Monday, September 5, 2011

The Latest from TechCrunch

The Latest from TechCrunch

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The Wicked Lasers Krypton S3 Will Fry Passing Satellites

Posted: 05 Sep 2011 08:35 AM PDT


For a little under $300 you, too, can ruin passing satellites with what is purported to be the brightest legal laser available. The Krypton S3 goes up to 1000mW for an output of 86 million lux – “8,000 times brighter than looking directly at the sun.” That kind of power will cost you, though: the 1000mW unit costs $999 compared to the $300 300mW laser.

How dangerous is it? Well, Wicked Lasers advises:

Warning: This laser’s brightness is potentially hazardous to pilots’ vision and satellite sensors. NEVER point it at an aircraft or a satellite. The S3 Krypton is too powerful to be used as a laser pointer or a gunsight. Never point it at another person, an animal or a vehicle.

Why would you need something like this? Well, it’s fun for astronomy and experiments but – trust me on this – don’t give it to your kids. I’ve used some of their lighter lasers and found myself temporarily blinded just by glancing at a laser reflection off of a matte balloon I was trying to pop. This is not a toy.

Sharks and shark-mounted laser hardware sold separately.

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Deutsche Telekom Is Offering Pre-Orders For A Nebulous, Unnamed Apple Phone

Posted: 05 Sep 2011 07:57 AM PDT


In, according to Bloomberg, “anticipation of supply bottlenecks,” Deutsche Telekom aka T-Mobile is offering pre-order coupons to folks who call in asking for the next iPhone, whatever it may be.

The move is quite clever: customers won’t have to stand in line, DT is promised a huge rush of sales during the post summer holiday slump, and it allows anti-fanboys to crow about the iSchafe on this gloriously slow federal holiday. Win-win-win.

Stunt or actual effort to prevent “bottlenecks?” You decide.

One Medical Raises $20 Million For The Modern Doctor’s Office

Posted: 05 Sep 2011 06:54 AM PDT

One medical

It’s 2011, but most doctor’s offices are still stuck in the 1990s when it comes to patient-facing technology.  The receptionist probably has a computer to manage appointments, but typically you still sign in on paper, fill out forms on a clipboard, and your doctor relies on a loosely-bound sheaf of papers to check your medical records.  Tom Lee is trying to change that from the ground up with One Medical Group, the venture-backed primary care practice he founded a few years ago where he is CEO.

On Friday, he closed a $20 million series E, led by Maverick Capital, with Benchmark, Oak Investment, and DAG Ventures participating.  The new round brings the total capital raised since 2007 to $46.5 million.

One Medical operates 9 doctor’s offices in San Francisco and New York, and will open 5 more this year, expanding to Silicon Valley and Washington, D.C. Patients can schedule appointments online, request prescriptions, get lab results digitally, and see their personal health summary online. Doctors can access medical records electronically (One Medical designed its own electronic medical record with doctors and patients in mind, not administrators). One benefit of having digital medical records is that patients can visit any office since every doctor has access to their records.

New patients can join online, and pay online.  It even has its own iPhone app for scheduling appointments.  Simple questions which can be addressed via email or the iPhone app are done digitally instead of requiring an in-person visit.  And when patients do go in, the offices are bright, airy and modern.

All of this technology, which is a combination of off-the-shelf and proprietary systems, is aimed at reducing administrative costs, and improving the experience for both doctors and patients.  Lee contrasts his approach to the physician practice management movement of the 1990s, an investment fad which saw hundreds of doctor’s offices rolled up into larger operating companies.  ”The PPM movement in the 90s didn't fundamentally reengineer the workflow of the doctor's office or improve the experience,” says Lee.  PPMs were driven by administrators.  One  Medical is driven by doctors.  Its approach is to “reengineer the doctor’s office to be more patient-centered with less administrative overhead.”

Whereas most primary care doctor’s offices employ 3.5 to 4.5 support staff per doctor, One Medical offices make do with 1.5 support staff or less.  What does it do with these efficiency gains?  ”We invest that back into the doctor-patient relationship,” explains Lee, “so they have more time to answer questions and have a thoutghful discussion abouit healthcare choices.”  One Medical accepts most insurance, but also charges an annual membership fee of $149 to $199 for all the extra bells and whistles.

Lee himself was trained as a medical doctor before he got fed up with the healthcare system and went to Stanford business school.  He then became a co-founder of Epocrates, a popular mobile app used by doctors to look up drug interactions and care for patients.  Lee led the design of the mobile and web products at Epocrates.  Now he is using technology to redesign the entire primary care experience.


One Medical Group is a member-supported primary care medical practice that is redefining modern medical care by leveraging technology and innovative best practices to provide patients with affordable, high-quality...

