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Alan Bradley: [holds up his pager] I was paged last night.

Sam Flynn: Oh, man, still rocking the pager? Good for you.

– TRON: Legacy

Here’s my card. It’s got my cell number, my pager number, my home number and my other pager number. I never take vacations, I never get sick. And I don’t celebrate any major holidays. 

– Dwight Schrute in NBC’s “The Office”

As Software Eats the World and more and more of our daily activities move online, we depend ever more on IT infrastructure. In a day spent emailing, tweeting, catching up on the news, checking Facebook, shopping on Amazon, watching a movie on Netflix, banking at an ATM — it’s all too easy to forget that underlying all of these “mission-critical” activities are servers, routers, load balancers, switches, storage and millions of line of code.

In a world where we’ve come to view the Internet as a utility, a major website outage is almost as serious as a power outage — and usually affects far more customers. Amazon Web Services had several major outages in 2012, taking down Netflix, Reddit, Heroku and many other sites in July and December. In October, it was the turn of YouTube, Dropbox, Tumblr and Google AppEngine. GoDaddy’s September outage affected up to 5 million hosted websites and 50 million domain names for six hours.

In addition to negative publicity and customer dissatisfaction, downtime now has an enormous financial cost. A 2010 study reported that U.S. businesses suffer an average of 10 hours of downtime per year, at a cost of $26.5 billion. Another analysis suggests that one hour of downtime costs the average business $300,000. If there had been a major outage on our most recent Black Friday, it would have jeopardized $1 billion in online sales.

Dealing with downtime

Of course, modern IT infrastructure has been built for redundancy and is extensively instrumented. Automated tools such as Nagios, Keynote, New Relic, Pingdom, SolarWinds and Splunk monitor every element of the stack and alert engineers immediately to urgent or emerging issues. In fact, today’s machines are very good at detecting and reporting incidents. It’s when those incidents get handed off to humans for remediation that things sometimes break down — because the humans are still using processes and technology that haven’t changed much in ten to fifteen years.

When I was at Loudcloud back in 2001, everyone carried a pager. A small team in our 24/7 Network Operations Center (NOC) would watch for critical monitoring system alerts on big screens and then page the administrator on duty, no matter what time of the day or night. If the administrator couldn’t resolve the issue, they would escalate to developers, who also wore pagers. The process was labor-intensive and error-prone, involving emails, phone-calls, written duty rosters and escalation schedules.

While most other aspects of IT have changed dramatically, incident management in many IT organizations looks remarkably like it did back in 2001. The cloud has done away with the need for many NOCs, and the move to DevOps may mean developers are more directly involved in issue resolution, but the processes are frequently still manual, cumbersome and inefficient. Moreover, today’s large complex systems are never the responsibility of just one person — database administrators, developers, and system administrators all have a role to play — and the more people involved, the more complex and error-prone the process becomes. Reporting of incidents and handoffs from person to person are often done manually via email or SMS. Escalations and problem descriptions are handled via person-to-person phone calls. Engineers consult spreadsheets to see who’s on duty at a particular time. I’m aware of at least one major cloud service provider whose ops people still wear pagers.

PagerDuty

Having studied software engineering at the University of Waterloo and then built and supported large-scale systems at Amazon.com, Alex Solomon, Andrew Miklas and Baskar Puvanathasan set out to bring IT incident management into the twenty-first century. The result is PagerDuty, a modern SaaS-based platform for incident tracking, alerting, and on-call management.

In a nutshell, PagerDuty collects alerts from a customer’s existing IT monitoring tools and alerts the on-duty engineer if there’s a problem. PagerDuty doesn’t replace any particular monitoring tool. Instead, the system sits on top of existing monitoring systems and aggregates all of the errors generated by these tools in a single place.

incidents PD

PagerDuty allows each engineer to configure his or her own customized notification chain. Engineers can opt to receive incident alerts using any combination of phone calls, SMSes, emails and iOS push notifications. So, for example, you could opt to get a push notification immediately when an incident occurs, then an SMS 2 minutes later, then a phone call 5 minutes after that. PagerDuty also allows the on-call engineer to acknowledge, escalate or resolve a triggered incident directly from his or her mobile phone. The company utilizes multiple redundant data centers and SMS and telephony gateways to guarantee reliable message delivery across more than 100 countries.

