Monthly Archives: September 2013

Is Aereo legal but doomed?

BVG1KrxCAAAfQI6This afternoon the folks from Aereo invited me and several other early adopters to lunch at the Ritz for their Dallas launch. The company has found a perfectly legal way of retransmitting over-the-air television via the internet to subscribers. The company is facing legal challenges by content providers, but they have successfully fought back each one time after time. The bad news? Content providers don’t make money when Aereo sells subscriptions to consumers.

My business partner at HAUL, Robert Bennett, met with Chasey Carey the COO at FOX who indicated that they will end over the air broadcasts if they can’t protect their over the air broadcast rights. Over the past decade content creators’ business models have changed whereby their revenues have transitioned from advertising to broadcasting rights. Content creators don’t make any money from OTA and make all of their money from OTT. What does this mean? If companies like Aereo make it easier for consumer to fire Time Warner, Comcast and Direct TV – over the air transmission will end. Ouch.

The good news is the Aereo has built an amazing product – basically a cloud based DVR for TV consumers. Basically TIVO without the box. To exist longterm they will simply need to enter into licensing agreement for content. The bad news? The service will cost more – likely driving down the cost of cable and satellite TV. In the meantime? Enjoy low cost content. I’m considering firing Time Warner. Maybe as soon as this month. I’ll let you know.

When should you raise money? NOW! [updated]

Garrett Camp, the co-founder of Stumbleupon, recommends, “Stay self-funded as long as possible.” I think I have been quoted saying the same thing, but over the past few years I have come to realize that you can wait too long to raise outside capital.

When I founded LayerOne I raised money first and then built the company. Since then I have been starting companies using my own money including my last company – ShopSavvy. Our investment strategy was to look at the company each month and determine if it makes sense to keep investing. While we had the resources to grow the business, there was a limit to those resources and I think we should have raised outside capital to increase the pace of growth. Ironically our success in user growth and engagement made it more difficult to raise money from early stage investors. It was not uncommon to hear a VC suggest that he wishes he talked to us earlier.

We grew a lot on a small amount of money, but sometimes I wonder if it would have been smart to raise outside capital earlier. Raising outside capital provides credibility to your business giving you instant access to the blogosphere (TechCrunch, VentureBeat and so on) and access to potential employees who pay attention to what deals investors are betting on. Using your own money doesn’t win you any access, credibility or friends.

The upside to not raising outside money? You don’t have to raise money, period. Tim O’Reilly said, “Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations.” Raising money makes me feel like I am visiting LOTS of gas stations – usually not getting any gas.

Now that I am doing it all over again with my latest startup, HAUL, we have decided to go ahead and raise a small amount of money ($750K) from a few smart angels (Dave McClure, Christine Tsai, Dave Matthews, Joel Fontenot). These early investors are valuable for a few reasons a) potentially ability to refer clients, b) potentially able to refer potential hires, c) potentially able to make referrals to VC firms for the Series A and (perhaps most importantly) d) social proof that the deal is smart. Within a short period of time, perhaps 6 months our plan is to raise a $5M series A investment from one tier one firm (perhaps with a co-investment from a strategic). The idea is to get everyone in the same boat together until it makes sense to raise the huge round or do a strategic deal.

When I was updating this post I realized that I wrote on this topic last year in November in a post titled, “When should you raise money?” (hmmm, I’m not too creative with titles). I suggested that when I started my next deal I’d do a few things…

  • participate in an early stage accelerator
  • raise a small angel round from Dave McClure
  • raise a series A from First Round, Benchmark or Andreessen Horowitz

Turns out we did the first two. After the holidays we will try to do the third. Go back and read that post (it was a lot better).