…someone keep my coffee warm, I’ll be back shortly.
In England there was, at the time, no funding right of passage. Having not lived there in ten years though I don’t know the full extent of how funding, if any, is distributed now. Once up a time though I lived in Harrogate and had a few ideas what I wanted to perhaps see about taking further.
Rarely there was an event going on and I made the effort to attend that was “open to all”.
Before I WAS LET IN I was asked one question, “Son, what’s your postcode?”, thinking it was some marketing thing I swiftly answered, “HG1”. The guy looked at me, “What are you doing here? You’re entitled to nothing”. I spent the next five minutes actually justifying my existence of why I should be let in. It’s not like it was a pitch panel, seminars or anything like that they were just the usual run of exhibitor stands. So you come away deflated and you are left with a choice, hammer it out and do it yourself or give up. At least 95% gave up.
Startup Natural Selection I call it, do you have the ability to survive when the odds are stacked against you?
You need to vary the idea pool, some ideas will thrive while some will obviously perish (hopefully sooner rather than later). Once a model is found that works (i.e. generates revenue) then exploit it to multiple revenue streams and make more money.
This is stark contrast to what happens now, especially where I live, where the first question is, “What funding can I get”, with Oliver like cupped hands. You hatch your idea and in a heartbeat it’s on the path to a proof of concept fund, first £10K and then £40K. That’s okay and I fully support the fact that you need to build something when you don’t have the skills pools to create product.
And that’s the game that’s played, just take what’s available and not worry about the long term outcome. Natural selection should take hold but take a little longer to kick in, money has this habit of keeping the patient alive a little longer than naturally required.
I’d not seen any real reading of what it was like to run a startup (aside my own experiences of working in Silicon Valley as a developer) until yesterday when Ben Hammersley pointed me to the Wired article on “No Exit: Struggling To Survive The Modern Goldrush“, the full version is available as a Wired Extra (it’s less than two quid or, 2/3 the price of that coffee you’re about to get in Established 😉 ).
Unless you are willing to move to where the proper money is, see Trustev and Pat Phelan, then you are seriously reducing your chances. Not to say great things and great exits can’t exist over here because that’s just not true. All business is local and taking Silicon Valley money is the call sign to them that you are willing to prove your business other there, not over here. There are a few exceptions but not many.
Some would argue that I’m being too cynical about free money, possibly. Perhaps the rules need to tighten a little, perhaps. What happens though on the day it dries up? Does your belief in your idea run so deep to the core that you’ll do anything to make sure it happens? Let’s be honest, probably not….
A piece of advice, “build it and they will come” is nonsense.
While there wasn’t a lot of public feedback with “Startups: The Passion and The Paradox” the private feedback has been incredibly interesting. I am acutely aware that the last few posts have been rather opinionated, I make no apologies for speaking my mind, it’s been rather therapeutic actually.
As I close a chapter in the next few days and come back refreshed, ready but not going to take on the world…. well not without measured risk assessment first.
“Deep Knowledge Ventures (DKV), a Hong Kong based venture capital fund focused on companies developing therapies for age-related disease and regenerative medicine, has appointed VITAL, a machine learning program capable of making investment recommendations in the life science sector, to its board.” (PRWeb)
Well, well, well…. I would say there’ll be a large clause in company law saying that board members must be human but it made good jumpy out “machines are taking over the world” reading nonetheless.
Decision trees have been on my mind a lot recently, they were mocked a few years back but have come back in favour with more powerful machine learning algorithms.
When I was writing a the book “Machine Learning: A hands-on approach”, (yes I’m writing a book) I decided to dedicate a whole chapter on the blessed creatures. Divide and conquer still has a place.
If you want to play around with decision trees and you have no idea how to create them, then grab some csv data and head to www.decisionshare.net (disclaimer I’m the 100% equity shareholder, CEO, CTO and CTO and all the other CxO’s :)).
Will we ever approach a time when these trees will control? Well a bit of yes and a bit of no I suppose. In advertising it’s a yes, it’s already happening. It’s happening in trading too… but in the board room? I don’t think so, you need some human level of insight and intervention, just in case.