Incidents in PagerDuty are routed according to an escalation policy. A policy specifies how incidents should be escalated within each team. For instance, you can configure a sysadmin policy to route incidents to a primary on-call engineer and automatically escalate the incident to a secondary on-call if the primary doesn’t answer within 20 minutes. Escalations are crucial to incident response because they add redundancy and ensure nothing falls through the cracks.

escalations PD

PagerDuty lets you build different on-call schedules for each specialization within the organization. For example, you can create one schedule for your database administrators, and another for your network engineers. Incidents can be easily configured to alert the appropriate on-call specialist, ensuring that problems are always automatically dispatched to those who are on-duty and best able to handle them. No more spreadsheets!

on call sched PD

Getting customer feedback on PagerDuty proved to be very easy, as it turned out that a large majority of our portfolio companies were using the product — and they were overwhelmingly positive about how it has dramatically simplified and improved their IT operations management. In fact, the company already has several thousand paying customers, including web giants such as Microsoft, Electronic Arts, Adobe, Rackspace and Intuit as well as a growing number of enterprise IT organizations. Overall, PagerDuty has achieved a remarkable amount on about $2 million dollars in initial funding, including generating a substantial and rapidly growing amount of recurring revenue. With a market of almost 10 million infrastructure and application specialists worldwide and multiple ways to expand within the multi-billion dollar IT Service Management segment, this company has a lot of potential.

In closing

The world’s inexorable transition to cloud computing and modern large-scale mission-critical IT systems is creating the opportunity for an exciting new generation of software companies like PagerDuty to play a critical role in its enablement. Many Andreessen Horowitz portfolio companies, for example GitHub, MixPanel, GoodData, CipherCloud and Snaplogic, are members of this class.

As veterans of IT systems management and automation ourselves, we are excited to lead a $10.7 million investment round for PagerDuty and welcome them to the a16z family.

Living in silos

As software continues to eat the world, we spend an ever-increasing portion of our time online. Worldwide, we pass over 35 billion hours a month in the digital world, with US Internet users spending an average of 32 hours online monthly. As the Web has evolved, more and more of that online time is spent in specialized venues such as Facebook, Instagram, Twitter, Pinterest, LinkedIn and Foursquare. While these are fantastic applications, they have a downside, in that they largely exist as parallel, unconnected containers for our personal data. Trapped in their respective silos, our posts, photos, tweets, pins and checkins are largely inaccessible to us from outside. Moreover, creating useful connections between one application and another is far beyond the average user. Sure, most of the most popular web applications now have APIs, but they’re written for the benefit of developers, not people. (Take a look at Instagram’s API documentation, for example.)

Announcing IFTTT

Andreessen Horowitz’s latest investment, IFTTT, (for If This Then That) is out to change all that. IFTTT (rhymes with “gift”) is a simple yet powerful way to create connections between any two web applications, triggering an action on one every time any event you specify happens on another. For example, when I post on App.net, my post instantly appears on Twitter too, thanks to IFTTT. Every time I post a photo (or am tagged in one) on Facebook, IFTTT downloads it to my Dropbox without my even having to think about it. Here’s what that recipe looks like:

Facebook > Dropbox

Looking for a short-notice ski rental property in Tahoe used to mean checking Craigslist several times a day – this week I just had a simple IFTTT recipe call my cellphone the minute the one I wanted showed up. I no longer check for new movies on Netflix – IFTTT does it on my behalf. While I go about my digital life, IFTTT is in the background, quietly watching out for me.

