Technology

The Paradox Of More Value To More People In SaaS Products

When it comes to building SaaS products, all founders dream of having killer Product Market Fit (PMF). It’s the idea that your product is so good, and solves such a pain, that it basically flies off the shelves.

To do this, founders and product managers think about ways to increase the value of the product. One way to do this is to make the product valuable to a larger set of users across a company. As Clark Valberg, CEO and Founder of InVision once told me about Troops, “your product is so good because it is like tentacles into the entire organization.” The idea is if more people at a company find value, then obviously, the more valuable the product will be and the more likely it will be to sell that product.

However, the paradox of creating more value for more people, is that more people may feel like they need to weigh in on the purchasing decision. And more people, means more meetings, more friction, more decision-makers, more gatekeepers, and a longer period of time to sell the deal, if ever.

So what to do? Well, one approach is to focus on creating a valuable product for just one individual persona, thus limiting how many other people need to weigh in on the decision. Less friction! If you do this, you can get better bottoms-up adoption for that group of people. And perhaps after you’ve done your job here, you can move on and create value for other people in the company. But, making this transition from a single-use, single-persona product, to many personas is not that easy either.

This is the paradox of adding more value, to more people, in SaaS products.

Qualified Small Business Stock and ChatGPT

Qualified Small Business Stock (QSBS) is a critical topic that most founders are unaware of.

Instead of writing my own blog post about what it is and why it is important, I asked ChatGPT:

describe what qualified small business stock and why it is financially beneficial to people that have equity that qualifies as qsbs

And the answer:

Qualified small business stock (QSBS) is a type of investment in the equity of a small business that offers certain tax benefits to the investor. QSBS is generally defined as stock in a domestic C corporation that is acquired at its original issue, directly or through an underwriter, and that satisfies certain requirements regarding the corporation’s active business, gross assets, and length of time the stock is held.

One of the main financial benefits of QSBS is that it allows investors to exclude a portion of the gain from the sale of the stock from their taxable income. For example, if an investor buys QSBS at a cost of $100,000 and sells it later for $200,000, they may be able to exclude up to $100,000 of the gain from their taxable income. This can result in significant savings on taxes and make the investment more financially attractive.

Another potential benefit of QSBS is that it may qualify for a lower capital gains tax rate. Under certain circumstances, the gain from the sale of QSBS may be taxed at a maximum rate of 28% rather than the higher rates that apply to other types of capital gains. This can further reduce the tax burden on the investment and increase the potential return on the investment.

Overall, QSBS can be a financially beneficial investment for people who have equity that qualifies as QSBS, as it offers potential tax savings and may be eligible for a lower capital gains tax rate.

It missed an important point about how much tax exclusion you can benefit from so I followed up with:

What is the total amount of money an investor can exclude from the gain of the sale if the equity is treated as qualified small business stock?

And the answer:

The total amount of gain that an investor can exclude from the sale of qualified small business stock (QSBS) depends on several factors, including the amount of the gain, the length of time the stock was held, and the amount of the exclusion that was previously claimed on the stock.

Generally, an investor can exclude up to 50% of the gain from the sale of QSBS if the stock was held for more than five years. This means that if an investor buys QSBS at a cost of $100,000 and sells it later for $200,000, they may be able to exclude up to $100,000 of the gain from their taxable income.

However, the amount of the exclusion may be limited if the investor has previously claimed an exclusion on the same QSBS. In this case, the exclusion is limited to the greater of 10% of the stock’s adjusted basis (i.e., the cost of the stock plus any improvements made to it) or $10 million. For example, if an investor previously claimed an exclusion of $5 million on the same QSBS and the stock’s adjusted basis is $100,000, the exclusion would be limited to $10,000 (10% of the adjusted basis).

In summary, the amount of gain that can be excluded from the sale of QSBS depends on several factors and can vary depending on the specific circumstances of the investment.

Lastly, I needed an image for this post. So I asked Dall-e-2:

create an expressive oil painting of a dog in a suit, smiling, depicted as an explosion of a money flying all around them

The results:

So there are two really important and unrelated points here:

  1. If you are a founder or early-stage employee, you should internalize QSBS and speak with your accountant about it.
  2. It’s worth spending some time with OpenAI and ChatGPT. It’s wild and only took me 5 minutes to create this post.