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Netflix Starts Rolling Out Streaming Service To Mexico, Latin America And The Caribbean

Posted: 05 Sep 2011 06:53 AM PDT


Movie and TV subscription service Netflix has announced the arrival of its service in Mexico, Latin America and the Caribbean in the coming week. Netflix launched today in Brazil and will be launched in 43 countries in Latin America and the Caribbean by September 12.

Netflix announced in early July that it would be launching in 43 countries across Mexico, South America and the Caribbean later this year. The company also announced a deal with CBS to offer content in these regions.

Brazilian users can immediately begin a free, one-month trial of the Portuguese-language version of Netflix by going to Netflix’s site. After the free month, the monthly subscription price for Netflix will be BR$14.99.

On Wednesday the Spanish-language version of Netflix’s streaming service will become available in Argentina, Uruguay and Paraguay. The monthly subscription for unlimited streaming of movies and TV shows in Argentina is 39 pesos while in Uruguay and Paraguay the price is US$7.99 per month. On Thursday and Friday, the service will roll out to Chile (3790 pesos per month), Bolivia ($7.99), Colombia (14,000 pesos), Venezuela, Peru and Ecuador (US$7.99). On Monday September 12, Netflix will launch its service in Mexico, Central America and the Caribbean. In the Caribbean region, Netflix will be available in English and Spanish and will cost $7.99 per month.

It should be interesting to see if Netflix can take off in these regions. Already, the company is seeing success with its service in Canada, recently announcing 1 million subscribers. Of course for Netflix, broadband access will be a contributor to usage outside the U.S. and Canada. And striking international content deals is going to be key to the company’s growth beyond the U.S., where it already has major deals in place. And Netflix recently closed a deal with Telemundo for Latin American subscribers.

The company suffered a blow this past week, when Starz announced it would not be renewing a content contract with Netflix next year.

Chinese Online Gaming Giant ‘Perfect World’ To Invest $100M In A VC Fund

Posted: 05 Sep 2011 05:47 AM PDT


Perfect World, a publicly listed Chinese online game developer and publisher that specializes in 3D MMORPGs, this morning announced that it – or rather, “one of its entities” – will be investing in a new venture capital fund.

As a limited partner, Perfect World has agreed to invest a total of approximately RMB643.5 million (roughly $100 million) in the fund, which will focus primarily on backing technology and media companies.

Michael Chi, chairman and CEO of Perfect World, in a statement says the company’s knowledge in TMT industries will allow it to better identify opportunities, but that the fund will likely also serve as fertile ground for partnerships that can enhance Perfect World’s online platform and grow its business.

Perfect World primarily develops online games based on proprietary game engines and game development platforms. Its current portfolio of online games includes massively multiplayer online role playing games like “Perfect World”, “Legend of Martial Arts”, “Zhu Xian” and”Battle of the Immortals and an online casual game called “Hot Dance Party”.

Perfect World’s games have been licensed to game operators in a number of countries and regions in Asia, Latin America and the Russian Federation and other Russian speaking territories. The company also generates revenues from game operations in North America, Europe and Japan.

The company, which is listed on NASDAQ, recently paid roughly $21 million to acquire C&C Media, a Japanese online game operator, from computer and video game developer ATLUS.

Launch Date:

Perfect World is a China-based online game developer and publisher specializing in 3D MMORPGs. (NASDAQ: PWRD)

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Foodzy Turns Healthy Eating Into A Game, Launches iOS And Android Apps

Posted: 05 Sep 2011 04:43 AM PDT


A lot has been said about gamification, dubbed badgification by some, and it seems people are still divided over whether it’s a fad or the future.

Be that as it may, one area where I think it just might work is health and fitness improvement.

Enter Foodzy, a service that enables users to keep track of what and how much they eat over time, in order to provide them with some insights on how to eat and live healthier, lose weight or simply on how their eating habits compare to their friends.

Today, the fledgling Amsterdam company behind the service (not to be confused with Foodzie by the way) is launching free applications for iOS and Android, although one needs a Foodzy Pro account ($15 per year) to log in.

The app helps people keep track of what they eat even when they’re on the move. Using Foodzy, one can access deep statistics and unlock badges (there we are!) for healthy eating habits, but also for fun ones – think Hangover badges for when you’ve consumed too much alcohol in a single night, or a BBQ badge for barbecuing more than 5 times in one Summer.

Foodzy uses localized food databases from over 58 countries, and is currently available in English, French, German and Dutch.

You can check out Foodzy free of charge, but the number of badges you can earn are limited and your eating history will not be kept longer than 30 days. Also, as I mentioned before, you need to cough up cash for the premium version of the service and to be able to use the mobile applications.

Foodzy was one of the 18 finalists at this year's TNW Conference Startup Rally, where it was ‘soft-launched’ – they opened up for public beta about two months ago.

