Not the transition I expected. But that’s how change and new lives work out sometimes.

Wake them up, or let them sleep?, Bangkok, Thailand, 2005

Lots of things running through my mind right now.

I could talk about the wonderful world of APIs. I could talk about how the default societal gesture that says “creating is time consuming” impacts engagement-based marketing strategies. I could talk about how hard it was for me to write a non-pompus artist statement for a small exhibit. I could talk about my new-found inability to sleep, the result of these soul-stirring jolts that are robbing me of the golden sleep past o’dark hundred.

But none of that would really hit the nail on what’s running through my head.

And more importantly, running through my life.

I’ve pontificated about what happens when we bring the web into our life, but they’ve really been nothing but pontifications. Untested, unexplored, unused. I mean, I’ve used Twitter to be social before, but it’s always been a portal to other people’s lives around the world, more of a replacement than an augmentation. As much as I’ve followed the wonder of geo-locational data and the potential of stuff like foursquare, I’ve never really used any of it. I love the idea of “faving your life”, but I’ve never really adopted the tools that would help me do it.

It’s all a part of giving up control, creating more accidents to re-invent the self.

I’m not there yet, but I’m working on it. Feel free to tell me where I’m going wrong, what I’m missing out on, and I’ll try it. I’m easily swayed.

Unexpected changes. And unknown results. All part of a little life reboot.

Thinking through a venture capital investment thesis.

I traditionally think about startup and investment opportunities through broad frames, sectors and trends; but in an effort to get a bit more tactical, here is a general investment thesis:

• Products and services that build markets, networks and/or communities,
• Focused in industries with inefficient, expensive middlemen, high transaction costs,
• That aggregate and structure data,
• To create valuable relevance,
• Created and accessed via any device, anytime,
• Built as an API from the beginning,
• Monetized through API access,
• Requiring a small funding gap between costs and profits,
• Created by founders that embrace a grand challenge.

Perhaps that’s too broad an outline to be a meaningful and actionable thesis, but let’s start here. Breaking it down…

• Products and services that build markets, networks and/or communities.

  Markets, networks and communities form the base of successful next-gen companies; they create and serve niches, promote humanity and meaning, organically incent repeated competition and collaboration, create viral marketing and engagement loops and have “built-in” business models that facilitate creating and exchanging rather than allocating.

• Focused on industries with inefficient, expensive middlemen and high transaction costs.

  The media and entertainment industries get all the attention for the collapse of their legacy business models, but they are just the canaries in the coal mine for many more industries.

  The world doesn’t need another app for sharing photos and music: we need another app for solving expensive problems, understanding our actions and lives, valuing our impact, sharing meaning, being human.

• That aggregate and structure data.

  It should be fairly obvious by now that there are a world of opportunities in a world of increasing unstructured data. Why?

• To create valuable relevance.

  Data is cheap to create but expensive to understand. The basic need of people and businesses to understand the world and make sense of what is happening is the fundamental driving force behind innovation on the web today. Better yet, the high cost of context and relevance is creating opportunities for a variety of businesses. Relevance is a fundamental concept behind many of the web’s current fascinations: realtime, social search, the business models behind news and journalism, social capital, social anything.

  Examples? To start: surfacing and pricing externalities, reducing the cost of relevance, cheaper serendipity, faster, better and cheaper links between online and offline.

• Created and accessed via any device, anytime.

  How, when and why we interact with applications and web services determines their eventual impact; just like “the best camera is the one that’s with you” , the best computer is the one that’s with you. Neglecting to develop applications for mobile interfaces and use cases is at best a limiting strategy, and at worst a death wish.

• Built as an API from the beginning.

  Highlighting a comment by Joe Lazarus on APIs in the Late Afternoon:

  I’m not an engineer, so I don’t know how technically realistic this is, but I’ve always thought that conceptually, companies should build APIs before they build their own interface. That way, they ensure that all the APIs needed to replicate the experience are already in place. The company’s front-end engineers simply become part of their own API developer community.

  Given the importance of APIs (read and write APIs, btw) in linking together web services, creating development communities and building effective business models, developing an API at the same time as creating the technical infrastructure and user interface is an important part of building a web services company today.

  One might read this to think that I’m only creating an investment thesis for a web services company: however, the same principles apply to any company and person today. At its core, an API is a rules-based structure for collaboration, and the basic premise of developing and using APIs can be used by any company using the web for any part of its business.

• Monetized through API access.

  Disrupted businesses often misunderstand what business they are really in: focusing on the products they sell, rather than the needs they serve and the problems they solve, is a recipe for unnovation. Businesses based on multi-sided platforms are often the most confused, failing to understand how to evolve the platform as the markets on either side of their platforms change.

  Media companies are obvious examples of this confusion; but they won’t be the last to make this error.

  Focusing on APIs is a powerful way to focus on the core business, because APIs are structured around exchanging and transacting value. At the moment, only businesses are able to really publish, use and pay for APIs, but eventually using and paying for APIs will be easy enough for individuals to use APIs in their daily lives.

• Requiring a small funding gap between costs and profits.

