Alfidi Capital Attends Bluetooth World 2017

I have always been curious about this Bluetooth stuff, so I had to check out Bluetooth World 2017 down in Silicon Valley. I did not actually see anyone with blue-colored teeth at the conference but maybe I just didn't look closely enough into people's mouths. There's more to Bluetooth tech than just drinking blueberry juice.

Alfidi Capital got a free pass to Bluetooth World 2017.

Some Cisco guy supposedly predicted that the IoT market would be worth over $14.4T by 2023. It's one of those phantom quotes that gets thrown around at these types of conferences. The Bluetooth Low Energy (LE) aficionados here were all about grabbing that big IoT market. There's no free lunch with this tech, meaning there's a tradeoff between longer range and higher bandwidth forcing developers to choose between optimizing for either speed or power.

The "mesh networking" protocol enthusiasts here think it's some revolutionary leap for power optimization over many IoT devices without recourse to gateways or routers. We hear about revolutionary leaps all the time in this valley. IMHO developers for Bluetooth and others techs are way too enamored with smartphone I.D. authentication. Techies never want to admit that bad people can steal or hack phones. Once again, everyone's pitching convenience over security! The immaturity in this valley is mind-boggling.

Bluetooth dominates the wireless audio market and it will probably rule the beacon market in retail store promotion. Online shopping is decimating retail, so beacons have a closing window of opportunity. The next recession will see this window slam shut, and I predict only a few surviving upscale retailers will truly leverage store beacons.

The big push for Bluetooth Mesh as an IoT architecture is doomed to fail if it relies on end users to implement security. It is also unclear how Bluetooth IoT devices and apps will generate revenue. Bluetooth SIG whitepapers should spell out the Cloudonomics metrics that will guide investment. Beacon data generating contextual information about customers will have commercial value once it is aggregated in clouds.

Let me continue on this money metrics theme. Energy use and data processing throughput are measurable costs for IoT devices. Any value Bluetooth adds must exceed the energy and data costs per device. It's also worth asking whether Bluetooth promoters intend the tech to be a completely open source system like ARM, Arduino, and Raspberry Pi. The choice to keep it moving in that direction will affect how developers build apps.

Bluetooth IoT devices will generate enormous volumes of data and metadata, requiring a greater role for machine learning in analytics. Developers should define where machine learning belongs in the data flow from device to cloud. I suspect only a minuscule amount of AI can reside at gateways due to power and processing limits, especially as Bluetooth Mesh pushes these support functions beyond gateways. Developers should focus their AI efforts on the cloud, where power and processing are theoretically unlimited.

It is unbelievable that some people at Bluetooth world think that blockchain will add value to Bluetooth in IoT. The vast amounts of data flows I mentioned above will quickly overwhelm a blockchain ledger. Imagine the constant forking and multiple layers of ledgers to track the new forks. Just say yes to machine learning and no to blockchain.

I foresee a market opportunity for startups based on scraping, collating, and cleansing data from Bluetooth Mesh networks. Venture investors should ask how these startups translate data from Bluetooth and other tech systems into a single format, as long as Bluetooth has competition. Startup IoT devices are amenable to crowdfunding if they have some consumer hook, like a cute beacon base station that invites in-store selfies. I am certain we will hear a lot more about AI and IoT convergence as startups figure out the combo is a hook to get VC funding.

I keep seeing startups jump on the wearable tech bandwagon and Bluetooth World 2017 had its share of starry-eyed wearable devotees. There is very little chance the wearable train will ever leave the station, folks. Wearables will always be way too expensive for most consumers. Battery life is a major limiting factor. Embedded sensors and processors make the products so fragile that they will need delicate care and frequent replacement. The connectivity path loss by distance from embedded devices to sensors is a challenge for devices hanging on a human body. These things will never be a mass-market product, and any personal data aggregated from wearables would likely pose HIPAA violations if released without a user's permission. Security matters "over the air" for wearables.

I asked one tech expert here about how we can design physical plant for maximum flexibility with future digital architectures. The guy said bandwidth is the bottom line, with physical structures built for the maximum possible access points and transmission capacity. There you go, Bluetooth fans, just develop your devices to fit in every building's joints, corners, and shafts.

Anyone who wants a head start on the next big thing should start adding Bluetooth knowledge to their skill set. The IoT frontier is like a gold rush and vacant land rush combined. Proliferating Bluetooth tech that identifies devices should make QR codes obsolete. Startups building solutions that can flex between Bluetooth and other techs will own the IoT future. You heard it here first from Alfidi Capital, thanks to Bluetooth World 2017.

The Haiku of Finance for 10/03/15

Monetize data
New virtual supply chain
Distribute the app

API Monetization And Distribution At Integrate 2015

I scored a seat as a panelist at Integrate 2015, so I had to check out other parts of the conference to see what's new in API World. There's more to app ecosystems than hackathons and gamification. Apps need information fed from the remainder of the data supply chain: data warehouses, SDKs, and APIs.

Deep linking into the app ecosystem is the brand new way of getting content to searchers. I think "discovery service" will be an emerging buzzword for content marketers. App distribution has been one-to-many so far, unlike Web searches matching many-to-many. New app store indexing with knowledge graphs and search will bring apps into many-to-many distribution. The deep linking experts on hand at Integrate 2015 claimed that cheap and free discovery drives app downloads, but they had no examples of success. Paid social media promotion still seems to be a key to driving app downloads. Aspiring startups building APIs and apps must still budget for marketing and raise capital with promotional milestones in mind.

One speaker shared some pretty good insights on the API value chain. Adding details after basic data implies adding value. The API and app have different price points, so the "spread" between them is the added value. The speaker identified different business models based on who pays for distribution. Each model had several different permutations of pricing structures. The cool thing about the broader distribution models is that they allowed for multiple price points. Developers can get paid with affiliate revenue sharing, like the way Uber's API gets revenue when partners in travel and tourism use it to make their own apps. Subscription-based fees for units or tokens tracking API calls resemble the pricing plans we recognize in our smartphone data plans. The acceptance of subscription plans for API calls comes when API providers have large numbers of APIs addressing many segments. The biggest revelation for me was the high cost of hosting APIs in the cloud if they generate high data transaction rates. Hybrid cloud solutions may be best for Big Data providers, with high-volume transactions hosted on premise and other less intense data hosted in the cloud.

The developer experience (DX) is another term that belongs with UX and UI. Cool incentive promotions can generate developer buzz. Displaying an API with pleasing aesthetics means app developers will find it attractive and give it social proof. One piece of conventional wisdom floating around Integrate 2015 is that it's okay to raise prices until some portion of your customers complain, provided you understand your API's sales cycle. I think raising prices until 20% of your customers complain validates the Pareto principle. The other 80% won't notice the price increase because the API relationship isn't significant enough to them.

Proprietary API certification means little if it does not reference some independent computer sector standard. Do a Google search of "API certification" and see the links related to petroleum engineering, not coding. The data sector covering SDKs, APIs, and apps is still so young that it does not have a standards body. The elegant solution would be OASIS standards for API call testing, installation, configuration, documentation, escalation processes, and versioning triggers for re-certification.

API developers must find distribution channels. One successful developer insisted on using a universally accepted protocol. I suppose JSON fits the bill because a lot of developers at Integrate 2015 were enthusiastic about it. Partner networks matter, and so does saying "no" to the wrong partners who want distribution for the wrong business reasons.

I'll conclude with a brief overview of my own participation on one of the panels. I shared the stage with Nicole Bryan from Tasktop and Salil Deshpande from Bain Capital Ventures to discuss venture capitalists' perspectives on investing in API-centric startups. We explored the relationship between monetization and distribution, some changes in the economic landscape that make APIs viable as a core business model, the stories an API startup can tell to make outsiders care, and some standout aspects of an API business model that we would notice in a format like Integrate's startup challenge. The audience of developers and tech aficionados needed to hear the back-and-forth of both genders on a panel representing tech practitioners, venture investors, and the analyst community. I thought our panel was more well-attended than a couple of the main stage headliner talks. Our audience asked sharp questions relevant to launching an API startup. This is the kind of high-level attention developers can get when they attend conferences like Integrate 2015.

