What Netflix Doesn’t Do

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Founders like to talk about "focus" a lot, but when it comes to creating focused brand messaging many find that it's actually a more frustrating and challenging experience than they expected. The reality is that you face a struggle between two conflicting instincts: the need to clearly and narrowly  define what your company does; and the desire to paint a compelling, expansive, and inspiring picture of what you envision your company will become. 

By definition, using focused and definitive language is an exclusionary act. If you say you build accounting software for SMB's you'll worry you might be in trouble when pitching a Fortune 500 contract. If you say you're a web shop experienced in building e-commerce sites, you are concerned that you'll have trouble with your dream of building a media website. And so on. 

I used the terms "need" and "desire" for a reason however. You may want to paint the most broad and rosy picture of your business, but in order to succeed with brand messaging you absolutely must be able to communicate quickly and simply what kind of thing you are. 

And let's face it, people know how to read past vagueness. So don't tell people you're a leading transportation logistics company if you're a taxi service, or that you're an mobile events food provider if you're a hot dog cart. People like taxis and hot dogs, and they might like you. 

For an excellent example, here's an excerpt on focus from Netflix's investor relations page: 

Netflix is a global Internet TV network offering movies and TV series commercial-free, with unlimited viewing on any Internet-connected screen for an affordable no-commitment monthly fee.

We don’t and can’t compete on breadth of entertainment with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google.  For us to be hugely successful we have to be a focused passion brand.  Starbucks, not 7-Eleven.  Southwest, not United.  HBO, not Dish. 

We don’t offer pay-per-view or ad-supported content.  Those are fine business models that other firms do well.   We are about flat fee unlimited viewing commercial-free. 

We are not a generic “video” company that streams all types of video such as news, user-generated, sports, porn, music video, or reality.   We are a movie and TV series entertainment network. 

Remember, if it's not immediately clear what you are not, then nobody is going to ever know what you actually are. 

Selling Dollars For 85 Cents

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Writing on Above the Crowd, Bill Gurley digs into the recent spate of ultra-high valuation startup investments. 

Over the last few years, the late-stage (pre-IPO) market has become the most competitive, the most crowded, and the frothiest of these financing stages. Investors from all walks of life have decided that “late stage private” is where they want to play. As a result, a “late-stage” financing is no longer reserved for high-revenue, pre-profitability companies getting ready for an IPO; it is simply any large round of financing done at a high price. An unprecedented 80 private companies have raised financings at valuations over $1B in the last few years. These large, high-priced private financings are the defining characteristic of this particular technology cycle.

Conventional wisdom in the post Web 1.0 era has been that a "normal" state of affairs would be for these relatively mature companies to have reached an IPO already by this point, but due to a variety of terrors — lawyers, regulation, Sarbanes-Oxley, and so on – these poor companies have no choice but to resort to private equity. Gurley points out that this conventional wisdom is both incorrect and dangerous. 

Actually, very few of these companies are at a point where they could or should consider being public. Lost in this conversation are the dramatic differences between a high priced private round and an IPO.

The first critical difference is that these late-stage private companies have not endured the immense scrutiny that is a part of every IPO process. IPOs are remarkably intense, and represent the most thorough inspection that a company will endure in its lifetime. This is why companies and their board of directors agonize over whether or not they are “ready” to go public. Auditors, bankers, three different sets of lawyers, and let us not forget the S.E.C., spend months and months making sure that every single number is correct, important risks are identified, the accounting is all buttoned up, and the proper controls are in place.

He goes on to highlight the many minefields present in these deals, things like shady tactics in reporting gross vs. net revenue, or the broader problem of investing in a business that has had its economics severely distorted by the infusion of enormous amounts of capital, and are "simply selling dollars for $0.85."

All of this suggests that we are not in a valuation bubble, as the mainstream media seems to think. We are in a risk bubble. Companies are taking on huge burn rates to justify spending the capital they are raising in these enormous financings, putting their long-term viability in jeopardy. Late-stage investors, desperately afraid of missing out on acquiring shareholding positions in possible “unicorn” companies, have essentially abandoned their traditional risk analysis. Traditional early-stage investors, institutional public investors, and anyone with extra millions are rushing in to the high-stakes, late-stage game.

Story: Late-stage Private Rounds Are Very Different from an IPO

The Difference Between NYC and Silicon Valley

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In New York, you may be a famous TV personality, who isn't nearly as cool as the fashion designer and makes less than a Goldman analyst, who in turn has money but is far less famous than you. Even if you can get into the hippest club you probably can't break into the ninth generation native gang sitting at the end of the Brooklyn bar talking about the Yankees, or be given the time of day by an NYPD detective.

Each of many subgroups is superlative, the subject of global admiration and books and movies and mythology. You can be truly exceptional in a category or three in a place like this but you will always be surrounded by people that have you badly beat in some other category that matters.

It keeps you humble, and prevents typical delusions like the idea that being the eleventh most crucial person in the creation of a killer 12 month old photo sharing computer program actually makes you consequential.

Advice to Startup Founders: Be Yourself (not too much)

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Recap and full video of Belgrave Trust founder Nick Baily speaking about “Vision & Values” to a class of startup founders at the New York semester of Adeo Ressi’s Founder Institute, 2010.

In the many years I’ve known Adeo Ressi he’s never failed to be an inspiration, for sheer energy if nothing else, but also an unbounded optimism, bias towards getting things done, and a willingness to toss aside the old in favor of a vision of how things could be. So its no surprise that his most recent endeavor, the Founder Institute, a “school” (or bootcamp?) for startup founders, has grown so rapidly.

It’s a no-nonsense semester long class that takes in people at all stages, united only by their desire to be entrepreneurs. A crash course intensive, it covers direct hands-on issues and skills required to run a startup, as well as the intangible stuff that really matters but is rarely taught — like dealing with stress, or partners, and how to explain yourself and what you do (a message Adeo has a gift for delivering with brutal clarity, as this video makes clear).

So needless to say it’s been a blast to participate in this semester’s NYC chapter as a mentor, with chapter head Gabe Zichermann. I had the pleasure of presenting at the semester’s first formal class a few weeks ago, dubbed “Vision & Values,” about the big picture questions that face every founder as they get started.

Here’s the video, and there’s a link to the slides below. Also you can see this clip as well as the great presentations on the same night by fellow presenters Carter Cleveland (art.sy) and Gary Whitehill (NYEW) too via this Vimeo link

Belgrave Trust Founder Nick Baily Speaks at NY Founder Institute Session #2

Slides also viewable here, as PowerPoint and PDF