In December of 2010, the NYT published an article called “Silicon Valley Bubble Shows Signs of Reinflating” citing quotes from investors like Fred Wilson, Dave McClure, Chris Sacca, and more that set the tech world abuzz with repressed memories of 2000′s dotcom bust. Then Newsweek fanned the flames. Groupon turned down a $6 billion acquisition offer from Google, prompting Google CEO Eric Schmidt to comment that “there are clear signs of a bubble, but valuations are what the are”. The hand wringing in startup land reached a fever pitch when Color.com raised $41 million without even a whiff of revenue last month. So with Facebook valued at $75 billion, Groupon at $10 billion, and Twitter over $4.5 billion with almost zero revenue, can anyone deny that there is a bubble blowing in Silicon Valley?

The always thoughtful Ben Horowitz doesn’t think so. Ben argues that 2011 is very different from 2000 for several reasons:

1. Public market valuations are presently much more in line with rationality.
2. Venture funds today have raised only about 25% of the money they raised in the late 90′s, and have deployed less than half of the cash they did last time around.
3. This time, the Internet boom has actually arrived.

Are these fair arguments? Is there a bubble in startup land? Let’s break it down.

Public market valuations are more rational today than in 2000, so there is not a bubble

On the surface, this seems to make a lot of sense. Looking at the table above (borrowed from Ben’s post), you’ll see that valuations of large public tech companies are certainly more in line with reality than they were in 2000. However, I don’t think that public market valuations of large companies with thousands of customers and hundreds of millions of dollars in revenue are necessarily a proxy for startup valuations (often pre-revenue, pre-customer base). Startups are notoriously difficult to value on objective metrics. Startup valuation is as much of an art as a science, and quality of the founding team or competition between venture firms is as often a driver of valuation as underlying financial fundamentals. I just think there are different dynamics at play in private early stage valuations than there are in the public markets.

Venture firms have deployed a smaller amount of capital, so there is not a bubble

Again, this stat is compelling on the surface. There can’t be a bubble if 2008-2010 saw such a relatively small amount of venture capital dollars deployed vs. 1998-2000 right? Sure, there may have been less capital invested, but into how many deals, and in what types of deals? In 1999, we saw tons of companies like Kozmo, WebVan, eToys, Pets.com, and more that raised and burned hundreds of millions in venture capital trying to build online businesses. They spent their money on expensive servers, bandwidth, and traditional media advertising. That’s no longer the case – startups are cheaper to start than ever before now that we have things like on-demand cloud computing, commoditized bandwidth and hosting, and the viral spread of hot ideas through social media. As Fred Wilson puts it, “you can now bootstrap yourself into existence”. In a world of less capital intensive startups, it makes sense that less VC money would be deployed. It doesn’t preclude those investments that are made from being at bubble-like valuations.

This time, the Internet boom has arrived, so higher valuations are justified

This one might hold a little more water. I agree with Ben that last time people’s expectations of the speed and scale of the internet’s takeover were vastly overinflated, which led to some crazy valuations that were based on a hope and a prayer rather than hard data. Ten years later, we have a much more realistic mental map of how internet technologies are developed, adopted, and integrated into existing industries. Today there are over 2 billion people in the world with internet access (30% of the world), and that number is growing by about 15% per year. Compare that with a worldwide internet user base of only about 360 million in 2000. It’s clear that maybe finally in 2011, the internet has begun to reach the global scale investors expected from it ten years earlier.

So, is there a bubble or not?

It depends on how you define “bubble”. Is there a bubble in the 1999, economy-wide, dotcom boom sense? I don’t think so. As Ben proves above, valuations for large public companies remain relatively rational. Retail investors are not betting their life savings on companies that have never earned a dime of revenue. At least in the public markets, signs of a technology bubble are tough to find. However, the private markets are another story. During the financial downturn of 2009 and 2010, tons of private equity and venture capital money sat on the sidelines in cash. Eventually though, that capital needs to be deployed so investment firms can deliver a return to their limited partners. As the economy has thawed a bit in 2011, a lot of that capital has started to come back into the market. This has led to a lot of capital chasing the same number of deals, and that drives valuations up as investment firms compete to get into the hottest deals. Are some of these valuations reaching bubble-like levels? I think so. However it’s important to remember that this bubble is specific to a small segment of investors, unlike the one in 2000. If/when startup valuations come back down to earth, a lot of venture guys and their limited partners may lose a fair chunk of change, but there’s very little danger of contagion to the greater public markets and economy. If anything, we’re seeing a bubble in the venture capital and angel investing communities, not the tech industry as a whole. So in the end TechCrunch will get all worked up for several more months, but in my opinion, the sky remains firmly in place.