Like all of a16z’s investments, this one starts with a compelling founder. Linden Tibbets, IFTTT’s co-founder and CEO, started working on IFTTT from his San Francisco apartment in 2010, after three years at design firm IDEO. Struck by how instinctively we know how to use physical objects in creative ways, he set out to enable us to be just as creative with the applications we use in the digital world. To quote Linden, “Much like in the physical world when a 12 year old wants a light-saber, cuts the handle off an old broom and shoves a bike grip on the other end, you can take two things in the digital world and combine them in ways the original creators never imagined.”

“Digital duct tape”

What resulted is IFTTT— described by a recent interviewer as “an idea so alarmingly simple and amazingly powerful… it makes you wonder why nobody thought of it before.” True to Linden’s design roots, IFTTT is visually appealing, approachable and easy to use. In Linden’s words, “IFTTT isn’t a programming language or app building tool, but rather a much simpler solution. Digital duct tape if you will, allowing you to connect any two services together. You can leave the hard work of creating the individual tools to the engineers and designers.”

IFTTT allows people to create “recipes” that connect “channels” (e.g., Instagram, Dropbox, Twitter and 56 other apps) so that “ingredients” on one (e.g., an item with the description “dog painting” appears on Etsy) become a “trigger” for an “action” on the other (e.g. “Add a new line to my Dog Paintings spreadsheet on Google Docs ”).  A glance at some of IFTTT’s channels:

IFTTT Channels

With virtually no promotion, IFTTT has nevertheless achieved remarkable traction since its beta launch two years ago. Its mission statement is to “enable everyone to take creative control over the flow of information.”  People have created over 2 million individual “recipes” to connect their favorite websites and apps in ways that meet their own unique needs. There are tens of thousands of shared recipes for common use cases. Three million recipes are executed every day, addressing individual interests as varied as “Text me if Apple stock drops below $500” and “Post my App.net posts tagged #a16z to Yammer.

Looking ahead

Although Linden and his tiny team of seven have achieved an amazing amount already, the best is yet to come. With Andreessen Horowitz’s investment, 2013 will bring more and simpler recipes and exciting mobile apps. A new developer platform will enable application developers to create services that connect their application to others in new and powerful ways, opening up new functionality to users with virtually no diversion of internal engineering resources. Perhaps most exciting of all is the role IFTTT can play in the emerging Internet of Things. As everyday objects from fridges to shoes to weighing scales become equipped with communicating smart sensors, individuals’ need to create useful connections and information flows between them will far outstrip their developers’ capacity to build them. I don’t know exactly when my fridge will be capable of knowing I’m running low on milk and contacting Safeway to order more, but there’s a pretty good chance an IFTTT recipe will be involved when it happens.

The Challenge of Sustainable Development

I just came back from a short stay in Rio de Janeiro, Brazil.  Like its fellow BRICs China and India, Brazil has experienced a massive economic boom over the past decade.  While the boom has lifted tens of millions of people out of economic misery (40 million have entered the middle class in Brazil alone), the increasing challenge for the world is to sustain such growth without intolerable pressure on the earth’s increasingly scarce resources. While I was in Rio, the city hosted over a hundred heads of state for “Rio+20”, the United Nations Conference on Sustainable Development. While the conference has passed, the immense challenge of sustainable global development remains—and sustainable agriculture is a particularly critical imperative.  As the UN’s Rio+20 website puts it:

…Right now, our soils, freshwateroceans, forests and biodiversity are being rapidly degraded. Climate change is putting even more pressure on the resources we depend on, increasing risks associated with disasters such as droughts and floods.  Many rural women and men can no longer make ends meet on their land, forcing them to migrate to cities in search of opportunities.”

The Green Revolution – Part I

Forty years ago, the world was faced with the similarly daunting challenge of feeding the exploding populations of India, China and other developing nations.  A 1968 bestseller predicted that “India couldn’t possibly feed two hundred million more people by 1980” and “hundreds of millions of people will starve to death in spite of any crash programs.”  In fact, technology saved the day, in the form of extraordinary, new high-yield grains and seeds, powerful new fertilizers and modern agricultural management techniques.  Far from succumbing to famine, India and its peers became first self-sufficient and then net exporters of food, as a technology-powered “Green Revolution” enabled a massive increase in agricultural productivity.

