Response to Jason Calacanis' Attack on Mike Segal & Private Equity Forumss

I know Mike Segal of Private Equity Forums and we even promote his events. So let me stick up for him in this way: his events bring out-of-town investors and entrepreneurs to New York. That is his strong suit and has been doing that well for years, filling up room after room with investors and entrepreneurs. He deals with what I call pedigreed starts-ups: people who have serious experience in their fields, have put a good amount of money into it and can afford to pay to be in this league. Dotcoms are a small part of his world - most of his Entrepreneurs have biotech, heavy engineering, energy, packaged goods or financial services businesses.

These obey very different rules from the digital world that Jason and his cohort inhabit – so before we get into some version of class war let’s understand that we are dealing with other classes of new enterprise.

As the organizer of the iBreakfast I should state that we run very modestly-priced start-up events and we give our winning entrepreneurs tickets to Mike Segal’s events so they can see what his world looks like. Some of it is familiar but a lot of it is very different – his investors usually look for revenue, tangible assets, assumable debt and a host of things dotcoms start-ups are oblivious to.

I can’t argue with Jason or anyone that access to investors ought to be Free. Why not? If Fred Wilson or Steve Jurvetson wants to see you – go ahead. They might even throw in a VitaminWater or buy you lunch. But unless you’re a serial entrepreneur and were recommended to them, the chances are the don’t want to see you. So events like Mike Segal’s and to some extent, the iBreakfast have emerged put you right in front of investors and get you into the general recommendation system. By organizing it into a marketplace they are entitled to charge what the market will bear. In that respect Mike is no different from a trade show producer or the Wall Street broker that takes his commission and the spread.

If you think he is charging too much – don’t pay. The iBreakfast offers a low-cost pitching event that grooms, educates and gives start-ups access to investors for a nominal $125. We don’t market it like crazy but then we also don’t pack dozens and dozens of investors into one place. So take your pick. As for the groups that do it more or less free, go to them – but they are probably oversubscribed and they’ll make you wait.

So, should one approach drive out the other or should all of these coexist?

If Jason can attract Investors and Entrepreneurs from all over the region – or the country to an event, do it on a regular basis and give it away for Free, I say more power to him. I might have a plan or two I’d like to trot out myself.

But keep in mind a few things. Free often drives out the good. Without a financial incentive there is a good chance the forum will run out of steam. Even if the forum continues, they still have to add some kind of value that makes it worthwhile for the investors to show up and for the best pitches to rise to the top. If they can do that, Free may win. Even so, many companies would still rather pay for all kinds of reasons like speed to the investor market or controlling their destiny.

A big question is why would Jason do it for Free. I buy his “sticking up for the hood” motive up to a point, but the real deal is publicity for his Mahalo “people powered” pedicab of a search engine, he needs to attract contributors, fire up his base them up and make them feel important.

As for the profit motive, well excuse me, Jason had no trouble charging over $1,000 for his Silicon Alley conferences when he could – thereby keeping good information and contacts away from the needy. Tech Crunch 50 is not Free. So why should these organizers behave differently? If Mike Segal can save his Entrepreneurs from traveling all over the country just to see investors and get the word out at once, then there is a value in it. Something like a road show in one place. Plus, many investors take this kind of effort seriously and see this as separating these Entrepreneurs from the pack – those which just can’t afford the effort and therefore may not be as viable.

That’s why these events take place at fancy ballrooms and not at a taco stand – it makes people take these presentations seriously. Maybe the investor should be paying for the lunch but the market dictates otherwise. Trust me, the doctor who just prescribed Jason his self-righteousness pills didn’t pay for his own lunch either if he didn’t want to. The drug company was happy to pick up that tab. More importantly, if an Entrepreneur is flying in from Minneapolis, Free starts to look very iffy while a paid event says “this is happening” and his time and travel costs will not be wasted on a flake out. Likewise, investors realize their time is unlikely to be wasted by people who are not really committed to their new enterprise.

Having said all that, I actually welcome Free because it forces the paid guys to do a better job or else. Plus it gives the posers a chance to discover their real selves before they do something silly like empty their trust funds.

