Ten million users is the new one million users - Chris Dixon
The most important point:
Internet users have tens of thousands of services/apps to choose from but limited time and attention.
This is true for blogs as well as apps.
It's really, really hard to build a brand in 2012.
Instagram and Pinterest made it look easy. It's not easy at all.
Consumer products like Pinterest,Tumblr, Instagram need not spend any $'s in marketing their product. Marketing was well built-in in the DNA of these products. These products have Network Effect. Each user who joins in, they touch many other non-users. And the viral loop goes on and on.
The point with Chris Dixon is, if you are building a consumer internet product make sure you hit Network Effect at some point during your product lifecycle. If you do that, 10million users is achievable in short period.
If you remember Glassdoor Facebook app, they took 2 years to get first million users, another year to get next two million users and they got their 3rd million in "7 days". Thats the Network Effect Chris Dixon expects in every consumer internet product.
He's also saying that consumer companies can go years before attracting funding as a result of that.
He only days Series A. Get x million by raising from angels or friends & Family or bootstrapping. Then go for a VC round.
It's weird to me that a VC can make this kind of pronouncement about all web businesses. It suggests to me that they want to fund the same kind of business over and over again.
Jeffrey, yes, an investor likes to invest in the same business over and over.
Anuj, the Facebook 50% plummet has much of the angel community afraid that companies they fund won't get venture capital. As a result they seem to be investing less. Or maybe we're just in the dog days of summer. Will let you know in October if they pulled out of this attitude after summer.
VCs just want to play safe. For 15 years, VC funds have failed to return to investors the significant amounts of cash invested, despite high-profile successes, including Google, Groupon and LinkedIn.
Infact we are seeing a lot of angel investing these days compared to past few years. Its just because now we have access to incubators like 500startups, Techstars and the AngelList and the very recent KickStarter. Angel investing will become more popular when JOBS act gets through.
I agree, most VCs are on holidays during the summer. Deals are always slow during this period. But i'm sure number of Angel deals this year will be the highest.
I'm not convinced the number of angel deals this year will be the highest.
I see a lot of angels sitting on the sidelines right now.
Perhaps it's because a lot of them have money tied up in Facebook, Groupon, or Zynga, so they're illiquid.
Hell yeah, i think you are right. The Trust factor in Tech is definitely starting to fade away due to the recent IPO drama. And valuations are sky high too. But things were quite different during the first quarter of this year. If you remember, every other person was talking whether we are witnessing yet another BUBBLE or not. But after the Q2 results of almost all new tech companies, except LinkedIn, things have changed dramatically.
Now no one mentions the word bubble, and the stocks of Apple and Google look like screaming buys because investors are afraid of tech stocks.
We'll have to wait until that fear turns into greed again. Funny in an environment with the Dow at 13,000 that tech is underperforming.
One of the major factors influencing all kinds of investment right now is US and European monetary policy. Because everything is attuned to keeping inflation at 2% or less, keeping a lot of cash around seems like a good idea. But if we get an modest inflation spike, we'll see investors return to the market in a big way.
The period of November 2012 through January 2013 will definitely see things change as the six-month post-IPO lockout for Facebook's 1,000+ newly-minted millionaires expires and the JOBS act provisions kick in.
What will signal the next tide change? For instance, everyone was waiting for the Facebook IPO. It was a disaster and now people are scared. What's next on the horizon that will tell us how things are/how they will be?
If Facebook's stock stays at the current levels (or goes lower!) I would think most of those unlocked employees won't sell.
The November election will resolve the uncertainty of where the country is going.
August is usually a slow month but I'm hoping there will be more enthusiasm for investing starting in September...
What the industry really needs right now is another breakout like Instagram in 2010 and Pinterest in 2011.
Something new that gets people excited again about the possibilities of the Internet.
I would guess that *most* early FB employees will sell *some* of their stock at the market price, particularly as they continue to receive new grants. They don't have to time the market or anything since most of their options are priced at a fraction of today's sub-$20 stock price -- whatever price they get is nearly all profit, and most of them should know that trying to time the market is largely a fool's errand.
Facebook's staff skews pretty young and a lot of these folks have been waiting for their payday for 4-6 years; they want to buy houses, get married (and in many cases, generate some fuck-you money so they can go off and do their own startups).
I figured those folks already sold some on the secondary markets a year ago.
At a price higher than $20 per share!
There's another major point here:
For consumer startups with transactional models, e.g. e-commerce, the number of users required is often far lower because revenue is the more important metric. Hence, many early-stage consumer startups are switching to transactional models.
Transaction models include freemium as well as subscriptions and ecommerce.
Dropbox, WordPress, Tumblr, Flickr, and Evernote: Expect more services to charge.
Not for what you're using.
One day we'd like to add some value-add services worth paying for, and we'll only charge for those services.
Expensive to do two things: see profile view history (and doesn't have an accurate day/time viewed -- just "more than 2 days ago" -- and send "in" messages; that being said, they charge that much for both because both are valuable. Think they need a "scrappy entrepreneur" plan.
I'm not sure there are enough scrappy entrepreneurs to make it worth their while. :)
Plus LinkedIn has little incentive to change something that's working for them: http://allthingsd.com/20120802/ever-the-solid-internet-stock-linkedin-delivers-on-expectations/
We want LinkedIn to charge for in messages. If LinkedIn stopped charging for in messages they'd become the internet's principle source of recruiter spam.
Actually, they already ARE the internet's principle source of recruiter spam.
Here's a different perspective of companies that wouldn't exist if investors waited till a service had 10 million users.
Facebook, Twitter, Tumblr, Pinterest, Path, Foursquare, Instagram, Draw Something, Bleacher Report, BuzzFeed.
Still, this is true:
"If you are thinking of starting a non-transactional consumer startup, be aware that you are entering what is perhaps the most competitive sector in tech in the last decade."
Long list. Maybe what Chris means to say is investors lack guts.
Chris IS an investor: http://foundercollective.com/people/Chris-Dixon
How many of their portfolio "consumer" companies have 10m users? http://foundercollective.com/companies
Very few. Which is why he's likely writing from first hand knowledge.
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