From the Industrial Revolution to the Knowledge Era – Next Up: The Data Renaissance

1913 photograph Ford company, USA
Image via Wikipedia

The world will never be the same. Our society used to build machines and parts, in factories and in assembly lines. Today, our society builds computer programs and data bases, on laptops and in many cases, from anywhere around the world. People and businesses are becoming more efficient. They are working smarter, not harder, because they are beginning to leverage the most valuable employee of all: Data.

Take for example the airline industry. Consider all those times you got bumped off of a flight, rescheduled, canceled, or offered money to take a different flight. We’ve all been there and it always happens for a reason. This reason is that airlines try to prevent the loss of business and in doing so, they look at dozens of consumer driven behaviors such as how long you travel for, how many weekend flights you take, how many return flights you take, how many flights you take during the week, if you are a frequent flier, and the list goes on. All of these individual data points are used to inform a business decision. The decision is objective. The decision is data driven.

But what happens when we can make decisions using even more data points? Much more data points? Literally, hundreds of thousands if not millions of data points, and did I mention, in real time?

Welcome to the Data Renaissance. Thanks to increasingly efficient and scalable technologies like solid state drives, mobile devices, and cloud computing, the possibilities of data analysis are endless. I mean, just think about how much time we either spend online or connected to a mobile device. This has tremendous implications from travel, health and fitness, to finance, education, and media and the best part is, we haven’t even scratched the surface.

Like I said before, the implications here are huge. Many companies recognize the need to have these comprehensive data sets while having ways of analyzing that data. The digital media and online advertising industry in particular are both in a unique place since their very foundations are dependent upon these high growth technologies; digital devices and the Internet. In this space, companies are racing to a holy grail of advertising where they can leverage millions of individual consumer behaviors to inform brand engagement opportunities and purchasing decisions. Unlike the airline industry, online advertisers can leverage millions of data points instead of those “dozen,” and if done correctly, the consumer experience will be better than it’s ever been before. Everything will matter. Everything will be relevant. We will all become more enlightened and informed to things that interest the most because these new technologies are launching us into the very early, but still uncharted, data renaissance.

(Disclosure: The post can also be found at Lotame Learnings. Lotame is my current employer)

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A New Age of Online Media – The Build Up

“Here’s what’s important. We’ve allowed the way transitions look from the outside to drive our perception of what they must feel like to those going through them on the inside. From the outside, they look dramatic, almost revolutionary breakthroughs. But from the inside, they feel completely different, more like an organic development process.“-Jim Collins, Good to Great

Lotame Grabs $13 Million in Funding for New Advertising Idea

August 19, 2008 — 05:31 AM PDT — by Don Reisinger — — 13 Comments

Online advertising is the key to the future for companies that want to be successful, but a small firm called Lotame has just raised $13 million in Series B funding to take aim at advertisers and provide a unique way of getting in front of the target audience….(continue reading @ mashable.com) or at:


“Clearly, the good-to-great companies did get incredible commitment and alignment – they artfully managed change – but they never really spent much time thinking about it. It was utterly transparent to them. We learned that under the right conditions, the problems of commitment, alignment, motivation, and change just melt away. They largely take care of themselves.”-Jim Collins, Good to Great

*And if I couldn’t make it any more obvious, anyone in business or plans on entering the business world, should most certainly go out and buy Jim Collin’s book, Good to Great

Are You In College And Thinking About Your Career?

Fred Wilson recently wrote a post about one of his portfolio companies and its search for interns in the NYC area.

In the Post…

Greg Yardley, founder/CEO of our portfolio company Pinch Media tells the following story about graduating from college and facing the career question:

When I finished school, I had a MA in Russian history and absolutely no idea what to do with myself – I started working as a customer support rep at an Internet startup because they were the first ones to offer me a job.  (If the startup was a week later with the job offer, I’d probably be a 911 emergency operator today.  Sometimes life can lead you to unexpected places.)  I was surprised to stumble across a field that I loved – soon I became a product manager, and now I’m the co-founder of a company. You never know – maybe there’s a career here for you that you’ve never considered.

