Paul Wallbank – Brilliant Communications

Category: Investment

  • Lowered expectations – What is the future for Apple?

    Lowered expectations – What is the future for Apple?

    Last Friday I had a story in Business Spectator on the future of Apple in light of the company’s warning of a 20% fall in revenue next quarter.

    The clear message from Apple’s executives was that the company is facing a terminal decline in iPod sales and the iPhone – it’s most profitable and highest selling product – is facing slower sales.

    So the search is on to find something that will replicate the iPhone’s success, with the biggest candidate being the iWatch.

    The problem with that is the entire wearable technology market is only forecast to be $6bn which is a seventh of Apple’s $42 billion profit last year, so the iWatch can never replace falling iPhone sales.

    It may well be for Apple that the period of massive profits and growth is drawing to an end, it doesn’t mean the company is dying – for a start they has nearly $200bn in cash reserves and a healthy $150 billion in sales each year.

    Short of Tim Cook unveiling something similar to the iPhone, the future for Apple is probably going to be a bit modest than past few years of huge growth, that’s not a bad thing.

    Rather than being the end of Apple, it’s more a revision to the role the company has held for most of it’s existence – a high profit, niche business that sells on quality and brand rather than fighting in the commodity markets.

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  • On looking foolish

    On looking foolish

    Looking foolish is one of the biggest risks when taking chances in business. It’s something every innovator and entrepreneur has to consider.

    Venture Capital investor Mark Suster explains why he doesn’t mind looking foolish with his choice of investors on his blog today.

    One of the toughest things in life is taking the risk of looking foolish in front of your peers yet that’s what the real high risk inventors, innovators and entrepreneurs do with their ventures.

    Light bulbs and the telephone looked ridiculous to many at the time they were invented and no doubt the inventor of the wheel or the Neanderthal who came up with the idea of cooking meat in a fire both probably received a far bit of scorn when they told the others in their tribe about their idea.

    While Suster is talking about ‘moonshot investments’, even the most modest venture is going to attract scorn.

    There would be few people who decided to buy a doughnut franchise, establish a cafe or set up a lawn mowing service who weren’t told by some of their relatives, friends or colleagues that they are doing the wrong thing and they should stick to their safe job in their cosy cubicle.

    Should someone want to change the way doughnuts are made or lawns mowed, then they can expect even more naysayers laughing at them.

    In this current craze about ‘entrepreneurship’ it’s easy to overlook the real costs and risks of running any sort of business. Looking foolish is another of those risks.

    Having a thick hide is another useful attribute when you’re investing, running a business or changing an industry.

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  • Startup economics

    Startup economics

    Business advisor Ivan Plenty’s in-depth study of the viability of failed photo sharing startup Everpix with some useful lessons for business owners in any industry.

    Everpix shut down last November having run out of money despite getting favourable reviews from the tech press and in an unusual move, the founders put the company’s financials up on GitHub.

    As Plenty points out in his analysis of Everpix’s finances, the company was unlikely to ever break even and it’s a lesson to every business owner on the importance of keeping an eye on cashflow and understanding where the venture’s break eve points are.

    One of the key take-aways from Plenty’s analysis was that the base costs of the business were too high and even in the best circumstances it was unlikely that venture would have succeeded.

    A good business plan would have helped the founders understand this problem and it illustrates why rigorously developed cashflow forecast is a great tool for a manager or proprietor.

    The Silicon Valley investment model

    The ultimate objectives of a company’s management are always important when considering the success or failure of a business; what objective is the business working towards?

    In Everpix’s case, it may well have been the Silicon Valley Greater Fool model was a likely end, with good software and a growing customer base the company could have been attractive to a buyer.

    Were that the objective of Everpix’s founders, the company was under-capitalised as management couldn’t afford either the burn out or the PR and marketing team essential for raising the venture’s profile with key investors.

    Under-capitalisation is one of the greatest problems for any new business and its clear that Everpix didn’t have the equity to scale the way it needed.

