Big Idea Social Entrepreneur: The New 21st Century Career

Late last year I wrote on this blog about my frustration with the lack of Big Ideas driving innovation. My rant was stimulated by a New York Times article on the grim underbelly of the “an app for everything” culture: people who were working on “small ideas,”  and losing their shirts in the process.  I also shared the thoughts of other entrepreneurial leaders, investors, and journalists, also bemoaning the fact that we seem to have lost our way, and are no longer thinking BIG.  This morning I stumbled on a post on the HBR Blog Network, entitled “Idea Entrepreneur: The New 21st Century Career.” I took some editorial license and added the words “Big”  and “Social” to my blog post, simply because the author was actually making the case for Big Ideas and Social Entrepreneurship, and the hopeful sign that there may be a re-emergence of people who care about Big Ideas.  Read my original post here, followed by the HBR Blog post.

The concept of “social entrepreneurship” has noticeably taken off with this generation of young people. While there some debate about the definition of “social entrepreneurship,” I am comfortable with the following explanation.

A social entrepreneur is a person who pursues novel applications that have the potential to solve community-based problems, both large and small. These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives.

Examples of social entrepreneurship include microfinance institutions, educational programs, providing banking services in underserved areas and helping children orphaned by epidemic disease. Their efforts are connected to a notion of addressing unmet needs within communities that have been overlooked or not granted access to services, products, or base essentials available in more developed communities. A social entrepreneur might also seek to address imbalances in such availability, the root causes behind such social problems, or social stigma associated with being a resident of such communities. The main goal of a social entrepreneur is not to earn a profit, but rather to implement widespread improvements in society. However, a social entrepreneur must still be financially savvy to succeed in his or her cause.

I had the good fortune of working with the global social entrepreneurship NGO,  Enactus and a group of my students from the UBC Faculty of Management. We interacted with other social entrepreneurship groups as far afield as Perth, Australia, and Rotterdam in the Netherlands to develop our own project. Enactus categorizes projects by the potential for the project to become self-sustaining by the participants, and the original project volunteers working themselves out of a job. Our project was designed to meet the highest categorization within Enactus. We designed a roof-top hydroponic vegetable garden project that would produce high yield cash crop fruits and vegetables for the homeless community, managed by a local housing organization.  The end goal was to enable the homeless volunteers to take over the operation, generate income for themselves, and collaborate with the charity organization to enter into simple permanent housing.

Read more: What Makes Social Entrepreneurs Different?

Read more: http://mayo615.com/2012/11/18/app-development-booms-depressing-underbelly-what-ever-happened-to-big-ideas/

“Big” Idea Entrepreneur: The New 21st Century Career

Reblogged from the HBR Blog Network

by John Butman  |  10:00 AM May 27, 2013

Read more: http://blogs.hbr.org/cs/2013/05/idea_entrepreneur_the_new_21st.html

There is a new player emerging on the cultural and business scene today: the idea entrepreneur. Perhaps you are one yourself — or would like to be. The idea entrepreneur is an individual, usually a content expert and often a maverick, whose main goal is to influence how other people think and behave in relation to their cherished topic. These people don’t seek power over others and they’re not motivated by the prospect of achieving great wealth. Their goal is to make a difference, to change the world in some way.

Idea entrepreneurs are popping up everywhere. They’re people like Sheryl Sandberg (Facebook COO and author of Lean In), who is advocating a big new idea from within an organization. And like Atul Gawande (the checklist doctor), who is working to transform a professional discipline. Or like Blake Mycoskie (founder of TOMS shoes), who has created an unconventional business model.

In my research into this phenomenon (which forms the basis of my book, Breaking Out), I have been amazed at how many different kinds of people aspire to be idea entrepreneurs. I have met with, interviewed, emailed or tweeted with librarians, salespeople, educators, thirteen-year-old kids, marketers, technologists, consultants, business leaders, social entrepreneurs — from countries all over the world — who have an idea, want to go public with it, and, in some cases, build a sustainable enterprise around it.

The ones who succeed — whether it’s disrupting an established way of doing business as Vineet Nayar has done with his company or bringing a mindset change to a small community like Maria Madison has done in Concord, Massachusetts — share the following methods:

• They play many roles. They are manager, teacher, motivator, entertainer, coach, thought leader, and guru all rolled into one. Think Reid Hoffman (founder of LinkedIn and author of The Start-Up of You), Daniel Pink (author of Drive) or, in India, Kiran Bedi, leader of a worldwide movement to transform prisons and root out corruption.

• They create a platform of expressions and generate revenue to support their social activities. Idea entrepreneurs have to be exceptionally good at expressing their idea, and usually do so in many forms. They give private talks and major speeches, write books and blogs and articles, participate in panels and events, engage in social media — activities that can generate revenue (sometimes in considerable amounts), through a combination of fees, sales of their expressions, and related merchandise. Jim Collins has created a long-lasting enterprise supported by the sale of books and media, as well as fees for consulting, speaking engagements, and workshops.

• They offer a practical way to understand and implement their idea. Because people have a hard time responding to an abstract idea, the idea entrepreneur develops practices (and personally models them, too) that lead people to the idea through action. Bryant Terry, an “eco-chef” who argues that good nutrition is the best path to social justice, embeds his ideas in cooking methods and suggestions for social interaction around good food.

• They draw other people into their idea. The idea entrepreneur gathers people into the development, expression, and application of their idea. They form affiliations, build networks, and form groups. Al Gore created the Climate Reality Project Leadership Corps to bring his ideas about environmental sustainability to people around the world. Eckhart Tolle, a spiritual leader and author of The Power of Now, has established the online Eckhart Teachings Community with members in 130 countries. This inclusion of many people in many ways creates a phenomenon I call respiration— it’s as if the idea starts to breathe, and takes on a life of its own.

• They drive the quest for change. It is all too common that people with an idea for an improvement or a change to the world are satisfied to point out a problem, propose a solution, and then expect others to execute. The idea entrepreneur, however, sees the expression of the idea as the beginning of the effort — and it can be a lifelong one — in which they will continue to build the idea, reach new audiences, and offer practices that lead to change. Dr. Bindeshwar Pathak, based in Delhi, believes that world-class sanitation is necessary for India to realize its full potential. In forty years of idea entrepreneurship — spent in writing, speaking, travelling, network building, and technology development — he has influenced the way millions of people think and act.

People who have shaped our thinking and our society over the decades, even centuries, and continue to do so today — from Benjamin Franklin to Mohandas Gandhi to Hannah Salwen, an American teenager who modeled a disruptive approach to philanthropy — have followed the path of the idea entrepreneur.

These days, the model is well-defined and, thanks to the amazing range of activities we have for creating and sharing ideas, is within reach for just about anyone. If you have an idea, and want to go public with it, idea entrepreneurship can be one of the most powerful forces for change and improvement in the world today.

As Trump Tightens Legal Immigration, Canada Woos Tech Firms: But Canada Is Not Silicon Valley

There Is More To High-Tech Immigration to Canada Than Meets The Eye

My long-time business partner and I, one of us in Canada and the other in Silicon Valley, earlier this year launched a business targeted at bringing immigrant entrepreneurs to Canada, Vendange Partners. http://www.vendangepartners.com

From our years’of experience in Silicon Valley and with technology entrepreneurship around the World, we knew that many of the best and brightest young entrepreneurs abroad dreamed of bringing their ideas to the United States to forge their skills and their new companies.  But from our discussions both in California and overseas it is clear that Trumpism is having a profoundly negative effect on this flow of talent into the American economy, both individual technical talent and entrepreneurial teams looking to start companies and raise capital.

