The natural evolution… of people and startups

It has been a while since I’ve written, I guess I didn’t have much to write about. Ok, I admit it, I had a shit load of stuff to write about, however, I simply never got around to actually do it. A full time job, two babies – or as they call it – real life, has somewhat managed to creep up to me and take its toll on my writing time. Over the course of the past few months, I’ve been heavily thinking about the role of the founder in a startup. Many people regard the founder of a startup as the CEO or some other key role in the company, but it’s not always like that. The question that I asked myself, and I have been for quite some time, is: “as a founder of a startup, what is the most important thing I need to know?” – I recently realized that the most important thing, is also the hardest thing to do.

As I see it now, the most important thing a founder needs to know how to do is: “When to walk away!” – Yes, you heard me right, understanding that you as a founder have to walk away from your creation is the hardest thing you’ll ever do. In many cases, walking away may seem to you like bailing out or giving up, but this is not the case. Sometimes, walking away means: “I’m entrusting my creation with someone else, simply because I can’t progress it any more”. It is very easy to become infatuated with your startup, it’s just like a baby. Initially, it’s just an idea, then after a long incubation time, suddenly it takes form. You hire people, slowly afterwards, you have a proof of concept, then you start selling, then different things can happen – some good, some bad. At that point in time, that’s a critical path, this is the time where you might find yourself at an impasse with your partners, investors, customers, VC’s, etc. What should you do? stay and fight? or just pack up and leave? – well, it all depends on your situation. I won’t detail the situation when you need to fight and stand your ground, as those are fairly easy. The harder ones relate to when to leave.

I would say, that if any of the following are upon you, it’s time to leave:

  • Your investors are pushing toward an illogical track, although, they have no idea how the market nor the niche works.
  • You ran into financial issues and leaving is a logical step in order to continue the life of the company.
  • You are at an impasse with the CEO or other members of management, the issue can’t be bridged.
  • You have lost trust with your partners.

At any of those, you must pack up and leave. The reasons are simple enough, all of those relate to direct trust between people. When trust is no longer there, it’s better to pack it up and move forward, simply because it won’t go to good places.

Can you trust your integrator with Fraud Analysis?

As some of you know, over the past 9 months, I’ve been heavily involved in the establishment of Humbug. For those who may not know, Humbug is a Call Analytics and Fraud Analysis SAAS. Now, differing from many of the current telephony SAAS projects, we are not based on Amazon EC2 or some other public cloud infrastructure, we build our own cloud environment. Why do we build our own cloud? simple, we need to keep your data secured and confidential. At Humbug, we see ourselves as a cross between Google Analytics – in our ability to analyze and handle data and Verisign – in our security and confidentiality requirements and methodologies.

Question be asked, why do people trust Verisign to provide SSL certificates around the world. What makes Verisign’s CA better than a privately owned CA – the answer is simple, it’s a third party 2 entities can entrust at the same time. Humbug aims to provide the same lever of trust, simply because we regard your data as sacred and valuable.

Since about 2 months ago, we’ve been contacting various Asterisk integrators around the world, inviting them to evaluate Humbug services. Now, while some integrators and vendors were somewhat reluctant, others were more than happy to join. We now have over 250 monitored systems around the world, with system being monitored and analyzed in Israel, USA, UK, Brazil and more.

The thing that amazed me in regards to some of the integrators who decided not to participate was that they claimed: “we provide our customers our own brew of fraud analysis service, we don’t require your SAAS”. Now, while I can accept the fact that an integrator would offer such a SAAS as an in-house service, I can’t see why a customer would rely on these services. In my view, relying on your integrator to provide fraud analysis services is like relying on the integrator of your alarm system to provide hired guard services – it just doesn’t make any sense to me. Why doesn’t it make sense? in Hebrew we say: “Go prove that you have a sister”. Imagine that your PBX integrator offer you such a service, then, in some obscure manner, your PBX gets hijacked and you get slammed with 50K$ worth of phone calls to Somalia. Now, your integrator would say: “Hmmmmm… that’s odd, we didn’t even get those CDR events to our system… you really got hacked bad…” – sure, if you only rely on CDR records to do your analysis (which is what 99.9% of integrators do). There is much much much much more to fraud analysis than just CDR analysis – if it all began and finished with CDR analysis, then by far Cvidya, Verint, NICE and many others would have been made redundant.

Allowing your integrator to provide you with fraud analysis SAAS is like putting the fox to guard the hen house, when things louse up (and they may), he’s the first one to bail out saying: “It’s not my fault”.

