Failure is hardly the worst thing that can happen to you in Silicon Valley.

While 2012 saw some spectacularly large IPOs like Facebook and Workday, it also had its share of major mergers and acquisitions.

In my previous blog posts, I have discussed at length the complexities of establishing an enterprise pricing structure, the dials on the model to optimize revenue and growth, and building a long term view of the price strategy. In this last post in the series, I want to go back to an even more fundamental concept: Value.

How do you monetize a unique business model based on users rather than selling an actual product? We asked members of the Young Entrepreneurs Council for their thoughts.

Note from the AuthorHi, my name is Dharmesh, and I’m a startup addict. And, chances are, if you’re reading this, you have at least a mild obsession as well.This book is based on content from the OnStartups.com blog. The story behind how the blog got started is sort of interesting—but before I tell you that story, it’ll help to understand my earlier story.As a professional programmer, I used to work in a reasonably fun job doing what I liked to do (write code). Eventua...

Pricing your business’ products represents one of the biggest challenges most startups face. This is especially true when you’re bringing something new to the market that can’t be benchmarked against similar products — although even new entrants into established marketplaces may find it difficult to determine where their offerings should fit, price-wise.

Some very good advices on pricing too low: hard to recover, devalues product, future growth less sustainable

Biggest mistakes YOU need to avoid:

Mistake 1:&Cofounder didn’t attend Lean Startup Machine, resulting in some lack of understanding.&If you have a cofounder or startup team, you should all attend Lean Startup Machine together.

Mistake 2:&MVP doesn’t need to be built. Now we’ve broken down MVP into 3 stages to really emphasize MVP is any experiment you run that will increase your learnings about your customer.

Mistake 3:&Stop selling on vision! Start listening.

Mistake 4:&Don’t ask leading questions.&The way you phrase your questions determine the level of reliability in the answers you get.&

Mistake 5:&Don’t think or pitch on features of the future.

Mistake 6:&Beautiful design will not cure an ugly baby. (Product that no one wants)

Mistake 7:&Don’t fall in love with your solution and romanticize it in your head.

&

Entrepreneurs aren’t quitters. To succeed you need to be resilient, thick skinned and borderline crazy. You need to have just the right amount of delusion to believe you can succeed, spurring you on despite the absurd odds. But sometimes, you have to quit.

“I’m just doing my best… and you can blame it all on me. It’s all my fault.”

Ouch.&

Test and innovate on your business model using the business model canvas, lean startup, and customer development.

Yummly, a semantic recipe search engine, has raised $6 million in Series A funding led by Physic Ventures and Unilever Corporate Ventures, the venture capital arm of food giant Unilever, with contributions from returning investors Harrison Metal Capital and the Harvard Commons Press, among others. Yummly aggregates over hundreds of thousands of recipes from around the web and allows you to filter results by type of food, course, and ingredient and break down recipes by diet, allergy, nutrition, price, cuisine, time, taste, and sources.

• Passion for the business to help recruit, build the brand, raise more money, and speak to the press.
• Willingness to work build his/her network to drive the business forward.
• Honesty and straightforwardness. Civility and respect for other members of the board and team.
• Decision making auditor. Someone willing to challenge the CEO.
• A great listener and someone who asks questions before making recommendations. See&Why Smart Executives Fail.
• Openness for learning new models and ways of doing things. Willing to be wrong.
• Patience.&Long term vision and the stomach to bear ups and downs, inevitable in any company.

The so-called early-stage funding frenzy seems to be a real phenomenon, with the numbers to prove it. The median angel round for American start-ups grew 40 percent last year, to $700,000 from $500,000.

All these assessments come from analysis of 573 deals in 2011, worth a total of $873.3 million dollars, as compiled in the first “Halo Report,” a joint project of the Angel Resource Institute, Silicon Valley Bank and CB Insights.

Great post. Must read.

The story hasn’t been fully written but consider companies like Tumblr, Twitter, Pinterest, Instagram, Foursquare, Fab, AirBnB and plenty others.

They didn’t start out as rocket ship. Quite the contrary. They started off rather slowly and bumpy.&

One area of fundraising that is not that straightforward is how to put together a syndicate of investors for your seed round.&

1. Understand the difference between and a lead and a follower.
2. Get soft-commitments early.
3. Fill in the round with value-added followers.

