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Article from TechCrunch.

At a recent Startup School, Mark Zuckerberg made some very poignant comments about Silicon Valley’s lack of long-term focus.  While the quick turnover of capital, people and innovation makes the Valley an incredibly attractive place for starting companies, it also produces an environment that’s almost hostile when it comes to building them for the long haul. The tension is remarkable, yet it’s rarely highlighted among the more explicit challenges – say, going up against the 800lb gorilla – faced by entrepreneurs.

Every so often, my non-tech friends half-jokingly ask, “Have you sold yet?”  And for the first few years of Box’s existence, to placate them, I would ask for just a couple more quarters. Right after we get our next product to market, after we double again, and so on.  But soon it dawned on me that I wasn’t going to stop.  I couldn’t.  There was just too much to do, too much unexplored territory. Even when things weren’t going well, the challenge of righting them was like another shot of pure adrenaline.

In many ways, starting a company in college (isolation) in 2005, before the dawn of TechCrunch (insulation), permitted a certain innocence.  My co-founder and I didn’t fully understand the Valley’s business model and constant churning nature until we were smack in the middle of it.

The advantages of being here are obvious – vastly more talent, capital, experience, and resources than anywhere else – but we often forget that most of us started companies simply as a vehicle to get our (hopefully) world-changing products to market.  How quaint.  It’s all too easy to get swept up in the social pressures and biases of the Valley, where we idolize those that have sold their companies for large sums of money, mourn those that didn’t sell soon enough, and overlook the decisions (and non-decisions) it took to build companies with true longevity.  Victory begins to have a complex definition.

Referring to the mysterious craft of timing exits, one of the greatest investors in the Valley recently told me, “you have to be suboptimal to be optimal.”  While remarkably true, this statement assumes you’re optimizing for some knowable, local maximum – what if you’re trying to build something far beyond today’s vantage point?  We often miss the entire point of why most of us start companies in the first place, which is why Zuckerberg was universally seen as arrogant and foolish when he passed up the opportunity to sell Facebook for $750 million to Viacom, even by the smartest and most experienced minds in tech.  He executed brilliantly, and now looks like a genius.  Yet, had it gone another way, most would have said, “I knew that thing had no legs.”  Funny how that works.

With hindsight being 20/20, it doesn’t take much imagination to concede that the regret of not pursuing the opportunity to truly change the world might outweigh the near-term guarantee of a robust bank account.  Even so, the odds – and public opinion – are generally stacked against you when you decide to optimize for the former.

Everything is working against you

When nearly everyone is rooting for the underdog, maintaining and gaining market leadership can be antithetical to the very nature of the Valley. In building for the long haul, you’re competing with dozens if not hundreds of companies with equal determination to move upstream.

Even the motives of the constituencies presumably on your side – customers, employees, founders and early investors – are not always perfectly aligned. While software is busy eating the world, investors are still only content with eating IRR.   The very financiers that make millions building up one internet leader eventually must go on and bankroll its demise.  As they should.

And if you successfully quell external forces and internal conflicts to reach a stage of public liquidity – the new Holy Grail in the Valley – it’s not as if you’re magically home free.  In nearly all respects, your problems only compound.  Vested employees parachute out, Sarbox slows you down, analysts speculate on acquisitions you have little control over, and the news cycle surrounding your company’s every move is now tied to the ‘buy’ and ‘sell’ decisions of investors arguably less savvy than your Sand Hill neighbors.  Can you imagine what would have happened to Facebook’s stock had they launched the News Feed as a public company?  It seems we’ll soon find out.

With opposing forces like these, why would anyone even try to build for the long haul?  Well for starters, it’s ridiculously exciting and also extremely gratifying, and you create far better companies and products in the process. If you do it right, you have a chance to change the world.

How you build for the long haul

1. Set up a vision that puts you many years out

Be sure your company is tackling a long-term, complex, pseudo-existential challenge that isn’t going away anytime soon.  Not only are these missions the most fun to be a part of, they’re the only ones that survive over the long haul.  Amazon.com started out as “Earth’s Biggest Bookstore.” Now it “strives to be Earth’s most customer-centric company where people can find and discover virtually anything they want to buy online.”  Platitudes aside, gnarly goals are essential.  And getting your vision right is so important, because it should drive everything you do, your product most importantly.  

