Archive: General

„Die Website, wie wir sie heute kennen, wird es bald nicht mehr geben“

Dieses Interview habe der Beilage Digitale Medien der WuV gegeben, erschienen diese Woche:

soziale netzwerke haben eine eigendynamik entwickelt, die kaum jemand voraus gesehen hat. Wie begründen sie diesen erfolg?

Social Media bildet im Grunde nur digital ab, was Menschen schon immer getan haben: sich austauschen, befreunden und mitteilen. Sie erleichtern die Suche nach Gleichgesinnten, ehemaligen Kontakten und Beziehungen. Wenn man so will ist ein Soziales Netzwerk eine Art Suchmaschine für menschliche Beziehungen. Dabei steht allerdings das „in Kontakt bleiben“ im Vordergrund.

Was kann ein soziales netzwerk leisten, was macht es aus?

Zum Reiz sozialer Medien gehört, dass diese für jeden Einzelnen etwas anderes sein können: Freunde halten, die engsten Liebsten über das eigene Leben unterrichten, Interessen bekunden, sich inhaltlich austauschen, Ereignisse nachklingen lassen, die eigene Karriere fördern. Soziale Medien macht auch die Einfachheit aus – die am simpelsten zu bedienenden Plattformen sind auch die Erfolgreichsten.

Wer nutzt es und welcher Mehrwert steht im focus?

Die meisten sozialen Netzwerke haben einen soziodemographischen Fokus, wie ursprünglich schuelerVZ oder MySpace. Einige Plattformen umspannen sehr unterschiedliche Zielgruppen, wie Facebook, wer-kennt-wen.de oder meinVZ. Mit inhaltlich orientierten Diensten wie youtube und sevenload steht zunehmend auch die situationsbedingte Interaktion im Vordergrund: heute Verbotene Liebe mit einer Interessentengruppe diskutieren, morgen Star Trek.

das thema datensicherheit ist im Zusammenhang mit sozialen netzwerken sehr wichtig. Worauf sollten nutzer achten?

Wie im realen Leben muss jeder Nutzer darauf achten, wem er was über sich selbst preisgibt. Was einmal im Netz ist, ist dort für immer. Jeder muss sich bewusst machen, dass das posten in Sozialen Netzwerken eine Veröffentlichung ist, die auch viel über den Nutzer preisgeben kann. Das macht den Reiz,bei unvorsichtigem Handeln aber auch ein we- nig die Gefahr aus. Letztere lässt sich durch besonnenes Handeln vermeiden.

Was haben die user zu erwarten, wie werden sich die sozialen netzwerke weiterentwickeln?

Soziale Interaktion wird immer mehr zu einer normalen Dimension eines jeden Angebots in den digitalen Netzen. Die Verbreitung des “Like”-Buttons von Facebook ist ein erster Schritt in diese Richtung. Auch Inhalte wie sozial verknüpfte Fotos und Videos werden sich zunehmend in verschiedenen Diensten und Portalen ausbreiten.Die Website,wie wir sie heute kennen – quasi als „digitale Zeitung”, die durch Klicks geblättert wird – wird es bald nicht mehr geben.

Labor Costs and Service Prices in the US economy: hidden flexibility?

Travelling through the US once again and hearing comments about the recession every day, I was struck by the elasticity of US business once again. As much as the business climate is intoxicating to the point of being hectic in boom times, as seen in 1999/2000 and once again in 2007, in bear times everything gets very gloomy.

I was riding in a cab in Las Vegas headed to CES and for once in the habit of European cab fares I forgot to tip the cab driver. He commented “You Europeans never tip, do you?”. After paying the due tip, I reflected on how dependent employees in all services industries were on tips for their regular income. I also noticed that tipping behavior on the part of Americans differed strongly from what I had experienced just 6 months ago on my last extended trip to California. People now, out of need or out of fashion, were downright stingy. Given that such large portions of the US economy are service based, I could not help but wonder how that had the same effect as a wage cut in many of these industries. At the very least, it shows that employers, who deflect part of the necessity of paying market wages to the culture of tipping and its encouragement in the policies of their businesses, thereby have an instrument to reduce and flexibilize their labor cost. In boom times employees earn more from tips and in bust times they earn less without the employer having to enforce wage cuts. This benefits the employer because he remains at his (low) wage cost basis, keeps his prices stable and lets the customer reduce tips if he feels he needs to. Since tips are part of the price structure of using a service, this means that lower tipping amounts to a deflation of service prices from the point of the customer. Thus, in a way, the business owner is leaving part of the pricing to the customer who can deflate the price he pays at will if his pockets are tied – as is the case in a recession.

