Nov 062014
 
uber-logos

A great interview with Uber CEO Travis Kalanick by Kara Switzer in Vanity Fair touches on the mental difficulties facing startup founders.

 

He was depressed after his first start-up failed badly and his second went largely sideways. He was, as he recalls, deeply afraid of failure. “I had gone through eight years of real hard entrepreneuring. I was burned. So, I just wasn’t ready yet,” says Kalanick. In fact, he had been living at home with his parents in his childhood bedroom not long before his trip to Paris, after those two start-ups had failed to flourish.

xys

Nov 022014
 
las-vegas-downtown-project-tony-hsieh-tour-container-park-praying-mantis

Stepping off the bus at Las Vegas’ Fairmont Street in the early morning is a reminder of how seedy nightlife areas look in the harsh daylight.

The reason for being in Downtown Las Vegas on a warm Monday morning was to tour Tony Hsieh’s Downtown Project, a scheme to revitalise the rundown and neglected town centre of the gambling and convention mecca.

One of the striking things about Las Vegas is how much of it pretends to be somewhere else; The Luxor, New York, New York, The Ballagio. It’s almost as if the fantasy land of the American Dream is a little embarrassed about where it is.

Not that the tourists are embarrassed with millions pouring in every year to enjoy the gambling, entertainment and the pasteurized sin on offer along Las Vegas’ glitzy strip of mega casinos.

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Five miles north the mega casinos and bright lights, the luck runs out. The best thing locals have to say about Las Vegas’ downtown district is “it is better than it was.”

One of the reasons it’s better is because of one man — Tony Hsieh, the founder of online shoe retailer Zappos. Hsieh moved his business to Las Vegas because, in the entrepreneur’s view, San Francisco was ‘hostile towards company service.’

The Downtown Project is the result of a promised $350 million investment by Hsieh to invigorate the city centre of Las Vegas.

However the project has hit problems with Hseih recently stepping down from his position, layoffs being announced and community programs being cut back, leading critics to claim the project is in jeopardy.

So a tour of the project during a recent visit to Las Vegas was well timed to judge how things are going.

The tour starts with the small group meeting at The Window, an arts and meeting space on the ground floor of the Ogden residential tower which closed down in September as part of the scheme’s recent cutbacks.

Gathering in the room with our tour leader Maggie is a somewhat spooky experience with all The Window’s furniture, books and exhibits intact as on the day they were left at the end of the space’s six month lifespan.

las-vegas-downtown-project-tony-hsieh-tour-deserted-windows-space

Leaving the room’s contents intact and unpacked doesn’t engender confidence that The Window will find a new home. In all, starting the tour in the abandoned workspace is an unsettling start.

After a quick explanation of The Downtown Project, Maggie leads takes us around the corner to the Ogden’s residential entrance where we ride the elevator to Tony Hsieh’s upper level apartment.

The building doesn’t have a fourth or fourteenth floor; something familiar to anybody who’s lived in a city where property developers are courting Chinese investors — the sound of the word ‘four’ in Mandarin and Cantonese has unlucky overtones.

On the way up to the Twenty-Third floor apartment it’s also an opportunity to gauge the dynamic between the residents of the building; in reviews of the complex, many residents not associated with Hsieh’s projects have complained they have been marginalised.

las-vegas-downtown-project-tony-hsieh-tour-apartment-hanging-garden

Once in Hsieh’s apartment, it’s an impressive look into the domestic life of a modern successful internet tycoon with common workrooms, open plan living and a jungle themed party room featuring a hanging garden.

las-vegas-downtown-project-tony-hsieh-tour-refurbished-casino

The most important thing about Hsieh’s apartment is it gives a sense of perspective of the project with views across the downtown district, a panorama of the Las Vegas strip with the huge casinos rearing out the suburbia and the refurbished Goldspike Casino that is becoming a community hub of sorts.

