Kima Ventures' Jeremie Berrebi says no journalists told true Sparrow story(techbaguette.com)
techbaguette.com
Kima Ventures' Jeremie Berrebi says no journalists told true Sparrow story
http://techbaguette.com/2012/07/22/sparrow-truth/
16 comments
So what is the true Sparrow story? Because it looks like the Sparrow guys simply cashed out. I'm sure the founders and investors got a nice return, and the rest of the team, outside of stock options, got great salaries, and great retention bonuses. What else is there?
Thats the problem. Probably investors didn't get the return they expected. Google bought sparrow's for the team, not the tech. So what likely happen is Google payed a small sum for Sparrow and instead gave huge sign-in bonuses to the team. Thus investors don't ge a huge return, the team does.
I love how the "true sparrow story" is purportedly the one where the people who were already millionaires made a profit somewhat less then they had hoped.
That would be interesting. You can't totally screw over investors (you can screw them a little). Even if the founders hold majority shares the company needs to sell at a reasonable valuation. But you're right, I can see a scenario in which the founders supplemented their intake with the retention bonus (which is mostly likely in the 7 figure range) - and that would piss of investors.
I think the more likely explanation is that the Sparrow guys realized how tough it is to make a lot of money writing email software.
Again, the problem Sparrow, and all desktop/mobile apps face(d) is the one-time nature of their revenue. You must try to establish a recurring revenue model if you want a long term sustainable business.
Ironically, despite objections, I think recurring revenue models are better for the user in the long run: it keeps the developers solvent so you don't have any "oh shit, discontinued?" moments, it reduces the temptation for feature-bloat to drive upgrades, it allows you to more easily stomach pricing the software closer to what it is worth to you (a lot) than to its incremental production cost ($0), while still allowing you to send market feedback if the product ceases to be useful to you.
Ironically, despite objections, I think recurring revenue models are better for the user in the long run: it keeps the developers solvent so you don't have any "oh shit, discontinued?" moments, it reduces the temptation for feature-bloat to drive upgrades, it allows you to more easily stomach pricing the software closer to what it is worth to you (a lot) than to its incremental production cost ($0), while still allowing you to send market feedback if the product ceases to be useful to you.
>the problem Sparrow, and all desktop/mobile apps face(d) is the one-time nature of their revenue. You
That's a problem!? That business model has been a staple of software development for decades!!!
That's a problem!? That business model has been a staple of software development for decades!!!
It is, indeed, a problem. Software is maturing (has Office improved much in a decade?) and, assuming software engineers continue to wish to eat, they will go where the money is, which is in recurring revenue products like Basecamp.
I think the same thing will happen/is happening in mobile, but it's being masked to some extent by the fact that there is so much greenfield still available there.
It's a tricky problem, but it's one that entrepreneurs and developers increasingly can't afford to ignore.
I think the same thing will happen/is happening in mobile, but it's being masked to some extent by the fact that there is so much greenfield still available there.
It's a tricky problem, but it's one that entrepreneurs and developers increasingly can't afford to ignore.
Hold on a second. We've never had the notion of buy once, free upgrades forever. What developers did was version their software. You get minor updates but pay again for major releases. It isn't a bad model. It still largely works.
And this is where we disagree: I think software is becoming a more mature industry, and the upgrade-train model we've had for the last few decades is coming to an end.
I might be wrong.
I might be wrong.
I think it's more like an acknowledgement that some software markets are inherently very limited. Consumer email software is in a place similar to where manufacturing pagers were when texting blew up. Sure some people still needed pagers and the newer pagers were the best ones ever but that doesn't matter when basically no one needed pagers any more.
Meanwhile the market for non-recurring software seems as large as it's ever been. Sure you sell for $1-$10 instead of $200 but you sell to an audience thousands of times larger.
Meanwhile the market for non-recurring software seems as large as it's ever been. Sure you sell for $1-$10 instead of $200 but you sell to an audience thousands of times larger.
It's worse than that; it's not just no recurring revenue. Sparrow is stupid cheap. Comparable software such as eudora cost $50 - $100 in the late 90s. Compare to $7 for the mac app or $2.10 for the ios app.
And they're pinched between a platform vendor who wants a good email client on the platform; Google who gives gmail away for free because it's strategically important / they monetize it with ads; and people who are nearly unwilling to spend developer-sustaining amounts of money barring a giant hit, particularly for software requiring ongoing development.
And they're pinched between a platform vendor who wants a good email client on the platform; Google who gives gmail away for free because it's strategically important / they monetize it with ads; and people who are nearly unwilling to spend developer-sustaining amounts of money barring a giant hit, particularly for software requiring ongoing development.