Now while this, from a European perspective, could be perceived as an unfair advantage the business owner has in his relation to employees and customers, it could also be described as an “entrepreneurial risk” of the employee. Employees that commit particularly well to the service they are a part of and endear themselves to customers will invariably in good or bad times reap better tips from the customers. An employee who does well will probably convince a business owner to give him the responsibilities (assigned tables, assigned services) that will have the highest likelihood of earning him tips. One can already observe that some businesses compete on a labor market by installing policies that encourage tips.

A hamburger chain called Fat Burger places a small tip box next to a big tip box at the cash register and each time a larger tip is paid into the so called “fat tip box” the cashier yells out “FAT TIP!” and all other employees chime in yelling “FAT TIP!” as well.

As ludicrous as a discussion of the macroeconomic effect of tipping might seem at first glance, the impact on the US economy must be sizable. Considering the service industry is a 10s of billions of dollars segment of the economy and that average tipping is between 10 and 20 % of a purchase, tipping could well amount to several billion dollars in the economy. Adding or subtracting billions of dollars of volume to the price structure of the service industry could in turn have stronger than imagined effects on inflation and deflation, as well as on purchasing power in low income segments of the population.

As I am not an economist, I will leave the discussion at that, but I sure would find it interesting to know if this has ever been explored academically.

sevenload is Top 100 Global Startup (Red Herring)!!!

I am very proud that we won this Award (after winning ETRE 100 as one of Europe’s best Startups). Red Herring hands out this Award after a year-long selection process and winning a regional Award is a prerequisite. Red Herring is known to most as the chronicler of the tech industry, and has picked the global 100 from industries as diverse as biotech, optical technology, energy, cleantech and even pasteurized Eggs.

sevenload was one of two media companies selected and one of only a dozen IT / Internet / Software related business. So it is fair to say that Red Herring thinks we are one of the two hottest internet /media companies in the world!

We were also the only Social Media company to get the award!

Past award winners include Google, Yahoo!, Skype, Netscape, Salesforce.com, and YouTube.

Here is the official picture of me with Alex Vieux, Founder of Red Herring!

red herring
Thanks to Jeff Braverman (click picture for site)

And this was my reaction to the award ;-)

rh_global_yeah_as

CES Depressed

This year, all Las Vegas was abuzz with the expectations of attendance to CES – and how they were not met. From cab drivers to convention exhibitors, everyone was touting the scale of the downturn.

To us, the convention presented a more mixed picture. As often is the case in downturns, in an overall downbeat environment, a few interesting developments could be observed:

1) The Slingbox by Slingmedia: offering some 14 Mil. subscribers of its parent company, a midsize cable operator in the US, the opportunity to access Web TV content through their cable content.

2) The advent of HD to TV and other screens, including a number of interesting personal camera devices.

3) The increasing dissemination of “cloud” (now there’s a buzzword) logic to the consumer world: first through “thin client” notebooks that are not much more than windows to web services, and second through a push towards homes servers, ranging from Windows solutions to proprietary home hifi systems. Its too early to name this a significant consumer trend, but slowly we are seeing the first applications for the “internet of things”, “cloud computing”, and “semantic web”.

Recession is the best time for entrepreneurs, Ken Morse (and others) says. Now is the time to see and grasp the potential of these new technologies as they slowly approach end consumer relevance.

Marketing on a tight budget during a recession

The “Gretchenfrage” most discussed in the advertising industry right now is whether we will have a full-fledged downturn in advertising spending across all media, or whether there are niches and segments of the advertising /media industry that could even benefit from the recession. This being the 2nd downturn that I have experienced in my career, I am firmly convinced that the latter will happen.