The Revolution’s Serious Costs

Although the Green Revolution was a tremendous success, it was not without serious costs that are being felt with ever-increasing intensity today.  One of these costs is the excessive and indiscriminate use of chemical fertilizers around the world, with severe consequences for arability and for air and groundwater.  (For example, nitrogen causes algae blooms that deprive water of oxygen and kill marine life.)  China provides a case study: While farm yields in China have increased 40 percent since 1980, chemical fertilizer use has increased by 225 percent.  Chinese farmers now use over three times as much nitrogen fertilizer per hectare as U.S. farmers, but produce 30 percent lower yields.  Regulatory restrictions are proliferating worldwide.

Meanwhile, the challenge of feeding the world is back on the front burner.  The same UN report says:

A profound change of the global food and agriculture system is needed if we are to nourish today’s 925 million hungry and the additional 2 billion people expected by 2050.

The Green Revolution – Part II

The key to meeting this challenge will be to achieve further dramatic increases in crop yields, but in a sustainable way.  American farmers are leading the way, in a new technology-powered Green Revolution, investing in ultra-modern tractors equipped with smart devices that automatically control seed and fertilizer dispersal.  According to a recent fascinating Wall Street Journal article, “These modern tractor cabs have come to resemble airplane cockpits more than the seats of old-fashioned tractors.  Farmers can plant or fertilize a whole field without touching the steering wheels, and yield data from sensors in combines—the vehicles that harvest crops—help refine the plans for the next season’s planting.”

Introducing Solum

Solum, Andreessen Horowitz’s latest investment, is poised to play a fundamental part in this exciting shift to data-driven precision agriculture.  Founded by three brilliant young men with PhDs in Applied Physics from Stanford and ties to the American Midwest, Solum has invented a radically more accurate technology for testing farm soil, enabling farmers to measure actual nutrient content and apply fertilizer on a targeted and highly granular basis.  Solum’s platform enables farmers to correlate nutrient measurements and fertilizer application to actual yields, in a constantly improving feedback loop.  Over time, the result for farmers should be a “virtuous circle” of increasing crop yields driven by ever-smarter and environmentally sustainable use of fertilizer, water and other precious resources.  In essence, Solum’s technology will provide the data to drive farmers’ new intelligent machines, and the software to manage their application on a large scale.

While the potential societal and environmental benefits are enormous, a powerful profit motive will also drive global adoption of precision agriculture technologies such as Solum’s.  According to an expert in the WSJ article, “Improving how the seeds are planted and the soil fertilized can increase corn yields by several tens of bushels per acre.  At current prices of near $6 a bushel, every 10-bushel-per-acre increase in the yield on a farm of 2,000 acres would translate to $120,000 in additional revenue.”  The potential is truly global.  In its quest for more sustainable agriculture, China’s Ministry of Agriculture plans to test fully 60% of its arable soil over the next five years.  Brazil, which is rapidly becoming the world’s breadbasket, is investing heavily in advanced agricultural technologies and increasingly determined to make its remarkable advances sustainable.

“Software Eats Dirt”

In his 2011 Op Ed piece “How Software is Eating the World”, my partner Marc Andreessen vividly described a dramatic and broad technological and economic shift in which software companies, often based in Silicon Valley, are transforming almost every sector of the global economy.  As economic sectors go, agriculture is enormous—in fact, agriculture is the single largest employer in the world, providing livelihoods for 40 percent of the global population.  In our internal discussions, our affectionate codename for Solum was “Software Eats Dirt”.  We believe this is a company with the potential to revolutionize agricultural production literally from the soil up. I’m excited to be joining Solum’s board and we’re honored to support such an ambitious and important mission.

