2008 December » blog.jedchristiansen.com

One of the biggest stories in the tech world in 2008 has been Twitter. I was at first quite down on Twitter, but have since changed my mind. It’s a mix of a social network (like Facebook/MySpace) and a communications tool (like email/texting).

The best way to describe it is through this short YouTube video:

Now go sign up for Twitter and then follow me.

I was against Twitter at the beginning because of Kathy Sierra’s influence. Her post (circa 2006) pointed out that if you’re trying to achieve “flow” in your work Twitter can be quite detrimental as friends’ updates will always be interrupting you.

But I’ve found that when I need to I can just turn off the Twitter application. When I don’t need to achieve that flow it’s interesting to listen in to what friends and others are discussing. If you’ve got a lot of followers, then they can serve as quite a good group to “crowdsource” questions to! (I’ve seen people asking for advice on office space, restaurants, and more.)

In the end, I highly encourage you at least try it out. If you’re on Facebook you can link any Twitter updates you send to your Facebook status, so you only have to type your “status” once and have it link everywhere. Nice…

My apologies for the lack of posting recently… LondonAnnie and I moved!

We’re just down the road a bit from our old place. For the same rent we’ve got a much bigger flat that even has a view of the river. It’s a 2 bedroom, which means it will be much easier for family and friends to stay with us, too. (Hint!) It’s not for the superstitious… we’re #13 on our road in SW13.

Unfortunately, moving around the holidays means that our internet won’t get hooked up until sometime in January, and none of our neighbors has an unlocked wireless signal. Unless I can get Netshare up and running on my iPhone soon, don’t expect much posting from me until after my exams in January.

But Merry Christmas, Happy Holidays, and Happy New Year to everyone. I hope 2009 is even better than 2008 for you all.

He’s a rock legend. She’s a bluegrass star.

Together, they put together one hell of an album. Here’s one great video:

This article in the New York Times shows exactly how weak the economy has become:

In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, that they agreed to accept a zero percent rate of return.

The news sent a sobering signal: in these troubled economic times, when people have lost vast amounts on stocks, bonds and real estate, making an investment that offers security but no gain is tantamount to coming out ahead.

[...]

Investors accepted the zero percent rate in the government’s auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much.

In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.

How Clare College is taking advantage of the economy

Clare College is the second-oldest College at Cambridge, having been founded nearly 700 years ago. One of the benefits of this kind of longevity is that banks are more able and willing to make loans to you.

From the student newspaper about a month ago (sorry, no link):

Clare College has borrowed £15 million to invest in the stock market. The unprecedented inflation-linked loan is due to be repaid in 2048 and the College expects to make a profit of around £36 million.

[...]

This is the first time Clare has borrowed to invest in its 700-year history. Hearn acknowledged that it was a potentially dangerous strategy, but said the forty-year time frame brought security.

“Most Colleges have a very long-term perspective, which gives them an advantage over city funds which often have a short term focus.”

Wow…

Both of these stories are just unprecedented. The economy truly is upside-down.

… because Vampire Weekend started getting huge in the beginning of 2008. While I heard their music then, I recently listened to a few songs again and got really hooked all of a sudden. Their album is a really interesting, unique, solid piece of work. (Pop with African hooks and beats to use broad descriptive strokes.)

Here’s one of their hits: A-Punk

Oh, and they name-checked “Mystic Seaport” in one of their songs! I used to live in Mystic, just down the road from the Seaport, but never actually managed to get there.

One of the all-time most popular posts on my blog is my original post where I showed how I modelled the revenue and revenue growth of 37signals. It showed a business that has made quite a bit of money in the past few years; I originally estimated revenue of $3.5million in 2007 and over $5million in 2008.

Well, it’s been nearly a year since I put up that post and based off of feedback I’ve received personally and comments on the post I decided to refine this model. My new estimates are that 37signals had revenue of over $4million in 2007 and over $8million in 2008.

Breaking down 37signals revenue by product

These are my estimates of 2008 revenue, in descending order. (Please read the initial post for more detail on how I created the model.)

Basecamp: $4.9million
Highrise: $1.9million
Backpack: $0.6million
Job/Gig Boards: $500k
Conferences, workshops, etc: $180k
Campfire: $133k
The Deck: $60k
Getting Real: $45k

Analysis

Basecamp is the 37signals product champion, and a key revenue generator. Highrise seems to be quickly gaining momentum, but facing tougher competition from entrenched CRM products. My figures for Backpack are likely a bit low after their recent multi-user update; I think that sales there have significantly increased. Campfire seems to be a minor product. The ranking of Basecamp/Highrise/Backpack is likely right, as it mirrors how they are promoted in 37signals marketing materials.

The other significant revenue source for them is the Job and Gig Boards, which I estimate to be $500k/year. The rest are fairly minor in the grand scheme of things.

Estimates on 37signals costs

37signals seems to be very generous with their 12 employees. (You can be when you’re generating over $600k in revenue per employee!) I’m guessing that between salary, perks, office space (where appropriate), payroll services, equipment, etc. that they average $150k in costs per person. I’m biasing this guess towards an overestimate, so as to be conservative in estimating profits. This is by far the biggest cost at $1.8million per year.

