on point about making a product that delights folks–he
helped build out YouTube.

In fact, Mark and Roelof both built similar businesses in video that
both had billion-dollar exits. So, it can be done both ways–you just
better be sure you know which one you’ve adopted and that everyone on
your team is on the same sheet of music.

9. The End of Servers?
Folks are building on cloud computing platforms despite these
platforms being only a couple of years–or months–old at this point.
It’s only a matter of time before someone builds a Twitter or
Facebook-level service on EC2 or Google App Engine. I just can’t tell
if it’s one or three years out.

Bottom line: Cloud computing might be unproven, but it’s proving to be

10. The Oversourcing of Crowds
Everyone wants something for nothing–that’s the bad part of American
ethos–and every business plan seems to revolve around recreating the
success of Wikipedia and digg. Truth be told, Wikipedia and digg
might, in fact, be one-time events. Truth be told, they are only
partially crowdsourced.

It’s been proven over and over again that Wikipedia is run by a small,
secretive cabal of administrators. Additionally, folks have busted the
top digg users over and over for selling their influence to marketers.

Bottom line: My guess is that 50% of the “crowdsourcing” on these
sites is really just an underground economy being masked as community

The age of crowdsourcing your way to success is over, and we’re
heading back to the age of expertise and curation. Startups like are not crowdsourcing–they’re paying experts. When
faced with two options–a professionally produced version of a product
and an anonymously gamed version of the same product–it’s fairly
obvious which one users will select. Wikipedia has operated without a
competitor for a very long time, and there is no guarantee that they
will be number one forever. 😉

11. Social Network fatigue & data portability
After building out their social network five or ten times in the same
year, users are starting to give up. Services going forward are not
going to have an easy time convincing folks to build their networks
out again. As such, using Google, Yahoo and Facebook’s shared social
services are going to be the future.

Bottom line: Data portability is going to move from a conversation on
the Gillmor Gang in 2005 to a consumer reality in 2010. I suggest you
get your act together now before users put you in the “evil” category.

12. Meetups & Professional Accounts
In a down market, people want to socialize. Sites like are
going to boom during this recession. How do I know? Well, I watched
the company explode in 2003 when thousands of disenfranchised young
people leveraged the service in Howard Dean. Additionally,
is on right side of the revenue conflict: users value their product so
much, they are willing to pay for it.

Prediction: Twitter will launch a $20 a year professional version this
year and have 50,000 sign-ups in under a year.

Bottom line: is the model for Web 2.0 service-based
businesses. If you’ve built a web 2.0 company that has some user
traction but has no advertising revenue, stop everything you’re doing
and beg Scott Heiferman to join your board (or buy your company).

13. Make Media Time
In a down market, people with free time get creative. The blogging
boom was not born out of a technological innovation–far from it. In
fact, blogging-style software existed for almost 10 years before the
boom. Blogging broke out because so many folks were laid off–and
pissed off–that they took the time to write down their thoughts.

Flickr didn’t boom because it was the first photo-sharing site. It
boomed because in the 2003-2005 period, a lot of underemployed folks
were traveling and wanted to share their photos.

Bottom line: In a down market, folks get fidgety and look for
something creative to do. What startup can you create that will
inspire the recently unemployeed? Perhaps collaborative filmmaking
software? Maybe a screenplay-writing community? Maybe
will take off in this recession and become Flickr 2.0?

14. Game time
As I mentioned above, folks are going to have a LOT of free time. In a
down market, folks level up their World of Warcraft characters and
build out a website for their clan. Some of them might even want to
participate in the games being run by TechCrunch50 startups Akoha and

15. Hookups
When people are stressed out about work, and tired of trying to get
rich, they put relationships, and potential relationships, on the
front burner. My guess is that services like eHarmony and,
as well as startups like Mixtt, will boom in the down market. Again,
when folks don’t think they can get rich starting a company, they look
for other things to fill their time–like a significant other.

See above for the related example.

Bottom line: when people are feeling blue they like to socialize.

Wrapping up
If you’ve made it this far, I’m impressed. Hit the reply key and tell
me what products and services you think will take off in a down

Even with the down market, a looming recession and global instability,
there’s never been a better time to be an entrepreneur. Fortunes are
made off companies that are built–or that build marketshare–in the
down market. Be brave, be bold and go for it!

That’s what I’m doing right now: I’m head down, creating new features
and services for Mahalo. Traveling around the world, I’ve seen the
innovation in Seoul, London, Paris and Athens. I’m sure, next week,
I’ll be blown away by the startups in Japan. (Any tips for Tokyo?).