The Haiku of Finance for 05/22/15

Mobile app business
Model, test, and launch cycle
Not some waterfall

The Business Of Apps At AppsWorld 2015

Apps World North America held court last week at San Francisco's Moscone Center, and I was in attendance to display my usual flair for original thinking.  The Internet of Things World event happened concurrently but I only had room on my schedule for the first day's apps action.  I'm in demand these days.  Stand by for a blast of Alfidi Capital wisdom.

I continue to be impressed that the Customer Development model works for startups.  App developers launching into the Apple and Google app stores really do their CustDev homework.  Apps that don't collect customer data have an advantage in not having to worry about privacy policies or data breaches, but their disadvantage is that they must still collect usage data somehow.  The rise of the app coding, rock star, mercenary hacker owes much to local culture.  Silicon Valley likes to overpay for talent and now programmers think too much of themselves.  Cheap outsourcing may be a shortcut to app development while quality ultimately suffers, at least according to conventional wisdom.  The developer community has every incentive to perpetuate that belief.  Code testing separates the good app developers from the poseurs.  The elegant solution is to make some portion of a coder's pay dependent upon the outcome of independent testing.

Google's sales pitch for monetization included pitches for its other properties.  If I owned a property like YouTube, I would also be a fan of a broadcast channel dedicated to an app's vertical.  I'm sure that's also a great reason to buy Google AdWords campaigns.  Mobile deep linking will be challenging for unskilled developers; standard formats will keep the UX the same across different platforms.  Google's AdMob service will probably corner the market on in-app purchases and native ads.  Google has its eyes on the Web's next growth phase and that means owning the biggest app monetization plan.

Evernote CEO Phil Libin wanted us to mourn the pending death of apps.  His point about content taking priority over architecture resonates with users who don't have to design anything.  Even wearables need some kind of reachback capability into the cloud where all of the architecture and almost all of the data must ultimately reside.  I appreciated Phil's insights that wearables will profoundly shorten session length and multiply use frequency compared to mobile app use, and that screen size on a smartwatch is not the crucial form factor for apps in a wearable world.  I'll quote him:  "UX will replace apps."  He wants us to design experiences for the person, not the device, so handoffs between phone and watch will be seamless.  A single session on multiple devices means marketers expect us to be immersed in our own private clouds every waking minute.  If there's no need for every app feature on every device, some of those devices will do background work that won't require user input.  Think quantified self here, folks, then think about involuntary biofeedback from your smartwatch.  Taking Phil's advice to design for short, frequent sessions measured in session opens the door to invisible apps that work with body's automatic rhythms rather than our conscious minds.  Phil's talk was heavily attended but I wonder if anyone came away with as much to think about as I did from my front-row seat.

All that talk about ubiquitous UX made me think that the real action is still on the back-end.  If developers gravitate to UX the way they currently do to gaming, anyone left who works on the back-end will face little competition and higher compensation.  Outsourcing back-end services carries risk.  Most app builders may not be skilled in supervising third-party providers.  "Storyboarding" is a very important part of app development for some companies.  Big companies tend not to do it while startups tend to break an app's process into different storyboards.  Third-party libraries can be useful sources for code that has universal appeal, especially for security and encryption.

New developers have two more metrics to learn:  cost per install (CPI) and cost per unique user (CPUU).  App Annie shared some developmental wisdom about soft launching to find an app/market fit.  I did not know that test launching in an Asian market has a lower CPI until App Annie said so on stage.  I also did not know that markets with similar development demographics will show comparable LTVs.  Wow, listening to App Annie is better than listening to Gartner.  These developers will need finance types like me to help them model their LTVs if they take App Annie's lessons seriously.  Look before you leap, test the app before you deploy, and model the business before you launch.

I was maxed out on apps after the first day.  Building a business around apps is easier than ever.  The elimination of difficult entry barriers is precisely what makes the app space so attractive, and so crowded.  I believe the game developers at this Apps World will pivot to wearables once they figure out how to make games for those short sessions Phil Libin foresees.  Your smartwatch will play a game with you to get you to take the stairs more often and eat less sugar.  I'll see the devices at some future Apps World but I much prefer to wear my old-fashioned watches.

The Haiku of Finance for 05/15/15

Starbucks mobile breach
Stealing app account money
Grab the tall mocha

Alfidi Capital Attends Mobile Monday's 2014 Year in Review

Mobile Monday's year-in-review for 2014 and predictions for 2015 was one of those can't-miss San Francisco events.  I trekked over to Adobe HQ on Townsend Street to absorb the night's wisdom.  I've been over there often enough to know that any startups seeking street credibility need to attend those events.  Bear in mind that the observations below are all my own.

First, allow me to orient my readers to the Adobe gathering place past the front entrance.  Anyone who's ever visited Adobe has seen the employees' creative expressions around their public meeting space.  Sketches adorn the walls and they're much better than your kids' etchings hanging on the fridge.  I guess the Adobe folks are taking classes after hours to add right-brain creativity to their left-brain work.  You might even see something like this unique branding interpretation below.

That's a whole bunch of gumballs arranged in a Plexiglas cube resembling the Adobe logo.  It's really cute but the gumballs are not available for consumption.  I thought about adapting the Alfidi Capital logo in this style but I don't have a physically impressive space where I can display it.

Adobe's meeting space has all of the fun tech gadgets you'd expect, like cameras and projection systems to capture the audience.  That's me taking a selfie of my image on the big, fancy projection screen before it rolled up.  I have no idea what these other people were doing.  I did not come to Mobile Monday for them.

Mario Tapia kicked off the event with his special rendition of a Christmas rhyme, "Twas The Night Before Funding."  I hope he puts it on the Mobile Monday website.  Every startup dreams that their primary investor will be some kind, grandfatherly type pushover like Santa Claus.  That's why it's a fun fairy tale, kids.  Reality is a VC who wants to cram down the founders' stake and push for a premature exit.

Let's get to the panel already.  I did not write down much of what they said because I was too busy generating my own thoughts, which I shall now share with you out of generosity.  The bubble charts from a tech sector investment bank still projected huge mobile revenue growth even though it means cannibalized growth in other online services.  Mobile subscriptions and advertising are very sensitive to economic downturns, and consumers will do without either in the next recession.  I'm not sure why the panelists think Millennials' preference for smartphones as data carriers means they're less likely to use it as a phone.  Other generations use the devices to make voice calls.  The world does not revolve around Gen-Y people even though the ones in Silicon Valley think it does.  Mobile sector analysts all seem to be Millennials anyway, so their research is becoming self-referential.

Games dominated every bubble chart and quad chart the Mobile Monday panel discussed.  Analysts expecting non-game app categories to overtake games are foolish.  Mobile users' preference for amusement on demand is now so thoroughly ingrained that only other gamified apps can satisfy the craving.  App makers targeting business functions still have not figured out how to incentivize users with playable levels and token rewards, and that's why they won't see growth that displaces games.  The obvious way to jump start growth in any other app category is with gamification.

There may be some growth left in sectors that provide on-demand services specific to locations.  Yes, Uber and Lyft, I mean you.  The mobile sector forgets those companies aren't just mobile apps, but analysts who don't leave their desks much won't understand logistics in the physical world.  Virtual services are a different story.  Lots of sectors don't have enough workers who are mobile enough to justify a device and app for everyone, so traditional seat count metrics for ERP systems still matter.  I can only see mobile "virtual back offices" for SMBs viable only for those businesses with localized services (gardeners, junk haulers, whatever).  The mobile sector is too much in love with itself if it thinks every cubicle dweller is destined to go mobile.

