Monthly Archives: August 2010

Paul Allen’s Legacy: Patent Troll

Last month my father’s old boss and billionaire, Paul Allen, announced he was going to give away the majority of his $13.5 billion net worth to charity. Kudos for Paul! When Paul and Bill co-founded Microsoft I wonder if they had any idea how big an impact their company and the resulting wealth would have on the world? In light of this announcement I was shocked to learn that Paul Allen is using four business method patents he owns to sue Apple, AOL, Yahoo, Google, Facebook and eBay for ‘existing’. Why would Paul do this? Does he need the money?

Who is harmed by Paul’s legal actions? First, you and me (assuming you have a 401K). Second, any startup (like ours) who uses web technologies. We need more innovation in the United States, not less. Software patents, like Paul’s, are bad for business, America and the planet. They simply don’t make any sense for software. When the government grants a monopoly for 20 years it should be for something unique or novel – i.e. a machine, a manufacturing process or pharmaceuticals – not an essential programming technique. Brad Feld has been a long time critic of software patents and he does a pretty good job of explaining why they are a bad idea:

The WSJ explained how broad Paul’s patent claims are:

Patent Claim: Browser for Use in Navigating a Body of Information, With Particular Application to Browsing Information Represented by Audiovisual Data

Implication:The specific example in the patent might be for a news aggregator, but the patent could have applications far beyond news. The suit says the defendants are infringing the patent “by making and using websites, hardware and software to categorize, compare and display segments of a body of information.” That quote describes a lot of websites.

Patent Claim: Attention Manager for Occupying the Peripheral Attention of a Person in the Vicinity of a Display Device

Implication: “AOL, Apple, Google and Yahoo are the only companies alleged in the suit to have violated these patents. But again, the patent is for a tool that is ubiquitous online, particularly on websites that give users real-time news updates.

Alerting Users to Items of Current Interest

Implication: “Theoretically it could apply to anything that uses technology to alert you to something you’re interested in. It’s important not only for news but for e-commerce — think about notices when an item you like is on sale or when a bid has been placed on something you’re watching. This patent is the only one in the suit that all the companies are alleged to have violated.”

Brad should add Paul to the list of folks who should see Patent Absurdity.

After post D&B revises our risk rating!

Just last week I wrote a post titled, “Dun & Bradstreet Class Action Lawsuit?” where I explain how D&B explained to other businesses that our company had a “High risk of severe financial stress of the next 12 months”. Here is what our potential customers saw:

This week, after I wrote the post, D&B has ‘updated’ our “Supplier Evaluation Risk” from an 8 to a to a 4. Here is what our potential customers see today:

D&B still suggests we pose a “Moderate risk of severe financial stress over the next 12 months”, but at least we are almost in the ‘green’ section of the chart.

Again, I stand by my previous post when I explained, “I think there is a potential for a massive class action against D&B on several counts – but most importantly their propensity to offer credit advice without sufficient data. D&B should have to disclose that on accounts, like ours, they simply don’t have enough data one way or another. They can’t possibly know whether or not our company is likely to fail based on the data they have collected. Their data is used by our potential clients to hire us. How many clients have looked at this data and decided that since we are ‘likely to fail in the next 12 months’ they will choose another vendor? How many other clients have low PAYDEX scores and ‘High Risk of Failure’ warnings where there is little or no data available? I would be happy to sign our company up as a lead plaintiff. I can show a loss of at least $1,000,000 in billings as a result of their 66 Paydex report on our company. Let me know if you want to join by filling out this form: D&B Class Action Sign Up

Dun & Bradstreet Class Action Lawsuit?

Have you ever heard of a company called Dun & Bradstreet? They are ‘sort’ of like Experian for businesses – supposedly helping their subscribers to make credit decisions about suppliers. Recently a potential client of one of our company’s ran a D&B report on our company. The score came back very low and the company scored a 7 on a 9 point scale of likeliness of failure. Ouch. I contacted D&B and asked them what the issue was. They indicated that they only had four of our vendors reporting payment history and one of them reported a 90 day late payment of $50. I was flabbergasted. They were publicly reporting that our business was likely to fail (7 out of 9) because one of four vendors indicated that we were late on a $50 invoice. The D&B rep indicated that I could pay approximately $400 and begin ‘building’ my report through a tool called Self Monitor. I paid the fee and began adding my vendors to the system.