Over the past few weeks I’ve gotten a ton of positive feedback on FoxyWire (several people are building businesses on the platform as I type this). After talking more with the Shipwire team, I discovered that tons of users were clamoring for an integration of Shipwire and BigCommerce, which is one of the most widely used shopping carts on the internet. And so, here it is – Shipiro, a seamless integration of BigCommerce and Shipwire.

Like FoxyWire, Shipiro offers an out-of-the-box, point and click integration with Shipwire. Shipiro is a little more advanced however, in that it makes it easy to push tracking numbers from Shipwire back into BigCommerce. That allows things like inventory management and customer notification of shipments, all using built-in BigCommerce functionality.

Here’s a bit of background on how each service works, and how you can stitch them together quickly with Shipiro to build an enterprise class e-commerce supply chain.

BigCommerce

BigCommerce is one of the web’s most popular e-commerce solutions (over 10,000 live stores). BigCommerce is extremely full featured – everything from custom templates to inventory management to eBay integration to marketing and analytics is included. Just about the only thing BigCommerce didn’t have was fulfillment. Enter Shipwire with Shipiro.

Shipwire

Ah, how the world has changed. Advanced logistics and fulfillment used to be reserved for large, international companies with sophisticated supply chain managers. Not anymore. Shipwire brings professional-grade fulfillment within the price range and sophistication level of an individual entrepreneur. Shipwire has warehouses in LA, Chicago, Toronto, Vancouver, and London. To get started, you can ship your inventory to any or all of Shipwire’s warehouses. When a new order comes in, simply send the SKUs and address information to Shipwire (automatically via their API if you’re using Shipiro), and they’ll use intelligent business rules to ship the order for the lowest cost possible, dynamically selecting the closest warehouse and cheapest shipping carrier. Check out this interview with their CEO to learn a bit more about how they are trying to help entrepreneurs build supply chains to rival Fortune 500 companies.

Shipiro

Shipiro.com reaches out to the BigCommerce API with each user’s credentials a few times a day and requests the orders list, which is then parsed for “physical” items only (so we don’t ship e-books for example) and passed over to Shipwire. Then nightly, Shipiro hits the Shipwire API and pulls tracking numbers back into Shipiro. Lack of write capability in the BigCommerce API prevents me from pushing those numbers back to BigCommerce, but Shipiro is able to export a CSV of all orders with tracking numbers that easily imports back into BigCommerce with their import tool. Shipiro keeps an auditable log of every single piece of XML that goes back and forth to make the above steps happen, which can be viewed order-by-order inside of the Shipiro interface.

The folks at Shipwire have listed Shipiro on their website as the only currently available method for BigCommerce/Shipwire integration. Shipiro is also featured on the BigCommerce blog. If you’re running an e-commerce store on BigCommerce and are looking to automate your supply chain and fulfillment, give Shipwire a try with Shipiro.

Just a quick post to announce the availability of my latest side-project: FoxyWire, which I built in about 15 hours of coding (PHP/mySQL) over the course of a week. FoxyWire is an out-of-the-box integration between two of the quickest ways to cobble together an e-commerce business that I’m aware of – FoxyCart for almost instant shopping cart functionality, and Shipwire for automated intelligent fulfillment and shipping.

Until today, if you wanted to use FoxyCart and Shipwire together to run your business, you needed to either transfer orders manually by uploading spreadsheets, or do some custom coding to connect the two APIs. I went ahead and did the hard work for you – now you can use a (free) FoxyWire account as a “universal connector” to funnel FoxyCart orders directly into Shipwire and build an end-to-end automated supply chain without leaving your desk.

Here’s a bit of background on how each service works, and how you can stich them together quickly with FoxyWire to build an enterprise class e-commerce supply chain.

FoxyCart

FoxyCart is different than any other online shopping cart software in that it’s designed to be lightweight, easy to setup, and not require the customer to jump through tons of hoops to check out. It’s the last point that drew me to FoxyCart – every additional “Next Step” click is a chance for cart abandonment. The checkout page is a single screen that can be completed in under a minute. Very slick, very easy. I’ve used FoxyCart to power several side projects, and have gotten explicit feedback from customers that “your checkout is the easiest I’ve ever used.” FoxyCart also doesn’t have any software at all you need to upload to your own server – orders are simply passed into their hosted cart via forms, links with parameters, or even a JSON API. Check out their 2-minute tour of FoxyCart for a deeper dive into their features.

