01, 20, 2011
Recently, I’ve been exploring Google’s web app development ecosystem. Here are a few thoughts for those trying to bootstrap a brand-new web app for a startup or in a small company and thinking about the Google vs Microsoft platforms.
- Google Web Toolkit is almost as good as JQuery and benefits from nice tight integration to the GoogWebStack compared to some other platforms like JQuery and MSFT.
- Google App Engine is awesome from a get-going standpoint but is still really a Beta overall. I’ve heard horror stories about downtime. GOOG is addressing with their focus on uptime for the “pro” version but it still feels early to build a large-scale business on it. I’m sure in 12 months they’ll have it under control. Right now it’s perfect for a mid-size or small business. Eclipse integration means a scalable back-end is measured in hours to go from keystroke to deployment. Right now it’s a straightforward path toward an eventual AWS or internal RMDBS back-end over time.
- UI Binder got the GoogWebStack basically up to speed with ASP.Net.
- RequestFactory now brings GWT up to speed with ASP.Net MVC almost. Documentation is still light and basic things like controller management aren’t as intuitive. GWT MVP is a bit all over the place right now with new ways of doing things coming out monthly.
- Activities and Places make a Web app a lot more practical. Things such as a useful back-button or the Undo feature you see in Gmail are fairly simple to put in place.
- Tight integration with Eclipse is almost as good as VS with regard to building a basic web app. Auto-build and auto-complete still aren’t as good as MSFT’s. Library management can be a rats nest of open source libraries so Maven is probably a good call.
- Open means GOOG benefits from open source that can fill the gaps. Of course as they build out their stack those efforts fall to the wayside. Sorry Gwt-platform, Restlet, etc. Spring may be a different story. Just like a lot of other Google vs Microsoft battles, Google doesn’t have the cloud of expensive lock-in hanging over it, yet.
- You can’t use C# or VB, but I think Python and Java captures most of the bell curve on non-corporate web dev right now. If you’re a MSFT shop internally and need synergy on apps and dev knowledge that’s probably the biggest reason for an enterprise to pass.
- Lastly, you can’t beat the price. While MSDN brings down upfront costs for MSFT dev tools for larger or very technical companies, for most brand-new or small companies, Microsoft takes its pound of flesh for having the best dev tool and overall ecosystem on the market. Yet another example of Google using free to compete. Good for us. While GAE and Azure are comparable on price, Azure is more expensive upfront and more expensive in general.
It’s clear that Google is using a slippery slope, openness, and hyper-development cycle to catch up on the development stack front. Unless you’re building the next Facebook or are tied to C# I think it’s the best platform out their right now, especially if you value speed-to-market and an open infrastructure.
12, 31, 2010
David Skok of Matrix Partners has put up a couple of really good posts on recurring revenue business models: a 2-part discussion, a deck, and related models. Having spent a number of years working on a recurring revenue model, David’s advice totally rings true. Some of it’s obvious, like try getting paid upfront, but I think it is critically important to have the concepts and math down. I’m always amazed when sales managers don’t have math like this baked into their DNA.
Here’s a bullet list of points, but do go read the posts. They’re worth it if you’re running a recurring revenue model.
- Building out the recurring revenue sales team can create a significant cash flow issue as revenues take time to build.
- Over a long period of time, however, recurring revenue can lead to a great return on investment.
- Costs of generating leads for a direct sales force are often overlooked.
- Find your market fit and scalable sales model before ramping the sales team.
- Ratio of churn vs rate of new sales can have a large impact on long term revenues.
- Biggest blocker on scaling is lead flow because lead sources tend to flatten out over time.
- Collecting payments in advance can have an outsized impact on cash flow needs of the business and allow you to scale much faster by eliminating the cash flow trough associated with recurring revenue models. So get paid in advance if you can.
- Quotas and gross margins can have a big impact, though David doesn’t offer explanation on how you would control those.
- Halving your churn rate will double the Life Time Value of a Customer, so do it if you can.
- You can create negative churn by growing existing customers.
I think the PowerPoint is sufficient to get the gist of what David’s outlining. To this I’d add a few of my own points on a recurring revenue model:
- Attrition can’t be brought to zero but if you have to spend on dollar on new sales vs reducing churn, do the latter. It’s a more profitable proposition.
- Investments in customer service shouldn’t only be thought of as a cost center. An extremely high customer satisfaction rate is not just a good selling point, it can have a significant cash flow impact with respect to attrition.
- Setup fees are one way to move the cash flow forward.
- Some large customers, like Fortune 500 companies, actually prefer to pay upfront annually to reduce the administration overhead so don’t be afraid to ask.
- Consider your cost of capital. Discounting to get a larger contract out of the gate is another version of moving the cash flow forward and it may not even cost you anything from an NPV standpoint.
- Keep track of acquisition costs from day one, especially direct sales costs. Ramping the sales team before your first salesperson is an overall positive investment means you in fact have a proven negative margin model. Obviously scaling a negative margin model can kill a recurring revenue company. Sometimes it’s hard to see unless you lay out all of the costs and understand Lifetime Value (LTV).
Some of these concepts might seem like common sense but actually running the models for your own company is when it becomes really powerful. Using Cost of Acquiring a Customer and LTV models that include things like churn and cash requirements to make decisions on ramping the business can have a huge impact on the potential success of your recurring revenue business.
05, 11, 2009
When you’re running a startup it’s pretty hard to get comparable salary and equity compensation data. There are general compensation sources but the mix between equity and salaries is generally different for venture-backed companies than normal companies, small or large. So when we first got our startup running a great resource was the compensation study done every year by J Robert Scott and Ernst and Young. It focuses on private companies in technology and life sciences. They are currently looking for participants for their most recent study and I highly recommend participating. Compensation is a critical aspect of hiring an ‘A’ team and having data as an objective reference point is really helpful both in setting salary and equity levels and also communicating compensation policies to employees.