The Canadian government and some of the provinces, particularly British Columbia, Ontario, Quebec, and to some degree the Maritimes, have done a commendable job of promoting high-tech immigration and entrepreneurship.  The Global Talent Stream visa is an excellent vehicle as described in The New York Times article included in this post. Global Talent Stream attempts to address the need for technical talent for companies already operating in Canada.  The competition for such talent and the salaries offered in the United States are a major problem for Canadian companies, particularly in AI and robotics. Theoretically at least, a Global Talent Stream applicant with an employer lined up can be working in Canada within about two weeks.

The so-called “startup visa” program for founders and already established teams wishing to set up in Canada is more complicated.  The program requires a committed investment from a “designated” Canadian investor and a letter of endorsement among other requirements before the visa is granted. The difficulties of doing this are something of a Catch-22. In practice in the past, endorsement letters were written by government listed “designated” investors without actual investment, but this still did not result in a wave of high-tech startups coming to Canada. The only other option is for entrepreneurs to bring a significant amount of their own capital with them to Canada.  This option has led to abuse. At its original launch under the Harper government, the startup visa program, unfortunately, became a magnet for immigration scams.  Hence, the startup visa program remains over-subscribed with applicants bringing their own capital to qualify for the “startup” visa for up to five founders.

Finally,  There is also simply too little smart Canadian venture capital and too many startups competing for the limited funds. It is also commonly acknowledged that Canada’s investment institutions and the Canadian financial mentality are not well-aligned with the Silicon Valley investment culture. Major U.S. pension funds like the California Public Employees Retirement System (better-known as CalPERS) annually invests 10% of its entire portfolio in venture capital funds. The same cannot be said generally about Canadian pensions funds and investment banks, as one example of the differences. Much lower risk debt capital and convertible debt seem to be more popular products in Canada.  In defense, it is often pointed out that the Canadian economy is roughly one-tenth the size of the United States. Yet, on a relative scale, the Canadian venture capital industry still does not compare well. Add to this the fact that the Canadian government has historically been far behind other OECD industrialized nations in R&D investment in innovation and you have major problems.  Anecdotally, the sheer amount of money and number of available investors in Silicon Valley alone is well-over 5oo compared with a mere handful in Vancouver. When the more than one thousand local indigenous BC startups actively seeking capital are layered onto the available sources of risk capital in Vancouver, there is major local competition before the immigrant entrepreneurs even arrive in Canada. Looking for risk venture capital in Canada, a la Silicon Valley is problematic.

With that candid and sobering analysis of high-tech immigration to Canada, for individuals who have taken the time to do an in-depth analysis of themselves, and the pro’s and con’s of such a major move, Canada may still offer many advantages to entrepreneurs, and those advantages are only likely to improve over time.

Vendange Partners

 

Trump’s Policies Are Already Sending Entrepreneurs to Canada and France

Canadian and French Policies to Attract Entrepreneurs and Researchers Impacting Silicon Valley

Last week, the U.S. Department of Homeland Security delayed the International Entrepreneur Rule to next March, and it is currently accepting comments on plans to rescind it altogether. The agency cited logistical challenges in vetting these new visas. The International Entrepreneur Rule was designed by the Obama Administration to support Silicon Valley and the high tech industry’s need for immigrant entrepreneurs and engineers. Immigrant entrepreneurs in the U.S. account for 44% of all startups.   The news has prompted a backlash from immigrant entrepreneurs like PayPal cofounder Max Levchin and leadership at the National Venture Capital Association, who argue that rolling back the rule will drive would-be job creators to other, more welcoming nations. This is already happening.

Canada’s Global Talent Stream Visa Program For Immigrant Entrepreneurs Targets U.S. Immigration Policy

To Silicon Valley observers, Canada has always seemed incapable of igniting a technology-driven economy, despite years of the government support for telecommunications, and a byzantine maze of government grant programs for research and development. Canada has remained a laggard in R&D investment compared to other OECD industrialized nations. Venture capital and government tax policy in Canada seemed to have a focus on short-term tax deductions rather than long-term gains as in California.  Then there was the demise of Nortel and the decline of Blackberry. There may be a new opportunity to bootstrap Canada into the high-tech industry big league: Trump Administration immigration policies that are already impacting Silicon Valley.  Not long after Justin Trudeau’s Liberals came to power in 2015, Trudeau sensed the opportunity to exploit Trump’s anti-immigration stances and the Liberal government swung into action to create the Global Talent Stream visa program specifically designed for rapid immigration for entire entrepreneurial teams. Since that time Trump has fulfilled his promises by slashing the H1-B visa program and announcing the end of the Obama Administration’s Startup Visa Program. Immigrant enrollments at U.S. universities is already down over 40%. Startup Genome, the acknowledged global leader in entrepreneurial ecosystems rankings, currently ranks Vancouver and Toronto 15th and 16th globally in its 2017 study, but those in the know acknowledge that Canada still lacks crucial technology ecosystem capabilities.  Nevertheless, Canada may be on the verge of a technology tidal wave.

Source: Trump’s Policies Are Already Sending Jobs to Canada | WIRED 

Source: Macron Inspires Entrepreneurs to come to France – Financial Times

Source: Trump Administration to end Startup Visa Program – Government Tech

Macron Determined To Make France “A Startup Nation” With Major Technology Initiatives

In 2015, long before Emmanuel Macron’s launched his campaign for the Presidency of France, as a minister in the Hollande government, Macron launched a significant new technology initiative, The Camp, on a seventeen-hectare campus just outside Aix-en-Provence, designed to inspire new thinking on crucial technology issues, and to incubate new entrepreneurial companies. The Camp will open officially this Autumn.  Now that Macron has swept the country in a stunning Presidential victory, it is clear that technology and entrepreneurship are crucial elements of his vision for France, backing it up with a 10B € technology-based economic development fund. The South of France generally, the Cote d’Azur and Provence are emerging as France’s technology center.  France’s nuclear research facility, Cadarache, just northeast of Aix-en-Provence, is the equivalent of California’s Lawrence Livermore Labs, and the home of ITER, the European nuclear fusion project. Prior to Macron’s 2015 launch of The Camp, the government had already established the Sophia Antipolis technology park near Nice, as a center for advanced telecommunications research and entrepreneurial start-ups.

The Camp, Aix-en-Provence

As if to underscore France’s rise on the global stage, France has recently leapfrogged the U.S. and Great Britain as the world’s new leader in “soft power,”  the ability to harness international alliances and shape the preferences of others through a country’s appeal and attraction.

 

 

Jerks And The Start-ups They Ruin

Perhaps the premiere of Season 4 of “Silicon Valley” twigged me to share this post. but despite the title, the HBO series only connection may be the now viral “mean jerk time algorithm.”     The real “Silicon Valley jerk” has been around for decades, buried with all the other dirty laundry. Uber’s Travis Kalanick has only brought it front and center at this moment. It is something of a conundrum as some of the jerks are also the most successful. We all now know about the “bad” Steve Jobs. Oracle for years had a very bad reputation that came directly from Larry Ellison himself.  Microsoft was long known as a “sweatshop” with a highly negative culture led by Steve Ballmer. Even venture capitalists themselves have caught the disease as evidenced by Reid Hoffman and the late Tom Perkins of KPCB.  The best assessment I have heard is that these aggressive unrestrained corporate cultures destroy their own goals. Or better yet, the saying that “culture trumps strategy.”

 

Reblogged from the New York Times

SundayReview | OPINION

Jerks and the Start-Ups They Ruin

By DAN LYONS, APRIL 1, 2017

Credit: Tim Enthoven

The tech industry has a problem with “bro culture.” People have been complaining about it for years. Yet nobody has done much to fix it.

That may finally change if the people in charge of Silicon Valley — venture capitalists, who control the money — start to realize that the real problem with tech bros is not just that they’re boorish jerks. It’s that they’re boorish jerks who don’t know how to run companies.

Look at Uber, the ride-hailing start-up. It’s the biggest tech unicorn in the world, with a valuation of $69 billion. Not long ago Uber seemed invincible. Now it’s in free fall, and top executives have fled. The company’s woes spring entirely from its toxic bro culture, created by its chief executive, Travis Kalanick.

