Here’s the car I just bought to list on RelayRides: a 2001 BMW Z3 2.5i roadster with 72,589 miles - hooked up to jumper cables (more on that, in a minute).

I spent most of Saturday surfing online for different types of cars - ranging from trucks to SUVs to hatchbacks to convertibles.  Using Truecar.com, Craigslist, and eBay Motors I focused my search on the following characteristics:

1. Fun to drive
2. Attractive to renters in the Palo Alto area, including Stanford students
3. Highly depreciated in market value, yet still reliable
4. For sale nearby

At the top of my list was the Mazda Miata, followed closely by the VW Rabbit/Golf.  As I started looking through Bay Area listings for these cars, I was surprised by how (relatively) slowly they depreciate.  Trying to find one in great condition, with less than 100,000 miles and a price of less than $5,000 was difficult - so I decided to raise the cap on my budget to $10,000.

$10,000 opened up the possibilities quite a bit.  After a lot of research, I came across the original generation of the BMW Z3.  The original models were underpowered with anemic inline-4 engines, but mid-cycle BMW added their classic inline-6 motors to the mix.  I came across several 2001 models with the 2.5-liter engine that appeared to be in excellent condition.  And in contrast to similarly-priced Miatas, the 2001 Z3 delivers 184hp and a 0-60 time of roughly 7 seconds flat.

Why $10,000?  Assuming a used car loan rate of 4.35%, no down payment, and a term of 4 years, the purchase works out to 48 monthly payments of $227 each.  I haven’t added in insurance or maintenance yet, but I’m assuming that will roughly double the monthly cost.  Given that the top cars on RelayRides can regularly make $600 - $800 per month for their owners, this would equate to a free car!

Also, I had a final consideration - any car that I bought wouldn’t take a lot of time to find and purchase.  I wasn’t looking to find a mis-priced car, but just a fairly-priced car.

So I narrowed the search down to three Z3’s in the area, and negotiated the price I was looking for with the first seller I visited ($10,250 paid, versus $11,999 asking).  Everything went fine until this morning, when the car wouldn’t start.  I hope it’s just a dying battery - it started fine with the jumper cables you see in the picture.

I’m getting the battery replaced tomorrow, and the listing will be going live on RelayRides.com soon.  I’m planning to experiment with many different methods of social media to see what works best.  More to come.

This is one of the coolest demo videos I’ve seen in a long time - for two reasons.

Of course, the product looks compelling.  The Leap shows that machine vision is advancing quickly, and it’s simply incredible that (1) this much power can (2) be packed into a device this small (3) at a price point of $70 and (4) be completely reverse-compatible as an input device.

But more interestingly, the fact that in just 3 days this video has been viewed over 3 million times demonstrates the power of social media as a tool for rapidly building consumer awareness of new products, without a paid advertising campaign.  Compelling demonstration videos have emerged as a powerful (yet inexpensive) new way to drive consumer demand well in advance of a product’s launch.  It allows companies to gauge initial demand to help figure out production volumes, and in the case of products like the Pebble, even allows companies to finance production and development by advance orders.

I wonder if Apple has noticed this trend.

Here’s how I spent last Saturday afternoon - launching high-performance rockets in the Central Valley.  Our efforts required an FAA waiver and a no-fly zone.

I love this photo - I was the guy on the left, carrying the back end of a 70 pound fully fueled launch vehicle, helping out a rocket-loving entrepreneur at a Shasta company that’s changing the world - Nest.  I like being the guy in the background helping entrepreneurs bring crazy, insane products to market, even if they explode once in a while.

There’s a famous phrase in venture capital - it’s called “will the dogs eat the dog food?”  It’s another way of asking “…is there product-market fit?”  Or, in other words, will customers want to buy [a lot] of what you’re selling?

I’ve been an investor in RelayRides for about 9 months now, and I’ve been a regular renter.  Now, with exploding usage nationwide, it’s time for me to take the plunge as an owner and to list a car on the service.

There are some RelayRides owners that have already made more than their cars are worth.  I’ve decided to take on that challenge for myself, and see if I can buy a used car for less than $5,000, aggressively market it on the system, and make back my investment from Stanford University students eager for temporary car rentals of cars far cooler than what they can get with Zipcar.  So I’m looking for ideas, starting with VW Golfs, Jettas, and old Mazda Miatas.

Any ideas?

Here’s a demo from Tuesday’s BlackBerry 10 announcements that will blow your mind.