Video: Four-Legged Animal Robot PIGORASS Jumps, Gallops By Itself

Posted: 05 Sep 2011 04:10 AM PDT


We’ve covered our fair share of animal robots from Japan in the last years, but PIGORASS, developed by Yasunori Yamada from the University of Tokyo surely stands out: Yamada has developed a four-legged robot that can walk, jump, and (in a way) gallop, too.

Given that Yamada is still a master student and even advanced robots (like Honda’s Asimo, for example) are only able to move in a slow, chopping motion, the way the PIGORASS works is pretty impressive.

Another point worth noting is that PIGORASS moves “autonomously” via a simulated neural system, meaning it isn’t necessary to program which action it should take in advance. Instead, the robot uses a set of pneumatic artificial muscles (shown in red below), passive muscles (springs, in blue), pressure sensors and potentiometers to propel itself forward:

The idea here is to “to understand better the mechanisms underlying the animal's locomotor skills and how to apply them in robots” and “capture the important features of animals' musculoskeletal system in order to realize the embodiment of the neural system”, as Yamada et al. explain here [PDF].

You can watch PIGORASS in action in the video embedded below:

Via Plastic Pals

Square Enix Announces Online RPG Dragon Quest X For Wii And Wii U

Posted: 05 Sep 2011 03:03 AM PDT

Picture 8

The Tokyo Game Show 2011 is just ten days away, but Square Enix preferred to hold a separate press conference in Tokyo to announce their next big game, Dragon Quest X [JP]. Perhaps the biggest surprises, after months of anticipation, are that the tenth installment in the 25-year old RPG series will be an online RPG and available on both the Wii and the Wii U.

The full title of the game is “Dragon Quest X: Awakening of the Five Tribes Online”, with Square Enix planning to release it next year on the Wii (a date for the Wii U hasn’t been fixed yet). Players will be exploring the same world on both consoles and can transfer game data to their 3DS and share it with other players via Streetpass.

This is the first official screenshot:

Square Enix hasn’t revealed too much as to what the game will actually be about, but it looks like players can form parties with others online, choose between five races and explore the five continents of a world called Astortia (for offline players, there will be NPCs, too). Unlike Dragon Quest IX and VIII (which were created by Level-5), X is being developed by Square Enix alone.

As previous Dragon Quest did make their way out of Japan, you can expect X to hit the US and other places after the Japan release, too (even though no official announcement has been made yet).

Here’s a first (unofficial) trailer in Japanese:

Gadgets Week In Review: Transport

Posted: 05 Sep 2011 01:00 AM PDT

Hot, Flat, And Widescreen: The Rise Of The Minitabs

Posted: 04 Sep 2011 06:29 PM PDT


The past three days have brought us a trio of interesting “tabs:” the Samsung Note, the 7.7 Gal Tab, and (bear with me) the new, flatter iPhone. Sadly, two of those may not make it to the US of A (and one can’t even be shown in Germany), but it’s clear that there’s a trend. Wait a few months and we’ll see more new 5- to 7-inch tablets/phones on the market than, I’d wager, 10-inch tablets. But why the shrink? Who is clamoring for a flatter, bigger “minitab” about the size of a phone but just a hair bigger?

First, this trend is not new. It began with the HTC HD2 (and, going back further, with a few recent Archos tablets) and many Android phones have gone the “flat and big” route, creating phones that are more in line with widescreen media players than what we currently call candybar style.

Hardware designers run in packs. A few years ago, the hardware designers at LG, Samsung, and Apple all went for something they called piano black. Everything was piano black – phones, cameras, TVs, DVD players. You had some splashes of “color” in the trade dress, but glossy plastic a la iPhone 3G was all the rage.

The same thing is happening here – the running of the herd – but for a few interesting reasons. First, the 10-inch tablet market is tapped. There is nowhere to go. To build another one is folly and to many consumers to buy anything other than an iPad is moral failure.

Gadgets hold totemic significance and their shape is important to manufacturers. Shape allows for a level of differentiation that is immediately apparent to the consumer and allows the manufacturer to hide any number of sins. Chip speeds are stagnant and the physical limitations of a compact device are forcing manufacturers to rethink the size and shape of their devices.

Consumers, too, are looking for something new. The 10-inch tablet is boring and, more important (at least according to Apple) a patent violation. What better way to keep tab-like gadgets in the pipeline than to smoosh them down?

Additionally, big touchscreens are still hard to come by. With everyone focusing on glass that maxes at 10 inches and larger, manufacturers can reduce costs by hunting down smaller pieces.

In the end, the next tablet is the next tablet. There is a certain fickleness to hardware size and it’s based on fashion, manufacturing ability, and some designer’s whim. Whether we buy these things as they get bigger (or smaller) is a matter of taste and quality. Manufacturers are trying to figure us out while reducing costs and, for a while, we’re going to be saddled with some truly pocket-straining devices until the next technology comes along to replace this one.