What is bro culture? Basically, a world that favors young men at the expense of everyone else. A “bro co.” has a “bro” C.E.O., or C.E.-Bro, usually a young man who has little work experience but is good-looking, cocky and slightly amoral — a hustler. Instead of being forced by investors to surround himself with seasoned executives, he is left to make decisions on his own.

The bro C.E.O. does what you’d expect an immature young man to do when you give him lots of money and surround him with fawning admirers — he creates a culture built on reckless spending and excessive partying, where bad behavior is not just tolerated but even encouraged. He creates the kind of company in which going to an escort bar with your colleagues, as Mr. Kalanick did in South Korea in 2014, according to recent reports, seems like a good idea. (The visit led, understandably, to a complaint to the personnel department.)

Bro cos. become corporate frat houses, where employees are chosen like pledges, based on “culture fit.” Women get hired, but they rarely get promoted and sometimes complain of being harassed. Minorities and older workers are excluded.

Bro culture also values speedy growth over sustainable profits, and encourages cutting corners, ignoring regulations and doing whatever it takes to win.

Sometimes it works. But often the whole thing just flames out. The bros blow through the money and find they have no viable business. For example, Quirky, founded in 2009 by the 20-something Ben Kaufman. It raised $185 million to build a “social product development platform” that sold kooky gadgets but filed for bankruptcy basically because the “brash” and “unorthodox” chief executive had no business being a chief executive. One indication that Mr. Kaufman is a bro? Well, the first reference he lists on his LinkedIn page is: “He’s a dick … but hilarious.”

Zenefits, a human-resources start-up, and another bro co., raised $583 million, at a peak valuation of $4.5 billion, then crashed after reports that it had used software to cheat on licensing courses for insurance brokers, and operated a hard-partying workplace where cups of beer and used condoms were left in stairwells. Zenefits limps on, but its C.E.-Bro co-founder has left the company, and nearly half the staff has been laid off.

Uber’s public downfall began in February, when Susan Fowler, a former engineer at the company, wrote about enduring sexual harassment and discrimination there. Other employees came forward with stories. One involved a manager groping employees’ breasts. Mr. Kalanick’s own bro-hood became part of the story when a video surfaced showing him berating a Uber driver who complained that Uber’s price cuts had driven him into bankruptcy. Mr. Kalanick said the driver needed to take responsibility for his own life.

As this was happening, Google’s self-driving car unit sued Uber, alleging it had stolen its ideas. Then word leaked that Uber had been using a sneaky software tool to deceive regulators in cities around the world. All this is as much a part of “bro culture” as the poor treatment of women; the point is to get away with as much as you can.

Hoping to right the ship, Uber appointed one of its board members, Arianna Huffington, to join former attorney general Eric Holder and others to investigate the sexual harassment claims. Mr. Kalanick has apologized and vowed to “grow up.” (He’s 40.) Most important, Uber has announced that it is planning to hire a chief operating officer, ideally a steady hand like Sheryl Sandberg, the chief operating officer of Facebook. It’s a great idea, but it should have happened years ago. Now it may be too late.

Ms. Huffington insists the board has full confidence in Mr. Kalanick. But should it? He’s a college dropout with a spotty track record and a reputation for pugnacity. His record at Uber includes racking up enormous losses — reportedly $5 billion over the last two years. Despite this, the bluest blue-chip investors (including Goldman Sachs and Morgan Stanley) have invested a total of $16 billion in Uber.

Bro C.E.O.s are better at raising money than making money. So why do venture capitalists keep investing in them? It may be because many of the venture capitalists are bros as well.

Venture capitalists used to be tech engineers who had made a bundle, retired early and took up investing in start-ups as a kind of white-shoe hobby. The new breed are competitive alpha males who previously might have gone to work as bond traders. At the same time, there are fewer women. In 1999, 10 percent of investing partners at venture capital companies were women. By 2014 the number had declined to 6 percent, according to the Diana Project at Babson College. This is probably one reason that, despite many studies showing that women run companies better than men, none of the 15 biggest American tech companies valued over $1 billion has a female chief executive.

Uber’s collapse should not come as a surprise but it does offer a lesson: Toxic workplace culture and rotten financial performance go hand-in-hand. It’s possible for a boorish jerk to run a successful company, but jerks do best when surrounded by non-jerks, and bros do best when they hire seasoned executives to help them. Without “adult supervision” and institutional restraints, the C.E.-Bro’s vices end up infecting the culture of the workplaces they control.

This poisonous state of affairs will get fixed only when investors start getting hurt. A crash at Uber, the most high-profile tech start-up in the world, could provide the jolt that finally brings the tech industry back to its senses.

Dan Lyons is the author of “Disrupted: My Misadventure in the Start-Up Bubble.”

Vancouver Technology Industry On Verge Of New Era

The Vancouver technology industry may well be on the verge of an extraordinary period of growth.  Global, national, and regional factors appear to be aligning in ways that could create an extraordinary economic opportunity for the Lower Mainland which could not have been anticipated.  Vancouver has been an endless topic of discussion about its comparability (or not) to Silicon Valley, the historical Canadian investment conservatism, and the lack of other resources necessary to create the “secret sauce” that makes a region achieve critical mass. That may be changing if only the convergence of factors is grasped and exploited.

In an expansion of regional cooperation, the University of British Columbia and the University of Washington today announced the establishment of the Cascadia Urban Analytics Cooperative.

Universities establish joint centre to use data for social good in Cascadia region

Media Release | February 23, 2017

University of Washington President Ana Mari Cauce, Microsoft President Brad Smith, and University of British Columbia President Santa J. Ono at the Emerging Cascadia Innovation Corridor Conference in Vancouver, B.C., September 20, 2016.

In an expansion of regional cooperation, the University of British Columbia and the University of Washington today announced the establishment of the Cascadia Urban Analytics Cooperative to use data to help cities and communities address challenges from traffic to homelessness. The largest industry-funded research partnership between UBC and the UW, the collaborative will bring faculty, students and community stakeholders together to solve problems, and is made possible thanks to a $1-million gift from Microsoft.

“Thanks to this generous gift from Microsoft, our two universities are poised to help transform the Cascadia region into a technological hub comparable to Silicon Valley and Boston,” said Professor Santa J. Ono, President of the University of British Columbia. “This new partnership transcends borders and strives to unleash our collective brain power, to bring about economic growth that enriches the lives of Canadians and Americans as well as urban communities throughout the world.”

“We have an unprecedented opportunity to use data to help our communities make decisions, and as a result improve people’s lives and well-being. That commitment to the public good is at the core of the mission of our two universities, and we’re grateful to Microsoft for making a community-minded contribution that will spark a range of collaborations,” said UW President Ana Mari Cauce.

Today’s announcement follows last September’s Emerging Cascadia Innovation Corridor Conference in Vancouver, B.C. The forum brought together regional leaders for the first time to identify concrete opportunities for partnerships in education, transportation, university research, human capital and other areas.

A Boston Consulting Group study unveiled at the conference showed the region between Seattle and Vancouver has “high potential to cultivate an innovation corridor” that competes on an international scale, but only if regional leaders work together. The study says that could be possible through sustained collaboration aided by an educated and skilled workforce, a vibrant network of research universities and a dynamic policy environment.

Microsoft President Brad Smith, who helped convene the conference, said, “We believe that joint research based on data science can help unlock new solutions for some of the most pressing issues in both Vancouver and Seattle. But our goal is bigger than this one-time gift. We hope this investment will serve as a catalyst for broader and more sustainable efforts between these two institutions.”

As part of the Emerging Cascadia conference, British Columbia Premier Christy Clark and Washington Governor Jay Inslee signed a formal agreement that committed the two governments to work closely together to “enhance meaningful and results-driven innovation and collaboration.”  The agreement outlined steps the two governments will take to collaborate in several key areas including research and education.

