Money, Money, Money...MUN AY!

I've started three business - Access, TaskUs and Smarter Social Media. What went into these business in no particular order was: free Starbucks Wifi, Overnight Flyers, over generous developers, very tight fists, fourteen security guards and the relentless (emotional) support of family and friends. What didn't go into any of them was a significant amount of capital. Access, the series of all age nightclubs Jaspar and I used to run every summer was started with $6,000. The first summer we grossed well over $100,000. TaskUs was started with $25,000. And Smarter Social Media grew organically out of TaskUs.

So there you have it, my ventures to date have been funded with a grand total of $31,000, not counting the tireless, unpaid hours Jaspar and I have committed to each.

I'm not opposed to capital. I just never had an attractive way to raise it. My parents aren't rich and I never felt that I deserved venture or angel funding. I also never wanted to dilute the ownership I had over my ideas. But I am beginning to reconsider.

Over the past three months I have grown our TaskUs operations center in Manila from 12 to over 100 people. The company is stronger than ever. The final meeting with my management team their yesterday was amazing. Everyone has a role and is executing it relentlessly. So much so that I am beginning to feel unneeded.

None of this would have been possible without money...lots of it. Late last year I secured a partnership with a large US public company that has funded all of this growth. Hundreds of thousands of dollars have poured into our operations and the effect has left me feeling like I am running an actual business.

At Smarter Social Media we have a much smaller staff of 8. All in our Santa Monica offices. I have written before about how being in LA allows us to keep labor costs down. But it still ain't cheap (especially when compared with Manila!) That said the business is profitable. So I'm starting to wonder what a capital infusion could do for that business. In fact I'm starting to wonder if I will ever start a business with $6,000 or even $25,000 ever again. Having a large capital base now appears almost essential. To hire the right talent, build a sustainable organization and secure and number one or (at worst) number spot in the market.

Broadband Essential

Fred Wilson did a post yesterday on The National Broadband Plan. As an American I'm embarrassed by the broadband situation in our country. Both TaskUs and Smarter Social Media have offices in a building that is owned by the City of Santa Monica, a city that is supposed to be known for its "progressive" attitude. For the first year in our offices we had one option for internet - Verizon that ran a whooping 3 mbps download speeds on its best days. Fortunately this changed when Verizon rolled FiOS out in our area. We are now on a more comfortable 50 mbps plan. But still, for the better part of 2009 I was running on speeds barely faster than those found on a good 3G connection. Pretty pathetic for the second largest city in the worlds leading economy.

Simply put boardband access is no longer a nice to have. It has become has become a daily essential for work and life. It has become a utility like water, power and electricity. Those running on 56K modems (or even Verizon 3 mbps connections) are lighting their homes with candles, in what should be a fully electrified grid. But its not. Millions don't have access to truly high speed internet, and those that do find access is often unreliable.

Today I was sitting in our office in Manila and the internet went down. This is something you would expect to happen in a developing country. And it does happen. But no more frequently then our FiOS stops working in Santa Monica.

LA, LA Land

Mark Suster had a great post yesterday on Starting a Technology Company in LA. Mark was the spokesperson for our city in Fast Company's series of profiles of startup hubs outside Silicon Valley. All of these are definitely worth a look. Check them out here: LA, NYC, Austin, Boulder, Chicago, Boston.

I've started two companies in LA: TaskUs and Smarter Social Media. Neither one is really a tech company. But we have had to hire tech company people - developers, content creators etc. - so I've begun mixing in the tech start up scene here. From my experience I've found one major advantage and one major disadvantage of being a tech startup in LA and they both relate to talent.

Let's start with the negative: Developers are VERY hard to come by. Finding a competent, affordable developers is very difficult. Finding one with a good attitude, who is prepared to work hard is damn near impossible. Competent developers will run you $80K - $150K, easily. Then they'll work 6 to 8 hours a day and keep their work totally obscure. I've written before about my $12,000 mistake in this area. Maybe, great developers are hard to find everywhere. But something makes me think they'd be easier to find in Menlo Park.

Now on to the positive: Non-development talent is cheap! If you are looking for content creators, American Administrators (in the case of TaskUs), or Social Associates (in the case of Smarter Social Media) there is no better city in America than LA. All of these positions can be hired for $10 an hour and the hires themselves aren't dopes. We're talking Harvard, Standford and UCLA graduates. Why you ask would someone of that pedigree work for $10 an hour? They are living the dream baby! They are aspiring actors, writers and directors. As long as you offer them flexible working hours they'll work hard at $10 an hour. This phenomenon was pointed out to me by my fried Tyler Crowley. It helped him and Jason build Mahalo into the most popular Question and Answer site online today.

One final note on why I love the LA startup scene. All of the people in tech here are amazingly approachable. In stark contrast to the hierarchical, ego maniacs in our city's entertainment industry, everyone in the startup scene here is relaxed and friendly. Over the past few month's I've had great conversations with some of most successful people in the industry like Matt Coffin and Mark DiPaolo.

