It’s time for http://csjconferences.org/socon11, the 5th annual social media conference at Kennesaw State University. The dates are Friday and Saturday, Feb. 4-5, 2011. The theme is Social Media Meets Mobile.

I was a founding member of the SoCon conferences, so they are dear to my heart and Appcelerator will have a part again this year as sponsor and our own Appcelerator partner, Andrew Zuercher, Titanium Evangelist, will be running a breakout session entitled: Use Your Web Skills to Develop Native Mobile Apps.

He will be joined by some 25 other presenters and discussion moderators, including social media gurus from Ford Fiesta Movement, CNN, AT&T, Edelman, and the Pew Center’s Internet and American Life Project.

Here is the full information http://csjconferences.org/socon11/ , including how to register for the Friday Night 5th Anniversary Mixer, Social Networking party at the Carter Center. It’s your chance to network with some of the Southeast’s most influential figures and enjoy food, music, and lots of cool stuff.

Register now, last year, they closed down registration two weeks before the event. So this next week is fairly crucial if you definitely want to attend. You can register now at http://csjconferences.org/socon11/

Unfortunately, this year, unlike all the previous years since we started SoCon, I won’t be able to attend.  However, I’m very excited about how the event has grown and wish Lenn and the rest of the gang a great event – it looks to be the best and biggest yet!

At Appcelerator, we recently received permission from Apple to gain access to their full iTunes catalog which we receive through nightly updates.

I’ve been playing around with the data to see what kind of useful information I can gather to better understand the applications within the store; both today and over time as it matures.

Here’s some initial information about the iTunes marketplace as it relates to iPhone and iPad applications.  This data is from September 15th, 2010 for the US iTunes store.

What’s the average price per category?

The top 5 categories by average price are:

Medical – $7.65

Navigation – $5.08

Book – $5.07

Reference – $3.51

Education – $3.27

What’s the most expensive apps per category?

The top 5 categories by maximum price are:

Business – $999.99

Education – $999.99

Utilities – $999.99

Lifestyle – $999.99

Medical – $499.99

The bottom 5 categories are also interesting:

Weather – $9.99

News – $34.99

Social Networking – $99.99

Healthcare – $99.99

Travel – $109.99

How many apps are in each category? (i.e. how many apps am I competing against)

What’s interesting in the latest statistics is that Books have pulled way forward beyond Games recently.  There are now 45,542 books in the iTunes application marketplace vs. 38,033 Games.  Books represent 17.5% of all applications in the store and Games represent 14.6%.

The top 5 App categories:

Book – 45,542

Games – 38,033

Entertainment – 29,285

Education – 20,228

Lifestyle  - 16,592

The bottom 5 App categories:

Weather – 1,030

Medical – 3,941

Finance – 4,023

Social Networking – 4,138

Photography – 4,695

What are the average size (in MB) of each app by category?

The size of the application (in megabytes) has an interesting perspective since the size determines how much bandwidth is used to download an application (assuming over-the-air, which I believe most people use).  It also determines if you must download from the web and synchronize (apps over 20 MB).

The top 5 categories by size are:

Navigation – 50MB

Education – 26.8MB

Travel – 26.0MB

Healthcare – 24.5MB

Reference – 17.3MB

Wow, what’s interesting about this statistic is that 4 out of 5 of the applications in these categories cannot be downloaded over-the-air from your phone on the 3G/EDGE network – they must be downloaded from within iTunes and synchronized to install them.  However, you can install an application over wifi at any size.

The smallest applications on average by category?

Utilities – 2.3MB

Weather – 2.9MB

Productivity – 3.2MB

Social Networking – 3.5MB

Finance – 4.5MB

The average application on the iTunes store is 14.85 MB.  This means that the average application in the iTunes marketplace is storing a lot of content inside the application and taking advantage of the fact that these applications are resident on the device and don’t necessarily need to connect to the Internet to retrieve content.

What’s the largest application in the store?

The winner up is G-Map U.S. & Canada by XRoad Co., Ltd. at 2.12GB.  Yes, that’s right, Gigabytes.

This looks like an awesome application.  It costs $49.99 and has live traffic and text-to-speech.

What’s the smallest application in the iTunes store?

iJustLight comes in at the featherweight size of 14K.   It costs $0.99 and appears to — well — present a light to help you see.  I love their screenshot – it’s simply a white image (I can’t even insert it here, you can’t see anything).

Which developers has the most applications in the store?

We all know it’s not about quantity, but quality.  But which publishers creates the most applications in the store (based on total number of apps)?  Here’s the top 5:

Iceberg Reader – 7,708

Brighthouse Labs – 4,407

Andrews UK Limited – 2,604

PraiseMorgan – 1,720

Your Mobile Apps Inc. – 1,703

Who are the top game publishers by the most applications in the store?

Alain Fernandes – 333

Brighthouse Labs – 251

Quizicals – 207

M5 Systems LLC – 165

Gameloft - 161

Who are the top eBook publishers by the most applications in the store?

Iceberg Reader – 7,701

Andrews UK Limited – 1,723

Libriance Inc – 1,646

Your Mobile Apps, Inc. – 1,613

For-side.com – 1,550

How many unique application publishers are in the iTunes marketplace?

There are 52,354 publishers and 260,119 applications in the iTunes marketplace (US).

The top 50 publishers on average have produced 49,335 apps and an average of 986 apps per publisher.

The top 50 publishers produce 19% of all applications in the store.

The top 100 publishers product 24% of all application in the store.

This is a typical long-tail distribution of application publishers to applications.

What’s the breakdown of applications by content rating?

Publishers must rate each application according to a content rating. What’s the breakdown of applications by content rating?

What’s interesting is that 2,603 applications have no content rating – probably when Apple didn’t require it.

