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One of the best talks I heard at CasualConnect last week was “Building communities, not just hits” by Max Levchin (founder and CEO of Slide) and Philip Rosedale (founder and CEO of Linden Lab, the company behind Second Life). Creating an online community is extremely hard to do and I have seen a lot of examples where it just happened but nobody could explain why (and tons of examples where community plans never took off) so I appreciated the thoughts by Max and Philip on this topic. They basically boiled it down to 4 success factors:

Yesterday I spent a day at CasualConnect in Seattle, one of the largest casual gaming conferences in North-America and took away some interesting thoughts on where social gaming is headed:

I often get asked by investors and entrepreneurs alike how building a startup outside of Silicon Valley is possible and I always answer that it depends on what kind of company you are trying to build. So if you are trying to create the next Facebook, Google, YouTube, Twitter, or Foursquare and your company requires a large amount of funding and needs to be close to where the buzz is (because dozens of other startups are competing with you with exactly the same idea and the winner will take it all), then a “secondary market” like Denver / Boulder, San Diego, Seattle, Boston, Montreal or Vancouver is not the best place to be. But if you have carved out a niche for your company that is a bit off the beaten track, are comfortable to do more with less money, bootstrap longer and grow your company a bit more organically, then any of those secondary locations could be the perfect place to start and build your company. You might not have the same access to money and senior talent but you usually have much lower costs of operating your company, access to great engineering talent without competing with the Google’s and Facebook’s of the world (and the salaries that they are paying) and an environment that sometimes makes it easier to focus on the real value of a product for customers compared to chasing the latest hype. Not sure if you can create big companies in places like Edmonton, Kelowna or Victoria? Yes, you can! Take Bioware, the Edmonton-based gaming company that the two founders Greg and Ray built over a decade in a city that did not have not a single gaming company before they started their company – sold to EA for close to a billion dollars. Or Kelowna’s Club Penguin, a company that was the first to create a virtual world for kids and sold to Disney for over $750 million. Or my own company AbeBooks that got built in Victoria, BC, over more than a decade before being sold to Amazon. Great companies are being started in these markets every day – they will perhaps not be as glamorous as the Valley startups but will still create enormous value for customers and subsequently exit opportunities for entrepreneurs and investors alike.

I met with 10 early-stage startups in Seattle yesterday and it was a good reminder for me what some of the most important messages are that you want to bring across to an investor when you have a limited amount of time to present your company. Here are the 4 key points that I very much care about:

As the Soccer <a class="zem_slink" title="World Cup 2010" href="http://g.sports.yahoo.com/soccer/world-cup/" rel="yahoosports">World Cup</a> tournament in South Africa is down to 4 remaining teams (<a class="zem_slink" title="Spain" href="http://g.sports.yahoo.com/soccer/world-cup/teams/spain-31/" rel="yahoosports">Spain</a>, <a class="zem_slink" title="Uruguay" href="http://g.sports.yahoo.com/soccer/world-cup/teams/uruguay-39/" rel="yahoosports">Uruguay</a>, the Netherlands and my native <a class="zem_slink" title="Germany" href="http://g.sports.yahoo.com/soccer/world-cup/teams/germany-3/" rel="yahoosports">Germany</a>) it is interesting to analyze why these teams did so well and other (much more favorited or traditionally strong) teams likes <a class="zem_slink" title="Argentina" href="http://g.sports.yahoo.com/soccer/world-cup/teams/argentina-9/" rel="yahoosports">Argentina</a>, <a class="zem_slink" title="Brazil" href="http://g.sports.yahoo.com/soccer/world-cup/teams/brazil-21/" rel="yahoosports">Brazil</a>, <a class="zem_slink" title="Italy" href="http://g.sports.yahoo.com/soccer/world-cup/teams/italy-18/" rel="yahoosports">Italy</a> and <a class="zem_slink" title="France" href="http://g.sports.yahoo.com/soccer/world-cup/teams/france-26/" rel="yahoosports">France</a> did not. As I see it, it comes down to two main factors: <ul> <li>Talent over experience: experience is important especially in critical situations like a short tournament but in the end talent trumps experience. Germany sent the youngest national squad to South Africa since 1934 with an average age of only 25 but these young players have not only an incredible talent but also a bigger hunger to win and an amazing speed and energy that lets them out-hassle older teams. On the contrary, both Italy and France sent teams with a majority of players that participated in the 2006 final and were clearly some of the most experienced players in the whole tournament but still exited after the group phase with not a single win. But it is also important to note that the German team is not only made up of youngsters but also has a few really experienced players that provide the necessary leadership for the team.</li> <li>Coherent vision of a team over reliance on a star performance: all 4 teams succeeded without relying on a star player (actually almost all star players like Kaka, Rooney, Messi, Ronaldo or Ribery disappointed at this tournament) but by developing a coherent system of play where the team was the star and not an individual. By getting everybody to help out on the field wherever help was needed, involving every team member in the play independent of popularity off the field and always following the game plan that the coach designed the result was much more powerful than an agglomeration of talented individuals.</li> </ul> So what can startups learn from all of this? I think that both points are also some of the most important success factors for startups. Always hire for talent over experience as the young, smart, hungry team member will very quickly produce more for your company than the seasoned employee that has worked in a similar position for the past 10 years (but make sure that enough seasoned leadership is in place to guide the younger team members). And always focus on the team and a coherent vision that they can follow instead of relying on a few super-stars that might do incredible things once in w while but most often stand in the way of building a great company in the long run. Looking forward to the final 4 games - and you might guess which team I am cheering for... <span class="zem-script more-related pretty-attribution"><script src="http://static.zemanta.com/readside/loader.js" type="text/javascript"></script></span>

