Bloomberg Gets Timing Wrong: The Short Was Already On

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An article suggests that Treasury Secretary John Paulson leaked insider information.  It’s catchy headline says “How Paulson Gave Hedge Funds Advance Word“.  But timing of the trades shows the word was clearly not in advance.

According to the article:

  • From July 9 to July 14, short interest rose from 86.3 million shares to 163 million shares–that’s 88% in less than week
  • On July 21, short interest continued to rise, to 240 million shares–that’s another 50% in 1 week
  • On July 21, Paulson gave the notice to investors suggesting a short was a good trade
  • On July 24, short interest peaked at  262 million shares–that’s just a 10% increase after the meeting

I don’t understand how it can be construed that Paulson gave advance notice if the bulk of the shares sold short ( 240 million out of 262 million shares ) were sold before the meeting.


Disclaimers: This is just my opinion — I did not speak to my brother with the SEC. I do not know what other information may have been revealed by Treasury staffers to investors earlier in July, when there was a large increase in short interest.

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Delight Frequency vs Delight Depth

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A friend in the VC community asked me to evaluate a mobile wishlist and deal finder.  Interestingly, that’s what SF darling Pinterest first raised money for with HelloTote.

I advised my friend to focus on how deeply and frequently consumers get delighted by the product.

  • Low delight, high frequency products offer a user low levels of delight daily. Facebook, Instagram, YouTube and Zynga are great examples.
  • High delight,  low frequency products offer delight a handful of times each year.  RentTheRunway and Fab.com acted upon 50% off deals fall in this category.

If your product doesn’t offer over 50% off, you need to make sure it can deliver delight often. Delight can come in many forms:

* Getting a comment from friend and feeling a sense of connection

* Earning a badge and getting a sense of accomplishment

* Learning something

* Getting a laugh

* Showing something cool

What you don’t want to offer is a few dollars of savings or a few comments from friends a few times a year.  That is what a comparison search engine or mobile shopping tool might do.  Web comparison search engines like Shopping.com and Kayak.com need to invest heavily in advertising and search engine optimization because their product delivers only moderate savings and delight.  They struggle with retention.  A mobile app has an even more difficult time with retention because intent-based marketing opportunities like Search Engine Marketing on the web are immature on mobile.

And, of course, the deeper the delight you provide the more you can charge a consumer.

What impresses me about BirchBox is that they’re doing everything with their community, points, deals, instructional videos, and personality.

On the other hand, I fear Foursquare doesn’t offer quite enough delight beyond just badges with their low levels of interaction among the community and low monetary rewards.

Lastly, “time until first delight” is a metric that will drive retention and virality.  A wishlist and deal finder can  struggle to make a user delighted on their first visit.  On the other hand, a social site the lets a user interact with a friend or earn a badge, or a daily deal sites can offer 50% off, can do much better on offering some delight over the first 30 days.

How often do your favorite products delight you? Where to they fall on the chart?

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KartMe.com & KartMe Mobile – Product & Business Development Opportunities

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KartMe.com and KartMe Mobile are looking for Co-Founders.  Get in a growing, funded business at the ground level!

About the Company

KartMe is the first web and mobile tool to save mobile photos and web links in shareable online lists, making it easy to organize and share clippings, family recipes, wedding inspirations, and more. Apple has twice named a KartMe Mobile a “Staff Pick”.  Over 20,000 recipes, gifts, and more have been organized on KartMe.com.  Cosmopolitan, The Washington Post, TechRadar, and other leading publications have featured KartMe.com and KartMe Mobile.  KartMe is seed funded by investors who have done over 100 private deals, including Vans, IdeaPaint, LocalMatters.com, and more.  You can try KartMe free at http://kartme.com and learn more at http://kartme.com/about.

Business Development Co-Founder

KartMe seeks a Business Development executive to pursue opportunities to partner with leading consumer brands.  KartMe’s  social and mobile technology has made it very easy to open doors at leading companies.  KartMe has compelling engagement statistics (pageviews, time-on-site) and has already completed one major deal, with a second in the works. We’re looking for someone to pursue new digital media opportunities.  The ideal person has closed deals, with experience working both in an entrepreneurial environment and in a large company.

Product Design & Marketing Co-Founder

KartMe seeks a Product Design & Marketing manager to improve the user experience.  KartMe members have added 20,000 items to lists, and we want to make them even more engaged and social.  The ideal person will have experience working in an entrepreneurial environment, and is excited to engage with members and execute to tests to improve retention and virality.  Appreciation for beautiful graphic design and actionable a/b testing is a must.

All positions are located in the fun, food, and fashion capital of the world, NYC.