Here’s the breakdown:

4+ – 203,886 (78.38%)

9+ – 16,280 (6.26%)

12+ – 21,649 (8.32%)

17+ – 15,701 (6.04%)

None – 2,603 (1.00%)

This means that almost all publishers are trying to reach the youth/teen or above market with 93% of all applications rated 4+ or above.

In Summary

If you’re an application developer, it’s good to understand the economics of the app store.  Of course, these statistics above are specific to an individual day and only good for the U.S.  In the future, I’ll try and expand these statistics to include more regions and over a longer period of time.

Of course, if you’re not already building a native mobile application and would like to find out how, you should check out Appcelerator Titanium.  Titanium gives the power of building native applications to the web developer.

As of today, Titanium Developers have built over 4,453 applications for the app store – making Titanium developers collectively the 2nd largest publisher in the App Store. Congrats to the Appcelerator team and all the Titanium Developers!

(Updated: 9/19 with better charts)

Today was a very busy day. I spoke about Appcelerator Titanium at the O’Reilly/360 Inside Mobile Conference in San Jose and later served on a discussion panel with Daniel Brusilovsky (Teens in Tech, Techcrunch), Phil Libin (CEO of Evernote) and Christian Sepulveda (Pivotal Labs).

I then spoke tonight at the iPhone Business Meetup in Santa Clara. Tonight, I spoke a little bit about iPhone and the Enterprise and gave some perspective on the opportunities and challenges for developers considering iPhone in the Enterprise.

Below are my slides from the presentation. As always, I generally try and post all of my public presentations on my Slideshare Slidespace.

iPhone in the Enterprise offers a lot of interesting opportunities and some big challenges today. However, some of the challenges are not just inherent in iPhone – they are overall challenges of a rapidly changing marketplace. We’re seeing a massive change in the dynamics of the mobile ecosystem. These changes aren’t just with the emergence of iPhone and Android – new mobile devices that have changed the smartphone marketplace almost overnight – but also in how these new entrants are disrupting carriers and handset manufacturers. In addition, we’re seeing new mobile handset entrants like HTC and Dell Computer also come into play. Of course, we’re also seeing old players like Palm make a play with WebOS in a very exciting way.

It’s an exciting time to be a web developer. I believe web technologies will continue to emerge as the most important pieces of the technology landscape. It’ll be fun to watch how this emerges. I think in the next 24 months we’ll see some pretty big ecosystem changes.

If you’re considering building an iPhone and/or Android application, please consider taking a look at our Appcelerator Titanium product. Titanium allows you to build native mobile applications using web technologies. That’s right – HTML, JavaScript and CSS. These are technologies, tools and skills you have today.

Russell Jurney’s blog post has spurred me out of my blog-laziness to talk about something I’m passionate about – starting companies and helping entrepreneurs. If you haven’t read his most excellent post, titled “The California State of Mind” – stop now and read it.

As a follow-up from his post, I wanted to share something not widely known in Atlanta circles about how Nolan and I funded Appcelerator. Sure, everyone by now around town has heard that Appcelerator was funded by Storm Ventures, a well-known Silicon Valley VC. They’ve probably also heard that we moved Appcelerator from Atlanta to Mountain View, California last summer – almost a year ago now.

But that’s not the full story and I’d short change you if I don’t tell you the rest of the story. How did we get there? So, you know that we moved and that we raised money to follow our dream. But, how did we get there and how did we survive before that?

We had been in business almost a year and half before we raised money and had almost 15 employees when we raised money. The other little known fact – and for good reason – is we also generated just shy of about $1.5M in revenue in ~12 months *before we raised money*. Yes, our little ‘ole poor startup in Atlanta had real revenue from some real customers. Mind you, our revenue was largely services based and was revenue we generated by helping a few select customers implement our technology.

That’s the rest of the story – the back story to the funding. And there’s a lot to learn from that. Of course, as a small private company, I’m not really a big fan of talking about revenue. It’s just not usually fruitful to do that for a lot of reasons. However, it’s easy to misread the situation when you talk about our situation and your situation and the greater situation of the Atlanta startup scene. That’s because, most entrepreneurs get fixated on raising money to build their business – that they forget about what matters: solving real problems for real customers and translating that into cash. Remember the goal of that wonderful startup? Yeah, create revenue. Your cool product idea sucks if it doesn’t somehow, someway, create a path to value – which most of the modern world ultimately weighs as cold hard cash. Facebook’s doing it. Google’s printing it. Even Yahoo, that company we all thought was “dead” is generating billions of it.

The new VC is the old VC and it’s got the best terms on earth: cash.

No equity and no board meetings required. Just build something that they need and they’ll pay you for it.

Do that and you’ll transform your startup. You’ll have lots of options. Worse case, you’ll have a lifestyle business. (I’ve heard that 2 cadillacs and a boat is better than an office at the ATDC these days.)

So, I’m sure I’ve made it sound easy. Well, solving a real problem for a customer that will pay you isn’t always easy. But, guess what, if you can’t do that, you can’t raise money outside of the Bay Area anyway – give it up. And, guess what, the myth is that Valley companies don’t make money. Well, some don’t, sure. But, the pressure here to perform, to measure, to execute … much much much more than Atlanta. Steel sharpens steel.

Here’s what I did to make it happen

I was very, very fortunate to have a few trusted customers that believed in me. That’s right, not too much different than investors. They bought my vision and believed I could help them – and that by doing that, they would also help me (key point). They were willing to take a risk on me and what we were trying to accomplish and that there would be a mutually beneficial outcome.

The mutually beneficial outcome was that if we could help them solve some problems at a certain price and within a smaller than usual timeframe, it would be worth it to them (read: they would pay money). In trade, it would help us improve the product, work to refine our value proposition and give us cash. I love working hands-on with customers because there’s where it matters the most. It’s not as fun as just getting a pile of money to spend and getting in a nice little bubble… but trust me, if you’re not working with customers, you might as well assume you’re doing it all wrong – because you are.

