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When I first started in venture capital five years ago, I wanted to create a programmatic way to analyze companies well. My goal was to be able to step into a meeting with an entrepreneur with some kind of form that I would fill out throughout the meeting, so that by the end of the meeting I might have an understanding how the startup fits into its ecosystem.

It took quite a while to devise this framework and to revise it until it became useful, practical and insightful. I spoke with friends who were consultants and who analyze companies for a living. I read many books on the topics of competition and strategy. Last, I spoke with other investors.

What is a social product? This was the question Sandi MacPherson, founder of Quibb posed to me, over lunch earlier this week.

In Startupland, we bandy about terms like social, social media, virality and community when talking about products but it wasn’t until that moment that I stopped to think a bit more about what each word really means. Sandi has thought a lot about these concepts while building Quibb and she has some of the clearest points of view on social products I’ve encountered. These are my notes from that conversation:

What is a social product? This was the question Sandi MacPherson, founder of Quibb posed to me, over lunch earlier this week.

In Startupland, we bandy about terms like social, social media, virality and community when talking about products but it wasn’t until that moment that I stopped to think a bit more about what each word really means. Sandi has thought a lot about these concepts while building Quibb and she has some of the clearest points of view on social products I’ve encountered. These are my notes from that conversation:

There’s an adage that is being passed around by entrepreneurs that goes something like this: “As soon as you raise this round, it’s time to start worrying about the next round.” I think it’s a wise adage.

It’s similar to my most important principle of fund raising which is “Raise enough money to achieve a set of milestones that will attract a subsequent round of investment from new investors.”

Those two ideas are simple and logical. But what does this mean for the business on a very tactical level? How much revenue? How much dilution should an entrepreneur expect? What should valuations look like over time?

One of my favorite courses in engineering grad school was Marketing which was taught by a brilliant quirky professor. On the first day of class, our professor wrote on the board this equation:

Innovation = Invention + Go To Market

Addressing a group of engineers who prided themselves on their technical skills, this professor of marketing tried to instill in us that invention alone isn’t enough to create innovation.

The invention has to be coupled with a way of understanding the customer, speaking to that customer, educating the customer and ultimately convincing the customer to adopt the invention. Only when the customer base has adopted the invention at scale have we truly innovated.

In the past 12 months, we’ve seen at least three major acquisitions of social networks by larger social networks. Facebook acquires Instagram. Google acquires Waze. Yahoo acquires Tumblr. And we are likely to see quite a few more given the dramatic growth of mobile messaging clients and social networks of all different kinds.

While each of these acquisitions has their own particular motivations, underpinning all three is user engagement. Engagement means activity which translates to advertising dollars. Additionally, it is not unreasonable to suspect that all of these acquisitions will one day be used to bolster the parent companies own social network: Facebook and Google+. Yahoo’s plans are less clear.

Recently, hardware companies have been popping up in all kinds of places. Nest is building the next thermostat. Sonos sells seamless and beautiful soun systems. Thalmic Labs and Leap Motion are innovating in alternate forms of computing control. Electric Imp is building the platform-as-a-service to connect devices to the web via Wifi and so on.

Hardware investments are blossoming because software is reinvigorating the market. Hardware companies face deeper logistical challenges, greater likelihood of margin erosion, and more complex go-to-market strategies than their software cousins. But subscription revenue streams like streaming music services or device remote control breathe life into hardware companies, driving ultimately higher margins and more sustainable revenue streams.

In the center of Google’s campus lie a cluster of four buildings: 40, 41, 42 and 43. Contained within building 42 was the epicenter of product management: Jonathan Rosenberg’s office. Immediately next to his office stood a collection of three bookcases containing a library of different books on various topics that JR curated.

I used to pass that library every day on my way to meetings and each time I walked past, I would pause to see which new volumes had arrived.

Pricing is one of the most challenging decisions for any startup. One of the simplest ways of discovering customer willingness to pay is simply to ask them.

At first blush, that might seem a reasonable and effective solution, it is prone to wild inaccuracy. Absolute pricing judgments are hard without reference points. For example:

How much would you be willing to pay for a new iPhone?

It’s a very challenging question to answer in the abstract. It all depends on what the phone can do and what sacrifices I would have to make to be able to afford that phone. That calculus isn’t any different for smart phones, expense management software, or flash storage. Every pricing conversation is a game of trade-offs.

Over the past 15 years, we’ve seen a wholesale migration of software development on the web towards cloud away from client/server models. The cloud offers many benefits: seamless upgrades, synchronization of data across different devices and lesser hardware requirements.

But the cloud centralizes all the data. All of our Dropbox files, Google documents, and emails are held within one or few companies' servers - which provides easy access for hackers and government.