For more information about the opportunities, contact Phil Michaelson, phil at kartme.com.

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From Student Side Project to Apple “Staff Pick” with Elance

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This post by me originally appeared on the blog of eLance, an outsourcing platform that I used to find contractors to build a prototype…and later to build KartMe’s first mobile app, which got a “Staff Pick” from Apple.  The post was shared over 600 times.

How did I graduate from Harvard with a live website and iPhone app, without spending my days programming? Mark Zuckerberg and Bill Gates dropped out of school to get their companies off the ground. But with Elance, I was able to get KartMe.com and KartMe Mobile running while still making it to all my classes and getting my homework done. Soon after launch, Apple awarded KartMe Mobile a “Staff Pick”. This led veteran investors to get involved. Before I knew it, I was living my dream of building a useful product used by thousands.

It all started when I told people I’d be moving to Boston. Suddenly I received lots of recommendations–restaurants to try, books to read, movies to see, hotels, ski resorts, and more. At first, I saved these ideas on scraps of paper. Then in a draft email. Finally, in an Outlook contact that sync’d with my phone. Months later, I realized I never used these recommendations. When I was out and about in Boston—I couldn’t quickly see which restaurants were around me. When I was walking by a bookstore or planning to go to a movie, I couldn’t quickly pull up my “bucket list” (that is, lists of recommendations of things to do). That’s when I had the idea for KartMe: an Internet site for the creation of online lists, where recommendations, reviews, prices, and notes are at my fingertips. It would help me organize and save. When a friend asks, I could share a list. I could use it at home, work, in class, or on-the-go. Saved information would instantly be available on my iPhone, BlackBerry, or Android.

I wanted to get a prototype together quickly, but at the same time I didn’t want to spend my days in front of a computer. Class was interesting and meeting classmates was really fun. I’d only be in school briefly—and I wanted to make the most of it. I chose to outsource so that I could be efficient with my limited time in school. Elance was my first choice because of the number and quality of vendors who could bid on my proposal.

Using Elance, I started working with a firm in India to put together a prototype website. Before class at 7 a.m., I’d chat with them using Skype. Once we had a prototype, I’d sit in our student center and show it to passing classmates. Based on their input, I decided to pursue the idea further. Again using Elance, I hired a team to build a full website. As soon as we started getting free traffic from Google, I had another firm on Elance build the iPhone app and mobile website.

I launched the site upon graduation. In the course of 6 weeks, Apple twice gave KartMe’s mobile web app a “Staff Pick” and TechRadar.com called our site “really useful”. We raised some angel funding and are improving and marketing the product.

KartMe has helped friends and families to save, organize, and share 20,000 recipes, restaurants, books, movies, home design ideas, wedding dreams, travel tips and more. We’ve served millions of webpages, partnered with iVillage, been featured in Cosmopolitan, and more. I’ve had a blast running the business – particularly as KartMe has deepened relationships between families and friends.

Going forward, we’re making KartMe better at delivering more value to our members. We’re making it possible to pass grandma’s recipes down from generation to generation, while also ensuring you can look them up on your iPhone. We’re helping bridal parties share style ideas from their phone. And we’re ensuring friends can exchange mobile travel guides. If you want to follow our progress, start cataloging and sharing your favorites at http://kartme.com.

About the Author:
KartMe.com is Phil Michaelson’s first company. He started the website, built the mobile version, and attracted users and investors initially by using Elance. Use KartMe.com for free to organize your recipes, plan your wedding, collaborate on a home design project, or organize travel tips, books and more. With KartMe Mobile, you’ll never forget an ingredient and can easily share with friends your photos of cooked dishes or fashionable looks. age, been featured in Cosmopolitan, and more. I’ve had a blast running the business–particularly as KartMe has deepened relationships between families and friends.

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Notes from Steven Blank Talk on November 12, 2010

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I’ve been a fan of Steve Blank’s writing for a LONG time.  I wished HBS would teach more about the search for a business model.  Where you need to get out of the office, and test and refine.

Today, I not only had the the chance to hear him speak, but I also won a copy of his product management book,  4 Steps to the Epiphany, by limbo-ing better than the rest. If a picture of my limbo-ing appears, I’ll definitely share it.