“Increasingly, tech is not just another standalone sector of the economy, but fully integrated into everything from transportation to social work,” said Premier Clark. “That’s why we’ve invested in B.C.’s thriving tech sector, but committed to working with our neighbours in Washington – and we’re already seeing the results.”

“This data-driven collaboration among some of our smartest and most creative thought-leaders will help us tackle a host of urgent issues,” Gov. Inslee said. “I’m encouraged to see our partnership with British Columbia spurring such interesting cross-border dialogue and excited to see what our students and researchers come up with.”

The Cascadia Urban Analytics Cooperative will revolve around four main programs:

• The Cascadia Data Science for Social Good (DSSG) Summer Program, which builds on the success of the DSSG program at the UW eScience Institute. The cooperative will coordinate a joint summer program for students across UW and UBC campuses where they work with faculty to create and incubate data-intensive research projects that have concrete benefits for urban communities. One past DSSG project analyzed data from Seattle’s regional transportation system – ORCA – to improve its effectiveness, particularly for low-income transit riders. Another project sought to improve food safety by text mining product reviews to identify unsafe products.

• Cascadia Data Science for Social Good Scholar Symposium, which will foster innovation and collaboration by bringing together scholars from UBC and the UW involved in projects utilizing technology to advance the social good. The first symposium will be hosted at UW in 2017.

• Sustained Research Partnerships designed to establish the Pacific Northwest as a centre of expertise and activity in urban analytics. The cooperative will support sustained research partnerships between UW and UBC researchers, providing technical expertise, stakeholder engagement and seed funding.

• Responsible Data Management Systems and Services to ensure data integrity, security and usability. The cooperative will develop new software, systems and services to facilitate data management and analysis, as well as ensure projects adhere to best practices in fairness, accountability and transparency.

At UW, the Cascadia Urban Analytics Collaborative will be overseen by Urbanalytics (urbanalytics.uw.edu), a new research unit in the Information School focused on responsible urban data science. The Collaborative builds on previous investments in data-intensive science through the UW eScience Institute (escience.washington.edu) and investments in urban scholarship through Urban@UW (urban.uw.edu), and also aligns with the UW’s Population Health Initiative (uw.edu/populationhealth) that is addressing the most persistent and emerging challenges in human health, environmental resiliency and social and economic equity. The gift counts toward the UW’s Be Boundless – For Washington, For the World campaign (uw.edu/boundless).

The Collaborative also aligns with the UBC Sustainability Initiative (sustain.ubc.ca) that fosters partnerships beyond traditional boundaries of disciplines, sectors and geographies to address critical issues of our time, as well as the UBC Data Science Institute (dsi.ubc.ca), which aims to advance data science research to address complex problems across domains, including health, science and arts.

Find other stories about: Cascadia Urban Analytics Cooperative, Emerging Cascadia Innovation Corridor Conference, Microsoft, University of British Columbia, University of Washington

Source: Universities establish joint centre to use data for social good in Cascadia region

Why The Biggest Tech Companies Are Not In Canada

Mayo0615 Reblog from July 22, 2013

It dawned on me that my blog post from July 2013, still has particular relevance to the current situation in Canada. I discuss the longer term structural issues confronting Canadian entrepreneurs and Canadian venture capital. Boris Wertz, founder of Vancouver’s Version One Ventures is also crucial to this discussion. When I first arrived in Canada, I learned quickly that the Vancouver startup ecosystem was nothing like what I knew from Silicon Valley. My personal case study was Mobile Data International, a pioneering company in wireless data, well before WiFi and Bluetooth, that could have led the market and the technology. Instead, the company was taken public much too early.  MDI was bought by Motorola Canada for $39 Million,  in a hostile takeover, and was essentially moved out of Canada and shut down.  Later, in 2012, I had another opportunity to be up close and personal with Canadian innovation, as a participant in the Canada Foundation for Innovation deliberations in Ottawa. These two experiences have played a major role in the development of my views on this topic.

The following reblog raises the tough questions that are holding Canada back.

From July 2013:

In 2013, ContentDJ founder Jerry Tian published a blog post addressing the issue of “Why Canada Has No Big Tech Companies” – Nortel is dead and RIM is quite obviously dying, he points out. Tian, who was himself responding to an interview with Boris Wertz, founder of Vancouver’s Version One Ventures, offers a thought provoking theory and one that applies to a large degree to all up-and-coming startup ecosystems.

The founder questions the commitment and willingness of Canadian investors and entrepreneurs to devote the ten years or more that it may take to build an independent multi-billion dollar company with staying power, rather than flipping that company for an eight, nine, or even ten figure exit – typically to Silicon Valley acquirers – and exporting that future innovation and wealth building. It’s a charge that could be applied equally well to New York, Los Angeles, Chicago, Austin, Boulder, and dozens of would be international startup hubs.

“’Silicon Valley is not a place but a state of mind,” Tian writes, quoting KPCB General Partner John Doerr. “Some of these insights are collaboration, competition, openness to innovation, failures and experimentation. Probably the most important one is the long term commitment behind technology companies.”

Of course, Tian and Doerr are spot on. What emerging startup hubs often miss when trying to “become the next Silicon Valley” – a flawed mission in and of itself – is that the grandaddy startup ecosystem is more than its physical infrastructure of entrepreneurs, engineers, designers, investors, service providers, universities, and the like. Equally important are the systematic irrationality and a feedback loop around the willingness to turn down the quick buck and go for the massive once-in-a-generation success story.

This isn’t the case with every company, founder, or investor, but it exists in enough density in the San Francisco Bay Area, and based on results to a lesser extent in Seattle, that these are the only two areas areas in the country that have led to multiple ten billion dollar plus technology and internet companies – the true giants that transcend their local ecosystems and seep into the lives of average consumers.

It is these companies, with their ability to attract talent, make acquisitions, invest in long-term R&D, and create systemic wealth that make ecosystems. And with very rare exception, getting to this scale requires a decade or longer commitment and a willingness on the part of founders and investors to turn down near and mid-term paydays. Similarly, it requires a vision and an ambition  to build something that will be around forever.

Tian writes:

So, why is nobody talking about these acquisitions? I think it’s simply because investors are getting filthy rich off these deals.

And that’s exactly what not to do if you want to create the next Silicon Valley. You cannot sell the hen that lays the golden eggs for a few quick buck [sic]. Technology companies take 10 years to really manifest the value. To really build a billion dollar company, it takes tremendous multi-decade commitment. And that’s the biggest missing piece in Canada.

Like or hate Zynga founder and former CEO Mark Pincus, one has to respect him for saying that he wants to build a “digital skyscraper,” a company that would be around for 100 years. Pincus went further to say that he views serial entrepreneurship as failure and that he wants to run Zynga for the rest of his career. Ironically, he recently replaced himself as CEO, personally recruiting Don Mattrick for the role. But Pincus made the ego-busting move in an effort to return Zynga to its former glory and to get it back on that century-long track.

In his somewhat controversial on-the-ground reporting on the Chicago ecosystem last summer, Trevor Gilbert delved into “the Midwest Mentality” and the impact it has on the types of companies that are built there. Gilbert called Chicagoans “pragmatic.” Lightbank partner Paul Lee offered an example of this pragmatism, saying that Chicago startups typically focus on generating revenue from day one, rather than building a massive, but unprofitable user base, a la Facebook and Twitter pre-monetization. Profit is all well and good, and should be the ultimate goal of any business that wants to be around for the long term, but focus on it too intently early on and it can be impossible to invest in growth. It takes a special kind of vision and fortitude to look past the short term and make the big bets required to create massive companies.

