Gosier.org

Jon Gosier is a Data Scientist, Philanthropist, and Venture Capitalist. Read my full bio...

[jongosier]

Rethinking My Startup Investment Strategy

Crains just published a piece on my new venture Southbox and how we’re experimenting with the early-stage investing and incubation model. An excerpt:

When you are an investor in tech startups, to a degree, you operate in a particular way, which is what I had been doing over the past three years. I was putting money into companies that were all at the early stages, where they were trying to get their first customers, build their product and make it sure it worked, and all that other fun stuff that happens when you are trying to start something from nothing. The observation that I made towards the end of last year happened when I was working with a much larger fund that had probably 300 companies in its portfolio. As I was looking at all the companies that didn’t make it, I noticed that they all seemed to fail for the same reasons. They didn’t have the ability to share resources beyond capital, and were sort of left on their own to find their first customers, hire their first software developers — all of those early stage problems. If you’re a VC, and are effectively funding all of these companies to solve for all the same problems, it’s way cheaper for you to allow the companies to share resources and collaborate. 

Read the full story at Crains

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Six Posts to Read Before Reaching Out to a VC

I get a lot of emails from young, upcoming founders who want advice, help, funding or many other things. If that’s you, or you’re about to reach out to me or some other investor please take the time to read the following articles first:

Jason Calacanis does a great job of telling people what it takes to get funding with his post “When You Should You Reach out to Investors?”

Fred Wilson does a great job of explaining how to build a minimal pitch deck and why that’s often preferred in his post “Six Slides”

Steve Bowman offers an interesting counter-point to Fred about doing a longer, more elaborate, pitch deck.

Guy Kawasaki is somewhere in the middle on the subject.

DJ Patil writes about what it takes to succeed in his post “Failure is Our Only Option”

This post over at Less Wrong tells you to just “Shut Up and Do The Impossible”

The first four of these are pretty quick reads, the last two are longer reads. Still they are worth it. So read them. If you can’t invest a few minutes of reading into your company, you’re either wildly successful already or you’re doing something wrong.

The last one I’ll add is one from myself for entrepreneurs who feel they are at a disadvantage because they are a minority.

Guess what? You are and no one gives a shit.

Being a great entrepreneur means tearing down the hurdles that others put in your way, no matter that they are. Here are my even more candid thoughts on the matter: “The (Bad) Advice You’ll get as a Minority Startup Founder” Updated 6.8.2017: Changed ‘Five Posts’ to ‘Six’ and added Guy Kawasaki’s

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Microsoft’s About-Face

My opinion piece for CNN on Microsoft’s changing direction...

Windows 10 also marks a potential milestone in a change of direction for a company that has built a $170 billion empire by selling software. In Windows 10, the business model of Microsoft's future is laid bare. In short: it's all about data.

Read the entire article here...

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Join Myself, Media and Tech Executives at Pivot Con 2015!

I’m excited to be hosting the upcoming Pivot Con 2015 at the Dream Hotel in New York City. I’ll be accompanied by executives and staff from the industries leading media companies to discuss the future of tech and media.

The pace of business transformation accelerates year over year as new technologies emerge and best practices evolve. Pivot exists to create a community of leaders from innovative brands and companies, and to provide this community with a roadmap to navigate the increasingly complex modern business landscape. From product development, to customer experience, to internal operations Pivot provides the insights and connections you need to remain agile and impactful in a Social/Digital world. The one-day conference will combine dramatic keynote presentations with interactive roundtable conversations to leave you inspired and ready to take action.

Join us at the Dream Hotel in New York, NY on October 29th for Pivot Con!

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Grinding

Yesterday I had the pleasure of giving a talk at Startup Grind Philly. Startup Grind is a nationwide speaker series that invites some of the best investors, entrepreneurs, and innovators to a fireside chat style session - basically a mixture of interview, Q&A, and presentation

In the session I spoke about my journey, from my initial foray into making comics, then into the music industry, then film, then tech. But mainly I gave advice to upcoming entrepreneurs that I’ve learned over the years. Here is the TL;DR version....

Don’t let other people define success for you. Build something that works and that you’re proud of and own that as your success.

Build a strong company first, worry about investors later. You can torpedo a solid business neglecting operations and sales to raise capital.

Investors are fickle anyways. You can have customers, revenue, and a great product and still not be able to raise capital. Investors should be nice-to-haves, not need-to-haves.

Do one thing well first. A lot of startups fail by trying to ‘boil the ocean’ with features and serving all possible markets. Nail one first, grow into the rest.

The worst thing in the world, which I learned the hard way, is to have a wide set of features for a wide set of customers. Either narrow the product offering, or narrow the customers you’re targeting, or both.

Diversity in tech is about “who’s in the room”. Whoever is in the room, controls who else gets in the room. It’s that simple. We have to focus on nurturing more minority and female investors who are good investors first, minority investors second. By changing who’s in the room you eliminate some of unconscious biases that exist.

