Add to iTunesChris Shipley - Founder, Guidewire Group
Introduction
Chris Shipley is probably best known as the executive producer of the DEMO conference. She is also the founder of Guidewire Group. Between these two roles she talks to hundreds of entrepreneurs every year. In this episode, we discuss both her predictions for where the web is heading and also specifically what she would do if she were a venture capitalist or entrepreneur. She finishes the interview sharing some of the common attributes she’s observed across entrepreneurs who have gone on to be successful.
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Transcript
| 00:45 | Sean Ammirati: I’m here with Chris Shipley at the Defrag Conference. Chris is very well-known probably by most of this audience, but it’ll probably be helpful for you to give your background for people who may not be familiar.Chris Shipley: Sure. I think I’m probably best well-known for the DEMO Conference which I have been producing since 1997 for 11 or 12 years, which is essentially a launch venue for products. We look at hundreds of products from lots companies of all sizes and try to create a venue where those products can be presented to an audience and thought leaders in the investment community, business development community and the media to try to, again, create an accelerated launch for products that are out and doing something and really changing the market. |
| 01:34 | Sean Ammirati: You also are running the GuideWire Group as well.Chris Shipley: GuideWire Group is a market intelligence firm that is focused on early stage companies.So we spend our time talking to startups and trying to not only give them advice and counsel on how to take their products to market and how markets are shaping, but also use those individual encounters to create a collective picture of where the market places are going.Sean Ammirati: Cool. So where do you see the market place going now? |
| 02:05 | Chris Shipley: That’s interesting. I think we’re seeing the end of the web 2.0 frothiness and a return to real business value, what we were talking before we turned on the microphone about companies succeeding based on their ability to serve customers and to deliver value and to extract value in fair exchange from their customers. I think we’ve gone through a period of 12 or 24 months of all things web 2.0 must be magic and wonderful to, “Wait a minute. It turns out that I can’t pay the rent with page views, with clickthroughs. I got to pay the rent with real money. So what’s my business model behind this company?” I think that’s what investors are going to wind up to investing in and what really would create sustainable long-term companies in the market place. So the froth goes away a little bit. The basic principles of the social web that all of this hype was built on remain. We’re going to see some really interesting businesses in the next 12 months. |
| 03:16 | Sean Ammirati: It’s interesting to think about the substance behind web 2.0 remaining and the business models emerging now. What are some of the creative business models that you’re seeing on the edge with your view of GuideWire Group and DEMO?Chris Shipley: Ones that are about to go over the edge are the model of: Let’s just get a whole lot of people using the site and then we’ll figure out later. That’s not going to work. It works really well if your ambition is not to create a company but to create some pocket of value that you can flip quickly. I think we’re seeing that, and we may have six months or so left in those kinds of quick flip kind of featured companies being created and sold.I think that we are going to see models where we start to understand that there are all sorts of currencies of exchange, and that those models allow them to provide content, for example, to an individual in exchange for valuable personal data which you then sell as a lead to a marketer as an example. So there’s a chain of value where the cash that fuels the company may come from a different point than the direct end customer. So you get these multi-tiered businesses that are about attracting customers on one hand who are the end users, the website or service, because the real business is selling leads on the backend, for example. |
| 04:35 | Sean Ammirati: So this is an interesting point. I can talk about it both in my role at mSpoke but also just in general as I look at and see things that come through at Read/Write Web. Even in that example that you gave, you still have to get to a certain critical mass of users before there’s really an interesting business model there. So do you see it actually changing how people are creating the companies or more just how they’re thinking about the destination of those companies? |
| 05:10 | Chris Shipley: Probably both. I think you’ve got to be building companies thinking about: How is this technology or this product, how is it relevant? mSpoke is a great example in a lot of ways. There’s a company here at Defrag: HiveLive. mSpoke and HiveLive have been at trying to understand and crack the nut open the communities they serve for a couple of years before they ever ran these products to market. You understand the customer base really well understand what they need and you’re watching and being responsive to your customers.At the end of the day, that’s the businesses. We can get all kinds of creative about who is paying for what and how do we amass users and how do we do this and that. At the end of the day, if you’re not providing real value, you’re not going to continue to really attract but retain customers. So I think a lot of tactics for amassing audience are fairly well-known. The trick isn’t about amassing so much as it is about maintaining. It’s all about the value to it. |
