RSS

Category Archives: Silicon Valley

Trail and Error spawn Success

I just read an article in The Next Web, where the author explores the mediocrity of the start-up scene in Silicon Valley. That the vast majority of the start-ups are meaningless, produces no value, and are initiated for the wrong reasons, namely to exit quickly and make a nice pile of cash. According to the author, the business of starting up a business must not be approached as what it is – to pay the rent and put butter on the bread – but must be done for philanthropic reasons.

It’s not that I don’t get the point, because I do. An entrepreneur, who actively believes in his idealistic vision, is easier to idolise and if only everybody were like that then the world would be a better place and people would smile and not curse.

However, it’s utopian to assume that big successes don’t attract ambitious youngsters, who would like to earn money and fame. Ignoring the obvious monsters of Silicon Valley, a simple project like Instagram, where still only the 2 or 3 founders are working (at least last I checked), is an example of how easy you can get traction using limited resources. These successes are conceived because hundreds are trying. If nobody gave the small and accessible ideas a shots, we wouldn’t get anywhere. And normally the big mammoths of the tech scene arise from the small ideas, which were just allowed to evolve. Did you know that Flickr started out as an online multiplayer game

On a side note it should be mentioned, that most venture capitalist find entrepreneurs more attractive if they have failed with a start-up beforehand. The reasoning is that they have gained experience, even in tough times etc. If failing actually turns out to be a positive thing, why patronise youngsters who get into the game of entrepreneurship early, potentially fail, allowing them to move on to more demanding projects wiser and more experienced?

Secondly, if you can build a small start-up, offering say an iPhone app, in days, this makes sense, since the risks are that much smaller. It just makes sense that you see more of these since barriers to entry are so low. This is just a trait of a competitive market.

Since Silicon Valley has become the synonym of tech start-ups it’s the natural place to initiate a tech business. Even the incompetent entrepreneurs flock to the area, however that does not limit any of the competent entrepreneurs from succeeding, or any of the successful companies from becoming even more successful. It may drag the average success rate down, but I don’t agree with the argument that Silicon Valley experiences a problem from this, as the title of the article, which I’m attacking, argues. Eventually the idiot entrepreneurs will give up and get a job (at one of the surviving ventures, perhaps), they will succeed with the subsequent project, or they will leave.

Last point; are the entrepreneurs too short-sighted, and too unambitious in terms of solving the problems of the world? How can the author be so moralising as to assume that entrepreneurs are more responsible of solving world hunger, warfare and health problems than other people? Anybody taking a 9-5 job is just as responsible (or just as little), however entrepreneurs are generating work for future employees, at least in a much more direct way than the average office slave. Any current entrepreneur, retired entrepreneur or venture capitalist is encouraging a rookie business founder to create a product/service that he would want to use himself. And if you want to use an app, that directs you to the nearest tofu cupcake, then that’s what you should build. And not be criminalised because of it.

 

Dressed for failure – Business suit and no experience

When I was in San Francisco around a month ago I was fortunate enough to hear a presentation by Silicon Valley-icon, Guy Kawasaki. He was one of the main drivers behind the initial Macintosh, has founded a handful of tech companies in the Valley, and is founding partner and entrepreneur-in-residence at Garage Technology Ventures. Further he has written a long list of books about entrepreneurship, marketing, raising capital etc.
And as he has a pretty memorable name, and he held an inspiring presentation (wearing an orange Hawaii shirt, inspiring us to wear flamboyant clothes to our next pitch event), I noticed one of his books, as I was just browsing Amazon’s books about entrepreneurship.

I’ve now read the first 70 pages of his book ‘Reality Check’, and a few points deserve the attention and a quick rundown on this highly selective blog. The book is written very similarly to an online blog – from where many of the chapters actually originate.

Kawasaki explains how he receives numerous emails from hopeful business students, who wish to get into the game of venture capitalism. Their hopes of artificially becoming the center of attention of all aspiring entrepreneurs seeking dollars to finance their startups and mingling at events in their business suits, while securing an impressive pay and the additional cut of the multibillion aquisitions they facilitate. And who can blame them?