    Capital on its own though isn’t a panacea, from Ivan Plenty’s analysis the indications are that Everpix’s fate would have been the same, but more drawn out.

    Everpix’s failure and the numbers behind it are a good lesson for anybody thinking about starting a business — numbers matter and businesses live and die by them.

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  • Dangerous liaisons – the risks in government support

    Dangerous liaisons – the risks in government support

    “I coulda bin a contender” is the first thing that comes to mind when reading The Register’s story on how the iPhone could have been a British invention.

    However the tale of British engineer Andrew Fentem and his struggles with the UK investment bureaucracy is a warning to all of those who think that government support programs are an easily solution for getting ideas to market.

    Fentem’s story is a common one around the world – an inventor approaches a government agency which agrees to support the project and then bogs the entire venture down in paperwork and bureaucracy.

    In some respects this is understandable as bureaucrats and politicians are deeply risk averse, which is fair when taxpayers money is involved, with the result that justifying an investment is going to be more about ticking boxes and meeting criteria rather than genuinely helping projects succeed.

    During my short stint in working for a government agency every week would see at least three people contacting me about taxpayer support for their businesses.

    Most of the time there was no godly reason for the government to give these folk a penny and it took the few diplomatic skills I have to politely break the news they had little prospect of getting a grant or subsidy.

    Some approaches though were very good projects but usually I’d warn the inventor or entrepreneur that any support the state government would give them would come at the cost of spending hours completing irritating paper work.

    My advice was that driving a cab and living on noodles for six months to raise the capital would be a better investment of their time than dealing with grey suited bureaucrats like me.

    This advice didn’t always go down well, but it was better for both the taxpayer and the entrepreneur in the long run.

    Well thought out government programs can do a lot of good for businesses or inventions that might not otherwise come to fruition, although many of the success stories probably have as much to do with the calibre of the public servants running the scheme as they do with the programs themselves.

    In the case of Andrew Fentem and his touchscreen technology it’s almost certain that the folk at NESTA were out of their depth and far more comfortable with subsidising trips to Las Vegas for circus clowns, which in itself is a valuable lesson for governments on defining programs and supervising agencies.

    Raising funds for any business or invention is a tough game anywhere in the world and assuming governments are an easy way to find money is as flawed as any other misconception about building a startup.

    The moral is government money in neither free nor easy if you’re an inventor or an entrepreneur.

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  • How important is public transport to smart cities?

    How important is public transport to smart cities?

    One of things that stands out when discussing economic development with city governments is the importance of public transit for towns aspiring to be smart cities.

    This was particularly notable in interviewing Gordon Innes, CEO of London and Partners, about British capital’s building upon the legacy of the 2012 Olympics and its quest become the digital capital of Europe.

    At the centre of these developments is public transit, something mentioned by both Innes and Laurel Barsotti of the City of San Francisco.

    Innes sees public transport as essential to London’s growth, “it’s absolutely critical to the physical growth of the economy.”

    “In the run up to the Olympics nine billion was spend in upgrading the tube and Dockland Light Railway and that opened up all of East London’s economy in way because it wasn’t accessible or attractive for businesses.”

    “Stratford now is the best connected train station in Europe,” declares Innes. “That part of the city and around the Docklands is much more accessible and that’s bringing in investors. It wouldn’t have happened if the transport infrastructure wasn’t there.”

    In San Francisco, Laurel Barsotti sees a much more subtle advantage for the city in having, by US standards, a comprehensive public transit system in its bus, light rail and subway system.

    “A lot of the entrepreneurs creating those companies are concerned their employees see people using their products,” says Barsott. “They want them riding the bus to and from work and see people interacting with their products.”

    While in Barcelona, the public transport system is forming part of the local Smart City program where bus stops are Wi-Fi base stations and a fundamental part of the town’s communications network.

    For cities, it may well be that having decent public transit systems is going to be the competitive difference in being a key part of the 21st Century economy.

    Those parts of the world not investing in transport networks may find they are being left behind in the new economy.

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