Jyllandsposten om Silicon Venture

Recap: The Entrepreneurial Buzzwords in The Bay Area

by Krisitan Brøndum


We are near the end of our trip to the most extreme entrepreneurial environment in the world, also called The Bay Area. It has been a great experience being here sensing what I have been reading about in books and academic papers during my studies at Aalborg University. But what have I learned about entrepreneurship and startups in the last 4 weeks, which I have not learned in my entrepreneurship program in Denmark?

Since this entry is a recap, I would like to start out by introducing the two entrepreneurial buzzwords I have heard the most out here: traction andscalability. Coincidentally, these “concepts” or words were kind of new to me but both appears to be some of the most important things to grasp when doing a startup in The Bay Area and wanting it to succeed. 

TRACTION

Firstly, traction has been named at every single event I have attended here; be it a talk at Stanford, a VC pitching event or a company visit. Generally speaking, "getting traction in the market" or "your product gaining traction" means that “your customers” is getting aware/showing interest in what you offer to them, i.e. your value proposition. So what I have learned out here is that it is important to get customers as early as possible. A better conceptual might be “early adopters”, as these adopters do not need to buy anything from you – that is not essential. Adoption is everything; you can make the smartest and most sustainable product in the world, but if nobody wants to buy it, it is not a success! So, regarding business startup you need to ask yourself: is this [read: value proposition] something someone would pay for? Is it something people would show interest in? Investors might not even consider you if cannot prove that your business idea has traction.  ¨

SCALABILITY

Scalability is another buzzword I have heard at every event in The Bay Area. Scalability of a business implies that the underlying business model offers the potential for economic growth. You need to be able to quickly extend your business into new markets and/or customer segments.  Now, out here this buzzword plays a vital role in the overall theme “entrepreneurship”, as entrepreneurship in The Bay Area is equal to funding. Bootstrapping your business is only a temporary thing - you need to have funding in order to succeed and become the next Facebook, Twitter etc. which every entrepreneur out here dreams of. Scalability and funding goes hand in hand, as VCs only want to fund businesses which are scalable, i.e. ideas that have the ability to scale. They invest in you because they want to flip over the company and get 7X or maybe even 10X in return of their initial investment. VCs will think: “how does this business turn into a billion dollar exit?” or they ask: “is this business scalable?”.    

In short, your business idea needs traction and your idea needs to be scalable, in order to raise funding – be it seed funding, angel funding or venture capital. Even though most entrepreneurs want to avoid giving up equity of their startup, out here it is the only way to go if you want to succeed. Scott Engler, CRO of Longboard Media, even stated that growing your business in a healthy way is by not taking in funding. When you take in money from the outside it becomes a little less fun, he said. However, if you are a technology company (which most of the startups in The Bay Area are) it is very hard to grow your company organically and not take funding from the outside, as technology is changing so fast.  

"Only Those Who Dare to Fail Greatly, Win Greatly"

-- by Yuval Oren

It is soon time to pack my luggage with all the new insights and inspirations i have collected in the past 4 weeks, and get back to the real life. The trick now, is to se what of all I've seen here will actually stick, and how could I implement this in my future actions.

I think that the events I've been to during the last few days in many ways sum up this experience for me. We began with an event called VC Task Force. This event was an excellent opportunity to see how entrepreneurs pitch to VCs in real life. I thought that it was very satisfying to see how the last 3 weeks have changed my mind set; I could see the exact structure the different entrepreneurs used for their pitch, noticed small "mistakes" they have done, and then heard the panel of VCs correct these exact things in their feedback. I found the VCs feedback to be especially interesting, as it opened my eyes to the exact issues they care about: e.g. amount of costumers needed to break even,  why are you uniquely suitable to run this company, how much money do you ask for, how will you use this money, present your team and so on, and so forth.

The following event was the Clean Tech Open 2011 Global Forum, in San Jose, CA. This event allowed us to enter a very special environment of entrepreneurs and investors and hear how developers of different products and services pitch their ideas and how VCs responded to that. Furthermore, this event gave us a great networking opportunity. I pitched www.fundtalent.com to many different people and companies, including the HR managers from PWC, and came back home with great feedback and a stack of business cards. The highlight of the evening for me without a doubt, was hearing the presentation of Edward Lu, former NASA Astronaut who spent 6 months in space. He brought forward NASA's innovation view - "To predict the future - invent it!".

Perhaps one of the most inspiring meetings we had during this trip was the one we had with Juha Christensen from Progression Partners - one of the founders of Progression Partners, as well as a board member and/or president in several other companies. Juha has a great knowledge base in the development of Startups. He gave us a very critical and useful point of view regarding what they look for in new startups, in order to take them on board. I have pitched www.fundtalent.com to him, and he found it very interesting. I plan to keep him in touch and try to use his advice as much as possible. I especially liked Juha's final remark: "When creating a startup, aim for big ideas. If you aim for a multi-billion exit, even if you hit around it, it will still be a success. There is no point wasting all that time on a small idea". This for me is Silicon Valley in a nutshell. I love it.