This is the final installment in a five-part series on building a global company from the ground up.

Summing it all up

We’ve covered quite a bit of ground together since I started this series.  Here’s the executive summary:

  1. There are simple steps you should take to lay the groundwork for international expansion from the moment you start your company.
  2. Before you launch internationally, you should have an explicit, well-articulated strategy.
  3. You should assign a qualified executive to develop the international strategy and drive its execution, and involve the rest of the company in the process to gain their emotional commitment.
  4. A headcount plan and budget that cover both the “visible” and “invisible” requirements will set the business up for initial and lasting success.

Some closing thoughts

In closing, a few reminders as well as suggestions that have worked well for me:

  • As the CEO, look for ways to make it clear to the company that going international is a critical priority for you personally.
  • Involvement builds commitment.  Take the time to get buy-in from your managers and their teams, who are probably already overloaded.  Involve them thoroughly in developing the international strategy, and make sure they get the resources required to support it.  Make it their plan, not somebody else’s plan!
  • Assign a small support team to represent the international operations at HQ and to make sure they get their needs met quickly and efficiently.
  • Enlist one respected manager from each company function for a cross-company oversight team, to drive execution and run interference with the relevant departments as issues come up.  The best people for this are usually not the most senior execs, but director-level thought-leaders who have the respect of their organizations.  They will be honored to be chosen.
  • Remember to treat international as a startup:
    • Be realistic in setting schedules and milestones—it will take longer than you think.
    • Be prepared to live with a startup financial profile—likely several years of losses before turning the corner into profitability.
    • Report on the international business separately from the domestic business.  It should be following a similar (or steeper) growth profile, but several years behind.
    • Be ready for exceptions to corporate policies—compensation for top overseas hires will be a prime example!
    • Make sure everyone’s performance objectives and incentives encourage support for a successful global rollout—performance reviews, 360 feedback, compensation for all key functions should include specific criteria.
    • Challenge your management team to ensure company policies and processes aren’t purely US-centric.  A small example:  all-hands meeting times that don’t require overseas employees to dial in at 3am.
    • When you make your first overseas hires, give them a month at HQ before turning them loose in market.  They need time to soak up the culture, value proposition, products and so on, as well as developing personal relationships with key HQ people they’re going to be working with remotely for years.
    • Send out regular updates on international progress—emails, blog posts, all-hands updates.  One company I’m involved with, Shoedazzle, has set up a live webcam feed between their California HQ and their new London office, so the teams can see each other as they go about their day—great idea!
    • Make it fun and celebrate success.  At Silver Spring Networks, we launched our Brazil operation with a big all-employee party at HQ, complete with Brazilian food, music and caipirinhas.  We turned the World Cup into another great opportunity to celebrate our becoming a global company, screening the matches live at lunchtimes.
    • Finally, protect and nurture the international business.  When the domestic business has a revenue shortfall or a product slip, it’ll be tempting to take it out of international.  Don’t—it will send a message to your employees, overseas teams, customers and partners that international is a second-class citizen, and you may never recover.

In conclusion

If you’re really serious about having a big impact and delivering a great return for yourself and your investors, you have to build a global company.  While you may not be ready to cross the border yet, you should be talking and walking the talk as a CEO from the beginning, and building global thinking into the company’s DNA.  As soon as you can afford to, assign a respected manager to lead the development of an explicit international strategy and plan, with participation from all key functions of the company.  Assign the resources to make it successful, and protect it when the domestic business hits a bump in the road.  Remember—your growth in three years should be coming from countries you’re not in today.  Bon voyage!

Comments or questions?

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Twenty-five years ago, I funded my Stanford MBA by becoming a junkie—a spreadsheet junkie, that is. IBM had just acquired a high-flying Silicon Valley technology company called ROLM, and the IBM execs needed data and analysis to manage and track their progress against their business goals. As a young engineer just entering the business world, I was surprised by just how extraordinarily difficult it was for managers to obtain relevant information on a timely basis to guide their decisions—even in the corporation that invented business computing.

