Jan 152014
happy guy with lots of money

One of the myths of the current cult of the entrepreneur is that everyone will be a winner as their startup gets bought out by Google for a billion dollars. The reality is life for a startup founder is a grind.

Startup Compass looked at 11,000 startups across the world to discover what founders really earn and the results show the reality of life when you’re starting up a business is that the wages are pretty poor.

In San Francisco, London and New York, the wages are piddling compared to the cost of living in those cities.

Low pay and business success

This is good news for investors though, as there’s a clear correlation between the success of a startup business and the salaries its key staff members draw – successful businesses are built on the back of founders ploughing everything into the venture.

It’s also high risk as a failed business can leave the founder with nothing to show for several years of hard work, something that’s overlooked by the ‘liberate yourself from your cubicle’ gurus advocating everyone starts up their own venture.

Australia’s high cost economy

Notable in the stats is the high rates demanded by Australian founders, more than 25% higher than their Silicon Valley counterparts and a gob-smacking 60% more than London or Canadian equivalents.

Australia’s high cost of doing business was emphasised last year where a comparison by Staff.com found Sydney was the second to Zurich as a place to base a tech startup. Worryingly, that survey didn’t consider owners’ drawings.

Part of Australia’s high wage requirements are no doubt due to the country’s lousy tax treatment of options and share plans but a bigger problem is property ownership – an Australian who hasn’t bought a home by 35 is destined to be one of the nation’s underclass.

So an Aussie entrepreneur has to earn enough to qualify for or service a mortgage, it also discourages Australians from starting even moderate risk ventures.

The consequence of the need to draw a high salary is that the proportion of investor funds that goes into founders’ wages is almost three times higher in Australia than it is in Silicon Valley. That’s a big disincentive for foreign investors to put money into Aussie startups.

If you wanted an example of how uncompetitive the Australian economy has become, this is a good start.

Regardless of where a startup is based though, the message remains that the road to a billion dollar buyout from Google or Facebook is not paved with gold.

Dec 192013

Could the current internet spying scandals result in the internet become fragmented into different national empires?

Over dinner with President Obama with fourteen other tech industry leaders, Yahoo!’s CEO Marissa Mayer warned that US spying threatens to ‘Balkanize the Internet’, Bloomberg reports.

Mayer has reasons to be worried, the scale of the US National Security Agency’s multiple programs monitoring internet traffic around the world has surprised even the most hard bitten commentator and it is already affecting US technology sales to China.

Coupled with  revelations that Britain’s GCHQ was tapping the subsea cables themselves in concert with US agencies almost every national government is now pondering the fact that, as an invention of the US military, the internet itself is open to being misused by its creators.

The Internet’s critical economic role

As online communications become more critical to nation’s economies and security it’s understandable that governments would be considering how to make their networks more hardened to interception or interference and creating whole new protocols outside current standards is one way of doing that.

With the industrial sector increasingly being connected through the internet of machines the stakes suddenly become much higher, as the Iranian government discovered with the Stuxnet worm that crippled the country’s nuclear research program.

After Stuxnet every country and business with critical systems exposed to the internet is now working on hardening those systems from similar attacks.

Until recently, almost all the profits from the internet’s growth have gone to US technology companies so its not a surprise that Facebook chief Sheryl Sandberg and Google chairman Eric Schmidt were with Mayer when she expressed her concerns to President Obama.

Balkanising the web

A balkanisation of the internet along national lines and industrial sectors is bad for US business which already struggles to get traction in non-Western markets like China and India.

The irony is though that Yahoo!, Google and Facebook are all trying to balkanize the internet themselves in locking users into their own networks.

While that’s a concern for internet users, it appears those commercial walled gardens don’t seem to be working.

The failure of commercial walled gardens

Yahoo!’s attempt to monopolise their corner of the web has clearly failed and it’s appearing that Google’s attempts to take over social media are failing despite forcing YouTube users onto Google+ while Facebook is beginning to buckle under the sheer weight of its own News Feed.

Common wisdom about internet markets is that you have to be the number one provider in your niche to succeed, what we may well be seeing is those niches are smaller than we thought and leadership in one sector doesn’t automatically guarantee success in another.

As Deloitte’s Eric Openshaw told this blog last week, ““one way or another, these things can be problematic in the short run but typically over time they are resolved.”

Tesla, Edison and Jonathan Swift

One of the reasons for the internet being one of the most successful technologies is that it was standardised relatively early, it didn’t have the battles over industry standards like the AC versus DC electricity arguments between Edison and Tesla, or the insanity of different railway gauges plaguing countries and international trade.