I make this assumption based on several factors:

  1. A new generation of marketing decision makers now has control over most large budgets. This generation understands the power of digital communication- even though in the past years it has underestimated the potential impact of Web 2.0 and has continued allocating a disproportionate amount of money to traditional media without measuring that performance.
  2. Cutbacks in marketing and sales budgets are rather absurd when the real problem is crumbling sales, but this happens in every recession and it will happen this time around again. Since at the same time marketing performance will be measured more and more in terms of contribution to sales, marketing decision makers will focus on campaign tools and media that either directly or indirectly increase sales performance. Gone are the expensive TV commercials with bikini clad, young beauties on a tropical island, and in comes unsexy sales-driven below the line marketing. The past 2 ½ years have proven, however, that marketing in a Web 2.0 world need not be dreary at all even while contributing directly to sales lead generation.
  3. Web 2.0 advertising formats and communication models have reached a level of maturity and a critical mass among users that allow them to have a measurable impact on brand communication and sales lead generation.

The coming year will see providers of Web 2.0 campaign solutions and media ad placements achieving disproportionate success considering the downturn and cutbacks of media budgets. This will happen for precisely the reason that in the past 1 ½ years many showcases of Social Marketing have been started that have proven or will prove to have been successful to an unexpected degree. After the Beacon disaster these showcases will turn the tide, much in the way keyword advertising established itself in 2002 – 2004.

Our best reference is http://bmw-web.tv, which generated considerable brand awareness for our client BMW. BMW itself doubled that success by creating, at the same time, a national web TV project that was equally successful called BMW TV which greatly enhanced traction to its own site. For confidentiality reasons I cannot give you figures, but trust me the impact was measurable.

Advertisers of the old school often argue that performance marketing or traditional lead generation marketing does not help the brand gain emotional traction and awareness. That dichotomy is of the past. Social relevance, rich media and video formats allow the digital sphere to create a branding experience that is as emotionally compelling as television and as measurably successful as search engine marketing. That has always been the holy grail of advertising, and we seem to have found it.

If you want more information or need help achieving that success, contact me.

Excitement at SIME once again

Amidst all the depression caused by the financial crisis, attending SIME this year was like a breath of fresh air. Ola Ahlvarsson worked his magic once again. A very entertaining 60+ year old professor of medicine demonstrated an exciting new technology to create visual statistics called Gapminder, which was acquired by none other than google.org. Rockstar entrepreneurs and investors ranging from Morten Lund to the founders of Bwin infected the audience with entrepreneurial spirit.

Blowing away any clichés about a gambling company, Bwin demonstrated that they have a particularly modern HR Policy.

David Sifry showed how a leading rockstar blogger can become a travel tour guide entrepreneur. Among the most fascinating aspects of the conference was a panel of leading entrepreneurs from exciting international markets such as Vincent Fong for China, Joi Ito for Japan, Mahesh Kumar for India and Michael J. Wolf for the US. That was especially exciting for me as sevenload is in the midst of its internationalization. The most inspiring thing about the conference was the infectious “can do” spirit that the entrepreneurs’ presence radiated, especially those from Holland and Sweden- two countries with a distinct positive attitude that I sometimes miss in Germany.

What makes good leadership?

A lot is being said and has been written about how strategies and market mechanics determine the success or failure of ventures and large companies. But any entrepreneur will confirm that it usually is execution which decides the fate of the company, especially in venture companies. Thus, leadership capabilities may be the most important skill set of venture management.

Leadership, management, and the principles which guide how employees are motivated and directed in their tasks are usually treated either as a self help topic in management books or as the HR side of company organization.

It might be time to focus on leadership and HR capabilities in the strategic dimension they have for the company. This means to recognize that the best company strategy can be killed by the wrong leadership methods. Good leadership is not only an important requirement for management. It is the necessary condition for company success!

In the region of North Germany where part of my family comes from we say that a fish always stinks from the head, which in my opinion puts in a nutshell the essence of leadership. If your venture team is not motivated or doesn’t excel, start at the head.

Ted Levitt once said that

organizations exist to enable ordinary people to achieve extraordinary things,

which I believe is only a way to say that things happen only if people do them. The success of a company is only achieved if the employees and the managers of that company willingly take the necessary actions to enable that success.

