Category Archives: Business

On fear, entrepreneurship, and wealth: Felix Dennis

Felix Dennis who comes from humble beginnings:

An art college drop out, Dennis left home before his sixteenth birthday, and lived in a number of bedsits. Dennis started his career in publishing with Oz magazine, the Sixties counterculture magazine, initially as a successful seller, through which editor Richard Neville realized Dennis’ potential business acumen. Dennis had earlier contributed to a television discussion on the counterculture, which Oz reprinted; the first magazines Dennis sold had been Neville’s only available means of compensating him for using this material.

Oz was prosecuted for obscenity in 1971. All three editors were found guilty of corrupting children, and given jail terms with hard labour, although Dennis himself was given a shorter sentence because the judge, Justice Michael Argyle, considered Dennis “very much less intelligent” — and therefore less responsible — than his co-accused. It was such a cutting remark that it allegedly drove Dennis to create a business empire to prove the judge wrong.

Revenge empire? Interesting, if true.

Some quotes from this article, which somehow manages to be simultaneously annoying, enlightening, and heartening. Probably quite a bit like Dennis himself, if his writing is a window into who he is as a person.

The key, I think, is confidence. Confidence and an unshakeable belief it can be done and that you are the one to do it.

Tunnel vision helps. Being a bit of a shit helps. A thick skin helps. Stamina is crucial, as is a capacity to work so hard that your best friends mock you, your lovers despair and the rest of your acquaintances watch furtively from the sidelines, half in awe and half in contempt.


If you wish to be rich, however, you must grow a carapace. A mental armour. Not so thick as to blind you to well-constructed criticism and advice, especially from those you trust. Nor so thick as to cut you off from friends and family. But thick enough to shrug off the inevitable sniggering and malicious mockery that will follow your inevitable failures. Not to mention the poorly hidden envy that will accompany your eventual success.

Consider carefully this shortlist:

  • If you are unwilling to fail, sometimes publicly, and even catastrophically, you stand little chance of ever getting rich.
  • If you care what the neighbours think, you will never get rich.
  • If you cannot bear the thought of causing worry to your family, spouse or lover while you plough a lonely, dangerous road rather than taking the safe option of a regular job, you will never get rich.
  • If you have artistic inclinations and fear that the search for wealth will coarsen such talents, you will never get rich. (Because your fear, in this instance, is well justified.)
  • If you are not prepared to work longer hours than almost anyone you know, despite the jibes of colleagues and friends, you are unlikely to get rich.
  • If you cannot convince yourself that you are “good enough” to be rich, you will never get rich.
  • If you cannot treat your quest to get rich as a game, you will never be rich.
  • If you cannot face up to your fear of failure, you will never be rich.

On risk: Ann Winblad

Ann is the co-founder of Hummer Winblad Venture Partners which opened its doors in 1989. It was the first VC firm to focus exclusively on software. Since that time, 45 of its portfolio companies have been acquired or gone public. She began her career as a systems programmer at the Federal Reserve Bank. In 1976 Ann co-founded Open Systems, Inc., a top selling accounting software company, with a $500 investment. She operated Open Systems profitably for six years and then sold it for over $15 million.

$15 million in 1982 dollars is worth approximately $50 million today using GPD per capita measure, which is the appropriate metric for this kind of thing.

From page 299 of Founders at Work: Stories of Startups’ Early Days:

When I went there, it was the first real business experience I had — although I had had part time jobs. I’d never been in a corporation, and it felt so glamorous to have a cubicle. Minneapolis is a bright city. There’s the Nicollet Mall and you were right downtown in the city. It’s like getting a job in San Francisco.

But it just wasn’t inspiring. No one was chomping at the bit. I actually can’t remember — I knew I was going to quit, but I can’t remember the moment where I thought, “I’ll quit and start a company.” I still felt very empowered, like, “This isn’t this hard a job. This is a big job and I’ve already gotten promoted once in the first 3 months and I know I can earn money. I can always come back to this, so why don’t I break out?” So the three guys from the Federal Reserve that started the company with me — one guy did quit his job and the other two took a year sabbatical, just in case this didn’t work. They held on to the safety ring.

There were not a bunch of people saying, “Start a company, start a company. Let’s do this. Let’s build something from scratch.” It’s so long ago now that I just remember the general feeling that there was very little to risk. I was somehow already fully trained for anything that might confront me. Of course, all that is false; there’s a lot of risk and you are never fully equipped to… you just have to be very adaptable. It turned out that I was adaptable. I didn’t know that until I did that, but it was just a feeling of fearlessness. “What’s the risk? What will I have to lose? I’m sure I can do this.” It was not cockiness, just that moment you feel in your youthfulness that you are sort of empowered to achieve.

