Rustic Canyon

BY BRIAN DEAGON

INVESTOR'S BUSINESS DAILY

Posted 1/23/2009

Jason Nazar, founder and chief executive of Internet documents firm Docstoc, tells a story about the time he tried to hypnotize three people at the request of his college buddies.

He'd recently taken a weekend course on hypnotherapy, and this was his first show.

It flopped, big time.

He called the teacher to ask why he failed, and what his secret to success was. The teacher replied, "The next time you do a show, pretend that you are the greatest hypnotist in the world."

At Nazar's next performance he acted as if he were Harry Houdini in the flesh, full of flash and arrogance.

It worked. The group under his trance shivered when he said it was cold and panted when told they were hot.

"It was the most important lesson I learned about what to do when starting a business," Nazar told an audience in Santa Monica, Calif., recently, for a presentation he gave about mistakes to avoid. "The single most important thing you need when starting a business is belief in yourself, that you can do this."

Docstoc, based in Beverly Hills, Calif., was launched in November 2007 with the backing of venture capital firm Rustic Ventures and investors in other successful Internet startups. It's an Internet platform where users can upload and share a vast repository of documents on topics such as legal, business, technology and education. The site received 3 million unique visitors in January, up 25% from the prior month, said Nazar.

Errors To Avoid

During the presentation, Nazar ran down a list of mistakes to avoid when creating a company, among them not sharing the idea with enough people to get their impressions and advice. Another mistake lies in believing that your idea is totally unique, which is highly unlikely.

And just because someone else got there first doesn't mean the game is over. An example comes from the evolution of social networking Web sites, he said. Among the first was Friendster, which was shunted aside by My-Space and is now losing its luster next to Facebook.

"Just because something has been done before doesn't mean you shouldn't do it. Just do it better," he said.

He also advises budding entrepreneurs to remain confident and not give up too soon when road bumps slow their journey. Also, become your company's first salesman and prove it's a sound concept before building a sales staff. Don't over-analyze to the point of paralysis.

Entrepreneur Tony Greenberg, an early commercial pioneer in the Internet industry and chairman of technology outsourcing firm Ramp Rate, says many successful startups go through three or more business-model shifts before hitting the right mark.

"And people usually don't abandon a bad business model quick enough," he said.

It's also important to promote innovation by clearly understanding employees' core strengths and putting them in a role that will promote that.

Craig Allen, who has a track record of developing and launching interactive entertainment brands and services, and is currently chief executive at Spark Unlimited, a video game developer, advises not to underestimate cash needs and the timing of payments.

"A lot of times folks know how much they need to start a business but underestimate the amount of money required to get to the point of an operational and sustainable business," he said.

And in some cases payments due by partners can come in later than expected, especially if by doing so they believe they can use it as leverage to negotiate a better deal.

Be Prepared

He also recommends ensuring the business is ready to operate before adding staff and serving clients. This ranges from registering trademarks and having proper insurance to forming an employee handbook with all legal and policy points in place.

Lawrence Langs, a corporate attorney, investment banker and serial entrepreneur, provided this: "Letting legal and financial engineering lead the business instead of a business driving these considerations leads to a lot of roadkill."

On the flip side, "Not investing in proper legal structure, intellectual property protection or fully researching a business plan is sure to kill a company as well," he said.

Langs also says good companies often go astray due to personality- driven issues more so than operations or product issues.

"This is especially true in family-run businesses where nepotism and the business of the family takes center stage," he said. But it also applies to most nonfamily companies since they often act similarly.

Successful companies nurture and respect great talent.

"Many young companies treat employees as fungible and run into unexpected business interruptions as a result," said Langs.

Kelly Perdew, a serial entrepreneur and chief executive of RotoHog.com, a fantasy sports platform, warned against wasting time getting to market by overstressing perfection. When it comes to Internet ventures, get the site up as soon as feasible and start getting feedback from customers, he said.

"That feedback is worth more than a year in development," Perdew said.

And never forget that customers know more than you do, said Perdew. "Always listen."

And when it comes to leadership, said Mike Weiss, founder of Streamcast and its Internet file-sharing software Morpheus, lead by example. "Don't command respect. Earn it," he said.

Under Matt Freeman, GoFish Is Reborn as Betawave
Turns Company From Video-Sharing Site to Ad Seller
by Abbey Klaassen Published: January 19, 2009
NEW YORK (AdAge.com) -- When Matt Freeman left the CEO post at Tribal DDB last year to helm GoFish, the first thing many of his colleagues in the ad industry wondered was, "GoWhat?"

