Tag: startups

Google expands its campus program

Google expands its Campus program to new cities

One of the reasons for the success of London’s Silicon Roundabout neighbourhood was the Google Campus that provided a drop in centre and community venue for the growing tech hub.

It turns out the success of London’s Google Campus can be replicated, as shown by the Tel Aviv outpost having similar results.

As a consequence Google are now opening new campuses in Warsaw, São Paulo, Seoul and Madrid.

Whether these cities will have the same success as London and Tel Aviv, both had a thriving tech start up community before their Google Campuses opened, remains to be soon.

One thing is for sure, we’ll see other cities’ governments and tech communities lobbying Google to base a Campus in their tech neighbourhood. It may be worthwhile they have a look at the London one to see what works and how they can set their own local hub.

The tough determined business of building a business

It takes a special kind of grit and determination to succeed with a startup business says BlackLine founder and CEO Therese Tucker

In 2005, Therese Tucker’s company was down to its last three staff when a customer suggested a new line of business. Today BlackLine is valued at over 200 million dollars and about to list on the stock market.

A few week ago Therese described her journey from a struggling software startup to a hundred million dollar business on the Decoding the New Economy YouTube channel.

BlacklLine’s business automates financial processes  as Tucker explains, “we have the interesting job of providing software that helps companies automate all the things around accounting and the financial close that they currently do on spreadsheets.”

At the time of Tucker’s pivot, the business was supplying a wealth management system when that prescient customer asked her to develop an application to manage the ten thousand spreadsheets they were struggling with for accounts reconciliation.

BlackLine wasn’t Tucker’s first business having been involved in a series of ventures after working as an electrical engineer designing automation systems before moving into the IT industry.

“There’s a reason for the term ‘serial entrepreneur.” Tucker says, ” it’s a bug that once you catch it you really don’t want to rest until you’ve been successful at it.”

For aspiring entrepreneurs Tucker’s advice is blunt — “The best advice is ‘don’t do it’. Because if you listen to that advice you’ll never make it.”

“It’s the people that are crazy and are determined to work themselves to death and to fail and fail and fail until they don’t fail. It takes that kind of grit and determination.”

“If I tell you not to do it, then that’s great advice for you.”

Navigating a world of silos

Blogger Robert Scoble sees social media silos as the cost of distribution in the new media world

Having seen Robert Scoble interview dozens of startups and founders, it was fascinating to get him on the other side of the camera for a Decoding the New Economy interview.

One of areas I was keen to explore with Scoble was his experience of moving from his blogging platform to Facebook and particularly the risk of being locked in a silo, something previously discussed with Doc Searls.

“I’d rather all my content wasn’t in Facebook,” Scoble observes, “but those days are over.”

Unlike Searls, Scoble sees the social media networks — particularly Facebook — as being a useful distribution tool while accepting their limitations; “I find I get a lot more engagement and distribution on Facebook.”

“Unlike a lot of other journalists I don’t have to make my money out of advertising so I don’t care about taking my eyeballs off the blog and onto Facebook.”

“It does limit my storytelling ability because you can only use one video and I can’t do a lot of typographic stuff,” says Scoble, “people are seeing these on mobile phones anyway so they don’t want to see all of this stuff anyway.”

The mobile aspect is key to the business world going forward, we stopped midway through the interview to buy an iPhone 6 which went on pre-order right in the middle of the discussion.

For the mobile world Scoble sees the rise of various ecosystems like Google’s and Apple’s forcing people to make choices about which camp they are going to join.

Like many in the tech industry, Scoble is very cautious about looking too far ahead; “none of the people, even the investors, are looking more than five years ahead.”

The key though is miniaturization as devices get smaller and more portable, the potential for technology becomes greater.

Whether that potential is limited by the desire of vendors to lock users into silos remains to be seen.

 

Beating the 1980s business model

Overturning the payment industry’s 1980s business model gives the opportunity to create new industries believes Stripe co-founder John Collison

Interviewing Stripe co-founder John Collison in the company’s crowded, noisy lunch room in San Francisco’s Mission District is a good place to appreciate how quickly the online payment service has grown since it was founded three years ago.