This is not to pick on Chicago. A similar phenomenon seems to exist in LA where companies race out to a low nine-figure valuation and then either stall out in that vicinity or sell for sub-one billion dollars to a larger out of town acquirer. Call it the curse of the big-little deal – maybe everyone here just wants to see their name in lights. In a market that is desperate for success stories and validation, these medium-sized exits are hailed as “wins” – and they are, given the difficulty of building a hundred-million dollar company – but they often rob the ecosystem of potential multi-generational tentpole companies. This is a mentality that appears to have changed in recent years, but that change has not yet bore fruit in the form of LA’s answer to Google, Amazon, or Facebook.

New York has seen its own version of this phenomenon, with the ecosystem’s biggest success stories, DoubleClick and Tumblr, being exits to Google and Yahoo respectively. Local darling MakerBot followed suit, selling for $600 million in June. New York does have Fab, Gilt, and Foursquare all shooting for the moon but these companies and the ecosystem as a whole still must prove that they can sustain this ambition and parlay it into a giant company.

As Tian points out, part of the blame for these exits falls on investors. It’s not that investors aren’t interested in massive outcomes – they most certainly are. But not all non-Silicon Valley investors are equipped for the financial and time commitment it takes to create them. These investors, many of which operate out of first- or second-generation funds, often have smaller pools of capital to invest out of.

Write a $2 million check at a $10 million valuation out of a $100 million fund, and a 50x return looks pretty good, returning 98 percent of your fund. Make that same investment out of a $1 billion fund and the impact on fund economics is decidedly less interesting. This is one of the few arguments in favor of mega-VC funds. But it also benefits firms that are on their fourth, fifth or sixth fund and have less to gain reputation-wise with solid base hits.

Returning to Tian’s piece, he closes by writing, “If you are wondering why Canada doesn’t have the [sic] billion dollar company, it cannot be more obvious than this. Too many people are in it trying to get rich quickly off entrepreneurs. Not enough people have the gut [sic] and commitment to create or help create something truly meaningful.”

Tian paints with a broad brush, yes, which ignores many of the subtle nuances and external factors that contribute toward building massive technology companies. But there’s little arguing that people in Silicon Valley think differently. Armed by decades of case studies and social proof, the ecosystem has developed a healthy disregard for rationality.

Mark Zuckerberg famously did just that when Yahoo came calling. He was just 20 years old and Facebook, at less than two years old, was unprofitable with just $30 million in revenue. Yet Zuckerberg and Facebook’s board, which included Peter Thiel and Jim Breyer, turned down Yahoo’s $1 billion offer. When the elder advisors tried to convince the young founder that his 25 percent of that offer would be a big number he said, “I don’t know what I could do with the money. I’d just start another social networking site. I kind of like the one I already have.”

Israeli social mapping company Waze just made the opposite decision, selling to Google for slightly more than that mythical $1 billion. Sarah Lacy cautioned Israel-bulls to “reconsider too much high-fiving over Waze.” While legendary local angel investor Yossi Vardi likes to compare Israeli startups to tomato seeds which need more experienced farmers to grow properly, Lacy believes that the country has the potential to build and sustain globally dominant Web companies without selling, offering MyHeritage as an example.

None of this is to say Silicon Valley is immune from this syndrome. There are thousands of entrepreneurs in the Bay Area who would rather flip their company than do the long, hard work of building something sustainable. But the sheer density of the ecosystem means that a dozen or so each year choose the road less traveled. Also, given the scale of the Valley ecosystem, building a big company is the only way to move the needle and attract talent and capital. Everyone in line at Philz coffee is working on the next “billion dollar business.”

Finally, Silicon Valley is a magnet for those entrepreneurs around the globe who want to build great technology companies, and the ecosystem surely benefits from this imported talent. This was actually Wertz’s central point in the original interview and is one that Tian touches on briefly. It’s a difficult problem to solve, given the power of knowing someone (or several someones) who has summited the mountain before and who can show you that it can be done. In each of these other markets, someone will have to be the first.

In many cases, it is highly irrational to turn down a nine- or ten-figure acquisition offer. There are real benefits to gaining access to the financial and personnel resources of a larger acquirer, ones that can often make or break the success of a still fledgling company. But, if there’s anything in Silicon Valley that Canada, LA, New York, and other startup ecosystems should aspire to it’s this willingness to roll the dice. Sometimes the shooter rolls a “7.”

The Okanagan Never Has Been, And Never Will Be, Silicon Valley: A Lesson From New Zealand

UPDATE: This post from February 21, 2016, is being republished in the light of the announcement that Club Penguin is closing its doors in March. No amount of PR spin, arm waving, or equivocation can make the bitter truth of this post go away.  I note that Lane Merrifeld and Accelerate Okanagan have been conspicuously silent.  Before that, it was Silicon Valley company Packeteer, that morphed into Vineyard Networks when Packeteer pulled the plug and was eventually “parked” with Procera in Silicon Valley, which benefited very few in the Okanagan.  There is a long legacy of this that need not continue.

Kelowna Innovation Centre

British Columbia and New Zealand share many economic similarities, except that New Zealand has way more sheep, is way better at rugby and has much better sailors.  Both economies are focused on natural resource exploitation, tourism, wine, and horticulture. The motion picture industry has been a major factor in both economies, but both are highly vulnerable to foreign exchange fluctuations. Both economies have similar populations though we have more space and are not isolated in the South Pacific.   Both economies have made efforts to diversify into high tech, pouring millions into development of startups. Both economies have had modestly successful companies in high tech, which seemingly have mostly been bought out, moved out and any benefit to the local economy lost.  The crucial difference may be New Zealand’s pragmatism about how to deal with this economic reality.  British Columbia could learn from New Zealand.

Andy Hamilton, the long-time Director of Auckland, New Zealand’s Ice House high-tech incubator shared the following article from New Zealand’s NATIONAL BUSINESS REVIEW.  I first met Andy when I headed up New Zealand’s “Beachhead” incubator facility in Silicon Valley some years ago. The article has significant relevance to our situation in the Okanagan and British Columbia as a whole.  The Okanagan has seen high-profile startups like Club Penguin, Vineyard Networks, and Immersive Media bought by much larger foreign buyers, essentially leaving little benefit to the local economy. The founder of perhaps the most successful startup in BC, Ryan Holmes of Hootsuite, admitted that he did not base the company in the Okanagan (he is from Vernon) because he knew he could not attract the necessary talent here. It is well-known that many if not most UBC Okanagan graduates do not stay here.  While Vancouver has D-Wave and General Fusion, it has also seen Recon Instruments bought by Intel.  New Zealand has dealt with the same reality.  Forget the names of the Kiwi companies in the following editorial piece and substitute any Okanagan or BC startup company you feel is comparable. With Kelowna now tarred with the reputation as the worst job market in Canada, it would serve the local Okanagan establishment to give serious thought to the editorial below.

New Zealand: We’re not, and never will be, Silicon Valley

NATIONAL BUSINESS REVIEW (NEW ZEALAND)

MONDAY FEBRUARY 22, 2016

OPINION

BEN KEPES

New Zealand’s Diligent Corporation chief executive Brian Stafford

John Donne famously wrote that no man is an island entire of itself. The same is true for countries, and especially those countries situated in the middle of nowhere and with a relatively tiny population. At the same time, the old adage of not wanting to throw out the baby with the bathwater springs to mind.

All this mixing of metaphors seems timely given the current debate over Diligent Corporation [NZX: DIL] and its likely sale and exit from New Zealand. People on one side of the debate bemoan foreign sales and suggest this is why we should stick to our primary production knitting. Those on the other side suggest  offshore sales are fine since the money reenters into the economy via the oft-quoted “rinse and repeat” cycle.

To be honest, both sides simplify things with their arguments and I think it’s time for New Zealand to think a bit more deeply about what we want our economy to look like.

We’re not, and never will be, Silicon Valley.

It frustrates me when people glibly suggest that New Zealand should create a mini-Silicon Valley down here in the South Pacific. Silicon Valley only exists in one place and is a unique creation of a number of factors including a university that was founded on the idea of entrepreneurship. Leland Stanford created the university as a memorial to his 15-year-old son who died of typhoid. The university was to be co-educational (a rare thing at that time) and, above all, designed to produce practical members of society. This wasn’t about research for research’s sake, Leland Stanford, a railroad magnate, wanted to produce research which was focused on commercial possibilities.