Dork State of Mind

Those who know me know that I am a huge Jay-Z fan. I also happen to be a geeked out entrepreneur. So when I saw this I went wild!

AutoMarket

In high school my SAT tutor nicked named me AutoMaddock. It didn't stick but the name is useful for this post.

My friend Brendan Cooper ran a great article yesterday in which he discussed his frustrations attempting to navigate the web presence of major brands. In the post he briefly mentions two types of companies - those that have Advertising Influence with those that have Advocate Influence. I think this is a really good way to look at corporate marketing programs, so I'll write about it today.

Companies with Advertising Influence push a message out to their customer relentlessly. They inundate the masses with billboards, radio ads, TV spots and online banners, all vying to hijack your attention, and ultimately influence you in their favor. Today I was at SM, the largest chain of malls in the Philippines. There are plenty of brands in SM with major Advertising Influence. But I came across one that really hit home - Whatchamacallit - a candy bar with peanuts and carmel. There was a small Whatchamacallit billboard advertisement in my elementary school. In first grade I walked past it everyday and slowly but surely I found myself really wanting to try a Whatchamacallit. This was my first conscious experience with Advertising Influence.

To find companies with Advertising Influence all you need to do is think of companies that you see everyday - Coca Cola, Verizon Wireless, Honda, Geico, McDonalds - the list goes on. The one thing all of these brands have in common is that they are fighting for your attention. They want to remind you that they exist. More important, they want to tell you over and over again who they are. Coca Cola will refresh you. Verizon has the best 3G coverage. Geico is insurance with a sense of humor. To accomplish their goal this they spend tens of millions of dollars every year and employ tens of thousands of people, to tirelessly hijack your attention.

In stark contrast, Advocate Influence is effortless. Company's with Advocate Influence find their customers do all the work for them. They tell their friends, they write blogs, tweet and post updates on Facebook. This is the essence of word of mouth. Companies with Advocate Influence include In-&-Out Burger, iPhone (from Apple), and Emergen-C. All of these companies also pay for Advertising Influence. But the one thing that defines the companies with greatest Advocate Influence is that they do not need to spend money on advertising. In-&-Out could never run another radio ad again and they would stay enormously profitable. The iPhone could drop all of its commercials and still continue to sell millions of units. Emergen-C need not advertise in parenting magazines to retain its core group of users who also double as its best marketing force. And that's the point really - Companies with Advocate Influence need not employ a marketing staff because their customers do all of work for them. What's more, their customers market the product better than a marketer ever could, because they do it authentically.

Baby Girl

Driving through a forrest of palm trees in the center of Hispanola, Rich and I started arguing about the rise of China. Rich's points were strong and supported, as usual. China is a economic powerhouse. This year they will have the 2nd largest GDP in the world and by 2050 they will have the largest. Their authoritarian system is a benefit as it allows them to move quickly and decisively as a country. I, on the other hand, have never been sold on the rising Dragon. I think China is headed for troubled waters and in arguing with Rich I made one point that really stuck:

50 million unmarried men!

Both Rich and I are avid fans of The Economist, and the day we returned from the Caribbean we discovered our knowledge source running a cover story that described the situation far worse than I had argued:

What happened to 100 million baby girls?

Here's a section from the article:

"XINRAN XUE, a Chinese writer, describes visiting a peasant family in the Yimeng area of Shandong province. The wife was giving birth. “We had scarcely sat down in the kitchen”, she writes , “when we heard a moan of pain from the bedroom next door…The cries from the inner room grew louder—and abruptly stopped. There was a low sob, and then a man’s gruff voice said accusingly: ‘Useless thing!’

“Suddenly, I thought I heard a slight movement in the slops pail behind me,” Miss Xinran remembers. “To my absolute horror, I saw a tiny foot poking out of the pail. The midwife must have dropped that tiny baby alive into the slops pail! I nearly threw myself at it, but the two policemen [who had accompanied me] held my shoulders in a firm grip. ‘Don’t move, you can’t save it, it’s too late.’

‘But that’s...murder...and you’re the police!’ The little foot was still now. The policemen held on to me for a few more minutes. ‘Doing a baby girl is not a big thing around here,’ [an] older woman said comfortingly. ‘That’s a living child,’ I said in a shaking voice, pointing at the slops pail. ‘It’s not a child,’ she corrected me. ‘It’s a girl baby, and we can’t keep it. Around these parts, you can’t get by without a son. Girl babies don’t count.’”

The situation is not always like this. In many cases the baby is not born at all. The Chinese and Indian preference to have a son has combined with ultrasound technology to make sex-selective abortions very common. But whether it be the slaughter of a baby girl after birth or the abortion of a girl in the first trimester it is repulsive. 100 million baby girls have been murdered for the past twenty years.

Beyond my repulsion there is a far larger concern for Chinese society. Over the next two decades 50 million men will get married and have families in the US. In China and India two times as many will not be able to get married, have sex and have a family at all! The unmarried, unfamilied, unsexed man is a dangerous, dangerous thing. Put 100 million of them together in a developing nation, living under an authoritarian regime and you have written a prescription for chaos.