Early on at Box, our vision was less than crisp and put us into a head-on collision with giants that would also want to help consumers store files online.  Through relentless refinement and imagining the shifting landscape over a decade-long view, we developed a roadmap and mission that represented perhaps a much larger challenge (making enterprise collaboration and content management simple), but one that allowed us to imagine how we could fit into this transitioning world.  This dramatically changed what we would develop and how we would go to market, always acting as a straight-forward guide for what we would do next.

Building for the long haul gives you the freedom and clarity to build out a product over a much greater time horizon, realizing an ultimate vision that is far into the future.  Fred Wilson calls it the Long Roadmap.  You get to move beyond a range of visibility limited this quarter’s priorities.  And it means that your product today will look almost nothing like what you eventually want it to become.  The stretch of time betweenMicrosoft Windows 1.0 and Windows 95 was a decade.  Even fifteen years after that, the product still has dozens of iterations to go.  I’m guessing with Evernote’s vision of “Remember Everything,” they’re going to be at this for some time.

2. Build an organization that can get you there

With long-term product planning comes the opportunity to build an entire organization based on your terms and vision.  You get to set the culture, pace, tone and attitude.  Watching a startup go from a handful of people to hundreds is an incredible experience. I can only imagine what it’s like to take it to thousands.  People will come and go at varying points; some will scale and evolve as quickly as your company and mission, others won’t.

It’s critical that your culture is established and enforced early on, in large part by hiring people that fit, and maintaining that bar without exception.  How many times have we heard that A-players hire other A’s, yet how many organizations stay disciplined when having to quickly build up their ranks?  Is your culture institutionalized to the point that deviating is a fire-able offense?  Are people unwaveringly convinced by and committed to the vision?

Most importantly, you must build an organization that understands this fight will have multiple rounds, and will require excruciating persistence and dedication.  Sometimes this is about long hours and insanely difficult work.  Other times it’s about maintaining composure when dealing with the mental stresses and strategic challenges that come with each of the many revolutions.  Every now and then it’s about complete reinvention.

3. Constantly reinvent yourself, your product and your ideals. Oh, and occasionally that vision

Nothing about the internet is set in stone.  The cycles between technology revolutions are shortening with every major innovation.  By extension, your company’s vision, competencies, and product should always be subject to reinvention.  Organizations that last are constant avengers of the status-quo.

Google made it its mission to manage the world’s information. As we’ve moved toward more of a social vs. indexed web, and now that computing cycles and storage have become exponentially cheaper, this strategy on its own looks less compelling. Google realizes the profundity of this change, and is shuffling resources and people extensively.  Larry “what-is-cloud-computing” Ellison has done an about-face, and is (at least publicly) betting the farm on the cloud.

If you’re not incessantly checking to see if your company’s tactics, strategies, and assets align with the current (and future) market, there’s simply no way to win.  Constant reinvention of your ideals and product is the only path to survival.  Amazon discovered that selling DVDs was no harder than selling books, and selling digital media was not so different from selling DVDs. Now, supplying devices is essential to selling that digital media.  Reinvention.

Now, I’m not saying that no one should ever sell.  God no.  There are generally more reasons than not to sell a company.  Sometimes you’ve been at it long enough, and you want a great landing for employees and investors. Sometimes your technology’s adoption will be accelerated or more impactful under another owner. And on the internet, this ambiguity is at its highest – with few moats to rely on, it’s a wonder that any survive.

But perhaps it’s the challenge, and thus the scale of the opportunity, that makes it so exciting. With the right conviction, you can build for a distant period with full acceptance of the difficulties and costs of doing so, ensuring that your product and organization are always better positioned in the future than the present.

And for those that can do this –reconcile the need to constantly grow and innovate with the reality that most companies fail or are subsumed– the glory and benefits are sweet.”

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Article from Business Insider.

“Douglas Leone of Sequoia Partners just finished on stage at TechCrunchDisrupt, and he had some interesting advice for young founders: stop talking.

