Investment | Paul Wallbank - Communications Professional

A geek’s tour of Barcelona

How Barcelona is using smart devices to make their city better.

Spain and Barcelona have faced challenges in recent years as the economy was hit hard by the 2008 crisis. Now the city is looking to the internet for the next wave of prosperity.

This quest for reinvention isn’t new for the city, “Barcelona used to be an industrial city, that was badly hit by the economic crisis of the seventies,” said Deputy Mayor Antoni Vives. “There were some guys in the city at the time that decided that we had to keep on being an important city.”

“There’s a new generation of politicians, civil servants, of thinkers and people committed to the city that ten years ago started to work on a new phase of what the city was to become.”

Antoni Vives - Deputy Mayor of Barcelona — Antoni Vives – Deputy Mayor of Barcelona

“We decided that Barcelona had to become the edgiest city in the world related to the new revolution and the new revolution was this one — the technology related to mobility, devices and mainly the internet.”

That vision resulted in Barcelona starting to rewire the city which was one of the reasons for Cisco choosing the city as the venue for its inaugural Internet of Things World Forum.

As part of the event, the City took delegates on tours of some of the connected infrastructure the city has installed. Here’s what we learned on the press tour.

The digital bus stop

The digital bus stop is one of the prides of Barcelona, not only does it display digital advertising and real time bus schedules it also offers tourist information, USB charging sockets and acts as a free WiFi base station.

One of the barriers Barcelona has encountered has been the Spanish telecoms regulators objection to the city providing municipal WiFi so services are restricted to the city’s property, which happens to include bus stops.

The bus stops themselves are connected to the city’s fibre network that runs most of the backhaul and connects many of the fixed devices.

Smart parking spots

Connected to the city’s WiFi network are these smart parking spaces that detect the presence of cars through a combination of light and metal detectors.

The city’s plan is that payment and monitoring of the smart parking spots will happen online and with smartphone apps.

Powering the dot, which is a fairly dumb device, is a battery with an expected five to seven year lifespan. Interestingly, the dots don’t work with motorcycles.

One of the reporters on the tour questioned the durability of these devices given Barcelona doesn’t get extreme temperatures, the response from the Cisco and city staff indicates that ice or hot weather may shorten the lifespan of these devices.

Smart lighting and monitoring

In the square outside the Born Cultural Centre, the city has installed a row of streetlights with multiple features including CCTV, air monitoring and Wifi. All of these lights are connected to the city’s 500Km long undeground fibre network.

The fibre network itself is being installed progressively as the city carries out routine maintenance to roads and other underground services. By co-ordinating the work with other trades it reduces the installation cost dramatically.

Smart rubbish bins

The connected garbage bins are one of the showpieces of the city’s services. By monitoring trash levels, the council’s sanitation team can plot the optimal routes for collection services.

Again the sensors on the bins are fairly dumb devices that connect wirelessly to a base station, shown on the pole above the bins in the earlier photo, these track rubbish levels and later versions are expected to detect the presence of obnoxious or hazardous materials that might be dumped in the bin.

Single person operation of the connected garbage truck

Operators of the garbage trucks get real time updates to their routes which optimises their productivity. It’s cost savings in the city’s operations which is one of the key drivers for the city’s investment in these technologies.

Power savings

One of the major cost savings identified by the Barcelona Council is in energy costs. Along with the expense of running garbage trucks unnecessarily are power bills.

Part of the smart lighting system is that it will dim when there’s no motion detected in the streets and lighten when pedestrians are around. This is intended to save money and help the city meet it’s zero carbon emission targets.

Barcelona and the future

Every single one of the technologies being shown today in Barcelona will be commonplace in most developed cities in the near future.

The problem for adopting these systems is going to be connectivity, in places where there aren’t the fibre optic services or easily deployed WiFi it will be difficult to install smart devices and monitor them.

Every major city is going to be facing the question of how they deploy these devices over the next decade as their residents expect better and more efficient service. Barcelona has taken the first steps that most others will follow.

