MochaTalk

Sunday was big day for all of us at Livemocha. Livemocha was covered in a major story in the New York Sunday edition along with ChinesePod, another excellent language learning solution. The story titled ????????Learning From a Native Speaker, Without Leaving Home was written by Anne Eisenberg who authors the well known Novelties column in the New York Times. This follows coverage 2 weeks earlier in the Wall Street Journal.

While it is great to get covered in these major publications, these stories are really indicative of the interest that the press has in the whole phenomena of globalization and the tremendous impact that it has on our lives. The fact that we have been able to quickly build up a user base of 200,000 users from over 200 countries demonstrates the tremendous need that people have to utilize foreign language learning to improve their lives. In many countries, people can literally double their income by learning English. What is also very interesting, I believe, to the press is the perfect confluence of this global need with the emerging phenomena of social networking allowing people all over the world to leverage their native languages proficiency to help each other. They are also excited by the possibility that social networking concepts can be applied to more productive” endeavors such as learning language as opposed to enabling people to engage in “food fights” on sites like Facebook.

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I am very pleased to announce that Livemocha recently closed a $6 million in funding led by Maveron, a leading Seattle area venture capital firm. Maveron was founded by Howard Schultz, CEO of Starbucks and Dan Levitan in 1998 and has tremendous consumer and e-learning expertise that we hope to leverage. Maveron was also an investor in Capella University, a leader in the online education space.The irony of a Howard Schultz led venture firm investing in “Livemocha” is also not lost on us. Like Starbucks, we hope to create the premier international brand in multi-cultural language learning. The Starbucks phenomena is an extra-ordinary story and we hope to apply the many innovative strategies that Howard Schultz utilized to create an unparalleled experience for Livemocha users.

Maveron’s investment in Livemocha is, we believe, testimony to the tremendous opportunity offered by the language learning market. Based on various research reports that I have seen, this is a market that is well over $20 billion in size with over 350 million people all over the globe learning a variety of different languages. In many countries, people can double their income by learning English because they can get more attractive jobs in industry. And the need has become even stronger given increasing trends towards globalization, immigration and travel. The time is also ripe for a compelling online language solution given the widespread adoption of broadband internet access, VOIP and social networking technologies.

In the 3 months since our launch at the end of Sept 2007, we have seen a tremendous reception to the Livemocha concept. To date, we have signed up over 130,000 registered users on our site from over 200 countries all over the world. The amount of daily activity and interaction on our site has grown by leaps and bounds generating over 25 million page views a month. As a result, our Alexa rank has climbed quickly to between 5000 and 6000. In fact, in many countries, we are in the top 1000 sites. This type of interest shows that people are clearly hungry for to learn a variety of different languages and are looking for ways to build their language proficiency skills by practicing with other native language users.

There’s a lot of exciting work ahead of us to add more languages, make the site more fun and engaging and to continue to build a stronger global community. With the new funding round, we now have the ability to hire more engineering resources to further accelerate our product development plans. Stay tuned for more exciting developments over the coming months!

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Yesterday, John Cook from the Seattle PI posted an article in his blog about the Top Seattle Startups. It noted that Livemocha was the biggest mover in the list from last month. This is very exciting to see. However, the list is based on a 3 month average and we launched only at the end of last month. If you look at the weekly average (see screen shot below from Alexa), you will see that we are already in the top 10 sites. This is just one month after launch. What’s also great is the user interest that we are seeing from users all over the world. You will notice that we have also become a highly ranked site in a number of different countries. We now have users from over 140 countries. This is exactly what we wanted to see — a crucial part of our strategy is to build the world’s largest community of language learners and we are now making significant progress towards achieving that goal.

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Livemocha launched last week at DEMOfall in San Diego. Demo is a premier conference with a great reputation for showcasing the latest startup technology. You get essentially 6 minutes to make a brief yet compelling pitch to the audience which consists primarily of press, VCs and established companies like Microsoft, Qualcomm etc. who are hunting for promising new technologies. It took an amazing amount of time and numerous re-writes to put this together but the end result I think was pretty good (well, maybe you be the judge). We kicked off the demo with a video clip from one of my favorite movies “Lost in Translation”. There’s this classic scene where Bill Murray is filming a video for Santuri Time Whiskey and is getting harangued by the director who is speaking to him Japanese. But the only scraps of translation that he gets from the interpreter is “He wants you turn and look in camera”. We used this video to illustrate in a funny way the increasing importance of acquiring foreign language proficiency in this increasingly global world that we live in. Here’s a link to our DEMO presentation so you can see how it all came together.