As the Soccer World Cup tournament in South Africa is down to 4 remaining teams (Spain, Uruguay, the Netherlands and my native Germany) it is interesting to analyze why these teams did so well and other (much more favorited or traditionally strong) teams likes Argentina, Brazil, Italy and France did not. As I see it, it comes down to two main factors:

Call it the Fred Wilson school of thought but hanging at the Union Square Ventures offices in the past month has really convinced me that I should blog more. And I have already started to do so in the past weeks (here, here, or here). Why?

Facebook‘s success in building out the social graph is exciting and scary at the same time. Exciting as it has turned social into one of the key growth drivers of the web, scary as one company seems to control the “social infrastructure” that we all want to build companies on. I am pretty sure that Facebook will remain the only mainstream social graph on the web for the next little while but also think that more and more site-specific social graphs will emerge (check out the thoughts on this topic by Albert Wenger and Fred Wilson). So if you are a startup building a product based on a social graph, I would recommend to follow two strategies:

Michael Arrington has argued at the occasion of the launch of his new Techcrunch Disrupt conference that a “third wave” in the evolution of technology is here. With personal computing being the first wave and the Internet the second, he claims that the growing importance of social, mobile and new forms of commerce is revolutionary enough to be called a “third wave”.

There has been a lot of chatter about platforms as of late and their moves have mostly been to the detriment of platform developers (Facebook forcing Zynga to use their credit system; Twitter banning third-party apps from inserting in-stream ads or Apple changing their developer agreement to ban use of third-party analytics and services). As the life of a platform developer has become less interesting / profitable and more risky, should you still consider building a company / product on top of an existing platform?

There has been a lot of development in the display advertising markets in the past 18-24 months and there is no better place than New York City to dive into this vertical. Terence Kawaja did an excellent job at his IAB keynote address a few weeks ago to show how complex the display advertising technology landscape has become. So with 192 companies in 24 categories the marketplace is clearly overcrowded with billions of invested dollars at stake. While this growing complexity currently limits the amount of additional ad dollars flowing into display, it is probably a very efficient trial at large scale to find out what features, tools and types of marketplaces will be ultimately needed.

People search must account for a significant portion of Google search traffic and it is interesting to see that they are now trying to grab a larger market but asking people to store essential information in a Google profile. If this takes off, this would not be great news to Facebook, LinkedIn and specialized people search engines.

Start-ups are all about the people creating and growing them so all of our founders and CEO’s are continuously looking to add great talent to their teams. Going forward I am going to highlight some of the job opportunities here on the blog – so consider applying if you are interested in one of the jobs below (and please spread the word if you know of any candidates that might be a fit):

I have been very impressed with what Mark MacLeod has done for numerous Montreal and Toronto startups as their part-time CFO. A former CFO for numerous startups himself, he started StartupCFO Enterprises a few years ago in order provide financial and strategic guidance as well as back office admin services (so everything from help in the fund raising process to running pay roll / accounting). Every startup with serious ambitions needs good support in the financial area but great part-time CFO’s are hard to find and often not affordable. But by offering his services to about a dozen start-ups, Mark has not only found a business model that works for him but is also a tremendous addition to the startup community out East. So where is the StartupCFO of Vancouver? Reach out to me, would love to chat.

I am spending the month of May working with Albert Wenger out of the Union Square Ventures offices and had the chance to dive deep into the New York Consumer Internet scene in the past few weeks. What I am seeing leads me to believe that this city is developing into a serious challenger of the Valley when it comes to Consumer Internet (and SaaS) activity, combining some of the best VCs and most interesting startups with the incredible energy New York always had. The city seems to have reached critical mass to a point that some entrepreneurs don’t even travel to the Valley anymore to raise capital or do bus dev deals.

Last week’s W Media Ventures CEO summit provided a good opportunity for me to reflect on where W Media Ventures stands today and where I want it to be in the near future. Over the last 2 years, W Media has evolved into one of the leading early-stage consumer Internet investors in the Pacific Northwest with currently 15 investments of which a bit more than half are based in the Vancouver region with the rest split between 6 other locations. Sectorwise social (like TeamPages), travel (like Escapio), content (like Suite101) and applications (like Tynt) dominate the picture. It has been a fantastic ride and I am really proud of the great group of founders and portfolio companies I am able to work with on a daily basis.