Jonathan Swift parodied these technological arguments in Gulliver’s Travels where the main point of contention between the warring empires of Lilliput and Blefuscu was over which end boiled eggs should be cracked.

It would be a great economic loss if security concerns or commercial opportunities saw the internet follow those examples and saw the online world carved up into many little empires.

Should it happen, we deserve a future Jonathan Swift to parody us mercilessly.

Walls of Constantinople by Bigdaddy1204 through Wikimedia

Dec 172013
A small business closing due to rent increase

One of the mantras of the digital economy is new technologies, such as the web and cloud computing, level the playing field for small businesses competing against large corporations. Could it be that belief is wrong?

The Australian Centre for Broadband Innovation last week released its Broadband Impacts report where it examined how high speed internet is changing communities. The results weren’t good for small businesses.

One of the key metrics the ACBI used was business use of websites, it’s shocking enough that only 70% of Australian corporations have an online presence but less than half of small businesses being on the web is disgraceful.


An interesting quirk in the above table indicates that there’s quite a few microbusiness using online sales services and one wonders if the question being asked by the Australian Bureau of Statistics is too limiting in its definition of websites.

The ABS defines businesses with a web presence as those with a website, home page or other web presence but excludes those listed solely as part of an online listing. A web presence was reported by 45% of Australian businesses as at 30 June 2012.

With this definition excluding social media and listing services, it probably does understate the number of Microbusinesses that have an online presence but not a website as defined by the ABS.

The relevance of broadband

In the context of broadband it’s worth noting that websites and online commerce don’t need high speed internet connections, so it’s hard to conclude that giving these businesses faster access is going to make a difference to the way they work.

Where high speed broadband and ubiquitous internet really make a difference is in business operations. As workers become more mobile and the internet of things rolls out, having access to reliable connections is going to become critical to most organisations. Again though, small business tracks poorly on this measure.business-reporting-new-operations-by-size


Overall the use of cloud services – which is what the bulk of these “new operational processes” will be – is pretty poor across the board although one suspects in the larger organisations various groups have changed their business practiced around services like Dropbox and Documents To Go without senior management being aware of it.

What’s particularly disappointing about this statistic is small businesses are the group most suited to using cloud services and those not adopting these technologies are missing a competitive advantage.

So who needs broadband internet?

These results beg the question – does small business really need high speed broadband access? If they aren’t doing things that could be done on a dial up modem, like registering domains or setting up websites, it’s hard justifying the investment of connecting SMBs to fibre networks.

While there’s no doubt high speed internet is essential to the economic future of communities and nations, we have to keep in mind that not all groups will take advantage of the new technologies. Some will be left behind and in Australia’s case, it may well be small business.

Dec 122013
private property limiting access to cloud computing and social media web services

For owners of YouTube channels life has been tough in the last few months as Google plays with the service and its features.

The first irritant for YouTube administrators was the integration of Google Plus into the comments that now requires commenters to have an account on Google’s social platform.

Google’s reasoning for this is some transparency in YouTube’s comments will improve the services standards of conversation and there’s no doubt that YouTube comments truly are the sewer of the internet with offensive and downright deranged posters adding their obnoxious views to many clips.

Unfortunately the objective of improving YouTube’s comment stream doesn’t seem to have worked which casts the effectiveness of Google’s identity obsession into doubt, but it has had the happy – and no doubt totally unintended – effect of boosting user numbers for the struggling Google Plus service.

The latest blow for YouTubers has been Google’s copyright crackdown where the service is removing posts it claims are in breach of owners rights. Many channels, particularly game review services, are being badly hit.

Of course the Soviet attitude to customer service that Google shares with many other Silicon Valley giants doesn’t give these folk many options of getting their problems resolved.

All of which illustrates the risks of being dependent on one social media service which the poor YouTubers are finding this the hard way.

Watching this play out, it’s hard not wonder how vulnerable services like YouTube are to disruption, while they have the network effect of being the leader it’s not hard to see how alienating the people who create the platform’s content opens up opportunities for new players.

Dec 072013

Over the past decade the idea of offering Wi-Fi internet connections to customers has become standard in the hospitality industry, today it’s pretty well a commodity.

Not so long ago it was difficult to find a cafe that offered Wi-Fi and many of those that did either charged for it or were part of a provider’s networks that you had to be a member of.

Today, Wi-Fi has become pretty standard in cafes and places like airport terminals although interestingly the hotel industry has been slow to adopt it.

In the hotel industry a perverse rule of thumb seems to apply that the more expensive the property is, the pricier internet access will be as backpackers hostels invariable have free Wi-Fi while six star hotels charge anything up toe $30 a day for a connection.