I may be one of the few analysts on Earth who understands what drives M&A in mobile.  It's not corporate development targets or cultural fit.  It's really cheap capital from the Federal Reserve's ZIRP that makes mobile deals look better than than they would without steroid dollars.  The next most important deal driver is the collection of billionaire tech egos who use cheap capital to buy threatening startups.  Really, that's it.  None of the things I learned in my MBA coursework about strategic fit are driving mobile deals.  It will take a severe stock market correction and the removal of the Fed's monetary stimulus to bring old-school methods back to dealmaking.

No way are mobile startups going to keep rocketing from zero to exit in two years.  Stratospheric acquisition prices, especially those measured by price paid per employee in startups with low headcounts, are an unsustainable phenomenon unique to bubble economics.   I'll believe that WhatsApp and others are viable when their acquiring parents' public financial statements show their line item revenue.

The panel's best insight was the difference between acquisition strategies of tech companies run by different generations.  Gen-Y billionaires (Mark Zuckerberg at Facebook) buy messaging startups because that's what Gen-Y uses to communicate.  Gen-X firms like Microsoft and Yahoo buy email startups, but I wonder how entrenched Gen-X culture is at those companies.  Generational difference in corporate management cries out for a Harvard Business Review case study.

I just LOL at VCs endorsing strong encryption.  No way will the NSA allow it.  I expect any US-based startups pushing encryption to be bought out by the big firms that have already agreed to cooperate with the NSA, just to see their tech absorbed.  Non-US startups offering encryption will have a hard time entering the US market, if you know what I mean.

I heard one of the attendees at this event who mentioned Ashley Madison in the same breath as other dating site success stories.  That site caters to adulterers but apparently some people in mobile don't mind.  I will not link it here.  My readers who approve of that site should never read me again.  I take personal integrity very seriously and keeping a marriage vow is a reflection of one's character.  Mobile enthusiasts who equate breaking marriage vows with business success might as well invite business partners to betray them.

The panel closed out with their predictions for 2015.  They were all over the map expecting disruption in real estate, wearables, wealth management, and other sectors suffering from friction.  I agree with the trend of emoticons and short-form messages dominating communication in post-literate society.  Maybe the next hot mobile startup will have a hieroglyphics UI.

Mobile Monday's 2014 close-out left me satisfied that I know more about mobile use than most VCs and analysts.  I expect more of the same from the sector, particularly from the continued growth of games.  The mobile sector can expect to see more of me in 2015.  

The Haiku of Finance for 11/26/14

App life cycle work
Certify knowledge support
Process meant for growth

The Haiku of Finance for 11/24/14

Mobile mapping app
Tracking terrain for drone flight
Three dimension cash

Viggle Needs Income to Make Its Share Price Jiggle

Viggle (VGGL) is one of those small online companies crying out for attention.  I'll be generous and give them some.  Their main properties are an entertainment rewards platform, a content sharing platform, and an audience analytics suite.  My Google searches of those terms reveal that none of Viggle's brands are on the first page of search results.  That must be discouraging for these folks.  Viggle's app partnership with DirecTV counts as a good user engagement method but I don't see what would prevent DirecTV from tweaking its own apps to capture Viggle's rewards traffic.

The Viggle team is extremely large for an app developer.  Consider that successful app companies in Silicon Valley have a handful of employees.  Their financial statements should indicate whether all of these people add value.  The 8-K dated June 25, 2014 reveals a merger with Choose Digital that cost Viggle almost 2M shares (a significant dilution) and created a contingent payment of almost $4.8M, payable in about a year.  That wouldn't be such a bad hole to crawl out of if Viggle had sufficient net earnings to pay it off.  Unfortunately, the 10-Q for May 14, 2014 shows Viggle is not profitable.  They had about $1.4M in cash on hand back in March but lost almost -$14M for that quarter.  That burn rate puts them at going concern risk on a weekly basis.  Check out their SGA of $18.8M; that's what that huge team displayed on their website costs.  Silicon Valley VCs get sticker shock when they fund a company that blows through its investment hiring unneeded people before their sales justify expansion.

Viggle is a good case study showing that user engagement stats and lots of app store downloads don't necessarily translate into revenue.  The history of this company as entities named Function (X) and Gateway Industries escapes me, but it's irrelevant.  This one really reminds me of Inuvo, another Web portal I evaluated today.  Only so many online rewards marketplaces will ultimately prove viable; the rest will end up selling to each other in a frenzy of blowout, self-cannibalizing referrals.  I've given Viggle more attention than it deserves.  It will get more attention if it cuts its burn rate and becomes profitable.

Full disclosure:  No position in VGGL at this time.

Mobile Monday Knows Your Startup's Top Legal Mistakes

I attend Mobile Monday Silicon Valley events even though I don't work in the mobile sector's ecosystem.  I keep my finger on the pulse of mobile action and meet the folks who put those fancy apps on your smartphone.  The event this week was a chance for aspiring entrepreneurs to hear from attorneys on how not to make common legal errors.  I did not make any errors when I wrote my nametag.  It is truly a state of perfection.

The panel attorneys from Arent Fox and elsewhere handed out free wisdom like candy.  There was also free candy available from the Tea Room where they infuse their chocolates with green tea, oolong tea, chai tea, and other stuff.  I had my fill of chocolate and took the legal stuff seriously.

Following one's own privacy policy and assigning founder ownership stakes early are pretty basic things.  The preponderance of lawyers with diverse specialties makes me think there's a disruptive opportunity for an online lawyer rating and referral service.  Call it the attorney version of Yelp.  It's too bad Yelp has such a poor reputation that even lawyers should be reluctant to use it.

I hate to admit that likability is a factor determining whether VCs invest in a startup.  Investors believe in founders more than tech and will push them to pivot if Plan A doesn't work out.  I learned long ago that physical attractiveness and pedigree are key to likability.  The guest lecturer in my 2002 MBA venture capital class told us about how her high heels, fishnet stockings, and revealing cleavage helped her close several rounds of funding as a serial entrepreneur.  I have told several female entrepreneurs that leveraging sexuality is a successful tactic.  That's one reason many attractive women flock to me for wisdom, and other means of stimulation.

I liked hearing the tidbit about structuring owner and advisor equity stakes to align with those parties' fair time commitments.  Linking the vesting of an advisor's shares to their fulfillment of agreed objectives is an acceptable practice.  Setting term limits on an advisor's board participation is a helpful way around the discomfort of firing them for non-performance.  I remember last year when a startup I was mentoring through an accelerator demanded that I violate the accelerator's rules on time commitments and complete all of their worksheets for them.  I refused to violate the rules and the startup fired me as a mentor.  They retained a former poet with no entrepreneurial experience as a mentor.  That startup never made it through round one of the accelerator and the founder failed to commercialize any of his inventions.  I don't think it's difficult at all for an advisor to perform well for an ethical entrepreneur.

I learned a little bit about the culture of Silicon Valley.  The Valley ethos of "pay it forward" favors gratis introductions to build relationships.  Any startup advisor who demands compensation in exchange for introductions to investors raises a red flag in the Valley.  That alert must propagate through the Valley's networks like wildfire when it happens.  I marvel at the persistence of some "pay-to-play" entities that knowingly flout this ethos.  Their excuse is that many hopeless startups benefit from paid exposure to well-heeled groups even if no investment is forthcoming.  The reality is that naive startups get fleeced by paying entry fees to pitch fests where no serious investors will be present in the audience.

Some top-drawer law firms do demand a cut in exchange for investor introductions, but they can get away with that because they have access to so many real venture investors who look to them for deal flow.  I've also noticed that the top law firms will accept equity compensation from cash-poor startups.  I say that's a fair way to comply with the Valley's culture of mutual helpfulness.

I'm not going to castigate the legal climate of California.  I trust my state's business laws and I don't need a legal domicile in any other state that would subject me to an unfamiliar jurisdiction.  I unwound my LLC structure and Alfidi Capital is now a sole proprietorship because incorporating just didn't benefit me.  I don't know how California law treats employee non-agreements but plenty of Valley firms poach from each other constantly, so I suspect those agreements aren't worth much outside of something extraordinary.  The attorneys present at this Mobile Monday panel viewed non-competes as a form of golden handcuffs enforceable during corporate acquisitions.

