This is a really cool way to get more users to sign up for your app, without having to deal with the fast-changing landscape of digital identity solutions. Instead, just paste some code, and we’ll take care of it for you! The idea is to address some of the pain points for site owners (or “relying parties”) that I talked about in my previous post on the Laws of Identity.

You can read more about the new PrefPass service here; we’re also working on a WordPress plugin that should be out soon. Check it out!

The issue is that entrepreneurs are usually most interested in one number: percentage. As in, what percentage of the company will I own after raising money? This can confuse things because the way financing works, percentages aren’t treated as inputs; they’re treated as results of decisions on value. It was suggested that I lay this out in a blog post, so, here it is.

At its most basic, the important inputs to financing math are the pre-money valuation, and the amount raised. These numbers result in percentages. So let’s say for example that two founders decide to each own 50% of a company, and then they decide to raise $500k on a $1M pre-money valuation. That means that before the financing, the company is worth $1M, and right after the financing, the company is worth $1.5M (since it now has $500k in the bank). So, since the investors contributed $500k of the $1.5M post-money value, they now own 33% of the company. That means that the founders now own 33% each — they’ve been “diluted”.

This approach makes sense since the focus is on something that shouldn’t depend on how much money is raised: how much the company is worth right now. Then, depending on how much money is raised, the existing shareholders are diluted to lower percentages to make room for the investors.

Here’s a quick spreadsheet to play with that hopefully will make this all clear. The yellow bolded cells are the ones where you enter values; everything else then falls out from there. The number of shares per dollar of value is totally arbitrary; here it’s pegged at 10 cents a share.

I don’t disagree with this as a technical description of why the web is such a powerful enabler; but the thing is, it seems equally accurate for “Web 1.0.” Web 2.0 is a new “version,” and I think that versioning is always, for better or for worse, more of a marketing thing than a technical thing: sometimes it means lots of technical changes, sometimes not; but what it always means is that you’re claiming that enough new value is being created that you want to “re-launch” or offer an upgrade.

A classic instance of this is when Skype got a lot of attention and Yahoo “re-launched” Yahoo Messenger (v6.0) as “Yahoo Messenger with Voice” (v7.0). The fact is, Yahoo Messenger had offered PC-to-PC *and* PC-to-phone calls for years! It was just not very well-marketed, and so not too many people knew about it. In this case the new version was just a way to remind people that “hey, we have that stuff too!” Of course, a bunch of improvements and small new features were also included, but that’s not really what the new version was about.

In the case of “Web 2.0,” I think we’re also talking about what is primarily a marketing term: I like Paul Graham’s interpretation, that it really just means “using the web the way it was meant to be used.” There are a few new features like RSS and the ping infrastructure, but the real reason for the new version is to say “it’s worth taking another look, really cool things are happening.”

Regarding platforms, looking at the comments to Fred’s post, it seems to me that people might be mixing up two separate ways a company might build value:

(1) by building a new application on an existing platform
(2) by building a new platform

The word “platform” in software usually means a standard infrastructure you can build applications on. The web is such a platform, and one that to an increasing degree supplants the PC OS. Applications like Google search and del.icio.us tagging are of the first kind: they are built on this platform, “the web as platform.” But Google and del.icio.us APIs, and for that matter eBay and RoR, are of the second kind: they are *new* platforms. Moreover, they are *proprietary* platforms.

A question that a lot of people seem to be asking is, “should I consider building a new application on a new, proprietary platform?” The standard answer is that you can, but this consists of making a pretty big bet:

– that the platform will become ubiquitous
– that the fees charged by the company owning the ubiquitous platform will not be onerous
– that the company owning the ubiquitous platform will not decide to compete with you, and do so by altering the platform to give itself an advantage

But I think that this answer might be changing. This brings me to what I think is a second aspect to “Web 2.0,” a new value that is not so much a technical improvement, it is more of a social and economic shift. I’ll have to save that for the next post…

For example: advertising is more economically central than the content that it supports; in the open source model, expertise and support are more economically central than the software itself; and as a user of software or the Internet, data about you is more economically central than you are yourself!

Zooming out to an even broader view, this concept could be viewed as a special case of the more general observation that “the rules are more important than the game.” Or maybe not more important, but at least as important. So, innovation is as important as efficiency, a software framework is as important as the application written on top of it, and politically, legal structures and government regulations are as important as capitalism itself.

Anyway, that’s the thinking behind the title of this blog. Meta-, although somewhat overused, often means “about itself,” so EconoMeta seemed to work. Plus it’s short, uses the obligatory two-words-smashed-together naming method, and in Spanish sounds like it might mean “put it cheaply” or “an easy goal.”

My goal here is more one of conversation and collaboration, rather than exposition. I’m hoping to spur discussion, contribute to the blogosphere, and have fun!