While the hotel industry still has to be dragged into the 21st Century on this front, cafes seem to have reached a point where having Wi-Fi is no longer a commercial advantage but not having free internet is now a distinct disadvantage.

This was the point made by Nicholas Carr in his 2003 essay IT Doesn’t Matter where he suggested that computers, and other ‘infrastructural technologies’, don’t offer a competitive advantage once they are widely adopted.

For a brief period, as they are being built into the infrastructure of commerce, these “infrastructural technologies,” as I call them, open opportunities for forward-looking companies to gain strong competitive advantages. But as their availability increases and their cost decreases – as they become ubiquitous – they become commodity inputs. From a strategic standpoint, they become invisible; they no longer matter.

Carr’s proposition also implies that businesses who don’t adopt these technologies once they’ve become widespread risk being irrelevant and marginalised.

For cafes, this means that customers will be ignoring them unless they do offer Wi-Fi and it will be another cost of doing business for the proprietors of coffee shops.

Which begs the question of how do cafes differentiate themselves.

Perhaps the answer lies in the dog bowl shown in the photo, making a venue pet, or child, friendly may be one way to attract customers.

One thing’s for sure, just having good coffee and tea might not be enough to cut it in the future.

Dec 032013
happy guy with lots of money

A short article appeared on London’s City AM website yesterday discussing the successes of Google’s Campus and the government’s Tech City initiative.

What jumped out of that story is the quote from Benjamin Southworth, the former deputy chief of the Tech City Investment Organistion, that London’s first tech IPO is “probably 18 to 24 months away”

Southworth’s comments raise the question of how do you measure the success of initiatives like Tech City, does a stockmarket float indicate success of business or tech cluster?

The debacle of Australia’s Freelancer float which saw the shares soar over 400% on the first day of trading certainly doesn’t indicate anything promising about the startup scene down under apart from the opportunities for those well connected with insiders on Australian Security Exchange traded stocks.

In London’s case, Google’s Campus gives a far better indicator of what tech hubs and industrial clusters can add to an economy – £34m raised from investors in the 12 months to October 2013, 576 jobs created and 22,000 members of its coworking space.

Google’s statistics raise an interesting point about the different objectives for the stakeholders in incubators and hubs; entrepreneurs want money or glory, investors want returns, corporate backers want intellectual property or marketing kudos, governments want jobs and politicians want photo opportunities with happy constituents.

These different objectives means there are different measures for success and one group’s success might mean bitter disappointment for some of the others.

What the various partners define as success is something anyone involved in an incubator or hub should consider before becoming involved, in that respect it’s like a business or a marriage.

Nov 232013

“I don’t want to use a laptop again,” Marc Benioff told the closing Dreamforce 2013 customer Q&A. “The desktop remains the biggest security threat to corporations — it’s a nightmare. The PC and laptop we never designed to be connected to a network.”

Benioff was walking his talk in promoting his company’s Salesforce One mobile platform, claiming at the Dreamforce conference opening that he hadn’t used a PC or laptop or nine months as he’s moved over to tablet and smartphone apps.

That push to move the company and its customers onto mobile services was emphasised by Peter Coffee, Salesforce’s Vice President for Strategic Research.

“Your mobile device is no longer an accessory,” says Coffee. “It’s the first thing you reach for in the morning and it’s the last thing you touch at night.”

Salesforce’s push into into the post-PC market follows Google and Apple’s lead, much to the distress of Microsoft and its partners.

“We saw the phenomenal engineering work of Scott Forstall at Apple and the visionary work of the late, great Steve Jobs,”  Benioff told his cutomers at the final Dreamforce Q&A. “When we saw the iPhone we sat up and thought ‘wow, what are we going to do about this?’”

“This is a paradigm shift, we’re moving from the desktop world to the mobile phone world and then of course we saw the iPad world emerge and that amplified it.”

Salesforce’s impressions were shared by much of the business community as senior executives, board members and company founders quickly embraced the first version of the iPad, which on its own triggered the Bring Your Own Device (BYOD) trend in enterprise computing.

In a mobile age, Benioff now sees three key priorities for Salesforce; “we want to be feed first, we want to be mobile first and we want to be social first.”

Regardless of Benioff’s vision, not everyone will go mobile which is something that Peter Coffee acknowledges.

“The laptop will occasionally be used to author creative work like a presentation or to deal with something that needs a large screen like pipeline analysis,” says Coffee.

Marc Benioff though is adamant. “Honestly I don’t ever want to use a laptop again,” he told his audience.

It will be interesting to see how many business leaders follow him in abandoning their desktops and portable computers as the post-PC era of computing develops.