Coopetition

After ten years spent in the film world, dipping a foot back into the tech space has been a bit of a culture shock.

Tech people seem happy to help out even strangers at other companies, just for the good karma. Whereas in the movie world, even close friends secretly root for one another to fail, if just for the frisson of Schadenfreude.

I suspect that difference stems straight from the trajectory of the two industries: the tech space’s total market cap is growing rapidly, while the movie industry’s total grosses have held largely static.

In that context, it makes sense for film folks to resent the success of other players: in a zero sum game, others’ wins necessitate your losses. Whereas in a growth industry like tech, someone else’s achievements don’t inherently undercut your own.

In fact, as many tech companies and products benefit from [network effects](http://en.wikipedia.org/wiki/Network_effect), others succeeding is likely even a net positive, a rising tide lifting all boats (or, at least, all valuations).

Which is to say that, for whatever reason, the large number of tech people I’ve been dealing with of late have all been remarkably nice. After a decade of dog eat Hollywood dog, it’s a welcome change.

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August 3, 2011

Filmmaker == Hacker

Having split my professional life between the tech and movie worlds, I’ve always been struck by how similar filmmakers and hackers are. For example, both groups:

  • Think about the world as a collection of fascinating material to be mined / problems to be solved;
  • Disdain things that are boring and have already been done;
  • Distrust tradition/authority as a sufficient rationale in and of itself;
  • Respect competence and support meritocratic structure;
  • Work collaboratively and share ideas and solutions (even with ‘competitors’);
  • Are willing to put in huge amounts of work, even when unpaid, just for the love of the game.
  • And, most importantly, want to share the things they pour their hearts and souls into making with as many people as they possibly can.

In the tech world, that’s easy for hackers to do: they start startups, build stuff on their own terms, and then share their stuff with users by building direct customer relationships.

In the movie world, however, filmmakers haven’t had such a direct route; instead, they’ve traditionally had to rely on studios and distributors to build those relationships for them.

Now, sites like YouTube allow filmmakers to share directly. But those sites also don’t generate real filmmaker revenue. And while filmmakers (like hackers) don’t actually care all that much about getting rich, they do at least want to make enough money making their stuff that they can live comfortably, and show their investors strong enough returns to play again as soon as they come up with their next big idea.

With more and more films being made each year, it seems almost inevitable to me that new solutions will emerge somewhere between the studio and YouTube models – solutions that help filmmakers build broad audiences, profitably, and in ways they directly control.

I’ve been giving that a lot of thought of late. Because it seems like that’s a big problem waiting for a solution – and an equally big business waiting to be built.

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May 31, 2011

10k

There’s an excellent story in a recent edition of Tampa’s St. Petersburg Times, about Dan McLaughlin, a guy who’s decided to take up golf.

Or, rather, a guy who’s decided to really take up golf. Despite having never played before, he’s set his sights on a slot in the PGA tour. His plan is simple: practice golf for 10,000 hours over the next six years. (That’s six hours a day, six days a week, for those without a calculator.)

It’s a great, albeit clearly insane, experiment, that puts to test an academic theory popularized most recently by Malcolm Gladwell’s Outliers: that becoming truly excellent at something requires less talent and natural skill, and more a willingness to put in about 10,000 hours of hard, focused work.

If that theory is right, by the end of six years, Dan should be one hell of a scratch golfer. If not, then perhaps some of the research on expertise is bound back to the drawing board, and Dan is clearly headed back to a real job.

Either way, I’m curious to see how this pans out, so I’ll be following along at his blog, www.thedanplan.com. But I’ll also be giving some real thought to where the 10,000 hours idea might apply to my own life.

Because, at some basic level, much as I’m impressed with Dan’s commitment and focus, I’m also pretty sure I wouldn’t want to spend six years of my life devoted to nothing other than being a better golfer.

What I’m less clear on is, what would I devote six years to? And, similarly, where have I already been chalking up serious practice hours?

There’s trumpet playing, for example, which I’ve been doing regularly since the age of nine, and where I’ve, by napkin calculation, amassed about half of the expert count, weighing in somewhere near 5,000 hours total.

But there, too, I’m not (and don’t want to be) a full-time professional trumpet player. I do consider myself a full-time entrepreneur, however. Though, on that front, I’m not sure my daily work really qualifies as hard, focused practicing of entrepreneurship. In the world of practice research, that would be ‘deliberate practice’, which roughly boils down to:

1. Focusing on technique as opposed to outcome.
2. Setting specific goals.
3. Getting good, prompt feedback, and using it.

