Founders Only Need This Simple Math Equation

Sustainable businesses make money. To scale, you have to make a lot of money.

As a startup founder, you need to learn if you’re building a sustainable business as quickly as possible. It doesn’t need to be profitable from day one but there has to be a clear path to sustainability. If you can’t identify that path, you need to make changes immediately.

You have to make more money than you spend to be profitable. No glitz, no glamour. Just basic math. Here is how it works:

If Cost of Acquiring a Customer (CAC) is lower than the Lifetime Value (LTV) of that customer, you win. In other words, CAC < LTV = \$\$.

I’m constantly amazed at how many entrepreneurs don’t understand this simple equation. Drive down CAC. Increase LTV. Make money. Invest the profits. Scale. Win.

Nothing is better than winning.

I’ve been reading a lot about death and disease lately. It was surprising to learn that 56 million people died globally in 2012. Over 60% of those deaths were attributed to noncommunicable diseases. Only 9% of deaths were caused by “injuries.”

We can drastically reduce the death rate if we’re able to eradicate disease.

I previously thought this accomplishment was 50-75 years away with current medicine and research resources. However, the more I learn about nanobots, the more bullish I become on disease eradication becoming a reality by 2050. Even Ray Kurzweil appears to be a believer.

The impact of disease eradication is hard to predict. There are positives (longer life expectancy, healthier population, etc) and negatives (over-population, potential food shortage, etc). What if we have colonized Mars by then? How about if our bodies build immunity to disease but become susceptible to a larger existential threat?

We may not completely understand it until we get much closer. Either way, the possibility of preventing the leading cause of death is exciting stuff. I hope I’m fortunate enough to have it happen in my lifetime.

The Slow, Painful Death of Voicemail

Voicemail is slowly dying.

The staple functionality is being used less and less by younger demographics. As these demographics become older, the overall usage of voicemail continues to drop. So how did one of the most important features of telephone communication enter this downward spiral?

The largest contributor has been the adoption of additional forms of communication. For example, when voicemail was first introduced, SMS messaging wasn’t around. There was no way to tweet at someone or leave a comment on their Facebook wall. People have historically migrated to the most efficient, friction-less forms of communication. Could you imagine writing a letter and sending it through the mail today? How about sitting on the phone for 2 minutes to tell someone a short message? I can’t.

The second, less obvious contributor to this trend is the decreasing likelihood that your voicemail will be listened to. Numerous times I have made the effort to call someone and refrained from leaving a voicemail, only to immediately send them a text message that relays the necessary information. I could have easily left a voicemail but I feared that the message wouldn’t be heard. (For context, I have 13 unread voicemails on my phone right now).

Lastly, many voicemail systems are out-dated and difficult to use. While iPhone users can listen to messages by tapping 3 buttons, most people are stuck calling a special number and entering their 4-digit password. This is utter chaos – remember, we live in a world where Apple replaced 4-digit passwords with our fingerprints to unlock our phones.

The world of communication is evolving quickly. There are too many human, product, and network forces acting against traditional voicemail for it to survive. I’m excited to see what comes next.

I am transitioning to a new role at Facebook this week.

The last 9 months have been awesome. I was fortunate to work with an amazing team to grow the Facebook Pages product to record levels. It was hard, tactical work that tested our dedication to success many times. The team persisted and crushed all expectations. In the end, it was rewarding to watch our efforts empower millions of businesses to thrive. I can’t speak highly enough about each individual person – hopefully I will get the opportunity to work with them again in the future.

It was a hard decision to leave such a great situation but ultimately the right one. I’m becoming Product Manager on a new division within our Growth organization. The Facebook Growth team is one of the best in the industry so I’m excited to learn from them. I’ll be working on a number of projects that solve real world, tangible problems that directly impact people’s lives.

It’s no secret that I believe many technologists are chasing money, rather than using their skills to improve lives. I’m excited to work with another highly skilled team to tackle these really hard problems. If you’re interested in helping, ping me.

Keep an eye out for some really cool stuff in the new year. This is going to be fun.

The Mobile Apps Used By 18 College Students

College students’ mobile app usage is a great signal for which apps are gaining traction. This demographic tends to be on the cutting edge of the newest, shiniest thing. Below are screenshots from 18 college students mobile phones – lets see where they are spending their time.

Social media apps are littered across the home screens.

Male

This active group utilizes multiple fitness apps to keep track of their progress.

Female

Music apps like SoundCloud, 8tracks, and Spotify are wildly popular.

Male

Apps such as Dropbox, Fedex, Quickbooks, and Yammer are popular among the business-focused segment.

Male

Male

Dating apps like Tinder are just as popular as emojis. Anonymous apps like Brighten are also growing in popularity.

Male

It is not uncommon for these students to use their background photo for daily motivation.

male

Android is not nearly as popular as iOS with this group.