Stripe was founded after twenty-four year old Collison and his brother Patrick encountered problems with online payments in their previous businesses, “we came to Stripe because we had built apps and webservices before and it was phenomenally difficult to take a product you had built and turn it into a business.”

“At the time you had two options; you could turn your business over to PayPal, which was problematic for a whole bunch of reasons, or you’d build something from scratch.”

“It was clear to us that neither of the options were very good so we went about building something better.”

Silicon Valley’s strengths

Since its establishment Stripe has grown from ten employees to 150, something the founder believes shows the strength of California’s Bay Area over areas like Collison’s native Ireland.

“One of the things that I like about Silicon Valley is that people here tend to be relatively risk tolerant. Joining an unknown internet payments company three years ago, most people would say ‘you’re out of your mind’. But the psyche around here is that’s a reasonable thing to do.”

Another aspect that attracts Collison to San Francisco is that most of his employees at Stripe have run their own businesses or startups themselves. Having a workforce of risk tolerant, independent self starters makes it easier to manage a fast growth company.

Pitching for funding

The Bay Area’s appetite for risk is reflected in how investors look at businesses; “in the startup world, people like to maximize the opportunity rather than reduce the risk,” observes Collison.

Collison’s advice for startups seeking funding is to get have users on board that validates the idea, “when we pitched Peter Thiel we had production user for four or five months. What made us think there was something here was that those users were really passionate.”

The other attraction for Thiel and other members of the ‘PayPal mafia’ – Thiel’s fellow PayPal founders Elon Musk and Max Levchin are also investors in Stripe – was their first hand dealings with the problem of online payments.

“With the PayPal guys specifically, they really get this. Early on this was what they were trying to do with PayPal – make it easy for people to move money around the world.”

Entering the era of mobile commerce

The problem today that Collison sees with PayPal is that it is a product based on a desktop view of online commerce in a time where the industry is moving to mobile.

“One of the things that has held online commerce back for so long is the purchasing experience has such a high barrier to it.”

”We’ve replicated the mail order form on the internet. It feels to me that in five to ten years time we will not be in the same world with people like Google and Facebook improving the identity story. That’s exciting because that helps merchants sell more.”

“That whole model comes from a desktop era so if your building a lyft or a mobile site it doesn’t make much sense.”

Beating the 1980s business model

For the credit card and banking industry, the payments sector is even further behind. Collison believes that until recently the payments industry was based upon a 1980s business model where the costs of inefficiency were pushed onto merchants and small business.

“All the banks and companies that offered services at the time were operating in the 1980s,” says Collison. “The business model was based on the old way of your customers being people within a fifteen block radius, on the internet your customer base is the whole world.”

Building new industries

With Stripe Collison sees an opportunity for new industries to develop out of easier ways of collecting payments, particularly given much of the world’s population in areas like Africa and China doesn’t have credit cards.

“If we just building a business to take transactions from PayPal and get them onto Stripe, that’s not that interesting. What is interesting is if we can create new types of transactions that would not have existed otherwise.”

“By providing better infrastructure for anyone to build a global business. That will change the kind of things people will build.”

Don’t be at the wrong end of the long tail

The state of the apps market shows how the long tail theory doesn’t work for businesses in digital markets

One of the most important characteristics of the technology industry is  you have to be first or second in your market to guarantee profitability.

As more of the world become digitized this is becoming true in other sectors, as Tomi Ahonen’s survey of the app industry shows. This also demolishes the long tail theory of online economics.

The long tail idea was put out by writer Chris Anderson during the first dot com boom.

Anderson’s view was the long tail of older material would be a useful income source for creatives and businesses. For many, small payments on a ‘long tail’ of older work would add up to reasonable revenues.

I’ve always skeptical of that view as the internet tends reward the ‘one percenters’ — a tiny number with the most traffic or revenue make the money while the bulk of players fight over the few crumbs that drop from the table.

A sheer disaster industry

A good example of how digital markets favour a tiny group of leaders  is in Tomi Ahonen’s survey of the 2014 mobile apps market that shows the vast majority of developers struggle for pennies.

Ahonen pulls no punches, describing the apps industry as a “sheer disaster industry with only one sector making money” and goes on to describe just how dire the predicament is for most developers.

