MochaTalk

April was a month of great progress. We added 3 additional team members to our team reaching a total strength of 7 people. One more person will be joining us in early May. We have folks from a great array of companies including Microsoft, RIM, Opsware, Revenue Science and Amazon.

Development is well under way this month. We have a development milestone every 2 weeks with the team giving a demo on what they have completed. It was great to see the quick progress our team was able to make and demonstrate the major pieces of the functionality. We also made great headway in building the overall UI for the site and are actively looking for a great web design firm to make UI even more compelling and easy to use.

On the funding front, the news about the launch of our company allowed us to attract attention from a number of prominent investors. While we were not looking to raise additional funds in the short term, we decided to take in some additional funding to give ourselves more flexibility with our launch plans and resources. In a matter of a few weeks, we closed funding from a number of very prominent angels including some from the VC community who have invested their own personal funds in the company. The additional funds has allowed us to add more development resources as well as expand the scope of our initial offering. In addition, our investors will be very helpful in making introductions to top tier VC firms both in Pacific NW and the Bay area.

Another item of note is the coverage we received in the Washington CEO magazine. The article will be in the May issue of the magazine and covers our company along with 2 other Seattle area start ups (Zoodango and Mixxer).

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Last week the Wall Street Journal published an article called “Dropped Call - How Motorola Fell A Giant Step Behind” in which it talked about how Motorola “milked” the Razr while “rivals sneaked ahead on the next generation”. In my opinion, the writer got it totally wrong. The issue wasn’t that Motorola fell behind in developing phones for the next generation 3G networks rather that Motorola couldn’t build a sustainable value proposition with the Razr. In a previous article, I had written about the importance of getting the value proposition right RIM nailed its value proposition with BlackBerry. But it is not sufficient to get it right for a single go around - your strategy has to continue to deliver value to customers over successive generations of products.

In Motorola’s case, their unique value proposition was built on a passing consumer fad — the ultra slimness of the phone. No doubt, the company rode it to great success selling over a 100 million phones. I even had to buckle to pressure from my daughter and buy her a Razr when it was still fairly expensive. However, barely a year later, many of her friends have a Razr and she no longer cares to have one. Other vendors like Samsung have also come out with ultra slim phones so Motorola’s unique value proposition is no longer so unique.

The question to ask though is why buying a Razr is no longer cool but buying an iPod is still cool for my daughter since all her friends also have iPods. I believe there are 2 reasons for it - one is pricing and the other is tremendous value proposition that the iPod continues to provide over its competitors. With the Razr, Motorola continually drove its price down to the carriers and, in turn, the carriers kept heavily subsidizing the device to make it more affordable for the masses. The carriers didn’t really care much about maintaining a certain exclusive appeal for the Razr - their primary motivation was to drive customer acquisition. However, pricing plays a key role in driving customer perception of value and exclusivity. As the price came down, it no longer became cool for consumers to own the device and the Razr became just another flip phone on the market. In comparison, Apple has done a great job of sustaining the appeal of its device (from a pricing perspective) by maintaining its price points while continuing to add features to its devices. Of course, Apple has the advantage that it controls the pricing offered through its distribution channels. It will be interesting though to see what happens now that Apple has entered the wireless world where the carriers can dramatically affect device pricing.

The other reason that I believe sustained the iPod phenomena is that the iPod continued to be the only device on the market offering markedly better and easy to use music management and listening software vs its competition. This was the real value proposition to the customer not the hardware innovation and styling that Apple introduced. The Razr, on the other hand, was just an ordinary phone from a software perspective - its only appeal was the slimness of its design. Motorola would have been much better off buying RIM so that it could acquire the DNA that it lacks to deliver real value added applications on its devices. Now instead, Motorola is under siege from Carl Icahn and Ed Zander’s job is on the line.

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