Get excited about this opportunity… or give up and leave the
marketshare for the rest of us! 🙂

A lot of folks have been asking for yesterday’s email newsletter. Now, this is a one time thing… if you want to get these in the future you have to signup for Jason’s email

Good News for People who Hate Bad News

NOTE: I’m no longer blogging, but rather sending my thoughts, advice and insider information to my friends via email.

If you would like to get my thoughts by email visit to signup.

Note: I’ve been getting crushed this afternoon with folks asking for a copy of this email that I sent to my subscribers. I’m going to post this one since I can’t possibly get back to all of you out there. However, this is not going to be a regular thing. Don’t expect to see the next 10 emails on I’m retired from blogging and have moved to the comfort of my email newsletter, where 9,400 of my close friends and I have a nice intimate discussion.

No comments here please.  🙂

If you want to get future email please sign up now:

best, Jason

Location: Mahalo HQ, Santa Monica, CA
Monday, October 27th, 12:00PM PST.
Word Count: 2,585
Jason’s List Subscriber Count: 9,400
List management:
Message type: Startups
Forwarding instructions: startups, VCs
Republishing: PLEASE DO NOT REPRINT (This includes Mike Arrington and
A month ago today, I wrote an email to you guys about about “(The)
Startup Depression.” When I wrote it, I obviously knew there were
rough waters ahead, but frankly I didn’t think a financial tsunami was
coming. Since I wrote that post on September 27th, we’ve seen the Dow
Jones drop from 11,143 to less than 8,000. One year ago, the Dow was
over 14,000. Think about the sheer destruction of wealth that has
occurred based on that fact alone.


The severity of what has happened can’t be underestimated. There will
be no white knight. Even the massive coordinated government
action–including the first global rate cuts and bail outs–has done
nothing to stop the panic or create a bottom (at least from where I

Bottom line: there is zero chance of a short or medium term-rebound.


As a startup, you are now, officially, on your own. You can’t count on
your VCs saving you or some magical offer from Yahoo or Google showing
up to bail you out. Chances are Yahoo and Google are going to be
shutting down and/or selling off companies they’ve already
bought–like EBAY and AOL have started doing. Parents don’t adopt
while they’re putting their kids up for adoption.

What you do in the next 30 days will probably make or break your company.

The storm is upon us and the death spiral has started. Once that
happens, you can’t stop it–you can only ride it out. Let’s take a
moment to see how this movie will play out. Since I’ve seen it two
times, so I think I know what the second and third acts will be.

What is “The Death Spiral”?
The death spiral for startups is like the condition that occurs to
pilots when they fly into “weather.” The “weather” right now is the
massive confusion and uncertainty of the financial and consumer

In other words, it’s so choppy and dark out there that none of us can
simply look out the windshield and know exactly where we are. The
greatest pilot in the world is a blind man in these conditions.

When a pilot flies into a mess like this, the only thing they can do
is look at–and trust–their instruments. Nothing else matters,
because what you see out the windshield is pure black and gray. What
you feel in your gut is just the choppiness and uncertainty.

Your instruments will tell you what is true and what is false, and if
you listen to them you will not do what ill-fated pilots do: turn into
the death spiral. When this happens you accelerate the process of the
plane going down because you’ve made a turn that eventually leads you
right into the ground. By turning into it you’ve increased your
acceleration and decent–at the same time. (At least that’s my
understanding of the death spiral in flying).

The paradox of the death spiral is that many pilots actually believe
they are stabilizing their plane when they are actually tilting it.

Enough of the metaphor for now. You should understand the basic point:
you must trust your metrics (revenue, burn rate, page views and
earning), not your senses. Your senses and emotions are FUBARed right
now, but your metrics are not.

The Death Spiral of the American Economy
Startups and established companies have started their layoffs already.
The list of layoffs on TechCrunch’s tracker is growing, and sadly it
now includes Mahalo. EBAY and Yahoo will shed thousands, and most
savvy folks I’ve spoken to expect to see Microsoft and Google cut some

Yes, there is chance that even the mighty Google might lay folks off.
Not because they have to–they’ve got a ton of cash–but because they
must show earning growth or risk a stock collapse. The best way to
show earning growth in a down market is by cutting costs. Google’s big
cost? People.

These layoffs are turning us deep into the death spiral.