So I’ve been thinking about how I might make my work more deliberately practiceful. About what other areas of interest might warrant 10,000 hours of focus. And, finally, about how, as I’m certainly unwilling to put in 10,000 hours of practice on it, I’ll likely always be terrible at golf.

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April 20, 2011

Fill the Gap

Venture capital funds invest in fast-growing, early-stage companies, in ‘sexy’ industries like high tech, biotech, or green energy.

Investment banks chase larger, more mature companies in those same industries, as potential IPO’s or M&A sellers.

Private equity funds seek out similarly large, mature properties, though in ‘stodgier’ industries, often where hard assets work as collateral for lower cost secured debt.

Who invests in early-stage companies in those stodgy industries?

It turns out, nobody.

cyanmatrix.png

Consider this: while LBO firms were quick to pounce on Hertz (in one of the industry’s largest deals ever), Zipcar (founded in 2000, just filed for IPO) was unable to raise VC dollars for its first six years (until Benchmark led a $10m round in 2006).

[Target, locked](http://www.self-aggrandizement.com/archives/101510_the_old_new_new_thing.html).

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October 18, 2010

The Old, New, New Thing

Old joke:

>A guy is leaving a bar late at night, and comes across a drunk looking for his keys under a lamp post.

>”Hey, buddy,” says the guy, “are you sure this is where you lost your keys?”

>”No,” says the drunk. “But it has the best light.”

Which, in short, is the startup world in a nutshell.

New York, Cambridge, and Silicon Valley are aflush with dozens and dozens of new, well-funded companies. The bubble lives again. Yet, this time, like back in the late ’90’s, nearly all of those companies are clustered in the same few industries: high tech, biotech, green tech.

Sure, those areas have a large number of historical exits. But they also have an even larger number of investors and founders, all competing in the same space.

People ask me all the time why I left high tech for the world of film. The answer is simple: it’s not well lit. Entertainment is a giant, hugely profitable industry. Yet, to be brutally frank, it’s also operating at a far lower average IQ than, and lags behind the basic business best-practices long since implemented in, most other industries.

That makes it a really interesting wild west in which to ‘innovate’, either by applying genuinely new ideas, or by simply re-applying old ideas from elsewhere that seem new here.

I’ve spent nearly the last decade building Cyan around that model. And, over time, as we’ve honed down to the core of the idea, we’ve realized that we could actually improve returns by outsourcing a lot of the operational aspects of physically making or releasing films, so long as we remained very hands on, and held our partners to the top-down strategy based on those innovative ideas.

In other words, we’ve essentially become an early-stage VC firm in the world of film.

Fortunately, that’s turned out to be a very profitable approach. Which is why we’ve also been kicking around ways that same approach might more broadly apply. Couldn’t we move from investing specifically in film, to investing simply in smart companies in stagnant industries?

We think the answer is yes. So, to that end, we’ll shortly be shifting our name from Cyan Pictures to Cyan Capital (though the Cyan Pictures brand [and team] will continue to exist, as a subsidiary, for all our film investing). And, over the next six months, we’ll hopefully have some new and interesting expansion to announce along those lines.

A few friends have already pointed out that this is really just a circuitous, ten-year loop back to essentially the same business model I (fortunately, also profitably) implemented a decade back with Silicon Ivy. To which I say: true. At least I’m consistent.

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October 15, 2010

Step by Step

How to build an interesting company:

1. Address a large market,

2. in an industry where most of the companies are either well behind the times or simply run by stupid people,

3. where well-tested ideas and best practices from other industries can be freshly applied,

4. to create both ROI and a positive impact on the world.

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August 19, 2010

Structured

After a swirling mess of 2009, 2010 seems to be off to a solid start for Cyan. Things are, as mentioned, calming down a bit, though mainly because our projects are for once happily moving forward, rather than all simultaneously coming off the rails. One of our films was just acquired, another is in the final throes of post-production, and a third gears up for pre-production at the end of next month.

Still, most of my day is spent fundraising and then fundraising some more. Movies ain’t cheap.

This morning, however, I had the brainstorm of all brainstorms, and I’ve been feverishly drafting documents since.

The idea itself – a tax-arbitrage structure leveraging Federal and state subsidies for film – is complicated, but the effect is simple: it reduces risk on a film investment to 15 cents on the dollar. In other words, invest $100, see potential upside from that full $100, but face a maximum loss of $15.

Which, I think, should make fundraising a fair bit easier. Those Goldman boys got nothing on me.

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May 18, 2010