That is certainly first and foremost a question of deciding which of the actions that are available in a given situation is chosen, but it is equally importantly a question of ensuring that every employee executes that strategy in the way that best ensures success, including feedback and adaptation of the strategy when problems arise.

Achieving this, however, is a question of leadership.

Since all dictatorships eventually fail, leadership cannot be reduced to the ability to bark orders. All great historic figures acclaimed for their leadership, from Julius Cesar to Napoleon, from Spartacus to Martin Luther King, are all admired for their ability to inspire, to motivate, and to convey a sense of purpose to a large number of people, i.e. to the organization that they led.

Inspiration however, is nothing without credibility. Credibility, in turn, is only achieved through authenticity. Authenticity is only achieved through honesty. Applied to the world of the 21st century and the context of leadership in business organizations, this means that a truly successful leader needs to combine the ability to inspire others with a set of skills and principles that are tenets of credibility as a leader:

1. An inspiring sense of purpose.

2. A clear set of unflinching values. Shifty leaders command no respect.

3. Honesty at all costs.

4. The ability to communicate necessities and convey a sense of urgency to a team.

5. The ability to define the organization as a community serving a common goal.

6. The ability to honestly admit own mistakes and address the weaknesses of the organization.

7. Relentless commitment to the company goal, including the necessary ability to “punish underperformance”, without humiliating anyone in the organization.

8. The ability to lead by example, including in personal matters such as health or respect for others.

9. The discipline to pursue a strategy and tactics that belong to that strategy and to adapt these whenever necessary, not only “acting from the gut”.

10. The intelligence to always overestimate competition and underestimate your own position.

Most of these traits require a certain level of self-assurance, respect for others, and clear view of your own shortcomings that is incompatible with most managerial egos. But while there are enough cases of at least temporarily successful egomaniacs, in the long run only those entrepreneurs intelligent enough to value, respect, and reward their performing team members, and self-critical enough to recognize their own mistakes become truly great.

Reps and Warranties in Venture Capital Deals

This weekend a friend of mine called me up, as he was completing – as a leading seed investor – the first round (series A) of a company that I have a minority stake in. He told me that the round being negotiated was just short of Signing, as all main deal elements had been agreed with the investor (a large and well-known VC Fund), but there was one last point of contention left, and – big surprise! – that was Reps and Warranties.

That made me think once again about the peculiar habit of venture capitalists to turn Reps and Warranties almost as much a difficult topic as in M&A. If you think about the term “Venture Capital”, the whole concept is that you venture into something and there is no precisely NO guarantee of success.

Of course it makes full sense to commit founders to proper representation of the state the company is in and to also make them liable for the so-called Title Guarantees, in effect making sure that the shares being transferred to the investor are free of third party rights, are indeed constituted legally and are not subject to any limitations. However, I do not understand why these Reps and Warranties so often go to the core of the risks of the business model, thereby in effect giving the venture capital investment more the character of debt financing, disguised in the Reps and Warranties clause.

Why do I say this?

Because if a founder signs up for – say – a 3 Mil. Euro investment and the company fails due to an event that is at the core of the typical risk of the business model, this may create a warranty case that in the worst of all contract agreements may include full damage to be paid by the founder. This then means that the investor may get up to the total sum of that investment in damages from the founder because of an event that constituted the essence of the typical venture risk.

So put very bluntly, by enforcing Reps & Warranties covering business risks, the investor covered his venture risk by making the founder liable for failure of exactly that risk.

We all know that founders who may be otherwise admirable do not like to focus on legal details and may have bad luck in a choice of their attorneys.

That can be a deadly mistake.

When founders find themselves in such a contract situation, it is not just a reflection of poor negotiation skills on the side of the founders, who – one might argue a bit unfairly – therefore would not deserve anything better.

Such contract clauses are also always a case of misguided priorities on the side of the investor.

While as an investor I have full sympathy for contractual rules that prevent an irresponsible founder from walking away, as in the old adage “with my time and your money to waste, we have nothing to lose”.