This is where Kawasaki has created a test, which assesses your chances of being hired as a venture capitalist ‘first-step-on-your-career-ladder’ – employee, as opposed to just becoming a VC because you successfully exited your startup and are now equipped with enough money to gamble. It’s called the Venture Capitalist Aptitude Test, VCAT. Here are some of the interesting points of the test:

Background
Are you technically minded (engineering degree) or do you know how to market and sell a product (sales education)? These are the directions of study, which improve your chances, since a new product/service either needs to be developed and/or sold, and you get plus points in the test.
Do you have an MBA, or are you educated within management consulting or investment banking? These are the big no-no’s. You subtract points if you fall into one of these categories.

The two first tend to arm you with the perception that, as long as you have done your market research, as long as you have calculated your NPV, applying conservative guesstimation (when you acknowledge that you can’t even estimate), and when you know all the important concepts like ‘Porter’s 5 Forces’, ‘Product Life Cycle’ and ‘diminishing marginal utility’, then implementation is straight forward, and will happen exactly like you wrote in your business plan, which you wrote prior to everything else. (Immanuel Kant would be proud of a sentence this lengthy).
These guys are the once who rarely succed in the startup environment, thus making them poor representatives for an VC fund.

This is kinda similar to all the overly-ambitious business students, who I’ve had the pleasure to get to know during some years of studying at Copenhagen Business School, CBS. Having a shot at working McKinsey & Co, Boston Consulting Group etc gives these fine students an academic orgasm, and justifies wearing a suit to lectures, despite the fact that they will spend several hours at home before going to work later that day.

What the target group of Kawasaki’s test and consulting-horny students/recent graduates have in common is the desire to apply their academic theories and ‘ideal type’-frameworks to the real world, which of course makes sense. However, they tend to have that (unintended) arrogance that they know better than people who have been in the industry for 15-20 years. Or that they can evaluate the potential of a startup, when they have never founded a company. I have never ridden a horse, so I would not be the ideal judge at a dressage competition, even less someones horseback riding coach.

That was only one point from Kawasaki’s test, but the link is just above, so read the rest if you like. It’s quite interesting.

An ending remark: The person who ended up with the highest GPA at our class at CBS, and was invited to a job interview at McKinsey, had been selling his empty bottles the previous day, in order for him to buy marijuana (you know who you are).
Not really that there’s a point to this, but nonetheless a fun piece of trivia.

 

Tags: ,

4 things a Danish startup can learn in Silicon Valley

Be Open
When you have a good business idea the conventional assumption among Danes is that you keep it to yourself, fearing that everybody will copy everything you had planned to create. That whoever is introduced to your new idea will be ready to abandon their own startup, their job, or other activities they were in the middle of, in order for them to pursue something that you have just introduced to them.

This happen very seldom, and the losses are the tremendous amounts of feedback that you will never receive, because you follow through with an idea that you have not tested on reality. In the case that your business idea is to be a commercial success amongst the masses, you will need test it with your future users, and/or customers. You may then experience that you may have gotten most of it right, and you will be able to tweak the features that you wrongly expected to be sparks of genius.

Of course you do not reveal the idea to your prospective competitors, who may have the resources to copy the whole concept, but you must not be afraid to share your thoughts with experts within the industry, or a savvy IT-guy. These could easily become your future co-founders, or the guy who end up being the one helping you create your product.

Be Commited
If you want to succeed you must do whatever it takes. It’s as simple as that. You need to be so commited to what you’re doing so that failure is not an option, and then you will experience that you will not fail. This is mostly due to the fact that you will be open to change you initial approach, in order for it to appeal more to your customers. Napoleon Hill said that you must actively ‘burn all ships’, like in medieval warfare, where the attacking soldiers could not retreat. I don’t totally agree with, but it will leave you with no other option than success.

Commitment also drives your work morale, giving you the strength to work late and get up early with an unaffected devotion to your startup and its associated success.

Additionally, it will affect your team mates, as well as the people you’re selling the product or idea to.

Think Big
If you want to attract talented employees, or the first, second or third round of capital, you have to be able to convince yourself and the people around you that what you’re doing is about to change the world. If you’re a talented guy, are you going to join a team that is only striving towards the mediocre? And if you’re a venture capitalist, are you going to invest in a team (because it to far greater extent the team, rather than the idea, that they are impressed by) that will settle for less? No. That’s the fast and correct answer. Obviously, everybody wants to invest in the next Facebook or Twitter.