Their difficulty was my opportunity, and I earned many thousands of dollars writing ever more sophisticated Lotus 1-2-3 macros to automate the extraction and analysis of market data for my new white-shirted bosses from Armonk, NY. The money’s long gone, but the key lesson from that time remained with me as I advanced into more senior management roles in six subsequent companies: for a manager trying to make high-quality fact-based decisions every day, it’s really hard to get good data.

Business Intelligence – Big Market, Low Satisfaction

It turns out that it’s worth a lot of money to customers to try to solve this problem. In fact, their willingness to spend has funded a lot more than just my MBA in the last 25 years. It’s spawned a $25 billion industry known as Business Intelligence, or BI, devoted to extracting and making sense of the masses of data trapped in corporate IT systems, with a couple of billion dollar revenue companies (Business Objects and Cognos) and one half-billion dollar company (Hyperion), along with thousands of smaller software companies and consulting firms.

But these companies achieved this level of success without even really solving the problem. For many IT buyers, traditional BI solutions came to epitomize everything that was wrong with large-scale enterprise software.

  • Just to get started required a spend of at least a million dollars on software and hardware, with maybe another million on consultants for deployment and integration with a separate data warehouse, as well as the unwieldy ERP or accounting systems that were the source of the data.
  • Maintenance and upgrades cost another 20% a year.
  • Deployment would take six to 12 months, by which time user requirements might have changed.
  • Trying to add a field or two to a dashboard, or create that new report format requested by the CEO might take weeks because changes and ongoing maintenance typically depended on a small team of dedicated experts with deep knowledge of the back-office systems and BI solution.

It’s no wonder, then, that many traditional BI implementations fell well short of their promise—confined to a small set of users and dashboards, or even shelved entirely.

As a result, that first wave of big BI pioneers is no longer with us, at least not as independent companies (SAP bought Business Objects for $6.8B, Oracle bought Hyperion for $4.5B, and IBM bought Cognos for $4.9B—all in 2007). In their defense, they did a pretty remarkable job with the technology and software business models of the time and created billions of dollars of value for their shareholders. Furthermore, their solutions continue to generate sizeable legacy software sales and consulting revenues for their new parents.

BI in the Cloud – The Chance to Do it Right

Business users’ appetite for timely, relevant information and analysis for decision-making hasn’t diminished since I wrote my first Lotus macro back in 1984. In fact, it’s stronger than ever. What has changed fundamentally in the last few years is our ability to meet enterprise customer needs efficiently and effectively.

The SaaS delivery model means the customer starts to see value from their software within days or weeks, with an up-front investment of thousands, not millions of dollars. Changes and upgrades are seamless, and included in the monthly subscription. The cloud enables consumption to be scaled up and down on demand on a pay-as-you-go basis. The platform shift to SaaS and cloud computing creates an opportunity to finally deliver on the promise of Business Intelligence.

Like their peers in other large established software categories, the old BI vendors are valiantly striving to port their legacy client-server stacks to the cloud. In any platform shift, however, the big winners are the new entrants who designed their product and business model around the new platform from the beginning.

Introducing GoodData

Just like Salesforce.com in sales-force automation and Netsuite in cloud-based ERP, we believe there’s an emerging opportunity for the right new entrant to build a giant new franchise in BI. We’re putting our money on GoodData. We’ve followed the company closely since we invested in their original seed round, and we’re delighted now to be leading a $15 million expansion round to capitalize on the strong lead they’ve established in BI for the cloud.

Our enthusiasm starts, as always, with the Entrepreneur. CEO Roman Stanek is that powerful combination of brilliant product visionary and compelling sales guy. He started two successful software companies, Netbeans and Systinet, from his native Czech Republic prior to founding GoodData in 2007. He’s assembled a stellar team to pursue the BI opportunity and they’re executing very well.