The first point is where the money is being made; the first answer is by Google and Apple who skim five billion of the industry’s $21 billion in revenues. Just that stat alone shows where the real money is in the sector.

Of the remaining $15 billion the top 1.3% of the industry — around 27,000 developers — take $11 billion, or 73% of the revenue and leave four billion to be shared among the other 98%.

Slaves and huddled masses

At the other end of the scale those who Ahonen calls the ‘slaves’ and the ‘huddled masses’ there’s only 400 million dollars to be shared around two million developers. Implying 87% of the industry barely make a few hundred dollars a year.

On Ahonene’s figures two out of five developer make nothing.

HUDDLED MASSES IN APPS ECONOMY 2013
Revenues left . . . . . . . . . .  0 million dollars
Bottom 39% developers . . 819,000 developers
Bottom 39% earn . . . . . . .  0 million dollars
Bottom 39% earn . . . . . . .  0% of all revenues
Bottom 39% earn . . . . . . .  0% of developer revenues
Average per dev . . . . . . . .  0 dollars
In above numbers:
Beggars failed to earn . . . . 400,000
Hobbyists don’t care . . . . . 250,000
Branded utility app devs . . 170,000
Source: TomiAhonen Consulting analysis on Vision Mobile survey Aug 2014

The Apps industry is a stark indicator of just how brutal the economics of digital distribution are. The long tail is real, it’s just that it describes a massive imbalance in income within markets.

For all of us trying to make a dollar in the digital world, we need to find the niche where we fit into the profitable part of the curve.

Being on the wrong end of the long tail is a recipe for poverty.

Partying like it’s 1999 as investors pour into delivery services

The startup scene is back to the heyday of the late 1990s

At the peak of the dotcom mania in 1998 delivery services were all the go, those days are back reports Claire Cain Miller in the New York Times.

“We’re really well funded, so that is not something we’re as worried about,” Aditya Shah, Instacart’s general manager says. “Growth is the most important factor.”

This is the classic Silicon Valley Greater Fool model, where the aim is to get as many customers as possible to make the business attractive to a cashed up large corporation.

It might work, but the odds of being an Amazon or Salesforce – both companies have barely made a profit in the decade and a half they’ve been running – is unlikely.

One of the big problems is that delivery doesn’t scale, the ‘last mile’ problem of getting the goods to the customer remains the most complex and expensive part of the process.

Drones may solve the labour cost problem and sophisticated algorithms from companies like Uber may make the process more efficient but it’s unlikely an ad-hoc delivery service can ever scale to the degree these entrepreneurs project, unlike the post office and courier services where the system is built around predictable delivery routines.

Uber is the company that validated the model of today’s delivery startups, as Miller mentions;

“Meanwhile, venture capitalists joke that every other entrepreneur they meet pitches an “Uber for X,” bringing goods and services on demand: laundry (Washio), ice cream (Ice Cream Life), marijuana (Eaze) and so on.”

It’s hard to see how the current craze of delivery startups will end any better than the Webvans and dozens of other services that soared and crashed in the late 1990s, however business models are changing and it may be one of these will find the formula that works in the new economy.

Uber looks to sending taxis and lyft ride sharing service to the deadpool

Uber is to launched a new service that further disrupts the taxi industry

In its latest move to reinvent the taxi industry, Uber has launched a new service caused Uberpool reports Techcrunch.

Uberpool allows customers to split fares with other passengers, making the service cheaper. This threatens both taxis and and ride sharing services like Lyft.

It also shows what deep pockets can buy, with plenty of venture capital funding Uber can afford to experiment with these services. Those resources makes it hard to compete against Uber.

For Lyft and many of the other hire car startups, Uber is doing everything it can to drive their businesses into the deadpool.

Rent doesn’t matter to startups

Rent doesn’t seem to matter for startups — for the moment

Following yesterday’s post about the factors behind cities like New York, London and San Francisco becoming startup hubs, a friend asked “let me gues — cheap rents?”

In truth it’s the opposite; none of the cities cited as startup centres are cheap places to live or work and London is usually towards the top of the most expensive places on the planet.