The best way to become fearless is to fail epically at least once. If you can bounce back, you learn that failure is usually worse in your mind than it is in reality. If you can’t bounce back, you’ve still learned a valuable lesson about what NOT to do again.

Thanks to everyone who attended!

[predpop]

We’re excited to unveil a cool little project we’ve been working on. We call the project the Music Data Canvas. The project makes use of a dataset we found published by BullsFrogPond that contains decades of chart topping hits, the number of weeks the...

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Design for Better Outcomes

What is outcome design? Outcome Design is a methodology I developed to help companies, innovators and engineers design solutions that yield better ‘outcomes’ for society.

Why does this matter? Well to quote myself, “When you incorporate risk or disadvantage as part of your design, you’re able to monetize what was previously not monetizable.“

Most innovators focus on features or sophistication of a solution, but orienting design around outcomes can help reduce risk, eliminate potential PR disasters, and ultimately make companies more profitable. Below you’ll find the talk I gave at Maine Startup and Create Week with examples of how it works. Slides:

ODX: Designing for Better Outcomes from Jon Gosier

Accompanying Text: As a technologist I specialize in an area of called Outcome Design. I work with organizations to help them best understand the potential downside of the things they make. This helps them become better, more profitable companies.

I myself am a software developer I spent the last decade building software solutions that help corporations and technology companies improve the way their innovations affect society. Initially, I did this as a consultant to organizations that literally worked in areas of disaster response – responding to wide-scale human disaster. Organizations like the Red Cross, World Bank, United Nations, FEMA, Department of Defense and others.  In 2010 I was working with a team to deploy tech solutions in response to the earthquakes in Haiti, the floods in Queensland, Australia, and in 2011 the devastating tsunami in Japan.

However, these days I mostly work as an investor and consultant to corporations. I help enterprises and rising tech startups improve technologies of all sorts. Way less stressful, but equally important. 

For investors this is important as identifying and mitigating these risks early on can add a lot of value a young company as it continues to grow. If I invest in your company, I want to know you’ve planned for all scenarios, best case and worst case. For larger companies this helps them avoid embarrassing public oversights or loss of shareholder value. 

However, before I talk to you about how to designing for better outcomes I want to put into context why this matters to me.   We are living in a period of incredible technological achievement and innovation. Some have gone as far as referring to this period as a ‘Cambrian explosion’ of new technologies, apps, smart cars, bio-technologies, and I could go on. These technologies are terraforming our world both metaphorically and literally. 

Two examples. In the literal sense, wind and solar farms offer the potential to change our skylines. In the not-so-literal sense, when is the last time you visited a Blockbuster video store? In both cases, new technologies have affected the physical world as much as the way we go about our daily lives. It seems small and insignificant but some people’s lives have totally changed because of these small proliferations. What was once a staple of family entertainment, the video rental store, has been upset by streaming services like Netflix or automated vendors like Redbox. 

I give those examples as a reminder that technology has both a tangible and intangible affect on the world around us. These are the outcomes I’m referring to in when I use the phrase ‘outcome design’.

And yet, if you’ve turned on the news lately there are a number of sobering reminders that in some ways much of the world hasn’t changed at all. Why does it seem that so little societal change follows all this amazing technical innovation?  When Tim Berners-Lee and his peers at CERN created the foundations of the Internet in the late 80s they imagined the internet would become a great equalizer for communication, for commerce, for marketing, and education. They succeeded exponentially, in ways that they couldn’t have even hoped to have imagined at the time. As the internet developed others built on that legacy, hoping that the internet would be come a democratizing force globally.

Its estimated that since 1991 the Internet has generated $19 trillion dollars in value to the global economy, and even that number that is probably a gross underestimation. The internet of things is projected to add ten times more than that!

Yet we know that the internet has also been a disruptive force that’s destroyed as many industries it’s helped to create. An article in the UK recently said that there are 10 million jobs at risk due to the advancement of internet technologies.

Software is eating the world venture capitalist as Marc Andreesen once famously said. By this, he meant all industries are being impacted by the internet. It doesn’t matter if you’re a doctor, a lawyer, a music producer, an architect, a barista, some form of connected technology has surely cemented itself in your professional or personal life. It’s true, software is eating the world and the internet is eating software.

But every invention ever made has duality. A hammer can be used to build a house or it can used to bash in a skull. A stone can be used to build a wall or take down a giant. The internet can be used to bring people closer together, or tear them apart.

The problem at most technology companies is that they forget about the downside of innovation until it becomes a law suit, public relations disaster, or a competitor exploits to oversight to steal business. 

So we’ve established that technology has the power to terraform the world. We know this can be for better, we often forget it can also be for worse.  