There has been quite <a href="http://www.techvibes.com/blog/bootup-labs-20-now-with-more-money-and-less-startups">some discussion about recent announcements</a> over at <a href="http://www.bootuplabs.com">BootUp Labs</a>, including the unfortunate downsizing of the portfolio of the current cohort, but I think that people need to keep in mind that BootUp Labs is a start-up like the start-ups they are financing. Start-ups sometimes don't get the financing they were hoping for and then need to cut back and make tough decisions, start-ups are a continuous work in progress hitting rough patches from time to time (with potentially negative effects for some of the people involved). But what is most important for the long-term success of a start-up is a strong vision and passionate people and I know for a fact that BootUp Labs has both. That is why I am excited to join BootUp Labs as an investor and director, helping <a href="http://bootuplabs.com/about/team">Danny Robinson</a> to take BootUp to the next level. Every city that wants to play an important part in the tech industry needs an incubator / accelerator - companies like <a href="http://www.ycombinator.com">Y Combinator</a>, <a href="http://www.techstars.org">Techstars</a> and BootUp help create new entrepreneurs, attract outside talent and provide dealflow to angels and VC's. So let's all work together on making BootUp Labs one of the best of its breed in North-America - excited to be part of it!

There has been quite some discussion about recent announcements over at BootUp Labs, including the unfortunate downsizing of the portfolio of the current cohort, but I think that people need to keep in mind that BootUp Labs is a start-up like the start-ups they are financing. Start-ups sometimes don’t get the financing they were hoping for and then need to cut back and make tough decisions, start-ups are a continuous work in progress hitting rough patches from time to time (with potentially negative effects for some of the people involved). But what is most important for the long-term success of a start-up is a strong vision and passionate people and I know for a fact that BootUp Labs has both. That is why I am excited to join BootUp Labs as an investor and director, helping Danny Robinson to take BootUp to the next level. Every city that wants to play an important part in the tech industry needs an incubator / accelerator – companies like Y Combinator, Techstars and BootUp help create new entrepreneurs, attract outside talent and provide dealflow to angels and VC’s. So let’s all work together on making BootUp Labs one of the best of its breed in North-America – excited to be part of it!

As the iPhone 4 antenna problem is slowly spiraling out of control (some people even start discussing a recall) I thought it would be a good time to review a few key points how to react to (serious) product problems as a company. I learned my share back in the AbeBooks days when we had a period of frequent down times that we didn’t manage that well. From my experience, there are 3 simple rules for dealing with serious product problems:

Both <a href="http://redeye.firstround.com/2010/03/some-more-thoughts-on-innovation-in-ecommerce.html">Josh Kopelman</a> and <a href="http://www.avc.com/a_vc/2010/03/commerce-20.html">Fred Wilson</a> have lately been pointing out that it is time for e-commerce 2.0 after we have seen a lack of innovation in this space for almost a decade. I have been thinking about concrete opportunities in the e-commerce vertical for some time now and wanted to share them – here are my top 3: <ul> <li>Private sales sites for niche verticals: <a href="http://www.nytimes.com/2009/12/07/technology/internet/07private.html">private sales sites</a> have seen an incredible success over the past 3-4 years in almost every major market in the world as the approach of brands at discount prices coupled with being part of an exclusive sale has hit home with consumers and vendors alike. In the past 6 months a few sites have started to focus on specific verticals (e.g. <a href="https://www.onekingslane.com">One Kings Lane</a> for home decor or <a href="https://www.zulily.com">Zulily</a> for kids’ products) but there remain many more niches that haven’t (e.g. travel, sports and outdoors apparel)</li> <li>Social commerce: despite being a buzzword for quite some time now no one has really nailed an approach that uses the power of trusted friend recommendations to create a more interesting e-commerce experience. Sites like <a href="http://www.blippy.com">Blippy</a> or our own <a href="http://www.justbought.it">JustBought.it</a> have created interesting ways to share your purchases with your friends in a Twitter-like approach but neither has yet fully realized the potential of social commerce. So how would a social commerce product look like? Like <a href="http://www.vark.com">Aardvark</a> but focused on commerce? Like <a href="http://www.kaboodle.com">Kaboodle</a> but focused more on friends instead of a whole shopping community?</li> <li>Customization: it feels that customization initially stopped at coffee mugs and t-shirts and has only recently picked up a bit (e.g. for suits by our portfolio company <a href="http://www.indochino.com">Indochino</a> or shoes by <a href="http://www.distortedpeople.com/Shoes">Distorted People</a>) but what about all the other apparel categories out there? This requires pretty complex manufacturing and logistics capabilities but feels like a largely untapped market.</li> </ul> Let me know in the comments section what you think of these ideas and if you have others – and looking forward to seeing many entrepreneurs tackling e-commerce 2.0, there is money to be made.