Stay away from Fanbox

I am normally a proponent, and sometimes early adopter, of new technologies including Web Sites and Web Services. I'm also a believer in the value of personal networking. I have accounts all over the web including Face book, LinkedIn, and Plaxo Pulse. I've even signed up for some of the losers such as Friendster, Naymz, and Spaces. I never had a bad experience until I came across Fanbox (notice that I refuse to link to it).

It started with an innocent looking message from a colleague; Dawn has a question for you. When I clicked on the link, I was directed to Fanbox and presented a somewhat racy question that was apparently directed at someone with a much different demographic than me. Ironically I had been introduced to Fanbox a few days early by Sterling Brown and given Sterling's reputation I was intrigued. So I clicked on an answer to the question.

Here's a clue, if you get a message about a question, don't click on it! Answering the question kicked off a wizard inviting my contacts to Fanbox. Fanbox apparently scanned my Outlook Contact list, even though I never click a link for that purpose. It then asked if I me to send a question so I immediately clicked cancel. Later I discovered that Fanbox forwarded the question to my contacts and causing me much embarrassment.

It's really a shame because the fundamental technology of Fanbox is pretty cool. They have reproduced a workstation desktop and point-and-click user interface deployed over the web. The desktop comes with storage, email, and that mimic Microsoft Windows pretty closely. Apparently a Web-based Windows environment is a solution looking for a problem, because Fanbox has jumped on the social networking bandwagon. Outside of social networking, I did not see any real value to the site. There certainly is nothing that would persuade users of Facebook or Google Docs to jump to Fanbox.

So Fanbox has resorted to tricks to obtain members. Grabbing my contact list was akin to spyware or worm tactics. Maybe someday a company with vision will snatch up the Fanbox technology and deploy it provide some real benefit. Until then, avoid Fanbox like the plague.

Plant a Billion Trees

Brainteaser

See if you can solve this problem.

Each number shown below follows a certain rule. Figure out the rule and determine the missing number.

January	20
March	5
April	10
December	15
July	?

Is the answer?

1. 5
   
2. 10
   
3. 15
   
4. 20
   
5. 25
   

Check back in a couple of days. I will post the answer in a comment.

Cash is King

There is a common notion that most start-ups fail for one of two reasons; either they are under capitalized or do not sell aggressively. In both these cases, the firm fails to raise the appropriate amount of cash needed to sustain operations. Of course all failed businesses run out of money, but some never give themselves a chance.

A firm that never gave itself was chance is Elite Technology Partners. The company was born from the technical brain trust of Blackwood Trading, and quickly conceived a product and business model based on their experience from the other firm. Their product was greatly inspired by Blackwood, but targeted a specific strategy and different distribution channel.

Elite's founders had learned from their experience at Blackwood. Certainly, they put to use the intellectual capital gained at Blackwood. They also learned from Blackwood's failed effort to market themselves successfully. In addition, the founders recognized that Blackwood's operational model was very expensive.

However, Elite underestimated the effort required to develop a product and bring it to market. Very quickly the firm fell into a chicken and egg situation. In Elite's case, they couldn't sell product because they did not have the capital to complete it. And they could not raise cash through sales because their product was not finished. Add to their situation the economic environment during 2002, where investment capital had effectively dried up. Venture capitalists were only looking at firms generating cash through sales.

In Elite's case, the lack of cash led to a series of strategies changes that sealed the fate of the company. First, a shortage of cash caused many of their best engineers to secure positions at other employers. Elite sought an investment arrangement through key prospects that would enable them to bring their product to market. But partnerships with a large investment come with restrictions. Demands of exclusive use and ownership of intellectual property made partnership deals impractical.

To raise cash, Elite sold its' talent in consulting arrangements. The consulting business was profitable and brought in enough cash to keep the operating. Unfortunately the opportunity cost of consulting was a halt to further development of Elite's product. In the end, Elite failed to complete its' product; Elite failed to complete its' product because it failed to raise the capital necessary to build the necessary technology.

I am working with an entrepreneur who is in a similar position. He is following a conscious strategy of delaying raising despite having an established relationship with investment bankers. The entrepreneur is betting that signed contracts will make the firm more attractive to investors. This may be true, but having no cash in his firm, he will have a difficult time meeting any operational commitments.

My observations of Elite Technology Partners leads me to believe that my friend has a risky strategy. Because he refuses to seek capital, he will not have a fully functional team in place when he signs his first contract. When the contract is signed he will need to complete his technology, hire staff, and seek capital within a very short timeframe. In the three to six months needed to receive private equity cash his venture could fail.

Elite Technology Partners failed because they did not raise cash for their operations. Successful entrepreneurs beg, borrow, or steal (Ok, maybe not steal) enough to give their companies inertia. A firm with inertia will attract further investment, or generate cash organically.