Add to that a hub of military research, significant funding streams for startups, a cultural focus on technology generally, and entrepreneurship specifically, and you have a unique place. Silicon Valley the product is very much a product of the crucible of Silicon Valley the place. We’d be advised to remember this.

But there are more reasons beyond viability to not want to recreate Silicon Valley in Auckland, Wellington or Christchurch. I’m lucky enough to spend a huge amount of time in “The Valley” and while I’d be the first to suggest that it is an exciting and bustling place, I’d also hate to live there. Unaffordable housing that makes Auckland look easy by comparison, ridiculous traffic issues (don’t even bother trying to drive the 101 on a weekday). A slightly weird culture in which 20-year-old entrepreneurs trying to reinvent laundry services or lawn care are seen as more heroic than doctors, firefighters or teachers.

Silicon Valley has something of a culture of “viva la revolution”. Ride-sharing service Uber’s founder, Travis Kalanick, is almost religious in his fervor for making transportation undergo a rapid revolution. Ultimately, he sees drivers as an impediment to this and is actively investing in driverless car technology in an effort to get rid of the very individuals who are currently making his service viable.

Perhaps this is the very reason that we shouldn’t try and recreate Silicon Valley in New Zealand. We have a society that, to some extent, at least, looks out for everyone. We were the first country in the world to give women the vote. We have a social welfare system that provides a safety net for people. When we’re sick in New Zealand we take it for granted that (hospital waiting lists notwithstanding) we’ll get treatment. The Silicon Valley focus on “automation and efficiency above all” forgoes all of this and, while creating a society where we can get our floors vacuumed by robots, our lawns mown as-a-service and even our meals prepared with synthetic meat by robot chefs, also helps create a dystopian world where anyone who isn’t a computer programmer, a robot engineer or independently wealthy falls by the wayside as an “unfortunate side effect of productivity enhancing tools and technological change.”

A final note on this point. Rod Drury, the chief executive of Xero [NZX: XRO], famously chooses to live in Hawke’s Bay where he can enjoy all that the region has to offer. Rod has seized this idea of balance in his working life and has found a way to build a business while not forgoing all possible quality of life. Indeed, this is a theme that Xero has used often when trying to attract talent. Let’s never forget these aspects in the desire to create GDP growth.

Do these technology exits really feed our economy?

All of this talk of quick technology exits funding lots of $100,000 plus software developer jobs here in New Zealand is a nice sound-bite but it arrogantly sidesteps the questions about what all those people who are left disenfranchised by those technologies are going to do. While TradeMe’s exit certainly helped to create companies like Vend, we need to be thinking, as a nation, about what is going to happen to all of those people who actually do things – tradespeople, manufacturing staff etc – once this ultimate in globalized efficiency is achieved.

If we look at the money that has been brought back to New Zealand from the sale of companies like TradeMe, how much has really gone into the economy? Yes, I’m well aware that TradeMe money has gone on to fund Vend, Xero, SLI Systems and a host of other companies. But while these are all interesting companies, doing good things and with (hopefully) a chance of a good outcome, they’re not particularly big employers and hence I’d be keen to see some empirical data about how much the so-called “trickle down effect” from exits like TradeMe actually exists.

True, both Sam Morgan and Rowan Simpson have built big houses that have kept a few tradesmen busy for a while – it would be helpful for some independent economists to really nut out the continuing value from this model. Often this argument is one which is had from a perspective of dogma – we need to really get some clarity as to the economic impacts of the technology industry in New Zealand.

Notwithstanding the economic benefits of these offshore sales, or otherwise, the fact is there is little option for our technology companies. Again, in this respect, Xero remaining, at least to some extent a New Zealand company is very much an outlier.

This talk of the problems caused by companies like Navman, The Hyperfactory, and NextWindow, that have grown, been sold offshore and all the jobs (along with the tax revenue) lost to NZ Inc is simplistic as well. We live in a tiny market, one which makes a domestic focus pretty much impossible for all but the most niche of players. To achieve growth, these companies need to look to customers overseas. In this technology space, the norm is very much to follow a rapid merger and acquisition path.

The very model of the technology industry is for there to exist a myriad of startups, all of whom sprint in order to get ahead of the others. The prize for being at the front of the bunch is generally (with only a handful of exceptions) a quick acquisition by one of the titans of the industry. After which, and other than a general couple of years spent in purgatory working for said vendor, the founders head back and do it all again. Hopefully.

Is there a third way?

Now I’m not suggesting that we shroud ourselves in an isolationist mist. The last person to do that was Robert Muldoon and it was a disaster. But to suggest, as many do, that technology will replace the need for any of our traditional businesses is simplistic. Similarly, the view that it is best to follow these models of building fast-growth software companies to be quickly flicked off to the highest bidder is unhelpful.

So maybe there is a third way. Maybe we can look at what we naturally do well – things like growing grass and turning it into milk and meat, horticulture and agriculture generally, and the technologies that help those industries to be more efficient, ideas that need a unique combination of practicality and DIY-mentality (Gallagher’s fences anyone?) – and apply technology to those things. With the utmost respect to Xero, a company that is a terrific success story for New Zealand, there is nothing about accounting software that we fundamentally have a point of difference with. Xero could have been created out of Bangalore, Silicon Valley or London. The fact that it has been successful out of New Zealand is down to good luck, good timing and some unique factors. Xero is an outlier – a great one – but an outlier nonetheless. It would be a dangerous bet to make to assume that we can create enough Xeros to fund our big, expensive economy.

Ever greater extension of dairy farming isn’t, of course, an option. Our rivers and lakes are already enough of an abomination without more nitrate runoff. But how about celebrating those companies that are attempting to add value to primary production – Lewis Road Creamery is one that springs to mind. But there is a host of exciting new startups in the agricultural technology space as well.

We need a diverse economy, one in which we have small companies making added-value products alongside companies that will grow rapidly and be sold off. If I look at the companies I’m involved with, I certainly invest in the “high-growth and sell offshore” model. Appsecute, a company I was an early backer of, sold a couple of years ago to a Canadian company which, in turn, sold to Hewlett-Packard last year. Companies like MEA mobile, Raygun, ThisData and Wipster will, potentially, follow this model. But other technology companies have a domestic focus or one which favors remaining independent and growing from New Zealand – PropertyPlot, CommonLedger, and Publons are examples. And finally, companies that are involved in real physical products. While it may be totally unsexy to actually make anything in New Zealand anymore, I’m proud to be involved in Cactus Equipment, a company that not only makes awesome products but keeps scores of people employed here in New Zealand – people who are unlikely to become software developers any time soon.

Focus on a diverse NZ Inc

When Sam Morgan suggested that a focus on NZ Inc was unhelpful for companies and would get them killed, he was referring to technology companies specifically. I believe that, as an economy, we should look more broadly at what we do and celebrate both the meteoric risers of the industry, but also the bit players – those who aren’t gunning for a US exit, those who are able to make a living in the traditional economy and those who are trying to add extra value to what we do well.

Christchurch entrepreneur and cloud computing commentator Ben Kepes blogs at Diversity.net.nz.

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Read more from Ben Kepes

Email Ben: ben@diversity.net.nz

Canadian Startup Case Study Underscores Canada’s VC Challenges

UPDATE: It is worth noting that this 2012 case study on a company in British Columbia, Mobile Data International, and its CEO Barclay Isherwood, attracted the ire of followers of Werner Erhard, prominent San Francisco New Age cult leader, with similarities to L. Ron Hubbard, founder of Scientology.  It is a lens into New Age cults at that time.  In the same way that Scientology reacts to attacks on itself. Erhard’s followers attacked this post in a frenzy of irrational hatred. 

