Seth Godin on eBook Platforms

“I think what’s going to happen is as we move to a more app-centered world, someone you and I have never heard of is going to build some killer apps that are free but become a conduit - just like cable TV is a conduit to content - that people will eagerly pay for, and it will be customizable, networkable, viral, and tribal.”

— plenty of insights from Seth Godin on the latest Reading Edge Podcast

Jesse Schell Describes The Future of Games

School is a game, right? You go, you get scores. You come out, there’s a leaderboard.

He (Lee Sheldon) doesn’t give out grades for each assignment. He gives out experience points. And you level up through the class. So class attendance is up. Class participation is up. Homework is turned in better. Because it’s a better structure. It’s a better system.

— via fury.com

Thoughts on RightSide Capital

MobileCrunch reports that David Lambert, Kevin Dick and John Lee are starting RightSide Capital, a new seed-stage fund that will make 100-200 investments per year

Entrepreneurs looking for funding won’t have to go the traditional route of begging for a meeting and then having a second meeting and then waiting 3 months for traction until finally closing a deal. Instead, they will fill out an application – similar to applying to College – and receive a response in 2 weeks.

I have mixed feelings about whether or not RightSide has a good model. On one hand, I do somewhat agree with the HN commenter who wants “our capital markets to look more like our mortgage markets: you get your history read by a computer, numbers get crunched, and you get a take-it-or-leave-it offer presented to you by a junior employee of the firm.” Or at the very least, our capital markets could look like this at the most accessible, lowest-common-denominator stage. And for millions of people, this would be wonderful.

But for those of us really trying to change the world, what we need most is time with experienced mentors, and not just a little bit of cash. If RightSide can find a way to scale mentoring to a few hundred founders per year without sacrificing quality, they really could shake up the angel market.

I’ll be eager to see whether they can do it.

One Person Profitable

Ideally you want between two and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear. Even Bill Gates, who seems to be able to bear a good deal of moral weight, had to have a co-founder

— Paul Graham, How to Start a Startup

What Is One Person Profitable?

There’s a lot of single founders out there, and an increasing number of them are managing to get their startups or micro-ISVs ramen profitable while maintaining 100% equity and incurring no debt. I’ve picked up the habit of calling this milestone “One Person Profitable”.

I’ve found the origin story of Admobs to be a particularly inspiring example of how a one-person shop was funded by Sequoia, quickly grew, and was recently acquired by Google. I’ve also found that there are plenty of Hacker News readers who have successfully bootstrapped as a single founder.

Ramen profitability is always a milestone, but it’s another thing altogether if you can achieve One Person Profitable. If someone has pulled it off, I want to see it on their resume or bio in clear, unambiguous terms. In fact, if you’re building webapps or mobile apps and you have the technical chops to do all the development yourself, there’s usually no reason why you can’t reach profitability as a single founder.

The Multiple Founder Arguments

So why are incubators implicitly or explicitly requiring teams to have multiple founders? Here are two main arguments that come to mind:

• There’s Too Much Work (or Moral Weight) For One Person

This is the most easily debunked argument. If developing an MVP for your startup idea is too much work for one person, maybe you’re just doing it wrong. I still remember the amazement I had while sharing an office with Disqus at how their two-person co-founder team managed to be incredibly productive by making quick decisions and being able to frequently say “no”. Even just one of them could probably pull off ramen profitability as a single founder.

Of course Disqus, Tumblr, and all the other successful two-people startups out there have all had the added benefit of a two-person labor division. But like Paul Graham says, the most important role of your co-founder is to help you navigate through the rough patches. The moral weight has proven time and time again to be too much for one person.

My only rebuttal to this is that the faster you can become one person profitable, the less likely you are to feel the full pressure of being a single-founder. If you reach one person profitability and then bring on four co-founders the next week, you’ve still achieved the one person profitable milestone.