As to which approach is really better – let’s say they are different and serve different purposes that may ultimately harmonize. A free event favors just-out-of-college start-ups with those big moonshot ideas like the next Twitter, iPhone Killer App or Search Engine (know of any?) Few succeed but the ones that do, make it really big. They change the world.

Paid events favor the seasoned player – the pedigreed start-up that has 10 years of experience in a field, often a mundane one where they see the real opportunity in their space, know the players, the customers and so on. There is less pizzazz and few ground-shaking ideas. The payoff is more earthly but to the investor, is also a safer bet.

The true serial (and successful) entrepreneur which includes Jason, only has to pick up the phone. The sensible entrepreneur has to know which category they belong in before they choose their path but they all have their place.

My prediction – a year from now, all these forums will exists in one way or another. All will do a better job and all will charge about the same – even the Free.

The New Free Attack

An introduction to our Oct. 7 (almost) FREE iBreakfast

When you make something FREE something else becomes valuable. That, according to Chris Anderson, the author of the popular new book FREE, is the secret to fighting against the phenomenon that more and more industries are having to battle: The FREE attack.

The Recording Industry, Newspapers, Magazines and Hollywood have already faced this assault – so maybe we think we’ve learned a thing or two. We know ad-supported FREE (as in get eyeballs and ads will follow) and Freemium (give away the low end so that 5-10% will pay for the high end).

What's worse, according to a study reported in the Silicon Alley Insider - when you get a FREE Attack - you can't have it both ways and be a mix (a/k/a Freemium) you either go completely FREE or completely subscription.

Even as we absorb that message - we also need to look at something new that's coming.

The new FREE ties to together the major themes of the past few years – Social Media, User Generated Media and Open Source – and then turns it on entrenched players. That could be your typical Fortune 500 Company, the Government or you.

Just to be clear, the Internet introduced a kind of growth based on abundance (low-cost bandwidth) and zero-marginal cost – so once a site paid off its ever-lower set-up expenses, adding new customers cost very little. That’s standard digital FREE.

The New FREE is when companies aggregate Crowd Wisdom and particularly, Social Media groups, to go after high value targets. Flat World Knowledge is using this to go after the high value college text book industry: by using professors without typical publishing advances they are able to give away the books to students – and still make money. How long before mobile apps are harnessed in a high value way, like providing a virtual guide or legal assistant – an crowdsourced expert who comes to your phone – and goes after areas where customers are paying for high value information?

It doesn’t have to be completely FREE to qualify for an Attack. Just being so abundant that it is, as Anderson puts it, too “cheap to meter” is good enough. Look what happened to AOL’s hourly charge when the Internet become to too cheap to meter. Could that happen with the hourly billing system at a PR Agency, law firm or even Con Edison, when renewable energy really kicks in?

Abundance has its problems too. Facebook may be FREE but who pays us for stealing my children’s attention for hours a day as they jockey for social standing? FREE email means spam. When 18h Century settlers around the Appalachians learned to grow corn in abundance they soon found the best way to store it was to make whiskey. That lead to oddities like farmers drinking whiskey for breakfast. When the government tried to levy a tax it sparked a rebellion. The solution, as it runs out was Canal and then Railroad transportation which brought the corn to market while it was still fresh.

So yes, where there is FREE there is a solution of one kind or another. It just may not be obvious and it may not come quickly - but its there.

Soon, the tobacco industry and all the governments that depend on their steep taxes will be embroiled in a similar Attack as e-Cigarettes bring on “almost FREE” both in terms of health and cost to this age-old practice.

Barry Diller is latest Media Baron to take on FREE and believes he can get people to pay for content that others expect to get FREE. Maybe he knows something. But as the smartest players have found out, FREE and Paid can coexist in many ways – often reinforcing each other with FREE offering exposure and paid offering quality assurance, times saving, exclusivity and status.

Our next iBreakfast on October 7 will take this whole issue apart at our first (almost) FREE event. It's FREE to members and their guests……..and as our New FREE definition explains, that qualifies as FREE.