It’s a nice idea though and one I’ll be pursuing a little more…..
Occasionally I get asked this question, “Why the Marilyn Monroe quotes/fascination?”, along with the second question, “Why are you so grumpy?”
The second question is easier to answer first, I’m the grumpiest man in Yorkshire, I’m opinionated and when I have something to say I’ll say it. No way am I on par with Jamie McDonald, the “crossest man in Scotland” (clip NFSW, you were warned), but there you are.
The first question is slightly more difficult. This is a lot more to do with psychology, the art of persona and the willingness to play the industry at their game, Hollywood wanted a simple blonde but strip away the actress and you have someone far more in tune, complex and intelligent. And no I don’t fancy her, this is about the internal not the external.
Do Your Passion?
A lot of books preach this “do your passion” thing, not “build something that will create sustainable revenue”. We’re reaching a point of “peak startup” very similar to wedding photographers in Northern Ireland, there came a time that there were more, what felt like, more professional photographers than population. I think the same is happening with tech startups. The people that peddle the “it’s great to be a startup” either aren’t working in one, are getting a stable salary or work for the public sector plumping up the PR press releases that we need an “entrepreneurial mindset”.
If you think of a rock band, they want to do stadium shows and sell platinum albums. A story writer/actor/actress will be looking for the Hollywood blockbuster with record box office takings and a startup will be looking for the billion dollar exit (that may be running the company, merging or selling on). All possible but all highly improbable.
Wherever you look on this path to enlightenment you’ll come across the same pattern, someone will want to be in the middle to help you on your journey.
- The rock band needs a record label.
- The film folk need an agent.
- The startup needs an Incubator, Hub, VC or Angel.
Now here’s the rub when you have one of these guys in the middle of you and your dream there’s a good chance their motives will not always aline with yours. A record label will want control of the music you product, the band now builds product to order, “what the kids are listening to is this…. could you be a bit more like Lady Gaga’s early days?”.
Startups look at VC’s, investors and angels as the towering oracles of mentorship, advice and all knowing omnipresence. Not many will do that, they have job to do, make money. I only know a few VC types I could walk up to and ask what companies were they in when they exited?
Many VC’s are like doctors who can’t take the medicine they prescribe. Let’s quickly remind ourselves of what a VC actually is, they put money (usually other people’s) in to ventures they believe will give a return back to the fund. I won’t start on management fees per quarter or the high probability you’ll be ousted as CEO real quick once the VC takes a board position, as hopefully you know all this already. If not, then I suggest you start reading and quickly.
There’s the lean movement, investor readiness programmes, funds, proof of concept programmes, accelerators, hubs and they’ll all feed the notion that your startup is great, brilliant and worth the 20 hours days, progress reports and so on. Let me add this notion, they’re paid to tell you you’re great so you keep on coming back.
At no point did anyone say, “for f**ks sake stop!”, because they all know there’s the 10% rule in any given city that you might progress further. To a VC you are a bet, a risk with a 90% chance of failing. And they won’t be there to brush the dust off your shoulders when it all crumbles around you, by that time they already invested in another 20 companies in the two year space and you’re a mere after thought, “Did that company make us 5x? Nope, move on”.
VC’s and investors have a name for their pool, “captives”. I’ll leave that statement at that, make of it what you will.
A Note To The Accelerators, Hubs and Programmes
I know you have a job to do, I understand that it’s a numbers game, in order to get more state money you need to put n startups through the programme (the end results of those startups isn’t really a talking point). One thing I ask, honesty. Not to me, or the public, but to those who are putting their lives and sanity on the line. Don’t sell them false hope, or the notion that they can “make it” when you full well know they don’t have a cat in hells chance. The paradoxical statement of saying something is right when you know it’s wrong.
Best, finest surgeon accelerator programme, come cut me open….
Here’s the big Marilyn chink, opening up the huge notion of what the startup is, the business plan or executive summary and finding out there is nothing there. Nothing but sawdust as Marilyn put in her diary of the dream she had.