Hsieh’s apartment also gives some ideas of the plans the tycoon has, particularly the  Life Is Beautiful festival that Maggie promises will be a “combination of Burning Man and South by South West.”

las-vegas-downtown-project-tony-hsieh-tour-life-is-beautiful-festival

Returning to street level from Hsieh’s apartment does give the impression there are two breeds of residents in The Ogden; the Zappos and Downtown project crowd who treat the other residents with polite disdain.

The dismissive attitude towards non-tech outsiders is common among the technology startup communities around the world but that doesn’t make it any less jarring for those living with it in their building.

Stepping out into the mid morning heat of Las Vegas, we go around the corner to the Beat Coffeehouse, part of the Emergency Arts Collective that’s based in a disused medical centre and which, interestingly, isn’t part of Hsieh’s downtown project.

las-vegas-downtown-project-tony-hsieh-tour-refurbished-department-store

A block further along is The Container Park, the retail and entertainment hub of the Downtown Project that welcomes visitors with a giant preying mantis, shown at the beginning of this post.

The container park is an interesting rag tag collection of independently owned food and retail outlets, a test laboratory for hospitality and bricks-and-mortar shopping outlets. In the mid morning heat it’s somewhat deserted.

Unfortunately that’s where our official tour concluded and it was time to explore the dubious delights of downtown Las Vegas on our own. The locals are right, there isn’t much.

Later that evening I returned to see how The Downtown Project and downtown Las Vegas itself do at night. The difference with daytime is spectacular.

Getting off the bus at the Fremont Street Experience with its roofed in mall the boasts the world’s biggest video screen is a great difference from its dowdy daytime appearance.

Fremont Street jumps with the tame bacchanalia that’s the hallmark of Las Vegas; all the false unfulfillable promise of sexual and economic success that defines modern America.

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The three block walk from West Fremont street to the Container Park is stark; while the Beat Coffeehouse is packed with drinkers enjoying the live band, the street is dark and quiet; it’s quite easy to feel uncomfortable on the short walk.

At the Container Park itself, things aren’t exactly busy. A few families play on the central green while a band plays. Few of the food stalls are selling anything and most of the shops are closing at 8pm. While it’s a Monday night, it’s not encouraging.

las-vegas-downtown-project-tony-hsieh-tour-container-park-at-night

Leaving Downtown Las Vegas on the WAX express bus — fifteen minutes to the MGM Grand down the interstate rather than the hour plus trudge down the strip on the Deuce — it’s a good opportunity to reflect on a superficial tour of the Downtown Project.

For young families wanting to move from the wallet crushing costs of San Francisco  and Silicon Valley, Las Vegas could be an option but it’s going to require more business than Zappos and a small cluster of startups.

The city is going to need more drop in spaces like The Windows – something like Google Campus is going to be needed to encourage smart young entrepreneurs to make the journey and try their luck.

Another aspect is more accommodation is needed as right now the housing stock around the downtown district is either run down or overpriced — while cheap by San Francisco or New York standards prices don’t reflect the fact Las Vegas is not an economic powerhouse like the two cities.

The Ogden building is an example of everything that is wrong in the current global property mania with high priced, high maintenance apartments aimed at rich investors rather than ordinary people and their families.

For residents transport also remains a problem although Las Vegas’ public bus system is surprisingly good, one suspects the service is subsidised by the immensely popular Deuce double decker buses carrying crowds of tourists up and down the strip.

To get a San Francisco or Brooklyn type critical mass into the city requires a high density population and a deeper local tax base which is something beyond Hsieh’s power.

Las Vegas also has the problem that it is in a competitive field with towns like Kansas City and Des Moines among others all vying to attract young entrepreneurs to their low cost communities. Just being cheaper than Mountain View or South of Market is not enough on it’s own.

Overall, it’s not hard to leave Las Vegas with a feeling that the Downtown Project is floundering. To build a community like that envisioned by Tony Hsieh takes more that $350 million and a few years work; it’s a lifetime commitment and it needs several generations of funding.