Greg’s words could not be more appropriate to the current state of my career/life. Having recently graduated from college, I was faced with a choice:

  1. Enter the working world (with a conservative approach) – Get a job with will respected, high profiled employer. Good resume builder.
  2. Enter the working world (with a less conservative approach) – Join a startup, work on my own startup or company.
  3. Go back for more school – Law School, Masters, 5th, 6th year, etc.
  4. Travel and relax for a year or so

My original intent was to go back to school, however a unique opportunity presented itself, and now I am in the working world taking a less conservative approach then most of my peers.

As Greg said, “Sometimes life can lead you to unexpected places.  I was surprised to stumble across a field that I loved.”

This could not be more true.

Are You In College And Thinking About Your Career? Which decision would you make and why?

New Ideas – Y Combinator

Startup Ideas We’d Like to Fund
Paul Graham
July 2008

When we read Y Combinator applications there are always ideas we’re hoping to see. In the past we’ve never said publicly what they are. If we say we’re looking for x, we’ll get applications proposing x, certainly. But then it actually becomes harder to judge them: is this group proposing x because they were already thinking about it, or because they know that’s what we want to hear?

We don’t like to sit on these ideas, though, because we really want people to work on them. So we’re trying something new: we’re going to list some of the ideas we’ve been waiting to see, but only describe them in general terms. It may be that recipes for ideas are the most useful form anyway, because imaginative people will take them in directions we didn’t anticipate.

Please don’t feel that if you want to apply to Y Combinator, you have to work on one of these types of ideas. If we’ve learned nothing else from doing YC, it’s how little we know. Many of the best startups we’ve funded, like Loopt, proposed things we’d never considered.

 

GREAT LIST. GREAT IDEAS.

http://ycombinator.com/ideas.html

Organizing the world’s heath

Of all the doctor’s offices I’ve ever been in, I can undoubtedly say they all have one thing in common: The overwhelming amounts of patient files and folders. Next time you go see the doctor, take a look behind the front desk. You will most likely find the sea of colored tabbed, manila folders, each one corresponding to a different patient.

Think about this for a second. Each medical office or facility has huge amounts of patient data that exist in isolated silos. If I were to visit two different general physicians, I would get two different examinations, with two different diagnoses, two different perspectives, and two different data sets on my health. Although they may be very similar, they will most certainly be different to some degree.

With the advent of the internet, the social web, search optimization, and relational databases, it has become increasingly easier to share and access information.

Why can’t we apply the same methods to our own heath? Imagine if every doctor’s office shared one database, offering more insight to a patients health. Granted privacy is an issue and a big concern. But what if those patients lived in the database as ID’s rather then name? The patient would be completely anonymous, and doctor can gain new perspective to a patient’s health they may not have previously had.

Now imagine the database existed in an open source, atlassian-like structure. If the doctor was trying to diagnose a patient based on a list of symptoms, they could hypothetically type in some keywords into the database, and have real time, real world patients at their finger tips (with no personally identifiable information). It would be like a real time, global medical journal. Doctors would have to qualify in order to participate in the database.

Ultimately, the patient wins as their health becomes an open source project for all of the doctors that participate, without their indentity ever being known.

My version of IBM’s new supercomputing initiative

IBM has recently announced “a next-generation version of its Cell processor, the first specifically geared for computer servers.”

The PowerXCell 8i will drive the Road Runner system now under test at Los Alamos National Labs to see if it can become the world’s first supercomputer to deliver sustained petaflops performance. Besides cracking the petaflops barrier, IBM hopes hundreds of users will decide to plug into their IBM servers a two-socket board housing the new Cell chips to deliver what IBM calls “supercomputing for the masses.”

Instead of servers being plugged into a grid, why not use PCs and gaming consoles?

I find this announcement to be kind of ironic since it was IBM that realized open source (the Apache Web Server) is more valuable than a centralized and closed platform, even if is somewhat open.

If I was IBM, here is what I would do.