Booktrack: Just A Horrible Idea. Really Horrible

Posted: 04 Sep 2011 05:46 PM PDT


I was going to leave this one alone. In the interests of light and shade, I wanted my next column to be something fun and positive. Whiskers on kittens and warm woolen mittens — all that good stuff. To say, damn it, let’s take our minds off the drama with something unequivocally great.

I wanted to do all of those things. And then Robin Wauters asked for my thoughts on Booktrack.

In case you didn’t catch Robin’s review, Booktrack is an iPad app that add soundtracks to ebooks. As you work your way down the page, following a little animated arrow — not unlike a karaoke bouncy ball — to keep pace, the app matches music and sound effects to the text. Instead of relying on Arthur Conan Doyle’s prose to conjure up an image of Victorian London in The Adventure of the Speckled Band, Booktrack users can just sit back and listen as the ebook’s background music builds to its dramatic crescendo. The other title bundled with my demo edition — The Power of Six, by Pittacus Lore — takes the don’t-imagine-just-listen concept even further: providing assistance to any reader who might struggle to imagine the sound a police siren makes.

It, hopefully, goes without saying (not least because so many people have already said it) that Booktrack is a laughably stupid idea. The whole point of reading fiction is to remove the reader from reality — for the physical book to drop away and the sights, sounds and smells of the story to play out in the mind. As such, soundtracks and animated arrows urging you to read at a fixed (“it’s adjustable!” the PR will be yelling at this point) pace are an unnecessary and unwelcome distraction. In fact, they’re so at odds with the way that people read books that one has to wonder whether the company’s founders have ever done so.

Certainly the founders’ public statements strongly hint towards a troubled relationship with literacy.

“It’s difficult to imagine a movie with no soundtrack,” Paul Cameron, Booktrack’s co-founder and CEO told Business Insider, “Yet, until today, the technology did not exist to synchronize music and sound within an e-book”.

My God, he’s right. Similarly it’s hard to imagine an owl without wings — yet, until today, no-one has thought to graft a beak on to a cow.

To the New York Times, Cameron went further: "[Booktrack] makes a new and engaging way to read and really enhances the experience and enhances your imagination and keeps you in the story longer. And it makes it fun to read again. If you're not reading all the time, it might help you rediscover reading."

Again, Cameron nails it: reading hasn’t been fun since kindergarten. Why don’t they make pop-up books for grown ups? Why can’t books be more like movies? Hell, while we’re at it, what’s wrong with moving your lips while you read, or with eating soap? Hopefully Cameron’s next start-up will help us do those things too.

Seriously, is this the week all good things die?

I have to say, though, Cameron and his terrible app are not the real problem here. Entrepreneurs pitch terrible technology ideas all the time — confusing the universe’s unwillingness to allow something to exist with “a gap in the market”. In most cases, those terrible ideas die a well-deserved death, unable to raise the money, or attract the press required for success. Occasionally an idea makes it as far as the Disrupt Startup Battlefield, but that’s precisely why we installed the trap-door and flame pit.

Booktrack, however, has attracted way more attention — and money — than the typical shockingly bad idea. From the New York Times to, uh, TechCrunch, everyone is asking in all seriousness whether the time has come for books with soundtracks.

There are two reasons for all this undeserved attention: the first is that Booktrack has been insanely proactive in its approach to PR. In the past two weeks, I’ve had several friends forward me introductions to the company, apparently at the behest of the founders. The company’s PR representative has been shameless in namedropping mutual pals in the hope of providing social proof, and she even admitted (really) to having spent ten minutes on the phone pitching a totally different Paul Carr in the UK before realizing her error. Helps to take a breath, love.

Really, though, the interest in Booktrack comes from the fact that Peter Thiel is one of the company’s first investors. Peter Thiel! The Paypal guy! If he likes Booktrack, it must be the future!

There’s no doubt that Peter Thiel is a genius. A plays-chess-in-his-head between founding and investing in technology companies -level genius. But he’s also this: a Silicon Valley genius. And the blunt truth is that, as a rule, Silicon Valley geniuses don’t understand — or particularly care for — old media.

What they do know, for absolutely sure, is that the publishing industry is ripe for disruption. They know this because it’s happening already: ebooks are out-selling paperbacks, authors are self-publishing, new digital-only publishing houses are gaining traction. The iPad has lead to a surge in interactive books, and the Kindle makes it possible to share notes and extracts with friends. Surely we’ve only scratched the surface of what books are capable of.

Certainly, technology is doing amazing things to how we produce and purchase books: millions of titles available at 2am in the middle of a desert; true democratization of the publishing process; plummeting prices for new releases; I’ve argued before that this is a new golden era of books. But the key to all of these innovations is that they were made by people who understand books, and how people read them.

