Facebook’s development credo is “move fast and break things”.

Uber’s credo is “break the rules, apologise (maybe) later”.

The lifeblood of the startup industry is this thing called “disruption”. Apparently all good things come from disruption: Craigslist disrupted the newspaper classified ads industry, Napster disrupted the online (and, by extension, offline) music industry, Apple disrupted the mobile handset industry (and along the way took down the software, music (again), and cellular industries for good measure), and Facebook disrupted interpersonal communication for good. And that’s just the first decade of the 21st century.

Many new companies like to describe themselves using the “X for Y” formula, where X = Well Known Company and Y = different industry. Therefore it is possible, and even probable, that some company will introduce itself as the “Uber for dog food”.

The original Uber – i.e. Uber for Uber, a company valued at over 40 billion dollars – connects people looking to get from Point A to Point B with people randomly driving around in cars who don’t mind veering out of their way to pick said other people up at Point A and deliver them to Point B all for the consideration of some reimbursement for their time and gas.

Unfortunately before Uber for Uber was called Uber, it was called a taxi service. And taxi services are regulated in every city that prides itself on preying on disadvantaged immigrants with borderline driving abilities providing reasonably priced, safe transportation from point to point.

So while Uber’s business is providing an alternative form of public transportation, their business MO is to bend the rules as far as they can bend, and in some cases break them, even if this causes the near-collapse of the established taxi services.

This is disruption. (Delivering dog food on demand – not disruption.)

Disruption can be a good thing if it causes a stagnant, overly regulated, over-compensated sector to snap out of its reverie and provide better, leaner services to its clients or completely fail and clear the way for the innovators.

If “stagnant, overly regulated, and over-compensated” makes you think of Banks, you’re probably not the only one in the room having the same thought (unless you’re the only one in the room).

The banking sector not only needs innovation, it also craves innovation. Unlike, say, travel agents who were caught completely unawares by the speed at which online travel booking made them mostly a sideshow, the banking sector, already a tech-heavy industry that is supposed to know a thing or two about risk assessment and management, knows that it cannot remain the closed opaque industry it has been for the last few centuries.

To name but a few, Wells Fargo, Barclays, and the Bank of Ireland, have all set up accelerator programs for outside startups in the Fintech sector. Citibank has taken the lead by setting up an Innovation Center in Tel Aviv where it combines its own internal innovation crew with different perspectives from the outside startups in its accelerator program, taking advantage of the brain power and technological prowess found in “Silicon Wadi”.

For many people the online banking revolution begins and ends with checking their account balance online (or mobile). But startups are looking to innovate in core banking areas, funds transfer for one, where Transferwise, Clearshift, and CurrencyFair are all making inroads in their own way in this gargantuan market.

Back to why Uber for banking is a Bad Idea: trust. Trust is the foundation of the financial industry. Banks and other financial institutions (“FIs”) either store your money or send it, and they tend to be sitting upon ALL of your money with the exception of what’s in your wallet for splurging on the occasional slice of pizza.

Banks are regulated up the wazoo in order to force trust upon them: liquidity, anti money laundering procedures, deposit insurance, and trading regulations are but a few of the measures the Regulator imposes upon FIs to keep your money safe. True, the Regulator doesn’t do a perfect job (sub-prime mortgages come to mind), but they have a pretty big stick to use when banks break the rules.

Ask yourself if you would really put your life savings – EVERYTHING – into the “Internet Uberbank”, one with no capitalisation, regulations, or oversight, just because it’s cheaper or willing to waive its fees if only you would just look at an ad or two.

Next question: do you think upending an industry where most people keep all of their assets – EVERYTHING – is a good idea? Is this really a place where you want to take an all-or-nothing risk? (If you live in Greece you don’t need to answer this question.)

The break-rules-and-move-on method is just the thing the financial industry doesn’t need because it kills trust. Real innovation will come from companies who have figured out how to make a particular banking function cheaper, transparent, and more competitive (“person-to-person loans” is the first answer to the ‘banking innovation’ question any banker will give you these days), in conjunction with banks, not in opposition to them.

Without realising it, we negotiate every day. The act can be non-verbal, such as signaling and merging into traffic on the highway, or as simple as a single sentence: “You want fries with that?”

You generally wouldn’t think of these situations as negotiating opportunities, but the former is a complex dialogue with other drivers about conceding their place, creating a gap, coordinating speeds, and integrating within the flow of vehicular traffic, and the latter is the opening round in a sales up-sell situation.

But professional deal negotiation is a different matter where the parties are acutely aware of the stakes and seek an outcome that can often lead to great financial gain or, if carried out improperly by one or more parties to the negotiation, significant loss.

Negotiating is a skill in itself, in some cases it’s a whole profession. Whether I’m negotiating a deal with a Fortune 500 company or a contract with a new employee, I follow these core principles.

Never negotiate for something you want.