This is not a moral argument, although it certainly could be. I help companies maximize their value by avoiding risk as part of the design process. 

Ultimately, when you incorporate risk as part of your outcome design, you’re able to monetize what was previously not monetizable.

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Maine Startup and Create Week 2015

I’m embarrassed to admit when TEDster Adam Burk reached out to me to Portland, Maine to speak Maine Startup and Create Week 2015 a few months ago, I had no idea that Portland, Maine even existed. Everyone knows Portland, Oregon but Portland, Maine was about as familiar to me as Paris, Texas is to most people. Meaning not at all.

So I’m glad I decided to come for a number of reasons, but the first is I learned about this new great place. On top of that, Portland, Maine is pretty awesome (in the summer). I will definitely revisit. Startup and Create Week was a unique conference in that it wasn't all tech oriented, there was also a food track and a general entrepreneurship track which brought in a lot more people than those who might attend the typical tech conference.

While there I was interviewed by the local NBC affiliate WCSH 6′s Caroline Cornish about my work as an investor and my ‘outcome design’ methodology which I use to help companies mitigate the risks of innovation.

  You can view my interview on WCSH6 here.

Later I was interviewed by the team at the Knack Factory which can be viewed here.

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The Unintended Consequences of Innovation

This past fall I had the pleasure of being invited to TED Global in Rio de Janeiro to deliver a talk on the unintended consequences of technology and innovation.

‘Trickle-Down Technomics’ is a phrase refering to the general assumption many technologists and engineers share – that if they build things for a small group of individuals, eventually the benefits will find their way into all communities. However technical innovation behaves a lot like wealth, the benefits tend to consolidate for the few. As technologists, we also bear responsibility of being ethical and empathetic innovators.

While clearly we can’t account for all unintended consequences we can be more thoughtful about the things we build and how these things affect the lives of others.

I always write my talks before I deliver them, the original written version appears below.

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As a serial tech entrepreneur who’s worked on civic activism projects all over the world. I’ve been a champion for ‘tech for good’ for many years.

For instance, in East Africa I worked on software that circumvented government surveillance in 2010. Later in North Africa, I worked on projects that help activists stay connected when governments used information blackouts as a means of population control. And I’ve used data and visualization to assist agencies responding to disaster.

So many of us today are obsessed with the virtues of technology. We tell ourselves things like“if we build great, things will improve for everyone.” We like to think that technologies we design to aid efficiency and share information among the few will eventually help the many. Tech, we tell ourselves, will find a way to make the world a better place.

But over the years, as I worked on these projects I was always nagged by the question – what if we’re wrong? What if, in some cases, the consequences of the tools we build (intended or not) are actually making it worse?

I call this blind optimism for the net benefits of innovation ‘trickle-down techonomics’. Much of the tech industry throughout the world operates the same assumptions. That is - invent great technology for those who can afford it and eventually those innovations will find their way out into the rest of society for everyone to benefit.

But, Innovation doesn’t always trickle down. In fact, technology is remarkably like wealth – the benefits seem to increasingly consolidate in the hands of the privileged.

Is this actually the case? Perhaps, perhaps not, but here are a few examples we can learn from…

1- There’s a movement to make our populations healthier through connected devices like Apple’s HealthKit which tracks our steps & movements throughout the day in the form of a $400 dollar watch or iPhone. In turn, the medical industry in the United States is rapidly getting digital ready, building solutions that can connect with these devices and learn everything about an incoming patient in seconds.

But what good is a $400 connected watch or phone that tracks health to someone who can’t afford them. Where should the priority for technology fall for people who can’t afford to send their children to school with enough money for lunch? More importantly, how will doctors and hospitals respond to patients who don’t have these devices. When hospitals come to expect 1- click patient entry what will service be like for people with less resources, but who require the same (if not more) medical attention? Will the digitally visible be preferred over the digitally invisible?

2- Crypto-currencies like BitCoin are a revolution in currency. Never before has the world had a more efficient way of moving money across the globe. It could revolutionize remittances to poor countries, which account for over $436 billion annually as expatriated loved ones send money back home.

But if digital currencies do take off, they won’t take off evenly. No invention ever does. What happens to the value of any regional paper-based note when borderless digital currencies become the preferred currency?

Let’s also not forget that the barrier to entry – a connected digital device or phone -- is far higher with digital currencies then simply holding paper currency in one’s hand.

3- Recently I was at the Free Library of Philadelphia which, like many libraries around the world, is facing an existential crisis. With public funding diminishing and costs rising, libraries have to downsize to stay open. Part of their strategy includes digitizing literature, text books, and magazines and moving them to the digital realm.

As the analogue world falls away, and brick and mortar libraries shut down, information will become available ONLY in digital form. Only those who have access to digital devices and connectivity will benefit. We have to ask ourselves what level of access will kids who aren’t growing up in ‘digital or mobile first’ households retain? What will their education look like?

