Glut of Startup Accelerators Points Toward a Shakeout

Yesterday, I was an invited guest at an annual “entrepreneurship” event held in Vancouver. The event is an extraordinary opportunity to connect with most of the major figures, leaders, and investors in the entrepreneurship community.  It also prominently showcased presentations from a number of the most promising new startups.  But the undercurrents in conversations around the room were soul searching questions about the current glut of startup accelerators around North America, and the frothy euphoria and enthusiasm about “entrepreneurship.” Some experienced entrepreneurial investors complained about the air of unreality of it all, and the excess of mediocre companies being cranked out. A very prominent and experienced Vancouver venture capitalist pointed out to me that a glut of Canadian startups only compounds the long-standing issue that Canada could not produce the necessary risk capital even if more of these companies were investment ready, which they are not.  A related issues is the waste of government money in these companies. Clearly, the situation is a mess.

But back to the central question: whether all this effort is producing real measurable results. Equally significant 1s the question, “Where are all the Big Ideas?”  Some startups are focused on extremely esoteric niche markets, which is fine, but should they be included in serious, and very expensive accelerator programs? Some have suggested that there should be lesser tiers of services for companies like this. Many suggest that there is not enough “tough love”:  up or out!

Ironically, when I returned home, I noticed that one of my friends, and a leader in the high tech accelerator community here, had forwarded to me an article from yesterday’s Financial Post, headlined, “Glut of Startup Accelerators Failing to Produce The Next Hootsuite or Shopify,” as if it were timed to underscore my conversations in Vancouver.

Read more: http://business.financialpost.com/2013/05/12/despite-their-numbers-accelerators-arent-producing-the-hootsuites-or-shopifys/

This is not a new problem.. For the last year a number of industry leaders, tech journalists and bloggers have been cranking out posts on this theme, and the rising evidence that it has become Problem One in the entrepreneurial world. Last December, PandoDaily published a post by Erin Griffith, titled, “We Know Accelerators are Headed for a Shakeout, But Do They?” Poignantly, the article highlighted the fact that Y Combinator in Silicon Valley, the paradigm for accelerators, announced that it was cutting its number of startups in it’s stable by almost half and reducing the size of their investments in response to all the over-enthusiasm.

Read more: http://pandodaily.com/2012/12/03/we-know-accelerators-are-headed-for-a-shakeout-but-do-they/

Another prominent high tech blogger, Francisco Dao, posted on his blog, “The Case for Fewer Entrepreneurs.”  A well known and respected blogger, Dao asks many of the tough questions and argues that “less is more.”

Read more: http://mayo615.com/2013/02/12/1530/

The last problem is the crucial need to encourage bigger thinking, Bigger Ideas. If we are to have a meaningful effort in entrepreneurial accelerators, shouldn’t it be more like a Manhattan Project, by prioritizing the kinds of new ideas that have real potential to advance and improve human existence?

The Washington Post published an article last year with the title, “Moral Decline and the End of Big Ideas.”   http://www.washingtonpost.com/national/on-innovations/moral-decline-and-the-end-of-big-ideas/2011/09/14/gIQAQntJwK_story.html  The author’s  point is that it is a sense of moral duty to make the world a better place that drives someone to change the World.  Or at least it should be..

Another opinion piece in the New York Times by Neal Gabler, also last year, asks where are the Big Ideas?  http://www.nytimes.com/2011/08/14/opinion/sunday/the-elusive-big-idea.html?pagewanted=all   The Atlantic magazine had published a list of the ” 14 biggest ideas of the year,”  the biggest of which, ironically was “The Rise of the Middle Class – Just Not Ours,” describing the rise of broad prosperity in the BRIC nations. The Atlantic list stimulated Gabler to predict a future of Big Data, but not Big Thought.. The implication I hear in Gabler’s editorial is that we are in a post Enlightenment time, a period of anti-intellectualism.  I hope not, but I fear it may be true.

Wary of edtech? Coursesmart crashes before student exams

I have heard a number of students express the fear that apps like Coursesmart will crash at the worst possible time:exams. Now it has happened, which creates a market acceptance problem that will take months to repair.. It is similar to the Odwalla juice contamination case study that eventually took the company to near bankruptcy.

Earlier this month, edtech company CourseSmart was awash in press for its new, albeit somewhat controversial, learning tools. Using digital textbooks, CourseSmart shows teachers and professors exactly how much time each student has spent with an assignment. Naturally this ignited concerns about privacy and the message it sends to students. (Are we educating them or babysitting them?) CourseSmart deftly batted those criticisms away with talk of engagement and data and improved teaching methods.