In the last few days of our stay here we tried to take all the great pieces of information we got during this trip, go out and try to process it all and come out of some take-home key points. Hiking in Yosemite Park, cruising to Alcatraz Island, and simply walking across the Golden Gate Bridge, reminds you how beautiful this area is, and how good life is here. It is my personal view that when life is good, when you are calm and happy, your mind is open to create great things. Not to counter the "Necessity is the mother of all invention" which I greatly agree with, i believe that this area is so amazing, that one simply gets in the mood to take over the world. And this leads me to my bottom line; The beautiful thing in Silicon valley is that everybody wants to take over the world, to be the best there ever was. This is done through the understanding that it is sharing rather then fighting with everybody, and hiding in your basement, that leads to the greatest of improvements. People are open to new ideas, to new people, always want to hear about a new concept, a new point of view. It is by pitching and explaining your idea a thousand times, hearing a thousand different responses and feedbacks, and pivoting the original idea again and again until it is perfect - which leads to truly inventive ideas, and to success. Be all you can be.

iPivot

- by Johan Stockmarr

We are now close to the ending of our trip and this is my personal sum up of how my initial Business idea have changed (Pivoted) during my stay in San Francisco and what I have been doing.

As stated in many of the other blog posts; Lean Start-up methodology is the hype here. The central reason for its popularity are in my opinion related to fact that the business around Venture Capital (VC) funding have changed. It seems that the classic VC funding of small promising start ups have broken and are now focused more on small companies that are all ready ”making it” and needs capital to scale their business. In this environment, concepts like Lean Start-up is a popular and applicable method to for start-up companies to ”Bootstrap” there business – getting started without funding.

The main concept of Lean Start-up is to go out an test your business idea and your related assumptions about your marked – what the customers want. As you test your assumptions a find discrepancies you change your business model to fit your findings – lowering the risk of product failure. Every time you change the business model due to new test findings you 'Pivot' your Business model. This is the general concept of Lean Start-up and has been the methodology that I have used to test my own Business Idea; The Edition.

My original idea – before going to San Francisco

The Edition was to make multiple mobile applications that provided users with information about a specific niche environment of Copenhagen Night-life – places, events and users of the environment. Whether it was Tango music, Jazz, Techno-clubbing and so on, users could get access to this information through a small fee, buying the mobile application.  

Experiences, Findings and testing in San Francisco

After meeting many entrepreneurs the start-up companies during the first three weeks, it has become clear to me that my original business model; making people pay for every new mobile application, would not work. A more precise strategy on how to get people to use my product was necessary. 

During the first day San Francisco I found the company Yelp that was already doing something similar to what I was working on. I was not the same product – but had many similarities. Yelp does not operate in Denmark and had never hear of it. Yelp is a web and  mobile platform that encourage people to rate local business and services, so that people can make a choice on behalf of others perception and experience. I want to do the same, but be more narrow in my scope and focus on real-time information – what goes on here-and-now around you.

Because of the many similarities I decided to make a personal study of Yelp – how did they engage people to rate local businesses, how did they engage local business owners, what was the business model and how did people actually use the application and for what:

1)    I started my research by finding every interview and news spot I could get my hands on. This gave me some insight on the history of how they build the company and what strategies they had used. I also had some good talksith Torsten Kolind from YouNoodle about the project. He had been working on a similar idea many years ago – gave me some great inspiration and things to consider – how to do that extra little thing that brings customers more value, than you put into it. He also new some of the original start-up team members of Yelp and gave me some insights into their initial strategy in getting people to use the service. The created a team of early vangelists and nurtured them to help building up the database with recommendation.

2)    I wanted to know how people used Yelp. So I started to use the program myself and go out on café's and into stores – asking customers if they used Yelp, how they used Yelp and why they used Yelp. As a reversed Dane this was quite wird to do at first. But I got use to it and got some very interesting insights. Insights that made me change my original assumption on how people use these kind of services and what risk that comes along when letting people in power of the content. To my surprise many people used the web application of Yelp on there mobile, because they searched businesses through Google and found the Yelp business profile in the search result. This made me think – because I originally did not plan to make a web application of the product. But now it seems that this would be a mistake. The most important finding though, is that the user is not willing to pay for this service, if it is to generate user-recommendations. So now I am working on a different business model that has to do with ticket sales and advertising.

3)    After starting my research I have been working on developing my pitching skills – every time you find something new, you start to see you product in a new light, forcing you to change you pitch. This has been very healthy and made my business idea more and more clear, even thought more knowledge brings more unanswered questions too. I view it as a healthy sign of getting closer to something useful.

The Present Idea

Too structure all this new information, I have started to use the Lean Canvas as a way of structuring my present view of the business, based on the findings I constantly get:

I'm very pleased with this opportunity of going to San Francisco and the experience of the business environment in Silicon Valley. It is definitely not the last time I have been here. As Danes we can learn a lot from this place when it comes to entrepreneurship. But I think it is important to emphasis the fact that it is a culture and mentality and not just a model or busniess cluster that makes this place special. If we strive for this environment in Denmark I'm convinced that facilitating and promoting entrepreneurship early on in the education system is the essences and central strategy for being successful in this goal.