DEMO turned out to be a great event for us. We were featured as one of the top 5 applications on Day 1 of demo. We also got a great press coverage in a number of major publications and blogs such as USA Today, Seattle Post-Intelligencer, Webware, VentureBeat, Mashable etc. What’s great is that these stories were then picked up by a large number of bloggers who then wrote about Livemocha as well. It is truly amazing how the PR game has changed since I did the PR launch for TeamOn in 2000. At that time, the only coverage you could hope for was the coverage that you got from the major print and online publications. However, it was very difficult to create the kind of “buzz” that you can get today in the blogosphere without much proactive effort on your part.

Thanks to all the PR and blog coverage, we have had a great first 2 weeks in terms of registrations. What’s amazing is that 60% of our users are coming from overseas which is exactly what we were hoping for. Some of our biggest countries include Germany, Brazil, Spain, Portugal, Canada and the UK. Clearly, there’s a real demand for foreign language learning all over the world. The other interesting data point is the high level of engagement of our users. People are spending a significant amount of time on our site and submitting a large number of exercises (writing and speaking) for review by others and getting helpful feedback from native language speakers.

While we have a lot of work still ahead of us to continue to improve the site and make it even more relevant and useful to our users, it has been very gratifying to get a number of kudos from our users:

• Just wanted to let you know, this is the most valuable website I’ve ever used. It’s just phenomenal! (Fargo, ND, USA.)
• Hi! First I’d like to say…amazing site! …that said, I’d like to request adding Finnish to your languages list. Personally, I’m a native speaker and wouldn’t mind this being known to anyone who might want to learn the language. (Finland)
• I’m so excited about Livemocha. I’m an experienced Italian and Spanish native speaker and teacher. I’ve been traveling to many countries around the world and, due to my huge interest in knowing people and other cultures, I needed and loved to learn the most important way to human knowledge: language. In my case I speak five foreign languages that allows me to share feelings, emotions, thoughts, dreams and information with fantastic people all around the globe. The way I learned English, Portuguese ( fluently ) and Romanian, French ( elementar ) is quite simple: 1) motivation and will to communicate with interesting people 2) massive listening to, talking to, reading and asking for native speaker’s help 3) I found wonderful people to patiently teach me. With such experience, I started to teach what I knew to others and now with Livemocha this will be fun and easy.(Marconisida, Italy)

Thanks for all your feedback! We are carefully noting the feedback that a number of you have provided and our team is working hard to incorporate your suggestions as quickly as possible.

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After many months of hard work, the time has come to unveil the fruits of our labor. Welcome to Livemocha — we are building the world’s largest community of language learners. The language learning market is a huge worldwide market growing rapidly due to macro economic trends such as globalization, immigration and travel. We estimate the market to be more than $20 billion in size with emerging economies like China and South Korea spending billions of dollars on English and foreign language training.

English, of course, remains the number one language for international communication. According to the British Council, the number of English language learners is going to soar to 2 billion people in the next 10 to 15 years. However, with globalization, there’s been a significant interest in learning other languages. French and German have always been popular languages but now Spanish, Chinese and Hindi are in demand as well due to the growing economic role of regions/countries where these languages are spoken.

While the market for language learning is growing rapidly in the new millennium, the existing self help tools on the market have remain stuck in the 90s relying on outdated CD ROM technology. As I have written in my previous blog post (Taking advantage of Platform Shifts), platform shifts such as the shift to internet computing and now to Web 2.0, provide the perfect opportunity for new companies to displace the existing incumbents by being the first to embrace the new platform. It is time to create such a platform shift in the language learning market.

How is Livemocha different? When we designed Livemocha, we built it on the beliefs that:
1. People want to communicate with and integrate into cultures; they don’t want to be linguists.
2. Most of us are capable of learning a second language and it can be a lot of fun, but it takes time and commitment. Having a learning environment that provides strong motivation is critical to success.
3. Self-study provides the basics, but to truly become fluent, you need to have on-going real life conversations with native language speakers.