Lessons in crowdfunding from an unsuccessful Kickstarter campaign

Crowdfunding is in its early days and Moore’s Cloud founder Mark Pesce explains some of the lessons we have to learn about this new way of raising capital.

“I’d rather eat a bullet than do a Kickstarter campaign again,” says Moore’s Cloud founder Mark Pesce in the latest Decoding The New Economy video when asked about crowdfunding his project.

Moore’s cloud is an internet of things company that focuses on lighting, “we think it’s interesting and something that expresses emotion” Mark says.

With their first project, Moore’s Cloud looked to raise $700,000 to build their first project but fell well short of their target.

Falling short lead to Mark and his team executing a classic business pivot from a static lights to Holiday, a system of intelligent fairy lights.

“We took exactly the same technology and put it into a different form factor,” said Mark. “It’s as if we took the light and unwound it.”

The failure of the Kickstarter campaign gave the Moore’s Cloud founders an education on how crowdfunding works.

Customer focused from day one

An important aspect of crowdfunding is it’s very customer focused. From day one of the campaign, the venture has to devote resources on relations with those who’ve pledged a contribution.

Most startups don’t have those resources, or the time and skills, to deal with those relations.

“People say it’s a better way of getting investors. I would have to say ‘it’s not better, it’s different.'” Mark says about crowdfunding.

The psychology of investors

One of the differences is the psychology of investors. Mark was urged by the CEO of Indiegogo, Slava Rubin, to set a low target as participants like to back successful campaigns.

“There’s a whole bunch of psychology I didn’t understand going in,” says Mark. “If we’d had a goal of $200,000 we probably would have filled it in the first two weeks.”

“Once a campaign is fully funded, it tends to get overfunded.”

A truism of business is that banks will only lend to you when you don’t need the money and it strangely appears the same thing applies to crowdfunding.

We’re in the early days of crowdfunding and there’s more to be learned about the way it works and for which ventures the fund raising technique works best.

The experience of campaigns like Moore’s Cloud are part of how we’ll discover the nuances of crowdfunding and the psychology of the crowds that contribute.

Finding the smart money

Can events like Sydney’s AngelEd and London’s City Meets Tech help those cities become global startup centres?

Around the world startup communities are working to connect with local investors, in Sydney and London two groups are showing how it is done.

“We’re looking at turning idle money into start money,” is the aim of Sydney AngelEd says one of its founders, Ian Gardner.

Fitting startup companies’ capital needs into the established criteria of investment managers is an ongoing problem that AngelEd’s founders want to resolve. “We see startups becoming an asset class,” says Gardiner.

AngelEd, to be held on November 7, aims to educate high wealth investors and asset managers on understand the risk, benefits and hype around angel investment, particularly in tech companies.

The global search for funds

Startups around the world are struggling to engage with investors – in London, the local tech community has set up City Meets Tech to introduce British investors to high growth companies.

London should have an advantage in this field given its leading role in the global finance industry, however the challenge for the tech community is to find financiers who are prepared to accept higher levels of risk than mainstream investments.

“The City is generally risk adverse and doesn’t understand tech and tech start-ups,” says the City Meets Tech website, “though really it’s about understanding the business and managing risk though unfortunately innovation requires at least some risk.”

Australia’s trillion dollar superannuation system should similarly give Sydney an opportunity that to become a global centre however it suffers from a similar, if not worse, conservative investment culture to London’s.

Turning Sydney into a global finance centre has been an objective successive state and Federal governments for twenty years but the sleepy, comfortable and risk averse culture of Australian fund managers offers little to attract foreign investors or companies.

Much of Australia’s is problem is the insular nature of local fund managers with all but a tiny part of the nation’s retirement savings being put into the top local stocks, listed property funds or domestic infrastructure projects that are notable for their lousy returns and extortionate management fees.

Breaking that mentality is going to be the key to both AngelEd and the Sydney’s success as a financial centre.’

Competing with the world

While London and Sydney are struggling with the challenges of encouraging investors into the high growth sectors, cities like Singapore and New York are developing investor communities that are attracting entrepreneurs to their cities.