  Venture capital emerged to serve a need, to fund the timing gap between costs and profits that would otherwise stop new businesses formation. To avoid diving deeper in an oft-discussed subject, the economics of funding new ventures aren’t what they used to be. Start cheap, create a minimum viable product and iterate often.

  Value attracts money; focus on value first and the money will come.

• Created by founders that embrace a grand challenge.

  Embracing grand challenges as an organizing principle helps build adaptable institutions that reward passion and create awesomeness.

  Why place big bets on small ideas?

How would I use this investment thesis? If I was an outside investor, this is how I would use for evaluating businesses as investment opportunities. If I was an entrepreneur, I would start by first determining what problem angers me deeply, and then apply this same thesis to help figure out how to structure the solution.

Obviously it’s only a framework, but it’s a start…

As always, I’m open to thoughts. Feel free to tell me what’s wrong, misguided, unclear, naive; and of course, I’m curious about what’s right…

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Related

• Fred Wilson, Thematic vs. Thesis Based Investing
• Michael Karnjanaprakorn, If I Started an Investment Fund
• Charlie O’Donnell, Free Business Plan: How to start a venture capital fund in New York City
• Seedcamp, Seeding Ideas for Seedcamp 2009
• Seedcamp, Seeding ideas Round 2
• Me, Five cultural and technological frames shaping new business opportunities.

Adding a note about Foursquare to months-long thoughts about combining online and offline technologies with real-time data to help us live better lives.

Getting bigger | Sighisoara, Romania | Sept 2009

Me, Sept 2008, Online technologies will transform how we make offline decisions:

The true long-lasting impact of the Internet will be in how we harness the power of the web to transform how we make decisions in the physical world.

Instead of just focusing on how to improve our online lives, the far greater potential is in combining online and offline interactions. The power of the web is how we can structure, measure, analyze and evaluate the massive amount of data we continually create to guide our decisions in real-time.

In the physical world, however, we invariably face a lengthy lag between when data is created and when it is used in a decision. We constantly make decisions using incomplete information because we have no choice; collecting more data is often too expensive, too difficult or simply not possible. Thus we create heuristics, stereotypes, rules of thumb and other methods for making decisions in environments we do not fully understand.

While collecting more data does not always lead to better decisions, technology is creating unparalleled opportunities for us to use larger amounts of up-to-date data to make quicker decisions. We are beginning to see web technologies address larger opportunities in navigating the physical world using dynamic, real-time, structured data in addition to our more typical use of the web to access static, dated data (e.g. restaurants, bars and driving directions).

Obviously, Foursquare is a great example of how we can aggregate and structure real-time offline data about people and their actions to create networks and communities around human behavior.

The real question in my mind is how can we aggregate those interactions into platforms that can create new markets to support new business models?

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Related

• Consider an extrapolation by Jan Chipchase, Owning Eyeballs.
• Consider the difference and similarities between physically and digitally annotating the physical world; what good are directions if they are in places we don’t look?

A short note illustrating how paying attention to the real “numbers behind the numbers” can help you change your life.

Harry Pavlidis of Hardball Times recently discussed how Brian Bannister, a major league baseball pitcher for the Kansas City Royals, analyzes the “numbers behind the numbers” to dig into his performance and refine his pitching approach:

Brian Bannister, a right-handed starter for the Kansas City Royals, revealed the key to his recent success: PITCHf/x. Bannister has studied the data, after a demotion to Triple-A, and found out he already had the tools to succeed, if he put them together the right way.

As Brian explained in an interview (transcribed in this comment):

I know how the numbers work. I know how OBP works. I know all the numbers that will never be printed in the newspaper. They’re slowly working their way on to major league scoreboards. But, how the game really works, it’s not what you see out there, and it’s not about short term emotions in games. It’s numbers behind numbers… it’s how the game works.

I’ve sold out to those numbers, and I’ve finally found a way, and by throwing that cutter 60 times a game to get the hitters to consistently hit the top half of the ball, and its the difference between being a 5.70 ERA guy and a 3.70 ERA guy.

How did Brian do it? As Dave Allen explains, Brian dug deep into his PITCHf/x numbers:

Bannister is a student of sabremetrics. Back in 2007 when he had a great ERA, build largely on a unsustainably low BABIP, he understood what was happening and that his current approach would not work going forward.

Brian knew his success in 2007 was unsustainable. His changed pitching approach for 2008 didn’t work out as planned, but he looked into the data again and devised an alternate approach for 2009 to accomplish the same goals, and this year, it’s working.

Brian understood that ERA was a “thin” measure of value, and that the “thick” measures lie deeper, in the “numbers behind the numbers” that baseball researchers have been developing and refining for the past twenty years.

Open-mindedness, adaptability, forward-thinking: that’s the kind of guy I can root for.

Why do I point this out? Merely to provide an example of how digging into the data behind our lives enables us to change our relationships, careers and lives. And by sharing our methods of inquiry and refinement with others, it can help other people evaluate and refine their own lives. That’s why we’re here, right?

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Yes, deep at heart, I’m still a baseball geek.