But this week, the company experienced a software company’s worst nightmare: It crashed. This seems to be a lean startup’s right of passage — Tumblr and Twitter’s early histories are peppered with well-publicized outages. Sure, people will whine that they suddenly can’t use their free social media tools, and it makes the startup look incompetent for a day. The difference when an edtech platform crashes, though, is that the consequences are a lot more serious. Unlike Twitter and Tumblr, textbooks and homework are mission-critical to students.

What’s worse is that CourseSmart isn’t a lean startup iterating its way to success. Used by more than 100 institutions, CourseSmart is owned by Pearson, McGraw-Hill, and other major publishers. And CourseSmart’s digital book rentals, which students lose access to after 180 days, are not cheap: 101 books cost between $90 and $100. Tuesday’s crash, which lasted a whole afternoon, led to a stream of angry tweets from students cramming for their exams.

 

Multidimensional Mobile Market War: Silicon Rust Belt

Winners and Losers: Tech’s Hot or Not List

Read more in the Wall Street Journal: http://online.wsj.com/article/SB10001424127887323809304578431211400776432.html?KEYWORDS=Tech%27s+Rust+belt

In this, my third post on the dramatic and fascinating developments, shifts, and impacts of the Multidimensional Mobile Market War, the precipitous decline of the leading personal computer industry competitors, has become even more pronounced than anyone suspected.  Last week, IDC and Gartner were in more or less violent agreement that the bottom had very suddenly dropped out of the PC market.

In my previous post I speculated that Michael Dell‘s attempt to take Dell Computer private was in major trouble. Carl Icahn and the Blackstone Group had already thrown a monkey wrench in Dell’s effort to buy back personal control of Dell. Then came the SEC disclosure statement that showed that Dell’s situation was more dire than previously known. This week the Blackstone Group announced that they no longer had an interest in Dell and were pulling out.  The final chapter of this may be that Dell Computer will run out of cash and simply be forced to shutter its doors.  Please keep in mind that Microsoft is a key strategic investor in Michael Dell’s privatization plan.

Then we turn to Microsoft itself and its problems. Microsoft has been grappling with major strategic problems as it attempts to transition away from personal computers into smart mobile.  Windows 8 has been a disappointment.  I gave my wife a Windows 8 laptop, and she immediately complained that the “Start” button was gone, and nothing was intuitive.  Microsoft has just announced that Windows 8.1 will include the return of the “Start” button. You can’t make up stuff this dumb. Nokia is struggling to re-establish a survivable market share in mobile using Windows 8 as its OS… IDC has been forecasting that Microsoft is unlikely to establish more than a 8% mobile OS market share by 2015. This is catastrophic for Microsoft.  Facebook‘s decision to implement an HTC Android device is yet another nail in Microsoft’s attempts to reinvent itself.

Some articles and blogs have argued that Intel is also at a “strategic inflection point,” as Andy Grove would have said, with its legendary reputation grounded in the PC business, as with Microsoft. While this is true, Intel’s short term results belie the  historically volatile and cyclical nature of the semiconductor market. What is clear, is that Intel saw the future some time ago, and that it has a coherent long term strategy. Intel has been diligently plowing its profits back into research and new market development programs. Most important in these new markets is the Atom low power chip for mobile, and perceptivity computing. The Intel Hillsboro facility we used to call “Jones Farm,” the Intel Labs, is famous for leading the industry efforts on the Universal Serial Bus (USB), Universal Asynchronus Digital Subscriber Line (UADSL), PCI bus, Bluetooth, and now a host of new market efforts, including energy harvesting technology.

I speculated last week that Lenovo must be rethinking the wisdom of it’s decision to buy IBM‘s PC business.  This appears not to be the case.  It has been reported this week that IBM is now in talks to sell its server business to Lenovo.  This revelation is also important in understanding IBM’s strategy. IBM appears to be completely disconnecting from its legendary past in computing hardware, and exclusively embracing “The Cloud”  and software as a service (SAAS).

Then we must consider the case of Hewlett Packard.  Over the last two years, HP has engaged in a schizophrenic death dance with the PC business, that has damaged the credibility of the HP brand, something many of us could never have imagined.  HP’s bizarre decisions to purchase the Palm OS for over $2 Billion, and British software company Autonomy, for over $11 Billion, which some have described as the greatest business blunder in history, surpassing Time Warner‘s blunder in purchasing AOL, leave observers shell shocked. But even more bizarre in my humble opinion (IMHO) is HP’s repeated blunders and reversals in the PC and tablet businesses.  HP has been in and out of the PC and tablet businesses so often that the HP brand credibility has been completely trashed.  With IBM now apparently getting completely out of hardware and concentrating entirely on The Cloud and SAAS, via IBM Global Services, it forces HP to yet again rethink its PC business, if it is to compete successfully with IBM.