Depending on the location accelerator programmes will be choosy, or not so choosy, like I said before it’s a numbers game and you, dear startup, are just a mere number. Yes the accelerator will help you but don’t discount the fact that they know you may be a on road to nowhere. What’s the loss to them if the 20-30k your getting isn’t theirs, there’s no loss so there’s no connect between the money and your performance in their terms.
Many books claim that the “Surgeon Story” recalled by Marilyn Monroe was a recollection of a nightmare, others say that it was a description of a mind control session.
Best finest surgeon—Strasberg
to cut me open which I don’t mind since Dr. H
has prepared me—given me anaesthetic
and has also diagnosed the case and
agrees with what has to be done—
an operation—to bring myself back to
life and to cure me of this terrible dis-ease
whatever the hell it is—(…)
Every Startup Is A Marilyn
The startup might be hurting like hell on the inside but you’ll do anything to be noticed. You’ll go to all the networking events (casting calls), talk to all the “right” people and go for all the parts you can get your hands on (funding applications). And after years of pain, rejection, more pain, hard work, alienation and the rest of it you’ll happily play the blonde bimbo role to be noticed.
If a programme says, “well if you just changed this aspect of your business plan then you might get money”, from that point on you’ve sold your soul. The first puppet string has been connected from them to you, they can tug and you will react.
Here’s my advice, take it for what you will. You need a circle of friends you can trust to be honest with you. For this I am blessed, seriously blessed, I’m honest with them and they are honest with me in return. And I don’t mean people that just say, “that’s a great idea, you should do that”. That’s not an answer.
The Silicon Valley way has perhaps done more harm than good in terms of what’s attainable, like I’ve said nothing is impossible. Many countries focus on the Valley as a beacon of how it should be, regardless of cultural norms, available money and so on. The bottom line is it’s quite expensive to act like Silicon Valley. That too is a personified blonde bimbo actress with a serious complex.
At the end of the day the decision is really yours, what’s good for you, your team and how you deal with the day to day. Just make sure you know your VC/Accelertor/Hub/Angel inside and out.
Yes I’m grumpy, risk averse and 100% equity as rule and with good reason. I’m not looking for Strasberg or Kris like help only to watch the guts of the company go to them.
I’d rather be a small, mobile, intelligent unit than under too much control from someone else. It’s ridiculous and goes against the current trend of raise this and VC fund that, but I’d rather be ridiculous and me rather than what someone else wants me to be.
In November 2010 I was paraphrased. And it was one of those phrases that’s been used and used again. It all stemmed from a panel I was one when asked, “If I was to give you £100 now what you would invest it on?”, I replied that I’d invest in a startup that worked on mining data, we process little of what we create.
My dear friend, Kevin Parker, paraphrased it into: “Data is the new oil, in the next ten years it will be the world’s most valuable natural resource” (Kevin’s better at those sorts of things than I).
Fast forward to 2014, I’ve been teaching Hadoop things, endlessly blogging on Hadoop (all the way back in 2011), real time analytics with SpringXD and even a sentiment server on a Raspberry Pi. The buzzwords have finally caught on…. but alas, Northern Ireland my dear friend, you’re probably too late.
Only the large will survive. The rest will either be employed or outsource to the larger. Even then the larger will be catching the falling droplets of the very large.
It all boils down to the curve.
In standard deviation terms we’re probably zero degrees from the mean i.e. right in the middle. Call it “peak BigData” if you will. And as much as the suits, the consultants and invested startups might not like me to say it, that’s basically where we are. We needed to be ahead of the curve, the likes of INI missed that in my opinion.
Unless you’re willing to create a service company and catch the falling work then expect to have to raise $5-10M seed and series A to do anything remotely viable and get it in front of the right eyes. There’s plenty of opportunity in some respects, visualisation is still pretty untapped (except the likes of Tableau) but you have vendors clambering over the larger clients when it comes to in memory processing (SAP), Hadoop infrastructure (Cloudera, Hortonworks, MapR, EMC etc etc) and storage prices tumbling at a rapid rate.
And I know what you’re thinking, “we’re competing on a global platform Jase/Jazz”, yes we are. Along with everyone else and all this in the knowledge that Silicon Valley and India will be already taking 80% of it, leaving the rest of us to compete for the remaining 20%.