Report from the Glitter in Twitter II iBreakfast

Phil Perlman, StockTwits
Stephen Gilberg, WineTwits
David Berkowitz, 360i
Ariel Hyatt, CyberPR

By revisiting Twitter we learned that smart marketers have used the microblog platform to develop a following and then build a platform on top of that. Giving people timely, essential information was the key to growing a loyal audience for StockTwits which enables investors to follow the picks of savvy traders. Now, according to Phil Perlman, their website has become a hub for independent investors, traders and other high-value Wall Street players.

Stephen Gilberg used Twitter to build a following for his WineTwits start-up, where wine-lovers could crow about their favorite wines in real time. That has grown into “Social Grapevine”, a wine drinkers’ social portal with useful filters and Twitter management tools that any social marketer might covet.

David Berkowitz talked about the ways his corporate clients have used Twitter and Social Media Sites to develop business. He even offers a free handbook called “The Social Media Playbook.”

Ariel Hyatt talked about the ways musicians, mostly independent, but also established artists, have learned to use Social Media to build a following. With Twitter, they have learned, the more personal, the better. After all, they not dealing with customers but fans. While some musicians “just want to play their instrument” many others have figured out the lessons of Godin’s “Tribes” and Anderson’s “1,000 True Fans.” With a following, and no record company to pay back, many musicians have learned how to flourish.

Is Apple the Evil Empire?

Is Apple Really Evil?
As an old Apple person - I mean old as in covering Apple from way back in the now dead-and-gone Apple trade publications like MacWEEK, I can answer this very simply. They are not a technology company, they are a religion. They are giving us "cool people's technology" and they charge a tithe - about a 10% premium over non-Apple products - where they compete - and much, much more - where they don't. They expect followers to pay in blood sacrifice to be the first in line and rarely apologize when they abuse them for doing so. Likewise, their followers never really complain.

Some people say Apple is a cult - and they certainly are. That is why no one can really compete with them because they don't understand what it means to be a cult: You have to be very good, very important - you have to die in public - and then come back to life. That describes Steve Jobs and with him, Apple. No one in their right mind asks for this role but if it is foist upon you and you thrive - ordinary mortals cannot compete against you.

Apple is just competing against ordinary, grubby mortals: number-crunching tech execs, power-mad entertainment execs, government flunkies and shabby lawyers. Apple almost always wins - or at least wins in the public relations arena.

However Apple is more than a cult because they are just as passionately loved by ordinary users as they are by the geeky priest class. That makes them a religion. Because of that, Apple could survive the passing of Jobs.

So if you think religion is evil, then Apple pretty much is evil. You want technology heaven? You follow their path. That's how religions work. At least Apple delivered us from the temptation of illegal downloading, the darkness of Crackberry, the demon of Vista and so on. Then they made a deal with the devil - AT&T. This is like the cool early Christians, some gnostic - most not - teaming up with the Roman Emperor, Constantine. He made them bigger, established and formidable but something got sacrificed with that.

What got sacrificed is just what people like Mahalo's Jason Calacanis is complaining about. The cool open web is now a closed garden. It is the formal church. Just as Constantine threw out the heretics who would not hew to the canon - you can't just do what you bloody well want on an iPhone. No Google Voice, says Jason. No porn. No unapproved apps. No holy spirit other than AT&T. In return, you pay your dues, confess at the genius bar over sins against machine and pray for the high holy days of new product releases.

That's the deal we make with regular belief systems and Apple will not change any more than your favorite religion will. At least not fundamentally. So if you are talking about competing with Apple then you'll need some religion of your own because you can't seriously do this by numbers, or by the book.

Look at Microsoft - they were never better than Apple - but they got richer because they were anointed by a higher Power a/k/a IBM which gave them the exclusivity of owning their operating system. (Watch out AT&T!)

So all those Google/Android/Palm Pre iPhone wannabes take heed. You can do OK against Apple by offering better features, better mobile carriers, lower prices and blah blah blah. But you can't win unless you're willing to be great, die and come back to life - in public. Or get a higher power to anoint you. Become the official phone of the Obama White House with one free call to the man. Or put yourself at the heartbeat of youth culture - say, by buying up every major record label and film company. Or better than that, finance their talent directly..... Or pay for every kid's online college education.....