Unfortunately for RIM, I bet developers build iPhone and Android apps with this functionality long before BlackBerry 10 comes to market.  Too little, too late for RIM - their best ideas will be rapidly subsumed into iOS and Android by the very developer community that RIM wants to cultivate.  Apple and Google won’t need to do a thing.  One by one, millions of developers will put the nails into RIM’s coffin.

I wonder if Comcast has any idea what’s coming their way with streaming, Internet-based video.  I just consumed almost a terabyte of local loop bandwidth in April, up over 2x from March.

It’s pretty crazy to think about Lowe’s deploying roughly 42,000 iPhones into their stores for better customer service - roughly 25 iPhones per store.  This is an old link, but a powerful validation of the modern smartphone platform.

A couple of observations:

1. This should scare the hell out of Symbol (Motorola), which built a huge business around proprietary scanning devices.
2. They picked iOS rather than Android (let alone RIM or MSFT).
3. With a modern mobile platform, it’s easy to distribute software upgrades overnight to their entire chain of 1,700 stores and 42,000 devices - something not so easy with legacy Point-of-Sale (POS) systems.

The problem for mobile entrepreneurs and mobile developers isn’t distribution - it’s promotion and awareness.  People get this wrong all the time.  Distribution is the magic of modern mobile - not the problem.  The problem is awareness (promotion).

If you have a free application, you get to distribute it for free on iOS and Android.  If it’s a paid application, you pay a 30% tax.  Either way, the upfront cost is close to zero.  In return for an entrepreneur to access to nearly a billion iOS and Android users today, that’s unprecedented in the history of business.  Unlike any other time in history, tiny startups can develop mobile applications that can be instantly fulfilled - for free - to nearly a billion end users.  In contrast, during the last major technology wave of the late 90’s, there were only 20-30 million broadband connections and no easy-to-use payments infrastructure.

Today, the real mobile marketing challenge is promotion - how to build massive awareness among an attractive set of customers.  I might have access to one billion handsets, but what does it matter if no one can find me in the Top 10/25/100 lists?

In such a competitive environment, naming of a product, branding, and word-of-mouth are far more important than ever before.  Get it right, and a high NPS score leads to rabidly supportive end-users that want to get their friends to use your product or service any way they can.  Authenticity + rabid end-users = massive, rapid adoption.

In contrast, paying Tapjoy, Iddiction, or other marketing firms a “cost-per-install” (CPI) fee is only a gimmick or attempted shortcut for paying attention to the basic marketing fundamentals of a strong promotional strategy.  People who complain about high CPI pricing either have inferior product or aren’t creative enough to build leveraged awareness campaigns.

Understanding the fundamentals of marketing - the so-called “marketing mix” - is more important today than ever before.  Product, pricing, distribution (place), and promotion.  More to come on this topic.

Cherry is at the leading edge of a huge mobile technology wave that’s about to wash over a series of traditional, sleepy, multi-billion-dollar industries that no one expected Silicon Valley to influence anytime soon.

Did you know that the US carwashing market is $19 billion per year?  At Shasta we didn’t realize it was nearly that big until we took a close look at Cherry.  We also didn’t know that significant technology advances had been made in cleaning solutions that slashed water needs for a car wash to a only a few gallons.

But at Shasta, we do know a lot about mobile, and iOS- and Android-powered smartphones are putting location and payment technology into the hands of billions of consumers worldwide.  In the hands of consumers, these devices are going to allow startups to disrupt “traditional” industries overnight.

At the same time, these companies won’t be easy to build.  Mobile enables Cherry to rapidly find and serve consumers - but unlike purely digital businesses, Cherry needs to get a lot of operational details right.  Given that these operational details (hiring carwashers, scheduling washes, scaling customer service) are challenging and non-trivial, I think that Cherry will create a lot of value as they solve these problems and scale nationwide.  What should appear simple to the end-user will require a lot of hard work behind the scenes, which is the epitome of any great consumer-focused company.

We’re actively looking for other sleepy, multi-billion-dollar “traditional” industries that weren’t affected by the Internet - but - will be disrupted by mobile.  If you have a great idea that leverages smartphones to influence other massive consumer industries, let us know!

While getting ready for my interview with Semil Shah on TechCrunch TV tomorrow, I’ve been thinking about the key enablers of the “Internet of Things.”