It’s no coincidence that the Kindle was developed by a bookseller rather than a technology company. The Kindle is a reader’s device — for all the bells and whistles, the reason why it has blown competitors out of the water is that it goes as near to replicating the traditional feel of reading as is currently possible on an electronic device. Interactive books on the iPad are fun and all that, but we shouldn’t pretend that they’re books, any more than CDROM encyclopedias were books. The companies who enjoy the most success in revolutionizing the book industry (as opposed to simply creating a totally new medium) will be those that disrupt the publishing process, the writing process, the distribution process — but leave the actual reading process the hell alone.

Sadly though, the bizarre message peddled by Booktrack — that storytelling through the written word is somehow lacking — is finding an audience outside of the Valley. Harper Collins is said to be “on board” with the idea — and authors James Frey and Salman Rushdie were at the app’s launch party.

After a decade of being told that they don’t understand how technology will fundamentally change their business, old-media types have become conditioned to publicly embrace even the most ridiculous media-tech startup, lest they be assumed not to “get it”. It was true with music, it was true with movies, and it’ll be true with books. Soundtrack on books are coming, whether you like it or not! Either get with the program or die!

Ugh. I bet version 2.0 has badges.

The Complete Guide To Freemium Business Models

Posted: 04 Sep 2011 04:08 PM PDT


Editor’s note: This guest post was written by Uzi Shmilovici, CEO and founder of Future Simple, which creates online software for small businesses. The post is based on a study done with Professor Eric Budish, an economics professor at the University of Chicago Booth School of Business. It also includes ideas and comments from Peter Levine, a Venture Partner at Andreessen-Horowitz and a professor at Stanford GSB

The idea of offering your product or a version of it for free has been a source of much debate.

Pricing is always tricky. Unfortunately, many entrepreneurs don’t give it enough thought. They will often copy the pricing strategy of similar products, base their decisions on pompous statements made by “experts" or rely on broken rationale (we worked hard so we should charge $X).

Free is even trickier and with so many opinions about it, we thought it would be refreshing to take a critical approach and dive deep into why some companies are very successful at employing the model while other companies fail. We’ve looked into economics academic papers, behavioral psychology books and strategies that worked for companies to come up with the key concepts below.

The Law of Marginal Cost

Pricing plays a huge part in competing for customers. Here’s an economic law that holds almost as much truth as the law of gravity: in a perfectly competitive market, the long-term product price (aka "market clearing price") will be the marginal cost of production.

Guess what? Because of declining hosting and bandwidth costs, for most Internet products the marginal cost today is practically … zero.

In other words, if the cost to serve a customer (support aside) is zero, the long-term price of the product in the market will be zero (because of competitive pressure).

An Experience Good

At the core of the "Free" models are the products or services being offered to the customer. Most Internet products or services fall into the definition of an Experience Good: a product that needs a period of use before the customer can determine the value they can derive from it.

A good example is Dropbox. Consider Drew Houston’s words: “The fact was that Dropbox was offering a product that people didn't know they needed until they tried.”

There are plenty of academics who looked into the pricing of Experience Goods. In 1983, the Economist Carl Shapiro wrote a fascinating paper about this subject. His conclusion was that since customers tend to underestimate the value of a product, the optimal pricing for an experience good is a low introductory price which is then increased when the customer realizes the value of the product.

In some cases, a customer might overestimate the value of the product. In that case, the optimal pricing strategy is to charge as much in the beginning or to lock in customers with long-term contracts.

This is why customers are reluctant to buy when someone asks them to prepay for a service or product or sign a long-term contract.

Hence, the introductory price is a signaling mechanism. The conclusion?  A low entrance price signals that you are confident that your product will create value for the customer.

The Psychology of Free

Much has been written about the Psychology of Free. Two books that looked specifically into the subject are “Free” by Chris Anderson and “Predictably Irrational” by Dan Ariely. Putting it simply, Free is an emotional hot button that immediately reduces the mental barriers for the customer. Free makes people think that they have “nothing to lose” since many ignore time as an investment.

From this perspective, free is a huge accelerator of adoption. The flip side of this is that after using the product for free, it is very hard to get the customer to start paying for it. This phenomenon was broad enough to get its own name: "The penny gap"—the hardest part is to get your customer to pay you the first penny. This is why it is so critical to choose your premium features wisely.

Decision Factors

If all that is true, it seems like Free (or Freemium) is the answer. Well…. not so fast. The decision is definitely not easy. Here’s a basic framework to help you make a more informed decision. A word of caution though: for every complex problem there's a simple solution … and it's wrong. The framework is helpful as a thinking tool but there’s no magic formula.