4- One final example, there have been efforts across Africa and Asia to digitize land records of ownership to create a more transparent history of who legally owns various plots of land which are often in dispute due to poor record keeping, migrant populations, or conflicting claims.

Ironically, these repositories have become a boon for foreign investors, venture capitalists and wealthy individuals who can mine them and act on the information far faster than the typical citizen who doesn’t have access to the internet.

Like many civic technology efforts, these land record portals though well intentioned, have fallen short when it comes to ensuring the outcomes match the intent.

What these examples share in common is the unintended consequences of good intentions.

Technologists tend to prefer efficiency over efficacy. We tend to focus more on doing things quicker, faster, cheaper regardless of the consequences. But we have to change the fact that some of us have more empathy for the innovations we create than the lives that are ultimately affected by them. This is our responsibility as ethical technologists, hackers, makers, engineers, investors, and CEOs.

In the late 90s there was a big push for a focus on ethics in the financial industry. In 2014 I think we’re long overdue for that same level thoughtfulness when it comes to technical innovation – an ethical pledge from those of us who make the technologies that increasingly control the world.

We no longer have a problem with the rate at which we innovate. We have a problem with the rate at which we make those innovations more accessible to the many.

So I encourage you, when you’re working on the next revolution in technology, that you think about those who don’t have access, those who aren't your ideal user, and the potential unintended outcomes of the things you create.

The real innovation is in finding the way to include everyone.

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Coffee and Capital (Feb 10)

I'll be speaking at the University City Science Center at Philadelphia February 10th, 2015 to meet with a small group of entrepreneurs over coffee and a light breakfast for an informal Q&A session about funding and pitching. Sponsored by Dolfinger-McMahon Foundation.

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Miami Tech Rising

Over the past year the Miami tech scene has been getting a lot more national attention. I've had my own dabbling there working with colleague and friend Michael Hall of marketing firm  MediumFour.

So I'm looking forward to speaking at two forthcoming tech events down there.

The first is Black Tech Week in February. Black Tech Week is a week long series of events celebrating innovators of color during the last week of Black History Month. The Black Tech Week steering committee has invited top technologist, startup founders, venture capitalist, world leaders, grassroots activists and thought leaders to present at our 2 day summit, VC/Mentor mixer, Hour of Tech at Miami Dade County Schools, and a community hackathon as well as two pitch competition.

BTW is organized by the folks at Code Fever which focus on helping the next generation of young people learn to code. Find out more about Black Tech Week here - http://www.eventbrite.com/e/black-tech-week-tickets-15150416303

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I'll also be giving at talk at Startup City: Miami in March, an event sponsored by The Atlantic and The Knight Foundation.

Join us for our annual trip down the coast to Start-Up City: Miami, where we will highlight South Florida’s high-growth (and high-profit) innovation while exploring the emerging models of entrepreneurship taking root in cities around the U.S. As a beachside business gateway to Latin America and the Caribbean, Miami is a cosmopolitan city with high ambitions in rocketing emerging markets. And those ambitions are charged by changes at home, where tech is transforming traditional industries and talent increasingly clusters in cities reinventing their brands. With Miami’s high-profile growth as our backdrop, we’ll ask: how can cities maximize their homegrown strengths and small business values, while attracting the outside resources to compete with their bigger peers?

You can find out more about Startup City here - http://www.theatlantic.com/live/events/start-up-city-miami/2015/

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Congress of Future Science and Technology Leaders (June 28-30)

I'll be speaking to a wonderful group of brilliant students at the National Academy of Future Scientists and Technologist's Congress of Future Science and Technology Leaders this coming June. I'm humbled to be speaking alongside Foursquare CEO and Co-Founder, Dennis Crowley; writer, futurist and Director of Engineering at Google, Ray Kurzweil; prolific inventor Dean Kamen; Nobel Prize in Physics Winner John C. Mather and others.

But the biggest honor is that the event is convened by NASA Astronaut and NAFST Science Director, Buzz Aldrin.

The purpose of the event is to honor, inspire, motivate and direct the top students in our country who aspire to be scientists, engineers, and technologists to stay true to their dream and, after the event, to provide a path, plan and resources to help them reach their goal.

For more details on this event, visit scitechleaders.com

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How Venture Capital Can Affect Wealth Inequality

Venture Capital, a type of business asset investing, has become one of the primary generators of wealth in our economy. Yet, most middle-class households (minority households especially) aren't participating.

There are many reasons for this:

SEC restrictions prevent non-accredited investors from investing in securities which would include hedge funds, venture and most other equity investing. Non-accredited investors account for 97.2% of American households, while accredited investors 2.8%.

The investment instruments where minority households tend to over-index (like real-estate) aren't nearly as lucrative as they once were before the 2008 financial crisis.