We’ve been highly impressed with GoodData’s Product. Like its market-leading peers in other SaaS categories, GoodData was built on a multi-tenant platform designed expressly for the cloud. Unlike other BI offerings, it’s a complete solution, avoiding the traditional struggle to integrate one vendor’s BI product with another vendor’s data warehouse. While it can be implemented within days, the product is built for large scale. That’s critically important, because when you offer business users true operational business intelligence on demand, adoption and utilization grow explosively. (For example, there were 2 million report executions on the GoodData platform in July, up almost tenfold in six months.)

GoodData has already signed more than 100 direct and 2,500 indirect Customers, including mid-sized enterprises like Enterasys Networks and Pandora, as well as large corporations like Time Warner Cable and Capgemini. When we spoke to them, they said things like:

“The great thing about GoodData is that it’s been valuable right from the beginning – no waiting game…Our sales team now has direct access to metrics that used to take days for our engineering team to produce.”

“With GoodData we don’t have to jump through hoops to view our critical data.”

“GoodData has rapidly become our source of truth.”

“It’s put the power in the hands of our end-users.”

GoodData’s target is the ever-increasing number of established enterprise customers now migrating to cloud apps like Salesforce, Netsuite, Google Apps and Zendesk, as well as the new generation of players like Pandora who have built their entire business on the cloud from the beginning. Because cloud applications are dramatically easier and cheaper to implement, customers are deploying far more software than they did in the old world—one customer we talked to already has 18 cloud apps.

Roman and his team realized from the outset that it all starts with Apps: a cloud-based BI solution that provided dashboards, reporting and analytics on top of individual cloud apps as well as across apps—for example, combining website data from Google Analytics, marketing analytics from Marketo and CRM data from Salesforce to produce an integrated Lead to Cash report—would be hugely valuable to these customers. They already support most of the leading SaaS and cloud apps, and the number is increasing by the week.

However, they’ve gone further than that, creating an innovative Partner program called Powered by GoodData that allows leading SaaS and cloud providers to embed dashboards and analytics directly into their own applications. For example, help-desk software leader Zendesk—itself one of the most impressive exemplars of the new generation of cloud-based app providers—makes a compelling solution even more compelling by providing GoodData’s advanced dashboarding and analytics to its best customers.

In Conclusion

Business Intelligence, and IT as a whole, has come a long way since my days as a spreadsheet junkie—and the best is yet to come as the shift to the cloud becomes mainstream. Management’s demand for relevant and timely information for business decision-making will continue to grow, and cloud-based BI will make it accessible to more users, in more companies, than would ever have been possible under the old regime.

As veterans of the original cloud computing company, Loudcloud, we’re excited to add GoodData to the list of Andreessen Horowitz-backed companies that are leading the charge to that brave new world.

Give a girl the correct footwear and she can conquer the world
—Bette Midler

I did not have three thousand pairs of shoes, I had one thousand and sixty
—Imelda Marcos

As entrepreneurs who experienced the first wave of the Internet, we regularly recognize ideas from the creative ferment of the late ‘90s being pitched to us in a new form by today’s entrepreneurs. The newest member of the Andreessen Horowitz family, however, is reinventing a concept pioneered by a 1920s startup—and doing so with dazzling success.  (Read yesterday’s post about old ideas made new again.)

A Jazz Age Startup

Back in 1926, an economist and advertising man named Harry Scherman and two co-founders established the Book of the Month Club.  Convinced that bookstores were not catering well to a rapidly-growing and geographically dispersed American middle class with an insatiable desire for literature, these 1920s entrepreneurs offered readers a revolutionary mail-order subscription book service.  Subscribers agreed to purchase a book recommended by the club every month, with no title costing more than three dollars.  If a customer didn’t like that month’s selection, they could swap it for an alternate title from the club’s list.