However, it is equally unfair to put the investor of a venture in a position where his investment becomes more a case of debt with higher returns and higher default risk than of real venture investment. Moreover, discussions and probable litigation about business risk damage retribution by the founder can divert vital energy from surviving the damaging event, since both the founder and the investor will bes spending considerable time hedging their risks or enforcing their rights. THat can ultimately be much more damaging than the damaging event itself.

Here is my advice to founders in any negotiation about Reps and Warranties:

1) Before negotiation of deal terms, identify the natural risk of your business model

2) Prepare to describe and argue to the investor what the typical risk of the venture is and make it clear from the outset that that risk cannot will not be carried by the founder(s).

3) Make the investor acknowledge these risks early in the process of negotiating the terms

4) At term sheet level make sure that the basic principles guiding an equal distribution of reps and warranties rights between founder and investor include the following

a. Liability of founders is limited to willful behavior and gross negligence

b. There must be a cap of a certain percentage of the investment, in my opinion not more than 50% of the investment sum.

c. For all cases of non-willfull behavior the warranty term should be at most 12 months

d. Each founder is only liable for the fraction of the cap that corresponds to his fraction of shares in the entire company, so a co-founder who has 20 % of shares in a company shall only be liable up to 20% of the cap.

e. All shareholder managers with shares smaller than 7% should be exempt from any liability unless there is a specific reason for that.

f. Damages should be paid only to the extent that the Founder / Manager liable had best knowledge of the Warranty issue.

g. Retribution of damage should be limited to the damage that is incurred directly by the damaging event, confirmed by court ruling and could be reasonably expected. There should be no damage retribution for a loss of valuation of the company, which should be explicitly excluded. Valuation loss is usually covered by downround protection clauses.

h. Retribution of damage should be limited to such damages as cannot be corrected or “repaired”.

i. No damage retribution should be given for damages that are incurred due to lack of cooperation on side of the investor. This could include anything ranging from late payment of investment funds, lack of cooperation in litigation cases, failure of the board members dispatched by the investor to agree in litigating to avoid the damage, and so forth.

k. The most important advice that can be given to any founder signing Reps and Warranties is to put a large amount of energy into the due diligence and disclosure process and the documentation of that due diligence and disclosure process. THis is where attention to detail is a very necessary evil. The contract must include a clause that no events or fact about the company that were or could reasonable have been expected to be known to the investor at the time of the investment can lead to a claim of the investor against the founder. Thus claims are excluded if the the facts that led to the damage were known to the investor.

l. Negotiate all these points, then focus on disclosing well all risks that are part of the business model or lie within the company.


Often investors will present the founders with tough Reps and Warranties basically to incentivize them to puta significant amount of energy in thinking through the risks of the company and the development stage the company is at.

However, founders should rate their investors on the basis on their willingness to accept clauses that correspond with or at least resemble what I advise.

Good Luck!


sevenload relaunches and secures new round of financing!

We spent the past months preparing our relaunch and securing our next, series B round of funding. I am very happy today because we just received confirmation by the German Antitrust Office that our Funding round is approved.

Our relaunch brings us to the next level, where we simplify channel navigation, combine it with social features, and open our business model one step further to content owners, by letting them have a larger share in our advertising revenue. We still have a lot of optimization work ahead, but the metrics of the past weeks suggest that we are on the right track.

The round of funding we just secured will lay the groundwork for our further expansion, and I am happy and proud that we now have French, Spanish, Italian, Polish, Russian and of course Turkish localizations.

Here’s our official Press Release:

http://corporate.sevenload.com/sevenload-secures-new-round-of-financing/

When do I Invest? – Video Interview [German]

Recently I had the nice experience of being interviewed by the blogger / founder of http://www.easn.de or Everything A Startup Needs. He asked me to relate:

- how dw capital grew out of denkwerk

- what makes our positioning unique

- what are my criteria for investment

- and how much idealism a Founder can sustain

Of course, an [edited] video interview cannot convey all the things and remarkable people that shaped the rich history of 10 years of denkwerk, but maybe the interview gives anyone interested an impression of the philosophy behind our seed venture unit, dw capital. So, here goes:

Video Interview of Axel Schmiegelow

For the record, and because I also have an agency background:

I do believe in Branding, but I don’t believe Branding should be an excuse for bad conversion of a media campaign.

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