The idea: Mixing different kinds of computers into a supercomputing grid to create an infinitely scalable supercomputer for enterprise solutions. Just as SETI and Stanford have created new hybrids of supercomputers for astrological data analyzation and Computational Earth and Environmental Science research respectively, a similar supercomputing hybrid model has yet to be adopted for commercialized use. This idea will allow users to submit their PCs or gaming consoles to the supercomputing grid, where they can be accessed whenever they are not being used, and will contribute to a commercially available supercomputer. By participating in this supercomputing grid, donations will be made to charities on the users’ behalf. These donations will depend on the amount of data processes computed on their machines. On the other end of the business, enterprises will be able to rent, lease, or even purchase data processing bandwidth. This will enable startups, small to medium businesses, and large businesses, to acquire computationally intensive processing power with extremely fast clock cycles which could easily deliver sustained petaflops performance and beyond. This would be the first ever cluster of machines available for commercialized use providing for cheap energy costs and cheap hardware costs. By participating in this grid, users will be members of ongoing charitable donations, and businesses will, for the first time ever, have paralleled computing power to the likes of SETI and Stanford. PCs were once thought of “business or research only”. Today, virtually everyone owns a PC. Supercomputers today are only thought of as “research-only”. This put supercomputers in the commercialized or “business” realm. IBM has just announced a new initiative to delver a supercomputer to the masses, as they predict an $8-$10 Billion market. Instead of creating a centralized supercomputer for the masses, this idea will create a decentralized supercomputer to the masses, that will exceed any one supercomputer.

That is what I would do.

Facebook Connect

Facebook is opening up the walled garden and sharing…or are they?

Their new announcement:

“Today we are announcing Facebook Connect. Facebook Connect is the next iteration of Facebook Platform that allows users to “connect” their Facebook identity, friends and privacy to any site. This will now enable third party websites to implement and offer even more features of Facebook Platform off of Facebook – similar to features available to third party applications today on Facebook.”

At a first glance, it might seem as if this is a great move for Facebook and its users. But is it really?

Some initial thoughts.

In an attempt to be the social network across the internet:

  • Users can have one web identity (see sxip) which will eliminate the need for the thousands of logins we have.
  • Facebook will become even more centralized and necessary for warehousing user information. (Federal Reserve : Money :: Facebook : User Data)
  • Third party developers can build much more powerful applications without the restraints of the Facebook platform. No canvas page.
  • What was first an attempt to build a platform or centralized location, has now become an open initiative, encouraging users to engage third party websites ultimately leaving them with less advertising inventory.
  • User data might now become available for third party ad targeting outside of Facebook.com
  • Disrupting their own Facebook App ecosystem
  • New revenue model? Their current one isn’t really working.
  • They are becoming more open
  • They are becoming more closed

 

In the end, I think the real question is whether or not Facebook actually intends on adhering to these fundamentally “open” policies they are trying to replicate from the likes of MySpace, Twitter, Yahoo, and eBay

 

Ryan Waggoner states it best here:

“As Kaliya stated, I’m afraid that this is just another strategy for Facebook to “lock-in” their users and attempt to become the central repository of everyone’s social graph. If that’s the case, this is not data portability as I still don’t have full control over my data.

Hopefully, they’re going to be fully supporting open standards, but I doubt it. Facebook strikes me as a company that pretends to be open, but is only open one-way or to the extent that they can control.

Facebook is Microsoft 2.0”

Looks like we will have to wait and see, but something tells me Ryan and Kaliya will be right.

Rocks, Paper, Scissors….Memristor?

Consider the game of Rocks, Paper, Scissor. Three components. Three pieces that make up a rather historical game. What if a fourth component was introduced to the game? What would that fourth component look like, and what would its properties be. Wouldn’t this drastically alter the way the game is played?

Yes.

This is happening now in the world of electronics and circuits and stands to revolutionize an entire set of rules. What was once three fundamental devices (resistor, capacitor, and inductor), now has a fourth family member called the memristor.

Basically, this new device remembers how much charge was passed through, either forwards or backwards. Disregarding all the technical jargon, I wonder how this will effect chip manufacturing and design. 

Might the smallest invention or innovation ultimately have the most profound effect? 

There is simply nothing like true innovation.

What happens if you play Rocks, Paper, Scissors, _____________? Try it.

 

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