I see three key enablers for technology applications that connect the real world to the Internet (aka the Internet of Things):

1. Smartphones.  The massive, unprecedented consumer adoption of two major mobile computing platforms (iOS and Android) puts enormous processing power in the hands of end-users worldwide. Consumers can use these devices to discover and interact with the world (and nearby devices) in their immediate vicinity in powerful new ways.
2. Sensors.  Moore’s Law has driven the cost of sensors into the ground, at a similar rate to CPU power and speed.  Every smartphone today packs enormous sensor capabilities in terms of location, sound, accelerometers, imaging and touch.  Instagram and Foursquare are valuable examples of startups that have leveraged sensor technology in ways that appeal to mainstream consumers.
3. Actuators.  These technologies are advancing just as rapidly as sensors and CPUs, especially in terms of low cost and high reliability.  But startups haven’t fully realized their potential - yet.  Actuators allow control, not just information transfer.

Today, no one is talking about the importance of actuators.  But these are the devices that translate computation into action - also known as robots - which is where startups are about to make massive amounts of money.  The next Facebook/Google/Microsoft will be powered by actuators.

Look at the Nest Labs thermostat, for example.  It senses ambient temperature, monitors occupancy through motion sensors, and records user input when the ring is turned clockwise or counterclockwise.  But the magic in the device is the fact that it controls the HVAC system.  Without modern solid-state voltage actuators, this wouldn’t be possible in a such a sexy device.

For another great example, just go to the toy store and pick up a radio-controlled helicopter or airplane.  For $50, anyone can buy a personal flying drone with hours of HD video recording built in.  Military-scale spying for a fraction of the cost.  This type of $50 aircraft wouldn’t exist without super-cheap, state-of-the-art actuators to control propeller speed and control surfaces for long durations and difficult conditions (ie handled by kids).

The next great example, about to happen, will be the fully automated car.  Every major subsystem in modern automobiles is in the process of being replaced by drive-by-wire systems.  Manual transmissions are becoming obsolete.  By marrying these advances in actuation technology, with massive recent advances in computer vision, the self-driving car is about to revolutionize transportation forever.

Low-cost, reliable actuators represent the final building block of robotics - which is on the cusp of a huge revolution.  To date, robotics has been the realm of HAL and the Roomba.  But once the self-driving car hits the streets in volume, robotics will finally enter the mainstream.  And it couldn’t happen without the recent, incredible advances in actuators.

Catching up on my reading list is one of my favorite pastimes.

I just spent an 80-degree, sunny spring afternoon in my Palo Alto backyard reading Tony Hsieh’s “Delivering Happiness”.  My favorite quotes are from the list of lessons he learned from playing poker - with my indented interpretations:

“Table selection is the most important decision you can make.”

pick a great market opportunity,

“It’s okay to switch tables if you discover it’s too hard to win at your table.”

it’s ok to pivot,

“The guy who wins the most hands is not the guy who makes the most money in the long run.”

to win and make the startup worthwhile, go all-in for the big opportunity, not a bunch of smaller ones,

“Go for positive expected value, not what’s least risky.”

self-explanatory,

“Don’t play games you don’t understand, even if you see lots of other people making money from them.”

this is one of my favorite quotes from his book… meaning… understand your customer and industry better than anyone else.  Anything else is bubble behavior.

I fell out of my chair when I watched this video earlier this week.  Congratulations to the entire team at InPulse for making a minor course correction (moving from BlackBerry to iOS and Android) and staying the course.

Great name (Pebble), persistent founders, and an awesome demo video.  And if you use Garmin’s athletic watches, you’ll want to get one of these for sure, especially if you use Strava.  Garmin has tried to build a walled garden with their Forerunner watches, and if InPulse succeeds with their open SDK and platform, they’ll create a huge headache for Garmin.

This company points out the confluence of three major trends in Silicon Valley today:

1. The rise in importance of video in promoting a new startup via social media.  Another great example is DollarShaveClub, which has had over 4 million views to date.
2. The continuing maturation of the ODM industry.  Companies like Nest Labs, Eye-Fi and others “design in the US, manufacture in China.”  Great US startups spec the hardware and write the software, and amazing new products come to market at an accelerating pace.
3. The rise of crowdfunding.  So far, InPulse has raised nearly $6 million on Kickstarter - purely from early adopters.  That’s a strong measurement of underlying consumer demand.  Wow.

