Society and business in the 21st Century
The first ever guest of AirBnB tells his story. At the time the site had no contact details and Amol Surve was desperate to attend the San Francisco’s Industrial Design Conference in 2007.
He tracked down AirBnB co-founder Joe Gebbia to get the air mattress and the business was born.
Which shows a good business idea doesn’t need all their processes and technology in order to prove it works. Something that anyone with a new business idea should consider.
“The sincerest form of flattery is that customers will pay,” says Alex Bard, the San Francisco based CEO of Campaign Monitor, an email marketing platform originally out of Australia.
Two years ago we spoke to Bard who at the time was Salesforce’s Vice President for Service Cloud and Desk.com. Since then he left the cloud CRM giant to run the global of expansion of Campaign Monitor. We caught up with him again today at the company’s San Francisco offices.
Campaign Monitor is an interesting company in that unlike most tech startups it has been cashflow positive from its early days and when it did take investor money, half the funds were raised from private equity rather than venture capital funds.
“Because the financing climate in Australia wasn’t as fertile here in the United States – and San Francisco specifically – until recently, you have a whole crop of tech companies that have been built differently. From day one they’ve been focused on economics and business fundamentals.”
Bard sees this focus on bootstrapping and cashflow as being an advantage in the current funding climate where suddenly unlimited amounts of VC money can no longer be assumed.
It could turn out more conservative companies are better fixed to weather the coming investment drought than today’s unicorns.
Despite having spent a hundred thousand dollars on a chrome panda for their office lobby, Dropbox are warning staff that benefits are about to tighten, Business Insider reports.
The warnings from Dropbox’s management are a clear indication that tougher times are approaching for tech companies. For those wanting to imitate the Silicon Valley greater fool model or get a slice of it, that opportunity may have passed.
I’ve spent much of today, interviewing Australian tech company founders on why they moved to San Francisco for a project I’m doing.
One question I’m asking is what advice they would give others planning a similar move.
Every response so far has been, “do it now. Don’t wait.”
So what are you waiting to do?
What happens in Silicon Valley when your startup doesn’t fit into the current hot ‘unicorn’ categories?
I recently spoke to one female founder about her business and why she chose to setup on the US East Coast rather than follow the popular path of establishing a San Francisco base. Her answer shows the obsessions Silicon Valley investors have and why the Bay Area model may not be right for all companies.
Originally we planned to set up in the Bay area. That’s what you do right? So our company’s registered office was in Palo Alto and then I started plans to have three of my staff and myself relocate to San Francisco. I took onboard some Silicon Valley Advisors and this was a pretty horrific experience that taught me a lot. Here is my experience of trying to set up in the Bay Area then not. This is my cautionary tale to other Aussie Start Ups.
The Valley comes with a certain formula that gets beaten into you. Here’s how it goes:
A Start Up must:
- Be in the Bay Area
- Have had an MVP in market
- Be an incorporated US company, preferably a Delaware company if you want US VC investment
- Have a Run Rate (annual revenue) of $3-5million dollars in order to attract investment
- Not be enterprise software
- Be a SaaS company like Atlassian with a similar business model
- Have a product that is inexpensive where clients can self-install and there is no professional services or servicing required
I found the Silicon Valley Advisors I dealt with to be arrogant, formulaic and could not see potential outside of the standard Unicorn-creating formula. So I realized the Bay Area was not going to be a good fit for My business. Additionally I figured that none of our clients were actually based in the Bay Area and I needed to be near them. As a FinTech company the logical thing was for us to go to where our clients were so that we could constantly listen to them. Listen to their problems, understand their business, build relationships, have them help us figure out what our product should be and pay us
So we moved to NYC and set up on office in Chelsea. From NYC it takes only a couple of hours to get to Boston, Baltimore, Philadelphia, Columbus, Chicago, even Texas to be with clients.
Also the investment discussions are much more ‘normal’ and investors are respectful of me as the CEO and Founder and my background and potential to build a significant, revenue led and profitable large software company. They are backing me and value that I am experienced. Not once has age or gender come up. In fact to be fair, probably the opposite. Being a woman over 40 seems to be appealing to East Coast clients and investors.
The founder’s experience also betrays a herd mentality among the Silicon Valley investors, something that may be a weakness for the industry and the region. It certainly indicates the dominant business model may be very fragile as markets turn against tech unicorns.
Can Japan reinvigorate its startup community? A story in the Wall Street Journal describes some of the attempts to encourage entrepreneurs in an economy that has been stagnant for a quarter century.
In many ways Japan is a prototype for the modern global economy, just as the Japanese tried to stimulate their economy following their 1989 bust by pumping money into their deeply corrupt construction industry , so too has the rest of the world tried a similar strategy with the banking system after the 2008 crisis.
The results in both cases been the same stagnation as the money is wasted on non productive schemes and speculation rather than investment in job and wealth creating businesses and innovations.
Now the Japanese are looking to a bottom up stimulus to their economy which challenges the country’s social norms where getting a ‘safe job’ with a large corporation is seen as the best prospect for young people.
While this is a change from the accepted wisdom, the entrepreneurial model really isn’t that strange for the Japanese with a range of successful technology companies started by post World War II entrepreneurs ranging from Sony to Softbank.
The Japanese model though may not be suited to the Silicon Valley venture capital model and this is where it’s dangerous to make comparisons with what works in San Jose, Tel Aviv or Shoreditch.
Japan’s strengths in industrial engineering may well make its businesses well suited for the Internet of Things the Wall Street Journal article quotes serial entrepreneur Taizo Son as suggesting. Interestingly, the 43 year old serial entrepreneur is the youngest brother of SoftBank founder Masayoshi Son.
Another area where Japan is a glimpse of the future is in the aging population and it may well be that harnessing the abilities of older entrepreneurs is another area where the country can either show the way to success or what not to do with an older, stagnant economy.
In many ways Japan is a pointer to where the world is heading. How they manage the early twenty-first century will be a lesson for the rest of us.