Of course you’re negotiating for something you want (negotiating for something you don’t want, well, that’s just stupid. Or you’re really bored. Or you’re a lawyer.).

Desire impairs one’s ability to stay objective about acquiring “the thing”. For this reason we may fail to do proper due diligence or discern its real market value, and let impulse and want rule over reason and critical thinking. From the outset your attitude must be to negotiate, but not at any price.

Especially in emotionally charged situations (separation agreements, partnership dissolutions, and so on), it may be wise to let someone else do the actual negotiating for you. They are able to remain objective given the right parameters by you.

Decide what items are important to you and quantify them.

Contracts usually run into the tens of pages, and sometimes into the hundreds, but generally there are only 5-10 terms of importance. It’s these items you must focus on.

Let’s say you’re negotiating a term sheet for a venture capital investment in your startup. There is a lot of legal blah blah, or, as it’s more properly known, ‘legal blah blah’, in the investment papers. The parameters of real interest are valuation, liquidation preferences, board seats, employee stock options, follow-on rights, founder vesting, and a handful of others. Decide which terms are important to you, and what minimum or maximum value you would accept.

Don’t be afraid to say NO.

Negotiations are complex and usually comprised of multiple terms. If you’re faced with a condition you can’t – or won’t – agree to, say no. Recently I negotiated a deal with a corporation with sales of over $300 million dollars annually. They sent me their “standard” contract which I reviewed and found a series of stipulations we found problematic. So I said no. And they agreed to strike the terms.

Which leads us to the next point…

Understand what the other side wants.

I was successful in the above situation because I had a good idea of what terms were important to the other party and which weren’t (one indication: bringing up clauses in a contract to which the other party replies “Oh, I didn’t know that was in there.”)

We’re back to negotiating that term sheet for your startup with a venture capital firm. You’ve established by now that the terms that are important for you are valuation and vesting period, and you’ve already decided what minimum valuation you are willing to accept, and the maximum vesting period you’re willing to endure. On the other hand the VC is probably more interested in liquidation preferences and pro-rata rights. You may not have a clue what these things are, but before you sit at the table you need to understand why they are important, and if you can, find out what the VC was willing to settle for in the past.

If you have previous experience with the “other side” or have access to prior outcomes or people who have negotiated with them before, learn what items they focus on why they are important. Negotiate harder on the terms that are of interest to the other side than the terms you are interested in, and leave aside all the non-essentials (for example arguing about Governing Law or payment of fees (except for the cap)) – it can make a CEO seem amateurish and cause the VC to have second thoughts about the CEO’s ability to forge deals in the context of their business.

Put yourself in your opposite’s place while planning.

I specifically used the term ‘opposite’ and not ‘opponent’ because not all negotiation is antagonistic. Ideally you should see the persons across the table as partners as the two groups work to build something together.

Try to run a simulation within your company where you negotiate with someone taking the place of your opposite. This will help you understand how you look to them, how strongly and convincingly you elucidate your positions, and what to expect from their side of the table.

If everything was perfect, you wouldn’t need a contract. Contracts are for when things go bad.

Sigh. If only I could impress on you how important this is. “Good faith” negotiations are filled with optimism and the excitement of building something. The paper gets signed. Then reality sets in. Underperformance, sliding delivery dates, misrepresentations, failure to meet specifications, dissolution of a venture. All of these happen and that’s when ugly sets in. Contracts need to foresee these circumstances and grant remedy to the “infringed” side or mechanisms for correction. The larger the contract, the more paper will be committed to spelling out the solutions for these circumstances. It’s often an unpleasant, exhausting and grinding experience which will expose both your and your interlocutor’s “real” sides. There are times where these items break the negotiations, but it’s better to end negotiations then enter into a relationship where the outcome is going to be failure.

Don’t lose your cool. Or lose your cool.

It’s about style. You may be the quiet type who can use a minute of silence to completely turn the terms of a negotiation around, or you may be the bang-on-the-table, threaten-to-pack-your-bags-and-leave kind. Some people can do both. These are tactics, you should never consider this to be strategy. Always assume that at some point negotiations will reach an impasse and break down. By this point you should have some feel for your opposite and enough EQ (the best negotiators have great empathetic abilities) to understand what works, and what is merely theatre.

Stuck? Move on.

Can’t reach a solution? Move on to the next points. Come back later, perhaps everyone’s perspective has changed. (If these stalemates occur more than a couple of times during negotiation, you may want to reconsider the whole deal.)

Give something for something.

Don’t just lower your offer, make a trade. Connect two dots, or think of it as balancing scales. In a sales contract the buyer may want you to lower your price for which you can probably trade off Quality Control issues due to the shortened lead time (I’m not saying make a crappy product, but you can be looser with QC on your end if you know you will have a longer period to deal with defects in product after delivery).

Lead, don’t follow.