On stage with Mike Arrington, he gave the following advice for small startups:

Little companies have really 2 advantages: stealth and speed. You [Arrington] come from the world of speed and no stealth.

The best thing for little companies do is to stay away from the cocktail circuit….We at Sequoia have never released a press release in 35 years….Then run like a son-of-a- gun. Don’t say anything to anybody.

Leone contrasted the startups from when he started in 1988 with the companies he sees today. Back then, startups were building infrastructure — like chips — and that took an older founder with some experience at a big company, then a team 15 or 20 people who would lock themselves in a building and spend 12 and 15 months building “fundamental IP.”

Now, a couple of young smart people can create a beta Web site over a weekend and iterate from there. A lot of younger founders “don’t know what they don’t know,” and that creates the temptation to talk too much.

He’s worth listening to: Leone claims that Sequoia has never lost money on a fund, and has returned between $15 and $20 billion to its limited partners on an estimated total investment of between $5 and $7 billion. The company’s early investments include Yahoo, Google, and YouTube.”

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Article from Techcrunch.

“There’s no doubt that as smartphone usage increases, geo-location is becoming an increasingly important technology in consumers’ day to day lives. The Pew Internet Research Project has come out with a new report showing the growing number of U.S. adults that are leveraging location-based technologies in social and mobile apps. According to Pew, 28% of adults use at least one of location-based service that exist in mobile and social media spaces. The report shows the most popular use case of location-based technology is using mobile phones for maps, directions, or recommendations.

Pew reports that 28% of cell owners use phones to get directions or recommendations based on their current location (that works out to 23% of all U.S. adults). Only 5 percent of cell phone owners user their phone to check-in to locations using apps like Foursquare or Gowalla.

And 9% of internet users incorporate their location into Facebook, Twitter, or LinkedIn (7% of all adults). And 28% of U.S. adults do at least one of these activities either on a computer or using their mobile phones.

Unsurprisingly, smartphone owners are more likely to use location-based social networks on their phones. One in ten smartphone owners (12%) have used Foursquare, Gowalla, or a similar application and 55% of smartphone owners have used a location-based information service. Almost six in ten smartphone owners (58%) use at least one of these services.

Pew says that younger smartphone owners are more likely to use location-based services in their phone. And Pew says that geosocial services and automatic location-tagging are most popular with minorities. A quarter (25%) of Latino smartphone owners using geosocial services and almost a third (31%) of Latino social media users enabling automatic location-tagging. Pew says that only 7% of white smartphone owners use geosocial services, byt 59% get location-based information on their phones, compared with 53% of blacks and only 44% of Hispanics.

Pew reported nearly a year ago that only 4% of online American adults use location-based services. My guess is that number has increased since last Novemeber.”

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Article from SF Gate.

“AOL Inc. bolstered its strategy to reinvent itself as a major source of online content Tuesday by buying San Francisco’s TechCrunch Inc., which operates a popular and influential network of technology news blogs.

Financial terms of the deal were not disclosed, but Bloomberg News, citing two sources who were familiar with the terms, said AOL agreed to pay $25 million.

TechCrunch founder and co-editor Michael Arrington, a lawyer who has become an influential technology writer, agreed to remain with the company for at least three years as his company joins an AOL stable that includes the popular consumer electronics blog Engadget.

AOL Chief Executive Officer Tim Armstrong joined Arrington onstage during the second day of TechCrunch’s Disrupt conference at the San Francisco Design Center to publicly announce the deal Tuesday.

“I flew out here because the company I’m most interested in is TechCrunch,” Armstrong said in a tongue-in-cheek exchange with Arrington. “I’d love it if you let me partner TechCrunch with AOL to see if we can build a very substantial company together.”

“Yes is the answer,” Arrington replied before he and other TechCrunch executives signed the acquisition papers as the audience watched.

TechCrunch becomes part of AOL’s overall strategy to recover from its failed corporate marriage to Time Warner by reinventing itself as a major source of online news, information and entertainment and to make that content available on all Web-connected devices.

AOL already includes online sites and services such as FanHouse, Joystiq, Switched, MapQuest and Moviefone. The New York firm cut another deal earlier Tuesday to buy video distribution services 5min Media, which has a library of 200,000 fashion, cooking and fitness videos.