We also tried on purpose to limit how many customers we worked with and what types of deals we did. We were small and wanted to keep it that way. In our case, we didn’t want to build a big services business. We wanted to continue to generate enough incremental revenue to hire 2 more engineers and still have 4-5 months of cash in the bank in case things slowed down. We funded almost 15 souls through around 5-6 full-time billable employees (granted, a number of us were working well over 70-80 hours per week on multiple customers).

But, we couldn’t have done this if we didn’t have great customers that helped. And they were willing to take risks. And we’re forever grateful for that. (One note, our customers weren’t all in Atlanta and in fact, we covered Boston and another area too).

So, why did we raise money?

Nolan and I both have experience in services companies and both have started services companies before Appcelerator. Most service companies are awesome lifestyle business. They’re also feast or famine and very difficult to scale. We’re software guys. I like software – a lot. So, we viewed our strategy as a way to work with customers to help us develop the product and to give us enough runway to figure out how we could scale the product (and really, what the product we wanted to build would be). It always takes a lot longer from the beginning to create “the product”.

We got to a certain point (read: revenue) that we had a choice. We needed to either ramp up considerably given the size of revenue and potential pipeline of new services revenue, or, we needed to raise enough capital to allow us to transition out of the services business to focus on the product full-time. It’s almost impossible, in my opinion, to build out a real product and do services at the same time. We knew that.

So, we had options. I had experience raising VC money and I had contacts. Once we got to a certain level, our advisors and Nolan and I started thinking that it would be time to think about bringing in outside capital. We also were lucky on the timing. We timed things just right, and that’s pretty hard to do given where the economy ended up just 6 months later.

My advice to you is simple. And, it’s a slight twist on Russell’s.

Either:

1/ Move to the Valley and shut up.

2/ Stay in Atlanta and stop complaining.

In either case, you’ll need customers. Fund your startup with customers. Build something that customer’s need and will pay for. If you do that, #1 or #2 really makes little difference in the scheme of things.

(P.S. This advice applies to everywhere else outside of the Bay Area too).

Last night I got the opportunity to come back to my home town and do the keynote this morning at SoCon09 – a very excited event that we started 3 years ago and is still growing!

Here’s my slides.

We recently moved from Atlanta, Georgia to Mountain View, California and during the move I had a chance to go through some old boxes I’ve had for years — twenty years to be exact.

Tonight, I decided to open up some of the boxes and try and see if I could find some old pictures after seeing some of my high school friend’s pictures on Facebook.

I came across a Newsweek magazine in almost perfect shape from almost 20 years ago to the date: October 24, 1988. Spooky?

And on the cover, today’s hero was the wonder kid 20 years ago: Steve Jobs. Yep, that’s right, the man on top of Apple (once again) and by far, one of the world’s most influential technology snobs.

The title: “Mr. Chips”. The subtitle: “Steve Jobs puts the ‘wow’ back in computers.”

How apropos for then, and today.

As an aside, another big box read: “Why Bush is winning: The GOP’s Campaign Machine”. Yeah, that was Bush senior. 20 years later and we’re still talking about a Bush in the white house. But, that’s another story.

Flipping through this issue was literally going back in time. A number of computers advertisements, several cigerrate ads and an article on how “more consumers are ducking the price of perpetual interest by paying off bank cards in full”.

This was the IBM 280 PC. It ran DOS, had VGA graphics, 4MB of memory on the system board, proprietary PS/2 devices and could be configured to run IBM’s OS/2.

You don’t see cigarette ads anymore. This article predicted: “Heads you win. Tails you win.” However, fearing thousands of separate, costly lawsuits from customers with smoke-related health problems, the major U.S. tobacco companies and 46 states signed the Master Settlement Agreement (MSA) on Nov. 23, 1998. The MSA placed restrictions on future tobacco advertising and cigarette sales practices and also provided for a $250 Billion settlement.

The Epson PC? This one was the Equity ET with the tagline: “I don’t need a laptop computer. I need a desktop computer that fits on my lap.” Great vision, terrible execution.

Walmart was on the leading edge of technology stores with this tagline: “Name brand electronics. Always at lower prices: The switch is on to Wal-mart electronics”.

Let’s first start with the cover article on Mr. Jobs – the whiz kid, 33 years old back then.

The article is mainly about Steve Jobs’ comeback after Apple Computer with the NeXT computer. “Love him or hate him, people in the computer world couldn’t wait to see what Jobs had secretly worked on for three years in his Palo Alto headquarters.” The price tag for the initial model (with a university discount): $6,500.

Even Esther Dyson, back then the publisher of the Release 1.0 newsletter, said: “It’s a neat, neat box.”

And Steve Jobs was aimed “where the smart money is going”: the workstation market was $2.5 Billion and broken into the following market leaders:

25.5% – Sun Microsystems
18.6% – Apollo Computer
17.8% – Digital Equipment Corp
17.2% – Hewlett-Packard
17.0% – “Other”
3.9% – Silicon Graphics

Notice anybody missing? IBM, Toshiba, Sony, Dell, Apple?

Notice some that are gone? Apollo, DEC ? I would imagine Sun and SGI together probably own less than 3.9% of the workstation market these days.

The article also had a very familiar name in the article, Bill Gates, with an awesome photo. Back then, Gates was only 32. The article states that Gates is “a virtuoso software engineer with virtually zero charisma, he is the ultimate entreprenerd.” According to the article, Jobs invited Gates to contribute software to the NeXT, but Gates declined, saying there wasn’t enough money in the narrow market Jobs was pursuing. It also has Gates saying: “Steve always yells at me.”

