What’s the Plan, Stan?

Inspired by Path 101 anti-stealth startup philosophy, I decided to make public some of the business documents I wrote for Nouncer. Reading the Path 101 blog, I really enjoyed following their progress. My first reaction was they are making a mistake by revealing too much, but when I actually considered what they might be losing, I could not come up with a single point. At the end of the day, it takes a lot of storytelling to get a startup off the ground and you end up telling people everything anyway, with or without an NDA.

Before you dive into the presentation, you might want to read the rest of this post first. Also keep in mind that it is based on market research from March-April. A lot has changed and the plan was not updated.

Nouncer started as a microblogging service, similar to Twitter but closer to Jaiku. It was conceived before Jaiku and Twitter launched, and when they did I tried to differentiate it, at least on paper, by taking it to a less-social direction. I see the great potential of microblogging as a content distribution platform rather than a social interaction tool. The idea is to use social activities to enhance content, in some ways similar to the Digg concept. I have recently started calling Nouncer a micro-content platform to make it more accurate.

I learned about Jaiku and Twitter around the end of 2006 but for many reasons did not consider them a direct competition to my own idea. This changed around March 2007 when Twitter got their major growth spurt and received significant traditional media coverage. Combined with their simple and powerful API, they were able to enable developers to build some of the functionality they were lacking, creating a more complex competitive landscape. It is one thing to build a product you think is better, but a whole different ballgame to compete based on features with a platform anyone can easily extend.

I was already committed to leaving my day job and working on Nouncer full time as this was unfolding. It presented the challenge of having to figure out parts of the plan I was hoping to leave alone for a while. I spent a couple of week in April trying to write down a business plan. This was not meant as a tool to raise VC money, but a way for me to nail down what it is I am trying to accomplish. I found that this exercise is made much simpler using well establish formats such as a business plan presentation. It may seems silly to many new entrepreneurs but spending a day to come up with a one line description of your startup is critical.

Using the Sequoia Capital template for business plans, I created the first Nouncer business plan. It took about 3 days to get it to a stable state and about 2 weeks of revisions with the help of friends. It took another 3 days to work on an Excel spreadsheet with the financial model to produce the numbers on the last slide. I’ll talk more about the financial model in a follow-up post and include the actual spreadsheet (it is pretty cool). Few people knew what Twitter was in April, and most VCs I talked to (for advice, not funding) were not yet familiar with the service. But witnessing Twitter’s growth at the time made it clear the plan had to address it directly.

The basic idea was not to try and compete with Twitter, but take a different approach to the same service. Instead of building a social tool, build a central home for real-time content. In a way, I positioned Nouncer closer to YouTube than Twitter. Nouncer would offer a delivery platform for newswires. The content focus made it easier to frame Nouncer differently than Twitter and Jaiku. It also embraced the idea of Twitter becoming a messaging platform, something they only started talking about later, and harnessing its power to partially drive Nouncer and save cost.

I still think the plan is good, even with the significant gains in the space by both Twitter and Jaiku, and the emergence of new players such as Pownce (and over 30 other websites). There is still very little focus on content and tools to make content more relevant and of higher quality. So what were the fundamental reasons behind the decision to abandon the plan and come up with a new one?

Significant shift in the competitive landscape: Twitter raised $5M, Pownce launched with the name recognition of Kevin Rose, and Google bought Jaiku. These are all significant changes. The good news is that it is now easier to explain what I struggling to do a year ago and it is also proof my vision was right. The bad news is that there is no longer first to market advantage, and every new player is immediately called a clone, which makes it harder.

Loss of first-to-market advantage: If a year ago having an original idea was a big enough advantage, it is no longer the case. The idea is out and is attached to other successful sites. Continuing with a consumer service proposition that will in many ways compete with Twitter, Pownce, and now Google on features alone is too risky and hard to sell. Having over a year experience with microblogging development is an asset but no longer an advantage over others. The proprietary technology I possess, my experience in building large scale complex systems, usually with a real-time aspect, and having strong contacts within the New York financial services industry, are advantages I can focus on instead.

Inability to monetize: The financial model looked great on paper but was a very hard sell. Something I write about often is the complexity of using advertisement to monetize microblogging. I think it will change in the future, but for now the infrastructure is not there, and building a mobile ad network that can work with one line messages is a whole different business. Without (significant) ad revenues, a subscription fee model is needed, and that rarely works on a consumer platform (especially when Google is going to give it all for free).

The new direction, which deserve a separate post, is focused more on building a platform rather than a service, and focusing on the corporate world growing pains with email overload. The beauty of this technology is that it is good for a very wide range of applications, and this new direction does not require any changes to over a year’s worth of effort. Even the business plan I am sharing below played an important role in getting here.

As always, even if it is no longer the Nouncer plan, I would love feedback (except of course for fact corrections which are irrelevant at this point). If you like the template and can use it for your own business plan, contact me and I’ll send you the file.

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