Startups can protect their IP with a "file patent, sign NDA" approach.  Tech developers under contractual employment agreements may be tempted to leave early and take that tech to a competitor.  Filing a patent on that tech keeps it with the startup that agreed to pay for its development.  Requiring the contract engineer to sign an NDA clarifies their role as an employee hired to perform a specific service.  The disclaimer language assigning IP ownership to the startup, and not to the employee, should be airtight.  Don't ask me how to write it; I'm not an attorney.

I'll close with a video parody one of the attorneys liked.  Check out an imaginary Nikola Tesla pitching Silicon Valley VCs.  This never happened in history but some future super-genius will relate to the process.  All of the Silicon Valley biases are there.  Teams, lead investors, and pitch decks matter for any startup that isn't run by Nikola Tesla.  Those self-absorbed VCs like teams.  I don't like teams unless they leave me alone to do my thing.  I think Nikola Tesla would have loved to speak at Mobile Monday.  

The Haiku of Finance for 05/02/14

Make mobile payment
Easier impulse purchase
Cheaper to process

Mobile Money Spells Economic Annihilation For Credit Cards

I don't let hype over US-Russia economic sanctions take my eye off the ball.  Other wanna-be global powers can talk all they like about creating alternative global settlement systems to the US-based SWIFT system.  Russia will not succeed even with help from China until both of their economies are completely open.  Transparency and the rule of law have enterprise value even though they are weakening in the US.  The relative advantage still lies with the Anglo-West and even Asian banks prefer more transparent interbank transfers.

The real action worth tracking is in mobile P2P payments.  The emerging tech for smartphones is an existential threat to the major credit card companies.  Any combination of Google Wallet and M-Pesa is a knockout blow to credit card payment systems.  The combo will eventually metastasize in the developed world.

Vendors who migrate from card payments to mobile payments will find many advantages.  They won't lose gross margin by paying credit card charges.  Reducing the number of steps in a transaction means less friction for purchases.  Consumers will love the simplicity of mobile transactions and spend even more of their dwindling middle-class paychecks.  The unbanked poor in the US will finally join the mobile revolution once they see how quickly M-Pesa fills their SNAP accounts.  Everybody wins.  

Changing Low-Earner Behavior With Low-Information Incentives

A bunch of finance apps innovators shared their tips for changing behavior at last week's Meetup.  I attended because I'm always on the hunt for new control mechanisms that the ruling class can implement.  The open-source fin-tech community is always a big help.

One entrepreneur mentioned Startuponomics, a behavioral economics event that informs some of the business models percolating through fin-tech.  Irrational Labs puts on that show.  I don't pay to attend pricey events so they'd better invite me to speak.  Startups learn things like the importance of word choices in prompting debtors to honor their promises to pay, and this apparently drives improved debt repayment rates.

"Persuasive design" is a subset of persuasive technology that drives humans to make appropriate financial decisions.  It is the natural evolution of Edward Bernays' ad techniques into an all-encompassing environment for driving human behavior.  Action-oriented verbiage, emotionally warm color tones, and gamification that rewards prompt repayment with expanded borrowing limits are all persuasive tools.

I actually think it would be beneficial to use video and animation that talks down to low-information consumers.  Low-IQ people respond well to emotional appeals and celebrity endorsements in focus groups.  The imagery should be as condescending as possible to be effective.  Animated walk-through visual tours of a financial service encourage adoption because the vast majority of humans want to be told what to do in life.  Behavioral finance works well on stupid people.  The poor really should respond well to cartoon animal mascots telling them how to save, invest, and borrow.

A couple of the startups mentioned their reliance on electronic bill payments, and how vendors caught them off guard by accepting only paper checks.  Anyone who only deals in paper checks is way behind the times.  I pay as many bills as possible electronically.  Shame on those sloths who are unwilling to deposit checks in a timely manner.  Their poor cash management practices will be a death knell in a hyperinflationary economy.

My descriptions above reflect more than just a Jonathan Swift-like modest proposal to drive financial technology.  I truly believe that the lowest social classes want and need benevolent guidance from elites.  Fin-tech startups really do want to empower the poor to make better financial choices.  Bringing them inside the capitalist system from the fringes makes everyone better off.  Society becomes more stable, the poor become responsible customers, and the rich remain in power.  The best revolutions are the ones that leave elites entrenched while everyone else is better off.  Behavioral finance will change lives.

Nota bene:  I redacted one paragraph from this article on April 1, 2014.  I decided upon reflection that it was over the top and just plain unnecessary.  I go pretty far out there sometimes, but when I go too far I know when to pull back.  

Revelations Of Apps World North America 2014

I attended Apps World North America 2014 last week in my continual quest for technology market insights.  If there's something in the mobile app world that deserves an investment, I'm destined to find it.  I actually didn't find anything I'd want to invest in at the conference but I did come away a bit smarter about how the sector is maturing.

The legendary Steve Wozniak was the lead keynote speaker right at the beginning.  The more I hear technology leaders talk live, the more I see the common elements of their personalities.  The guru known as Woz was highly improvisational, weaving stories from Apple's early days into the tech news of today.  The most brilliant tech minds express themselves like jazz musicians by riffing through multiple topics that have common connections.  That kind of thinking is probably hard-wired at birth but the rest of us can adopt some of their techniques.

Woz says an intrinsic motivation for innovation comes from an emotional source, and is much more powerful than extrinsic motivations from rewards like stock options.  His favored roadmap for innovators leverages affordability and using existing building blocks.  I take that as a smack to VC-funded tech companies that spend millions on development when open source coding tools are readily available.  I also took something away from his description of Steve Jobs' understanding of product design aesthetics and his talent for reading people.  Startup team members should complement each others' strengths.  Woz's engineering knowledge and Jobs' design aptitude made Apple successful.  It probably wouldn't have succeeded if all of their early employees were clones of each other.

I like his cute equation:  H = S - F, or Happiness = Smiles - Frowns.  That's his shorthand for not looking back or second-guessing decisions.  I promise to smile more when I write insulting things about stupid people, because that will make them frown.  My smiles minus their frowns equals total happiness for humanity.  Woz is a genius.

He seems resigned to the end of privacy in the age of mass surveillance, and to the end of the Moore's Law increases in computing power.  Woz would like to see the dawn of intuitive AIs that replicate the human brain, but truly understanding brain science is hard and the end pf progressively more powerful computers means we may never reach the intuitive AI singularity.  I dunno, Woz, quantum computing may surprise us to the upside.  I was dumbfounded when he praised Bitcoin.  I think a computer genius would be more cautious about the computational limits of crypto-nonsense, although he did mention the risk of Bitcoin mining duplication.

He flicked his wrist to show off a cool high-tech watch hand-built from old parts but I didn't get his explanation of how it allowed his brain to do less work when he checks the time.  Maybe he knows more about brain science than me.  I'll give him the benefit of the doubt, but if he really likes Bitcoin then he's subject to the same cognitive limits as the rest of us.  BTW Woz, if you want a language where people can write their own scripts to interrogate IoT devices, check out HTML5.

Woz took tons of questions from the audience.  He thought Blackberry could have saved itself by making Droid phones and that TV subscriptions should be portable via mobile anywhere.  He looks forward to specialized mini-robots and realistic holographic projections.  He likes Siri enough to want it to manage other apps, but IMHO he'll need to get his wish for AI fulfilled.  I liked Woz enough to photograph him for my blog but I'm not enough of a fan to talk to him personally.  The hangers-on in the audience mobbed him for personal glory while I turned my attention to other talks at the conference.  There he is below, less than two meters away from the greatness that is Alfidi Capital.

Some of the speakers tried to differentiate between an app's user experience (UX) and customer experience (CX).  That's a distinction without a difference.  I do not believe app developers can draw such a clear line for any app other than premium ones that charge a download fee up front.  Other revenue models - freemium, in-app ads, in-app purchases - blur the line.  App developers who apply Forrester's Customer Experience Index metrics to their UX/CX concepts stand a better chance of adoption because they bothered to learn something about how people use tech.