Seeking future brands

AOL also is investing in a network of hyperlocal news sites through its Patch Media subsidiary, which already covers about 150 communities. Last week, AOL launched Patch U, a network of partnerships between Patch publications and leading journalism departments at universities including Stanford, UC Berkeley, University of Southern California, Northwestern and Missouri.

“There is one thing that remains constant across all of the major platforms on the Web, and that’s content,” Armstrong said last week at a business conference sponsored by Goldman Sachs & Co. “So our specific strategy for content is to invest in the future brands for the digital space for mobile, for the Internet, for the plasma screen, and you’re going to see us continue to make more moves down that pathway.”

Many consumers may still think of AOL as being America Online, the company that rose to prominence selling dial-up access to the Internet. America Online eventually merged with media conglomerate Time Warner but spun off in December.

“Today’s news has kind of reminded people that AOL is actually not dead and buried,” said Eric Talley, co-director of the Berkeley Center for Law, Business and the Economy.

Database of investors

The acquisition of TechCrunch, which has about 40 employees, contractors and contributors, “is not a gigantic deal,” but it does give AOL a well-known brand within the tech community, Talley said. AOL also gains the potentially valuable CrunchBase online database of company and investor information.

“That data could be the source of all types of future services that AOL is interested in getting into,” Talley said.

TechCrunch becomes part of the AOL Technology Network with Engadget, which according to online measurement service comScore was the top tech blog in August with about 7.3 million unique visitors.”

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Article from TechCrunch.

“We all know that social gaming giant Zynga is one of the fastest growing tech companies of all time and has turned games like FarmVille into a mainstream phenomenon. And via international expansion and deals with Facebook and Google, Zynga has continued its path to domination of the social gaming market. We have an idea of the company’s revenue and other gaming statistics, but there is some data involving the backend of the platform that has not been revealed. Today, Zynga’s CTO Cadir Lee is speaking at Oracle’s OpenWorld conference about the gaming giant’s infrastructure, business and challenges.

Lee offers the following statistics:

  • 10 percent of the world’s internet population (approximately 215 million monthly users) has played a Zynga game.
  • The company adds as many as 1,000 servers every week to accommodate growing traffic.
  • Zynga’s properties move a whopping 1 petabyte of data daily, and the company operates its own data centers; using a hybrid private/public cloud infrastructure.
  • Zynga’s technology supports 3 billion neighbor connections on games like Frontierville and Farmville.

The company itself has been steadily adding employees, through both acquisitions and new hires, and now counts more than 1,200 full time employees and includes 13 game studios.”

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Here is some news from Techcrunch.

“Google has quietly (secretly, one might say) invested somewhere between $100 million and $200 million in social gaming behemoth Zynga, we’ve confirmed from multiple sources. The company has raised somewhere around half a billion dollars in venture capital in the last year alone, including $150 million from Softbank Capital last month and $180 million late last year from Digital Sky Technologies, Tiger Global, Institutional Venture Partners and Andreessen Horowitz. The Softbank announcement was never officially confirmed by the company, however, and the Google investment was likely part of that deal as well.

The investment part of the deal closed a month ago or so. A larger strategic partnership is still in process.

The investment was made by Google itself, not Google Ventures, say our sources, and it’s a highly strategic deal. Zynga will be the cornerstone of a new Google Games to launch later this year, say multiple sources. Not only will Zynga’s games give Google Games a solid base of social games to build on, but it will also give Google the beginning of a true social graph as users log into Google to play the games. And I wouldn’t be surprised to see PayPal being replaced with Google Checkout as the primary payment option. Zynga is supposedly PayPal’s biggest single customer, and Google is always looking for ways to make Google Checkout relevant.

And there’s more. These same sources are saying that Zynga’s revenues for the first half of 2010 will be a stunning $350 million, half of which is operating profit. Zynga is projecting at least $1.0 billion in revenue in 2011, say our sources. This blows previous estimates out of the water.