Many governments dream of being the next Silicon Valley and while it isn’t likely anyone can recreate the circumstances that led to Northern California becoming the computer industry’s world centre , a vibrant and accessible capital market will be necessary for any place hoping to be a global cnetre.

For Sydney and London, the success of initiatives like AngelEd and City Meets Tech may be critical for both centres’ future in the global digital economy.

Venture capital investors as mentors

Early investors bring more than money to a young business

LinkedIn founder Reid Hoffman has a wonderful post on his blog detailing what he wished he knew when he first pitched his business to investors.

His seven myths of pitching are well worth reading whether you’re seeking capital from Silicon Valley venture capital firms, a sceptical bank manager or your mum and dad.

The first point is the most pertinent — a successful financing process results in a partnership that delivers benefits beyond just money.

Raising investor funds is only a step in the journey of creating a successful business, it is by no means the end point.

Hoffman’s point is something every business founder needs to keep in mind, those early investors are important mentors and their advice could prove to be more valuable than the money they bring to a venture.

Valuing Twitter

How does Twitter compare to Facebook and Google when they were floated?

Now microblogging service Twitter has released documents ahead of a stock market float, it’s possible to start looking at the viability and stock market valuation of the company.

When Facebook’s float was first mooted in early 2011, we looked at how the social media service stacked up against Google a decade earlier. The question was ‘is Facebook worth $50 billion?’

The stockmarket answer was resounding ‘yes’ despite an initial fall that saw investors face a 50% loss in the early days of Facebook being a public company. Today the stock has a market valuation of $122 billion, with an eye popping price/earnings ratio of 122.

So how does Twitter stack up at the valuations being discussed? Quite well it appears when we put it against Google, Facebook and LinkedIn.

Company	Google	Facebook	LinkedIn	Twitter
Market Cap	288	123	27	13
P/E	25	288	901	29

For Twitter, the real challenge is making money from the service and their latest idea is marketing the service as an essential companion to watching TV.

The discussion over how Twitter makes money exposes another problem for the service in it has no obvious revenue stream which makes comparing the platform to Facebook or LinkedIn rather problematic.

Facebook has advertising while LinkedIn has premium subscriber services both of which are problematic.

Not having an obvious revenue model may not turn out to be a problem – as LinkedIn’s P/E shows – and Twitter’s founders are probably more likely than anyway to be the digital media industry’s David Sarnoff.

It may be Twitter makes its money from giving advertisers, marketers and others access to the massive stores of data the company is accumulating.

Whatever way it turns out, Twitter’s going to be the hot IPO news for the tech industry for the rest of the year. At current prices, the investors will be lining up to buy the stock.

Big Data needs big databases

Investors are making big bets on the databases that underpin Big Data

While the tech industry’s startup hype this week has been focused on the impending Twitter Initial Public Offering, a much more fascinating company quietly completed a major capital raising.

MongoDB provides an open-source, document database program and last week raised another $150 million from investors that values the company at $1.2 billion dollars.

Databases lie at the heart of Big Data and businesses need better computer programs to manage the overwhelming amount of information that’s pouring in every day.

As every business is unique, larger corporations find they spend huge amounts of money on their databases. The enterprise that buys an Oracle, IBM or SAP system usually spends tens, if not hundreds, of millions of dollars in adapting the system to work for them, often with less than spectacular results.

While implementing MongoDB or any other open source program doesn’t eliminate implementation costs, it is often easier to setup and maintain as most of the information about the system is shared and freely available rather than locked inside the vendor’s proprietary knowledgebases.

Probably most important of all, the data structures themselves are open so customers don’t find themselves locked into a relationship with one vendor because all their information is in a format that can only be read by one system.

Open source is where Big Data, social media and cloud computing intersect – without the data itself being open and accessible, most cloud computing and social media services will almost certainly fail.

So MongoDB and the other open source products are the quiet, back of house technologies that keep the internet as we know it ticking along.