Shipwire

Ah, how the world has changed. Advanced logistics and fulfillment used to be reserved for large, international companies with sophisticated supply chain managers. Not anymore. Shipwire brings professional-grade fulfillment within the price range and sophistication level of an individual entrepreneur. Shipwire has warehouses in LA, Chicago, Toronto, Vancouver, and London. To get started, you can ship your inventory to any or all of Shipwire’s warehouses. When a new order comes in, simply send the SKUs and address information to Shipwire (automatically via their API if you’re using FoxyWire), and they’ll use intelligent business rules to ship the order for the lowest cost possible, dynamically selecting the closest warehouse and cheapest shipping carrier. Check out this interview with their CEO to learn a bit more about how they are trying to help entrepreneurs build supply chains to rival Fortune 500 companies.

FoxyWire

FoxyWire acts as a connector and translator between FoxyCart and Shipwire. FoxyWire simply listens for new transactions from FoxyCart, performs some error checking and logic (to be sure we don’t try to ship e-books for example), translates the orders into a format Shipwire can understand, then pushes the address and line item information to Shipwire. I couldn’t have built FoxyWire without the great APIs provided by both FoxyCart (API docs link) and Shipwire (API docs link). The Shipwire API is extremely handy in that it takes only an XML file containing address information and the order’s line items – no specific shipping instructions are required. Shipwire intelligently selects shipping options based on the rules laid out in the user’s Shipwire account.

The kind folks at both FoxyCart and Shipwire have listed FoxyWire on both their websites (here and here) as the only currently available method for FoxyCart/Shipwire integration. Over the next few months, I hope FoxyWire is able to help a lot of people launch new businesses without jumping through manual spreadsheet hell or expensive upfront coding. If you’re a new entrepreneur looking to launch an e-commerce business selling physical goods, I don’t know of any quicker way to get started taking orders and sending them to your customers than by using FoxyCart, FoxyWire, and Shipwire.

Note: As of November 2012, FoxyWire is now part of Order Desk. Order Desk is an extremely robust FoxyCart order management product created by David Hollander, which adds an order dashboard, subscription management, order statistics, custom reporting, and integration with lots of additional systems in addition to the simple FoxyCart/Shipwire sync offered by FoxyWire.

How is entrepreneurship like skydiving? As they say, the hardest part of skydiving is jumping out of the airplane. I think entrepreneurship is the same way.

I believe that the key to success in life is overcoming your fears and eliminating the excuses that keep you in your comfort zone. Action almost always brings more fulfillment than the status quo. “Ready Fire Aim” (the title of this blog) is an expression of that ethos. I also believe it’s very applicable to entrepreneurs thinking of starting a company – the starting is often the hardest part.

Think of all the “armchair entrepreneurs” in the world – everyone has an idea. And yet nobody executes. There always seems to be a reason to delay actually starting an entrepreneurial venture. I don’t have enough startup capital. I need to refine my idea a little more. I should save some more money first. I need to finish college first. I don’t know if anyone will use it. There are one thousand and one excuses for putting off starting until tomorrow.

So why do we do this to ourselves? What is it about human nature that makes us manufacture endless justifications for inaction? I want to mention two authors who’ve written about it specifically, one classic and one contemporary.

Sigmund Freud called these nagging doubts the Death Drive, or Thanatos – the destructive force inside human nature that rises whenever we consider a tough, long-term course of action that might do good for ourselves or others. The opposite of Eros (the drive for life), Thanatos is the natural drive in all of us to give in to the status quo and seek a state of calm, non-action, and death.

Stephen Pressfield (author of “Legend of Bagger Vance” and “Gates of Fire”) has a wonderful contemporary description of Thanatos. Pressfield calls it “Resistance” in his new book “The War of Art” and defines it this way:

Have you ever bought a treadmill and let it gather dust in the attic? Ever quit a diet, a course of yoga, a meditation practice? Have you ever wanted to be a mother, a doctor, an advocate for the weak and helpless; to run for office, crusade for the planet, campaign for world peace, or to preserve the environment? Late at night have you experienced a vision of the person you might become, the work you could accomplish, the realized being you were meant to be? Are you a writer who doesn’t write, a painter who doesn’t paint, an entrepreneur who never starts a venture? Then you know what Resistance is. Look in your own heart. Right now a small voice is piping up, telling you as it has ten thousand times, the calling that is yours and yours alone. You know it. No one has to tell you. And you’re no closer to taking action on it than you were yesterday or will be tomorrow. You think Resistance isn’t real? Resistance will bury you.

So how do we overcome Resistance and accomplish our dreams? To put it simply, “JFDI” (think Nike).