The technology space, where much wealth for younger professionals is being created is often criticized for being insular. Diversity in the most prominent tech companies is well below 3%. Those numbers are even lower at most startups. While employment is an issue, the real problem here is that it prevents building experience investing in this space and knowing which companies to invest in. 

In short, the best growth vehicles for investors has changed but the accessibility and understanding of these areas in minority households has not. 

In this white-paper I outline potential strategies where business asset investing can be redesigned to improve these non-participating communities, both directly and indirectly. None of these strategies are about charity, philanthropy or social responsibility. Successful investment vehicles have to be successful first but they can be designed to have social benefits as a second or tertiary outcome. 

21st Century Strategies for Financial Inclusion from Jon Gosier

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Why do so many venture capitalists ignore the single best predictor of the future: demographics?

David Teten, Forbes

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Pandora is Not the Enemy

This week Pharrell Williams sent the music industry into a frenzy by announcing that he only made $3,000 from 43 million streams of his massive hit song "Happy". This made waves throughout the music industry as many people point out what is an apparent imbalance in the market.

However this isn't a problem created by the streaming services. It was a problem with the way music was priced from the dawn of the digital era. The record labels lost this war a long time ago. Unfortunately a lot of people are just now figuring out what was lost. To point the finger at music sharing services like Spotify, Pandora, Beats and others is to misidentify the problem and the blame.

There are two main reasons that the streaming services are catching unfair flack for this:

The Economics of A Music Streaming Service

The first problem is the fact that streaming music is a tough business to be in.

The fees to join these streaming services are abysmally low - free for the majority of users and only $54.98 for a one year paid subscription on Pandora that allows you to stream whatever you want. The number of paying users is really small and the usage by free users is paid for by ads that they listen to.

We know Pandora makes money off of its free users but how much? We can start to guess if we apply the Pareto Principal which states the vital few pay for the many. In business this is known as the 80/20 rule, 20% of paying customers pay for the other 80% of non-paying customers. This works on the web because of freemium business models where web services monetize the two types of users differently. 

In this case Pandora sells its audience of millions of non-paying users to advertisers. The paid users offer $54.98 per year.  Pandora only has around 3.3 million paying users which at $54.98 add up to around $181.4M in revenue. Of course, not all users pay consistently, or for a full year, but lets agree to keep it simple for the sake of projecting.

We don't know how much Pandora pays for ads but we do know their revenue in 2013 was $427M. Since we know paying customer revenue, we can subtract that from the total revenue and assume that Pandora pulls in $246M from its advertising revenues. We also know from press statements that around 61% of Pandora's revenue goes to paying performance royalties. Assuming that number held in subsequent years, it would mean $150M is left to be paid out to the recording artists.

Pandora reportedly had 80,000 different recording artists in its catalogue at the time of its IPO. While, its probably grown considerably, I'm not sure those numbers are public so lets use to old number to be safe. If you divide $150M by those 80,000 artists, you get $1,875 at most they have available to pay out, per artist.

So Pharrell Williams actually earned 62.5% more money than the theoretical average Pandora music artist could possibly make. From Pandora's perspective Pharrell broke the bank!

The Value of A Stream

For the second problem, thank Steve Jobs and Apple.

In 2003, with the launch of iTunes Apple famously negotiated the 'fair-market value' of an MP3 to be $0.99. While, this literally didn't force everyone to sell MP3s at that price, the fact iTunes won as the platform of choice for the music industry and consumers effectively set this price for everyone in the MP3 selling business moving forward. The other thing this deal did was to allow for the unbundling of the album.  People no longer had to buy entire albums to get single songs. They could get single songs from the album at $0.99. Anyone selling music could sell for less than $0.99 but they couldn't go above unless they offered more value (in the form of selling WAV files, FLAC files, or other formats that were better quality than MP3s).

But a stream is not an MP3. Streaming a single song from a single source isn't valuable. An MP3 I can actually buy directly from an artist or music outlet. An MP3 one can 'own'. In that way (and that way only) they were similar to physical media. Physical media (CDs, Tapes, Vinyl) were different in that they had inherent scarcity and value. The costs of production, manufacturing, distribution, marketing and promotion were all added up and some margin above cost of production set the price of sale.

MP3's changed things dramatically. The cost of distribution became nominally low while the cost of manufacturing an MP3 essentially went to nothing. This is because the cost to 'make' the MP3 is some infinitely small fraction of the cost of owning a computer and having electricity to power it. The rest of the costs stay the same. 

When the Record Industry negotiated with Apple for the cost of digital music, they ultimately took the stance that costs of production were not more than half the cost of sale. CDs used to sell for around $20 each, MP3 albums (on average) sell for around $10 each. The cost of a single MP3 is around $0.99.