Finally we must consider the situation of Oracle, a perennial big player in enterprise software and services. It’s CEO and America’s Cup sailor, Larry Ellison, recently acquired Sun Microsystems, its traditional hardware partner.  The logic of Ellison’s decision to acquire Sun escapes me.   Based on the fringe SPARC proprietary semiconductor architecture, Sun was never able to achieve the cost/volume advantages of Intel. Oracle should have focused on becoming hardware independent, as IBM seems to doing.  Instead, Oracle’s financial performance is under pressure, and they are lumbered with Sun hardware.

The spectre of a Silicon Valley Rust Belt seems to be one likely outcome of the Multidimensional Mobile Market War.  Who will be a victim and who will be a survivor is not yet clear.  If only from a historical point of view, I would put my bet on IBM and Intel, who both have decades long reputations for reinventing themselves. I would also be looking at the strategic directions both IBM and Intel are taking, as potentially good indicators of the future.

Microsoft’s New End Game Strategy: Pray

PC Sales in Freefall: Wall Street Journal

Quarterly PC Shipments Drop 14% as Windows 8 Fails to Stem Advance of iPads and Android Devices

Mega Mobile Market Share War Moving At Breathtaking Speed to the End Game

In a further episode of my earlier posts on the Mega Mobile Market Share War, it would seem that International Data Corporation (IDC) and Gartner, the two leading high tech industry analysis firms, are haggling over whether the precipitous drop in quarterly PC sales is 11. 2% or 14%.  It also adds evidence to the accelerating rate of change in the corporate life cycle. Corporate life cycle events that took a decade are now occurring in a few short years.

Any way you look at it, it is a catastrophe for everyone in the PC business, and a further piece of the puzzle in determining who will win and lose in mobile. Shares of Lenovo, HP, Microsoft, and even Apple are all down as the market reacts to the news.  This is doubly bad news for Microsoft, whose strategy seems to have been to introduce Windows 8 to bolster lagging PC demand, while building for the future with tablets and smartphones.  It appears that the bottom has fallen out for Microsoft in more ways than one.  First, we have the dismal forecasts for Windows mobile, also from IDC. Microsoft had been forecast to have perhaps 8% of the smart mobile OS market by 2015, fighting with Blackberry for the leftovers not taken by Apple IOS or Android. Microsoft’s mobile device partner, Nokia, is not looking too healthy in the mobile device war.   If I were a Finn from Nokia, I would be camping out in Mountain View, not Redmond. Last week’s announcement that Facebook would adopt a modified version of the Android OS from Google, would seem to further dim Microsoft’s chances of finding a survivable market share in mobile, much less Blackberry.

No one has mentioned Dell Computer, currently in the midst of a protracted investor battle over privatization, pitting Michael Dell against Carl Icahn and the Blackstone Group. The market news today has undoubtedly impacted this situation in a major negative way. Michael Dell waited too long, and don’t forget that Microsoft is also a player in the original Dell plan to go private.. This is nothing less than a corporate train wreck.  I could envision Dell now perhaps closing its doors, and Icahn, waiting like a predator to buy the deceased’s assets for a song.

Frankly, for those of us who were forced to contend with Microsoft’s unbelievable arrogance and hubris in the late 1990’s, we view the likely difficult times ahead for Microsoft with some irony. The way it is playing out, it is extremely unlikely that Microsoft or Blackberry will survive in their current forms. Meg Whitman will now probably announce the third or fourth reversal in PC strategy at HP and exit the business once and for all, to save HP.

IBM was incredibly smart to sell out to Lenovo when it did, and Lenovo must now be asking itself if buying the PC business from IBM was such a good idea, and rethink where it is headed.

Has Intel Corporation moved rapidly enough into mobile low power devices, and new markets like “perceptivity computing” which they showcased at CES this year?

It does seem increasingly likely that Google Android is in an unassailable position to win the Mega Mobile Market Share War. Apple and IOS will be number two. I would also offer that Apple’s situation has been influenced by a number of other ancillary factors. The death of Steve Jobs and Tim Cook assuming the reins of the company is one key factor, still not completely clear in its effect.  Rumors began to float today that Cook would announce the first true mobile wallet app at the upcoming Apple Developer’s Conference.  I just don’t see mobile payments as being the Apple “killer app” that some in the high tech blogosphere are calling it. Apple does not have a monopoly on mobile payment systems, and most believe that “point of sale”  (POS) equipment will take nearly a decade to roll out. Another way of making my point is to ask why Apple left a “near field communication” (NFC) chip out of the iPhone 5 if Apple considered NFC and mobile payment to be the next big thing?  That is the other factor: Apple arrogance and monopoly mentality that has been part of the Apple culture since the early days. It is Apple’s Achilles heel.

So my final word on all of this is that I have great respect for Eric Schmidt, Larry Page and Sergei Brin at Google. But even if Google and Android win the MMM Share War, as we all know, competitive advantage is a fleeting thing. Google need only watch Microsoft’s current conundrum to be reminded of that fact.