Humbug takes a totally different approach to fraud analysis, specifically, in the way we regards the various PBX systems and integrators. We are vendor agnostic and integrator agnostic – we will provide you with the clear and concise information you require in order to make an educated decision as to how you were de-frauded (if de-frauded) and provide you a faster alerting and response time. Our recent adventures had lowered our fraud alert response time from 60 minutes, down to 14 minutes in some cases. Most fraud analysis system carry a 24-36 hour turn around time, by that time, you can be out of 50K$ – our aim is to lower that number to no more than a 100$ in the worst case. Ambitious? yes, down right crazy? probably so, but we always say: “Aim for the moon, you’ll land on a star!” – so we know we’ll get there.

Good bye Symbian, Hello Android

A Nokia E90 (open).

Image via Wikipedia

For those who had been reading this blog for some time now, you may have stumbled across my blog post from 2008, regarding me buying a Nokia E90 - http://www.simionovich.com/2008/06/06/i-finally-purchased-a-nokia-e90.

Well, it’s a fact, since the year 1998, I’ve been an avid Nokia fan. I think I’ve ranged from the old Nokia 51XX, through the 6XXX up to the E61, E62 and E90 – if it was some funky Nokia phone that gave me some new feature, I most probably had it. I guess that the time I spent at m-Wise, working closely with various mobile content technologies had put its toll on me – and I became a Nokia Cell Phone addict. For many years I couldn’t imagine myself digressing from the Nokia clan. Even when my friends moved from their Nokia/Motorola/Ericsson phones to a star spangled iPhone – I remained faithful to my old habits – and remained with my trusty Nokia.

Nokia 5800 XpressMusic showing Wikipedia's mai...

Image via Wikipedia

About two years ago I promised myself this: “If you ever decide to move to a touch screen phone, don’t go ala iPhone, stay for a Nokia phone” – so I waited. The initial Nokia touch phones came out. The first Nokia touch phone that came out, I believe shortly after the iPhone was the Nokia 5800, also known as the Nokia XpressMusic.

I’ve got one thing to say about this phone – “What the hell were you thinking???” – it’s a phone, not a bloody MP3 player – if I wanted an MP3 player, I would have bought an iPod. Apart from being the slowest phones I’ve ever encountered, its touch interface was annoying and disruptive.

So, I didn’t buy the Nokia 5800 – I simply had no use for it. At that point I decided to wait a bit more, and see what Nokia cooks up. Shortly after seeing the 5800 in dis-action, I met a new member of the Nokia clan: the Nokia 700.

The Nokia 700 was a totally new thing, not really a phone, not really a PDA – somewhat of a cross between the two. It was big and bulky, and I couldn’t imagine myself walking around with one of these – however, it showed some promise. Sure, it was big, bulky, slow and anything bad you can say about a device – however, it had one thing – it showed potential – something to look for. At that time, I decided that I needed a proper smart phone and purchased the Nokia E90 – and I was fairly happy with it till 8 months ago.

You are probably asking, why would an avid Nokia fan become displeased with his trusty E90 phone – the answer is simple – the plastics. The plastics are of such low quality, that after 18 months of usage, the paint job starts to peel away from the phone. As you run more and more applications, or store more data, the phone becomes sluggish and slow – to the point where you have to reset it.

So, 2 months ago I gave up, I said to myself: “that’s it, time to move forward and leave the Nokia clan” – but I still didn’t want to put myself with the iPhone clan – or to be more exact, the iPhone cult movement. While at the Amoocon convention, I came across some people who were using HTC phones, specifically the HTC Evo. Well, I was somewhat taken with this snazy piece of hardware. It was fast, it was fluid and for some funky reason, I felt at home with it. Could it be, have I found a new clan for my mobile needs? I returned back home starting to examine my options. The HTC Evo isn’t available in Israel, the next best thing is the HTC Desire.

The HTC Desire is also known as the Google Nexus-1, basically it’s the same phone. I tried using the Nexus-1, but I didn’t like it. Specifically, I didn’t like the fact that the four keys are touch based – on the HTC these are real keys, making my life much easier.

So now, I’m equipped with the HTC Desire, and apart from the occasional Android crash (not too often to be honest) – it is one of the best phones I ever had. It’s fast, syncs my life into a manageable construct and most importantly, it’s become a second nature to me. The only disadvantage of owning such a phone is that you need a massive Data plan with your carrier – this little machine can gobble up ten’s of megabytes on a daily basis. My old Nokia E90 was using 25MB of data per month, with the Desire, I consume that much in less than a day – that is an amazing number.