Here’s how I see a typical (if there is such a thing) fundraise shaping up for a $800K seed round:

Phase 1: Talk to leads and angels that know you. &Get ~$150K of soft commitments from good folks who know you (hopefully fast)

Phase 2: Close your lead. &Get ~$400K from the lead and set terms for everyone else. (could take weeks or over a month)

Phase 3: Fill in the rest. &Maybe with $150K from another seed investor, and $100K from 3 angels that are directly relevant to what you are building (hopefully fast).

If you want your start-up to become the next big thing, it’s not good enough to just build a great product. Unless you can afford to buy users, you’ll have to grow virally. The difference between getting one of your new users to convince one friend to sign up and that person getting two new friends, is huge. Assuming you start with 1,000 new users, after 9 months, it’s the difference between having 9,000 users and 511,000 users! Below are 9 ways your start-up can grow virally: Building a great product is only half the battle. Take the time to think through how you can build in as many viral growth opportunities. It’s worth the effort to go from linear to exponential growth.

Six months ago my company hadn’t even launched. Last week we found ourselves being talked about everywhere in Britain — a full page story in The Sun, the country’s biggest newspaper, columns in most of the other nationals (both online and offline) and pickup in literally hundreds of regional newspapers, radio stations, trade publications and blogs. How? Simple: We used our strengths — the data we live and breathe every day — and released a survey of the best and worst cities to find a job in the U.K.

Some really good tips. Credibility is probably the most important to me here, without you can kill every chance you may have.

• Share your idea frequently.
• Simple ideas win over complex ones.
• Have a single revenue stream.
• Identify your ideal and hopefully sole customer.
• Small markets suck.
• Explain your idea in less than 10 words.
• Have a secret sauce.
• Be original, be new.

We’d previously highlighted the top startup failure post-mortems of all-time here (32 in total) written by a group of startup entrepreneurs gracious enough to share their lessons learned from their startup’s failure. Many of you read those post-mortems and asked, what are the most common reasons for failure cited across those posts? Well, we’ve done the work, and below are your answers. After a thorough analysis of those 32 start-up post-mortems, we have determined the common reasons founders gave to compile this list of the top 20 ways to have your startup fail. First, a handy chart to highlight the top 20 reasons for failure followed by an explanation of each reason and relevant examples from the the post-mortems.

As the third most popular source of content on digital pin-board site Pinterest, Flickr and its photographers are subject to frequent acts of copyright infringement. But a site-wide update to Flickr promises to better protect members and their copyrighted works.

Flickr set up the meta Pinterest 'nopin'&on all copyrighted images.

What a move!

The Boston metro area is no Silicon Valley. But it fields its fair share of startups and it raked in the lion’s share of the nearly $780 million in venture capital invested in the New England region in the fourth quarter of 2011. While the area is more famous for the tech luminaries and startups it lost to other regions — Harvard alums Facebook’s Mark Zuckerberg and Microsoft’s Bill Gates being the most famous examples – it still can claim a roster of impressive tech startups. As a Silicon Valley-based partner for Boston-based North Bridge Venture Partners‘ Paul Santinelli has studied the differences between the two technology hotbeds up close and come up with a few conclusions. ”Boston is strong in infrastructure, comms [communications], and enterprise software — the kinds of technologies needed to build businesses,” he said in a recent interview.

Pinterest could be in Fair Use territory (meaning, legally protected).& Fair Use law allows people to use work they do not own the copyright to.

There are four elements to consider when determining if something is&Fair Use:

1. The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes
2. The nature of the copyrighted work [is it fictional or factual]
3. The amount and substantiality of the portion [of the work] used in relation to the copyrighted work as a whole
4. The effect of the use upon the potential market for, or value of, the copyrighted work

Perfect 10 v. Google&[...] Google won the case. The courts ruled that Google Image search is Fair Use because it's transformative.

Maytal told us, "The use of the thumbnails was highly transformative, allowed users to get to a source of information that they couldn’t otherwise get." Google Image search becomes a social benefit and a reference tool.

