Posts

Kenny van Zant drew this diagram for me on white board and I think it’s the best visualization of how SMB SaaS freemium business grow. The diagram highlights a few important mechanics of the SMB SaaS business model.

In any given freemium user base, small-office/home-office (1 to 20 employee shops) users tend to be a few times larger in size than true SMB customer (20 to 500 employees). Most of these SOHO customers remain unpaid evangelists. A few of these customers grow into SMBs and become paying customers - they cross the dashed line in this diagram. But most paying users for freemium services are SMBs.

To many entrepreneurs, hiring the first salesperson is a mystery. When should I do it? How much should I pay this person? How do I structure the work?

The great part about sales teams and sales departments is that they quantitative - sales teams thrive on numbers. At the most fundamental level, sales productivity has to exceed costs.

So let’s answer the question of when to hire a salesperson by understanding the financial mechanics of a sales team. When building a sales team, there are three things to consider:

Could you grow your users at 5% for 15 months? Or at 7% for 12 months? Or at 10% for 9 months? That’s how long it would take to double your user base at those growth rates.

Though there is some science to growth developed by the technology-fluent marketer, aka growth hacker, growth remains a confounding art because there isn’t one feature - like implementing FB Connect or promoting Tweets or having a big red button on a home page. Rather, it is the sum product of a hundred little things.

There’s something beautiful about handwriting that we’ve never been able to capture on the Web. Handwriting has style, a uniqueness to each writer and also an ability to capture the evolution of thought with crossed out words, carats and interjected clauses and margins full of edits. The image above is my favorite from Emily Temple’s curation effort of a series of famous authors' manuscripts on a Tumblog.

I was thinking about how much differently this blog feels to a reader than the above draft of Sir Arthur Conan Doyle’s “The Hound of the Baskervilles.” Doyle’s writing, careful and well-spaced, clean looks like Sherlock Holmes' hand and it gives a feeling of methodological study and thought.

Andrew Dumont wrote about his grueling schedule at a startup and the lessons on “Avoiding Burnout” which spurred a torrent of comments on HackerNews. For me, the most interesting comment is this one by Daniel Ribeiro who quotes Isaac Yonemoto:

Burnout is caused when you repeatedly make large amounts of sacrifice and or effort into high-risk problems that fail…You effectively condition your brain to associate work with failure… The best way to prevent burnout is to follow up a serious failure with doing small things that you know are going to work.

To answer that question, you have to look for examples of the best storytellers. The best storytellers are the television studios. They divide the day into different segments to reach different audiences. Morning: news. Midday: soap operas. Evening: Nightly news segues into primetime sitcom. Late night: news segues into comedy.

An entrepreneur told me a few weeks ago, when we where talking about how to build a blog audience and I had asked him how he thought about content strategy. In short, segmentation was his answer. Figure out all the customer types and give each one what they want.

When the neologism was popularized in 2004 by Tim O'Reilly, the words Web 2.0 captured a desire for the web to become interactive. It was a description of a movement towards social media and engaging users on the web. But more than an idea, it carried a design aesthetic which focused on the user, user experience and engagement. After all, users wouldn’t participate on a hostile site.

We’re no longer in the Web 2.0 age - look no further than the Google Trends data to prove the point - but the relentless pursuit of the best user experience lives on in a new era, the IRL (in real life) era.

“What’s the difference between a string and a String?” I asked on the first day of my engineering internship at a startup. That comment drew some sighs from the other engineers in the cube. The pit in my stomach confirmed what I already knew - I was out of my depth.

I had never programmed in Java before that day. And there I was, a Java engineering intern at this startup. Over the next few months, I imbibed as much as I could about object oriented programming and servlets and Struts and Tomcat and Apache and databases as I could. Boy, were those engineers patient with me. They were saints.

When I started at Google, I began working in the AdSense Online Sales and Operations team. The demand for AdSense was overwhelming and we received tens of thousands of website applications each day asking to be granted permission to run Google’s ad product on their websites.

Sometimes, automated approval systems would reject an application based upon strong spam or fraud signals. But thousands of applications each day demanded additional human judgement. So a team of us worked “the Bin.”

Pricing is taxation. A pricing plan taxes some element of a product’s use. For a startup, choosing what to tax and how to tax it can be one of the most perplexing decisions because the tradeoffs between usage and revenue aren’t always clear.

Activity based pricing or usage based pricing is one of the more common pricing plans in utility computing and software these days. Need to spin up another server immediately? Did another user sign up to use this software? No problem - we will just add it to your bill.