The poor folks being laid off are going have a hard time finding jobs,
and as such they are going to curtail their spending. They are not
getting that new car or laptop any time soon because, well, anyone can
get an extra year or two out of a car or laptop.

Even the “not poor” and the rich are going into penny-pinching mode.


Well, the pull back in consumer spending is half-emotional and
half-necessity. In times like this, emotion becomes a major driver.
That new iPhone or crazy weekend in Vegas probably won’t make or break
most folks financially, but they just won’t “feel right” doing it.

Ask yourself: Have you put off a purchase because it just “didn’t feel
right spending that kind of money” in the past month? Exactly.
Everyone is feeling it, even if it’s opt-in and guilt-based.

The days of $2,000 bottle service in the clubs of London, New York,
and Los Angeles are coming to a close–even for those who can afford
it. Simply put, you look and feel like a jerkoff if you spend like
this when people are suffering.

… and so the belts tighten.

The Group Belt Tightening Effect
In anxious times, folks like to take action, and the easiest actions
to take are the little ones.

This creates a massive ripple effect. Folks from dotcom companies and
investment banks stop coming into the Apple Store, so the Apple Store
lays off five people. Those Apple employees stop going to the
Starbucks on the corner, so Starbucks lays off a couple of folks.

Starbucks senses the lower same-store sales trend and shuts down their
lowest performing stores, letting go of their redundant managers. The
landlords renting to Starbucks are left without the money to take that
expensive summer vacation and buy new cars, which puts pressure on the
vacation destination and the car salesperson.

You understand the trickle down effect? This is the reverse: the group
belt tightening effect.

These little emotional reactions have not only started–they’re
building into a storm. That storm is going to hit in the fourth
quarter, when a lot of merchants see their order size drop and their
inventories climb. Some merchants will go out of business and flood
the market with tons of cheap merchandise, which will make the
profitable merchants suffer from competition.

Inventory will pile up, cash will dry up.

The fourth quarter is going to be a huge disaster: unemployment will
skyrocket, retail will crash and consumer confidence will flatline.
Some think it will be the bottom, some think it will half-way mark to
the bottom. No one really knows, and that’s really the scary part.

Emotional situations like these are impossible to stop–they have to
play out. The “cut spending now!” train has left the station and
there’s nothing that can be done about it.

How does “The Group Belt Tightening” stop?
At a certain point, folks feel more optimistic than pessimistic about
the future, and that’s when they start spending and taking risks
again. For entrepreneurs like us (I assume if you’re reading this you
are one), you’re wired to be optimistic, so you’re probably fighting
through this due to your internal fortitude.

That does not mean that you’re spending like a drunk sailor. It just
means that you’re wired to invest when you see an opportunity. That
makes you unique in relation to gen-pop (the general population).

The gen-pop doesn’t look inside their guts for guidance. Gen-pop
watches CNBC, the Dow, layoffs, and their friends’ consumption
patterns. They look out the windshield. The forecast for the next two
or three years is going to be dark, and as such, most folks will keep
their belts tight for at least two years.

At Thanksgiving and Christmas this year, your friends and relatives
will talk about cutting trips and not making major purchases. They’ll
recount stories of companies going under and kids moving back with in
their parents after college. It’s part of the morning process. Folks
have to vent, but on a psychological level, the venting causes
everyone to become more conservative than they actually need to be.

The conservative mindset leads to people paying down their debt and
otherwise cleaning up their personal balance sheets. This is the
virtuous part of the process: folks get their affairs in order.

At some point, the lack of competition in the marketplace results in
risk takers making impressive returns. Someone hears about a friend
who is “making a killing on Taser stock” or of a “startup making $250k
a month with five employees.” Then, folks think “hey, I’ve got a
little extra cash… maybe I should get in on that?”

Dentists start investing in startup companies again… We’re back,
baby! (Note: Too many dentists start investing and we’re in a bubble
again–careful what you wish for.)

The belt tightens out of fear and uncertainty.

The belt loosens out of greed and positive data points.

The way to leverage this, obviously, is to get greedy before everyone
else so you can take marketshare. Let’s look at all the good news,
shall we?

Good News Part One: Experiences Over Expenses
The good news in all of this is that folks are going to be spending a
lot of time online, playing video games and consuming things that are
not expensive. They’re going to be looking for “experiences over

If your service provides fun, social interaction and joy to the user,
you’re going to see it spike. Folks will start playing Mark Pincus’
Texas HoldEm on Facebook and the iPhone a lot more. Kevin Rose will
ride DIGG straight to 50m monthly uniques and five foreign language
versions in 2009. Garrett Camp will pry StumbleUpon from EBAY and
break the service out to the mainstream. If only Yahoo would give
Joshua Schechter back so he could finish the mission.