Male

More organizations, like blogs and schools, are building apps that gain traction.

Male

Some students leave the standard apps littering their home screen…

Female

…while others aggressively use folders to stay organized.

Female

Weather and health are important no matter what your age.

Female

Games are a great escape from a young adolescent life.

Female

Remember Passbook and Newsstand?

Male

Female

With the rise of Instagram, photography apps have exploded.

Female

Video apps like Vine and FaceTime are popular as well.

Female

And since money makes the world go ’round, banking apps are a necessity.

Male

Its obvious that college students’ app usage is not much different than other demographics. While they may get on board with the newest social network faster, these people still gravitate towards fitness, music, banking, and photography. It will be interesting to see how these home screens change in the next 6-12 months…

The Snapchat Rocketship

Photo courtesy of slashgear.com

In December 2013, most of the tech world was appalled when Evan Spiegel and Snapchat turn downed Facebook’s reported \$3 billion acquisition offer. I wrote at the time that people were overreacting and predicted a 3-5X valuation within 18 months. Snapchat has grown even faster than my expectations and is now rumored to be valued at \$10 billion.

I am now more bullish on Snapchat than ever. There are three factors that will drive additional growth and an ultimate IPO:

1) Snapchat’s daily usage among the under-25 crowd is insane. This demographic continues to send multiple Snaps a day, similar to their text messaging rates. It has become common to have a complete conversation with ephemeral photos. This places Snapchat as a competitor to WhatsApp, WeChat, or Facebook Messenger.

2) Snapchat’s My Story feature has filled a niche market need. Young people want to share content with each other in our public, social world. There are plenty of social networks that empower this sharing but they all have the same problem – the content lives forever. Snapchat was able to figure out a way to facilitate one-to-many communication without the fear of someone digging up the content two years from now. This small difference is powerful and compelling.

3) Snapchat ads are coming. Earlier this week, Spiegel hinted that the ads product would allow brands to tell a story in a similar fashion to My Story. With a highly coveted demographic, I’d expect brands to be attracted to this new, creative channel. Since self-service advertising appears to be farther down the product roadmap, I imagine the early advertising deals will be lucrative contracts with large agencies.

Additionally, most social platforms receive another level of validation when unknown individuals are able to build a celebrity following on the platform. We have seen this occur on Facebook, Twitter, Instagram, and Vine. Snapchat hit this milestone in the last 12 months. In some cases, thousands of kids are following a “random” person for multiple updates a day.

Everyone thought Snapchat was a fad back in December. It is clear that the company is not going anywhere for awhile. The big challenge for the team will be whether they can successfully execute their ads business. If all goes to plan, expect an IPO in late 2015 at a \$25-30 billion valuation. This will be fun to watch.

Google Will Acquire Uber – Here’s Why

There has been speculation about Google’s intention to acquire Uber. If we break down different potential motivations, there may be more reality than speculation to the deal.

Google has invested over \$250M in Uber through Google Ventures. These types of large investments indicate a strong belief in the companies leadership and an expectation of successful execution. A close relationship of this nature could easily lead to acquisition – just ask Tony Fadell and Nest.

Self-driving Cars

There has been no shortage of media coverage for Google’s self-driving car initiative. While it seems likely that the cars will become the norm, it may take time before there is wide-spread adoption by the general public. Uber’s use of self-driving cars could help people familiarize themselves with the technology and ignite faster adoption. Removing human drivers would increase efficiency (less wrong turns or mistakes), increase margins (you don’t have to pay the driver in a driverless car), and would empower Google/Uber to have more control over the rider experience.

Shopping Express

Shopping Express is starting to see increased adoption but it is still hampered by the limited workforce and vans. Using Uber’s platform, Google could empower anyone with a smart phone to become a Shopping Express delivery driver. With shorter wait times and cheaper delivery, I’d expect to see even more people leveraging same-day delivery. We know that Uber has run many tests in select markets to highlight their logistics power. This could even provide an acceptable intermediate step as we wait for aviation regulations to catch up with the drone industry.

Uber was integrated into Google Maps back in May. The integration allows users to compare transit, walking, and Uber routes as they try to get from Point A to Point B. There are plenty of additional integrations that Google could do if they owned the ride-sharing company. Imagine a world where a self-driving car shows up 30 minutes before your next meeting (based on your Gmail Calendar) to take you there.

Competition

Uber is in a battle with Lyft and Sidecar to win the ride-sharing market. Even with the first mover advantage, Uber is not out of the woods yet. An acquisition by Google would allow the company to leverage the resources of an international tech giant, while continuing to scale at an explosive pace.

Dynamic Pricing

Uber’s most underrated asset is the dynamic pricing algorithm that determines each fare. It calculates distance, time, current demand, and traffic among other things. Google could leverage the formula to provide dynamic delivery pricing – flat delivery fees are outdated. This increased efficiency would motive drivers and ensure that there was always a delivery vehicle available regardless of the traffic or weather.