People and ideas have inertia. That which is at rest tends to remain at rest, that which is in motion tends to remain in motion. I think the key to starting anything is to actually start. Take the tiniest first step. Get off the couch. Put out an ad for a web designer on Elance. Draw out a mockup in pencil. Make that first phone call. After you’ve started, I think you’ll find the second step comes much more easily. Make that inertia work for you.

The truth is that the only way someday turns into today is by getting off your butt and starting. Starting makes things real. Starting builds momentum. Starting gets you excited. Starting eliminates all your excuses and all the reasons you’ve invented in your head to rationalize your inability to overcome your inertia. Starting makes you an entrepreneur.

I also want to point out that in order to succeed with a “JFDI” philosophy, you must also excel at correcting course along the way – what some call pivoting. It is the final and most important term in the phrase “Ready Fire Aim”. Too often we all forget to aim. Most successful business are not perfect incarnations of the founder’s first business plan, they require a lot of adaptation along the way. Very rarely is it purely a brilliant concept that makes a startup successful. Success is a sustained, long term drive, and that’s far rarer than a good idea.

Twitter is a perfect example – it started as a side project inside a company called Odeo (also founded by the Twitter guys). They soon noticed that Twitter was far more popular than Odeo’s main product offering, a podcasting web app. They scrapped the Odeo idea entirely and focused all their time on Twitter, which now has over 150 million users. Good aim.

In summary, success is action plus agility. Get the ball rolling, put inertia to work for you, and correct course along the way. Jump out of the airplane. I’d like to leave you with a quote from Machiavelli that I have printed out and hanging above my desk. Hopefully it helps remind you to go out there and JFDI.

“All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but calculating risk and acting decisively. Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer.”
— Niccolò Machiavelli

I recently made a personal commitment to read more books, so I turned to the lengthy “Saved Items” cart on Amazon that I had been filling with friends’ recommendations for the past 18 months and ordered several titles. The first to arrive was Dr. Robert Cialdini’s fascinating and bestselling book “Influence: The Psychology of Persuasion”, which had been recommended to me by several friends, acquaintances, and subject matter experts, including Tim Ferriss, Guy Kawasaki, and Noah Kagan.

In is book, Cialdini (formerly a nationally renowned professor of marketing at Arizona State University) describes Six Principles of Influence which encompass every negotiation tactic and act of persuasion utilized in board rooms, living rooms and farmers markets the world over. That is to say, these are the six “puppet strings” that all of us tug at to gain compliance from those around us. They are vastly and widely applicable, from business negotiations to marketing to disagreements with your spouse. If you look closely, you’ll notice that all of us employ them every day to achieve our goals and influence those around us. Many of them are particularly applicable to entrepreneurs, so I’ve attempted to crystallize the essence of the six principles and share them below.

Cialdini’s Six Principles of Influence

1. Reciprocity

   The concept of reciprocation is pervasive in our society. It’s one of our established social rules – if someone does us a favor, we do them one in return. If someone invites us to a party, we put them on the list for our next gathering. It is a fundamental principle that has been ingrained in all of us since the earliest days of human society. It is the concept of reciprocity that allowed our ancestors to freely share food, skills, and protection with confidence that the resources would be returned in kind. The shared web of interdependency and obligation allowed for the division of labor and specialization of skills – reciprocity was truly an evolutionary advantage.

   Accordingly, it’s no surprise that our modern culture has socialized us all to carry a sense of indebtedness to those that help us first – the “Golden Rule”, Karma, and “Pay It Forward” are all reciprocal social concepts that are instilled in all of us from a very young age. We assign harshly negative labels to those that do not follow the cultural norm – mooch, freeloader, leech. It is no wonder that whenever another person does us a favor, we feel obligated to respond in kind. And so, our natural reactions can become a powerful influencer when exploited. Let me give an example.

   I experienced the reciprocity principle first hand this winter on a ski trop to Breckenridge. Our group pulled into the parking lot and began to unpack our equipment. As we did, a man approached and made a show of welcoming us to the mountain and complimenting our gear. He then handed out “free” Breckenridge wool hats to each one of us. After receiving our thanks, he quickly followed up the gifts with a request for a $10 donation to a charity he was representing. Three of the five in our group immediately ponied up, and the man went on to the next unsuspecting car. I later asked my friend what charity the man was representing. His response – “No idea, but hey – free hat!”

   The above is a perfect example of reciprocity in action – my friends felt compelled to donate to the man’s charity because they had first received the “free” hats, regardless of the nature of the charity’s work or whether they even needed or wanted a hat.