I will hereby announce my disagreement with people who say "tech drives innovation."  Tech is actually the result of innovation, and like Woz said above that comes from a human motivation to make something better / faster / cheaper.  Techies who love tech for its own sake join startups all the time, and they never succeed because they don't solve problems that meet market demand.  I saw lots of that among the gamers' pavilion.

Here's new tech buzzword that makes me LOL:  mind share.  It's so nebulous that it could mean anything in brand acceptance without any underlying data from Forrester or elsewhere.  This makes it fodder for tech charlatans and pseudo-visionaries who can throw it around and impress clueless tech executives.  I'd like to ask the next app developer who claims traction in "mind share" exactly how they measured that in their CustDev process.  Market share counts for more than mind share.  Sales fixes everything.

I saw one really cool slide on an "ROI pyramid."  It linked CRM data to customer LTV in a way that enabled managers to compare the NPVs of capex spent on tech projects.  A Google search for "ROI pyramid" shows a bunch of these models, all of them starting from radically different premises than what seems to be the original version circa 2010.  That original model looks cool but this is evolving in weird ways.  We may have another "mind share" type of concept on our hands here with this pyramid.  I think enough of these ideas strung together will make a convenient checklist for any tech charlatans who want to bamboozle old-school executives.  Mind share?  Check.  ROI pyramid?  Check.  Don't forget your web design wire frame for those startups with no internal HTML developers.  See folks, this tech stuff is easy.

I take experts seriously when they provide how-to roadmaps with verifiable data underlying their claims.  One of the best panels at Apps World 2014 was on boosting app downloads, presumably with such verifiable techniques.  They advocated A/B testing of ad tag lines with a target market in mind.  I've heard tech advocates endorse video walk-throughs of an app in use to aid users but these folks advocated a slideshow.  Okay, but that requires more click-through work than a video.  Truly successful tech appeals to post-modern human laziness.  Good luck getting repeat use after a single activation with a slideshow visual aid; maybe it works best for more complex apps.  I sure would like to see some data on the claims of customer LTV for different app revenue models.  I'd also like to see some data comparing the drop off ratio (i.e., app users who never return after the first activation) of different revenue models.

The dude who spoke on the evolution of mobility in the enterprise was cool.  Big enterprises went through brochureware, limited apps, the mobilization of full business processes, to the fully mobile enterprise of today.  I think that full transformation is still out of reach for enterprises tied to large physical plants; the energy and petrochemical sectors spring to mind.  The mentality that any and all companies can become fully mobile reflects just how limited in scope the prototypical Silicon Valley vision has become.  These app innovators all operate in a universe where games, messaging, and media feeds are the entire economy.  Show me a railroad or construction company that is going full mobile, please.  I did pick up on the need for an enterprise-level "mobile center of excellence" that can push mobile adoption across functional silos.  That one very important C-level insight will get lost among the jungle of developers' tech jargon.

Addressing MDM is getting more difficult as BYOD policies allow device brands to proliferate in the enterprise.  IT departments are belatedly learning the value of app security that ignores device specifics.  They're also learning that VPN is not a panacea because it fails on speed and battery life, crucial things in a mobile UX.  The panelists making these claims all referred to policy limitations rather than tech limitations.  I can read between the lines.  It means enterprise users who bring their own tech to the enterprise risk violating MDM and BYOD policies even if their tech is effective.  Policy exists to protect the enterprise from employees, not the other way around.  The insider threat is too big to ignore.  Employees who think outside the box are welcome to request policy modifications, or start their own enterprises.

There's still tension between developers of Web APIs and developers who prefer a mobile enterprise application platform (MEAP).  IMHO the MEAP isn't yet obsolete because it is still good at applying security protocols.  Gartner's Top Ten Strategic Technology Trends for 2014 still favors MEAP in the rise of HTML5.

The case study from 8tracks was as action-packed as a case study can get.  I learned another new phrase:  cohort retention.  A Google search tells me that a cohort is a group of app users who clustered their adoptions within a certain time.  If I were running an app startup, I'd synchronize my SDLC waterfall chart to these cohorts and measure what each iterative CustDev effort tells me about how I should update the app.  The point is to find some sweet spot that makes the graph of customer adoption rates go asymptotic.  The 8tracks guy was big on assigning success metrics to each group of responsible actors within the enterprise.  I would know what those metrics are if I worked in a large enterprise, but I don't do that anymore because I do not like working with other human beings.  My only success metric is the daily Web traffic I drive, which in turn flows from the number of people I can arouse to anger with my insults.

Some panelists discussed founding an app business because they had done that before.  Their passion for ideation came from the desire to improve something that touched their personal interests.  Hey, me too.  My creativity comes from observing the stupidest aspects of finance - hedge funds, bailouts, preppies - and imagining the opposite conditions.  The opposite of stupidity is the genius of Alfidi Capital.  These founders say leveraging popular keywords in app store searches will reveal ways to raise an app's ranking.  Got it.  The "TechCrunch spike" from a prominent tech media story no longer drives as many app downloads as it used to drive, so PR needs a re-think.  I had to re-think the wisdom of what these people presented when they dropped buzzwords like "concentric marketing," "building communities," and other techno-babble.  Hey folks, there are only a few ways to make an idea go viral and they all pretty much depend on emotional connections.  We all heard this stuff about connecting communities back in the first dot-com boom and none of it was cost-effective.  Virality works because it bypasses community gateways, and there's no way I'm dealing with dot-bomb startups or tech charlatans who pitch community solutions.  Nonetheless, they did close out with a good reference.  Bill Baker's tips on startup fundraising are worth a look.

One other presenter emphasized the aesthetics of design, because the human brain processes info quickly.  Got it.  Steve Jobs got it too.  No wonder adult images are such popular web search topics.  I'll think I'll check out a few images of hot women once I'm done writing this article.  Oh BTW, this presenter also mentioned using excellent economics, which I interpret as capex that achieves intended milestones and variable costs that don't get out of control.  Lining up all the right steps first in product development and CustDev means a crowdfunding campaign will make sense.

One panel on monetization showed me how to take the hard work out of segmenting your target market by demographics and location.  Ad networks gather much of this info, so reading their results is probably a decent shortcut that points the way to CustDev.  The experts say ad placement for in-app ads should be a consideration during the design phase, not an afterthought, because different ad concepts lead to different UXs.  Interstitial ads, for example, have fewer impressions but better overall results in conversion rates.  Banner ads have more accidental clicks so they may not give accurate CTRs even though they run continuously throughout an app's activation.

Another monetization guru mentioned the importance of using collaborative filtering to track and predict the adopting audience's preferred UX.  This requires app marketers to graph the longitudinal expressions of an audience's preferences to see changes.  Like I said above, ad networks and other social media tools have plenty of data on the audience.

One of the final presenters displayed another awesome chart . . . the Gartner Hype Cycle.  There's a hype cycle for just about every sector Gartner tracks.  It sure would be nice if someone could track a meta-hype cycle for the volumes of research that Gartner and Forrester have published on tech since the mid-90s.  I'll bet the peaks in the hype cycles of their publications have driven the peaks in VC funding for baloney startups.  Here's another new tech idea that deserves hype cycle tracking:  mobile backend as a service (MBaaS).  How much you wanna bet that it drives the next round of VC funding once VCs see the huge gaps in enterprise IT?  Yeah, you know it's coming.  I also see the resurgence of "middleware," another popular term at Apps World 2014.  You heard it here first.

The Hackfest sponsored a hackathon and awarded some prizes at the end of the conference.  Hackathons should ideally produce marketable ideas but I got the feeling that some of the participating coders do this to burnish their reputations.  Maybe these prizes are resume builders for techies.  There's nothing wrong with that at all.  I would trust a coder who had a competitive spirit.