We believe that we have built a strong foundation for an effective and engaging language-learning solution. It is a system designed from the learners point of view since we are language learners ourselves. Unlike other language learning systems on the market, we don’t make outlandish marketing promises to teach you a language in 30 days or some such guarantee. However, we do believe that through our unique motivational system and the support of the community that you will make significantly greater progress in achieving greater conversational proficiency than you have experienced before with other self help tools. Here are some of the key element of the Livemocha learning system.

1. Over 160 hours of beginner and intermediate self-study lesson content covering 6 of the world’s most-spoken languages (English, Spanish, French, German, Mandarin Chinese and Hindi). The content is presented in an immersive, engaging and game like fashion through careful sequenced set of images associated with text and audio. The user is challenged to deduce the meaning of the words and phrases that they see in each lesson. We provide a range of reading, listening, writing and speaking exercises to test your knowledge and understanding of the lesson content.

2. A social network that brings together a community of like-minded language learners from all over the world. The community runs deep throughout the application. For example, we allow members to augment lesson content with grammar tips, alternate phrases and colloquialisms so that learners can get a much richer understanding of how a specific language is spoken in various parts of the world. We have also provided a number of structured writing, speaking and conversation exercises and tools where they can get help from native speakers. For example, when you make submission for a writing exercise, native language speakers in the community get automatically notified so that they can comment on it and provide feedback. We encourage you, of course, to return the favor by leveraging your native language proficiency to review someone else’s exercise. Finally, we provide conversation exercises and a text,audio, video chat tool to practice your speaking skills with other native language speakers on the Livemocha network.

3. A motivational framework to keep language-learners engaged and making progress. Having a community has allowed us to offer some truly compelling motivational tools. First, we organize each course so that it takes roughly a trimester to complete. We assign lessons and exercises that you need to complete each week and tell you where you are behind. Of course, you are free to proceed at your own pace but you will make the most progress if you stick to the schedule that we recommend. We also let you create your “study buddy” system by inviting other learners to join you in your learning process. As they make progress in completing their lessons and exercises, you get notified through a Facebook like news feed. This way not only can you provide feedback on each other’s exercises (or benefit from feedback they have received) but it also likely will provide the extra nudge that you may need from time to time. Finally, there’s a fun competitive element in the form of a Leader Board that tells you how you are doing versus other learners taking the same course.

The Livemocha service is open now to any user interested in learning language. Please come and join us in our language cafe. Do send us your feedback - there’s a feedback link on the top of each page. We plan to carefully listen to feedback from our users and continue to make improvements to make the learning process fun, engaging and fulfilling.

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A number of people have been asking me lately about when they can expect to see LiveMocha in action. I am very pleased to say that we have now entered a “closed” beta phase of our launch. Our team has done an amazing amount of work to get to this stage in just a matter of 5 months and its great to finally unveil the fruits of their hard work. To participate in this beta, please click on the beta link here and enter your e-mail address — we will contact you soon.

I am also pleased to say that we have been selected to demonstrate our offering at the DemoFall conference in San Diego from September 24 to 26th. Demo is a premier conference with a great reputation for showcasing the latest startup technology. Many companies such as Skype, Salesforce.com, VMWare (which had an amaziing IPO recently), have gotten their start at Demo. Demo will be the launch event for our offering and we will make the site open to everyone at that time. If you are a press person and are interested in getting more information, you can e-mail us at press@livemocha.com. We started LiveMocha to ride one of the greatest macro economic trends of our time – globalization. According to Goldman Sachs, by 2025, the BRIC economies will account for more than half the GDP of the G6 economies and by 2050, they will be larger than all the G6 economies. Along with globalization, we have seen a tremendous boom in immigration and travel between various countries. In 2000, over 95 million people immigrated to other countries. International arrivals are projected to grow from 694 million to 1.6 billion by 2020 with East Asia and the Pacific expected to record the highest growth rates.

Globalization has created a tremendous need for people throughout the world to better understand and interact with each other. We have identified a multi-billion dollar market worldwide that is being under served right now by the current incumbents who have demonstrated very little innovation over the past decade. In fact, none of them have really embraced the web in any significant fashion, let alone Web 2.0 and Social Networking.