I can only hope that this is a serious effort to reverse this national problem of short-term thinking.

I have seen the problems with Canadian investors first hand, and have the following case study to share here.

Many light years ago, I worked for a pioneering wireless data company, Mobile Data International, in Richmond, BC.   I thought this company was so promising, I came from the UK to join it.  Regrettably, the Board of Directors and the Canadian investors were more interested in making a quick profit than in building the company to potentially be the company that established itself as a global leader in wireless data.  The CEO of MDI, Barclay Isherwood, was an avid follower of California new-age guru, Werner Erhard  aka Jack Rosenberg, of erhard seminars training, better known as “est”.  Erhard’s career has been marked by allegations, controversy, and legal disputes.  Leading academics have raised serious questions about Erhard’s qualifications, his businesses, and the highly authoritarian style of his organizations.

Finding that MDI was influenced by Erhard was a supreme irony. Years before, while in university, my housemate was also infatuated with Erhard.  My housemate eventually quit university and joined “est” as one of Erhard’s trusted senior lieutenants. I got to see “est” up close and very personally. I was brow beaten by my friend, who tried to convince me how important it was to take “the training” as they called it, at a price I could not afford. I was disturbed enough from what I saw from outside the cult, that nothing altered my view that est was extremely dangerous. Since that time, Erhard has run from his critics, and reincarnated himself and “est” into a new group called “The Forum” and another group called “Landmark.”

Isherwood was spending company money to have Erhard’s people “hang out”  at MDI, and he kept his girlfriend, Evi Truu on the payroll, supposedly reporting to me, but via “pillow talk” apparently also reporting to Isherwood himself. The Board took no action, employees were asking questions among themselves, and morale was suffering.  I brought Intel’s legendary Marketing VP, Bill Davidow to MDI for a speaking engagement.  I was flabbergasted to be told that no one liked Davidow, as he was too “arrogant.”  Ironically, they got their assessment backwards: they were too arrogant to get Davidow.   The company was floated on the Toronto exchange much too early, and as a consequence, MDI was eventually sold for a relative pittance to Motorola Canada in a hostile takeover. Isherwood has tried to take credit for selling out to Motorola, but the truth is otherwise.

The investors made a modest return, but Canadian investors don’t seem to think like Silicon Valley.  In a strikingly similar startup situation in Silicon Valley, the CEO, actually an Intel sales organization alumni, had become infatuated with the alleged “supernatural powers of crystals” and his belief system became part of the company culture. The investors quickly became deeply concerned about their investment and their fiduciary duty. The question was, “How could this have happened?” and “We need to move to fix this immediately or face consequences.” My former Intel boss, Barry Cox, was brought in by the Board of Directors to fire the CEO, take drastic action and turn the company around. Obviously, nothing like this happened with MDI.

In the years since, I have seen offers in California in the hundreds of millions turned down flat, and million dollar cheques thrown back across the table.   The MDI employees were mostly laid off and MDI’s doors were eventually shuttered.  The MDI building, an excessively elegant structure that would have raised eyebrows in California, sat idle in Richmond for 20 years, until it was finally leased again as the security headquarters, ringed in barbed wire, for the 2010 Olympics.

Let’s hope that this new realization of the need to build innovation in Canada strikes a chord, and that Canada doesn’t repeat the mistakes that occurred at Mobile Data International.

http://www.techvibes.com/global/category/start-up

The Importance of “Convergence” In Market and Industry Analysis

If You Get Technology “Convergence” Wrong, Nothing Else Matters

I came across this book during my most recent visit to the UBC Vancouver campus.  As good as I think this book is at focusing attention, in workbook style, on the importance of market and industry analysis in new venture due diligence, there is an issue that I think is not adequately addressed by any model or theory: not Porter, not STEEP or SWAT. Convergence is the issue.

We can imagine and even potentially envision a very cool business idea, but if the technology to achieve it is not ready, not sufficiently mature, the idea is Dead on Arrival (DOA).   I do not mean to pick on young entrepreneurs, but I reviewed a business concept last week that was a superb and compelling idea, but the technology necessary to achieve it simply was not there, either in terms of its capability or its price point. I am confident that it will be there in time, but it is not now.  As if to make my point, Apple announced that it was acquiring a company for $20 Million in the exact same technology area: indoor location tracking (no small feat).  At this point it is not clear that the acquired company has any extraordinary intellectual property or expertise, and the article primarily focused on the point that this “location identification” technology was “heating up.”  It looks like it may be a simple “aquihire.”   Global Positioning and geo tagging as in smart mobile phones, radio frequency identification technology (RFID), and inertial guidance are all currently used in various combinations by a host of competitors (too many) to achieve required levels of accuracy, immediacy and cost.  A local industrial RFID company has just closed its doors because it simply could not compete and make money.  The simple problem was that this company’s idea, as compelling as it was, could not achieve the necessary price point, or possibly would not even work.

So we have the problem of “convergence.”  Great idea but the technology simply is not ready….yet.

I have three personal case study examples of the problem of “convergence,” that every potential entrepreneur should study. I have to admit that I was a senior executive at all three of these Silicon Valley companies, one of which actually made it to the NASDAQ exchange.  All of them had the “convergence” problem.. Too early for the available technology.

1. Silicon Graphics.  Silicon Graphics was founded in the late 1980’s by a pre-eminent Stanford professor, Jim Clark, on the idea that 3D visualization of complex problems would become the next big wave in technology. As a minor side business, it also excelled at computer animation, a growing new market of interest to Steve Jobs and others. It is now obvious that Clark was onto something that has now finally become the Next Big Thing, but at that time, the available technology simply made it too difficult and too expensive. Silicon Graphics no longer exists. Silicon Graphics crown jewel was its enabling software code, the SGI Graphics Library. It does still exist in open form.

Read more:http://mayo615.com/2013/03/31/hans-rosling-makes-visual-sense-of-big-data-analytics/

2. iBEAM Broadcasting.  iBEAM was the precursor of YouTube, but too far ahead of its time.  the founder, Mike Bowles, a former MIT professor, envisioned streaming media across the Internet, but this was in 1999.  Intel, Fox Entertainment, Reuters, Bloomberg, Microsoft were all involved, some investing significant sums in the company. We tried mightily to make it happen for Mike, but there were technology convergence problems.  The Internet at that time simply did not have sufficient reliable broadband capability.  In 1999 the vast majority of Internet users still used a dial-up connection.  The company, with help from Microsoft and its other big pockets investors turned to satellite transmission, which is immensely expensive.  I did learn a lot about the satellite business. Great idea, way too early, and the company failed early.

3. P-Cube.  In 2001, I was approached by prominent friends at two downtown Palo Alto venture capital firms to consider joining an Israeli startup in which they had invested. The idea was wildly popular at the time….traffic policy management and so-called Internet traffic shaping.  I enthusiastically joined the new company and became its first U.S. based employee.  The compelling idea was simple, make money by charging for bandwidth. The background idea was to enable deep IP packet payload snooping to prioritize traffic, but also for its political potential. This is the technology that Dick Cheney employed after 9/11 to snoop all Internet traffic.  The only problem was that the technology was simply not yet ready.  The P-Cube Internet traffic switch was a 24 layer printed circuit board (hideously difficult to fabricate), with 5 IBM PowerPC chips, 1 Gig of onboard memory (at the time bleeding edge, but today laptops have more memory), a host of “application specific integrated circuits” (ASIC), and to top it off a proprietary software language to program the box.  In the end, P-Cube burned up $100 Million in venture capital, and I had great fun traveling the World selling it, but the box never worked, largely because the technology simply was not there..  P-Cube’s assets were bought by Cisco Systems and t0day such capability is built into the boxes of Cisco System, Juniper Networks and others.

The key takeaway lesson from this: do not underestimate the importance of technology convergence with a great idea.