Why will there be a boom in traffic, engagement and participation?
Well, people will have time on their hands and the desire to
socialize. Group behavior makes people feel better. One of the best
cures for the blues is sharing a meal with friends.

Blogging became a phenomenon not because of some technological
advance, but because between 2002 and 2005 there were a lot of
unemployed–and underemployed–individuals with a lot to say and a lot
of freetime. Bloggers like Peter Rojas, Michael Arrington, Nick
Denton, Rafat Ali, Xeni Jardin and Om Malik broke out in the down
market–not the upmarket.

Social networking and podcasting were born and boomed during the last
internet winter.

Bottom line: Folks with time on their hands–and anxiety in their
hearts–will be drawn to communications, content, and community

Free time is good news for modern man.

Good News Part Two: Measurable Advertising Boom
The fact is that most advertising spending is in media without real
measurability–like outdoor, TV, radio, newspapers and magazines.
These sample-based solutions have a lot of inefficiency and lack the
real-time measurability of the internet.

Advertisers will start cutting print, outdoor, TV, and radio (probably
in that order) in favor of the internet’s action-based offerings such
as CPA (cost per acquisition), CPL (cost per lead), and CPC (cost per

Three weeks ago, I attended and spoke at WPP Group’s very understated
agency retreat at a–gasp!–Club Med outside of Athens. It was the
cheapest location you could imagine, but the people and discussions
were amazing. Sir Martin Sorrell gave a big overview of the coming
world and told his troops to focus on measurable solutions. He wants
WPP’s advertising spending to be mostly measurable (if I heard him

Measurable advertising means internet advertising. The internet will
take a hit in the short term, but gain massive marketshare in the long

Good News Part Three: No Competition
There are no longer going to be 10 companies pursuing one vision.
Twitter, Pownce and FriendFeed are going to fight over short blogging
and almost everyone else will go away or stop investing in their “me
too!” solution.

MySpace and Facebook will not have another major competitor for some
time to come. and DIGG will not face many more clones, and
many of the existing ones will go away (or stop innovating). If you’re
launching a product, you won’t have 5-10 folks copy you in the first
year. There just won’t be the funding for the fourth or fifth person
in a space.

That jerk off who stole our code and content to make his vertical
Mahalo knock off? He’s not getting his next round of funding, I can
tell you that.

Bottom line: Less fighting, more marketshare. Less competition for
great developers.

[Sidenote: I’ve already heard some CEOs talking about the overpaid
developers they have on staff and that they wouldn’t hire many of them
for the prices they paid just six months ago. That’s a really hard
position to be in, huh? Overpaying for developers and being faced with
better options just six or 12 months later? What do you do? Cut the
existing staffer’s salary or replace them with a new person? Really
don’t envy either party in that situation.]

Good News Part Four: The Zero Cost Startup
When we interviewed folks for the TechCrunch50 show this year, we
asked them how much was invested in their companies. Many reported
nothing. Zero. They had no office space, no server farms and no Oracle
license. No marketing budget, PR firm or headhunters to feed.

The cost of a pure, boot-strapped, startups today is really the time
the founders put into it. Don’t pay for software, don’t sign an office
lease, and don’t hire a PR firm. Stay slim, build something great and
wait. If it doesn’t grow make the product better and wait some more.
Keep that process up until you find something that makes people
absolutely rabid for your product. If you can’t find something that
delights folks, well, then you suck. Give up. No really, you suck….
give up.*

* Note: That’s just a test to see if you’re a real entrepreneur. When
you read that, did you think of giving up? If you did, than you really
suck and shouldn’t be an entrepreneur. If you read that and said
“frack you, Calacanis…WTF do you know anyway?!?,” then you’re a
gangster entrepreneur and keep up the good work.

Your best investment right now?
The best investment you can make in any market–up or down–is in yourself.

Take this down market as a time to focus on yourself, professionally
and personally. If you’re level eight PHP programmer, make it your
personal challenge to become a 10 of 10. If you’re 20 pounds
overweight, get a trainer and if you can’t focus, start taking Tae
Kwon Do lessons.

