For today’s strategy post, I want to talk about Google interview questions for a couple of reasons. Most notably, I think that getting someone inside Google passionate about hiring you is a much, much better approach than trying to crack the nut on random questions of math and logic.

I speak with some experience here because two former employees at my Startup 1.0 now hold high-profile positions at Google, one in engineering and one in user experience. Neither person went through the interview process that people have been talking about lately.

The engineer, for example, was at Microsoft when Google came knocking. Now he may have rounded-out his education since he worked with me and eventually landed at Microsoft, but I know his college GPA wasn’t the bellwether Google claims because he didn’t go to college. I’m not even 100% sure he finished high school.

But he’s a brilliant coder within his realm and he loves defining and adhering to standards. A couple people inside Google lobbied hard to bring him in and, a few years later, he’s led engineering on some of Google’s biggest engineering initiatives.

As for the UX guy, I caught-up with him not long after he started at Google. He said he met Google when he was speaking at a UX conference on behalf of Bank of America. (He went to Bank of America shortly after Bank of America Ventures put money into my first startup.) Marissa Meyer liked his presentation and personally asked him to come interview with her at Google. I don’t think her first question at the conference was how a pirate would maximize his gold, or what his GPA was in Australia.

The point here – if there is one – is that a prospective Google hire would do much better to network on LinkedIn, Facebook or Twitter to find the people already at Google who can be your hiring champion. Conferences and events are great if you can afford them, too. I went to the Shop.org Annual Summit 2009 in October, and Google had people there looking at everything from tech to talent.

In case you still enjoy spending time on those brain teaser questions, I will say that I notice a certain trend. The answers to a number of questions share that same “Wow, weird!” moment as a book that inspired my senior research paper in college. Micromotives and Macrobehavior by economist Thomas C. Schelling makes the point that the macro behavior of a system often moves contrary to the motivations of individual participants in the system.

One example starts by assuming that people are tolerant of other races in their neighborhood, as long as no more than 70% of their neighbors are a different race than themselves. Start by putting the first citizen on an imaginary grid, then flip a coin to place neighbors randomly on the grid only re-flipping when more than 70% of a citizen’s neighbors are a different race. No matter where the first citizen goes or how the coin flips, the grid tends to segregate despite the apparent tolerance of the neighbors.

Wow, weird! And definitely relevant when thinking about the difference between the macro-solution for a collection of pirates hording gold vs. the apparent individual motivation of the top pirate to be greedy.

Here in the home office, I’ve been running an HP MediaSmart server for a little over a year and I can honestly say I don’t have a single complain so far. Microsoft may deserve the knocks it gets for a lot of its other software, but Windows Home Server (WHS) was easy to set-up and has worked as promised ever since.

The tiny little HP box is loaded with 2 terabytes of storage that can stream my music and video collection over Cat-6 Ethernet in the house. Paired with Plex in the family room and Boxee in the living room, I can watch or listen to just about anything I own, anywhere, any time. Windows 7 Media Center in the living room even archives live TV that it’s recorded to the HP automatically, effectively giving me a 2TB TiVo HD.

HP’s MediaSmart also comes with client software for Mac and Windows machines to run daily full-system backups. Every laptop, media center and desktop here in the house has a 30-day backup/restore image just in case anything goes wrong. The backups are “bare metal”, meaning that I can restore to a brand-new hard drive on every machine in case of a catastrophic failure.

Keeping so much data on one server started making me nervous, though, even though the HP supports automatic RAID disk layouts for increased data protection. The solution was an add-in provided on the HP Website. A WHS Extension for the MediaSmart series can upload data on a scheduled basis to offsite storage in Amazon’s Simple Storage System (S3) cloud. I get a bill for a couple dollars each month for bandwidth and storage charges from Amazon, but voila! – I have a network in the house that’s nearly as good as the ones I’ve built for my various startups.

I look forward to hearing from anyone who’s doing things differently or better in terms of home networking/backup. I’m also happy to exchange e-mail messages with anyone who wants to contact me with questions about setting-up or running a home or business network.

The first thing the deal reminded me about is how rare it is for a company to get top-tier VC funding, let alone get acquired by Google – the undisputed king-of-the-hill dream acquirer for tech entrepreneurs right now. Today, I’m doing some pencil math for what such a rare event might mean financially to the team that braved a fast-paced “startup mode” at AdMob these last few years.