I debated whether to include this as a strategic point. It’s definitely an acceptable negotiating tactic to speak first and dominate the negotiations, but that’s a tactic. Strategically it’s correct to lead in order to set or manage expectations during the negotiations. If you’re starting a new job and expecting 90 Thousand, but if the employer speaks first and offers you 60, you’ll never even get close to 90. It also means you didn’t do your homework on the company and similar positions.

One person speaks.

There is a good cop/bad cop methodology in negotiations. You are negotiating with two negotiators from Acme Corp, W. E. Coyote and R. Runner. Coyote always tried to act clever and leverage you into a corner, while Runner then comes along and saves the day with an offer that seems to undercut his colleague’s difficult position. Day saved!

It’s an act!

But it’s a good one, and used by pros with experience.

We are not pros with experience. Instead, the most senior person on the team negotiates the points, but he can ask another member of the team with specific experience to negotiate certain items (these can happen simultaneously in different rooms), with prior preparation and agreement on guidelines before the sessions. In any event, only one person will speak. If your number 2 is asked a direct question by the other team he should answer factually, but defer the negotiation to you (this is a type of divide and conquer tactic).

Speak in absolutes, not ranges.

“How much are you looking to make?” “Between 50 and 70 Thousand.”

You’ll get 50 Thousand.

It’s never personal.

(Unless it is.) Always keep your objectives in sight, no matter what means the other side uses to distract or confuse you. One egregious tactic is the use of ad hominem attacks. It’s often a weapon of last resort, or shows the character flaws of the person sitting across from you.

At the end of the negotiations the two sides will most likely need to work together, accruing bad blood at an early stage will foreshadow what will probably be the outcome of negotiations if not the working relationship – a quick end.

Having done significant telecom business in Africa, I can attest that this is the right way to do business in Africa: as opportunity and not as charity, with respect for those in the market and their own ideas.

http://www.theglobeandmail.com/technology/digital-culture/why-flying-internet-drones-over-africa-is-a-dumb-libertarian-fantasy/article17371996/

There are quite a few ways for apps to earn money. The most obvious is the paid app, and we will cover that in a later post.

Competition has forced many games developers to lower their prices to the lowest tiers, typically 1 Dollar (or equivalent) in most markets. The only lower tier is free, yet that may prove to be the highest grossing tier of all.

At this very minute (!) the top grossing Android apps on Google Play are: Candy Crush Saga, Zynga Poker, Clash of Titans, Heroes of Camelot, and Castle Clash.

These 5 apps have three things in common:

• They are all free. (In fairness 98% of all Google Play apps are free.)
• They are all games.
• They are all “pay to resume”
• (Bonus: they also all have iOS versions)

Pay-to-resume (P2R) is different than Free-to-play (F2P, i.e. pay to play more, access special features, or buy virtual goods – this is not to say that games can’t be both P2R and F2P at the same time).

Many game publishers put out two versions of the same game, one free and one paid. Often the free game is a “sampler” of the full paid game allowing the player to play through a small number of levels, fall in love with the game, and then unlock the full game with an in-app purchase.

Realistic conversion rates fall in the 1-2% range for most games, while very good games will see a 3-6% conversion of free to paid.

Bucking the F2P trend, the games in the top five list are all free, full featured games that allow users to play and advance at their own pace and level of skill. Distinct in the group is Zynga Poker which grants new users a relatively small amount of virtual currency to begin play since money is an integral part of the game. Zynga understands that all but the real card sharks will at some point need to top up with credits to stay in the game, or at least the higher payout games, and that it can expect a relatively stable source of income.

Let’s use King.com’s Candy Crush Saga as an example. Utilising the “deceptive difficulty” game mechanic where the game seems easy to play but is actually very difficult to master, users often find their lives used up and have three choices before them: wait out the “timeout” span and then return to play, ask for “lives” via social media, or buy more lives and resume play.

Given the extremely addictive nature of Candy Crush many users need to feed their cravings right now, to the tune of almost $800,000 a day. The brilliance in this tactic is that customers voluntarily pay to advance while they’re in the middle of a run, something very similar to the psychology of what happens in casinos.

What makes it a brilliant tactic is that there is no coercion on the part of the game for players to buy. Contrast that with many apps that force users to buy feature packs or upgrades. They are not being asked to pay to level up, but rather as an option to resume working on leveling up and thereby achieving the satisfaction of conquering a level (or an enemy). The conversion rate can be as high as 14.5-20%.

The price points are also an important factor in implementing pay-to-resume, and the most successful game makers have realised that a single price point is best. This may because of its seeming simplicity. Quite simply, view pay-to-resume as a sales opportunity with a limited lifespan. Presenting the user with multiple choices where buying the “warehouse-sized lives pack” might be more economical for the user in the long run is probably only going to confuse the user while he does the math and considers his options, as opposed to offering a single, cheap, option that comes with immediate gratification.

If your game does have break points where players will need to wait to reengage, consider pay-to-resume at a low price point, offered immediately to the user, and watch your revenues take off!