2. Consistency

   The consistency principle states that “Once we have made a choice or taken a stand, we will encounter personal and interpersonal pressures to behave consistently with that commitment. Those pressures will cause us to respond in ways that justify our earlier decision.” In layman’s terms, this means that once we have made a small commitment or statement (especially publicly), it becomes part of our self-identity. For example, if I can get you to make the statement “I love discovering new music” (and who doesn’t), you’ll be more than twice as likely to pull out your wallet when I then ask if you’ll buy my band’s CD. Because not buying the CD would be inconsistent with your previous assertion that you enjoy new music (a feeling known as cognitive dissonance), you feel compelled to purchase the album.

3. Social Proof

   Of all the six principles, I believe we experience and are influenced by social proof most strongly and most often. Social proof refers to the phenomenon that we are far more likely to do or believe something if we have seen others like us do or believe it first. Cialdini cities several studies in the book, including one that analyzed reclusive pre-school children. Researchers showed each reclusive child videos of other children their age observing a social activity, then actively joining into the activity. At recess the next day, the formerly isolated children immediately began to interact with their peers at a level equal to that of normal children in their schools. The principle of social proof illustrates that we often copy behaviors simply because if many others are doing something, we believe it must be the correct thing to do. The children in the experiment perceived that being social was the “normal” thing to do, and which gave them the courage to alter their own behavior. The principle of social proof is applicable to far more than elementary school behavior, and there are further examples in the book that examine social proof as an explanation for buying decisions, mass suicide, and traffic jams.

   Entrepreneurs also run head-long into the social proof principle when raising capital for the first time. Many venture firms are reluctant to invest until they hear that others have invested as well. If you’re able to secure a commitment from a big name VC firm like Sequoia or Khosla, you’ll probably not have much difficulty filling out the rest of your funding round. This is due to the principle of social proof – if others are willing to invest, it must be a good deal. Similarly, when you go to raise a second round of capital, any new investors will want to see participation from the firms that initially invested in your Series A. After all, if your original investors are unwilling to commit further capital, why should anyone new invest? This is often called “The VC Signaling Effect”, and has been discussed in depth by both Chris Dixon and Mark Suster.

4. Authority

   This one is fairly self explanatory – if someone in a position of authority commands you to perform a task, you are likely to comply. This was proved out in the now infamous and controversial Milgram Experiment. You can read the link for further detail, but essentially Milgram proved that despite moral objections and severe emotional distress, subjects were still willing to administer what they thought to be lethal electric shocks to others when commanded by someone in a position of authority. Milgram used his studies to explain the brutal actions of certain German soldiers during the Holocaust, committed despite stated strong moral objection by the soldiers themselves.

5. Liking

   This one seems obvious, but it’s very true – we tend to comply with requests from people who we like (friends, family, etc). Tupperware Corporation has exploited the liking principle to great success; each day thousands of people invite their friends over for tea and finger food, only to eventually ask them to purchase some Tupperware at the end of the party. By relying on the obligation we all feel toward those we like, Tupperware has built one of the largest direct sales organizations in history. In fact, Tupperware no longer sells in retail stores at all, relying almost solely on parties and the liking principle to generate over $2 billion in revenue each year.

   However, it’s not only your friends and relatives that can exploit the liking principle. The liking principle also encompasses arguably the most powerful persuasion method of all – attraction. An attractive, flirty stranger can create the same persuasive “liking” effect that your best childhood friends enjoy. That’s the reason nearly every pitchman, model, and TV commercial family is good looking, and all those Bud Light commercials feature women in bikinis. The more attractive the person trying to gain our compliance is, the stronger “liking” that they create, and better chance they have of persuading us. “Liking” is the principle that explains what Hollywood has known to be true for years – sex sells.

6. Scarcity

   “Hurry, supplies are limited! This deal won’t last! Call now!”

   How many times have you seen slogans like those above plastered on store windows or shouted by TV infomercial salesmen? Probably more than you can count, and it’s because of the scarcity principle. We are far more likely to agree to a request if we believe (falsely or correctly) that we will not have another chance in the future. Fear of losing an opportunity can be a very powerful motivator. It is generally true that things which are difficult to obtain are better than things which are easy to obtain – thus we are subconsciously conditioned to use scarcity as a proxy for higher value. Cialdini mentions a used car salesman that always made sure more than one interested buyer was present whenever he was selling a car. The competition increased anxiety in both buyers and made the car seem that much more attractive, which without fail increased the price the salesman got for the car.

Cialdini’s book provides far more detail on the above principles than I have included here, including numerous studies and examples ripped straight from current events that illustrate each principle in action. I’d recommend Cialdini’s book to any entrepreneur, product manager, or marketer, as well as anyone looking to be more persuasive in general. It’s an absolutely fascinating read.