Founders Only Need This Simple Math Equation

Sustainable businesses make money. To scale, you have to make a lot of money.

As a startup founder, you need to learn if you’re building a sustainable business as quickly as possible. It doesn’t need to be profitable from day one but there has to be a clear path to sustainability. If you can’t identify that path, you need to make changes immediately.

You have to make more money than you spend to be profitable. No glitz, no glamour. Just basic math. Here is how it works:

If Cost of Acquiring a Customer (CAC) is lower than the Lifetime Value (LTV) of that customer, you win. In other words, CAC < LTV = $$.

I’m constantly amazed at how many entrepreneurs don’t understand this simple equation. Drive down CAC. Increase LTV. Make money. Invest the profits. Scale. Win.

Nothing is better than winning.

What Your Startup Can Learn From Drill Music

Drill music has exploded in the last few years. Originating in South Side Chicago, the hard hitting, violent lyrics over trap-influenced beats have become a staple on playlists everywhere. The genre’s meteoric rise can be attributed to an organic marketing campaign that captured people’s hearts, minds, and ears.

To understand drill music, you must first understand South Side Chicago. The area is riddled with violence and gangs. Murders occur daily creating a “kill or be killed” mentality in a large portion of the area’s youth. The gentrified subset of Chicago was a large driver of the city’s 500+ homicides in 2012.

This violence contributes to a very different childhood experience for South Side kids. Many of them have never been outside a couple block radius of their home. They spend their days worried about what color shirt they’re wearing or which gang owns the block they’re walking down. Most of them end up burying their friends way too early. Eventually frustration and anger set in.

These young adults gained an outlet for relief, a voice if you will, with the arrival of drill music. Members of their community were rapping about the South Side lifestyle. Talents like Chief Keef, Young Chop, and Lil Durk began drawing attention to the realities of living in one of the most violent cities in America.

These drill music pioneers tapped into a community of people who were looking for a voice. Using basic music software and homemade YouTube videos, the genre creators quickly gained traction with their authenticity. Before they knew it, the entire world was listening.

The fame and fortune is only possible because of the massive scale that drill music reached. Startups and their founders can take away a great lesson here – use an authentic voice to resonate with your community. Be real with them. Don’t sugarcoat things. Give them a voice. Empower them. The rewards will be worth the work.

National Signing Day Technology

Thousands of high school football players will sign National Letters of Intent today. This is the culmination of years of hard work. It is also the beginning of one of the most exciting periods in their life.

I was fortunate to experience the excitement of National Signing Day nine years ago. As I reflect on those memories, I’m surprised to realize that the process of sending the signed letter to the school of choice hasn’t changed. High school players sign their documents and fax them to the football program. Yes, they use a fax machine like it’s 1995!

Coaches stand around the fax machine all day in anticipation of the signed letters. These grown men act like children on Christmas morning with each new commit. Remember, high school kids can be fickle – nobody likes a last minute surprise (unless it swings in your favor).

Technology has disrupted many industries but it’s cool to see culture and tradition resist change. The more things change, the more they stay the same.

Eradicating Disease by 2050

I’ve been reading a lot about death and disease lately. It was surprising to learn that 56 million people died globally in 2012. Over 60% of those deaths were attributed to noncommunicable diseases. Only 9% of deaths were caused by “injuries.”

We can drastically reduce the death rate if we’re able to eradicate disease.

I previously thought this accomplishment was 50-75 years away with current medicine and research resources. However, the more I learn about nanobots, the more bullish I become on disease eradication becoming a reality by 2050. Even Ray Kurzweil appears to be a believer.

The impact of disease eradication is hard to predict. There are positives (longer life expectancy, healthier population, etc) and negatives (over-population, potential food shortage, etc). What if we have colonized Mars by then? How about if our bodies build immunity to disease but become susceptible to a larger existential threat?

We may not completely understand it until we get much closer. Either way, the possibility of preventing the leading cause of death is exciting stuff. I hope I’m fortunate enough to have it happen in my lifetime.