Well, NeXT didn’t exactly take over the computer world, but Steve Jobs did and he did regain control of Apple (along with a number of key people and technologies from NeXT) after Apple bought NeXT only 8 years later for $429 million. Jobs returned as CEO in 2000 and NeXTSTEP was the foundation for the next generation of Apple operating system, OS X.

In this same issue, they outlined some interesting predictions for the future of technology.

Let’s see how we did 20 years later.

Education

Grade school
Prediction: Desktop computers will replace pens and papers.
Reality: Not only do classrooms have desktop and laptop computers, most students now have the full power of a handheld computer in their pocket.

Language
Prediction: Voice simulation will make it possible to learn foreign tongues from mechanical tutors.
Reality: Rosetta Stone, one of the leaders in language tutoring uses voice recognition and a computer to teach foreign languages.

Libraries
Prediction: Buildings full of books will be stored on optical disks.
Reality: Not only stored on optical disk, but stored in the global computer network and instantly available by keyword search thanks to the Google Book Search Library Project.

Programming
Prediction: Flexible software will make it easy for students to create their own computer programs.
Reality: With languages like Squeak, Ruby and HTML, students have a variety of programming languages they are learning way before they reach college.

Business

Design
Prediction: Everyone from architects to dressmakers will be able to make simulations of products – in 3-D.
Reality: Computer Aided Design (CAD) software has become common-place and producers and consumers worldwide can use software provided by companies like MFG.com to work with each other to build just about anything.

Secretarial work
Predictions: Machines will take calls, write memos and organize the busiest of executive schedules.
Reality: Secretaries? The secretary pool has been retired and replaced by the PC, Gates’ multi-billion dollar Office productivity suite and email. Only venture capitalists are the dinosaurs left that still use secretaries.

Networking
Predictions: Using groupware, machines will talk with each other.
Reality: Not only will machines talk with each other all over the world, called the Internet, but people also communicate in social and virtual reality networks.

Travel
Predictions: Laptops will be small enough to slip into a vest pocket.
Reality: Laptops aren’t quite that small, but full-fledged mobile devices from computer pens, mobile phones and RFID chips are fueling the nano revolution.

Science

Medicine
Prediction: Doctors will walk through surgery beforehand – on screen.
Reality: Doctors, even one’s across the world, can now operate on patients using computers and sophisticated video conferencing systems. We’re even now starting to see biocomputers which can enter the body to perform certain medical tasks.

Technology
Prediction: Sophisticated imaging will revolutionize high-tech design.
Reality: Imaging in all parts of science have revolutionized the world. Pocket cameras and mobile phones have more sophisticated imaging software and lenses than expensive professional photography equipment less than a decade ago. 3D ultrasound imaging can produce an almost photorealistic image of a fetus in utero.

Meteorology
Prediction: Computer “models” will track weather patterns and predict major shifts far in advance.
Reality: Computers have become more advanced at tracking weather patterns and creating more accurate prediction models.

Criminology
Prediction: Police will be able to recreate the scene of a crime – and simulate the moves of the criminal.
Reality: Police are using more sophisticated technology – from chemical analysis to DNA to find and prosecute criminals.

The Arts

Graphics
Prediction: Any artist will be able to do super-sophisticated animation or create images that look real.
Reality: Computer software gives artists the ability to create and mash up music, video, animation and photos and produce and distribute them at very little cost.

Music
Prediction: Compositions will be written and stored on computers.
Reality: Not only are they written and stored, music is distributed, re-mixed and stolen all over the world by millions of people each day with the click of a button or mouse.

Video
Prediction: High-resolution screens will revolutionize the field.
Reality: High-resolution video screens are everywhere, from the football field to the local bar to the airport check-in desk. High-definition television is available in many homes.

Games
Prediction: Home computers will be able to generate sounds and special effects of a “Star Wars” movie.
Reality: Not only have home computer games been able to generate sounds and special effects, the gaming industry has grown larger than Hollywood and music labels combined and has bigger production budgets than most movies. Multi-player interactive games can be played on-line at any time of the day, worldwide.

Alan Kay of Xerox’s PARC fame predicted that “portable computers will require built-in cellular-telephone connections – so you can tap into big data banks while sitting under the apple tree.” (The “apple” keyword has a particular significance today as the Apple iPhone takes a predicted 25% of the smart phone market share after only one year on the scene).

Mitch Kapor of Lotus fame said: “We need to build a national infrastructure that will be the information equivalent of the national highway-building of the ’50s and ’60s”. The World Wide Web was invented by English scientist Tim Berners-Lee one year later in 1989.

Wayne Rosig, at the time at Sun Microsystems, predicted: “It’s a waste to have hundreds of computers in a building that share nothing but AC power.” The article predicted that “Groupware will permit an officeful of people to collaborate on, for example, a magazine advertisement, with artists, copywriters and salespeople all contributing, via computer, to the project. When a writer changes a line of copy, it will instantly show up in the layout on the designer’s computer screen.” Today, we have applications like Google Docs and Zoho that have similar capabilities.

John Seely Brown of Xerox’s PARC fame, envisioned “meetings at which every participant has a computer – and the meeting’s progress appears on a ‘decision spreadsheet’ projected on one wall, on which the pros and cons of the argument are analyzed for all to see.” In most meetings today, it’s not uncommon for everyone to have a laptop and mobile device during a meeting. Today, virtual meetings are commonly held online using services like WebEx.

My favorite prediction was from Lawrence Tesler, then the VP of advanced technology at Apple and now at Yahoo: “Sooner or later, more people will carry their computers around than keep them fixed to a desk.” With more than several billion mobile computer devices worldwide in use today, this was probably the one prediction that was difficult to understand in its impact. In some countries like Japan, there are more mobile devices than personal computers. And, with the price of computer chips, storage and memory continuing to fall and with the advent of modern nano technology, we’re seeing more and more miniaturized computers in all sorts of products.