| 06:16 | Sean Ammirati: Right. I think it was Kleiner who said, “We’re not going to do anymore web 2.0 deals.”Chris Shipley: On the one hand, far be it for me to question Kleiner Perkins. It’s obviously a venerable firm. They’ve done amazing things. They’ve helped build tremendous value for the industry and for a lot of companies. On the other hand, what does he mean we’re not going to invest in web 2.0 companies? To me, that’s either a really stupid statement or it means they’ve been investing dumb for the last 24 months, and I doubt they’ve been investing dumb, and I doubt they’re stupid, so I’m a little confused by the comment.As an investor, your responsibility for limited partners is to put money into companies that you think will return something. Whether that’s called web 2.0 or something else is irrelevant. Investing in something because it’s full of hype and maybe we can tie it up and put some lipstick on it and parade it around to get sold is maybe a good model, but it’s not a model for building sustainable businesses. |
| 07:25 | Sean Ammirati: I couldn’t agree with you more on that. So as you look out into the market place, what are the verticals where you’re seeing people build businesses that you perceive to be sustainable going forward now?Chris Shipley: Let’s take the concepts where I think the principles that we’ve learned in web 2.0. If we consider that as a moment in time as a label, it’s about social dynamics. It’s about interactions. It’s about engagement. It’s about getting technology out of the way and letting people interact. Businesses, whether it’s an enterprise business, a small business, it’s an eBay auction site doing this, they’re transacting business where I involve my customers, I’m in conversation with them, I iterate quickly to satisfy their needs and their interests and I’m making some money. That’s a good business. |
| 08:20 | Take those principles, and I think we’re going to see web 2.0 principles applied to a lot of verticals in enterprise business. I think we’ll see some shift in the consumer markets because while we’re in this age of persistent partial attention. At the end of the day I have to focus somewhere, maybe that’s I have to focus because I’m mid 40s and I’m not some teen with like 12 IM windows up but this partial attention, I don’t think it’s a sustainable mental model to get solid business done. So maybe you’ll see these kinds of focus in those areas. |
| 09:05 | Another thing we get in this change as we’re moving forward is we peel back a little bit and look at all the infrastructure that’s acquired when you’ve got all these people hitting servers, posting content, and sharing content. What does that mean for bandwidth and security and storage? In all of these different parts of the ecosystem of a connection, there are a lot of business opportunities in making sure that we all get connected in a suitable bandwidth and that our information is secure and the disks and the sky don’t crash. So I think there are lots of infrastructure cases we’re going to see come out of it as well. |
| 10:09 | Sean Ammirati: Let’s dig into the enterprise piece of that answer a little bit because it’s something that has come up a lot at this conference. I think a lot of people who had been focused on building consumer face and apps either in their current business or in previous startups are really starting to focus on the enterprise. So there was a panel earlier today and had Brad Feld on it and some other people, and Brad made the statement that early on, it doesn’t matter if you’re building a product for the enterprise or for the consumer until you reach a certain point where you have to sell it. Most of the things are similar.I thought it was an intriguing thought. I’m curious where you sit because you talk to people right when they’re first creating them. How far along the way do you think people can get before they have to make a decision one way or the other, or do you think they ever have to make that decision, I guess, to give you a complete flexibility in your answer? |
| 10:43 | Chris Shipley: I’m really old-fashioned, I guess, because I think you make that decision early on before you ever start coding and figuring out, “What am I trying to build and for whom, and let me go talk to a lot of those people and figure out what they need.” So if you believe you are building a product for soccer moms or for 18-year-old file swappers or for 50-year-old accountants, you have to go talk to those people. So that decision gets made pretty early. Somewhere along the line, you can figure out that the thing that I built for the soccer moms, that’s going to work really well for the accountants, and the teenagers actually like it too. We just have to make these changes. But I think you have to focus on the business, and the only focus you can have and be successful is on the customers. |
| 11:30 | Sean Ammirati: So as you look at these people launching these enterprise startups then, do you think it’s a new group of entrepreneurs or do you think it’s a lot of the same people that maybe were at DEMO two years ago or three years ago launching consumer apps?Chris Shipley: A little bit of both. I think we’ve seen a little bit more gray hair in the startups. It’s great when they team with someone who is a little younger, maybe, but I think that for good or for ill, there is a certain credibility hurdle that an entrepreneur needs to be able to sell into business. Typically, that credibility hurdle comes from a bit of experience in the market. |
| 12:15 | Sean Ammirati: Yes. This capital efficient theme or something that was, I think, another thing that we’ve seen, right? So people have said that it’s one-tenth the cost it was 10 years ago to launch a company, but it ends up taking about the same amount of money to eventually run them. Is that something that you’re seeing in the companies, you’re seeing at DEMO? Are they one-tenth the cost they were to launch as they were when you were first seeing pitches 10 years ago?Chris Shipley: Absolutely. Open APIs and these sorts of technologies make it very cost effective to start a company to build a product. It takes a lot more money to scale a company and scale in a market place. We’re seeing the investment shift to a different place where maybe 10 years ago, a seed round was 5 million or $10 million because you needed that kind of capital behind the development, you had to acquire servers and these sorts of things; pay for energies or that have become commodity. Then you’d see an additional layer on top to drive marketing spend. Now, I think you can use a VISA card to setup on APIs start a company. Get a prototype maybe depending on your definition an alpha or beta into market and start to test. I think we’re using the leverage of the blogosphere and social media. You can post more on it. You can test what works and observe the community, listen to the community. Then you start pouring money on the things that work. There’s less waste in that scaling. |