I have not yet reached the point of diminishing returns from attending these tech conferences.  The cute new terms amuse me to no end, and once in a while a speaker impresses me with data-driven analysis that can be used to develop strategic business options.  I now have much more robust baloney detection filters that can detect a tech charlatan from across the Interwebs.  My desire to make simple, free apps to show off the Alfidi Capital flair for genius is stronger than ever.  I don't even have to worry about privacy or security as long as my apps don't collect personal data.  Stand by for more genius, at a time of my choosing.  

The Haiku of Finance for 12/13/13

App security
Layer with device, network
Encrypt end-to-end

Mobile App Marketing at APPNATION V 2013

I've got app fever after scoring a full conference pass to last week's APPNATION V Conference at Moscone West in San Francisco.  The rapid adoption of mobile devices is spurring a whole new subset of marketing campaign marketplaces, metrics, and agencies.  This ecosystem is going to completely replace traditional marketing in less than a decade.  I had to get my fill.

The opening keynote with Facebook introduced the build / discover / monetize paradigm for apps.  Getting 5% of app users to pay is considered the threshold for success but high customer acquisition costs defeat monetization.  There seem to be two broad categories for app adoption:  viral growth apps (with a large installed base monetized through ads) and utility apps built to be sold.  The Facebook rep pushed their Parse feature to build an app's back-end infrastructure and their Login feature for tracking and sharing data on users.  Okay, I think I get the difference; Parse is for hosting and Login is for app management.  Facebook's research shows that the typical app users has maybe 40 of the things and uses each between one and ten times.  Most users don't enable push notification but Facebook's autofill button must be enabled for apps to use its functions.  Hear that, developers.  Enable your one-click adoption functions early in the app's development cycle.

The state of the "app nation" according to Flurry is that 2.3T app events occur each month, and not just downloads.  Smartphones and tablets are really the first wearables because everyone keeps them on hand constantly.  I was astounded to see the figure that apps represent 87% of people's online time on their mobile devices and traditional web browsing is the other 13%.  Apps are thus the intermediary in the typical mobile user's online experience.  The browser wars are over, and the browsers lost.  I learned a new KPI:  monthly active users (MAU), which doesn't just pertain to games.  App marketers should know that what Nielsen is to broadcast media, comScore is to software and apps.  Some apps now have more subscribers than telecom carriers and are deploying virtual storefronts.  This is why Flurry and other players are counting on in-app messaging to be a dominant communication channel and promotional channel for goods.  They also think that the app communication sector will separate into distinct channels for messaging, visual media sharing, and news feeds.  I take that to mean that an all-in-one app just won't appeal to users.  I'd like to see how the mobile sector handles a mature market like South Korea now that it has reached saturation with devices.

I actually learned something from Bloomberg's talk with the dude from Hotel Tonight even though I don't follow the travel and leisure sector.  Holiday periods provide different use cases on shopping and the effectiveness of promotions.  I think Hotel Tonight's heavily manual method for vetting hotels is not as scalable as it could be if they would automate their process.  I think that's why they'll have a tough time competing against Priceline.  I'm getting the impression that how developers stack their ecosystem with incentives determines who participates.  Gamification incentives like star ratings and free channel exposure incentivize hotels to use this particular app.  I don't use Google Wallet or PayPal but their ability to store credit card data reduces friction in online transactions.  I'll bet hotels like that when they participate in an app marketplace.  Here's one more trick I'd like app developers to try.  Apps need geolocation tools to optimize omnichannel promotions.  Heat maps will reveal heavy users' geographic regions and Big Data can correlate usage instances with travel patterns to see if heavy users are frequent travelers.

LifeStreet Media took more than their allotted ten minutes to make their case for in-app advertising.  Freemium distribution plus in-app ads equals revenue for app developers who don't have paid subscription models.  Real-time bidding (RTB) ad servers allow advertisers to bid on individual impressions rather than a certain demographic's content adjacency.  Advertisers can combine RTB servers with mediators who optimize ad inventory to experiment with different campaigns.  A mediation layer monitors different ads' monetization.

I caught enough of Mojiva's monetization workshop to see how a second tier of ad networks can increase fill rates.  Do a Google search of "mobile ad network" to see these things proliferate.  I'd like to know how advertisers segment their ad inventory.  Is it by geography?  Or by some other user demographic?  I guess the seasonality use cases the Hotel Tonight guy mentioned are a factor.

The "Candace and Vijay Show" featured two mobile PR legends imparting wisdom on building a PR campaign.  They defied the conventional wisdom I've heard about journalists by saying app developers should appeal directly to reporters in their verticals for coverage.  Uh, ooookaaaay, but a lot of these developers in attendance are building apps just for the sake of building apps.  They'll be disappointed to find the "app beat" isn't covered by many journalists.  The PR gurus also recommended getting traction on app blogs first before going to mainstream media.  I had sticker shock when they threw down the cost of professional PR representation.  PR agencies run from $10-15K/month and limited-run consultants cost maybe $5K/month.  There's no way even VC-backed app startups should have to pay out that kind of dough!  The best PR is free.  The one best thing I got out of their well-attended show was that getting a journalist to agree to do a story involves iterative negotiations.  The process starts with an initial pitch of a PR statement in an email that's six sentences or less, with a time window for response setting a preemptive close.  Keep dripping those journalists for a feature, because the major app stores won't risk embarrassment by featuring an app that has zero traction from other media.

I didn't have time to watch the MEF trade association present their policy initiatives in a separate seminar.  Their white papers and market surveys look like good background research for app developers just beginning to craft their go-to-market strategies.  MEF's free App Privacy tool is a privacy policy generator that creates code for developers to embed in an app.  Filling out a short form has never been so easy.

Google Analytics' power session was a revelation.  Every app download can trigger tracking information thanks to conversion tags from Google Tag Manager.  See folks, that's why that embedded privacy policy from MEF's generator will be so important if you want to get full benefit from metrics with no legal problems.  Analytics and Tag Manager can track an app user across the entire Google experience to see how they found the app.  See folks, there's no privacy left for any of us anyway.  Going online means everyone can see everything you do.  I am very impressed that Tag Manager allows developers to store conversion-based rule sets and triage app bugs.  That's a cloud-enabled business rule engine in decision management.  Google Analytics Academy is a MOOC blessing for developers (and also us bloggers) who want max benefits from the platform.  I need to read up on the Google Analytics Blog to see the tips I've been missing.

I got one big thing from the "masters of monetization" panel.  If your app drives installation of other apps you can capture 80% of the ad dollars spent across those apps.  This is why WeChat and LINE are so effective.  They enable app ecosystem replication.  Their other points also made sense as effective tools.  App developers who can show use case data to advertisers will justify higher eCPM but I think they'll have to adapt the formats they use to present it if RTB is the marketplace norm.  App developers prove their worth with data on click-through rates, targeted user segments, and geographic data on adoption.  The ability to segment a user base is IMHO an underestimated advantage if business users don't like seeing ads in their apps.  Optimization eventually reaches a point of diminishing returns.  Advertisers use frequency caps to avoid oversaturating a target demographic.

A real live VC from Signia Venture Partners was among the panelists who spoke on getting an app discovered.  This panel was almost a counterpart to the "Candace and Vijay Show" because they mentioned the utility of getting validation from thought leaders before getting you app into an app store.  VC-backed developers have a special advantage because their VCs can asked the major app stores to feature the app.  Candace and Vijay would call that "hacking your pedigree."  I cannot overemphasize the importance of showing KPIs like LTV and CPA to VCs!  Those VCs review broad averages for app LTV and CPA to determine whether app companies can be profitably acquired.  The wide availability of good user acquisition (UA) tools and ad tools means app developers can use video ads, promoted tweets, and other integrated attribution layers that will help avoid duplicative ad buys.  I just don't think having someone wear an orange elephant suit on the trade show floor will accelerate discovery but that's what one exhibitor did.  I didn't stop by their booth to find out if it was working.