Here’s a set of questions that you'll need to ask yourself:

  1. How big do I want my company to be? If you are looking to build a lifestyle business that’ll make you $8,000 a month and you have a good product, you can probably do without Freemium. If you want to build a dominant company that has a substantial market share, Freemium can help you accelerate adoption.
  2. What is the value of the free users? Across all successful Freemium companies, there is a way of making money or saving money from the free users. Either by saving on marketing costs (Dropbox) or by making money from ads or data (Pandora, Evernote, Mint) or both. If you cannot turn your free users into savings in marketing costs or revenues from third parties—figure out how!
  3. What is the cost to serve free users?  This is a critical aspect of the model. If you spend a lot of money and/or time servicing free users, you are going to lose a lot of money. The cost of servicing free users must be lower than the dollar value they provide.
  4. How big is my market? “The easiest way to get 1 million people paying is to get 1 billion people using,” says Phil Libin, the CEO of Evernote. Free adds another conversion step on your way to revenues. You need a big market to have enough people who will be paying you at the end of the day.
  5. Is there value to one customer from other customers using the product? This will determine how many new users the free users will refer. There are three levels of value:
  1. Inherent value – You can use Skype only if the person you talk with also uses Skype. You can share a Dropbox folder only with other Dropbox users. In this case, Freemium can be a powerful strategy.
  2. Added value – You wouldn’t want to be the only user of LinkedIn. You derive value from other people using it. In this case, Freemium can help you gain traction if you use an effective invitation mechanism.
  3. No value – You don’t care if someone is using Evernote or not. The only reason for one person to tell another about the product or service is if they think it is awesome.

The Types of "Free"

One of the key factors in making Freemium work is the structure of the offering. What is it that you offer for free vs. charge? There are different types of free strategies. Let’s take a look at the popular ones:

  1. True Freemium – Give a version of the product for free and charge a fee for the other versions. There are two ways to go about this:
  1. Value based – The most successful type of Freemium strategy. The more a customer uses the product, the more value she derives, the higher the switching costs are, and at some point she'll hit a usage limit and convert to a paying customer. Evernote and Dropbox are beautiful examples of this.
  2. Characteristic based – For example offering the product for free for one user (so it is based on company size for instance). Let’s think about a B2B application. If I’m a freelancer, I will use the application forever and I will never have to upgrade. If I’m a 3-person company, I can't add more users and try the application for real and hence might not get to the point where I see the value in using it.
  3. Free Product for a Cross Subsidy  - Give one product for free and charge for complementary products.
  4. Time Based Free Trial – Give a free trial for X days and start charging once the trial ends. The issue here is figuring out what X is. On one hand you want to create a sense of urgency, on the other hand you need the customer to see the value in the system.

Open Source as a Free model

Lately I've seen many entrepreneurs confuse Open Source with Free so I thought it would be helpful to make the distinction. An open source model can definitely accelerate the distribution of your product and is a viable free model. It has two main advantages. You might get developers to contribute to your product (see WordPress). By doing that you can accelerate the development of your product. The other advantage is that you give customers peace of mind as they have control over the source code. You can then make money from selling pro features or value added services. There's a critical distinction here and that is that your code is out there and anyone can start a company to commercialize this code. Bear in mind that it is very hard (often impossible) to reverse a decision to open-source.
The Last Bit And The Secret To Success

There are many factors to consider when you are evaluating whether to use the Freemium model or not. However, there’s one last secret that I didn’t share with you. During the study, while looking at the successful Freemium companies, a pattern emerged. They all had phenomenal products. All of these decision factors are useless if the product or service you are offering is nothing short of amazing. If your product is not creating great value for its users, no tactic in the world will make Freemium work for you.

Image credit: Shutterstock/JelenaA

Future Simple

Uzi Shmilovici is an internet entrepreneur. He co-founded Netcraft - an Israeli web agency in 2003. Over the years, Netcraft set the tone and became an industry leader in...

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Lost In Legoland: A Gazillion Bricks And A Mini Star Wars Geekfest

Posted: 04 Sep 2011 12:58 PM PDT


What happens when a geek winds up in Legoland? He has loads of unfiltered fun, that’s what.

“WTF? I should have kept this for my personal blog. This has got nothing to do with technology, and this blog is called TechCrunch for crying out loud. A report and pictures about a visit to a theme park have absolutely no place here on this blog. I wasted a couple of minutes of your life, and your time is valuable. You can, and perhaps should, unsubscribe from and never visit TechCrunch, ever again.”

Ok, now that we got that out of the way, on to the fun stuff!

I was in Denmark this week for the Next Aarhus ‘Beautiful Mistakes’ conference and exhibitions. I had a great time, as you can tell from my report about the trip. I did something awful, though.