Like many other Web 2.0 companies, we believe we can disrupt the market and deliver significant new value by leveraging the latest trends in social networking to connect people in new and exciting ways and leverage their collective intelligence. As I have written in my previous blog post (Taking advantage of Platform Shifts), platform shifts such as the shift to internet computing and now to Web 2.0, provide the perfect opportunity for new companies to displace the existing incumbents by being the first to embrace the new platform. Often times, the current market leaders will dismiss the new platform as a passing fad but more importantly, they have an existing business model to protect that makes it impossible for them to adopt the change. By the time they realize what’s hit them, it’s too late because the new players have established the network effects making it difficult for copycat efforts to catch up.

Let the games begin!

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Since we started LiveMocha, I am often asked whether we are getting our software development done in India. People are generally surprised to find out that, in fact, all of our software development is done right here in Bellevue, WA. I guess given the fact that I am of Indian origin and outsourcing has become a very common strategy people expect that it would have been quite natural for me to have done the same with LiveMocha. However, it was a very conscious strategy, even while fairly expensive, to do all of the software development in the US. Starup companies like Like.com that established an office in India have recently shut down their office there and have moved their software development operations back to the US (see a recent WSJ article Some in Silicon Valley
Begin to Sour on India and the blog by Munjal Shah, CEO of Like.com Episode 26 - India grows up). As these articles point out, while the average cost of software development resources still remains significantly lower that experienced developers in India can now command 75% of the salary of a US developer. There are also many other issues in you face in working with an outsourced team that I will touch upon here.

There are several reasons why doing software development for a startup makes more sense in the US. Today time to market with a kick-ass product offering has become even more critical. If you have an interesting idea, you have to get your idea developed and launched into the market in no more than 6 months. Very likely, someone else has a similar idea and even a few months head start can give you perception of market leadership and allow you to quickly build network effects before someone else does. Also, there is no better way to prioritize features than to get your offering into the market and see how real users are using your product. Doing rapid software development in another country (India or otherwise) across a 12 hour time difference is just too difficult even if the costs are significantly lower. Anyone who has worked in a startup knows that development process is very fluid — you are not likely to find detailed specs and even if the specs are fairly detailed, things change very quickly as you exchange ideas with your team members or learn more about your market.

With an outsourced team in another country, it can be extremely challenging to get across the vision of your offering — the only communication medium you have are documents and phone calls. Besides the communication issues, there’s also the issue of market understanding/appreciation. Your team here is much more likely to understand the vision and direction that you are headed in vs a team in another country where people may not be exposed to the latest trends and offerings. More importantly, your team here will have lots of great ideas to make the original offering significantly better because they are living and breathing the vision and strategy everyday. The daily give and take of ideas that you experience with a close knit team is simply too difficult to achieve with a geographically dispersed one.

Working across a 12 hour time difference can also be extremely challenging and inefficient. As Munjal Shah points out in his blog, it means that your group over here has to work late into the night to be able to have live conversations with the outsourced development team which can be difficult to achieve on a sustained basis. Even with the live conversations, the outsourced team often times cannot quickly get their questions answered and have to wait until the next day which can significantly affect productivity and motivation. Over here, our developers simply have to look over their shoulders to talk to our Product Manager to get their questions answered about the feature they are building.

Perhaps the most important issue to consider is the quality and the cohesiveness of your startup team. The team that you hire initially sets the tone for how the company evolves. If you are lucky enough to hire a bright, highly motivated and hard working experienced team, as I have, it sets the tone for the culture of the company and who your team hires as the company grows. It just too difficult to establish an A+ team and create the right set of dynamics if you relying entirely (or even partly) on doing the development in another country.

Now, I will admit that our strategy of building a team in the US was possible primarily because we had sufficient funding to hire developers in the US. You may, however, be operating on a much more constrained budget so you may not have a choice but to seek out less expensive development resources. If you do decide to outsource development, make sure that you interview every developer who has been assigned to your team. Don’t make the assumption even if you retain an InfoSys or a Wipro that you necessarily getting the best resources since they are all desperately hiring developers (experienced or otherwise) at a furious pace to meet their growth objectives. They simply don’t have the depth of resources to staff your team with developers with the experience that you are used to in the US.

There will also be times where an outsourced team will have a specific expertise that you lack in which case it may make sense to retain their services. One of the companies that I had invested in had a need to port and test their mobile application to variety of handsets. I did encourage them to consider hiring a company in India that had done this for a number of mobile developers in India. I felt it would be much more cost effective and faster path for development to hire the services of this firm than to try to do this on their own. Of course, all of their core mobile development was still being done in the US.