I start my math with the face that AdMob took $4mm in Series-A funding in late-2006. I’m willing to bet that this $4mm came at a $10mm post-money valuation given a strong VC firm preference to own 40% of a startup right out of the gate. (Send me note if you’re an entrepreneur who wants to know more about “pre-money”, “post-money”, “cap table” or other VC 101 concepts.)

So who got the other 60% in AdMob’s Series-A cap table? I don’t have any specific insight other than the fact that late-2006 is when we first starting getting VC interest at my Startup 2.0. We eventually met with 20 VC firms in Europe and got to verbal or written term sheet stage with a few. The terms of our actual Series-A investment have never been disclosed, but I can say that most of the interested VC’s wanted to see 40% of their initial cap table to themselves – with angel investors getting around 5% and a share pool for future employees at 20% – leaving 35% for me and my co-founder to divide among us as the two of us.

Obviously, this Series-A cap table got updated at least twice when they took Series-B ($15mm in August, 2007) and then Series-C investment ($12.5mm in January, 2009.) My guess is that this money came in for 25% equity on a $60mm post-money valuation for Series-B and 5-10% on a $125-250mm valuation for Series-C. I base these numbers on the growth that AdMob must have been seeing to be on their now-public near-$100mm annual revenue run rate.

These assumption mean a simple cap table (as viewed by Series-A VC, employees, founders, Series-B VC, Series-C VC) might be 30%-15%-30%-25% at Series-B and 27%-13.5%-27%-22.5%-10% at Series-C. But money in from VC’s is rarely “simple” and the venture investors (Series-A in particular) likely got protections like anti-dilution that can affect the cap table dramatically.

My best guess for how things ended-up is 33% (Series-A VC), 20% (Employees), 19.5% (Founders & Angels), 17.5% (Series-B VC) and 10% (Series-C VC.) With the acquisition at $750mm and around 125 employees, these percentages would mean:

• Founders & angels split $146mm before tax
• The Series-A VC gets $250mm on their $4mm investment in about 36 mos. (>60x)
• The Series-B VC returns $131.25mm on their $15mm in about 26 mos. (8.75x)
• The Series-C VC returns $75mm on 12.5mm in about 9 months (6x)
• Employees have $150mm in their share pool which, like the founders’ reverse vest, is probably awarded in increments over 48 months from hire date

I could, of course, be wildly off in my final cap table figures but the math is still useful to me. Most of all, I’m reminded why the Forbes® list of billionaires is only around 800 worldwide.

If you found a venture-backed company that sells for three-quarters of a billion dollars, you make around $75 million after tax and angel payouts if you’re solo; $37.5mm if you have a co-founder. I wouldn’t complain about an eight-figure bank account, but my first startup missed its peak acquisition window because I was convinced that a founder who only took out $30mm from a hot startup in the Web 1.0 days was a chump.

I’m also reminded that it is possible to bring meaningful wealth to the people who risk startup life to join entrepreneurs in the critical startup days. Even allotting more shares to CxO bigwigs, an early employee should still see an acquisition payout well north of $500k for 48 months of work (at the most.) Even assuming minimal startup-mode salaries until now, the average AdMob employee probably pocketed $750k over the last three years, assuming they stick around to ride-out their vest.

Lastly, I see proof that the rich get richer. VC participants in all three funding rounds did best of all from a financial standpoint. I’m not complaining, since I’ve been on the receiving end of a startup that couldn’t attract talent without some stabilizing cash in the bank.

What I am saying, though, is that entrepreneurs should watch for VC’s who only see dollar signs when they present a term sheet. A hot startup can be a pot of gold for a VC firm but it takes more than money. It takes a real team effort among founders, angels, entrepreneurs and critical early-stage employees to cross the finish line in AdMob style.

Congrats again to everyone involved with AdMob as it evolved for a rare and tremendous success.

I don’t have any special insight into the big Google-AdMob acquisition today. The closest I get is that my neighbor’s daughter was one of the first 50 hires for AdMob in the Bay Area – so congrats to the whole Kirsch family!

My big achilles heel at my first startup was a collection of youthful and naive assumptions about how the venture game works, and an overly sentimental attachment to my “baby” (my business) that I didn’t want to sell when my exit opportunities peaked. I’ve learned a lot since then, so I figure it might be worth sharing how I look at a deal like Google-AdMob as a entrepreneur typically chasing venture capital.