At the third day of the event, there was a separate conference for school teachers about the next wave of technology for kids, at the Billund Center in – you guessed it – (tiny) Billund. As I wasn’t actually speaking at the event, I managed to sneak out of the conference room, and walked a mile down the street, passing the original Lego factory, which is conveniently located right next to Denmark’s second busiest airport, Billund Airport, as well the Legoland Hotel.

My destination: theme park Legoland Billund, a popular tourist attraction originally opened in 1968.

No disrespect to the Next Aarhus organizers who kindly invited me to the event, but it was by far the highlight of my trip. And not just because it made me feel like a kid again.

I even got on some rides, garnering wary looks from parents in waiting lines as I was pretty much the only adult in the park with no kids in tow – one carrying around a laptop bag, no less. Ah well, I thought, I’m used to making painful sacrifices for my work here at TechCrunch.

Here’s an elevated, 360-degree and slightly sped up video overview of the Legoland Billund park:

Quite a view, right? I can’t even imagine how many bricks are used for all this.

And here’s a small selection of the pictures I took:

You can quite literally spend hours gazing at the many fantastic creations, big or small, hop on fun rides, grab food, or visit some of the movies and exhibitions in the designated areas. I promised myself to come back here when my son, who is now only 5 months old, grows a few years older. If you have kids, or you would love to feel like a kid again too, I encourage you to see if there’s a Legoland park near you (spoiler: there are parks in Denmark, Germany, UK and California, US).

Here’s the video of a Lego submarine surrounded by (real) sharks, batoids and plenty of other fish:

Bonus points if you can name all the fish you see in the video.

On to the real highlight of my visit to Legoland, which was beyond any shred of doubt the 420 square-metre Star Wars display area in Miniland, which is at the heart of the park.

As a self-confessed Star Wars fan, the level of detail that went into the minitiature depiction of several of the movies’ most famous scenes genuinely astounded me. I took quite a few pictures, but they don’t really don’t do enough justice to the fantastic work that went into this.

Do you remember all the scenes from the films (and The Clone Wars animated series)?

Bonus: a slideshow featuring all the pictures embedded above:

Click to view slideshow.

What To Look For In A Company Board

Posted: 04 Sep 2011 10:32 AM PDT


At any company level, the board of directors has a direct impact on the organization’s product strategy, hiring, fundraising and much more. And startups have to be very selective in choosing board members who will advise the company in the right direction.  In the big company realm, both the media and the company’s shareholders have questioned Yahoo’s board, which continues to employ a floundering Carol Bartz as CEO and supports a bizarre product and business strategy. Then you look at Facebook, where founder Mark Zuckerberg has strategically assembled an all-star board to help the company grow as a public company and expand into new directions. Most recently, Facebook added Netflix co-founder and CEO Reed Hastings to its board, joining Marc Andreessen, Jim Breyer, Donald E. Graham, Peter Thiel and Zuck himself. Hastings not only will add his experience in taking a web company public, but he will also help Facebook navigate potential movie and TV show streaming opportunities. Facebook has a rock solid board—almost every member has been a strong innovator in the past few decades.

As we saw with HP, even huge, established companies need to make changes in board structure as a company’s strategy shifts. HP added five new board members early this year as new CEO Leo Apotheker took the reins. Of course, fast forward seven months and HP has announced that it will be discontinuing operations surrounding the TouchPad and all webOS phones, a major move for the company and certainly one that was influenced by the board.

The fact is that the board plays an extremely important role in some of the major events for any company with shareholders. The board helps manage and make decisions about financing, acquisitions, product strategy and even an IPO. So it goes without saying that entrepreneurs are faced with challenging decisions assembling a board.  For big public companies, this has always been the case, but the role of the board at startups is also changing.  I interviewed a handful of early-stage investors (and former entrepreneurs)—Jeff Clavier, Keith Rabois, Dave McClure, and Paul Lee—to find out what startup founders should know about picking and managing a board.

Lightbank partner Paul Lee echoes this thought, telling me that entrepreneurs have to be “very careful” about how they put their board together. “Each stage is different in terms of who you bring on,” he explains. “With an early startup in Series A funding, a smaller board is better because disparate voices make agility as a startup harder. When you get to five members, it is more difficult to come to a consensus.”

Of course, there’s a balance between finding board members who both challenge the company as well as reason with the founders when necessary. Having both is crucial, says Lee. He also feels strongly that giving equity to board members without any investment is not the right formula for many early-stage startups. “Entrepreneurs want board members to be vested in the company, and the board members need to have some skin in the game to serve the company best.”

In later stage companies, it makes sense to add seasoned execs who have run a successful companies in the role of the “CEO Coach.” In Facebook’s case, Hastings could fill that role. Another recent example of this was showcased by LinkedIn. In 2010, LinkedIn added former CEO George "Skip" Battle to its board, as well as Netflix’s CMO Leslie Kilgore pre-IPO.