Zynga continues to work on high level strategic business development deals. The reason these deals are so attractive to companies like Yahoo and now Google is this – Zynga allows them to rebuild the massive social graph, currently controlled by Facebook. For whatever reason people love to play these games and get passionately addicted to them, coming back day after day. That’s helped Facebook become what it is today. Google, Yahoo and others want some of that magic to rub off on them, too.”

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Here is a SF gate story that talks about high-tech growth.

“The technology industry is playing the white knight of San Francisco’s struggling office market, as startups and growing companies ink deals and scour the market for space emptied out by the financial meltdown.

Many of the tenants are swelling homegrown businesses like Twitter, while others are relocating from Silicon Valley or outside the Bay Area. As of June 15, 83 technology companies were in the market, seeking 1.5 million square feet of space, up 51 percent since the financial crash in fall 2008, according to brokerage firm Jones Lang LaSalle, which regularly tracks the market.

To be sure, that demand alone won’t turn around a market facing more than 13 million square feet of total vacancy, according to a first-quarter research report from Cassidy Turley BT Commercial. But it’s a big step in the right direction for San Francisco’s office market and employment.

“The greatest areas of job growth in San Francisco and the drivers for economic activity across a whole host of related sectors will come from those innovative industries,” said Michael Cohen, director of the mayor’s office of economic development.

One of the largest potential deals in the market is Zynga, the maker of popular social-networking games like FarmVille and Mafia Wars. The company is looking for anywhere from 150,000 square feet to 300,000 square feet of space, according to various industry sources, who asked to remain anonymous because disclosure of such information could affect their business.

Zynga was on the verge of signing a lease for approximately 140,000 square feet last fall, but that deal fell apart.

“Zynga doesn’t have an update on our expansion plans right now,” a spokeswoman said in an e-mail response to a Chronicle inquiry.

Expansion

Twitter, the popular microblogging service, expanded its San Francisco space by nearly six times in the past year. It had been looking for still more space, as much as an additional 100,000 square feet, but that effort seems to have gone quiet, sources say.

An especially encouraging trend for San Francisco business boosters, who have long lamented the exodus of companies to surrounding regions, is the relocation of a handful of Silicon Valley firms to the city in recent months.

Industry blog TechCrunch and video-streaming site MetaCafe moved up from Palo Alto, while Webcasting service Ustream and tech-consulting firm Encover Inc. arrived from Mountain View. Mobile application company Booyah Inc., also of Palo Alto, recently signed a lease to shift its headquarters to San Francisco.

In addition, gaming companies like Playdom Inc. and Playfish opened satellite offices in San Francisco, and Yammer Inc. moved to the city from Los Angeles. Meanwhile, there are a handful of out-of-state, and even out-of-country, companies touring space in the market right now, sources say.

Real estate and technology observers believe San Francisco is becoming a more attractive place to start a company or move to for a variety of reasons, including: South of Market rents that are about half of Palo Alto’s right now, the desire to cluster near success stories like Zynga and Twitter and the broader shift to the Web 2.0 world.

As Internet companies become as focused on social media and entertainment as they are on underlying technology, they want to locate near a different set of partners, customers and talent pools, several executives said.

It’s all about layering

“Tech is still the core of what we do, but you’ve got to add layers on top of this,” said David Rice, chief operating officer of MetaCafe Inc.

The company’s new address, at 128 King St., with exposed brick and a view of AT&T Park that puts their previous business-park space to shame, made it easier to tap into marketing, media and advertising expertise in the city, he said.

Other companies’ leaders say they opted for San Francisco because that’s where today’s engineering talent wants to be as well.

When David Sacks, chief executive of Yammer, asked his developers whether they should relocate the microblogging service for businesses to Palo Alto or San Francisco, the latter won hands down. This represents a distinct shift from a decade earlier when he was chief operating officer of PayPal in Palo Alto.

“There’s a lot more engineering talent living in San Francisco now,” he said. “The balance of power may have shifted.”

Web 2.0 firms also don’t need the massive research and development facilities required by the computer manufacturers and chipmakers that gave rise to Silicon Valley.

“Companies like Twitter can have incredible reach with a relatively small workforce,” said Kelly Pretzer, director of new media for the mayor’s office of economic development. “San Francisco has been able to complement that development in the industry nicely.”

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