Category: Investment

  • Knocking at Silicon Valley’s door

    Knocking at Silicon Valley’s door

    In opening Salesforce’s new London office yesterday, former BT CEO Lord Livingston described the city as “knocking at the door of Silicon Valley.”

    Judging from the Computing UK article that description hasn’t impressed the rest of the British tech community as it confirms in their minds there is, as usual, too much focus on the capital and Livingston’s view also raises the question of whether London really wants to be another Silicon Valley.

    Like all global industrial hubs Silicon Valley the result of a series of happy coincidences; massive defense spending, determined educators, clever inventors and savvy entrepreneurs all finding themselves in the same place at the same time.

    Trying to replicate the factors that turned the region into the late Twentieth Century’s centre of technology is almost impossible – even the United States couldn’t afford the massive defense spending over the fifty years from 1941 that underpinned the Valley’s development.

    Apart from the spending; the culture, economy, geography, markets and workforce of Silicon Valley are very different to that of London’s.

    This not to say London doesn’t have advantages over Silicon Valley; access to Europe and relatively easy immigration policies make Britain a very attractive location for tech businesses. If the local startup community can tap The City’s banking resources then London could well be the next global hub.

    If London is the next global tech centre – history will tell – it will almost certainly be very different to Silicon Valley.

    Strangely, the event Lord Livingston was speaking at reflects how the Californian tech sector is evolving; Salesforce is a San Francisco company and represents a shift in the last five years from the suburbia of San Jose and Palo Alto to the quirky city life of SoMa and the Tenderloin.

    At the same time Silicon Valley itself is evolving into something different, just as it did in the 1990s with the switch from microprocessor manufacturing to software development.

    That shift illustrates the risks of trying to imitate one industrial hub; by the time you’ve build your replica, the original has moved on.

    If you spent your life trying to knock on the door of heroes you want to imitate, it would be shame to finally make it only to find they’ve moved.

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  • Reinventing venture capital

    Reinventing venture capital

    James Temple writing in on tech website Re/Code has an excellent profile of Google Ventures founder Bill Maris and his quest to re-invent the venture capital industry.

    Certainly the Silicon Valley venture capital industry is ripe for disruption; Maris is not alone in pointing out that most investors in the sector and focused on short term incremental gains like shopping apps and online stores.

    Probably the biggest thing that Temple points out in the story is the importance of Big Data to the Google Ventures model, although Maris seems to be acutely conscious of the limitations of relying on algorithms to make decisions;

    Because you can 100 percent use data and statistics in exactly the wrong way. That’s a trap some fall into, one that we really try hard to avoid. But I think it’s important to use that as a tool.

    The data is a support. It’s just like having your other partners there.

    Being skeptical about the infallibility of  Big Data and algorithms seems a very un-Google thing, but it may work well for Bill Maris and his team.

    Whether Maris and Google Ventures can upend the Silicon Valley investment culture remains to be seen; the real message though is that the venture capital industry is just as vulnerable to disruption as any other.

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  • Uber’s Travis Kalanick on the highly valued business of disruption

    Uber’s Travis Kalanick on the highly valued business of disruption

    For a four year old business, hire car service Uber is certainly causing a lot of trouble.

    Bloomberg Businessweek’s Brad Stone has an interview with the company’s founder and CEO Travis Kalanick on his plans after announcing a 1.2 billion dollar fundraising that values the venture at $17 billion.

    Seventeen billion dollars is a hefty valuation for the business and many believe it marks the peak of the current tech bubble, although many of us though Facebook’s billion dollar purchase of Instagram two years ago was that marker.

    Kalanick’s views are interesting in his take on that valuation – as he points out the San Francisco taxi market alone turns over $22 billion each year, so Uber’s valuation isn’t beyond the bounds of possibility.

    Uber and Logistics

    Also notable is Kalanick’s view on the logistics market, something that this blog has maintained is the real business of Uber. In that field, Fedex’s stock market value is $44 billion although Kalanick is discounting the company’s potential in that field.

    Right now Uber is on a high, and regardless of any set backs they may get with their ride sharing services, it’s hard to see how the company isn’t going to grab a healthy slice of the global taxi industry and possibly disrupt the logistics industry as well.

    Even should Uber end up being the poster child for today’s tech sector irrational exuberance, the company is a stunning example of how businesses we once thought were immune from global disruption are now being shaken up.

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  • Zen and the art of stockmarket listing

    Zen and the art of stockmarket listing

    Cloud helpdesk service provider Zendesk today debuted on the New York Stock Exchange with the stocks seeing a 49% surge on their IPO price, taking its value to just under a billion dollars.

    Last year Decoding the New Economy had the opportunity to talk to Mikkel Svane, the founder of Zendesk about his company.

    Svane is an enthusiastic, open guy and clearly passionate about customer service – a field that’s the ugly stepsister of modern business. As Svane himself says, “no-one ever gets the girls by working on the helpdesk.”

    ‘Beautiful and elegant’ is a phrase Svane uses to describe his software and it’s notable how many other founders of cloud services use those words about their products – Xero’s Rod Drury even uses it as the company’s slogan.

    Like many cloud services, both Xero and Zendesk are still not making a profit and a big fat stage for a stockmarket listing is always a worrying sign that an IPO might have been undervalued.

    At the moment though, the initial stockmarket success of Zendesk is a win for some nice guys.

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  • Business as a commodity

    Business as a commodity

    What happens when your hot startup turns out to be in a commodity market?

    According to Danny Crichton at TechCrunch two of the hottest startups of the last five years, Box and Square may be finding out.

    You can make good profits out of a commodity operation – supermarkets around the world have shown you can earn good money from 2c profit on every can of baked beans you sell – but it’s hard work and it’s definitely not glamorous.

    It’s also not particularly attractive for investors looking for the next big thing and commodity businesses struggle to justify the massive burn rates

    The truth for most startup businesses is this is as good as it gets; no billion dollar buyout, no adulation from the tech press and no buying a yacht to rival Larry Ellison’s. Just a decent return from hard work.

    While many of us blinded by the billion dollar success stories of Facebook, Google and Amazon, it’s worthwhile considering that most successful businesses are far more modest ventures.

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