That the Fremont Street Experience and The Beat Coffeehouse are both jumping while the Container Park is quiet also tells us that building a community requires diverse groups and that no one guiding agency, private or public can build a thriving industrial centre.

It is possible that Zappos and Hsieh may plant the seed for Las Vegas to become a technology and business hub, but there’s a long way to go and it will need more than one man to drive it.

“Build it and they will come,” was something I heard constantly about the plans to invigorate the city’s centre from its supporters and Las Vegas residents. Whether the Downtown Project is Tony Hsieh’s field of dreams is for history to judge.

las-vegas-downtown-project-tony-hsieh-tour-apartment

 

 

Sep 242014
 
therese-tucker-blackline-ceo-founder

In 2005, Therese Tucker’s company was down to its last three staff when a customer suggested a new line of business. Today BlackLine is valued at over 200 million dollars and about to list on the stock market.

A few week ago Therese described her journey from a struggling software startup to a hundred million dollar business on the Decoding the New Economy YouTube channel.

BlacklLine’s business automates financial processes  as Tucker explains, “we have the interesting job of providing software that helps companies automate all the things around accounting and the financial close that they currently do on spreadsheets.”

At the time of Tucker’s pivot, the business was supplying a wealth management system when that prescient customer asked her to develop an application to manage the ten thousand spreadsheets they were struggling with for accounts reconciliation.

BlackLine wasn’t Tucker’s first business having been involved in a series of ventures after working as an electrical engineer designing automation systems before moving into the IT industry.

“There’s a reason for the term ‘serial entrepreneur.” Tucker says, ” it’s a bug that once you catch it you really don’t want to rest until you’ve been successful at it.”

For aspiring entrepreneurs Tucker’s advice is blunt — “The best advice is ‘don’t do it’. Because if you listen to that advice you’ll never make it.”

“It’s the people that are crazy and are determined to work themselves to death and to fail and fail and fail until they don’t fail. It takes that kind of grit and determination.”

“If I tell you not to do it, then that’s great advice for you.”

Sep 222014
 
Google-campus-london-cafe

We’re past the time where business owners can dismiss new technologies as toys says Profitable Hospitality’s Ken Burgin.

Ken’s Profitable Hospitality website is a must read for anybody in the industry and I was lucky enough to be the the guest of his 99th podcast where we discussed payment systems, marketing and the challenges facing restaurant and cafe operators in a changing marketplace.

In the podcast we discuss PayPal’s plans for the retail sector along with how startups like Stripe look to disrupt the sector and what Apple’s announcements last week will mean to the payments industry.

The key message from the podcast is the entire sector is facing massive changes both from technology and changing consumer behaviour.

Like many other industries, the successful restaurant and cafe businesses over the next decade will be those who have the flexibility to adapt to a very different world.

Sep 092014
 
visa-mobile-payments

Interviewing Stripe co-founder John Collison in the company’s crowded, noisy lunch room in San Francisco’s Mission District is a good place to appreciate how quickly the online payment service has grown since it was founded three years ago.

Stripe was founded after twenty-four year old Collison and his brother Patrick encountered problems with online payments in their previous businesses, “we came to Stripe because we had built apps and webservices before and it was phenomenally difficult to take a product you had built and turn it into a business.”

“At the time you had two options; you could turn your business over to PayPal, which was problematic for a whole bunch of reasons, or you’d build something from scratch.”

“It was clear to us that neither of the options were very good so we went about building something better.”

Silicon Valley’s strengths

Since its establishment Stripe has grown from ten employees to 150, something the founder believes shows the strength of California’s Bay Area over areas like Collison’s native Ireland.

“One of the things that I like about Silicon Valley is that people here tend to be relatively risk tolerant. Joining an unknown internet payments company three years ago, most people would say ‘you’re out of your mind’. But the psyche around here is that’s a reasonable thing to do.”

Another aspect that attracts Collison to San Francisco is that most of his employees at Stripe have run their own businesses or startups themselves. Having a workforce of risk tolerant, independent self starters makes it easier to manage a fast growth company.