Read more:&http://www.businessinsider.com/pinterest-illegal-faq-2012-2

Pinterest has managed over the past few months is spectacular. Recently reaching the milestone of 10 million users, the site has gained traction faster than just about any other site in history. But with that growth comes the responsibility to handle it and the site seems to be falling into spammer territory. A couple of hours ago (as of the time that I’m writing this), Google’s Don Dodge started tweeting that Pinterest was sending him a mass amount of emails saying that he had been followed on the site, and then asking him to follow that person back.

Black hat email marketing?

But with the average Facebook user&having 120 friends&(and many folks having exponentially more), it’s easy to see how growth of active users like this could happen in a much less justifiable way. To quote a Facebook friend of my own, “spam called. They want their idea back.”

A screen grab of the BBJ's pinboard, showing architects' renderings for planned buildings throughout Boston. After a careful read of the fine print, it has been taken down.

Unlike other social media services, when you ‘pin’ something on Pinterest, you automatically upload an (at least) medium-sized version of the related image to the service. Exceptions for publishers of user-generated content&protect Pinterest, but they don’t protect you. Unless you know you have a "worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license," you'd better tread carefully. I was not able to immediately reach Pinterest, for comment.

Advertising is the monetization plan for many of the hottest consumer Internet startups. But for brand new companies, nailing down that first brand partnership is a daunting task. It’s an experience Jeffrey Cutler, now Director of Digital Strategy at Team Epic, knows well. He spent a chunk of time “literally running up and down Madison Avenue,” he says, as Director of Marketing at Going.com before it sold to AOL in 2009. The time sink required to court brands and agencies is frustrating an...

http://hearmypitch.com/

Arguably most intriguing, however, is that 80 percent of all pins are re-pins, meaning that an overwhelming majority of content shared on site is recycled between users.

“Pinterest is conducive to sharing,” Moore said in an interview with VentureBeat. “There’s a very low barrier to sharing [pins] with everyone who is following you,” Moore said of the re-pinning phenomenon.

If i am not mistaking, this is the same for Tumblr in terms of re-sharing vs adding. It is important for any network to allow users

Pinterest is no longer using Skimlinks, and they probably realized that affiliate marketing did not perform too well as a revenue model for their platform.

Why?

Because Pinterest is a discovery engine. People are not in the mindset to buy when they browse Pinterest, and most pins are not products anyway. This means, a low click through rate (CTR) and verly low volume of sales (low conversions), on top of which they need to split the commissions with Skimlinks. That's not much left.

Pinterest needed to clean up the drama, so they added a new topic "How does Pinterest make money?" on the help page section. Time to move on.

What users need to understand is that Pinterest will test making money, because like&any other startup, Pinterest needs to make money at some point to be a sustainable business.

But what will be the right advertising model for Pinterest when&brands/marketers take over the site?

I bet on "Sponsored" pins.

Pins that would be relevant to a pinboard, targeted to specific users/visitors demographics and do not disrupt the discovery process of users, actually add quality to it by helping discovering new products for example.

It took over a year for Twitter to test and build their advertising app, so it probably will take a couple months for Pinterest to build an interface to allow brands and maybe small businesses to advertise on their site.

The idea came from the man who ended up investing in&Engagio:&Fred Wilson needed such a service to deal with the issue of spread conversations and interactions happening via social networks and blogs, now all in one cozy place.

I have been part of the beta for a while, and i love the service. This is very promising.

Why? Because it answers the following:

There is an existing growing Problem. Engagio offers a&Solution.

&

Plan B&is what you pivot to when you recognize that a new opportunity has more potential than the one you are working on. Sometimes you change to Plan B because A is not working, which is what most think when they hear “Plan B.” But sometimes A&is&working, yet Plan B appears to have more potential. Regardless of the reason for shifting, the best Plan B’s are different but related to what you are doing now; this way you can apply the lessons you’ve learned to date to the new plan.

This is right on. It's not necessary that Plan A was not going to work, but it's that you recognize a bigger opportunity in plan B.