Notes from Steven Blank’s talk:

  • A startup is a temporary organization used to search for a scalable, repeatable business model
  • Great founders know how to search for ideas that work.  Someone needs to build the business. And then, great managers know how to execute the busienss.  VC’s might want someone different for the different stages.
  • Startup metrics:  Customer Acquisition Cost, Viral coefficient, Customer Lifetime Value, ASP/Order Size, monthly burn
  • Startup customer acquisition: early adopters, one-off deals, done by founders, pricing/features are unstable
  • Startup product management:  you talk about testing hypotheses, minimum feature sets, pivots, continuous deployment, continuous learning
  • Your organization should not be a startup forever…or even 10 years
  • Customer development solves for unknown risk.
  • Founder needs to get out of the building
  • More startups fail from a lack of customers than a failure of product development
  • It takes 3-5 times for a CEO/product visionary to hear why a customer thinks their product sucks! Humans don’t want to hear what’s wrong about their idea.
  • Startups have a series of crises.  That’s just what happens. Pivot is the process to deal with them.
  • Customer development reduces customer risk and market risk.  It doesn’t reduce technology risk.

Also, thanks to Gary Whithill for organizing the event–and getting such a great speaker.

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Notes from Beauty 2.0 Meetup with PR Pro Deirdre Breckenridge

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With KartMe’s coverage in Cosmo and focus on mobile clipping folders, I’ve begun learning about the beauty space.  A meetup group titled “Beauty 2.0” seemed the perfect fit. Upon arrival, it was fun to see a familiar face in Holly Chen from group sponsor MySkin.

The highlight was definitely a talk from Deirdre Breckenridge.

Here are my notes:

* Everyone now has the power to amplify your message.

* Listen and observe the conversations being had across all social networks for months before engaging.

* Emotional connections can be developed by providing useful information .  If your beauty tip on skin care for frequent travelers makes some think they’re gorgeous, they’ll feel a deep connection with you.  MichellePhan and UrbanDecay are good at this.

* Your goals should be the first thing a prospective PR firm asks about.

* The up and coming tier of bloggers should be targeted first.  They might have 1,000s of followers.

* Social media releases are different from press releases.  Give the online community something interactive that keeps the conversation going. Include graphics and video.  Look at the “social media release template” from Shift Communications. PitchEngine also has some examples.

* A social media policy helps your team know how to engage online. Might also help legally.

* Free tools to help you locate and listen.  Here is a list from Deirdre.

I look forward to reading more of Deirdre’s blog at http://www.deirdrebreakenridge.com and following her on Twitter.

To share your notes, please post or link to them in the comments.  Thanks!

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Boastful Boar’s Head Easily Delivers 50% of Daily Sodium at Lunch

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Boar's Head Deception. September 2010.

Boar’s Head celebrates that they’re the first deli company to meet the New York City Department of Health’s National Salt Reduction Initiative (NSRI) recommended 2012 target levels for sodium in deli cold cuts and cheeses. The ad above appeared on a MetroNorth train from New York to New Haven in early September, 2010.  It makes a bold claim. So bold, that I’d expect to see a typical deli sandwich have less than 50% of my sodium for the day.  Sadly that’s not true. Boar’s Head is benefiting from not actually selling sandwiches.

Delis use 6 oz,  10 oz or sometimes even 1 pound (16 oz) of of meat per sandwich. So, when I let the deli make my sandwich, I’m getting about 50%-100% of my days sodium from just the meat. Let alone the bread, which can easily add another 10% of your daily recommended sodium.

“Maple Glazed Honey Turkey” is of my go-to deli meats . Yet, I don’t really know how that meat gets to my plate, as it doesn’t look like the turkey my mom makes on Thanksgiving.  Something happens along the way, which adds lots of salt.

Boar's Head Nutrition info

The nutrition info above is for 2 oz servings.  Yet, my sandwiches I make for myself are typically a  quarter-pound, or 4 ounces. Turns out that my conservative quarter-pound of turkey meat is giving me 36% of my salt for the day–before counting the bun.

Boars’ Head met the guidelines put out by NYC for deli meats ( NYC recommends 810mg of salt per 100 g of meat ). Yet, my complete deli lunch on a turkey sandwich can still contain 100% of my salt for the day. See how:

  • Boar’s Head Honey Maple Turkey (1/2 lb, 72% of daily sodium)
  • Arnold Kaiser Roll (1 roll, 1 serving, 11% of daily sodium)
  • Small bag of Lay’s Potato Chips (1 oz bag, 1 serving, 7% of daily sodium)
  • Can of Coke ( 12 oz can, 1 serving, 2% of daily sodium)

Unless Boar’s Head  encourages 2 oz or 4 oz servings of their meat, they should stop being so boastful.

This is a great opportunity for delis to make more money while making customers healthy. It’s simple: delis should advertise & price by portion size, using current prices for the small recommended portion size. Consider a deli menu offering 3 meat sizes, with prices relative to your current prices:

  • Healthy-size (4oz): less $0.50
  • Full-size (8oz):  plus $1.00
  • Super-size (12oz):  plus $3.00

What do you think?  Should Boar’s Head be less boastful?  Should delis standardize and charge for the amount of meat in each sandwich?