If you’ve got a great idea, find three friends and build it during
your lunch break and weekends, while your boss is too distracted to

Rafat Ali started PaidContent while working for me during the down
market. He asked me if it was OK and I said “yeah, sure… that
blogging thing will never go anywhere.” He sold it for $30m earlier
this year after six or seven years of hard, hard work.

Fortunes are built during the down market and collected in the up
market. Now’s the time to build, so turn off CNBC and forget the Dow.
It’s meaningless to you now. All that matters is your work and your
personal progress.

Eyes on your instruments please.

Sidenote: I was on the best podcast in the world, This Week in Tech,
yesterday talking about the economy and technology with Leo Laporte.
You can tune in here:

Press: In WIRED magazine Paul Boutin says you should shut down your
blog. His evidence? Our success with the email newsletter:

Question: Do you think I should post these emails to my blog, or
should I just keep them between you and I? I’m having a hard time
keeping these quiet, as folks like TechCrunch insist they are so
newsworthy that they can break my copyright and republish them based
on the alleged importance. Ugh. Is what I say really that newsworthy
that you can just take my work wholesale? I don’t think so.

Plug: We’re experimenting with a new feature called the “Mahalo Live
Blog.” Essentially if you go to you’ll see a
running list of breaking news stories that we maintain 24 hours a day
seven days a week. It’s sort of like the DrudgeReport but faster.
10-15k folks seem addicted to it. Your thoughts on the live blog?

Question: I was thinking about starting a group email discussion list
for Jason’s list. What do you think of an email discussion list based
on Jason’s list? I was thinking of maybe starting it, but limiting it
to folks who send me $1 in cash in an envelope with their business
card. This would keep the trolls out right?

(The) Startup Depression

I wrote this to my email list on Saturday the 27th of 2008. Two days before the single largest drop in the history of the stock market. 

Now, I promised myself I was retired from blogging to focus on my email newsletter, but I’m getting pounded with so many requests for this essay that I’m giving up and posting it here. This does not mean my retirement from blogging is off, this means I’m posting this so I don’t have to respond to hundreds of emails asking for a copy. If you want future missives like this signup for Jason’s List: Jason’s List signup.

For background, the goal of this post was not to spread fear, but rather inspire folks at startup companies to get focused and to save as many as possible from hitting the wall. Myself? We’ll I funded Mahalo for the long-term and while the market down turn isn’t good for anyone, we’re largely immune from it because we are building on a five year plan that we’re only 18 months into.  

Doesn’t mean I’m not hyper focused, I am…. I’m just not panicking. Great entrepreneurs build value and market-share in down markets. They go to work seven days a week and the breakout when other folks check out. 

Location: CalaCompound, Brentwood, CA
Monday, September 27th, 5:15PM PST.
Word Count: 3,283
Jason’s List Subscriber Count: 6,992
List management:
Message type: startups
Forwarding instructions: startups, VCs
Republishing rights: Please do not reprint

(The) Startup Depression
Since stock market gyrations and the elections seem to be making
everyone rightfully nauseous and depressed, I thought I would take
this email to discuss the biggest ramifications of these challenging
times: depression.

It’s my believe that the economic downturn will be much worse than it
is today, and that 50-80% of the venture-backed startups currently
operating will shut down or go on life-support (i.e. 3-4 folks working
on them) within the next 18 months.

Make a list of every Web 2.0 startup to raise an A or B round and
cross 80% of them off the list, because they will not make it to their
next round of funding or profitability.

Now, I could be totally wrong. No one can guess or time the markets
perfectly. However, planning for the worst is a virtuous idea, so I
encourage you to read on.

Everyone I talk to is feeling confused, paralyzed and anxious–many
are in full-blown depression. People are scared, and they should be.
This could be the start of a very difficult time for our country and
the rest of the world.

In this email, we’ll focus on the entrepreneurial and startup
depression and economic downturns/depressions–and how you can deal
with them.

Some background to get us started
Few things in the world are as exhilarating as starting a new company.
Metaphors abound, and we’ve all heard them: starting a company is like
having a baby, falling in love, and running a marathon. Few folks,
however, want to continue the metaphor when things go bad at a
startup. If they did, we would be having discussions about running a
startup being like divorcing your spouse, collapsing from exhaustion
in the 20th mile of the marathon, or–God forbid–losing a child.

Metaphors swing both ways.

Anxiety and depression from a failed, or failing, startup can be
intense–even debilitating. When outside factors such as markets or
buildings collapsing are added to the mix, I’ve seen great
entrepreneurs just fold.

Now, I’ve never folded, and I don’t say that as some badge of courage.
No, sometimes it’s really, really stupid to keep fighting. Most
consider it especially stupid to fight when you know you’re going to
lose. I don’t.

The result of never folding is that I’ve had my ass kicked pretty bad.
Multiple times.

Depending on your DNA, getting your ass kicked is either complete
torture or deviantly rewarding. Truth be told, I like getting my ass
kicked because it makes me angry, motivated and focused. If I look
back on the couple of moments of success I’ve been lucky enough to
have in my life, they all seem to come after a good ass-kicking.

The darkest hour is–in fact–right before the dawn.

Brief Disclaimer
I’d be lying if I said I understood the complexities of depression or
depressions. I’m not a psychologist nor am I an economist. I’ve never
suffered from clinical depression and I didn’t live through the last
depression. However, I do have a BA in Psychology, have read many
books about the psychology of happiness, and I’ve felt the sting of
the last huge correction (2000-2002).

Consider these one (hu)man’s notes on “entrepreneurial depression and
anxiety.” They are worth the price you’ve paid for them, but I hope
they are helpful to you–especially if you’re suffering right now. If
you are suffering from depression or anxiety, go see a professional.

Really, it’s the best thing to do. Feel free to print this out and
bring it with you and ask your newfound therapist what they think of
my observations and advice. Then email me back what they said… I’m
curious where my thoughts rank.

Kurnit’s Three Reasons Why Companies Fail
Scott Kurnit of the Mining Company (aka told me there are
three reasons why a business will fail: it’s a bad idea, bad execution
or outside factors. If you examine your business with these three
filters right now, you can baseline where you’re at: one, two or three

His theory correlates well with the attribution theory in psychology.
The theory concerns itself with how an individual attributes the
things that happen to them (or others). For example, if you were
pulled over by a cop for speeding, you can attribute that to number of
factors, both internal and external.

Some folks might internalize the event and curse themselves for being
reckless: “I should have known better!” Others might blame an external
source, such as the cop or the bankrupt city they work for: “Gosh darn
Los Angeles cops! They’re just trying to balance the budget by
harassing us!”

Kurnit’s theory, as told to me, mentions two internal factors (bad
idea and execution) and one external (outside factors). When faced
with massive market uncertainty, like we are today, it’s a virtuous
idea to assess each of these factors.

Right now, every single one of us has HUGE outside factors we must
consider. The market collapse is going to make the next couple of
years impossible and frustrating for many entrepreneurs. Even the
great companies – like Google, Microsoft and Apple – are going to hit
hard times.

One of the most important philosophical minds of our time summed it up
best: “I never blame myself when I’m not hitting. I just blame the
bat, and if it keeps up, I change bats. After all, if I know it isn’t
my fault that I’m not hitting, how can I get mad at myself?” — Yogi

Viktor Frankl’s Search for Meaning
John Brockman, my dear friend and agent (if I ever get around to
writing a book), handed me one of the most important books of my life:
“Authentic Happiness” by Marty Seligman. That book led me to the most
important book of my life: “Man’s Search for Meaning” by Viktor

Frankl was a psychologist and Holocaust survivor.

He studied how people react to horrible circumstances that are beyond
their control. He studied why some people give up and others carry on.
While few of us can understand the level of suffering of people during
the Holocaust, Nanking or the Killing Fields, Frankl put his theories
forward so that we could carry them into our daily lives.

Logotherapy was what Frankl called his theories, and their major
tenants are that we choose how to find meaning in our circumstances
and that our experiences all have meaning.

My interpretation of Frankl is that you actually get to choose how you
feel about your circumstances.

The Worst Year of my life
It’s still hard for me to talk about it seven years later–and I’m not
going to talk about it in too much detail right now. In the early
months of 2001, I watched my first business, Silicon Alley Reporter,
crash from 70 employees to 12. The $20m offer I’d received to buy the
business was a distant memory, as was the $11.6m in revenue we had in

Money was evaporating from the bank account, dotcoms were going bust
and we–the dotcom kids–went from visionaries to charlatans
overnight. I went from hosting multi-million dollar conferences, doing
Charlie Rose guest spots and being featured in a 6,000 word article in
the “New Yorker” to not being able to meet payroll.

Many folks said I was lucky with Silicon Alley Reporter, while others
said I was fraud who had finally been found out. I was broke, no one
cared about my work, and my life really sucked.