The Death of Sportscenter

ESPN’s Sportscenter was the default television program in my house growing up. My brothers and I would watch the same segment 2-3 times a day. There were intense negotiations with my mom for extra TV time so we could watch the Top 10 highlights. We couldn’t get enough.
My free time has decreased over the years but my love for sports has never waned. That said, it hit me last week that I haven’t watched a Sportscenter segment in weeks. I realized that despite this I still have a decent understanding of top highlights and recent developments in major sports.
I’ve been consuming sports through social media. @HouseOfHighlights (Instagram) gives me all the highlights I need to see. @ESPN, @ESPNStatsInfo, and @Sportscenter (Twitter) give me live updates and statistics. VICE Sports (Facebook) provides the human interest pieces that make sports special. The key development is that I’m now consuming sports on my schedule, in the way that works best for me.
Live sports are still held hostage by cable television but I predict that will change in the next 3-5 years through a combination of online streaming, virtual reality, and mobile apps. You can see this developing already with Snapchat’s College Football Story and online streaming of high school games. Imagine the disruption that occurs when I get a VR experience of the Super Bowl from my couch. I have goosebumps just thinking about it.
As eyeballs continue to shift from TV to mobile, ESPN and their partners need to rapidly innovate to hold our attention. The barrier to entry in sports media is eroding to zero. The people who create the most engaging, easiest to consume mediums will win. I can’t wait to see what comes next.

Snapchat CEO Evan Spiegel Is So Much More Than A Fratstar

Evan Spiegel is a cocky frat-star who got lucky when he created an app to receive naked pictures.

This is the public perception of the Snapchat Chief Executive and it looks like it couldn’t be farther from the truth. Numerous leaked emails from Michael Lynton, Sony Entertainment CEO and Snapchat board member, reveal a side of Spiegel that has previously been hidden behind closed doors.

After reading through the emails, it quickly becomes obvious that Spiegel has matured into a thoughtful, strategic leader who has a deep understanding of his business and the larger industry. He appears to be a bold, forward thinker who is interested in creating a valuable service with long-term sustainability. It is impressive to see considering how much the media has scrutinized the 24 year old.

For example, Spiegel shows strong conviction in the Snapchat monetization strategy in an email to Mitch Lasky, another board member:

You’ve seen the data – we have high engagement and high retention product with tremendous growth ahead of us. Monetizing the business now only makes a stronger case for the permanence of our product. I think most important thing I want to communicate to you is that this is not an emotional decision and is not about “proving it” – this business needs to make money. The argument of grow now, monetize later doesn’t make sense because we have reached abnormal levels of growth and our monetization product is value-added. I’d rather not burn another $100mm of OPM before we find out whether or not we have a business. If we can build profitable biz w Twitter-scale, 30-person headcount, and major growth ahead we are not going to have a problem attracting additional capital. (This does not preclude necessity of building a much larger team).

Not exactly what you would expect from a clueless bro, huh? The saying “never judge a book by it’s cover” seems to be fitting here.

I expect Evan Spiegel to be taken much more seriously going forward. These emails show that the one-time fraternity social chair has matured and evolved. It will be exciting to see how his continued growth impacts Snapchat’s success in the coming years.

The Slow, Painful Death of Voicemail

Voicemail is slowly dying.

The staple functionality is being used less and less by younger demographics. As these demographics become older, the overall usage of voicemail continues to drop. So how did one of the most important features of telephone communication enter this downward spiral?

The largest contributor has been the adoption of additional forms of communication. For example, when voicemail was first introduced, SMS messaging wasn’t around. There was no way to tweet at someone or leave a comment on their Facebook wall. People have historically migrated to the most efficient, friction-less forms of communication. Could you imagine writing a letter and sending it through the mail today? How about sitting on the phone for 2 minutes to tell someone a short message? I can’t.

The second, less obvious contributor to this trend is the decreasing likelihood that your voicemail will be listened to. Numerous times I have made the effort to call someone and refrained from leaving a voicemail, only to immediately send them a text message that relays the necessary information. I could have easily left a voicemail but I feared that the message wouldn’t be heard. (For context, I have 13 unread voicemails on my phone right now).

Lastly, many voicemail systems are out-dated and difficult to use. While iPhone users can listen to messages by tapping 3 buttons, most people are stuck calling a special number and entering their 4-digit password. This is utter chaos – remember, we live in a world where Apple replaced 4-digit passwords with our fingerprints to unlock our phones.

The world of communication is evolving quickly. There are too many human, product, and network forces acting against traditional voicemail for it to survive. I’m excited to see what comes next.