First, I remind myself that deals like this one are extremely rare.

AdMob is the third biggest deal (behind DoubleClick and YouTube) for Google – the ultimate dream acquirer in many startup business plans. Before champagne popped over this past weekend, AdMob had to be one of the 100 blips on investor radars that warranted a casual glance. Then they had to be one out of one hundred from among this original one in a hundred to make it from “glance” to full partner presentation.

If you’ve pitched a full gathering of partners at a major venture capital firm, congratulations. You’re already 1 in 10,000 among startups just like AdMob in late-2006.

Assuming that the typical VC probably only funds less than 20% of the Series A deals that come to full partner presentation, AdMob is at 1 in 50,000 by landing their initial $4mm. If pitching for funds has seemed like a long, frustrating process to you as an entrepreneur, it’s because the odds against you getting funded can be staggering.

And forget about the odds of a big exit. AdMob has been executing brilliantly since they left the gate with a Series A check in hand, and gone on to be profitable with near $100mm in gross revenue. (They keep 40% in a 60/40 split with publishers according to TechCrunch.)

This execution is what’s landed them a near one billion dollar exit in a sea where only one in ten Series A-funded companies exit for a gain at all, and 90%+ of those that do go for between $30-100 million according to a Wilson Sonsini slide deck that I used in my second funded startup.

On Wednesday, I’ll follow-up this post with a look at how the Google pot of gold likely broke down for the founders and employees. Every time I do this kind of pencil math on a deal, I’m reminded again why chasing an exit should always be second to building your product and revenue – something that I’m sure the AdMob team knows despite this Google icing on the cake AdMob has baked in just over three years.

Because this hobby is truly bootstrapped at the moment, I’m doing the database modeling and Rails code myself. I saw it didn’t take long for my brand new database to fill-up with funky characters like á, é and ú even though I had set my Rails application to UTF-8.

The solutions turns out to be pretty simple. If you’re developing a UTF-8 application in Rails, just make sure these two lines get added to the proper section(s) (development, production, test) of your database.yml:

encoding: utf8
collation: utf8_general_ci

Voila! All of your foreign language (and other UTF-8) symbols should go straight into MySQL without any weird encoding/decoding. Happy coding all you fellow weekend hackers!

Erik’s had a great set of experiences that give him a unique insight
into social marketing trends. First and foremost, he’s an extremely social guy. He has an energy and approachability that stood out
when we both met in Atlanta, a city that’s pretty high on energy and approachability overall.

Erik and I met when he was doing search marketing for EarthLink, one of my significant services clients from 2003-2005. Erik was way ahead of the curve on CPC optimization and PPC campaign metrics back then. There’s no doubt that the seeds of “socialnomics” are rooted in the surprise and delight Google has brought back to ad viewers through its AdWords and AdSense programs. They both display paid messages that are useful and relevant far more often than not.
(And how often can you say that about remnant banner ads?)

From EarthLink, Erik went on to TravelZoo (another of my clients) and then EF in Boston. Today, he’s got over 20,000 followers on Twitter and a video about social media on YouTube that’s been viewed more than one million times.

So today’s “Marketing Wednesday” on twicefunded is an embedded version of Erik’s video. Watch it now if you haven’t already. It’s great stuff for anyone trying to move the CMO needle from old-school marketing to the new social reality.

Oh yeah. The picture of the book is also a link to buy a copy of Erik’s hardcover on Amazon.
I haven’t gotten around to setting-up a twicefunded affiliate code yet, so just buy it for Erik.
A few weeks ago, I got a note from him saying he’s very nearly on the New York Times Best Seller list. (Congrats!)

I can tell you first-hand that A.D.D. has a downside, too. Any one of the products that my first startup launched might have been a home-run ball, had they not all competed for my own mindshare, let alone the mindshare of the internal ipi.net team.

The tendency toward A.D.D. is only exacerbated by the “real time” Internet where services like Twitter and Facebook open a veritable firehose of updates from a multitude of sources. That’s why I’ve found it so important to consciously focus on a select few things that rise above the noise for whatever reason.