In order to get better into Android development, I’ve ordered an Eken M002 device. This is a 7″, Android based tablet PC. I’ll be posting information about that once it arrives.

Enhanced by Zemanta

Business 2.0 – Taking the leap forward…

The following post doesn’t really fit in line with the normal spirit of the blog, simply because it’s not funny nor directly related to technology. It’s called Business 2.0, as it relates to the ever problematic question any business owner has: “When should I grow and how?”.

As you may know, I’ve been a freelance Asterisk Platform developer since early 2003, turned to freelance development (Penguin for hire) around April 2007. Since that time, I’ve built systems and platforms for some of the better known brands around the world. Be it working directly with the customer or through a 3rd party (as a sub contractor) – I can easily say that I’ve completed over 120 different large scale projects within 3 years time. Now, when I refer to projects, I’m not referring to installing PBX systems, I don’t do that at all – I’m referring to highly complex application level development, creating some of the most innovative Asterisk based systems I’ve ever seen.

Image representing Jajah as depicted in CrunchBase

Image via CrunchBase

Vodafone

Image via Wikipedia

Putting aside everything, finalizing a rough estimate of 40 development projects on a yearly base, most of these performed solely by myself is a fairly challenging task. Sure, at times I’ll outsource some work to other freelancers like myself, specifically in fields where I’m not all that fluent (Database, Web Development, UI) – but yet, doing that means that I’m conducting 3 – 5 projects on a monthly basis.

After doing so for 3 years now, I can’t help but start thinking about expanding my business, taking it to the next level by hiring more people and building it up to a new level. Question remains for this: “How? What is the natural track of expanding your business?” – of course the simple answer would be: “Just hire another developer or two, and start doing more sales” – it’s not as simple as it sounds. After thinking about it for some time, I’ve concluded there are a few models of expansion:

Model 1: Organic Growth

Organic growth can be described as the simplest way of growth: “Hire a new guy and get more work in”. The problem with this model that it is fully reliant on your ability to sell more. However, as you concentrate on sales more, you take time from the development and delivery process – thus, the addition of the new developer is not a 100% addition, it’s actually 100% (developer) minus 40% (you) – so you are not at 200% capacity, you are 160% capacity. Surely 160 is 100, however, for the initial 6 months, till the guy learns the ropes, you are not at 160, you are actually at 80 – can you and your business sustain that?

Thus, the main issue with Organic growth is cash flow, can your business sustain the elevated expenses with less income for the period of transition? If the answer is NO, then you need a different method. If the answer is YES, then you are in the best place in the world, however, bear in mind that taking someone to work for you is a responsibility – people are not resources, they are human beings, with families and children – taking someone to work for you is like taking responsibility for their lives.

Model 2: The Partner

Panama Business and Investment
Image by thinkpanama via Flickr

A partnership with a person who is equally matched to you is always a good option. Technically speaking, it means that you are teaming with someone who generates as much work as you do and is capable of finalizing the work as fast and as good as you can. Yet, taking a partner doesn’t negate the requirement for a new employee or two. In this case, you may end up with too much sales with too little staff to deliver – that is a big problem.

Another issue with partners is the issue of trust. While most partners tend to rely on each other and trust each other, that trust can easily be broken (in most cases by stupid things). It’s enough for one partner to now carry its weight in sales/development to initiate a chain reaction, shortly ending in the partnership dissolving.

So, the partner is a good option, however, may prove to be problematic if the wrong partner is chosen – in addition, dissolving a partnership solely on these issues isn’t all that simple – and usually ends up in litigation and other judicial issues – YUCK!

Model 3: Un-intrusive Angel

Some people ragard Un-intrusive Angels as “Stupid Money” – an Angel investor that doesn’t interfere in your company business model and operations. In many cases, this is how start-up companies start – someone gives them a lump sum of money to start their business, signing off to own a portion of the new company.

An un-intrusive investor usually gives you the money and pays you a visit once every few months to see how his money is spent. Don’t expect to raise a whole lot from these people, usually you will get anything from 25K$ to around 250K$ – tops. If you are getting an investment from an Angel, make sure you plan your business carefully – and make sure your investor knows what he is getting into. The Angel is not a found piggy bank, he is a business man looking for profit – if you make sure his expectations of profits (time frame, amount, percentage, etc) are kept within the reason of your business – he will make an educated decision and invest accordingly. Promises like: “you’ll double your money in 3 years” are stupid – make sure it’s realistic and to the point. If you promise the moon, and reach a star – that’s a problem, if you promise the skies and hit a start – that’s wonderful.