This is also where the phenomenon of scalability enters the scenario. Scalability means that you easily can increase the scope of your business, without increasing your expenses accordingly. This is really applicable to IT venture, since the marginal costs of bits and bytes are low. Consequently, it is imperative that you apply the possibility of scalability early in your development of your product and business plan.

Network with Everybody
As an extension to the section of being open, it is pivotal that you exploit your network. This applies to your personal network, where you may find your future partners, or people you can give you the honest feedback you need. But it also applies to the network that you constantly must seek to increase and improve. You never know who may become good and loyal users/customers of your service or product, and you never know who might be able to hook you up with that special person, who can change the trajectory of your startup.

Imagine your former co-workers, who from time to time change jobs. These people lobbying your product may be the easiest access to a potential customer (given you sell to a corporation). Imagine also the benefits of talking to other entrepreneurs. These may not be the most obvious sources of direct sales or rock hard capital, but chances are that they have dealt with your stakeholders in one way or the other, or know someone who does/has. I talked to a guy, whose plan was to develop an iPhone app, that you could measure the calories in the food you took a photo of. Not very beneficial, in relation to my own career portal, but his German friend had been dealing with numerous German universities and this is definitely something I’ll be trying to exploit.

In order not to make this post too long, I’m going to stop here. Did I forget some point, which cannot be ignored? Feel free to supply your thought below.

 
1 Comment

Posted by on 20 June, 2011 in Entrepreneurship, Silicon Valley

 

Tags: , ,

Roasting marshmellows with Steve Blank

How do you end up roasting a handful of pink and yellow marshmellows with one of the legendary entrepreneurs from the Mekka of innovation and (tech) business creation, Silicon Valley? And who is this guy, by the way?

Well, the well-dressed guy to your left is me. The guy wearing the fancy cowboy shirt is Mr. Blank. The name of the lady to your right is Rebecca, an Amerian who was recently thrown out of Denmark because she was, well American, despite being married to a Danish guy. That’s another story, though, with a far more political aspect.

The reason why I met Blank was because the startup I’m the co-founder of, Graduateland, had been invited to Silicon Valley by the Innovation Center Denmark, a governmental organisation helping Danish startups, who find themselves far from home, specifically in the San Francisco area.
The awesome team of Søren and Marie had put together a busy schedule for the bunch of Danish startups, and this included dinner and a casual chat at Steve Blank’s private ranch, just south from San Francisco.

Why is this interesting? Where I come from (Denmark) it is definately not common that the star of the show invites 35 total strangers into his home, and does this with no agenda of getting paid, or trying to convert to his cult (maybe, a little?).
To make a long story short – he gave a short insight of his career path and gave a presentation to his perception of entrepreneurship. This is not where I’m getting with this post. What I think is so positive is the approach towards people whom you have not yet met. It is genuinely positive, and it showed in so many ways during our days in Silicon Valley and in San Francisco. A journalist from The Next Web joined us, and subsequently made this video.

Exiting a movie theatre we’re asked by two old women, who had also seen the movie (which contained discussion about handjobs and teen sex) what we thought of the movie. Nevermind our response, being asked this, by strangers, after a movie has never happened in Denmark. Similar things happen in elevators, coffee houses etc.

We were introduced to a term called WIIFM (What’s In It For Me). This term explains the initial interest in talking to new people. Can I benefit? Can they benefit, and subsequently pay me? Do they know somebody who I wanna meet? This may also be emphasises by the fact that many of the early engineers from Google, Facebook etc have made tons of money. But they don’t look rich. Similarly, many venture capitalists and co-founders of successful companies blend in, but could potentially change the fate of the odd struggling startup. SO, everybody talks to anybody, if just to find out that they are not relevant. But this is alright, and people move along.

This might not a longshot to explain why old ladies talk to us, but the mentality that other people may have something useful to offer, be it only a kind response to a casual question, is appealing to a Dane, whose general approach to others is that they are just blocking the view. This can change, though.

Alright, first blog post must come to an end. Concludingly, my plan is to be inspired by the more open-minded approad shown by the Americans. We may be able to teach them many many things, but talking to strangers, they are way ahead of us.

 
1 Comment

Posted by on 13 June, 2011 in Entrepreneurship, Silicon Valley

 

Tags:

 
%d bloggers like this: