Comments on: New Media Hoop Dreams: The Smart Kids’ NBA

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By: davidkpark

davidkpark — Sat, 16 Jan 2010 07:14:38 +0000

Was told by a seed VC that a new media (consumer) startup needs 50K monthly repeats before they would even consider having a meeting, let alone investing.

By: davidkpark

davidkpark — Sat, 16 Jan 2010 00:14:38 +0000

Was told by a seed VC that a new media (consumer) startup needs 50K monthly repeats before they would even consider having a meeting, let alone investing.

By: The Fulcrum and The Funnel | innonate

The Fulcrum and The Funnel | innonate — Thu, 14 Jan 2010 04:55:32 +0000

[...] on a post by Ryan Janssen, the outgoing EIR at Rose Tech Ventures and Founder of SetJam, called "New Media Hoop Dreams." About Nate WestheimerNate is the Co-Founder and VP Product of AnyClip. He is also the [...]

By: drstarcat

drstarcat — Wed, 13 Jan 2010 19:21:17 +0000

I like the metaphor. The fulcrum essentially seems like your "idea". That
problem that you have unique insight into. For a new media company, it had
better be very tall because you're going to need to generate a lot of
leverage.

The funnel is your execution. It's the tactical things you do to get people
to do what you need them to in order to make money.

Of course, the fact remains that building and adequate funnel for a fulcrum
big enough to pay-off in the new media space is extremely hard and resource
(i.e time and money) intensive. You probably get 1 shot every four years,
so you BETTER make sure the market is right and that you execute perfectly!

By: innonate

innonate — Wed, 13 Jan 2010 19:04:29 +0000

Ryan,

I think the key here is to always bet on a fulcrum and a funnel, not a mere "idea."

Here's the hypothesis:

The fulcrum is the value of your company. Its your unfair advantage. Maybe its insight into a mass of customers, or foresight into the future of your competition, but the fulcrum is the value you create and the value you leverage off of.

The funnel is how you get people to push a lever (on the Web, it's a button) and realize the company's value. In the funnel is an Experience -- Usability, Findability, Likeability, Ability, etc -- which leads people to you and to press the lever which outputs the value.

That, is what a startup is about -- and it's the use-case for VC investment -- and if the economics of your fulcrum and funnel aren't good enough, you haven't addressed a large enough market problem or solved it in a compelling enough way.

Thoughts?

By: drstarcat

drstarcat — Wed, 13 Jan 2010 15:02:28 +0000

Thanks for the real numbers on someone doing this well. Just build cool
stuff and hope the money comes, it is tempting isn't it? Maybe we should
just give up the business pretense and call ourselves “digital artists”
instead!

By: Paul Orlando

Paul Orlando — Wed, 13 Jan 2010 14:34:57 +0000

Nice back of the envelope assessment. Such simple calculations and yet lots of startups don't think through this. I came across the fallacy of a pure Ad or Freemium model when studying this a few years ago for a client.
A thought on your Freemium numbers. I've seen the purchase % move up, for example in Evernote, which has raised that % over time. The latest number I saw for them was about 1.5%, though that is still not enough to cover their costs.
The thing about these models is, they are just so tempting. Imagine, you can build something without having to worry about the hard stuff like how to make money.

By: drstarcat

drstarcat — Tue, 12 Jan 2010 21:09:37 +0000

Just so I can understand this, I think you're saying two things: Monthly
Revenue/Daily Active is a cleaner metric and the revenue won't be generated
by what is essentially advertising.

If I understand #1 correctly, Monthly Revenue/Daily Active would be how much
money a site would make in a month off of a user who comes to the site every
day (even if that "user" isn't really the same individual).

If that's the case, that person on my model would generate about 30 visits,
90 pageviews (3 pageviews/ visit), and 270 ad impressions (3 ads/page), and
at a $4 CPM would generate about $1/month, which is exactly the number you
say FB makes.

If all of the above is correct (and I'm really asking), then it still seems
like we're playing the same game (with you using a cleaner metric that
bundles some of the assumptions).

My question, I guess, would be, how does this change the enormous burden of
user acquisition? And if the revenue isn't coming from CPM, or Affiliate,
or Freemium (all of which produce roughly the same numbers), is there
something else that will generate BETTER numbers?

I know you cite Zynga, but do you really believe it's all going to come from
virtual goods and that virtual goods will beat lead gen for real goods on a
rev/visit or rev/MAU long-term? If not that, then what?

The final point is indisputable--your product has to be SMOKING hot, which
goes back to my original point: as an entrepreneur you'll have to take
something like a $100k personal risk to even hope to produce something
incredible enough to show those numbers and justify an investment (which
will then hopefully take you to the $10 million point).