In the past, Lee says that the board used to be seen as a “collector item” of sorts, where it was an opportunity to add prestige to a company by adding well-known board members and CEOs. Board members basically sat there and looked pretty. Now, he explains, the board has become a more integrated part of a company where board members have actual responsibilities and are held accountable.

Well known angel investor Jeff Clavier, who runs his fund SoftTech VC, agrees with Lee that the role of the board has evolved in the past decade. As micro-venture funding started to come into play in funding startups, angel investors can’t sit on as many boards as they invest in. He says that in early rounds where there are 12 different investors (which happens pretty often these days), entrepreneurs have to make a strategic decision as to which investor or VC should take a board seat. With a group of rock-star investors, it can be difficult to choose who should join the board and who has the time for the role.

Clavier says that board member roles have become more proactive. As opposed to just sitting on monthly calls, more entrepreneurs are giving board members tasks outside the meeting such as helping recruit talent. For example, Clavier tells me that Zynga’s CEO and founder Marc Pincus would allocate certain jobs to board members, who had to produce a report on the status of tasks at meetings. He says that a successful startup brings together strong investors and advisors and engages them both in and outside the boardroom.

In fact, he compares early stage startups to houses with a bunch of holes in the foundations. One way to fill those holes is adding the right board members and advisors. As opposed to ten years ago, there are many more outside individuals involved in a startup’s progress from an idea to an actual company, and Clavier advises entrepreneurs to create a support network with a board. For example, many startups have created both boards of advisors as well as boards of directors. And he believes it is important for mid-stage, more mature companies to add experts from outside the investment community to a board. For example, the  addition of former Ticketmaster CEO Sean Moriarty to online event tickets platform Eventbrite last year.

Keith Rabois, who is currently the COO of Square and an angel investor, has a unique perspective on the changes in boards over time, having been on both sides of the equation. He relates the experience of selecting a board to getting married with no possibility of divorce.

Jokes aside, similar to Zuckerberg, Rabois and Jack Dorsey have built an all-star board at Square. Kleiner Perkins Partner and former Morgan Stanley Internet analyst Mary Meeker, Vinod Khosla, and former U.S. Treasury Secretary Larry Summers all joined the mobile payments company’s board this year. Sequoia partner Roelof Botha also sits on Square’s board.

Rabois tells me point blank that very few investors are actually capable of adding a lot of value to company boards. But in Square’s case, all of the VCs on the board had prior careers that made their additions a natural fit for Square. He says that Boetha’s experience as CFO of PayPal made him an ideal addition. And Khosla’s insight as an entrepreneur and CEO of a multi-billion dollar company (Sun Microsystems) added a lot of value to Square. Meeker has made a career out of studying and analyzing what makes a successful technology company and this brought a new level of expertise to the payments company, says Rabois.

Square’s board meets every two months, and Rabois says there is really no set agenda in the board meetings. The group starts by reviewing the financial and business performance of the company, and focuses on several long and short discussion items that arise.

As for how boards have evolved over time, Rabois feels that today’s best entrepreneurs have moved away from a model where investors are supervising companies and are looking to bring more value-add to boards with seats. But how to extract value from a board can be a challenge for many young entrepreneurs. His advice to entrepreneurs is to recruit board members and advisors that you can learn the most from. And he says entrepreneurs should get into the discipline of having regular reviews with investors and board members.

Another trend that is taking place in current board structures is that founders are retaining board control longer, even as the company matures. Q&A platform Quora only has three board members, after taking an $11 million round of funding from Benchmark in 2010. Founders Adam D’Angelo and Charlie Cheever both have seats as well as Benchmark’s Matt Cohler.

Angel investor Dave McClure advises startups to keep control for as long as they can, and be judicious about selecting board members. In fact, McClure, who has invested in hundreds of companies, only sits on three boards himself. Of course, that doesn’t mean that founders should eliminate the board altogether, but McClure says it should be a gradual process. His belief is that if a startup has two founders, both should have seats, and it should add an investor in a Series A round, then perhaps another investor in a Series B round, as well as an independent “expert” of sorts.

He also says that the more recent trend of 15 to 20 investors piled into a round with no board seats can be problematic. “Everyone is along for the ride and no one is watching what is going on at the company,” he explains. And I’ve heard similar sentiment expressed from others in the investing community as well.

There are so many stories in Silicon Valley of board members shirking their responsibilities to early-stage startups by making it only to one out of every three meetings and worse. And board members that has different goals from entrepreneurs could easily block a major exit for a startup, or even a new funding round. The general consensus from all the investors and entrepreneurs I spoke to is to choose your board very, very wisely, and don’t rush into any decisions about naming board members.

Photo Credit/Flickr/Gibffe

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