And, as a final bonus, the political carton section from this issue:

Even then, Donald Trump ruled the world. After a rise, and fall, and rise again, he’s back on top just like Steve Jobs. Funny how much things have changed, and in some ways, they’re still the same.

What will the next 20 years bring us? Any predictions for the next 20 years you’d like to share?

As everyone is aware, the global economic downturn is upon us and we’re all standing around trying to figure out what this means for all of us — especially us startups. I hope nobody is living in a bubble and believes we’re at the bottom and it can’t get much worse. My prediction, and plenty of others, is that it’s going to get much, much worse and last a lot longer than we can imagine. Maybe decades at this point, although that’s even hard to fathom.

The public markets are going to take a really bad beating and many companies, even companies with fairly strong balance sheets and business fundamentals, could find themselves in terrible terriority – either by a takeover or massive layoffs and cost reductions.

All-in-all, I do believe that this is a necessary cycle – part of the normal cycle of things. If you look at the chart for the past 30 years, we’ve been on the up and up for a long time. An overall correction is due.

DOW since 1970

I also believe that a large portion of the spiral is psychological. Nonetheless, the spiral will spin out of control for a good bit of time and we all need to be prepared. As a startup, you’ve got some really, really tough choices to make. Some are obvious, some are not so obvious. My advice would be to think long and hard about survival, forget everything you thought you knew a week ago and assume you’re going to have to get heads down and grunt through this. Even well funded startups are going to be in big trouble soon if they’re not careful. All your models, your predictions, yours forecasts and best guesses are gone. Throw them out and assume ZERO.

My advice to a startup that’s not cash flow positive right now is to assume ZERO revenue for 24 months. If you can’t survive right now with the cash you have in the bank for 24 months, you have a few options you should consider right now:

1. If you have access to capital, get it now. (And assume you won’t get it)
2. If you have access to debt of any kind, get it now.
3. If you have anyone you can live without, get rid of them now.
4. If you have outstanding AR, collect it right now – offer a discount or more product to get it in the bank.
5. If you’re negotiating a term sheet, sign one right now – regardless of the terms.
6. If you have a business line of credit, use it now.
7. Look to cut as many fixed expenses as you can right now. Get rid of anything that is monthly if you possibly can — even consider the cost of breaking obligations short-term over the long-term cost.
8. Look at your business and strongly consider simplifying everything you can.

If you’re cash flow positive, well, you’re in a different position but most likely have similar things you should consider (including above):

1. Cut your 12 month forecast by 50%. IF you make it up, wonderful, you’ll be that much better. Assume that your customer is going to get killed as well and will be going through similar cuts and reductions and assume you’re on that list.
2. Examine your bottom 25% of your sales force and eliminate it now.
3. Take the top 15% of your sales force and consider changing the incentive plan — consider lowering bases (they’re already top performers) considerably and making it up for consistency of exceeding their numbers. Consider increasing your accelerators, but try to tie your accelerators (even consider compounding them) to consistency on a quarterly basis. If you do #1, you’ll be in an even better position.
4. Reserve your cash as much as you can, you’ll be in a good position to sweep up around your market and get some of your competition on the cheap in the next 18 months.
5. Don’t hire anyone unless you absolutely have to for the next 3-6 months. There is going to be top talent on the street soon and you want to have reserves to pick them up opportunistically.

I remember quite vividly the first dot com crash. I was in the middle of it and it was very depressing for a long time. This feels much, much worse and feels like it’s going to sweep much faster than even the dot com crash. Why? This is much more widespread – global even. Because of that, it’s going to hit all very, very hard. And each part of society will be affected, not just one sector or set of markets.

There’s a lot more qualified people out there giving some good advice this week. I received this internal letter (below) that Benchmark sent out to their portfolio CEOs:

The recent downtown in the public markets (now known affectionately as “the U.S. Financial Crisis”) is obviously on everyone’s mind. Some of the entrepreneurs and executives with which we are privileged to work have reached out and asked what this means for private companies, the VC world, and Benchmark. As such, I thought it might be a good idea to send you our thoughts on the current situation, and specifically what it means for venture backed companies.

From a high level, this downturn is different from the Internet bubble of 1999. First, the last downturn started in our backyard. We were the speculators; this time it is someone else. This means that the “crash on the beach” won’t be nearly as severe. In the Internet crash, many times the customer was actually another VC-backed company and as such, there was strong negative spiral. That said, while this downturn might be shallower than last; it could last longer in terms of absolute time. The American consumer is super-leveraged which wasn’t true before the 1930’s or the 1970’s. The overall economy will have trouble gaining momentum with this debt anchor, and my best guess is the contraction is not yet finished. As such, it might take a long, long time before we see glory days again.

Like every major shift in the environment, this one will offer opportunities as well as risks. JP Morgan was able to buy two great assets at substantial discounts with government assurances, precisely because they played the game frugally while others were more risk seeking. The real key is to have a keen understanding of the game on the field and to be the one that adjusts swiftly, rather than the one that moves after it’s become blatantly obvious to everyone else it’s time to move. Many companies that thrived post 2001-2003 were simply “Last Man Standing” in their industry. It doesn’t sound all that glamorous, but it was the exact right strategy to deploy at the time.

In terms of defining our current situation, let’s start with the impact on the actual capital in “venture capital”. The institutions (limited partners) that typically invest with Benchmark and other venture funds are not the ones on the cover of the financial news everyday. In fact, these limited partners are typically quite conservative and have a very long-term perspective. Certainly, new precedents are being set every day, so it’s hard to say the word “never” in this environment. Still, we are unaware of any situation where capital availability for us or any other VC firm is in question.