Pitching for funding

The Bay Area’s appetite for risk is reflected in how investors look at businesses; “in the startup world, people like to maximize the opportunity rather than reduce the risk,” observes Collison.

Collison’s advice for startups seeking funding is to get have users on board that validates the idea, “when we pitched Peter Thiel we had production user for four or five months. What made us think there was something here was that those users were really passionate.”

The other attraction for Thiel and other members of the ‘PayPal mafia’ – Thiel’s fellow PayPal founders Elon Musk and Max Levchin are also investors in Stripe – was their first hand dealings with the problem of online payments.

“With the PayPal guys specifically, they really get this. Early on this was what they were trying to do with PayPal – make it easy for people to move money around the world.”

Entering the era of mobile commerce

The problem today that Collison sees with PayPal is that it is a product based on a desktop view of online commerce in a time where the industry is moving to mobile.

“One of the things that has held online commerce back for so long is the purchasing experience has such a high barrier to it.”

”We’ve replicated the mail order form on the internet. It feels to me that in five to ten years time we will not be in the same world with people like Google and Facebook improving the identity story. That’s exciting because that helps merchants sell more.”

“That whole model comes from a desktop era so if your building a lyft or a mobile site it doesn’t make much sense.”

Beating the 1980s business model

For the credit card and banking industry, the payments sector is even further behind. Collison believes that until recently the payments industry was based upon a 1980s business model where the costs of inefficiency were pushed onto merchants and small business.

“All the banks and companies that offered services at the time were operating in the 1980s,” says Collison. “The business model was based on the old way of your customers being people within a fifteen block radius, on the internet your customer base is the whole world.”

Building new industries

With Stripe Collison sees an opportunity for new industries to develop out of easier ways of collecting payments, particularly given much of the world’s population in areas like Africa and China doesn’t have credit cards.

“If we just building a business to take transactions from PayPal and get them onto Stripe, that’s not that interesting. What is interesting is if we can create new types of transactions that would not have existed otherwise.”

“By providing better infrastructure for anyone to build a global business. That will change the kind of things people will build.”

Jul 282014
 
Mikkel Svane and Michael Hansen of Zendesk

Two years ago we interviewed Mikkel Svane the founder of cloud service provider Zendesk about modern customer support.

Since we spoke to him Zendesk have had a successful IPO and is now worth over a billion dollars.

In the latest Decoding the New Economy video interview we catch up with Mikkel and discuss the journey from being a three person startup to a billion dollar listed company.

Jul 042014
 
Customers moving online presents challenges to hotels, cafes and restaurants.

Reservation Hop is a good example of many of the current breed of parasitic startups that want to create a new class of middleman.

The hospitality industry is tough work and something guaranteed to irritate restauranteurs are reservations that don’t show up.

One startup that seems almost certain to attract the ire of the restaurant industry is Reservation Hop – “We make reservations at the hottest restaurants in advance so you don’t have to.”

Reservation Hop makes table reservations at popular restaurants and then sells them through their website.

We book up restaurant reservations in advance. We only book prime-time restaurant reservations at the hottest local establishments, and we mostly list high-demand restaurants that are booked up on other platforms.

This is probably one of the worst examples of the middleman culture that dominates much of the current startup thinking.

Almost certainly there’s a market need for proxy queue jumpers – although one wonders how profitable it is when the transaction fees are under $10 – but this service will deeply irritate restaurant owners and diners who are crowded out by these ‘parasite’ services.

In many ways, Reservation Hop illustrates the problems with this phase of our current startup mania; the rise opportunistic businesses that are more akin to parasites than services that add value.

The Reservation Hop website assures patrons that there’s a 99% chance their booking will be honored by the restaurant on the night, we can expect establishments to start messing with that statistic as they wise up to the business.

Many in the startup sector speak about how new technology improves the world, services like Reservation hop illustrate that not every idea is a step forward.