Price

Google is one of the only companies with the cash and equity on hand to pull this off. Uber was valued at \$18.2 billion during their last funding round (remember Google has large equity stake). Lets say that the ride-sharing service could now demand a \$20-22B valuation. With over \$50B in cash sitting in the bank, and a sizable equity stake already, Google could easily negotiate an attractive deal for both parties.

This deal makes sense from both a utility and economics perspective. If it came to fruition, it would be the kind of blockbuster acquisition that defines a decade and changes the trajectory of an entire industry.

9/11: The Most Powerful Image For Me

This photo has special meaning to me. It hammered home the pain and suffering that innocent civilians experienced on 9/11. It showed me the compassion of our fellow man. It illustrated the courage of those who were sworn to protect us.

I carried a small, laminated copy of this photo with me while I was deployed. It reminded me why I was there. It made me realize that, American or not, no group of people should be subjected to brutality and extremism. Hopefully it does the same for you.

How The US Army Made Me An Entrepreneur

Credit: entrepreneur.com

This post is a reprint of the WRAL TechWire article titled, “Inside a deal: Why vet sold DigaForce – and how Army made him an entrepreneur.” Unfortunately the article was originally published behind the content paywall (more on that later). I am reproducing the article here with Rick Smith’s permission. I hope it can inspire other military vets to make the leap into the startup game. If you’re considering it, I’d love to hear from you!

Raleigh, N.C. — What Anthony Pompliano will do for his next gig now that he has sold his social media intelligence firm DigaForce to Strategic Link Partners isn’t clear at this point. But on another, he is quite clear: Serving in the U.S. Army – including the excruciatingly dangerous and nerve-wracking search for IEDs across the killing fields of Iraq – helped make the son of a technology executive an entrepreneur.

“The military had a huge part in making me into an entrepreneur,” Pompliano explained Thursday after news about the sale of his company broke.

Wait a minute: Taking orders in the Army develops entrepreneurial skills?

Well, says the young man who served as a sergeant and combat engineer, much thinking about the armed forces is wrong.

“Contrary to popular belief, service members are required to be resourceful and entrepreneurial on a daily basis,” he explains.

“Many times I was given a mission objective with very little guidance. It was up to me and my team to accomplish the mission how we saw fit.”

“Running a startup is very much the same. Do a lot with very little and in a quick time frame.” Pompliano reached the rank of sergeant. Here’s how the Army defines a SGT’s role:

SERGEANT (SGT)

Typically commands a squad (9 to 10 soldiers). Considered to have the greatest impact on Soldiers because SGTs oversee them in their daily tasks. In short, SGTs set an example and the standard for Privates to look up to, and live up to.

What better management teacher than being responsible for the lives of others?

Pompliano visited WRAL’s headquarters a few months ago and talked candidly about his Iraq experiences – along with other business. Searching for improvised explosive devices was never, ever easy. And IEDs killed many Americans, NATO allies as well as Iraqis – and Afghans. He calls those searches “combat missions involving route clearance and cordon and searches.”

The six-year veteran who spent 13 months in Iraq in 2008-9 says many of the men and women battle-scarred in the never-ending war on terror are now turning their attention to business and using their battlefield experiences.

“More and more veterans are becoming entrepreneurs,” he says. “After Vietnam, an unusually high-rate of CEO’s were vets. I expect to see this trend reappear in the next 5 to 15 years.”

Called to Serve as a Patriot

Devotion to duty and self-sacrifice are just two of the many reasons why a lot of corporate executives want to hire veterans. Pompliano was called to serve by what happened on 9-11-01.

“No one will ever forget where they were on September 11, 2001. I was in 8th grade, sitting in the cafeteria, when the principal told the school what had happened. We were too young to fully grasp what terrorism was, but we knew that someone had come to our country and tried to kill people,” he wrote in his personal blog called Pomp Logic.

“Little did I know, thousands of people would end up dying before the day was over. These terrorists were radicals who were hell-bent on destroying the country that I lived in. Once I got home, my parents explained the situation more in depth to me. I did a lot of growing up that day.

“Four years later, as a 17 year old high school graduate, I knew what I wanted to do. I walked into a US Army recruiting office and asked “What can I do to help?” The man sitting across the desk responded with something that I will never forget, “Son, if you want to help us, we can find something for you to do.” That’s all I needed to hear.

“Almost 7 years to the exact date of walking into that office, I took my uniform off for the last time. I had been blessed with the opportunity to serve with the infantry, combat engineers, and military intelligence. I had the eye-opening experience of serving on Active Duty and in the Reserves. The Army took me around the world, let me see some amazing places, and helped me mature in ways I could have never imagined.”