So what is the value of something that you can't 'own' like streaming music? Something that you want to have access to from anywhere in the world from any device? Streaming is like the digital equivalent of radio. The record industry negotiated price points that forced Pandora and services like it to adopt radio-like business models.  But so far digital radio ad buys haven't accounted for the type of revenue that terrestrial radio ads do, resulting in the streaming services having the razor thin margins that they have.

Beyond that, people aren't used to paying for radio. From their perspective, for the past 100 years its been free. They also aren't used to paying more than $0.99 per song or more than $10 per album. If the average person used to buy at least 5 albums per or 50 MP3s per year from iTunes, $50 per year is palatable for streaming services. If that price goes to far above $50 per year, people will just go back to buying MP3s because they will feel they are getting more for their money. Buying MP3s may not be the endless supply of all music that streaming is, but owning something still provides an endless supply of enjoying SOME music versus none.

The fact that Pandora raised its prices today is a slippery slope.  If the other streaming services follow suit and raise prices too high, it just sends public demand back to wanting to own their music and the streaming services will screw themselves out of business.

You can blame The Record Industry or you can blame Apple but don't blame Pandora for a business model that was forced on them.

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What I Learned about Tech and Business from Tyler Perry

When I tell people I used to work for Tyler Perry there are overwhelmingly two reactions. The first is the number of people around the world who haven’t ever heard of him or his work. The second reaction is laughter or condescension:

“The guy who dresses like a woman?”

“The guy who makes those black films?”

“The guy who puts his name in the title of all his films?”

Yes. That guy.

Regardless of whether or not you think he’s a creative genius, he is a genius of a different type and a lot smarter than people seem to give him credit for, especially when it comes to business.

First, some background. I only worked for Tyler Perry Studios briefly  from 2006 to 2007. It was just after he had closed a deal for $200 million dollars to build his studio in Atlanta and produce his first set of TV Shows, HOUSE OF PAYNE and MEET THE BROWNS, for TBS. I was a Sound Designer and Audio Engineer at the time and not involved in any business dealings so nothing I’m saying here is confidential. In fact, much of what I write here can be discovered through a few searches on Google, Wikipedia or Variety.com.

In any case, through following Perry over the years and reflecting on my own observations at his studio, I learned a lot that I later used to find success in the tech industry.  What are some of these lessons?

1- He Knows the Business He’s In

The secret to Tyler Perry’s success is really in that second group of people I mentioned. The smug people who underestimate him.

The first lesson I learned is, rarely are successful people in the business of the things their critics think they are.

People think Tyler Perry is in the business of pleasing the public or critics. He’s not. He’s not even in the business of speaking to his ‘niche’ audience. No, Tyler Perry is in the business of making movies that earn returns for his financiers. Yes, he speaks to an audience he understands but he’s always been smart enough to focus on what matters most which is the bottom-line.

But what makes him stand out, is that people at every level are always underestimating his ability to do one thing because of their opinion about how poorly they feel he does another. In this case, because they don’t get or simply don’t like his films, they often assume they will flop. When they don’t, not only has he succeeded, but he’s surpassed expectations that were probably unfairly low to begin with.  He knows this and uses it to his advantage. 

2 - He’s Bankable

At Goldman Sachs 10,000 Small Businesses they use the term ‘bankable’ to describe people and companies who are attractive to investors. In other words, people who prove they will use money wisely and therefore attract more money.

There is a saying that goes, “A good engineer is someone who can do for $1 what any idiot can do for $2”. In this regard, Tyler Perry is a good engineer.

His first film DIARY OF MAD BLACK WOMAN woman only cost $5.5 million dollars to make. It went on to gross over $50 million.

Many of the methodologies Steve Blank described in ‘The Lean Startup”, I watched Perry apply to his work in TV and Film. Prior to having the money to actually produce feature films, he just set up a camera and FILMED THE PLAYS ON STAGE!! Frugal innovation that would make even Navi Radjou proud. It was the sale of those homegrown DVDs and related merchandise and tickets that originally gave him his first big financial successes. This also proved he had an audience that was hungry and unspoken to.

It was these numbers that convinced Lionsgate to back him for his first few films. It was the success of those films that lead TBS to back him for TV syndication deal for his first two TV Shows, which lead his deal with Oprah's OWN network and so on.

He essentially sold his first TV Show, HOUSE OF PAYNE, into syndication before he produced a single episode. This was smart for many reasons. First, it gave him the money up front to produce the show, which would go on to build his brand over the next five years. Second, because his deal with Lionsgate also underwrote his studio, this asset dramatically cut costs on producing the TV show (and all his subsequent TV shows and movies). Third, because TBS put the money up for a syndicated show, we ended up shooting and editing the entire series (which ended up being 7 seasons long) in just over a year. One year!