[UPDATE on 9/10:   3 oz of fresh turkey has 55g to 80g of sodium-- that's 90% less than Boar's Head's Low Sodium offerings! Put another way, Boar's Head's Low Sodium turkey has 500-1000% more sodium! So, my preferred outcome is that delis in NYC carry freshly roasted turkey that is free of the unnecessary sodium. ]

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Notes from New York Viral Media Meetup on 9/7/2010

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The recent meetup on Viral Media had an AMAZING cast of speakers, who each spoke for about 10 minutes. Thanks to AOL for hosting, Jon Steinberg for organizing, and the NY tech community for supporting such great events.

The panel had a great mix of experiences.  From the recent action at Reddit (why are they on Digg’s front page?) to old Milgram experiments, the panelists covered it all.

The speaker list included:

  • Duncan Watts, Principal Research Scientist at Yahoo! Research, author of the great book Six Degrees
  • Nihal Mehta, CEO Buzzd, discussing their new viral offers
  • Greg Galant, Sawhorse Media, on building a viral product: Shoutworthy
  • Erik Martin, Reddit, “How something goes viral on Reddit”
  • Brian Morrissey, Digital Editor AdWeek, “The Science of Sharing”
  • Tim Schigel, CEO Sharethis.com
My favorite framework came from Greg Galant at Sawhorse. He said that viral products or campaigns must have 3 elements:
  1. Social Action – Enjoyment of the app or experience REQUIRES sharing
  2. Star Vehicle – Usage of the app or product enhances user’s career or social life, perhaps helping them better communicate with fans or friends. For example, Formspring and Twitter offer celebrities and self-promoters a new way to get their message out
  3. Ruckus – The app or product has something special or noteworthy. Perhaps it sparks imagination or disgust. Maybe its first to market. Maybe it has some simple hook that can easily be passed on.   My mom can’t explain why people Tweet, but she knows its a public message of 140 characters or less. People who don’t use FourSquare still know you can announce where you are and become mayor.

My favorite chart came from Tim of CEO Sharethis.com.  He said that certain verticals have more people in them who are likely to pass on content in the vertical.  Specifically, it appears that health content has a higher concentration of readers who will share the content.  See the full chart from their case study below:

There was a general agreement that to have a viral hit, you need to try often.  Duncan said its better to regularly trigger lots of small cascades, instead of trying to predict one large cascade.  Brian noted that “Elf yourself” was  one of 25 microsites by OfficeMax for the holidays, and only the elves went viral. [credit to @papillonc for elf reminder]. After the demo, Buzzd’s CEO said they regularly test content on their homepage which gets millions of unique visitors each month to see what has viral potential.

Duncan also noted that “less than 98% of tweets aren’t retweeted, and the majority of those that do, are retweeted once”. [credit to @justinjustin for reminder]

Lastly, I was impressed with how Erik and the 4 person Reddit team handled their recent opportunity from the Digg redesign.  He offered sage advice about milking a viral hit.  Once you have something going, you should do whatever you can:  change your logo for a day, release your stats to bloggers, turn your community into ambassadors, and go above and beyond to keep your company and its hit in the limelight.

Again, many thanks to all the panelists, organizers and hosts. I can’t wait for the next meetup.

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Is there a seed bubble?

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Paul Kedrosky just claimed there is a super seed bubble. As I can count about 12 super seed funds in New York, many of which are new, I agree there is more money flowing in to super seed funds than in 2006-2008.  But to claim there is a bubble, you need to claim that the amount of money flowing in needs to be reduced.

There will be less super seed funds if it is not as rewarding as the investors hope.  Super seed funds make their returns on acquisitions and IPO’s of their investments.  That is when the investors and partners get capital back.  So, to assess the bubble, you have to see if the exits will be less than the investors are expecting.  Will the money that can come out in M&A and IPOs be enough to provide returns to the capital going in?

Lets say there are 25 super seed funds with $20 million to invest.
Say they aim to own 7.5% of companies when they exit in 7 years.
Say they want an average annual return of 12% across their fund.
So, can their surviving companies exit for:

[ 25 funds X  $20 million invested X ( (1 + 12% )^ 7 years ) ] / 7.5% ownership

= $15B.

Assuming the exits are over a 5 year period, that’s exits of $3B a year (i’m excluding the fact that some exits have liquidity challenges in the early years).