Scherman pioneered several remarkable innovations that contributed dramatically to the club’s remarkable success.  First, he built the club’s brand as a definitive arbiter of quality and taste.  The “Book of the Month” was chosen by an expert Selecting Committee made up of five famous writers and critics—the literary celebrities of the day.  Being published in a club-branded edition as a “Book of the Month Club Selection” was enough to propel a previously unknown author to mass popularity.  Second, he applied the principle of  “negative response”, in which subscribers would automatically receive a book every month unless they proactively opted out.  Finally, he tapped into consumers’ love of serendipity:  Club members would eagerly anticipate the arrival of each month’s new selection, chosen for them by the “curators” of the Selection Committee.

Scherman’s subscription book business brought millions of affordable, quality titles to a subscriber base of over half a million households by mid-century, and spawned hundreds of mail-order subscription successors throughout the twentieth-century, from Oprah’s Book Club to clubs for CDs and DVDs.   In a sign of a truly great idea, however, Scherman’s concepts are also the basis for an amazing new twenty-first century ecommerce business.

From Jazz to Sole—Introducing ShoeDazzle

I’m proud that Andreessen Horowitz is leading a $40 million growth investment in a company that’s leveraging the Internet to reinvent the fashion business in the same way that Scherman used the postal system to reinvent the book business.  The company is ShoeDazzle, and, while the business is women’s shoes and accessories and many of the concepts are new, the parallels to the Book of the Month Club and its brilliant execution are remarkable.

Every new ShoeDazzle member (now more than 3 million strong!) first takes an engaging 3-minute “style quiz” that allows the company’s stylists to create a monthly selection of shoes and accessories personalized to her individual style profile.  She then receives an email invitation to a personal online “showroom” based on her style profile, with a new selection on the first day of every month.  She chooses her favorite item (or items) for a standard $39.95, and receives them in a beautiful package within days.   She can request an alternate selection, or skip one or more months if she chooses, so the service is highly flexible.

Like Scherman with bookstores, ShoeDazzle’s founder and CEO Brian Lee realized that traditional e-commerce sites offering women’s fashion were missing the point.

Observing the pleasure his wife took from visiting a favorite boutique to buy her latest pair of shoes, Brian and his team set out to recreate and even improve upon that deeply satisfying shopping experience on the Web:

  • They recognized that many women go shopping because they enjoy it, so they focused on making the experience fun and entertaining rather than purely functional.
  • They used the concept of personal stylists to replicate the trust that women feel when they visit their favorite store.
  • Like Scherman with his committee of famous authors and critics, Brian recognized the influence of celebrities on women’s fashion choices, enlisting Kim Kardashian as his co-founder and recruiting an ever-growing roster of additional celebrities as stylists and sponsors.
  • Like their 1920s counterparts, Brian and his team realized the appeal of serendipity and anticipation.  ShoeDazzle members await the first of the month with its new selection with the same avid excitement Book of the Month Club members must have felt as they awaited the mailman with their latest monthly title.  Unlike their Jazz Age predecessors, they can share their experience of opening the box with the whole world.
  • Whereas the closest those 1920s entrepreneurs got to social networks was probably local book–reading clubs, the ShoeDazzle team has been able to leverage Facebook in a truly impressive way to create a truly remarkable social shopping experience and an extraordinary community of almost a million enthusiastic fans.
  • Like Scherman, Brian and team understood the importance of brand, and brand all their products with a ShoeDazzle name that stands for exciting, affordable, quality fashion products, curated by experts and backed by extraordinary customer service.

Transforming the way fashion products are marketed and sold

From Valpak to Groupon, from the Full Service Network to the Internet, from Excite to Google, from the Book of The Month Club to ShoeDazzle—the story of the technology business is often a story of old ideas made new again.  Like their illustrious predecessors, Brian Lee and his team have taken a great old idea, added some brilliant new ideas of their own, put it all into Twain’s “mental kaleidoscope”, and come up with a “new and curious combination” they call ShoeDazzle.  The result is a new and genuinely exciting approach to ecommerce that is transforming the way fashion products are marketed and sold.

We’re proud to be associated with the ShoeDazzle team, and we can’t wait to see where they take it from here.