One would also expect across-the-board reductions in follow-on financing valuations. As financial markets deteriorate three things happen. First, investors get nervous. As such, they tend to “choke up on the bat” and be more conservative. We have already witnessed skittishness on behalf of follow-on funders, as well as a lengthening of the time it takes to complete a fundraising. The second reason valuations will fall is that the public market comparable valuations have fallen materially. This will have a direct impact on exit prices, be they an eventual I.P.O, or M&A. In fact, I was recently at a gathering of corporate development execs, and their number one concern was that private company executives have not realized that the scoring system was just reset (expectations too high). Lastly, investors are more concerned that a protracted economic downturn will negatively impact each private company’s specific results, increasing the likelihood of a revenue or cash flow miss.

If we leave you with one message it would be this: financings as we know it just got a whole lot tougher. Basically, the cost of capital is going way up. This is, of course, a sweeping generalization. Some of you have tons of cash, and some of you are profitable, so the immediate impact will obviously be less. That said, if you do need to go to the market for capital in the foreseeable future, you should consider that the environment will be much less hospitable than it has been for the past 3-4 years (which have actually been pretty benign), and that this less hospitable environment could first for time measured in years not quarters.

Another obvious strategy is to extend the runway. Hopefully, everyone is aware of exactly how many “months of cash” they have at their current cash level and burn rate. If you have a method for increasing this runway, we think you should do it, and quickly. This serves two purposes. First, it gives you the opportunity to outlast the competition, and second, it puts more time between now and when you are forced to re-enter the capital markets. One could argue you should draw down your bank lines right now. Why? When you need the money, the funding source may just say no (they did last time). What are you going to do? Sue them? Take away their warrant coverage? So what. If they get cold feet – you won’t see the cash, I don’t care what the term sheet says. The bottom line is that you should watch “months of cash” as your most important variable.

Be calm, but pragmatic. The purpose of this letter isn’t to send everyone off in a panic. It’s simply to convey that the rules of the game have changed. One key problem is that during these market downturns, most people don’t adjust quickly enough. As an example, not hiring heads that were previous TBH isn’t really a reduction in expense. Also, 10% cuts rarely lead to anything other than multiple rounds of cuts, which have a harrowing affect on culture. It’s easy to mentally understand this is the right thing to do. It is ten times harder to make the actual decisions to affect change. These are extremely hard decisions.

You may know that I am involved in Zillow. They did a survey of their users to ask what they thought was the current impact on home prices across America. The average answer was that homes in America were down 20-30% in value. The survey then asked what the user thought had happened to the value of their own home. Miraculously they thought their own home had retained value against the odds! Surprised? It is human nature. As most of you read this, you will be thinking in the back of your mind why your company is different than the average company (like these homeowners) and why you are the exception that doesn’t need to take action right now. This could be rationalization.

Recently, I spoke with an entrepreneur who as CEO during the dot-com crash and oversaw a headcount reduction from 130 to 28 (through two major layoffs), and eventually back to profitability and an IPO. If you think a 10% layoff is tough, imaging laying-off 78% of your employees. It is one of the hardest things I have ever seen anyone do. I recently asked him how that experience has shaped the way he would advise people on running a startup. He had a list at the tip of his tongue (included now):

1. You don’t realize how fast things spin out of control. There are self-reinforcing negative effects in a downturn.

2. Don’t spend money until you have to:
a. Don’t move out of your office until you are sitting on top of one another
b. Don’t hire any incremental employee until you just can’t stand it
c. Don’t get more capacity in your data center until your site is going down

3. Better to be “late to the party” than to be early and run out of money

4. Line item review of the budget every month (legal, accounting, everything)

5. Not just a CEO mindset, but a company mindset:
a. Everyone must buy in to the process
b. But in a calm way – not run for the hills

6. Create 2 or 3 different burn scenarios – know at any point in time how many months cash is left

I include this mainly because it highlights a “very high bar” in terms of frugality. It’s one thing to say you don’t “waste money” and another to live as lean as you possibly can. As mentioned before, in market downturns, frugality is not only a virtue, but also it could be the difference between survival and failure.

Many great companies emerged from the 2001-2002 time-frame. Companies built during tough times typically have incredible focus, great cultures, and true desire to compete and win in all environments. For many, this downturn period could be opportunistic: a real chance to differentiate yourselves from the other players in the market. However, it is imperative to understand that the environment has just shifted to one where differentiation will likely be defined not be aggressiveness, but rather by adaptability.

Folks, the game has changed. Time to get serious, get focused and sober up. The world’s going to be a much different place for awhile. And, I sure hope we’re all much better off for it in the long term.

This past week was a pretty significant event in the web2.0 world – at least to people who follow startups and Techcrunch. This week was the equivalent of the web emmy’s for startups, called the Techcrunch 50. Most startups presenting had absolutely no business model. Except one that really stood out. And, it not only stood out, but the guys at Yammer took top prize.

I’ve been a pretty active twitterer for quite awhile now. It’s quite addictive and impossible to explain. Here’s one way we discussed today at the office in an attempt to explain it:

• Phone calls are for urgency
• Emails are for content and detail
• IM is for immediacy
• SMS is for quick confirmations
• Blogs are for news and commentary
• Wikis are for knowledge sharing
• Twitter is for casual, micro conversations

With so many different ways to communicate, and so much more information available at all times, it’s becoming very difficult to manage our digital lives. However, on the other hand, we have more and more tools at our disposal.

If you don’t twitter, it’s probably hard to understand. I’d urge you to try it — but I warn you: you’ll probably hate it initially and give up quick. But, it’s one of those transformative events that will happen and you will “get it”. It’s OK – some people never get it (and shouldn’t). Others get it pretty much right away.

Yammer gave me one of those a-ha moments this morning. When I heard about Yammer, I thought, “hmmm…. that’s very interesting and obvious”. I signed up (it was a great experience) and invited a few people around me. They all joined within a few minutes. I started yamming (what do you call it?) — and within not too long — I decided to invite the rest of our employees. Within a few hours, everyone had joined (except one person who was traveling). And by the end of the day today (remember, we signed up mid-morning Pacific time), we had already had 11 members, 3 tags and 105 posts.