I would be interested in hearing from others on the strategies that they have employed in getting their startup off the ground (or from those who have worked at startups) and how well an outsourced strategy has worked for them. Let me know.

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The buzz around iPhone as we all know is reaching a fever pitch. Steve Jobs has said that they expect to sell 10 million iPhones by end of 2008. Is iPhone going to be a major hit as the industry expects or be a failure (at least compared to the hype and expectations). Clearly, it is risky proposition to bet against Steve Jobs. Steve Jobs has proven time and time again that he knows how to build products that not only are easy to use but also have tremendous sex appeal. The iPhone certainly has many appealing elements to it: a cool looking UI, a large screen and an innovative touch based navigation engine. It will also finally make the marriage of a cell phone and media device a reality — something that the traditional handset providers and carriers have failed to do.

There is no doubt that the iPhone will be sold out for many months to come. But the big question is what happens after 6 months or even a year, when the early iPod enthusiasts have purchased the device. Will the iPhone still be able to maintain its momentum with a broader user base allowing Steve Jobs to hit his goal of selling 10 million unit goal by end of 2008. I personally believe that this is going to be a tough number to reach. Here are some of the key issues that he will face:

Price: Price remains a key factor in the sale of cell phones. Generally 75% of all phones are sold at under $100 and only 5% of phones are sold over $400. At over $499, the iPhone is going to be a very expensive device. People argue that it is not really that expensive if you think of it as a combination BlackBerry and an iPod. However, I would still maintain that $499 is a very expensive price that will make people think twice before shelling out that kind of dough. Remember, most people also like to change their cell phone every 18 months. That’s very hard to do when you pay over $499 for a device. And technology in this industry gets old very quickly.

Battery Life: This is going to be a huge issue for the iPhone especially since there is no removable battery. And battery life is key requirement for a cell phone user. I can deal with a dead battery with an iPod but not with a cell phone. A large screen display is killer on battery life not to mention music and video playback.

Radio Performance: Having spent a number of years at RIM and testing a variety of different handsets with the carriers, I know how important radio performance is to the success of a phone. Typically, a handset manufacturer like Apple (unlike Nokia, Motorola, etc) will license the radio stack from another vendor. This makes it very difficult to deal with coverage, signal issues since you don’t own the code. Since users will be switching from a traditional cell phone device with superior radio performance to an iPhone, they will most certainly notice any coverage issues e.g. my Nokia phone works at home but my iPhone doesn’t.

Lack of keyboard: : I think this is going to be a real issue especially with those users for whom e-mail is a key application. Having to punch out your e-mail on a virtual keyboard is going to get old really fast.

Robustness/reliability: This is especially important for a cell phone which you carry around with you all the time and goes through a fair amount of abuse. My BlackBerry has gone through a washer/dryer cycle and still works. The carriers have a drop test that they use to determine how robustness of a cell phone device. I dread to think what will happen to an iPhone if you drop it on a concrete sidewalk. Having a such a large screen makes the iPhone particularly vulnerable to scratches, cracks etc. And the iPod has not been particularly well known for its reliability.

Low storage: : 4 or 8 GB of storage seems pretty low to me for a serious music lover. As for me, I would rather carry 2 devices - one optimized for voice and messaging and the other optimized for music/video/picture playback (i.e. an iPod with a minimum of 30 GB of storage). I do have a nano as well with lower storage but I am fine with the lower storage there because I use it primarily while working out at the gym — so having a lot less storage is fine because I want to carry a much smaller device with me.

Edge Performance: The iPhone seems to have a terrific browser with a cool UI. But it is going to be pretty significantly handicapped with a slow Edge network which is going to make browsing fairly painful. Many users who have looked at the cool browser demo on Apple’s web site are in for a disappointing experience.

Lack of an Application Platform: This is a sore point for many Apple developers who want to leverage their Mac applications to run on the iPhone. Apparently, Apple is asking its developers to develop Ajax based applications for the iPhone. However, you will still run into the speed issue of the Edge network. Ajax applications work fine on a fast broadband network but may not work as effectively on a slower network.

Let me know what you think. Are you going to camp out at a Cingular store on the 29th to buy an iPhone?

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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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