Bloomberg Businessweek reports there’s some very serious investors in MongoDB.

The deal attracted new investors such as EMC Corp. (EMC:US) and Salesforce.com Inc. (CRM:US), along with previous backers Red Hat Inc. (RHT:US), Intel Corp. (INTC:US), New Enterprise Associates and Sequoia Capital, according to MongoDB.

Sequoia Capital are one of the longest lasting Silicon Valley venture capital firms whose greatest success was being one of the first investors in Apple Computers and New Enterprise Ventures have a similar pedigree with companies like 3Com, Juniper Networks and Vonage. Investment by industry leaders like Intel, Red Hat, Salesforce and EMC in the company also shows MongoDB isn’t the standard Silicon Valley Greater Fool play.

When there’s a gold rush, it’s those selling the shovels who make the big money and the investors in MongoDB and similar services are hoping they’ve found some of the modern day shovels.

That may well turn out to be the case and while the smart folk make more money from the technologies that drive social media and cloud computing services, the rest of us are distracted by the latest shiny thing.

Farewell to the knowledge economy

The promise of the knowledge economy isn’t being delivered as knowledge becomes a commodity worth less than data.

One of the mantras of the 1980s was the future of western nations lay in becoming ‘knowledge economies’, unfortunately things don’t look like they are turning out that way.

As the developed economies moved their manufacturing offshore – first to Japan and Korea, then Mexico and finally China – the promise to displaced Western factory workers was the replacement jobs would be in vaguely knowledge based industries like call centres and backoffice computer work.

From the 1990s on, those jobs also started to go overseas to lower cost centres in India, the Phillipines and other countries.

When the internet became ubiquitous in the developed world in the late 1990s, the creative industries – musicians, artists and writers – found income dried up as their work became commoditised by digital distribution channels.

Now the professions are being affected by combination of offshoring, artificial intelligence and automated processes. Many of the jobs that were done by highly paid accountants and lawyers can now be done by computers or in places not dissimilar to those that took away the call centre jobs twenty years ago.

So it turns out the knowledge economy isn’t the key to riches after all and the future turns out to be more complex than what we thought in the 1990s.

Death of a typewriter repairer

The tale of two shops shows how change threatens to overwhelm many small businesses.

Despite owing his longevity to cheap scotch and strong tobacco, the US’ oldest typewriter repairman passed away two weeks ago. The fate of his shop is one that many other small businesses will share.

Manson Whitlock of New Haven, Connecticut had run his typewriter shop from the early 1930s until shortly before his death. Needless to say, he didn’t like computers.

“I don’t even know what a computer is,” Mr. Whitlock told The Yale Daily News, the student paper, in 2010. “I’ve heard about them a lot, but I don’t own one, and I don’t want one to own me.”

While Manson’s shop had six staff at its peak, in recent years he ran the operation on his own and the business died with him.

Many Baby Boomer business owners face the same fate as Manson Whitlock as their businesses decline in the face of changing technology and shifting change.

Some of the boomers will suffer because they are undercapitalised and, as the next generation of entrepreneurs can’t afford to buy these existing business, most of those will work way wall past the date they planned to retireme.

A good example of this is a radio shop near my office which has been run by an old gentleman for many years. When I went into it in 1997 for something – I forget what – the proprietor was almost shocked to see a customer and he couldn’t help me.

It wasn’t surprising as it was rare to see a customer and the none of the stock behind the cluttered counter seemed to date beyond 1980.

The only reason the shop survived was because the proprietor owned the premises as there’s no way the place could have paid the modern rents with the non-existent turnover.

A few weeks ago the shop closed. I don’t know whether the owner retired or passed away, but the business closed with him.

Both the Neutral Bay electrical shop and the New Haven typewriter repairer show how businesses can be left behind by technology.

While both stores had plenty of time to react during the rise of computers during the 1980s and 90s, their proprietors chose not to and by the 2000s it was too late.

Today, technology and business is changing even faster and there’s many more big and small enterprises that risk being left behind by change.