… and that was just the start.

Then, the stock market crashed and the accounting scandals set in.
Enron, Adelpia, Worldcom, and Arthur Andersen made the fallout from
the dotcom bust look like nothing.

… and that was still just the start.

While lying in bed listening to the radio, I heard that a private
pilot in a small plane had accidentally crashed into the World Trade
Center. Then, I watched the second one hit. Then, I watched them come

To say things went from bad to worse would be a gross understatement.
As I started in disbelief with my fellow New Yorkers, I wondered where
my brother, a NYC Firefighter, was. Then it hit me: he was probably

Due to a simple twist of fate, he wasn’t dead–but many of his friends
were. It was at that time I really took a deep look inside and found
meaning in what happened that day and what happened to me when my
first business collapsed.

In my mind, I was being tested. Horrible things happen in life and I
was faced with several at the same time. From that point forward, my
goal was to not only get back to the level I was at when I was at the
top of my game, but to exceed it.

My goal was to be truly happy every day doing what I loved: running a
startup company. A year later, we started Weblogs, Inc., and 18 months
after that, we sold it. The darkest hour became the dawn, and it was

If you’re failing right now, and if you’re suffering, you need to take
Kurnit’s test. You need to access where you’re at and you need to
fight on. You can give up, sure, but the truth is that when you give
up, you have to live with that fact for the rest of your life. For me,
living with having given up in tough times is a much worse fate than
certain failure.

If you fail, then by definition you have tried. But if you give up,
you didn’t.

Step One: How are you executing
It’s fairly easy to tell how well you’re executing, so let’s tackle
that up front. First, take a look at your plan and see where you are
in executing against it. Are you ahead, behind or on schedule? Second,
you can have everyone in your organization rank your product and its
various features on a scale of one to ten. Third, you have an outsider
rank your product and features.

If you’re executing at an seven or eight or above, then you know
you’re doing well, but could be doing a little bit better. If you’re
executing under a seven, your problems could be execution-based. You
just may not be delivering the goods. If you were a restaurant, the
analogy would be that you’ve got the right ingredients and product,
but you’re just not preparing them well. This means you need to focus
on making the product better.

Another way to get a handle on how you’re executing is to take your
product and put it up against your two top competitors and do the
one-to-ten rating process. Rate yourself and your competitors on the
top 10 features of all three offerings. How many are you winning? If
you’re winning more than three, you’re ahead of the game. If you’re
three or behind, then you’re average or losing.

Execution is the easiest thing to fix, and you can do it one of two
ways: get the people in your organization to perform at a higher
level, or get higher-level folks into your organization.

It really is that simple: folks can either step up or step out.

Step Two: How good is your idea
Determining if you have the right idea is a little more complicated
since most great businesses do not finish where they start. Google
started as a search engine but bought Applied Semantics in order to
create their real business: text-based advertising.

Microsoft started by building programming software (Altair Basic), but
went on to make it’s business in operating systems, Microsoft Office
and servers.

If you’re idea is wrong, it really doesn’t matter. What matters is if
the original ideas allows you to evolve into your big idea.

In order to evolve, you must think like Darwin. Ask yourself: have you
adapted to your market? Have your customers asked you for something
different than you’re currently providing? Have you given it to them?
After you give them what they want, can you anticipate what they’ll
ask for next? Are those items following a theme?

At Silicon Alley Reporter, we started with a magazine and people loved
it. However, they wanted to get more frequent updates and asked us to
make it weekly. We reflected on this “ask” and came back with
something they didn’t even know they wanted: “the Silicon Alley Daily”
email newsletter. 40,000 folks subscribed to it in the first year and
it was a much more usable product than the magazine or the requested
weekly print newsletter that we passed on doing.

The market will tell you what it wants.  You just have to really
listen. Clearly, there was a market for the DEMO conference since it’s
being going on for years. However, they never listened to the “ask” of
the market: let the companies be selected based on merit, not their
ability to pay almost $20,000. Yes, I know it’s a self-serving
example, but those are the best ones. 🙂

When Mike Arrington and I founded the TechCrunch50 event, we didn’t
think it would grow to be 2-3x as large as DEMO after only one
year–but it did. The market had MASSIVE pent up demand for a
merit-based show and we tapped it. We evolved DEMO’s business model,
not our own.

Now, I’m left asking myself, “if I was trying to evolve TechCrunch50,
what would I do?”