There was a brief unscheduled session on getting an app funded that featured Sergey Brin's brother.  The dude is in some startup but I didn't hear a whole lot that isn't already widely known about raising capital.  He did speak highly about getting on the top crowdfunding platforms, which I track for my own private use.  He said AngelList and Y Combinator matter to VCs, so the traditional VC reluctance to endorse new ways of funding and training startups is totally breaking down.  Brin the Younger pretty much endorsed the marketing mix 4Ps without explicitly saying so.  Everything old is new again.

Wing Venture Capital was present for the panel on mobile platform wars.  It's clear to me that platform-agnostic technology and HTML5 compliance will have clear enterprise adoption advantages.  Startups should take note of that before starting.  They echoed things I heard at mobile conferences two months ago when they said CIOs can easily accept apps that comply with BYOD policies.  Hybridizing business and personal use of tech makes enterprise adoption easier.  I learned a new word combo:  "Stackable / glanceable" means tech that describes anticipatory content pushed to users.

Mobile Monday Silicon Valley offered up a master class on app marketing strategies from 148Apps.  The apps with the most successful conversion rates solve problems unique to mobile, such as combining geolocation with micro-tasking.  Automatic sharing and friend referrals are an underutilized but worthwhile app marketing feature, worth building into an app at the start.  Public events like this trade show also work in getting attention.  The panelists liked BuzzFeed's viral creation ability but I have no experience with that platform.  They also endorsed A/B testing of app icons and buttons, and I've heard others say that Twitter is a good way to do this with a large enough follower base.  They hinted that a red button is the best conversion-generating color.  Lots of analytics tools are best and Google, Flurry, and others have stuff we can all use for free.  The panel likes the concept of a video showing a user interacting with the app if it concludes with a strong call to action.  The panel shared one very disquieting insight; they noted that LTV is approaching CPA across the mobile app universe.  This implies the aggregate of apps will soon be unprofitable and app developers will have serious difficulty succeeding with apps as stand-alone business models.

One unannounced panel on transforming an app into a full startup was a good segue from that last panel, and noted attorney Roger Royse served as moderator.  Someone mentioned a local social event series but I'm not sure whether they meant Startup Monthly or Startup Socials SF.  Well, you can never have too many networks.  The typical formula of product/market fit and entrepreneurial passion apply to this kind of transformation.  I say it also takes a scalable model that evolves into a Buffett-style durable competitive advantage.  That means a combo of market leadership (in a market of any size), high barriers to entry, and high switching costs.  One panelist mentioned BJ Fogg's habit-forming design work as worth a look, so I'll have to read up on his Fogg Method.  I was pleased that the panel admonished entrepreneurs to compare the ROI of their startup to the ROI of their present occupation and the opportunity cost of not working.  They drove home once again the importance of the LTV/CPA comparison.  That is so crucial that many of the experts here mentioned it.

I missed the morning sessions on the second day due to a previous commitment.  Chartboost's session on day two was all about a good user experience.  Here come their top tricks.  Upgrades that add clicks, increase hurdles, or degrade the user experience will ruin your app store rating from users.  Do A/B testing by changing the title of the app's listing in the store.  Measure your retention numbers and get your sector's benchmarks.  Only launch a 100% complete app.  Users won't tolerate an app that's 80% functional.  Don't think you can iterate such a partially completed app because you'll never get adoption.

Roger Royse returned to moderate another monetization session.  I should not have been surprised to learn that most apps use standardized design patterns, but I'd sure like to see some knowledge center where these common patterns are categorized.  Maybe the Fogg Method will shed some light there.  The panelists didn't come right out and finger IoT but they did see a big opportunity for apps that can talk to remote devices.  Oh yeah, graphics and photos make an app look good even with a simple layout.  All I can say about that is that humans are so visually oriented that playing to the lowest common denominator of perception always works.

One roundtable on disruptors who transform enterprises revealed the perils of in-house apps.  Many apps contain rich content that can impede server performance, and the enterprise IT architecture must account for how fast apps will load without a full download for each use.  IMHO that just means enterprises need to move at least their densest apps to a public cloud, but I'm not a CIO.  I don't yet buy the roundtable's argument that mobile will be the dominant platform in enterprises.  Maybe those enterprises whose workforce is highly mobile, with lots of field service reps heading out to remote sites, will need it to be dominant.  A lot of people are still going to be chained to desktops for a while.

Google's AdMob reps came out to give their session on how their platform will master localization.  They define internationalization quite differently from localization.  "Internationalization" is a code base designed to be adaptable to many markets.  "Localization" are language and details configured for a specific market.  They also gave us a hint as to why LTV is converging toward CPA and making the app sector unprofitable.  It's the 85% of in-app user spending for things other than the app's features and services that degrades the LTV of those users.  The placement of ads matters.  Users don't mind in-app ads as long as they disrupt the user experience.  That means ads should go in between instances of use (like game levels) that don't interfere with content.  I can't believe that so many app developers don't design in their monetization strategy from the get-go, but some people at this conference needed the reminder.  Google's Cloud Platform is ready and waiting for developers to jump in.

The final session of the conference from Fiksu covered marketing campaign planning.  Fiksu presented data showing clear seasonal patterns for app store adoption regardless of sales volume.  The cost to acquire loyal users (multi/serial downloaders) rises during holidays and drops off in January.  Fiksu's Indexes, ebooks, and other resources cover this phenomenon in more detail.  They left us with three conclusions for planning a campaign.  First, plan ahead for seasonal ad spending around holidays and sports seasons.  Second, link the ad campaign's goal to strategic KPIs:  increase total users, decrease CPA, etc.  BTW, the app's rank in a store is a poor goal because it's too volatile over the short term.  Finally, choose a strategy of either volume or value.  Volume means driving large numbers of downloads.  Value means a high LTV for repeat users.  Either strategy requires placing a dollar value on customer acquisition costs.  Fiksu thinks January and February are the cheapest months to buy ads, and that app developers must time their app submissions around the "freezes" when the app store's display is unchanged.

Allow me to wrap this up by linking those two Fiksu campaign strategies back to Facebook's opening description of two product types.  The positioning of your app and its product/market fit will IMHO determine the campaign strategy you select.  Viral growth apps for a large base are monetized with ads; these demand a strategy of volume to drive large numbers of downloads.  Utility apps built to be sold are monetized with paid subscriptions, paid upgrades, paid unlockable features, and the like.  These demand a value strategy seeking high LTV customers.  Alfidi Capital has thus spoken and rendered profound wisdom.

Wow, that was an action-packed conference.  They said up front that it was oriented for a business audience over a technical one and they weren't kidding.  There are enough links to free resources to equip an entire academic major in marketing.  App developers need to take campaign design, ad spending, and analytics very seriously.  Those who don't are just playing in a sandbox and throwing away VC money.  Like Donald Trump says, it's just business.  

Angel Launch Launches Startup Venture Summit

I was privileged to attend Angel Launch's inaugural Startup Venture Summit last week in Silicon Valley.  It was the perfect counterpoint in many ways to my Dreamforce 2013 experience.  The Salesforce honchos told their entire ecosystem which markets they wanted to penetrate and laid out the details of their platform updates.  Entrepreneurs at the Startup Venture Summit met investors and partners who could help them gain traction with a big ERP ecosystem.

That layout is typical of what you'll find at eBay's Town Hall venue.  I can be a very aggressive networker when I have a mind to do so but I now find that people at these events seek me out.  I'm sure my listing as moderator of two panels helped attract people, along with my pinch hitting moderation of a third panel at the last minute!

The first VC panel shared their perspectives on top trends.  Stars from Khosla Ventures, Draper Nexus, and Garage Technology Ventures were on hand to let us know that startups need to show investors their "map of the world" on how they will realize their vision.  Paradoxically, VCs are more comfortable funding a business that doesn't immediately need the money if said business spends more time chasing customers than investors.  They like product demos that are installed with customers.  I must agree, because there are way too many shelf-ready products launching at venues like DEMO that never make it anywhere but the showroom.  VCs like it when startups figure out the minimal amount of capital they need to solve their biggest risks.  I just did a Google search of "overfunded startup" to see the frustrations investors have when startups waste money just because they can.  We hear the term "traction" a lot at startup events but the VCs know the term is a proxy for sales and other metrics tracking external acceptance.