Then maybe.

Mobile Apps Revisited - DigiDays Apps Conference

A few thoughts from the Aug 12 Mobile Apps Conference

(First, a little disclosure - since we covered this topic at the May iBreakfast, everything I say may be tinged with professional jealousy. Or, I may just be right.)

Not a lot came out of the Mobile Apps Conference that we didn't already know - other than the fact that marketers are waking up to the App Business and so it is about to get much bigger. Since we were able to cover in 1.5 hours most of what took a whole day to discuss - and 3 months in advance - you can see why the iBreakfast is in its 14th year.

BOTTOM LINE

Fremium Model: Almost all sales models are Fremium based - give away the sampler and upgrade user to the paid version. Expect a 1% conversion rate.

Make Ad Deals: Everyone who can't sell their Apps - and that would be the vast majority of developers - needs to find a niche with a true need or a way to make a deal with an advertiser. Often, these deals are about expanding the free sample universe so they can get a higher number of paid conversions.

Jason Calacanis Keynote
The one-time publisher of the Silicon Alley Reporter asked who remembered that swashbuckling publication from the heyday of rebel internet world. Of maybe 150 people, 3 hands went up. Note to self - marketers are young and constantly being replaced.

As founder of Mahalo - a people-powered search engine - Jason's rationale was talking about the Apps he'd like to see. With App saturation being the topic de jour, that was a fairly lame pretext (several of the ideas which he pulled from his people-powered search list were already Apps) to talk about what he really wanted to talk about: Mahalo and the Evil Apple Empire.

No point in discussing Mahalo and human-powered search here. They have their place. So do pedicabs and Central Park buggies. But the Evil Apple Empire is a great topic and delivered by Jason with much aplomb. It is such a rich discussion that I'll devote a separate blog....

Report from the Sold Out White Plains iBreakfast: Social Media for Business

Michael Terpin, Social Radius
David Berkowitz, 360i
Selina McCusker, Personal Branding
Stephen Gilberg

Alan Brody introduced the this first-time event by talking about the Obama campaign as more than a new way of succeeding in politics but rather as a whole new way of doing business - and a key indicator of how other businesses need to reinvent their customer relationships. The difference between economically thriving vs. contracting regions seems to be whether or not they are in on the conversation about the use of new technologies. The iBreakfast is all about the conversation.

Michael Terpin talked about the impressive “Yes We Can” video video used to help turn the Obama campaign around on Super Tuesday. The important element, he said, was getting the middle universe of bloggers at the largest section of the bell curve, interested in their message.

David Berkowitz began by offering his 4 Basic Rules of Social Media and then other elements of his Social Marketing Playbook. He followed that up with the ways Fortune 500 companies are using Social Media to engage customers.

Selina McCusker talked about using Social Media in unexpected ways for corporate clients.

Stephen Gilberg showed how he built his following of 37,000 in the wine business by focusing on the oenophile's desire to share notes on their favorite wines, and then monetizing it by selling them quality wine at below-market rates.

Notes: Sign up for the WineTwits beta site. To see the overall map of Social Media see the Conversation Prism.

Does your town need to be part of the conversation? Talk to us about opening an iBreakfast in your city.

The Obama Campaign and White Plains iBreakfast: Social Media and the Tipping Point

Michael Terpin, who helped engineer the "Yes We Can" viral video with will.i.am is speaking tomorrow. Aside from telling us how he got to 40 million viewers and tons of press - this is a great time to ruminate on the power of Social Media. After all, it brought us an entirely new kind of President.

We all know the usual - harnessing the long tail, word of mouth, crowdfunding etc. But what about the gradual mass change of opinion anticipated by Obama's literary doppelganger, Malcolm Gladwell. While he never mentions Obama, Gladwell, whose 3 books (Tipping Point, Blink & Outliers) are still on the best-seller list was talking about a change in state, and he too is bi-racial. His books talked abut the paving new ways while paving the way.

Social Media, in other words, is not only a tool but a kind of change predictor and instigator. We're going to learn more about this tomorrow. But one thing is sure - we have entered into a new world of doing business, the likes of which we have never seen before.

We need all the change predictors we can get!