| 14:05 | Sean Ammirati: Yes. I think that’s true. The dynamic is interesting because if it is that capital efficient, it does change one of your customers - of GuideWire, I think, which are the VCs. So how are the VCs that you’re talking to reacting to this?Chris Shipley: I think we’re seeing a lot of firms wrestling with the problem, how do we take hundreds of millions of dollars of fund and put that to efficient work in $500,000 checks? That just isn’t the dynamic of a large fund. So we’re seeing fund of fund activities and other vehicles creating subfunds and these sorts of things as a way of providing that seed and playing in some of the very early things and allowing them to come back, that money can actually be more money we buy and some of what started off as small investments. |
| 15:20 | Sean Ammirati: So let’s say that CalPERS says to you, “You can take whatever management fee you want but we want you to run a $500 million fund today.” What do you do if you’re the general partner at a fund like that?Chris Shipley: You don’t mean me personally as I have promised my friend to shoot me if I ever decided to be a venture capitalist.Sean Ammirati: OK. [Laughing]Chris Shipley: I think you have to look at efficient ways to put little bits to work, and that’s difficult. It means you have to change the way you manage those investments. You’ve got to put different controls in the organizations that you can watch where your money is going. You’ve got to figure how you observe your bets and keep all plates spinning. That’s a harder activity. |
| 16:03 | Sean Ammirati: OK. Let’s play this game again but now you’re the CEO of a startup. If you had to be a CEO of a startup right now, not a research but a product company, what kind of product would you want to be creating right now?Chris Shipley: Well, it so happens that I am the co-CEO of a company that is building a product. I think we’re putting into play the capital efficiency models. We’re putting into play community leveraged activities. We’re putting ourselves on a platform to watch what the people do with our technology so we can be more responsive and make every spend count by a lot of testing. If you think about it, 10 years ago, you put an ad in a PC mag and hope that it worked. There’s a lot of waste in that, probably because you didn’t know where it was. Here, you can watch. The beauty of web-based applications is that you can watch what the users are doing everyday and you can watch it work so you can respond very quickly. So if I do X and people behave the way I want, let me go spend more money on X until that stops working. Now, there is very little waste in that system. I think that’s really the root of capital efficiency. |
| 17:30 | Sean Ammirati: So let’s change gears one more time. You are a bit of this. It’s less fair. Let’s make you be a futurist for a moment and say in 10 years, you know the people who are trying to change the way people live, right? That’s kind of part of the definition of an entrepreneur. What do you think will be most different about the way people are interacting with technology 10 years from now than the way they are right now? |
| 18:00 | Chris Shipley: I’ll tell you what I hope. I’m not sure if this is how it will be. I hope that people won’t be interacting with technology. I hope technology is invisible. I hope that people interact with one another. They focus on business problems. They engage or they support. They do all sorts of things; have a great time, entertain themselves, and the technology is not in the way.Today, you go into any public space and you’ve got all these people who are sitting together staring at this very small screen, and they feel that they’re so connecting to world because they’ve got that buried in their head. The whole world is passing around them, and they’re missing it because that device has become their window into the rest of the world.What happens if that device goes away and we could just have that where we can be in the world? That’s a little interesting and appealing to me, and maybe I’m oddly optimistically utopian or something. When we can kind of get technology out of the way and get to the core value of what we’re trying to do. I think that’s when it gets really interesting. |
| 19:10 | Sean Ammirati: One more thing I wanted to make sure I asked you because probably nobody has seen more entrepreneurs than you have, probably more than any venture capitalist even. What attributes have you been able to derive looking at all the entrepreneurs you’ve met and seen the best predictors of entrepreneurs being successful? |
| 19:30 | Chris Shipley: A clear vision and focus, hard work and an open mind. I think you have to, as an entrepreneur, know where you want to go, recognize that there are multiple paths to get there, stay focused on your choices. Don’t second guess yourself. But also keep your mind open to other alternatives. I think you can get so stuck in your own arrogance that you miss some great advice. It’s important not to ping-pong but it’s important not to put blinders onto where the market is going. A friend of mine once said, “The harder you work, the luckier you get.” So I think that’s true of any entrepreneur.Sean Ammirati: That’s good advice. Chris, I appreciate you talking today.Chris Shipley: My pleasure. |