I love it when a startup I’ve been covercloning for literally years suddenly finds itself in the spotlight, and for the right reasons. In this case, Skimlinks, originally from London but now with a growing US base, has been revealed as powering the affiliate links behind Pinterest, one of the hottest startups on the map right now. For some that appears to be a little bit of scandal, at least for Pinterest. LLSocial uncovered the practice, whereby if a posts Pinterest happens to link to a commerce sites with an affiliate program, Pinterest uses Skimlinks – a third party service – to modifiy the link to add their own affiliate tracking code. Anyone making a purchase from that click through sends affiliate revenue, via Skimlinks, back to Pinterest. Kerching, everyone benefits.

It looks like Path has heeded the words of investor Michael Arrington. Yesterday, the startup faced a major privacy backlash when it was revealed that the social app was uploading user's address book data without actually telling the user. Co-founder and CEO Dave Morin was apologetic, and there was a lot of argument about how big a deal this was (especially since the practice was in-line with Apple's policies), but Arrington had a simpler suggestion: "Just nuke all the data."

Don't screw up with user's privacy and data. They should have known better.

In the the spring of 2009, iLike had 45 million registered users and was the #1 music application on Facebook. "Is There An iLike Effect?", we asked then; and the answer was yes. The #1 and #2 albums on iTunes were Keith Urban's "Defying Gravity" and "Gavin Degraw's "Free" - two releases with nothing in common except that both debuted exclusively on iLike. Today the social music network officially closed, with the url redirected to MySpace. At its peak, iLike had 60 million registered users and content from 300,000 artists.Then MySpace purchased the company in August 2009, in large part...

Another one bites the dust...

Sources familiar with the negotiations said LinkedIn offered Rapportive “low teens” of millions of dollars worth of cash. The deal has not officially closed yet.

Rapportive is a really cool tool for Gmail. But $10M for this? really?

Silicon Valley's dirty little secret is that the startup boom is mostly a disguised jobs fair that directly benefits the big corporations.

Zappos CEO Tony Hsieh is spending $350 million of his own to make Sin City a startup hub.

So fricken awesome. That must be fun to be part of the adventure.

1. The severity of need addressed by your product or service.

2. The number of people who have that need.

ideal...

The best—and often the most successful—ideas service a huge need for a huge number of people. These are highly profitable as Internet treasures. They practically sell themselves—and grow customers organically. They're viral because everyone who encounters them tells everyone else about this great new thing that makes your life better. The cost to acquire users can often be very low.

risky...

The next-best sort of start-up ideas service a huge need for a smaller number of people. These types of ideas can be highly profitable as enterprise businesses. [...]&"There's no software priced between $1,000 and $75,000. [...] The minute you charge more than $1,000, you need to get serious corporate sign-offs. You need a line item in their budget. You need purchasing managers and CEO approval and competitive bids and paperwork. [..] the cost of making one successful sale is going to average about $50,000. If you're sending salespeople out to customers and charging less than $75,000, you're losing money."

manageable...

The next-best ideas service a smaller need, but serve a huge number of people. These are profitable, and will likely throw off enough cash to be an awesome lifestyle business. Since they're less essential to customers, though, it can be tougher to make money running one.

not good...

The yet next-best ideas service a small need for a small number of people. Not to bear the bad news, but there just isn't enough firewood around to light this kind of blaze.

change your plan...

The worst ideas are the ones that don't solve a problem, or create more problems than they solve. People neither want it nor need it. Zero times zero equals zero. Many arrive on this path when they've focused too much on capabilities (i.e. "wouldn't it be cool if?") or what they want (i.e. to be rich, admired, successful), rather than what other people actually need or want.&Change the problem you're solving. Address a different, bigger need that more people have.

So there you go - where does your idea fit?

What’s next for Tumblr, which just&raised a bunch of money

That's $4.5M in 2008, $5M in 2010 and&Sequoia is leading a round that will add “between $25 million and $30 million” in funding at a valuation “in the ballpark of $135 million)&

and&brought in some senior management? Well, monetization, for one thing. Karp said Tumblr is pursuing “novel approaches to revenue,” including selling blog themes.

At 15 billion page views per month across more than&41 million blogs, “with that many page views we could throw AdSense up there tomorrow and be profitable,” Karp said. But that’s not what he wants to do.

Yeah Adsense is defintiely not the way, not something Tumblers will like to see on their blogs.

