Read Write Web has an overview of bootstrapping a company.
Ultimately, bootstrapping means that you have to create an asset that over time will hold value while keeping your cost down in the short term. This is a trade-off that all entrepreneurs need to overcome. Michael Moritz, one of the more successful VCs of the modern era has a Top 10 Criteria for Investing (actually called “Elements of Sustainable Companies.”):
- Clarity of purpose. Great companies can be summarized in a single sentence.
- Large markets. Buy where there’s a billion to be made. At least.
- Rich customers. You don’t need me to explain this, right?
- Focus. Simple products with obvious value are easy to sell.
- Pain killers. Great businesses solve a real problem facing consumers.
- Think differently. Inventive firms drive their competition nuts.
- Team DNA. Talent attracts talent, and talent usually produces excellent returns.
- Agility. Being first to new markets matters.
- Frugality. Great managers allocate capital only where they must.
- Inferno. Excellent businesses produce huge returns from even small doses of capital.
We’ll look at frugality in this post. Michael Moritz once said that he looked for entrepreneurs that were frugal. When asked how he spotted these, he said he looked for startups that did not buy paper clips. I am not sure if this is a figurative or literal “acid test”, but the underlying premise was, according to Moritz, that you got paperclips en masse via the mail every day, so why allocate any capital to it?
Paper clips aren’t core to your operations, but many other expenses are. The real challenge is not in looking for ways to find efficiencies with random but immaterial office expenses, but also with your core operations and competencies. Google did that with servers. We do that with other things at WatchMojo.com. I’d love to share the details, but I’d have to send over a battalion of hitmen to contain the intel., and let’s face it, that would not be cost-efficient.
So I’ll simply say that what sets WatchMojo.com apart is largely our ability to create mass archives of high-yield video content.
The value of a stock, company, asset etc., simplified, is = Future Earnings / Cost of Capital.
As such, to maximize the value of your company, it’s not enough to only keep costs down or to have a high-quality asset, you have to do both. This is basically Gordon’s Model theory applied to video publishing.
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WatchMojo NewsletterScanscout, often described as Ad Sense for Video, just raised some more money from Time Warner, reports Tech Crunch, beating the press release.
History repeats itself, clearly, in the video space, too. Last year you saw VCs investing in Series A rounds for video file sharing sites. Now that is rare, with VCs investing in Series B, C and D rounds. Think Daily Motion, Veoh, Metacafe.
Earlier this year, you saw many first round investments in the video ad network space, we suggested the bubble had moved there. Now you are seeing less and less VC rounds in ad networks, too, but seeing more late round investments. Video Egg is onto Series D, and Scanscout today is a later round too.
Next area of VC interest, and it has already started, is video content.
Paid Content adds:
Financial terms were not disclosed. Time Warner Senior VP Rachel Lam, who will be joining ScanScout’s board, said the company intends to use ScanScout’s technology to take advantage of its growing array of online video content. ScanScout had raised $7 million back in May from General Catalyst Partners to develop its contextual advertising technology and to expand its staff.
Mind you, $7M is a lot, sure, but when you consider that video advertising is a $150B opportunity by 2011, what’s $7M for the supposed “AdSense of Video.” Of course, there are a lot of players in video, so time will tell if ScanScout can deliver on the hype.