Model 4: The Strategic-Intrusive Angel

Jeff pulver

Image by TheFemGeek via Flickr

A strategic angel is similar to the previous one in terms of funds, however, he is more capable in assisting your business meet its goals. Usually, it would be someone who is already a well established figure in your business sector, had made his money from previous companies and is now looking for new ideas and businesses. I call him an intrusive Angel, as sometimes he may have ideas as to where your business should go – and he will make sure you hear his ideas. You may regard it as annoying, but you should still listen to your Angel and pay him the respect he deserves.

Sometimes this Angel may invest in your business due to the fact that he has a hidden agenda. An agenda can be: The angel looks at your business and see a certain potential you are not planning, he’ll invest and try to re-direct your company to the agenda he sees. This is usually the case when your angel is invested into several endeavours that is either parallel to each other or may have orthogonal intersection points. These angels can be the builders of your business or the destroyers, it is up to you to make sure the latter doesn’t happen.

Prolog:

So, which model did I choose? – I didn’t choose yet, I’m still figuring it out myself. What ever the model may be, the choice isn’t simple nor straight forward. At best, whatever choice I’ll take will have a profound impact on my business and me – so I’ll need to weigh my options carefully. If you can think of an additional model, I’d love to hear about it – so just comment on this post.

Reblog this post [with Zemanta]

Asterisk, Greed and Revenue Shares

Revenue sharing is one of the oldest methods of earning profits, actually, I believe it may just be right up there with trading of goods and food. For those of you not in the know, I’ll explain what revenue sharing is:

  1. A content provider wishes to distribute a certain type of content – charging for it.
  2. The content provider has not ability to charge the consumers directly, thus he partners with another party – the transport maintainer.
  3. The transport maintainer charges the consumer, while keeping a certain percentage in his pocket.
  4. Everybody’s is happy.

In general, this model works really well in many markets – specifically those that are driven by unique content – for example the mobile content market (ringtones, screen savers, games, apps) – the Apple App store is a wonderful example of how this works.

In the telecom industry, the revenue shares business is very common – however, in many cases it is highly guarded as a secret – main reason is that now one wants anybody else to know how they do it. This hiding of information, usually results in some problems – as when there is hiding of information, only those in the know are able to access it. Those in the know are called “mediators” or in Herbew “Machers”. In this entire ordeal, the mediator also takes a small percentage – leaving the content provider with slightly less. So, now it looks like this:

  1. A content provider wishes to distribute a certain type of content – charging for it.
  2. The content provider has not ability to charge the consumers directly, thus he contacts a mediator to find him a transport partner.
  3. The mediator engages the prospective transport maintainer.
  4. The transport maintainer charges the consumer, while keeping a certain percentage in his pocket and passing some funds to the mediator as well.
  5. Everybody’s is happy.

So, if everybody’s so happy – why am I bitching about it? very simple – people are Greedy and always want more – putting the entire model into a frenzy. In order to give an example, let’s imagine the following scenario:

  1. Company A provides IVR based content utilizing Asterisk server, connected to the internet.
  2. The mediator engages a premium number company, getting the total revenue of 0.08$ for every inbound minute of traffic.
  3. The premium number company leaves 0.01$ in its pocket and also pays the mediator a fee of 0.01$ per minute.
  4. The content provider gets 0.06$ of the 0.08$ – 75% of the net profit goes to the content provider.
  5. Content provider says: “Hell, I want the mediators 0.01$ as well, and I think the premium company should only get 0.005$, so I would get 0.075$ at the end”
  6. Content provider contacts the premium provider and starts complaining
  7. Premium provider negotiates and strikes a deal for 0.07 to the content provider, leaving the premium provider with 0.005$ and the mediator with 0.005$
  8. Premium provider says: “I’m not making enough money on this, actually, I’m loosing money – I’ll find a better alternative service for that access number”
  9. Premium provider asks mediator to bring in a new customer, providing similar content – mediator has sure incentive here
  10. Premium provider gets new customer and transfers the access number to the new customer – returning back to previous profits
  11. Original content provider is left with no profits and only greed in his hands
Screenshot of a GPL screensaver
Image via Wikipedia

Over the past 10 years, I’ve seen this vicious cycle happen over and over and over again, in various formats and scenarios – but always ending in the same outcome – the content provider always suffers. If you’re a content provider and you provide IVR based services, let the people that provide you the access make their cut and the people in the middle, without them, you will have a service with no access – which means no service at all. Don’t go about thinking you can keep all the profits to yourself, you will break the equilibrium of this business, and eventually, no one will want to do business with you.

Reblog this post [with Zemanta]