That rents aren’t a huge factor is possibly because the typical tech startup is a lean operation with a small team crammed into a crowded location.

One suspects though there are limits to how much a business conserving its cash will pay — you don’t see many startups based in A-grade locations alongside big law firms and banks — and this may be the weaknesses of these big cities.

Certainly in London’s Silicon Alley the complaint is the days of cheap rent are long gone and newer startups have to base themselves in other locations across the city.

Overall, rents are important but they aren’t the critical factor in developing a tech sector hub. Whether that remains the case depends upon how the industry develops.

Why have cities like New York, London and San Francisco become tech hubs?

What are the ingredients that have driven today’s tech startup centres to prominence?

One of the recurring topics this site keeps returning to is how cities like San Francisco and London have seen an explosion of tech startups in recent years.

Probably the spectacular of all the cities that have shot to prominence is New York;  a decade ago tech startups in the city were a rare thing, today there are thousands.

Today I had the opportunity to visit AlleyNYC, one of New York’s biggest tech accelerators. It’s impressive how a venture two years old can be so successful.

A question I asked was ‘what has driven the change in New York?’ The consensus was the combination of the Great Depression and the success of high profile companies like Facebook.

The success of high profile startups has validated the business model in the eyes of both investors and founders, people who would have been reluctant to leave their jobs and start a business now see the opportunities while investors can see there are returns to be made.

What’s notable about cities like New York, London and San Francisco is the depth of industry expertise, capital, networks, education institutions and diversity. These are key factors in attracting tech startups.

For other cities aspiring to be ‘the next Silicon Valley’, it would be worthwhile considering where their strengths lie compared to these giants.

It’s not a given that any of today’s global leaders will be the future centres of industry, but other cities and regions will need to have a very strong reason for businesses to choose them over the incumbents.

Building a billion dollar start up

Zendesk founder Mikkel Svane describes the journey of building a billion dollar startup

Two years ago we interviewed Mikkel Svane the founder of cloud service provider Zendesk about modern customer support.

Since we spoke to him Zendesk have had a successful IPO and is now worth over a billion dollars.

In the latest Decoding the New Economy video interview we catch up with Mikkel and discuss the journey from being a three person startup to a billion dollar listed company.

Spreading the good news – Canva’s Guy Kawasaki

The tools for building new businesses have never been more accessible says Canva’s Chief Evangelist Guy Kawasaki

“My job is to spread good news,” says Guy Kawasaki of his role as Canva’s Chief Evangelist.

Kawasaki was speaking to Decoding the New Economy about his role in popularising the online design tool which he sees as democratising force in the same way that Apple was to computers and Google to search.

Democratisation is a theme consistently raised by startups and businesses disrupting existing industries and Kawasaki continues this theme.

“The world is becoming a meritocracy; it’s not about your pedigree, it’s about your competence,” states Kawasaki.

Falling barriers to entry

What excites Kawasaki about the present business climate are the falling barriers to starting a venture. “Things are getting cheaper and cheaper, in technology you had to buy a room full of servers, have IT staff in multiple cities. Today you call Amazon or Rackspace and host it in the sky.”

“Before you had to buy advertising for a concert, now if you’re adept at using social media – with Google Plus, Facebook,Twitter, Pinterest and Instagram – you have a marketing platform that fast, ubiquitous and cheap.”

“What excites me is there are going to be more technologies, more products and more services because the barriers are so low.”

Creating a valued and viable product

For those businesses starting into this new environment, Kawasaki believes the most important thing a startup should focus on is getting a prototype to market; “at that point you will know you’re truly onto something.”

“If you build a prototype that works you may never have to write a business plan,” says Kawasaki. “You’d never have to make a Powerpoint, you may never have to raise money as you could probably bootstrap.”

Kawasaki view is the MVP – Minimum Viable Product – model of lean product development should have another two ‘V’s added for ‘Valuable’ and “Validated’.

“You can create a product that’s viable, ie you could make money, but is it valuable in that it changes the world?”

“Is your first product going to validate your vision? If it’s not then why are doing it?”

The story Kawasaki tells is the tools to deliver valued and viable products are more accessible than ever before; that’s good news for entrepreneurs and consumers but bad for stodgy incumbents.