I think what does separate some entrepreneurs from other entrepreneurs is we’re not handwringers. We don’t worry about the unknown. We don’t really worry about the risk points ahead. As you get older and you get more experience, you train yourself to think ahead about the risk points versus just to take the next hill. But non-risk-takers and non-entrepreneurs would have really big headaches about this. They would need some level of comfort and safety.

That’s something that we look for in entrepreneurs — that they have the courage to do the job. That they’ll have the ability to judge the business situation. They’ll have the ability to lead people. They’ll have the ability to interact with the marketplace and to really build confidence into strategy.

On risk: Paul Graham

I’ve been doing a lot of reading lately, and today I was reading “Hiring is obsolete” by Paul Graham. I loved it, and the section on risk really stood out to me, and I’d like to highlight some specific bits.

So what you should invest in depends on how soon you need the money. If you’re young, you should take the riskiest investments you can find.

All this talk about investing may seem very theoretical. Most undergrads probably have more debts than assets. They may feel they have nothing to invest. But that’s not true: they have their time to invest, and the same rule about risk applies there. Your early twenties are exactly the time to take insane career risks.

The reason risk is always proportionate to reward is that market forces make it so. People will pay extra for stability. So if you choose stability– by buying bonds, or by going to work for a big company– it’s going to cost you.

Riskier career moves pay better on average, because there is less demand for them. Extreme choices like starting a startup are so frightening that most people won’t even try. So you don’t end up having as much competition as you might expect, considering the prizes at stake.

But it’s not necessarily a mistake to try something that has a 90% chance of failing, if you can afford the risk. Failing at 40, when you have a family to support, could be serious. But if you fail at 22, so what? If you try to start a startup right out of college and it tanks, you’ll end up at 23 broke and a lot smarter. Which, if you think about it, is roughly what you hope to get from a graduate program.

Even if your startup does tank, you won’t harm your prospects with employers. To make sure I asked some friends who work for big companies. I asked managers at Yahoo, Google, Amazon, Cisco and Microsoft how they’d feel about two candidates, both 24, with equal ability, one who’d tried to start a startup that tanked, and another who’d spent the two years since college working as a developer at a big company. Every one responded that they’d prefer the guy who’d tried to start his own company. Zod Nazem, who’s in charge of engineering at Yahoo, said:

I actually put more value on the guy with the failed startup. And you can quote me!

So there you have it. Want to get hired by Yahoo? Start your own company.

The entire essay is absolutely worth reading for anyone interested in starting their own business.

Quietly influential

I chuckle every now and again when I see the MSM reporting on blogs. The usual suspects almost always turn up: TechCrunch, the HuffPo, GigaOM, BuzzMachine — as well as a smattering of the hot blogs du jour. This time it was Steve Rubel’s MicroPersuasion and Passive Aggressive Notes.

I must confess some incredulity, because I have never seen Ars Technica mentioned in a story that focuses specifically on blogs. This despite being relegated to merely a “blog” (albeit acknowledged as an influential one) most of the time by the mainstream media when they reference a story that Ars breaks.

Now, the HuffPo is a huge website. Probably a little bigger than Ars with 5.7M unique readers per month. TechCrunch is markedly smaller, and GigaOM is smaller still (1.37M pageviews/month or so).

It makes me wonder why these particular blogs are chosen. Is it because the stories about blogs are by their nature more noise than substance? Indeed these stories are often widely hyped when they hit and will make their way around the ‘sphere several times before disappearing like yesterday’s newspaper. (The blogosphere echochamber at its finest.) Ars seems to be anti-hype most of the time. It’s been known to take a somewhat dim and sometimes even contrarian view to what’s hot in the blogosphere this week — “The Cloud!“, death by blogging! — if indeed what the blogosphere is focusing on this week is even worth talking about at all. (Usually it’s not.)

So here are some sites that Business Week may want to think about including, because these sites are the real movers and shakers in the Internet publishing world. This list is by no means comprehensive, and I make no comments about their content or quality of the sites, only their size. This list isn’t sorted in any meaningful way:

For comparison, TechCrunch sits at ~7.5M pageviews per month, and Ars Technica sits at ~30M.

On the Condé Nast Ars Technica acquisition

So the hot news in the blogosphere this week has been the acquisition of Ars Technica by Condé Nast. TechCrunch broke the story on Friday, but there was no official word from Ars until yesterday due to an embargo. Anyway, in that time, there has been quite a lot of discussion on the valuation of “blogs” — or the overvaluation thereof, as the thinking in the blogosphere seems to be.

Silicon Valley Insider:

Ars’ 8-person news operation will be folded into Wired Digital, which is run by CondéNet.

This is almost, but not quite, correct. Ars will remain its own brand, and will retain its own staffing. Ars will not be “folded” into Wired, though they will continue to exist under the Wired Digital umbrella (which is turn is owned by CN). In a very real sense, they will be friendly competitors. This is not unlike two newspapers owned by a larger parent company competing with one another in overlapping geographic territories. (A common practice in traditional print media.)