It’s not only the changing market place that risks the future of these business, the failure to invest in things as simple as modern Point of Sale systems or even a basic website will leave many exposed.

The time to invest in new systems and products is now and if you can’t invest in the future, then it’s time to get out.

Today marks a moment of reinvention

Regardless of what it means for the wider industry, Microsoft’s deal with Nokia means both companies have entered fundamentally different phases of their businesses.

In announcing the company will acquire Nokia’s mobile and devices business, Microsoft said “Today marks a moment of reinvention”.

This is certainly true, with the retirement of Steve Ballmer, Microsoft officially enters the post Bill Gates era and today’s announcement is an admission from Nokia that their moment as the world’s dominant mobile phone manufacturer is over.

What’s notable about the deal is what Microsoft doesn’t get — particularly Nokia’s maps service. While Microsoft gets a license to use Nokia’s mapping services, it leaves the Finnish company with a valuable asset and possibly leaves it as the only company capable of competing with Google in that market.

For Microsoft, acquiring the expertise of Nokia’s engineers shouldn’t be understated, although integrating 32,000 Nokia employees will test Microsoft’s management as this increases their workforce by a third.

Possibly the most fascinating part of Microsoft’s announcement though is the comment in the second paragraph of their media release.

Microsoft will draw upon its overseas cash resources to fund the transaction.

US technology companies have been struggling to deal with the massive profits they have accumulated offshore as part of their tax minimalisation strategy. What we may now be seeing is a wave of foreign takeovers as American companies start to reduce their offshore cash stashes without incurring domestic tax bills.

If that’s true, Microsoft’s agreement with Nokia may well indicate we’re about to see many more takeovers around the world .

Regardless of what it means for the wider industry, both Microsoft and Nokia have entered fundamentally different phases of their businesses.

Why do executives see romance in the startup culture?

Many managers think startups are romantic – could it be because of the corporate lives they lead?

One of the fascinating phenomenons of the modern era is how corporate managers have appropriated the startup culture.

At the announcement of the Australian Centre for Broadband Innovation’s Apps For Broadband prizes, Foxtel’s CIO Robyn Elliot described her experience of working in a startup.

“Foxtel was once in the category of startup itself,” said Elliot at the start of her speech.

Apples and Oranges

Comparing Foxtel to a scrabbling startup in the modern sense is bizarre given the company was a well funded joint venture between News Limited and Telstra – the company being a good example of modern Australian crony corporatism rather than a risky undertaking by daring entrepreneurs.

This conceit about startups isn’t unusual among corporate executives, in the early days of Australia’s National Broadband Network it was quite common to hear NBNCo managers talk about their startup ethos – this from a company backed by around 30 billion dollars of government funding.

At one stage I interviewed for a job at NBNCo and I struggled not to start giggling when the “startup ethos of the organisation” was earnestly emphasised to me several times during the meeting.

Not surprisingly the job went to an ex-telco staffer, as did most of the team’s roles. No doubt their corporate experience was far more suited to the company’s ‘startup ethos’ than that of actually having worked in four startups. Giggling in the interview probably didn’t help either.

The romantic dreams of executives

Given most corporate staffers would curl into the fetal position and weep after two weeks of working in a real startup, why do executives indulge in the conceit that their business is ‘just like a startup’?

The answer could lie in “The Consequences to the Banks of the Collapse in Money Values” written by John Maynard Keynes in 1931.

A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him. It is necessarily part of the business of a banker to maintain appearances, and to confess a conventional respectability, which is more than human. Life-long practices of this kind make them the most romantic and the least realistic of men.

So it is for the modern corporate executive who has spent their working lives fighting for the corner office having met their KPIs and spending years cultivating their network of like minded managers.

After two decades spent writing stern memos on the use of paper clips and climbing the corporate ladder, it must be tempting for a middle aged executive to look at those funky youngsters getting billion dollar payouts after a couple of years grabbing three hours sleep a night among the pizza boxes under the desk and get pangs of what might have been…..

