November 12, 2013
Icelandic Startup Plain Vanilla Games launched their new game Quiz Up and it has been getting a lot of attention and has been in the top 3 in the Apple App Store. I played the game and it was a lot of fun. I wrote about Plain Vanilla Games here and Thorsteinn their Co-founder and CEO has been a speaker in Startup Iceland Conference. I promise there is a point to my writing about this and not just a plug for Plain Vanilla Games or QuizUp. I remember Thorsteinn pitching in a Seed Forum Event 2 years back and I remember him talking about how he got a Venture Investor in the US to invest in the company and the rest is history. I find that very strange and interesting, how come the minute a VC investor putting money in a company an Entrepreneur turns out a big hit? Is there some magic that these US VCs seem to carry with them and their investments? Well, as much as I want to say there is a secret sauce and magic, there is none. It is all hard work to develop a product or service and a lot of partnering, hustling, marketing and selling. It takes time and effort to bring a product to market. I am really please to see Icelandic companies break the mould and are starting to venture out and be global. I hope with the success and role models created by these entrepreneurs we will have more investors wanting to participate in this journey in Iceland. Angel and Venture investing is a lot of hard work and value creation tied with investing unlike buying a stock or bond in the market where the part of the returns are driven by speculation and market dynamics. I have created an Angel Syndicate to motivate more people to co-invest with me in building the startup ecosystem in Iceland. I always put my money where my mouth is. I know there is value in Iceland. I can go all day about why I believe we can create global companies out of here, there needs to be a conscious vision, strategy and execution to make that a reality. Doing that right is the key, and investing in creating an environment that is conducive to that is a must have. We cannot guarantee success but we can reduce the odds of failure. I think with each success like Clara, Plain Vanilla Games, Betware (Betware was acquired by Novomatic, that news item is for another blog post) etc we are reducing the odds of failure in Iceland. With the syndicate that I have created, we will be doing $1m worth of early stage investing every year, in my humble opinion if we are able to get this going it will transform the Icelandic startup ecosystem.
May 9, 2012
Peter Singer makes a case for finding a business model that would make it fair for content creators in his article “The Ethics of Internet Piracy“. He goes on to say that he is fortunate enough to make a living off his salary that he does not need royalties of his work. It is an interesting argument, I wonder if every author starts out having 1 billion potential customers of their content. The economics of the Internet is not complex it is just different, it is hard to fit a model that has worked before into the new world. There have been many instances of debates and opinions around this and more recently by Open Rights Group with the title “We don’t have to choose between freedom and copyright“. There have been independent voices that say that most I mean 90+% of consumers on the internet would willingly pay for content, whether it is a scientific paper, music, video, movies or whatever the biggest challenge on the internet is determining the reservation price. To remind myself on what I learnt in Economics 101, that reservation price of a good is the price a consumer is willing to pay for that good. This is the basis for all of economic theory, the downward sloping demand curve, etc. The power of the network skews this model quite a bit. I am not smart enough to define a theory that would work for the Internet, but I can make some observations and try to tinker with the model. Lets take a first time author, what are the chances of her work being found and consumed on the internet when she publishes her work through her blog? well, depending on how big her network is and how good the content is and how many of the relationship she can influence to share, it can spread exponentially. So the pricing of the content should be a function of the network that her content is distributed through. Traditionally, the distribution mechanisms were monopolies, driven by the economic strength of movie studio, record production company or the circulation of a newspaper. That model is still valid and relevant but that model does not work for the millions no billions of bits of content that is being created by everyone who has access to the internet and an input device.
I fundamentally believe that those who create content and do not want to have it distributed through the internet should resort to the old mechanism of publishing, whether it is records, CDs, DVDs or paper books. But most of this content is going to be digitized by someone and distributed on the Internet, if the original distributor was not capable of using the Internet as a medium to find the right pricing to reach the billions of people online then too bad. Figure out a model, pricing plan to make the Internet work for you. I believe most of the people on the Internet would like to pay for content, but given the network effect, the pricing has to be driven by the network. Think of iTunes and the App Store by Apple. I believe they have solved the network pricing problem, 0.99 cents seems small enough that one can appeal to a large target audience and if the content is relevant to the target audience then it should enable the content creator to monetize the work profitably. I am not trying to say Copyright infringement is good or one is ok to steal on the internet, all I am making a case for is that the Problem is not out there, the problem is always with the content creator. If we start with working on ourselves, it actually leads to positive change in the environment. I want wrap this blog post with a quote “when morays are sufficient, laws are unnecessary. When morays are insufficient, laws are unenforceable”.