Why? Because the longer you shot a show, the more costs you have.  Staff, insurance, on screen talent, if it took 7 years to produce the show, you’d have to pay for all of those for 7 years. By doing it all in barely over one year, that’s essentially 1/7th the cost for the same amount of money.  That money he reinvested into producing other content which at that point could be sold for all profit.

The fourth amazing thing about that deal was the fact that he completely de-risked the entire process of launching a successful TV show in the first place.

Syndication means that a TV show will go on to air and ideally generate profit for the TV Network that purchased it for years. Usually syndication deals only work with popular, proven shows that have amassed huge followings when they originally aired. Shows like BIG BANG THEORY, SEINFELD, and CHEERS. Rather than run the risk of HOUSE OF PAYNE airing and not being that successful, by selling it directly into syndication he ensured that, regardless, his product was sold. It’s a bit like starting a business with a guaranteed exit.

There are a lot of people who try to argue away Tyler Perry’s success because of they don’t like his creative choices.  But they fail to realize that there are plenty of people who have talent who don’t survive in business. Talent isn’t always bankable, generating profit is.

  3 - He’s Consistent

More than the fact that he knows how to operate leanly and still generate profit, the reason why investors continue to back his projects is the fact that he’s so amazingly consistent. He has NEVER lost money on a film.  Not a single one.  In fact, almost all of his films made all their money back on the first weekend, Which is crazy given that in Hollywood’s eyes he’s still relatively ‘new’ (he’s only been directing for around 12 years).  This is in comparison to an industry full of big name directors who have lost tons of money on various projects.

Here is a list of the movies Tyler Perry has made throughout his career and their box respective office earnings (and cost where I could find it):

Title / Budget / Opening Weekend / Total Earnings (in millions)

MADEA GOES TO JAIL Unknown/$41M/$90.4M

MADEA’S WITNESS PROTECTION $20M/$25.3M/$65.6M

MADEA’S FAMILY REUNION $6M/$30M/$63.3M

WHY DID I GET MARRIED TOO?  $20M/$29.2M/$60M

WHY DID I GET MARRIED?  $15M/$21.3M/$55.1M

MADEA’S BIG HAPPY FAMILY $25M/$25M/$53.3M

A MADEA CHRISTMAS Unknown/$16M/$52M

TEMPTATION Unknown/$21.6M/$51.9M

I CAN DO BAD ALL BY MYSELF $13M/$23.4M/$51.6M

DIARY OF A MAD BLACK WOMAN  $5.5M/$21.9M/$50.3M

MEET THE BROWNS Unknown/$20M/$41.9M

FOR COLORED GIRLS Unknown/$19.4M/$37.7M

THE FAMILY THAT PREYS Unknown/$17.3M/$37M

GOOD DEEDS Unknown/$15.5M/$35M

DADDY’S LITTLE GIRLS $10M/$13M/$31.3M

THE SINGLE MOM’S CLUB Unknown/$8M/$15.9M

This data is gathered from the IMDB page on Perry.

My initial reaction is holy cow, MADEA GOES TO JAIL made $90 million dollars! Combined his movies have made $792.3 million dollars. That's just theatrical releases and doesn't include merchandise, DVDs and Blueray, his TV and licensing deals etc. No wonder he keeps making Madea movies!

Beyond that, if he were an entrepreneur or a venture capitalist Perry’s track record would be the equivalent of a like 9.3 of 10. (This assumes THE SINGLE MOM’S CLUB may have lost money since it was a theatrical release with big talent but relatively low earnings. The rest almost certainly did not lose money based on what they ultimately earned.)

It's actually stupid to bet against a guy who performs this consistently.

  4 – He Bets on Himself

I’ve talked a lot about how much money Tyler’s work generates in this post. While the arts aren’t always about profit, being able to finance your own work means you don’t need anyone’s approval to get stuff done.

From what I understand, Tyler Perry is still 100% in control of all his own work. This is similar to how Mark Zuckerberg has built Facebook into a public company valued at over $50 billion dollars without ever giving up more than 51% ownership. It means that nothing happens at Facebook without Mark’s say. He controls the show.

Likewise, with Tyler Perry, he’s the world’s most successful independent film-maker. He never gave up control. Lionsgate is an independent film distribution company and it largely backs independent film projects.  By working with them instead of anyone else, Tyler insured that he never really gives up creative control of his work.  

This means he doesn’t have to go to the Weinstein Company or Sony or anyone else to ask for money to produce anything. He has enough personal wealth, and enough credibility and success to convince people to back his projects himself.

In fact, the way Tyler’s films are backed tend to resemble venture capital deals more than typical film deals. He proposes a project, investors put up money, he does the project and returns their capital at some multiple of what they originally gave him. That’s the whole bankability thing at play. But because he reinvested his early money to build his own studio, there are far fewer middle men to pay. This means the costs of making a film or show are far lower for him than they would be for anyone else not in his position which allows him to take greater risks on projects.