The next panel on attracting angels and family funds featured some investors I've known for a while, and a new media outlet named BayLive.  These guys have been around the block enough to know that pitching them something they don't care about is a waste of their time.  This was not the first time I'd heard the startup investing "T's" cited all in one place:  Team, Tech, Traction, Timing, and Total addressable market.  I don't think the set of T's is standardized because different gurus tend to reword them based on their investing preferences.  These guys were big on networking because strong networks share visibility and investor referrals.  Many investors prefer referrals from their networks of attorneys, bankers, and consultants over cold contact from unknowns.  One panelist modestly admonished startups to take money from well-known investors first if they have the luxury of choosing their investors.  I should add that name recognition isn't the only thing prominent venture investors bring to the table and that some third-generation investors just do it because it's the "family business."  I should also add that some banks go out of their way to offer startups a beginner's guide to the early venture ecosystem.  I'm thinking Umpqua Bank, New Resource Bank, and Silicon Valley Bank would be good places for startups to keep their cash if they can't afford a pedigreed introduction at Goldman Sachs.

The moderator for the panel on valuation, acquisition, and expansion strategies was a no-show so I jumped up to offer the conference organizer my services.  I was already there as moderator for two other panels so I might as well save the morning.  "Luck is what happens when preparation meets opportunity" was Seneca's ancient wisdom.  Well, I was prepared when this opportunity presented itself.  Salil Pradhan and Bill Reichert reprised their roles from the VC panel and got more specific on how startups prove their worth as they grow.  They commented that early stage valuations are too high right now, and I was tempted to refer to the infamous Bin 38 "Angel Gate" meeting from a few years back that tried to hold valuations down.  Ron Conway had the correct reaction to that ill-conceived plan.  Anyway, I asked our panelists what they thought of valuation models like the market comparable method.  They thought it was more useful in later stages as the exit event looms.  Early stage valuation is different because it accounts for how much money it will take to build the company, and entrepreneurs need reasonable data points to show early investors.  They also thought expansion strategies must be sales-driven, with a sales capability ready on day one to do CustDev.  The point is not to lead investors into discussing valuation, but to get investors to commit to a business model that can move up a sliding scale of growth.  Experienced VCs have seen that customer acquisition costs are unique to each company and are typically costly in early stages.  Startups that don't need money have the luxury of saying no to investors.  I suspect those startups are rare.  Rarer still are those that can negotiate from positions of strength at an exit.  Our panel felt that taking a decent exit early may be preferable to facing more VC-backed startups later.  I got two things out of my hasty entry into this panel.  First, the ABC of "always be closing" recalls Guy Kawasaki's lesson from "The Art of Rainmaking" that sales fixes everything.  Two, your network is your net worth, and the ecosystem of partners a startup creates looks even better when a potential acquirer wants to merge it with their own ecosystem.

I moderated my next panel on Big Data, analytics, and business intelligence.  Our topic had a huge scope but the collection of VCs from Fung Capital USA, North Hill Ventures, and Sierra Ventures had it under control.  I'm pretty sure the entrepreneurs in the audience benefited from hearing that product-market fit, tenacity, and fast-scaling sales were some of the things VCs want to see when evaluating early startups.  Stuff like proof of concept and financial due diligence come into play in later rounds.  These VC think ERP pain points exist in Salesforce's mobile integration and in customer in-store behavior prior to the point of sale.  Take note of that, entrepreneurs.  If you can meet those data needs and bridge the gaps between technology platforms, you've got an audience.  They also think that focusing on unit economics early on is a key to scaling up later.  Your high customer churn rates will look bad to VCs so get sticky customers whose lifetime value is clearly measurable.  I asked the panel if any non-transaction ERP functions like HR and supply chain management allow for disruption.  They said that supply chain forecasting is often guesswork and could benefit from data that saves margins.  They key is assessing whether an organization's IT mindset is amenable to changing other non-transaction modules.  The VCs had very diverse opinions on the types of KPIs enterprises should use for Big Data; they mentioned revenue per employee (FTE) should be at least $400K, and that the customer lifetime value must compare favorably to the customer acquisition cost.  Payback period matters too, because VCs can't wait forever before they see a return on their investment.

Some more experienced angels from SF Angel and World Capital Market were up next to present strategies for funding pitches.  My biggest takeaway was the importance of an attention-grabbing story, because investors will want to know what's in it for them.  A lot of the lessons from Guy Kawasaki's 10/20/30 rule carry over as long as entrepreneurs remember that execution matters more than the idea.  I liked that they understood how a founder should be ready to surrender the CEO role or a majority stake if that is what will help the company make it.  Their list of speakers to study for good habits includes Steve Blank and Alexander Osterwalder.  I've heard Steve Blank talk and that guy knows his stuff.

My moderator duties continued with a third panel on enterprise platforms, cloud services, and infrastructure. This was another huge topic for serious investors from RWI Ventures, Second Century Ventures, Opus Capital, Scale Venture Partners, and IPV Capital.  Once again, product-market fit emerged as a key early investment criterion but the size of a startup's opportunity and its whether its revenue growth is sustainable also mattered.  One VC surprised me by mentioning LinkedIn as a due diligence tool.  See folks, your network and professional history don't escape notice.  I personally like to use the name query functions on superior court websites to see if someone I meet has a history of bankruptcies or lawsuits.  I've avoided several potential business partners who had sub-par legal histories.  Anyway, my panelists thought universal connectivity has validated Big Data and users want it accessible 24/7 anywhere.  The roadblock to full implementation is that enterprises don't yet fully trust the public cloud for sensitive data and still use hybrids.  The type of customer an enterprise faces determines whether security trumps performance in the inevitable tradeoff.  Cloud solutions offer value to SMBs that have few tools but startups need to make adoption easy if they want to disrupt big models.  The switching costs and key features of the big providers' walled gardens inhibit customer switches, so the pain points would have to be pretty high to induce a switch.  I asked our resident chip expert whether Moore's law still holds; he thought it was still valid because quantum computing and MEMS can extend chip life.  Ecosystems matter because a startup has to participate in a community of contributors to open source hardware (Arduino) and software (Hadoop) to make them all happy.  Companies can add valuable customized layers on top of open source tech.  The investors like freemium product distribution as a good way to qualify leads, and app marketplaces are a good way to evaluate the size of a platform's ecosystems.  I'll close this one by listing these investors' favorite accelerators:  Y Combinator, InnoSpring, and NAR REach.  There you go, folks.  I know my recollections of these panels can be jumbled in a stream of consciousness style, but buried in all that knowledge are hints you can use to move your startup forward.

I had time to listen to one more panel on investment opportunities in Europe after I had completed all of my moderating duties (three panels!) for the day.  Europort is the EU's vehicle for trade promotion in Silicon Valley.  The Bay Area Council Economic Institute is becoming ubiquitous at these types of events by noting that foreign R&D facilities are growing in the Bay Area.  This panel's observation that virtual trade missions are economical for SMBs mirrored what I heard the US Commercial Service say at a trade promotion event several months ago.  The Euro-folks cut the audience a break by noting that an entertainment budget for a trade mission to Europe wasn't nearly as important as one for a similar mission to Asia.  I guess those old legends about drinking Asian business executives under the table in some Tokyo karaoke bar are true.  I had to do some of that during my years in South Korea in the late 1990s for different reasons.  Perhaps I should have done a lot more.

I was impressed with this AngelLaunch event.  It attracted the right experts and hit the right themes.  Entrepreneurs need to hear this stuff as much as possible in many venues.  The endless pitchfest circuit is always a gauntlet but the addition of crowdfunding kicks fundraising into overdrive.  Tech startups need a 24/7 presence on multiple fundraising portals that leverages the feedback they get at these summits.  I am totally looking forward to similar events from iHollywood Forum.  I'm ready for my close-up.