Like I said at Beltech2014 last month, the skills are very short in supply over here so collaboration is key. Something that was being echoed in the #BDWBelfast conference yesterday. And if you believe you think there’s untold riches in that data, yes there is but a million people also said the same thing before way ahead of the curve, you have catch up to do and quickly.
An excellent talk (in plain English) from Jane Ruffino, tech writer and GetBulb CMO.
“I’m going to disrupt bacon, I know it’s a bold move considering there are so many bacon retailers out there but I’m passionate about bacon and it’s ripe for disrupting….. the idea came about because I couldn’t buy bacon the way I wanted to buy bacon and everyone will want to do the same”
At this point on we have two options, be real and do a back of the beer mat calculation to see if it’s a go-er, or rely on someone else to stump up the cash to fuel our wayward ideas. Fear of failure is one thing, fear of putting your own blood sweat and tears is something else.
We can business model canvas it, lean it this way and the other way (there are excellent books on this) but first I think it comes down to some basic maths. All hail the beermat!
As I don’t have a beermat to hand I’ll use a Moleskin, the hipster’s beermat, and doodle it from there.
So I have my team and they all work from home, handy as they’ll all use their own internet and save me a fortune in furnishing out an office, the latest funky coffee machine, pool table, fridge, light, heat, power and so on.
I need a team, the books have told me, I also know first hand it’s painful if you don’t. To pay the team I need to have revenue to the tune of 11K a month and it’s at this point why most man/woman in the middle operations die a slow and painful death.
In retail, especially in small retail the worst place you can be is between the retailer’s customer and the retailer. They’re quite territorial and protective of their customers, rightly so.
Also there’s the small matter of you, the team, it’s small therefore coverage becomes a problem and you’re essentially working to the locality or the 10K rule as it’s known in retail. The majority of sales will come within the 10K radius of where you are.
As a guess I’m guessing my average customer purchase will be £7.00 and I need to take my 10%* as I’m the man/woman in the middle. So that’s 70p. I’m handling the card processing then I’m liable for the processing fee too (but I could pass that onto the retailer afterwards).
So back of the Moleskin says I need over 16K transactions per month, call that 800 per day based on a five day working week (not everyone buys bacon on a Saturday or Sunday).And you have a duel sales pitch to do, one to get customers downloading your method of interacting with you and then the sale to the retailer to partner with you. That’s okay you hired a marketing person with no marketing budget to get on the phone and pound the ground. Man/Woman in the middle startups are not easy.
Funding might be available but this is an odd double edge sword. It might be handy to get you up and running (build app and backend etc) but it can give this false sense of security that you’re onto a winner because you got the funding.
Let me make it easy, you’re not.
The poor pen pusher that processes the funding applications is not passionate about your startup, they might use it once or twice but they’re not the customer who gets your logo tattooed on their chest.
For me personally it all boils back to those numbers. Can my “product” make that sort of money so I can sleep well at night, not have nightmares and show my face in public? No freebies or “it’ll be good for your profile” back scratching. That doesn’t put food on the table, sometimes these are good things but they should be the minority cases and not the majority.
You might get on to an accelerator who will expect you to mingle with other’s who had the same dream and now collect around the water cooler and realise from the exhausted looking faces that you’re all in the same boat. This time though you have to find n amount of customers for the next time you walk through the door. If you took a large dollop of cash from an angel or VC expect worse treatment in subsequent board meetings as it all hinges around one metric, “did you hit your revenue targets?”.
From disrupting bacon has now become a fresh living hell, if you’d taken a bank loan to fund this (notice how you didn’t try as you just knew what the answer would be) the manager would be on the phone every day asking about what revenue you’d taken….. at least you’d written it down on a beermat.
I don’t want to put you off I just want you to see what you’re letting yourself in for. The idealistic view of having a tech startup is glossed with shiny things and odd media headlines of the ones who made it. It doesn’t go into much detail for the other 98% who put everything on the line, including sanity, to not come out of the other side.
If you can cope with that then I wish you all the best on your man/woman in the middle startup journey.
* – probably most of the retailers profit margin another reason why these things fail