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.

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.

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.

A New Role at Facebook

I am transitioning to a new role at Facebook this week.

The last 9 months have been awesome. I was fortunate to work with an amazing team to grow the Facebook Pages product to record levels. It was hard, tactical work that tested our dedication to success many times. The team persisted and crushed all expectations. In the end, it was rewarding to watch our efforts empower millions of businesses to thrive. I can’t speak highly enough about each individual person – hopefully I will get the opportunity to work with them again in the future.

It was a hard decision to leave such a great situation but ultimately the right one. I’m becoming Product Manager on a new division within our Growth organization. The Facebook Growth team is one of the best in the industry so I’m excited to learn from them. I’ll be working on a number of projects that solve real world, tangible problems that directly impact people’s lives.

It’s no secret that I believe many technologists are chasing money, rather than using their skills to improve lives. I’m excited to work with another highly skilled team to tackle these really hard problems. If you’re interested in helping, ping me.

Keep an eye out for some really cool stuff in the new year. This is going to be fun.

The Mobile Apps Used By 18 College Students

College students’ mobile app usage is a great signal for which apps are gaining traction. This demographic tends to be on the cutting edge of the newest, shiniest thing. Below are screenshots from 18 college students mobile phones – lets see where they are spending their time.

Social media apps are littered across the home screens.

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This active group utilizes multiple fitness apps to keep track of their progress.

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Female

Music apps like SoundCloud, 8tracks, and Spotify are wildly popular.

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Apps such as Dropbox, Fedex, Quickbooks, and Yammer are popular among the business-focused segment.

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Dating apps like Tinder are just as popular as emojis. Anonymous apps like Brighten are also growing in popularity.

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It is not uncommon for these students to use their background photo for daily motivation.

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Android is not nearly as popular as iOS with this group.

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More organizations, like blogs and schools, are building apps that gain traction.

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Some students leave the standard apps littering their home screen…

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…while others aggressively use folders to stay organized.

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Weather and health are important no matter what your age.

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Games are a great escape from a young adolescent life.

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Remember Passbook and Newsstand?

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Female

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With the rise of Instagram, photography apps have exploded.

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Female

Video apps like Vine and FaceTime are popular as well.

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And since money makes the world go ’round, banking apps are a necessity.

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Its obvious that college students’ app usage is not much different than other demographics. While they may get on board with the newest social network faster, these people still gravitate towards fitness, music, banking, and photography. It will be interesting to see how these home screens change in the next 6-12 months…

The Snapchat Rocketship

Photo courtesy of slashgear.com

Photo courtesy of slashgear.com

In December 2013, most of the tech world was appalled when Evan Spiegel and Snapchat turn downed Facebook’s reported $3 billion acquisition offer. I wrote at the time that people were overreacting and predicted a 3-5X valuation within 18 months. Snapchat has grown even faster than my expectations and is now rumored to be valued at $10 billion.

I am now more bullish on Snapchat than ever. There are three factors that will drive additional growth and an ultimate IPO:

1) Snapchat’s daily usage among the under-25 crowd is insane. This demographic continues to send multiple Snaps a day, similar to their text messaging rates. It has become common to have a complete conversation with ephemeral photos. This places Snapchat as a competitor to WhatsApp, WeChat, or Facebook Messenger.

2) Snapchat’s My Story feature has filled a niche market need. Young people want to share content with each other in our public, social world. There are plenty of social networks that empower this sharing but they all have the same problem – the content lives forever. Snapchat was able to figure out a way to facilitate one-to-many communication without the fear of someone digging up the content two years from now. This small difference is powerful and compelling.

3) Snapchat ads are coming. Earlier this week, Spiegel hinted that the ads product would allow brands to tell a story in a similar fashion to My Story. With a highly coveted demographic, I’d expect brands to be attracted to this new, creative channel. Since self-service advertising appears to be farther down the product roadmap, I imagine the early advertising deals will be lucrative contracts with large agencies.

Additionally, most social platforms receive another level of validation when unknown individuals are able to build a celebrity following on the platform. We have seen this occur on Facebook, Twitter, Instagram, and Vine. Snapchat hit this milestone in the last 12 months. In some cases, thousands of kids are following a “random” person for multiple updates a day.

Everyone thought Snapchat was a fad back in December. It is clear that the company is not going anywhere for awhile. The big challenge for the team will be whether they can successfully execute their ads business. If all goes to plan, expect an IPO in late 2015 at a $25-30 billion valuation. This will be fun to watch.