The company pays out around $250,000 in payables each month to more than 100 vendors. Additionally we have credit lines ranging from $1,000 to $500,000. Out of these vendors D&B only had four. Our controller added more than 100 vendors and we were surprised how many would not agree to report payments to D&B. Companies like AMEX, Chase and Ingram Micro were unwilling to share credit history with D&B – later I learned they didn’t want to pay D&B a fee for the pleasure. Evidently, D&B is collecting fees from the companies that report and from the companies that are reported on. Wow.

One week later we were able to raise our ‘PAYDEX’ score from 66 to 77 by just adding a few additional vendors to the system. This morning I got an alert from D&B explaining that they had INCREASED our companies financial risk number from 7 to 8 – meaning they estimated that there was a HIGH risk of our company’s failure in the next 12 months. Our ‘PayDex’ score was improving, but D&B is now reporting that we are likely to fail. This company is ten years old and has been profitable since 2002 – why would D&B suggest we were likely to fail? What data are they using to come to this conclusion. Here is the chart the D&B account rep showed me:

Just a week after we opened out account with D&B and began helping them build our credit someone in the computer manufacturing business suggests that we have a payment 61-90+ old that is less than $1,000. I talked to our controller and she has no record of any late invoice – much less one for less than $1,000. I asked the D&B rep who was reporting the 61-90+ day late payment, but they would not release the name of the vendor. I assume the vendor who reported the late payment wants to get paid – why wouldn’t they want me to be able to contact them to get paid? The D&B rep couldn’t explain why the policy was this way. I then asked the D&B rep why they would issue a public report that we were likely to fail despite the fact that 99% of our vendors are reporting we pay within terms? I reiterated that we spend about $250,000 a month in payables – it seems crazy that a company would publicly report that we were likely to fail because an anonymous company reported that we were late on an invoice less than $1,000. She could not explain why.

I think there is a potential for a massive class action against D&B on several counts – but most importantly their propensity to offer credit advice without sufficient data. D&B should have to disclose that on accounts, like ours, they simply don’t have enough data one way or another. They can’t possibly know whether or not our company is likely to fail based on the data they have collected. Their data is used by our potential clients to hire us. How many clients have looked at this data and decided that since we are ‘likely to fail in the next 12 months’ they will choose another vendor? How many other clients have low PAYDEX scores and ‘High Risk of Failure’ warnings where there is little or no data available? I would be happy to sign our company up as a lead plaintiff. I can show a loss of at least $1,000,000 in billings as a result of their 66 Paydex report on our company. Let me know if you want to join by filling out this form: D&B Class Action Sign Up

Capital Factory Demo Day

Austin-based Capital Factory accelerator program – their second annual Demo Day is coming up on Wednesday, September 8th As the culmination of a ten-week technology accelerator program this summer, Capital Factory’s Demo Day will provide the five portfolio start-ups with the opportunity to launch their business concept to the world and specifically, to attending investors, to help the companies move toward the future and take things to the next level with their businesses. The Capital Factory 2010 demonstrator class includes:
  • Hurricane Party – a location-based social networking application that helps users create, manage and discover events that are relevant to them.
  • RecycleMatch – an online market for transforming commercial waste Into value.
  • Smackages – a makeup counter in your web browser.
  • Ripplefunction – a social media tool to track, manage and promote events online.
  • Keepstream  – a social media curation tool for saving and repurposing the best content from Twitter, Facebook, and sites across the web.

In addition to each of the 8-minute live presentations, Naval Ravikant, of Venture Hacks/AngelList, and Dave McClure, of 500 Startups, are confirmed speakers at the event. Be there, or be square…

Don’t buy the Ferrari. . .

I’ll have to admit I am guilty of this one. When I raised my first round for my first startup I immediately bought a Porsche. I used my own money, but it sent the wrong message to my wife, investors, partners, employees, customers and vendors. It is hard to negotiate salary with prospective employees when you are driving around in your brand new red sports car. My advice? Buy the Ferrari after your first exit, not before (oh and sometimes the used Ferrari is more expensive than the new one).

Small Startup Happy Hour Tonight @ CoHabitat

Small startup happy hour at CoHabitat tonight at 6PM http://cot.ag/aesQpi Our big startup happy hour event is in Oct: http://bit.ly/anRLzT.