Son of an Entrepreneur

Anthony’s name strikes some in the Triangle technology community as a familiar one. It should. His father ran a tech company in the Triangle called P4.

“I was not involved,” the younger Pompliano explains. “We share the same name but he goes by Tony and I go by Anthony. Blame the Italian heritage!”

His father is now involved with another firm, Anexio, which Anthony describes as a “great company” that is “on an acquisition spree.”

New Mission?

Pompliano chose to become an entrepreneur in the Triangle with a bet placed on social intelligence: Turning all that Facebook, Twitter and who-knows-what-else people want to share about themselves into “actionable intelligence” for companies became the hub of what he called a “social intelligence company.”

So why sell the company to Joan Myers and Strategic Link Partners?

“We have worked with SLP in the past and our visions/goals aligned,” he says. “Their team is one of the best in the industry and we can obtain market dominance at a much faster pace by combining forces. All aspects of this deal made sense for both parties.”

But Pompliano is not stepping away. He plans an ongoing role. Why?

“We still have a mission to fulfill.”

Pompliano declined to answer a number of questions about DigaForce’s “secret sauce” technology and all the controversy about social media monitoring taking place these days (as clearly documented by Edward Snowden).

“Due to the nature of the deal and the industry with which SLP operates, I can’t comment,” he says.

DigaForce did appear to be en route to landing funding, having applied for and reached the semifinal round for a grant from economic development group NC IDEA. That could have been worth as much as \$50,000. But as the reviews continued in the fall, Pompliano says the SLP deal came together.

“We were selected as a semi-finalist for the NC IDEA grant and felt we had a great chance to win,” he says. “Once we knew the acquisition was going to come to fruition (before finalists were announced), I worked with the NC IDEA team to retract our application with total transparency.

“As an entrepreneur, I like to think we would have won the grant if we hadn’t retracted the application.”

Pompliano also had touted DigaForce to potential investors, and he says money is available.

“Funding is one piece of the puzzle,” Pompliano explains. “Everything about entrepreneurship is hard. People who get hung up on funding are doomed from the beginning. There is plenty of money in the Triangle. If you have a compelling value proposition, investors will open their check books. Not being funded is not an excuse for failing.”

So what comes next?

“Not sure right now,” he says. “I’ve been spending my time helping other entrepreneurs (and) startups in the Triangle.”

A Personal Note

Readers of technology blogs in the Triangle are probably aware that Pompliano is not a supporter of WRAL TechWire’s decision to implement a premium content (“paywall”) plan last year. In fact, he launched a petition against it. And in a Twitter post on Thursday he lamented the fact that the first story to appear about the deal was, in fact, behind that paywall.

Anthony and I have talked about the Insider strategy, as we call it, and have been unable to come to an understanding. However, he graciously agreed to talk about the sale of his venture and his own experiences as an entrepreneur. So for that, The Skinny says “Thanks.”

Also, thanks to Anthony and all you other veterans who put your lives on the line so we at home can remain free. We are forever in our debt, just as our nation is to all the men and women who from the founding have been brave enough to respond to the call of duty.

DigaForce Is Being Acquired

The year of 2013 was very exciting and rewarding for me.  Throughout the year I learned many lessons and gained invaluable experience as an entrepreneur, son, brother, and significant other. Today I am happy to kick off 2014 by announcing some awesome news.

DigaForce is being acquired by Strategic Link Partners (SLP). Click here to read the article from Triangle Business Journal. This awesome opportunity came together at the end of 2013 and was the product of an on-going relationship with the team at SLP. We ultimately decided to join forces because we believe that numerous advantages exist as a result of our combined efforts.

This news wouldn’t be possible without the help of so many people. First I want to thank my co-founder, Matt Cotter. His passion and effort was a major contributor to our success. I pride myself on being results-driven and Matt consistently held me to that standard. There were many late nights that provided for great memories.

DigaForce was blessed to have a number of close friends who helped out at different times throughout the process, including Eric Martindale, Vance Fitzgerald, Tyler Cross, and Ana Echeverri. Their selflessness was greatly appreciated and I look forward to helping them in the future. We were also fortunate to have some great mentors along the way, including Burr Sutter, Brian Marks, Bill Spruill, David Gardner, Alex Osadzinski, Scott Moody, and Jonathan Hornby.

Lastly, I have to say “THANK YOU” to the Triangle startup community. Although it is hard to measure (and name everyone), there were countless times when we received help or publicity that proved beneficial. It takes a village to raise a child and this community played the parent role well. I look forward to spending time with more entrepreneurs and investors in the coming months. It’s time that I start trying to return the favor to anyone and everyone who is willing to put up with me!

Enough about 2013. It is a new year and time for new challenges. I’m excited to figure out what the future holds. As always, if I can help anyone, please reach out and lets talk!