A harmless startup fantasy

In some many ways the executive startup fantasy is touching and largely harmless, even if it does attract sniggers and giggles from the unwashed and underpaid who’ve actually been there.

The real risk is when a senior executive tries to shoehorn a Silicon Valley startup culture into an organisation.

While most large companies could do with some of the hunger and flexibility found in smaller businesses, there’s many ways that could go terribly wrong – particularly when driven by a starry eyed romantic manager.

For most executives though, the dreams of being in a startup will remain a fantasy – and that’s probably best for everybody.

A startup’s journey – what businesses can and can’t learn from Silicon Valley

There’s a lot small business can learn from the tales of Silicon Valley startups, but not every lesson applies.

Tech Crunch has a fascinating story on the journey of failed startup, Los Angeles based Flowtab that hoped to create an bar tab smartphone app.

In many ways Flowtab is a story of our bubble economy times – a cheap, easily built service that addresses what is, at best, a minor first world problem.

Flowtab failed when it turned out solving that problem was a lot harder than just writing an app, which is something often overlooked in the current startup hype.

However had the timing of Flowtab’s founders been a bit luckier they could have hit the jackpot.

Dave Winer describes the herd mentality of venture capital investors and had the hot trend of the time been bar ordering apps then the Flowtab team could have been one of the beneficiaries of the Silicon Valley business model.

Along with being a historical insight into today’s investment mania, Flowtab’s story is an illustration of how a new business needs to pivot when the original idea turns out not to be as compelling as the founders first thought.

Even when a business does a pivot, it’s not guaranteed the company will survive, but that’s part of the risks in starting a new enterprise, particularly when it’s undercapitalised as Flowtab was.

There’s many lessons from Flowtab’s failure, but not all of them apply to every business.

Coffee machines, the Big Blue W and the barriers to new technology

All new technologies involve a learning curve and sometimes people don’t have time to gain that knowledge.

Last week my wife bought a new coffee maker, an impressive, all singing and dancing device that’s a vast improvement on the decade old machine it replaces.

Despite drinking three or four cups of coffee a day, for three days after the new machine arrived I didn’t make one long black or cappuccino. The reason was I didn’t have time to figure out how to use it or the high tech coffee grinder that it came it.

Being time poor is one of the greatest barriers in adopting new technologies as business owners, managers and staff often don’t have the time to learn another way of doing things.

The coffee machine reminded me of something I learned with a business I was involved in the early 2000s. We were trying to sell Linux systems into small and medium businesses.

We had some success selling into small service businesses like real estate agents and event managers where the owners could see the benefits of open source software and, in many cases, had a deep suspicion or resentment towards Microsoft’s almost monopoly on small business software.

Despite the success in selling the systems, the business though came undone because many of the clients’ staff members refused to use the Linux machines, as one lady put it to our frustrated tech “I want to click on the Big Blue W when I want to type a letter.”

That Big Blue W was Microsoft Word and no amount of cajoling could convince the lady to use any of the open source alternatives — she knew what worked in Word and she had neither the time or inclination to learn any thing different.

Eventually that customer gave up trying to convince their staff to use non-Microsoft systems and the computers were reformatted with Windows, Office and all the other standard small business applications installed.

This happened at almost every customer’s office and eventually the business folded.

For those of us involved in the business the lesson was clear, that time poor users who are content with their existing way of working need a compelling reason to switch to a new service.

In many ways this is the problem for legacy businesses — the sunk costs of software are more than just the purchase price, there’s the time and effort in migrating away from existing products and training staff.

When we’re selling new technologies, be it cloud computing services, linux desktops or fancy new coffee machines, we have to understand those costs and the fears of users or customers who’ve become accustomed to an established way of doing things.

In the eyes of many workers new ways of doing business are scary, challenging and often turn out to be more complex and expensive than the salesperson promised. In an age where marketers tend to over promise, that’s an understandable view.

For those selling the new products, the key is to make them as easy to use and migrate across to. The less friction when making a change means the easier it is to adopt a new technology.