• Your Co-Founders Are Your Biggest Investors

This argument can’t be debunked because it’s true that having solid co-founders and advisors is always a positive indicator. Co-founders and early employees make the biggest investment of any stakeholder, and if you can’t sell your vision to co-founders or employees, then how are you going to be able to sell to customers and follow-up investors?

Conclusion

I find the co-founder as investor argument somewhat troubling only when I consider that investors have no reason to encourage you to reach ramen profitability as a single-founder. You’re more prone to failing or selling at an “acquhire” price, while startups that are five-founders deep at launch time can’t usually be successful unless they’re the type of huge success that investors desire.

Single founders tend to end up with a lot more control of their venture once it does become successful. And control, from what I understand, tends to be the most valuable asset to founders who really care about their ventures. Owning all your equity is just about as pro-founder as it gets, and while good seed-stage investors and incubators are pro-founder, I’m not so sure they are pro-founder enough to enthusiastically support the One Person Profitable approach.

I think it’ll be worthwhile to explore the idea of One Person Profitable further. If we really want entrepreneurship to be as accessible as more traditional career choices, I think it makes sense that there should be at least one decent resource advocating the advantages of being a single founder.

The E-Book Pricing War Heats Up

Publishing is made out of pipes. Traditionally the supply chain ran: author -> publisher -> wholesaler -> bookstore -> consumer. Then the internet came along, a communications medium the main effect of which is to disintermediate indirect relationships, for example by collapsing supply chains with lots of middle-men.

From the point of view of the public, to whom they sell, Amazon is a bookstore. From the point of view of the publishers, from whom they buy, Amazon is a wholesaler. From the point of view of Jeff Bezos’ bank account, Amazon is the entire supply chain and should take that share of the cake that formerly went to both wholesalers and booksellers. They do this by buying wholesale and selling retail, taking up to a 70% discount from the publishers and selling for whatever they can get. Their stalking horse for this is the Kindle publishing platform; they’re trying to in-source the publisher by asserting contractual terms that mean the publisher isn’t merely selling them books wholesale, but is sublicencing the works to be republished via the Kindle publishing platform. Publishers sublicensing rights is SOP in the industry, but not normally handled this way — and it allows Amazon to grab another chunk of the supply chain if they get away with it, turning the traditional publishers into vestigial editing/marketing appendages.

The agency model Apple proposed — and that publishers like Macmillan enthusiastically endorse — collapses the supply chain in a different direction, so it looks like: author -> publisher -> fixed-price distributor -> reader. In this model Amazon is shoved back into the box labelled ‘fixed-price distributor’ and get to take the retail cut only. Meanwhile: fewer supply chain links mean lower overheads and, ultimately, cheaper books without cutting into the authors or publishers profits.

Amazon are going to fight this one ruthlessly because if the publishers win, it destroys the profitability of their business and pushes prices down.

— via antipope.org

The e-book pricing conflict has been around for a while, but it has now reached an unprecedented intensity. This is an issue that, like the Google Books settlement, could actually have fairly wide-reaching consequences. Let’s say that the publishers just aren’t willing to budge, but Amazon and Apple still want a way to maintain acceptable margins on book sales. The result might resemble the unfortunate “minimum advertised pricing” rules that end up making shoppers have to jump through hoops in order to view how much an item will cost.

But ebook shoppers would refuse to support such annoyances. Maybe I’ll put a $300 digital camera in my shopping cart so I can see if I get 10% or 15% off retail price, but for a book with a hardcover price of $15? Fuggedaboutit.

I bet there are some more creative, innovation solutions here to please the publishers, vendors, shoppers, and even the authors. And I’m sure the publishers may need some help to come up with them.

How about opening up the playing field by offering your inventory via a flexible digital content affiliate platform? Even with the agency model - especially with the agency model - let the developers run wild with this stuff, and come up with 1,000 new ideas that will rejuvenate the publishing industry. After all, wouldn’t it be a shame to waste this perfect storm of an opportunity?