Yammer is twitter – but for business communications. It essentially is a clone; with finer control and a decent revenue model. With Yammer, you can use it for free. However, if you pay $1 per user per month, you unlock a number of enterprise features such as access control features (IP ranges), custom logos, etc.

Yammer will be a very powerful internal tool for communication – especially for passive information that can be followed or produced as desired. It’s much less invasive than email, a lot less urgent than a call, and provides a nice way to organize content across the company.

It’s especially nice for distributed teams like ours. We have people now in Atlanta, Texas and California. This is a nice way to bring everyone together in ways that aren’t possible with email or phone calls. It allows everyone to participate in cross-concerns across our organization.

Congratulations on the Yammer team. This is a great product.

As a parting note, there are others that are clamoring for this market as well. One that announced a little prematurely, namely because of Yammer’s announcement this week, was Present.ly. I haven’t been able to do a review yet of their application, but it looks similar and they seem to have quite a number of nice features as well and they’re ready to rumble. Ahhh, the fighting entrepreneurial spirit is so refreshing.

So, if you already twitter or are now considering it: you can follow me on twitter for random, sometimes useless, sometimes interesting tweets. You never know what might happen….

A bunch of the usual Atlanta suspects (Sanjay, Lance, Stephen, Scott and Paul) have just announced Startup Gauntlet. I love the name. Pitching is like being in a gauntlet.

Your pitch probably sucks — they all do. It takes a lot of going around and around to hone your pitch and most importantly, become confident in what your pitch is. You have too many slides, too much text on each slide, you’re trying to cram 3 hours into 30 minutes. That’s just how it is. Pitching to VCs is much more of an art than a science. It takes lots and lots of practice (read: failures) and a bunch of luck. But most importantly, you have to iterate and get it down to a few key slides that convey your message.

Remember: the goal of the meeting is to get another meeting. And ultimately, if you can keep them interested, you will make a deal (or quickly, it will end). Don’t try and answer every question possible in your slides — you’ll fail. Don’t try and cram a bunch of information on the slides for them to read, they can’t.

Slides should act more like an outline of the discussion. They should help you direct the conversation in a flow. But, in most cases, if you’re getting through the slides in an orderly fashion — you’re probably doomed. If they’re REALLY interested, you won’t be able to get through your deck. And don’t get pissed if you get off track, anticipate this. You will if you’re doing your job right. If you’re doing your job and they’re interested, their heads will be spinning with lots of ideas and questions and they will be engaged. If they’re just saying “uhhh huhh” and shaking their head — they’re probably just being polite. If they’re glancing at their iphone constantly, it’s time to wrap it up and move on.

Some of the best pitches I have done were one’s where at the end of the meeting, I was still on the 2nd or 3rd slide.

It’s not about the deck, stupid.

Think less is more when you put your presentation together.

I like to think in these terms:

• Who are we? (The team is 85-90% of the investment)
• What’s the problem? (Why do we need you?)
• What are we doing? (The solution to the problem and how’s it unique)
• The plan (The how and when, what are we doing today and what will we do with the money)

I’d suggest no more than 8-10 slides. You should put very little text on each slide. Instead, frame the topic transition with a bold and short title: “Our Team” Then, 4-5 big bullets. Watch out for the small text, you can’t read it.

Another tip: watch out on the contrast of your presentation. I once was pitching in the valley and was at a really big VC — really well know. I was my first introduction to these guys. They had really really cool offices with big logos of really well known Internet companies. I went into one of their conference rooms – and they were very nice. White everywhere. It was like being in a palace, literally. Then, they pulled down the backdrop (out of the ceiling) for the projector and it was white. And it was a bright and sunny day (even will shades turned).

I pulled up my slide deck, and I had a white background. FAIL. The contrast wasn’t too chipper and my deck was white washed out with everything else in the room. Completely impossible to have predicted this. But, as an entrepreneur, I was able to get around pretty easily by just quickly opening up the master and changing the colors. Lucky for me, I had followed the tips above and had simple text and only 8 slides.

A few other things to consider:

• You like your idea way more than anyone else
• There’s a lot you have even considered. Don’t try and have all the answers, it’s OK.
• A lot of the questions are more about how you react and think about the problems, less about their point of view.
• You’re wrong about the numbers
• You’ll need more money than you think
• You’ll need to hire a lot more people than you believe
• Fundraising will take you a lot longer than you’d like
• Most likely, fundraising will almost destroy you’re business during the time you’re doing it(time, money and distraction)
• It will be emotionally draining — highs and lows
• If you’re traveling to raise money (out of state), and you think you’ll be able to do “regular business” around it, you’re probably fooling yourself
• You’re idea might not be that unique
• You need trusted advisors around you that have your vested interest and can help you as a sounding board
• Make sure you take into consideration the people you’re pitching and talk to them on their terms and background — do your research!
• Time is on the VCs side. You need competition, a compelling event (not running out of money!), something to get them off their butts to move. They’ll move fast if they think they’re losing a deal. Don’t push your luck here, though.
• It’s about execution. Results speak much louder than good intentions and plans

And the last and probably key tip I’ll leave you with: DO NOT EVER PITCH OVER THE PHONE. NEVER, NEVER, NEVER. If you can’t meet them in person, you can’t read their body language and build a relationship with them. Sorry, pitching over the phone doesn’t work. You will get hit up on this and let me give you some tips for this. Most likely, they’ll have their analyst won’t to screen you if you’re not getting a really strong, warm intro to a partner. This is a weak sign, but one you may have to deal with. In this case, I would suggest you try and keep it at a very high level, almost act disinterested (but not a dick!). I would tell them you’re really focused on trying to build the business and would love to meet them sometime, but you’d prefer a face-to-face once that time is right. They’ll still try and get a bunch out of you, ask for your pitch deck or other materials, etc. Depending on what you have and at what stage, you can consider sending them some stuff. My recommendation is to never send them your pitch deck ahead of time. If you have a plan (which I would recommend is really very short as well), send that. Push for a face-to-face with a partner. If you can’t, your chance of success (and time suck) is much less. DON’T EVER TRY AND SEND A POWERPOINT AND PITCH OVER THE PHONE. You’ll be sorry you did. Trust me!