Here are three specific threads that I think are worth particular attention in the “how to do a startup” stream:

1. The Long Lost Formula for Startup Success – A real gem from across The Pond. The post is a reminder that real winners from the startup pool hardly ever happen because founders lock themselves away and work on what they think is cool. Instead, startup success is all about customer discovery and development.
2. 7 Must-Haves for Scoring Venture Capital Cash – Even as a guy who’s twice-funded, it’s easy for me to forget that venture capital investors work in a very formulaic way. How “cool” your early stage idea is doesn’t have much impact on whether you’ll get a proper VC to put money into you. If you’re looking to shop your idea in Silicon Valley, this article should be pinned to your wall
3. When It Comes to Founding Successful Startups, Old Guys Rule – OK. Full disclosure. I’m partial to this article because I’ll hit the big four-oh in November, 2009. But the real point of this post, I think, is that there’s no substitute for experience – whether you get it early by failing often to succeed more quickly, or whether the experience comes the old-fashioned way with gray hair along the edges.

We’ll be back Wednesday, November 4th with a post about startup marketing. Thanks, in the meantime, for stopping back by twicefunded.com.

Content here will post in a rotation of strategy, marketing, technology and networking. I should have a new post every Monday, Wednesday and Friday. I want the posts to deliver real, measurable valuable in term of tips, techniques, or analysis of emerging ideas & trends.

Look for the first official post on Monday, November 2nd. And pardon the dust as we prep the site before then. Thanks, and I’m glad you stopped by – and especially pleased if you’ve come back after the months the site was idle.

TIOTI – Social Networking meets TV shows online

My first startup has always been a talent magnet. When we first opened our UK office in 2001, I ran across a particularly talented freelance designer who would later go on to be a creative director at Razorfish UK.

We stayed in touch, and he ran an idea by me in late 2005. What if a bit torrent TV download/streaming site got mashed-up with social networking? Find shows you like, share them with friends and discover new stuff from people like you. Good idea.

I took a hiatus from ipi.net to work full-time on TIOTI from early 2006 until late-2007. During that time, I brought together the legal, partner and technical content to get across the finish line with a round of angel investment led by an extremely talented and successful gropu in the UK. Series A funding followed a few months later.

Ultimately, my “yin” and my co-founder’s “yang” were a bad fit. I wanted to create revenue from partnerships and focus on the social side. Fans seemed to agree.

My co-founder wanted to stay “pre-revenue” to avoid the possibility of underwhelming revenue that could kill follow-on investment valuations. He also wanted to focus on pushing international content toward a unified release date. In other words, let international users download content from the US even if not strictly “allowed” under various terms of use.

I left TIOTI in early-2008. The company was later acquired.

Reverb® – A framework for monetizing digital content

The sorry state of the music industry is pretty obvious today. The business used to depend on sales of albums and singles to create billions in revenue. The idea of getting this content for free exploded into cultural phenomenon with Napster and continues in the torrent era.

Most experts pin the problem on the idea that media scarcity is dead. But from the perspective of my first startup, a company that made a good-sized business delivering innovation and usability to big clients, the problem looked more like an industry that had lost touch with fans.

File sharing, even Napster, is inherently geeky. Torrents require knowledge about routers, port forwarding, and IP address URLs – not to mention a certain situation ethic that makes it feel OK to take something that sort of feels like stealing. But what made Napster worth diving into was the surprise and delight of getting a match for almost any song you wanted to find. And once you connected peer-to-peer with the user who had your song, you could browse the rest of their collection which almost always had additional nuggets of goodness tempting you to download.

The idea of Reverb® is to let brands help the music industry make downloading easy while keeping it free. The Reverb architecture embeds suppressible ads in the digital content. People who play the free content get a DJ-style talk-over that’s no more than 10-15 seconds long somewhere during the playback.

A simple Reverb API allows any desktop, mobile or digital player to remove this ad on the fly – almost like noise-canceling headphones. An advertiser might want to suppress the audible ad in exchange for you downloading a branded player for your desktop. Or maybe you paid for the content and iTunes or Windows Media Player would remove the ad on-the-fly.

We piloted Reverb with two major record labels in the UK. Reverb was neck-and-neck as the cornerstone of a major, multi-million dollar online rollout for The Coca-Cola Company that ultimately was awarded to the makers of Habbo Hotel for their virtual worlds.

Most of all, Reverb faced the challenge that only a superstar technical CEO could battle the entrenched music industry. Steve Jobs took up the challenge and iTunes/iPods have been nothing short of a cultural transformation. I’m not embarrassed to say that I’m pretty good as a CEO. But I’m no Steve Jobs. Not yet, anyway.