Another example from personal experience with start up evolution has
been with Mahalo. When we started, we were just doing hand-curated
links. The pages had very little actual content on them. In our user
lab, folks told us they loved the links, but they kept asking for more

We studied the situation and realized that we could evolve and help
our customers more by writing more content on each page. To do this,
we studied what were the 10-15 things people wanted to know when they
did a search–then we put them on the page. Doing this drove our
traffic from 300k monthly users last year to 4.6m uniques in August (a
record month).

Bottom line: Your first idea is rarely your best.

The first step in a journey is never the best either! Most folks hit
their stride two hours into the marathon. Don’t be afraid to nuke your
first idea and run with your second–or third, forth or fifth.

Evolution is the revolution.

Step Three: Outside Factors
Outside factors are the toughest to deal with because, by definition,
they are outside of your control. Despite our deepest wishes, we can’t
reverse the housing bubble, put the Towers back up or reverse the
accounting scandals.

All we can do is deal with outside factors, and knowing how to deal
with them is critical.

When the market is in the middle of correcting, as I believe it is
currently doing, people tend to underestimate everything including:

a) how bad it will be
b) how quickly it will get worse
c) how long it will take to recover

Chances are the market will get worse and that will happen sooner
rather than later. Watching folks on CNBC last month talking about a
two or three quarters of down market was just sad. It takes just as
long to clean up a mess as it does to make it–typically longer.

The housing mess took two or three years to develop (2004-2006). It
will take three years to unravel (2008-2010) from what I can see.
We’re gonna be dealing with a bad market for at least two years.

10 Specific things you can do
Since the outside market is out of your control, the best you can do
is focus your energy inward. Here are some things you can do after
you’ve assessed where you company is at.

1. Execute better: This is fairly simple, as I describe above. Rank
yourself and your performance and improve it.

2. Grow the talent you have: When the market is down, it’s a great
time to get your team educated and to the next level. Invest in
training and education of your top people, because they are the ones
who will lead your company through this mess.

3. Firing the average people: Again, it’s totally politically
incorrect, but I highly recommend firing anyone who is good or
average. Startups are an Olympic sport and every slot on your team is
critical. You wouldn’t put a “good” swimmer in a relay, would you?
Don’t have one in your startup. Fire the good and replace them with
the great.

4. Cut spending every where you can: Recurring costs like
connectivity, phones, rent and insurance are things that you can
easily cut. Go to each of your providers and ask for 20% relief
immediately or you’re leaving. Most, not all, will give it to you.

5. Find a revenue stream and ride it: If you don’t have a revenue
stream right now, you’d better find one on Monday. Seriously, by the
end of the day. Once you find this revenue stream, ride it. Put at
least 25% of your effort into bringing in revenue.

6. Focus on your profitable clients: If you have revenue, start
focusing on which clients are most profitable. Take them to lunch and
figure out how you can over-service them and sell them another product
(or more of your current product). You’re gonna want to protect these
accounts because the folks reading Point Five are going to be calling

7. Make your top ten 10% better: Look at the top ten aspects of your
business and come up with a plan to make each 10% better in the next
30 days. Ask everyone in your company to make suggestions for the 10%
better program and execute on the ones that will provide the most bang
for the buck. Sometimes, there are things you can do today that will
make something 10% better for free–you just haven’t brainstormed

8. Hold an optional off-site breakfast meeting on a Sunday and see who
shows up: If folks don’t show up for you to grow/save the company on a
Sunday for a two hour breakfast, they probably aren’t going to step up
when the sh#$%t really hits the fan. You need to know who the real
killers on your team are and you need to get close with them now.
Again, it’s fine to have 9-5ers on your team–if you’re the Post
Office. You can’t have them at a startup company. Note: if you reading
this and saying I’m anti-family, save it. Folks don’t have to work at
startups and some of the hardest working folks I’ve met have families
and figure out how to balance things.

9. Build marketshare: One of the best things to do in the down market
is build marketshare. Look for competitors that are going out of
business and buy them or just “steal” their clients and talent (i.e.
pick them up).

10. Raise money: I know I said above most folks won’t be able to raise
money in the down market, but that’s not because the money isn’t out
there–clearly it is. The issue is that the big money out there
doesn’t want to fund small ideas that are in the death spiral. Build a
plan based on revenue and taking market share and folks will consider
funding you.

What ideas do you have for winning in a down market?

How do you stay inspired in bad times?

Send me your response and if you would like it quoted in a follow up
email, attributed or not.

all the best