My last post generated a lot of great discussion about the good, bad and ugly in the Atlanta startup ecosystem. Thanks for everyone who sent me updates directly, via twitter and right here in the comments on my post. I also appreciated the one or two not so pleasant emails I received. You don’t have to agree with my perspectives on things — and that’s OK. Sorry that I pissed some of you off. My original intent was to provide some discussion in the community in a way to create a dialog that allows us to move forward. I think I’ve done that. It’s now up to you guys, the community, to take it from here.

Before I finally end my blogging about the startup ecosystem in Atlanta, I figured I’d depart with one last post on a more positive note. I want to highlight 2 great companies that I think are under-funded and currently dismissed (no fault to the founders or their businesses). I’ll speak specifically about each below, but both are great companies with great prospects. Will they be billion dollar businesses? Who the hell knows? However, they’ve got a lot of early traction, good people and deserve the community and investor support in Atlanta. As a disclaimer, I’m somehow involved in both companies – not financially by any means – but as a friend/advisor/cheerleader/customer/partner. Regardless of my involvement, I think these 2 companies serve as the great hope for companies being created in Atlanta.

Loopfuse

Loopfuse was started by Roy Russo and Tom Elrod a year or so ago. They had been thinking about it when they were still at Red Hat (after the acquisition of JBoss) and I’ll never forget the night I met with them to talk about starting the company and what their plans were. My advice: “quit your day job”. Like a lot of first-time entrepreneurs with good paying jobs and families – that was not something that was as easy as it sounded. But they did it. And, they struggled through building out the business – and they’ve really built something great. Not only a great product, but a great set of satisfied customers paying them real dollars every month. And some big customers. Appcelerator is a (tiny) customer too – and we put them through the ringer and they made the product better for us and we’re happy.

These guys tipify what local, first-time, startup entrepreneurs go through. They don’t have MBAs and they’ve never been CEO of anything. But they’re passionate, stubborn and just-fine-thank-you if they have to prove it to the world. And they’re doing it one day, one customer at a time.

Loopfuse makes a lead marketing product and it kicks butt. Every person with an online website / business in the world should be using this software if you care about turning those web site visitors into satisfied, life-long customers. You can think of Loopfuse as a Web2.0 version of Eloqua that doesn’t suck and that you can actually afford.

Tom and I worked together at Vocalocity. He and I co-authored JBoss Remoting together and worked on some of JMX for JBoss. Tom later left Vocalocity to join JBoss full-time as a lead developer. Roy joined Tom at JBoss and was the lead for JBoss portal. They’re tech guys and now they’re full-time entrepreneurs building something with real value.

Here’s the thing. These guys will eventually raise money – and my bet it will be before next spring. However, my 2nd bet is that they’ll raise money from the west coast if they don’t raise regional money this Fall. I don’t have any particular insight on this — this is just my opinion. They’ve got a lot of people who they’re helping – companies that have raised a lot of money out here. And, they’re really helping them making their businesses better. If the local investor scene doesn’t jump on this, they’ll be another Appcelerator quick. This is a great opportunity to really get in and help these guys out. I know they’ve been busting their butts working day-and-night to keep up with the business. They barely have any time to talk with anyone about investment because they’re busy running their company. Watch out Atlanta, if you don’t get smart and fund these guys now – you may lose your chance soon.

Skyblox

Dave Payne started Skyblox around a year or so ago. Dave’s an ex-Earthlink guy that worked in the local wifi group in business development. I met Dave through Andrew Zuercher who works for us at Appcelerator. Dave also knows a lot of the same people in Atlanta so we instantly hit it off. Skyblox is a really bold concept. Local marketing is the next big thing if you’ve been stuck under a rock. It’s where the big boys – Google, Microsoft, etc – are going. And Skyblox is dead in the middle of this with their Wi-Fi access point lead to local marketing and content. Think Web2.0 meets City Search + Yelp + Yahoo Local.

We worked with Dave to help him launch Skyblox in Atlanta. I think Dave thought he’d only get a handful of places in the highlands and some other local neigborhoods in Atlanta when they launched. Boy was he wrong – they got a lot of neighborhood’s signed up and from everything I’m seeing and hearing, they can’t sign them up fast enough. And, they haven’t even started their multi-city launch yet – but I think they’re seeing a lot of demand and success just right here in Atlanta.

This is another set of folks that are heads down and kicking butt. They’re making it through blood, sweat and tears. And, like Loopfuse, they’ll definitely get some attention outside of town if the local scene doesn’t wise up, quick. These guys have a big idea and it’s certainly not without concerns and likely capital intensive. But, if they can quickly replicate what they’ve done in Atlanta across the remaining major cities in the U.S., they’ll quickly lock up the entire local content/search/marketing marketplace.

So, in summary, here ya go Atlanta. Let’s see what we can make of these two great companies. They’re bootstrapping it, they have revenue and customers. They’re big, bold business models that will require sufficient capital to get to the next stage. And, if the bet is right, they’ll have a nice ROI. Best of luck to you. If you’d like any helping getting in contact with them, please email at jhaynie [at] gmail [dot] com.

Last thought: if I didn’t mention your company, don’t get upset. there’s lots of other companies. I’m just highlighting two i know about well.