Given tech companies are sitting on lots of cash: Cisco has nearly $40 billion in cash reserves; Microsoft, $37 billion; and Apple, $23 billion. It seems possible these companies can get $3B from their coffers.  Add in 2 IPOs, and you’re there.

I would say that only the seed investors who partake in the homeruns will make it.  The $3B in annual exits will be driven by the YouTube, Google, AdMob, Zappos, and other large exits.  So, seed investors need to be in lots of deals to increase their chances of being in the few big winners.  But, overall, the super seed industry will survive!

I’ll be fixing the math/assumptions as I hear from y’all.

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8 Ways FarmVille Designs for Engagement

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Earlier this week John Doerr, an investor in Google, Amazon, and Intuit, said Zynga is the fastest growing venture he’s ever been a part of.  Zynga’s flagship game, FarmVille, has 3 times the reach of Twitter. FarmVille has 71 million active users while Twitter has around 22 million active users (Twitter has 110 million registered users, of which an estimated 20% are likely active).  Perhaps more impressively, Zynga is estimated to generate $50 million in revenue from the most engaged members who buy virtual goods and keep up a toolbar.

Every web experience designer can learn from the tactics deployed in FarmVille to engage members over the long term. Here are 8 tactics you should include:

1. Reward users for returning in a short time period. Every website visitor is going to leave at some point. But why will they return in 24 hours? FarmVille is centered around planting and harvesting crops. The shortest time a new user can harvest a crop in is 4 hours. So on the first experience, FarmVille says: “Go away and come back in 4 hours”. How bold! In order to make progress in FarmVille, you need to go and come back. The site also has functionality that you can only use once per day (e.g., giving gifts to friends), further encouraging you to go and come back.

Come back to Harvest!

2. Reward users for helping friends every day. When you give a gift to a friend on FarmVille, it actually benefits you. Fertilizing a friends’ crops does not cost you cash. Instead, it raises your experience level. So, you can feel good about both helping someone else and gaining points at the same time. Dropbox.com does something similar with their program for inviting friends that gives both the inviter and recipient extra space. But on FarmVille, you can earn coins and give gifts every day you visit a friends’ farm.

Help friends with a click, and earn points

3. Allow users to create without typing. FarmVille is incredibly easy to play–you just point and click. Click to till soil. Click to plant seeds. Click to harvest. It can be played by 5 year olds, drunk college kids, or tired parents. You never need to think about what to say, how to spell, or what key does what. Perhaps most importantly, it can be played by the user whether they have 5 minutes free (i.e., to harvest crops) or 30 minutes free (i.e, to redecorate their farm).

4. Show progress…everywhere…on everything. It seems like everywhere I look in FarmVille there are progress bars implying future levels of achievement can be obtained. If it’s an activity you can do on FarmVille, it’s measured somehow with coins, cash, points, levels, ribbons, and more. This make’s users aware of the value of their past actions.  It also suggests what the next step can be.

Top Progress Bar

Ribbon Progress

5. Make users feel lonely without friends–because if they get friends on, they’ll stay longer. After spending a few minutes clicking around FarmVille, you quickly see the game is designed for you to have friends. The main screen has at least 10 reminders of where your friends should be. These serve as a call to action to add friends. And you’re more likely to stay engaged if you have friends involved. FriendFeed claimed that, for their service, a new user is much more likely to stay active if they have 5 friends.

6. Enable self expression. FarmVille immediately lets you customize your avatar and start to customize your farm. You can represent yourself with just a few clicks of the mouse. And by making a representation of yourself, it’s likely you’ll care about it. Do you want to be the person who has withered crops or a small farm?

Customize your avatar...with a click

7. Offer increasing levels of complexity for mastery. After playing FarmVille for a bit, they started to unlock new things that cluttered my display. For example, after a week of play did I get a “gas meter” for a “Tractor”. I expect that if I keep playing they’ll be more and more things to unlock that can be mastered. [Editors note:  I've now heard that "horse trading" is something veterans can do]

8. Have surprises & limited time events. Sometimes when you plow a plot of land, you find coins. Sometimes when you log in, there will be a special promotion for a limited time stuff to buy.  These surprises make it fun and encourage repeat visits.  Even Google changes up it’s logo every now and then just to keep things fresh. I’m so curious about what FarmVille will think of next that I’m sure I’ll regularly stop by in the coming year.

Limited Edition Items

In summary, FarmVille is designed to retain users over the long run.  There is a lot that designers of websites can learn from the tactics deployed.  To hear about follow up posts on how FarmVille acquires users and monetizes, follow me on Twitter.

 

What do you think?  What else does FarmVille do well?  Will they still have more active users than Twitter in 2 years?

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