If he was working within the studio system, he’d have a much harder time convincing “The Studio” that his projects were the right movies to make in the first place. Studios tend to want to make a lot of changes to scripts and they inflate costs because to them, putting more money into fewer projects is more efficient.  But what that does is greatly diminish their tolerance for risk. This is why they spend even more money developing and retaining A-List stars who they then cast.  The assumption is that A-List talent leading well financed film projects is far more likely to succeed than a bunch of unknowns in smaller budget films. This, as a rule, is usually true. Unfortunately for writers and directors, this ultimately means they have less control over projects that are backed by big Studios.  When you hear some directors talking about how hard it is to get controversial films made, it’s because they are asking permission from people at major film studios who are inherently risk-adverse. The Studios want to finance money makers, and they will do everything in their power to ensure everything they produce is such. For them ‘controversial’ means alienating, and alienating audiences isn’t helpful if you're trying to get the most people possible to go see a film.

The equivalent in the startup world would be the entrepreneur who successfully bootstraps a series of companies, versus entrepreneurs who only rely on venture capital.  Neither way is wrong and both can lead to great success but the boot-strapper can take greater risks because he or she has less people to answer to.

5- He's Obsessive and Detail Oriented

Now you might ask yourself how on earth I could learn anything from a film director if I was working in the audio department. At most film studios, you'd be right. The sound designers usually don't work too closely with the director.

I'm not sure what it's like at his studio now but back then, initially I probably saw Tyler Perry once a week (which is a lot). He wanted to change the music, he hated the laugh tracks I added, he wanted some dialogue to be louder, he made suggestions on sound effects. It wasn't just the audio department, he'd go into the writers room and rewrite portions of the script himself. He'd be on stage with the actors helping them with their performance. He'd supervise video edits. He was in accounting. He was in props. He was the lunchroom with the interns.

The point is, he wanted to know what was going on at every level of his business. While it sometimes it felt like micromanagement, it was ultimately because he cared.

On top of that, he was used to doing a lot with a little. When you build something from nothing, you aren't used to the people around you chipping in to make things happen. This is because people tend to assume you're going to fail, and therefore you aren't worth going out on a limb for. As the founder you know differently, you bet on yourself and you double-down on yourself. This means you're going to make sure everything gets done.

At Tyler Perry's studio I saw both sides. Initially he was always there making sure everyone was doing everything. This is completely unsustainable for any business. You have to delegate to scale. As he got more comfortable with the people around him, and saw that we were all actually doing good work (and better work if he left us alone ;-) he backed off. He was able to delegate and ultimately start doing multiple things at the same time.

While that 'founder anxiety' probably still rears its head every now and then, to be successful at his level you have to learn to let go. Regardless of the business you're in, this is a good management skill to develop.

  6 – When the Rules Aren’t in Your Favor, Make New Rules

While Hollywood has about 100 years on Silicon Valley, the film and tech industries have a lot in common. Both have very insular communities at “the top” which make it hard for newcomers to break in, both require access to capital or financing that not everyone has access to, both require more than just creative talent to be successful, and whether it’s intentional or not, a lot of people feel like many forces conspire to keep them out of the industry at all.

When faced with a tough environment like this, there are two options: fight the system or work outside of it.  As far as I’m concerned, Tyler Perry provides one of this generations best examples of a businessman who worked completely outside of the system until the system couldn’t ignore his potential for profit. At that point he had the leverage to basically do whatever he wanted.

From what I can see of his career, Tyler Perry rewrote all the rules that lead to his success because the old rules would have completely prevented it. While that isn’t always easy, it’s necessary for anyone who wants to succeed when the odds are stacked against them.

Sometimes fighting the system in place is a futile effort because you as a lone individual usually can’t change an establishment fast enough to also benefit from the change. If your goal is to make it easier for the next generation that’s one thing, but if your goal is to change it and play in it at the same time, that’s almost sisyphean.

So the lesson here is that when you feel the rules of a system are working against you, one option is to stop working in the system altogether.  There is more than one way to do anything.

If you can’t raise venture capital as an entrepreneur perhaps because you feel decimated against or any other reason, then double-down on what you do have.  Changing the entire venture capital industry is hard, it’s not impossible but it’s likely not going to be a battle worth fighting if you need capital tomorrow.

If you have an idea for a product or company, bootstrap as far as you can. Do what you can to prove that customers are ready for that product.  If you still can’t convince investors to back you, then use that demand to partner with other businesses who can help you get your own to the next level. You never know, you might build a massive business without backing, in which case you’re in the best place to be.

But most importantly, don’t let the fact that the system wasn’t designed in your favor prevent you from trying at all. Not trying is not challenging and not being challenged is exactly what any establishment requires to preserve its status quo.

[jongosier]

Your phone is no longer a part of you. It’s a weapon, pointed at you.

- Michael Arrington