Tough Love From Silicon Valley For Tough Times

Heidi Roizen is a very well-known Silicon Valley venture capitalist and entrepreneur. I first met Heidi years ago at a European COMDEX event in Nice when she was still in her entrepreneurial phase. Since that time she has gone on to fund numerous startups, and is now a Partner at Draper Fischer Jurvetson.  In this blog, Heidi is sounding the alarm to entrepreneurs that, as she says, the market has already turned for the worse. She has been there before and offers her sage advice to this generation of entrepreneurs on how to survive. IMHO, she is spot on.

Dear Startups:  Here’s How to Stay Alive

By Heidi Roizen

Reblogged from Tumblr

February 15, 2016

There are storm clouds gathering over Silicon Valley – and it’s more than just El Nino.

As a venture capitalist, I see a lot of data points within the private company marketplace.  Every Monday, I sit in a room with my partners and we discuss dozens of companies, both portfolio companies as well as those we are considering for investment.  When a market turns, we tend to see the signs earlier than the entrepreneurs working on the front lines.

This market?  I’d say it has turned.

It is going to be hard (or impossible) for many of today’s startups to raise funds.  And I think it will get worse before it gets better.  But, hey, my entrepreneurial friend, whoever said it was going to be easy?  One of my favorite expressions is: “that which does not kill us makes us stronger.”

So which is it going to be for you?  Tougher?  Or dead.

Fortunately, (unfortunately?) I’ve been to this movie before, during the dot-com “nuclear winter” – anyone remember that?   I’d like to think I’ve learned some things from that painful experience.

I’ve seen companies live, and I’ve seen them die. And I’ve concluded that certain behaviors separate the two.

Which behaviors, you ask? Here are a few from my downturn playbook for how to stay alive.

Stop clinging to your (or anyone else’s) valuation:  You know what somebody else’s fundraise metrics are to you?  Irrelevant.  You know what your own last round post was?  Irrelevant. Yes, I know, not legally, because of those pesky rights and preferences.  But emotionally, trust me, it is irrelevant now.  We even have a name for this – valuation nostalgia.  Yes, it was great when companies could raise those amounts, at those prices, blah, blah, blah, but the cheap-money-for-no-dilution thing is largely over now. The sooner you get on with dealing with that, and not clinging to the past, the better off you will be. As my DFJ partner Josh Stein says, “flat is the new up.”

Redefine what success looks like:  I had lunch last week with a friend of mine who broke her leg in three places four months ago.  “I used to think a successful weekend was 10+ miles of running,” she said.  “For now,  success is going to have to mean making it to the mailbox and back without my crutches.”  When a market like this turns, in order to survive, it is critical to redefine what success is going to look like for you – and your employees, and your investors, and your other stakeholders.  Holding on to ‘old’ ideas about IPO dates, large exits and massive new up rounds can ultimately be demotivating to your team.  If you can make it through the downturn, you will have those opportunities again.  But for now, reset your goals.

Get to cash-flow positive on the capital you already have (AKA, survive):My DFJ partner Emily Melton said this in our last partner meeting:  “Must be present to win.”  I used to say it at T/Maker (the company for which I was CEO) in a slightly different way:  “In order to have a bright long-term future, we need to have a series of survivable short term futures.”  You need to survive in order to ultimately win.

You know what kind of companies generally survive?  Companies that make more money than they spend.  I know, duh, right?  If you make more than you spend, you get to stay alive for a long time.  If you don’t, you have to get money from someone else to keep going.  And, as I just said, that’s going to be way harder now.  I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepreneurs are still talking about their plans to the next round.  What if there is no next round?  Don’t you still want to survive?

Yes, some companies are ‘moon shots’ (DFJ has a fair number of those in our portfolio) where this is simply not possible.  But for the vast majority of startups, this should be possible.

So, for those of you in the latter group, I want you to sharpen your spreadsheet, right now, and see if, by any hugely painful series of actions, you could actually be a company that makes money.  ASAP.  Or at least before you run out of money.   Because that’s the only way I know to control your own destiny.  You don’t have to act on it (although I would), but at least you will know if you have a choice.

And if you absolutely, positively, cannot get there without more capital?  Then you need to…

Understand whether your current investors are going to get you there: Guess who else cares about whether you live or die?  Yep, your current investors.   Another duh.  That’s why they are your best source of ‘get me to cash flow positive’ financing.  And yet, even though we all know this, why is it we don’t actually (1) create the plan that gets us to cash flow positive ASAP, and then (2) go to our backers and get their commitment that they will see us through  (or know that they won’t, because if they won’t, the sooner we know that, the sooner we can go out and do something about this.)  I know many VCs hate to be put on the spot about this, but I think entrepreneurs have the right to ask, and to know.

Stop worrying about morale:  Yes, you heard me right.  I can’t tell you how many board meetings I’ve been in where the CEO is anguished over the impacts on morale that cost cutting or layoffs will bring about.

You know what hurts morale even more than cost- cutting and layoffs?  Going out of business.  

I was at a conference once where someone asked Billy Beane how he created great morale at the A’s.  His answer?  “I win.  When we win, morale is good.  When we lose, morale is bad.”

Your employees are smart.  They know we are in uncertain times. They see the stress on your face.  They worry about their jobs.  What do they want to see most?  A decisive plan for survival, that’s what – even if some of them have to go.   Trust me, a clear plan is a real morale turn-on.

Cut more than you think is needed:  Yes, this is simple, but not easy.  It is so easy to justify why you want to lay off fewer people.  However, when you do, by and large, you’ll be laying even more off later.  Why we humans seem to prefer death by a thousand cuts is a mystery to me.  Don’t.  It’s easier on everyone if you cut deeper and then give people clarity about the stability of the remaining bunch.

Scrub your revenues:  Last week an entrepreneur pitched us, and his ‘current customers’ slide was alight with bright, trendy logos of bright, trendy venture-backed companies.  You know what I saw?  A slide full of bright, trendy, money-losing, may-not-survive companies.  (Luckily, in this case, the entrepreneur referenced these customers because he thought VCs would like to see that their smart startups use his stuff, but he actually had a lot of mainstream customers too.  He has a new slide now.) This, I think, was one of the biggest surprises from the last dot-com bust – we all knew we had to cut our expenses, but no one thought about what our customers might be doing. And guess what? They were all cutting costs too – including those costs which comprised our revenues.  Or worse, they were going out of business. If you are in Silicon Valley and your customers are mostly well-paid consumers with no free time, or other venture-backed startups, well, I’d be worried.  And yes, it sucks, but it is better to be worried than surprised.

Focus maniacally on your metrics: I know a few CEOs who delegate the understanding of their financials and their business metrics to the CFO, and then stop worrying about all that ‘numbers stuff’.  Don’t do that.  You have to know your numbers inside and out – they are your life blood.  You also have to know which metrics drive the business, and focus on them like your survival depends on it – because it does.  Figure out your canary (or canaries) in the coal mine (by that I mean the leading indicators that tell where your business is headed and whether it is healthy) and watch them weekly, or daily, or in real time, whatever is possible.  And, have a plan in advance about what you will do if/when the metrics go south.  Many of the best companies to have survived the last downturn became super data-driven, and were constantly course-correcting to make small but continuous improvements in their operations with what they learned.

Hunker down:  These markets generally take a long time to recover. Longer than you think. And, it might get worse. So don’t plan for the sun to start shining tomorrow. Or next month.  Or next quarter.  Or maybe even next year. Sorry.

Having just thoroughly depressed you, let me say that I’ve seen amazing transformations by companies who adapt early to the new reality.  Severe budgets give clarity.  Smaller teams often find greater purpose in their work.  Gaining control (by becoming profitable) feels really, really good.  Watching your competition (who didn’t read this) die, feels – can I say it? – well let’s just say that when your competition goes out of business, you often gain their customers…and that’s a very, very good thing.

Some of the greatest companies were forged in the worst of times.  May you be one of them.