Saturday, October 11, 2008

A piece of advice from Martin Varsavsky

From Martin Varsavsky's Blog: "My advice to other start up CEOs: the Fon experience"

I like to call this article "My advice to other start up CEOs (how to make a lot of money, without a lot of effort): the crappy Fon experience." Martin forgot to fill in the blanks.

Once again he keeps wasting his time reiterating his previous statements

"Last Spring we cut our burn rate at Fon. We reduced our head count from close to 100 to 60. It was painful. It was sad. But it had to be done. Since then Fon has grown faster than ever. Not because the people we let go were not doing anything. Quite the contrary, they had been doing a lot. But many times a start up is about first building a platform and then managing it. And just as it takes hundreds of people to build an office building but less to run it it also takes less people to run a platform like Fon than it took to build it. Bottom line is that when we went from 100 people to 60 we managed to grow revenues faster than ever before and to cut losses from over 1 million euros per month to 350 thousand. We also grew to one million foneros around the world. Our revenues grew from 20K euros per week to 50K and the good news is that these sales are mostly cash into the company (Fon is like a telco without capex or opex). What we also achieved is to stretch our investor´s money into 09 and to need a very small round to break even."

"We cut our burn rate by 70% mainly by reducing headcount, raising revenues, raising margins, and particularily by raising margins on the sale of the foneras themselves which we used to give away practically for free. In our case we discovered that the free mentality of the internet was not especially good for a wireless community as most people who got their routers for free did not connect them while those who paid were more serious about the whole thing. Moreover we are now about to raise the rates we charge Aliens who connect to Fon. Partly because we need the money but also again to show the value of becoming a fonero and share and never have to pay. We only charge $2 per day while other WiFi companies charge way over $10. Plus the value of our passes increases as we have more hotspots. Fon now has 10 times more hotspots around the world than our second closest rival. In the UK and Japan our coverage is especially good."

Selling routers for practically free? Charging $2 for a day pass? 10 times more hotspots around the world than our second closest rival, who is this, did I miss something?

I guess Martin missed the fact that T-Mobile just launched a mobile broadband plan in the UK for£2 per day, £10 for 7 days access, and £20 for 30 days access. Also, you need a USB Modem for £49.99. Not to bad of a deal.

(More at El Fon Blog: "T-Mobile UK Launches Mobile Broadband @ £.67/day!")

1 British pound = 1.7068 U.S. dollars

Read the comments on Martin's post, I love when avoids questions that would show the real side of FON.

Link: Fon Boards

1 comment:

  1. "It was painful. It was sad. But we still had fillet mignon for dinner that evening."

    I'm suprised that Martin needed to waste tens of millions of dollars to find out that people who invest their own money in something are people who are more serious about it. He could have given me 5 million and I would have told him that 2 years ago. :D

    By it's title, Martin seems to be aiming this blog entry at his "peers" in the big business club. If he's just now discovering such obvious nuggets of wisdom, I fear he's failed to impress them.

    What is the deal with him saying they charge $2/day? They charge $3. Maybe this is why 66% of the money collected is spirited away by Fon before they payout to the Bills? Martin thinks Fon charges $2, and so someone at Fon cooks the books so that Martin sees the expected figures in the end?

    Martin has been out of synch with Fon's official figures before. Just last week, he said Fon had "nearly 300K" active Fon hotspots, and the very next day their blogmonkey claimed "over 400K".

    Doubling the price of day passes is a fatal mistake. We Foneros all see that immediately. Martin's reasoning for doing it seems to project from his discovery about how [paying for a router] correlates with [being more serious]. If so, he's making that mistake for a idiotic reason. Bills are franchisers, and Aliens are customers. They don't work the same way. Franchisers are looking for good investments. Customers are looking for the best deal.

    I just think Martin is using the current financial turmoil as a pretense to make deliberately bad decisions as though they were reasonable reactions to it. He wants Fon off his shoulders so he can concentrate on Link Sortener and Mexican Wave. I wonder, if Fon shut it's doors, would Martin know until the weekend was over?