The other biggest cost they have is in servers/storage/etc. In April, their total costs with Amazon S3 were just $2k/month. Being conservative, I’ll guess they’re at $3k/month now, or ~$30k/year.

I believe they use Rackspace for servers. I can’t find any reliable information on Rackspace prices. But I’m going to guess that 37signals pays $30k/month with Rackspace. (If anyone has better numbers or a baseline for this, please let me know and I’ll update this post!) This is a yearly cost of $360k per year.

Guesstimate of 37signals profit

If 37signals is able to make $8million per year, with costs of just over $2million per year, it is a very good business to be in. If my figures are anywhere near correct, they make $6million in profit per year.

I titled this a guesstimate because there are just too many potential sources of error in this analysis. If any readers have any guidance, please leave a comment below or e-mail me directly.

Do you want to challenge my (revenue) assumptions?

You can download the spreadsheet I used by clicking on the icon below.

Summary

I hope this post is useful to you. Again, if you have any better information or want to challenge my revenue or costs model, please comment below or contact me directly.

While not the biggest business, 37signals does seem to be quite a profitable one.

I was thinking recently that it was only about a year or so ago that I finally decided to apply for business school. Registering (and paying!) for the GMAT was a first big step into making it real.

For those people that are reading this and have yet to take the GMAT, I have just a couple of simple tips for hacking the GMAT.

However, before all that, are you aiming to get into a top-tier school? Get a 700+ and you’ll be setting yourself up for success. You can certainly still get into top schools with significantly poorer scores. In fact, I’ve heard of a student who got into a top school with a GMAT score in the 400′s. (What happened in that case was the GMAT wasn’t at all consistent with the person’s CV/resume and work history. The interview clearly showed that the GMAT was an outlier; the person turned out to be a superstar.)

That said, the higher score you get the easier it is for schools to accept you.

Tip 1 – Challenge yourself

My first and most important tip is to really challenge yourself. If you really want to kick ass on the GMAT, forget 90% of the study books out there. Those are written for people who want to do above average on the GMAT, not kick ass. If you want to get that 700+, only go for the books that are trying to get you the mythical 800. Kaplan GMAT 800 is the book that I used.

Why do this? Well, instead of picking a representative sample of test questions, it only focuses on the really difficult questions. This is what you need to get comfortable with and master if you’re going to hack the GMAT. Forget your other study books; focus on the ones that challenge you.

Tip 2 – Prepare your body and mind

The second and final tip is to be very careful in the days before your exam. Get good sleep, and not just the night before the exam. Make sure your head is in the right place by getting good sleep consistently for a few days before the exam. Whatever you do, don’t be stupid and try cramming so much that you lose sleep the night beforehand.

So that’s it… my tips on how to Hack the GMAT. A good score won’t guarantee you entry, but neither will a bad score necessarily prevent it. But the better you can do, the easier it is for your chosen schools to accept you.

I want to say a public congratulations to Doug Rowe, a fellow Cambridge MBA student. Just yesterday he was named as the scrum-half for the Cambridge University Rugby Union Football Club 1st XV in their Varsity Match against Oxford at Twickenham Stadium next Thursday (the 11th). He will be a bit of a rare commodity; an MBA student that achieves a sporting “Blue”.

It’s hard to express how big a deal this is in the sporting world of the University. A sporting blue is the highest level of sports achievement, and comes with a distinctive blue blazer. While the Rugby Union Varsity Match isn’t quite as high-profile as the Boat Race (in rowing), it’s been played since 1872 and now takes place in the UK’s second biggest stadium, seating 80,000! Doug did used to play on the US Rugby Team, so top-level competition certainly won’t be foreign to him.

So a hearty congrats to Doug… well done! (Match photos of questionable quality taken by yours truly at a very cold home match a few weeks ago.)

On a completely different note, it’s already the last week of classes in Michaelmas Term! I really have no idea where all the time has gone.

Just this last weekend we finished a lengthy take-home exam for our Business Modelling class (lots and lots of Excel… thus the need for a take-home exam). In the next two weeks we’ll complete our term’s consulting project, a final essay for Management Practice, and the essay portion of Organizational Behaviour. Then it’s a month of holiday and revision for exams in the first week of January.

Finally, I just found what is quite possibly the best-written internship cover letter I’ve ever read. Check it out here.

M	T	W	T	F	S	S
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Get yourself on Twitter!

A short personal note

A Friday music video

Signs of a very weak economy, how Clare College is taking advantage

How Clare College is taking advantage of the economy

I'm late to the party here...

Estimating 37signals revenue and general profitability

Breaking down 37signals revenue by product

Analysis

Estimates on 37signals costs

Guesstimate of 37signals profit

Do you want to challenge my (revenue) assumptions?

Summary

Hacking the GMAT

Tip 1 – Challenge yourself

Tip 2 – Prepare your body and mind

An MBA Rugby Blue, the last sprint and a magnificent cover letter

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