I guess I’m a little bit stuck on calling Ars a “blog”, however. Ars is a news site with real, investigative reporting and thoughtful analysis, longer, multi-page in-depth investigative and explanatory pieces and guides, and has been around since before people had even heard the word “blog”. If anything Ars is a news site and a focused blog network all rolled into a single brand. (As opposed to the old Weblogs, Inc. model where each blog was separate and had its own flavor.) The journals section of the site combines six different journals under one umbrella — each of which has a large enough audience on their own to be considered very successful. Particularly Infinite Loop and Opposable Thumbs.

On the $25 million

There was a collective gasp in the blogosphere over the price commanded by Ars. Frankly, I’m not really sure why. When I first heard the number, I thought it was low, given the amount of traffic that Ars gets, which is different than the traffic that sources that measure such things think.

The usual suspects like Comscore and Alexa are referenced as though they’re absolutes. The truth is that Alexa is horribly inaccurate, as anyone who runs a website with a tech-savvy audience will tell you. (Who do you know that uses the Alexa toolbar?) Nonetheless, these same sites will turn around and quote the stats as though they’re somehow magically more meaningful for another web property. It doesn’t really make a lot of sense if you stop and think about it.

Maroon Ventures:

Some key stats:

  • Purchase Price $25,000,000
  • Monthly Unique Visitors: 1,500,000
  • Monthly Pageviews: 4,000,000

Okay, let’s have some fun. Let’s assume that this acquisition helps set the market price for the internet blog pure play. What it this acquisition telling us?

  • Value of the Monthly Unique User: $16.65/unique
  • Value of the Monthly Pageview: $6.25/pageview

Unfortunately, these numbers aren’t correct, no matter what TechCrunch would have you believe, but to be fair to Chris, Ken hadn’t posted the official word until yesterday. As far as TechCrunch is concerned, more diligent reporting would have led to Federated Media’s information page on Ars for potential advertisers — so they should know better.

Here’s the official word on the acquisition, straight from the horse’s mouth:

We have an amazing community, both in terms of its size (5+ million readers, as tracked privately by Quantcast) and in terms of its contributions (12 million posts, thousands upon thousands of news tips, recommendations, and corrections). Our community is unparalleled, in my not so humble opinion, and it’s a big reason why this year we’re serving more than 30 million page views each month. (I’ve seen lots of folks citing Comscore numbers… they’re horribly, horribly wrong).

Now you might think that the $25 million isn’t so unreasonable. Taking a look at the old Federated Media advertising numbers[1], you can see that Ars commands about $38 per thousand pageviews.

30,000,000 / 1,000 * $38 * 3 ads on each page = $3,420,000

That’s $3.42M per month in advertising revenue that Ars is generating. Yes, FM takes a cut of that, but Ars has other, smaller revenue sources, such as affiliate referal dollars and Ars-branded merchandise for sale, so we’ll call the difference a wash.

Now that’s revenue, not profit. There’re 8 full-time employees, as well as webhosting for the main site, the cost of the CDN (they’ve been using CacheFly to serve all static content), the cost of the discussion forums (currently a hosted solution: groupee’s eve product) as well as several ICs that do web development, CMS development and other technical work for them.

A typical business acquisition is 3-5x annual profit[2], so that means the four main founders (Ken, Jon, Ben Rota, and Panders) were taking in an annual profit of ~$6.25M per year split however they were splitting it.

Final thoughts

I often wonder why such blatantly incorrect numbers are often bandied about when the truth is usually freely available if you look for it. It’s no secret just how many pageviews Ars has been doing: they’re posted on Federated Media’s website for anyone who wants to advertise there. And you can bet your shiny metal ass that they’re accurate — and more likely (*gasp*) conservative. When millions of dollars are changing hands on a monthly basis, there are very accurate accounting measures going to be built in so buyers can have faith that they’re getting what they pay for.

And for those wondering whether Ars is or is not going to jump the shark, I have two thoughts for you:

First, this isn’t the first time Ars Technica has been part of an online network. Early readers of Ars may recall that Ars was once part of the now-defunct Maximum PC network. Then, as now, the larger and more focused you are, the more you command in CPM rates.

Second, having known Jon and Ken since 2000, I can say with a great deal of personal conviction that Ars isn’t going anywhere, and that thing most certainly will change, but they will change because that’s what the guys steering the ship (Ken, Jon, and possibly Eric) want — not because it’s what Condé Nast wants. So if you see something change in the future, you can feel free to continue pointing the finger at the founders, not at Condé Nast. ;)

[1]I’ve linked to a screenshot because the original FM link will inevitably disappear in the near future as Ars Technica will no longer be outsourcing their advertising to Federated Media.

[2]This will obviously change depending on your industry.