And rightfully so. The tiny company's stock trades on the OTC Bulletin Board for 20 cents, and its pedigree could easily leave some confused as to what exactly its business is.
But Mr. Freeman's vision was to create a media-sales company built on the idea that the value of media will be based on the amount of attention it garners, not just sheer numbers of people it reaches.
The ultimate turnaround If he succeeds, it will be the ultimate turnaround story. But he's got a long way to go.
Today, he makes an early move to recast the company, rechristening it Betawave. What started out as a video search engine before becoming a video-sharing site -- a sort of poor man's YouTube -- now makes money selling ads for other online gaming and virtual-world sites, such as WeeWorld, Cartoon Emporium and, its newest addition, Shutterfly. It's a classic rep-firm model, similar to the arguably better-known Gorilla Nation.
"[The publishers] going direct to advertisers, it would be difficult for them to get attention," Mr. Freeman said. "We provide a way for midtail, high-quality publishers to band together and make sense for major advertisers."
Third among sites He counts as a bragging right -- and the central selling proposition -- the amount of time people spend on the sites Betawave represents. According to December ComScore data, provided by Betawave, it ranks third among internet sites in the amount of time people 18 to 34 spend on it. In terms of unique visitors, it lies somewhere between Photobucket and Disney Online with 7.8 million 18- to 34-year-olds. But for teens ages 12 to 17, it doesn't compete for reach with traditional ad networks or portals; ComScore doesn't publicly release kids'-site audience data. Still, the time people spend on its sites has been enough to snag some early advertisers. The company has worked with marketers such as Nestle, Sears, Activision and Kraft to create things such as a branded games and virtual branded goods.
"When we're trying to get some scale on tween side, there's only so many properties you can work with," Tom Penque, VP-group account director for MediaContacts. "They offer a product to that demo we're looking for that resonates." He evaluates GoFish-cum-Betawave in the same bucket that he evaluates some of Viacom's Nickelodeon sites or IAC's Zwinkys.
But Mr. Freeman sees himself in a different competition set -- up against the large internet portals. "Look at it from major brand marketer's viewpoint," he
said. "If you need mass reach, you have two choices: portals or midtail sites that are garnering an engaged audience."
His example for how Betawave could sell its newest site, Shutterfly, involves going to a marketer of baby products and allowing them to own the new baby community by sponsoring tools and services to help people upload, edit and share baby photos. "[It's] adding a service to the community vs. advertising on the community."
Infusion of capital While it has added to its network under Mr. Freeman, perhaps his biggest achievement since taking the reins has been raising $22.5 million cash in December 2008, one of the toughest months for raising venture capital. The investors included Panorama Capital, Rustic Canyon Partners and Rembrandt Venture Partners.
Mr. Freeman believes his company will make good on the investment with its new model -- not owning any content but selling other sites' content. In fact, he's somewhat skeptical of owning content.
"You take the full the cost responsibility before you recoup any of the media potential," he said. "Our model is to find best media companies that have attracted audiences on their own merits and be their brand avenue into monetization. We don't assume any of the costs on our own balance sheet."
Of course, not everyone can take that point of view, or Betawave wouldn't have anything to sell.
http://adage.com/digital/article?article_id=133880

OTCBB-traded kids media company GoFish is changing its name and altering its business model. The company, which has offices in San Francisco and New York, is rebranding as Betawave, which is a term associated with brain activity. The name reflects the change in focus. Instead of concentrating on kids-themed media, Betawave says it will try to create new kinds of portals—media environments that demand users’ time. In a statement, CEO Matt Freeman described Betawave’s attempts to evolve from portals, saying that where portals are concerned with reach, the sites formed by Betawave will try to stress engagement.

Betawave will pick up from GoFish’s portfolio of casual gaming, virtual world, social play and entertainment publishers. The move follows last month’s $22.5 million financing, which erased the company’s 14.5 million debt burden. The proceeds also went to hiring additional staff in sales and marketing.

ADOTAS — GoFish is relaunching as Betawave Corporation, following a $22.5 million financing last month. The company believes that consumer attention will become the new economic basis for brand media. Betawave focuses on the highest attention span media environments as measured by time spent per month, time spent per page and receptivity to brand advertising. This approach, coupled with an emphasis on immersive advertising products, allows Betawave to weave brands into the fabric of consumer experiences and deliver measurable results that far exceed industry norms.