4 ms·

I'll start with your second question: In some categories lean can be a big number: search, making chips and (today) building a social network. Can you start wi

I'll start with your second question: In some categories lean can be a big number: search, making chips and (today) building a social network. Can you start with 10 people and 150k a month burn in these categories? Sure. However, if you're going to take a real stab at this type of problems in a massively competitive market with HUGE incumbents you need 30, 40 or 50 people. Also, "too expensive" is relative. Spending $500k a month might seem too expensive to someone starting out as an entrepreneur, but to VCs and founder who have been in the game for a long time they would rather risk blowing out 10m and figuring out a lot of problems quickly, than sit around and slowing figuring stuff out. The whole industry is biased toward big success. Just the nature of the beast. If you want to do something more modest--and i did on my last two companies--you raise small amounts of money and shoot for a small target. Neither model is wrong. In terms of #1, you can go check out youtube channels yourself. We basically stopped writing pages with great writers (but not experts) to creating videos with experts in them. This costs 10x as much, but the result is stunning. Not sure if you're into styling your hair, but we have one of the best stylysts in Los Angeles doing a series--think of it as a Khan academy course--on styling your hair. http://www.mahalo.com/how-to-style-your-hair/how-to-do-a-perfect-salon-blowout-at-home/ http://www.mahalo.com/how-to-style-your-hair/how-to-do-a-per... or photoshop tutorials like Lynda--except free: http://www.mahalo.com/learn-adobe-photoshop-introduction/ http://www.mahalo.com/learn-adobe-photoshop-introduction/ http://www.mahalo.com/photoshop-video-tutorial-how-to-make-a-movie-poster/ http://www.mahalo.com/photoshop-video-tutorial-how-to-make-a... Now imagine those not only as courses on mahalo, but also iPad apps. And imagine 1M videos with that level of instruction. That's what we're doing. ... and that all came from my vision of search results + content. Now, I still believe in that vision, but the truth is Google went from ten blue links in 2007 to what it is today: content + answers + some search links. we knew that was possible--that they would wake up--and they did. c'est la vie!

dennisgorelik 15y ago
When I'm thinking about lean discovery, $150K/month seems too expensive too. Initial version of Google Search was developed by team of two or three people. That's less than $30K/month burn. "Neither model is wrong." -- I agree. However "lean model" is much more common and relevant to majority of founders than "$150K+/month burn during discovery phase". Another consideration: you made your previous company profitable with lean approach. But you did not make Mahalo profitable with "$500K monthly burn" approach. That should teach us something. "The whole industry is biased toward big success." - I assume under "whole industry" you imply "Venture Capital industry", not "Information Technology industry", right?
- jasonmcalacanis 15y ago
  1. The Google example is only relevant in 1999, when the market was nascent. Now that you have a big, established product there is--in all likelihood--no way to create a google killer at $30k a month. If there was one at that level, it probably would have been found by now. Established markets take bigger checks... nascent markets take smaller checks. 2. I actually did get Mahalo to profitability last December. :-) Of course, the Panda Update endend that brief, beautiful moment. 3. Actually, I do mean the entire industry. Now that the internet is global, fast and ubiquitous (mobile) everything good tends to get really big, really fast. Heck, bad things get big fast (Rebecca Black's Friday comes to mind), and so do super simple things (i.e. Angry Birds). the internet is biased toward big...
  - dennisgorelik 15y ago
    1) While Google is efficient, there is no market need to create Google killer. Even if there is such a need, the goal of startup would be to create a model that at scale would overperform Google. Such model is likely to be created at less than $30K monthly burn. For example, team of two developers in couple of years may implement and fine tune some efficient social way of ranking search results. $30K/month * 24 month = $720K. 2) Jason Calacanis empirical rule: "if startup is overfunded then as soon as profitability is achieved it would be crushed by Google." :-) 3) "The internet is biased toward big..." -- I agree. But it's "big product scale", not "big organization".
    - jasonmcalacanis 15y ago
      1. The problem with this assumption is that Google is standing still--they are not. When Mahalo started doing comprehensive search in 2007 google was just 10 blue links. As we added more content to our results they did the same. We were a year ahead of them... in fact we still would be. It just wasn't enough against a scale player. 2. ha 3. agreed
dennisgorelik 15y ago
"And imagine 1M videos with that level of instruction." How much did it cost to produce these videos that you liked to? If it's ~$10K/video, then 1M similar quality videos would cost you $10B.
- jasonmcalacanis 15y ago
  We can produce videos at much, much less than $10k a video. Think about it, what does it cost to put an expert in a box and record them sharing their knowledge? not $10,000.
  - dennisgorelik 15y ago
    My question is about these particular videos. How much does that hair stylist video cost?
    - jasonmcalacanis 15y ago
      we don't give that specific piece of information out (trade secret), but it's low enough that we see a road to profitability that's enough for us to ramp up production. :-)

dennisgorelik 15y ago

When I'm thinking about lean discovery, $150K/month seems too expensive too. Initial version of Google Search was developed by team of two or three people. That's less than $30K/month burn. "Neither model is wrong." -- I agree. However "lean model" is much more common and relevant to majority of founders than "$150K+/month burn during discovery phase". Another consideration: you made your previous company profitable with lean approach. But you did not make Mahalo profitable with "$500K monthly burn" approach. That should teach us something. "The whole industry is biased toward big success." - I assume under "whole industry" you imply "Venture Capital industry", not "Information Technology industry", right?

jasonmcalacanis 15y ago
1. The Google example is only relevant in 1999, when the market was nascent. Now that you have a big, established product there is--in all likelihood--no way to create a google killer at $30k a month. If there was one at that level, it probably would have been found by now. Established markets take bigger checks... nascent markets take smaller checks. 2. I actually did get Mahalo to profitability last December. :-) Of course, the Panda Update endend that brief, beautiful moment. 3. Actually, I do mean the entire industry. Now that the internet is global, fast and ubiquitous (mobile) everything good tends to get really big, really fast. Heck, bad things get big fast (Rebecca Black's Friday comes to mind), and so do super simple things (i.e. Angry Birds). the internet is biased toward big...
- dennisgorelik 15y ago
  1) While Google is efficient, there is no market need to create Google killer. Even if there is such a need, the goal of startup would be to create a model that at scale would overperform Google. Such model is likely to be created at less than $30K monthly burn. For example, team of two developers in couple of years may implement and fine tune some efficient social way of ranking search results. $30K/month * 24 month = $720K. 2) Jason Calacanis empirical rule: "if startup is overfunded then as soon as profitability is achieved it would be crushed by Google." :-) 3) "The internet is biased toward big..." -- I agree. But it's "big product scale", not "big organization".
  - jasonmcalacanis 15y ago
    1. The problem with this assumption is that Google is standing still--they are not. When Mahalo started doing comprehensive search in 2007 google was just 10 blue links. As we added more content to our results they did the same. We were a year ahead of them... in fact we still would be. It just wasn't enough against a scale player. 2. ha 3. agreed

dennisgorelik 15y ago

"And imagine 1M videos with that level of instruction." How much did it cost to produce these videos that you liked to? If it's ~$10K/video, then 1M similar quality videos would cost you $10B.

jasonmcalacanis 15y ago
We can produce videos at much, much less than $10k a video. Think about it, what does it cost to put an expert in a box and record them sharing their knowledge? not $10,000.
- dennisgorelik 15y ago
  My question is about these particular videos. How much does that hair stylist video cost?
  - jasonmcalacanis 15y ago
    we don't give that specific piece of information out (trade secret), but it's low enough that we see a road to profitability that's enough for us to ramp up production. :-)