The most interesting thing here is his feedback about the network effect:

When the site really took off was when the curators — people who primarily respond to other Tumblr users’ content by “reblogging” it on their own pages — came on board.

Tumblr is about 10% content creation 90% content curation - others sharing grouping stuff they like." David Karp, CEO #DLD12

— Bill Gross (@Bill_Gross) January 23, 2012

Every time you want to make any important decision, there are two possible courses of action. You can look at the array of choices that present themselves, pick the best available option and try to make it fit. Or, you can do what the true entrepreneur does: Figure out the best conceivable option and then make it available.

And that ain't easy!

Summify, a startup that uses social data to create a personalized news digest, just announced that it has been acquired by Twitter. This sounds like a talent acquisition on Twitter's part — in other words, the main purpose of the acquisition was probably hiring the Summify team. Some of Summify's feature have been immediately disabled, it's no longer accepting new users, and in a few weeks, Summify says it will shut down the current product entirely. Meanwhile, the startup will be moving from Vancouver to San Francisco to work out of the Twitter office.

Great service. Smart guys behind it. Twitter bought brains more than code.

I’ve argued before, this is one of the areas where Digg failed. It allowed itself to get held hostage by a handful of rabid early adopters who were passionate about the site and made a lot of noise. And ultimately, placating them kept the site from becoming truly mainstream.

Sarah's got a good point. Early adopters are the reason why you can improve your service, they give you valuable feedback. On the other end, it is your goal to make sure they keep using your service and you prioritize features and enhancements they request, which can be a downfall.

&

1. Set the tone (checked)

2. Simple is strong (checked)

3. Do not use initials! (checked)

4. Opt for a descriptive name. (checked)

5. Don’t box yourself in. (checked)

6. Watch out for language pitfalls. (hmm)

7. Give any new name time to sink in. (checked)

8. Don’t finalize too soon. (checked)

From day one, Klout Founder and CEO Joe Fernandez’s goal has been to “help people understand their influence and to [help them] leverage that influence.”

During late 2007, Fernandez was recovering from jaw surgery with his jaw wired shut for three months. Unable to talk, he turned to social media to communicate. “When social media became my only form of communication, it changed the way I looked at it,” Fernandez says. “It was amazing to me that for the people who trusted me the most, I could tell them my opinion about anything instantly from my phone and it would have some sort of impact on them, just as what they were saying or thinking or experiencing would have an impact on me. Even more exciting was the idea that all the data was there to measure it.”

Fernandez started building Klout during his recovery period. Since then, the startup has received massive press and a lot of investor attention, with $10 million in funding. It has also built quite a large audience, and has assigned scores to more than 100 million people and brands. Klout is all about data — it analyzes 2.7 billion pieces of content and connections per day, receives more than 8 billion API calls per month and has worked with more than 5,000 partners and developers.

Alright, in my last post I argued that bootstrapping is just as over-rated as raising venture capital. But for those who decide to pursue fundraising, here are some things entrepreneurs should avoid when raising capital. For all of the talk about how much excess capital there is, it€™s actually hard to raise capital because very few projects fit the VC profile€”even though many VC-funded projects come across as frivolous, me-too projects.

One Million by One Million&is a global initiative that aims to nurture a million entrepreneurs to reach a million dollars each in annual revenue and beyond by 2020, thereby creating a trillion dollars in global GDP and ten million jobs.

Ryan Sit, who runs a website called&Picclick.com, feels the same way. His visual sales site attracts 300,000 unique visitors per month and generates millions in product sales for eBay and Etsy sellers—netting him a healthy six-figure income. He works from home and spends as much time as he wants to with his two small children and wife. Ryan cherishes the freedom to do anything he wants—like experimenting with new website ideas. The last thing he wants to do is to raise capital or merge with a bigger company. “You become a slave when you are funded, and having lots of employees is just a pain”, Ryan says.

1. Not learning from your mistakes - "we can learn to better learn"
2. Obsession with the wrong enemy.
3. Groupthink.
4. Midas-touch-syndrome.
5. Founder CEOs who have all the answers.
6. They focus on revenues instead of profits.
7. Too niche a focus.
8. 90% of VCs do&not&add value.
9. Too many cooks in the kitchen.
10. The Founders Have Never Failed Before.