I’ll admit that I was skeptical when I visited the team in their crash pad about a year ago.  I liked the founders a lot, but didn’t think the early focus on BlackBerry was right, and I wasn’t sure if the underlying consumer demand would be strong enough.  But they’ve made great moves since then, and the reorientation towards Android and iOS is right on target.  I can imagine just how awesome a Strava app could be on this device…

The biggest challenge will be making sure the watches live up to their promise - that they actually work in the hands of end-users.  Every one of these startups runs into manufacturing glitches in early production - it’s basically inevitable - and I hope they keep volumes super-small for the first few months to live up to the opportunity they’ve earned the right to exploit through hard work and a consistent vision.

According to this graph from Comcast, I’m part of the 1%.

I wonder whether the cable operators are really ready for Over The Top (OTT) video.  I subscribe to both a huge Internet pipe and an HD video package from Comcast in Palo Alto, but find that I rarely watch broadcast TV.  Instead, I watch almost all of my video content via an AppleTV, hooked up to a HD projector in my living room.

A lot of it is from Netflix, and much of the rest is from iTunes.  Between Netflix and iTunes (via iCloud), most of it is streamed.  Damn, it looks good on a 120-inch dropdown screen.  And from the charts above, it’s consuming a HUGE amount of bandwidth.  (right now I’m writing this post while watching Season 5 of Mad Men in HD on iTunes)

Last weekend I spent a day in a ten-episode non-stop marathon of watching the first season of Game of Thrones in HD.  That accounted for 20-25GB alone.  Another 50-100GB are probably accounted for by my kids watching SpongeBob Square Pants non-stop on an XBox360.  More from work email, Internet usage, and uploads.  I don’t think I have an unusual usage pattern for Palo Alto.

I haven’t gotten the nastygram yet from Comcast threatening to terminate my service.  The crazy thing is that I can’t figure out from the website how to purchase more than 250GB per month, but they’re more than happy to threaten customers who consume more than that.

Comcast and the other cable operators need to realize that what happened to AT&T and the other cellular carriers with the iPhone is about to happen to them.  Consumers are increasingly loving Netflix and other streaming services, and these streaming services are about to explode worldwide.

Too much success, and you’ll bring the government after you.  Just look at today’s headlines about the U.S. Department of Justice suing Apple over alleged price-fixing in ebooks, based on Apple’s use of a Most Favored Nation (MFN) clause.

There’s a great article here from Philip Elmer-DeWitt of Fortune about why the market didn’t react significantly.  First, it wasn’t a surprise.  Second, this could be easily settled.  And finally, this is definitely not Apple’s biggest business, not by a long shot.  Which is why I wrote last week that Apple Doesn’t Want #1 Market Share.

What’s the real indicator that a company has reached its peak market capitalization?  When the anti-trust government litigators show up in force.  And that hasn’t really happened to Apple yet - and may not for a long time.

Yes, Apple has dominant tablet market share, has been sued by the EU for iTunes, and noises have been made recently about collusive pricing of ebooks.  But tablets are a brand new market, and the EU case was dropped years ago.  Apple’s ebook problems may be real, but it’s not a big revenue stream for Apple yet and probably not a major component of their market value.

What’s really interesting is Apple’s tremendous impact on telecommunications - without any threat of government antitrust action anytime soon.  With only 6% of the global handset market in 2011 (and 9% in Q4’11), Apple has managed to claim 80% of the profitability of the handset market.

Without question, Android is the best thing that could have happened to Apple.  It forced Apple to rapidly open up the iPhone to outside developers with the AppStore, which now represents a multi-billion dollar revenue stream to Apple.  With Android breathing down the neck of iOS, Apple is forced to rapidly innovate to keep developers happy.  Despite the opacity of app approval, developers love the superior monetization of the Apple ecosystem, while avoiding the fragmentation of Android.

At the same time, since Android decided to chase the low end with free licenses, Apple was able to claim a strong position as the premium, aspirational smartphone platform.  No one lines up outside stores to buy new Android devices, but people in China are willing to riot if promised shipments of iPhones don’t materialize.  Finally, it becomes very difficult to bring antitrust action against the iPhone since Android owns over half of the smartphone market.

Having dominant market share makes it tough to continue to build amazing products.  But having a superior position in the market - serving a huge, loyal, high-end customer base, but staying well under 50% of the handset market - allows Apple to continue building a highly profitable, aspirational line of products.

Which is the better customer base?  The one that can afford expensive phones (and as a result, has much more disposable income for spending more money in the iOS ecosystem), or the customer base looking for free, low-cost phones?