I hope to be able to give share, by creating a new way of discovering the many amazing events and places Copenhagen night-life has to offer – bringing together local artist, businesses and you.

Reflections on three weeks in the valley

- Johan-Ulrik Lervang

So after three weeks in the valley I have learned quite a few things. One - three or four weeks will never be enough time to network in place like this. Although my "colleagues" might not agree, the only one actually having traction in regards to his business idea has been Steven. Steven has had the advantage of having friends living here prior to coming and therefore being able to leverage their networks. That being said, it has in no way been a waste of time for the rest of us. Seeing how networking occurs here raises quite a few questions - especially as Danes. This leads to my second point.

Networking in Silcon Valley at least seems to have people divided into two categories.  On one hand we have the people too busy to interact with people not within their area of expertise for more than 20 seconds and on the other hand we have people wanting to network, hoping that other things might be brought to the table. I am sure that all the us, the participating students, have experienced people coming up to us, sounding genially interested in knowing more about us only to walk away within a minute - as a Dane that comes off quite rude, but it is the rules of the game here. At the same time we have also experienced the other version. Last Thursday after having visited Progression Partners in Palo Alto - Yuval, Johan, Jakub and I went to visit a two women company called Panafold. Johan had befriended one of the two founders at an investors pitch event earlier that week. After having played around a bit with their application allowing Panafold to record our feedback and how we interacted with their application we sat down to talk about we had been so far and our ideas. Now these two women knew a lot of professors around the US, especially who to talk to even though our ideas ranged from employer branding to image recognition software.

Now I have since asked myself what I think about these two ways of networking. First of all both types network with the sole goal of obtaining access to the other persons network - in my mind a very shallow way of interacting with people. That being said I see reasoning behind both types. Going in depth with multiple people is time consuming and if you are on a mission and need to meet the right people now, it is likely not the way to go. On the other hand pursuing the right person now also means that you could cut yourself off from befriending the person, who himself might not be interesting, but knows the right people. Especially at these meet-ups this would appear to be an extremely fatal networking strategy as people do vastly different things.

In the end there is definitely a cultural difference. In Denmark we like to get to know a person before we introduce them to our network - here you don't. We've been told several times that we need to improve our ability to cut people off introducing their idea by simply leaving. I must say that I often find people's ideas interesting and inspiring and be honest I like to give people feedback on their ideas - at least when I am able to comprehend them. Deep down I am probably too Danish for this game because in the end I just want us all to be friends.

No fear necessary - A guidebook in failing for Europeans

- by Jakub Bares


My definition of entrepreneurship is “Asking smart questions and finding most relevant answers”.
The bigger variety of sources and points of view the better. 
In a sense, your own opinion doesn't matter, because it moves faster than a river. What matters is how you fin relevant points of view for the given problem you are trying to solve at the given time.
As result, the mind of an entrepreneur is a mosaic of interchangeable parts - each reflecting nothing more than the current best point of view.


POV 1:  Failure vs. Collapse - The truth about innovation

Most ideas are bad!.  9 out of 10 startups fail.

The other side of the coin is that US job growth is “entirely run” by startups  Study named “The Importance of Startups in Job Creation and Job Destruction” states that between 1977 and 2005, existing firms are net job destroyers, losing 1 million jobs net combined per year. By contrast, in their first year, new firms add an average of 3 million jobs,

See these articles:
Something is happening here.
Big Shift - Why it Matters
The Power of Pull, How Small Moves, Smartly Made Can Set Big Things in Motion


POV 2: How do you fail and win at the same time? 


"My willingness to fail, gives me ability to succeed" 
- Vinad Khosla




Problem = Opportunity


Wrong is necessary to understand right.


“If you haven`t failed before, VCs wont trust you have enough experience”
- Manu Kumar (K9 Ventures

The most important thing you can lose is time.




“Don`t even doubt it, your idea sucks, now go do it anyway”  

POV 3: Learning to swim 

 “Entrepreneurship is the management discipline that deals with situations of high uncertainty”
- Eric Ries 

“The goal cannot be reduction of uncertainty, but to build capacity to live creatively within uncertainty”
-  Tim Kastelle

Definition of entrepreneurship: “Insane perseverance in the face of complete resistance”


POV 4: Vision

“The entrepreneurs who make it, are focused on the vision and have unreasonable expectations that the world will be as they see it…


The key is that they see a world that is different from the world they live in now. That gets them through any the obstacle” Frank Chen (Andreessen Horowitz)

Getting around

- by Stephen Gregory Lutsch

Wednesday Nov 9^th:

Today was interesting. I was able to make a few meetings and connections within the energy industry here in California. Setup a meeting with a friend of a friend for tomorrow. She has been working for the big utility provider PG&E for years and now just moved into an energy consulting position. I look forward to picking her mind and getting a better idea of how utilities work and perceive the renewable market. Also, to find out how we might partner with them instead of compete against them.

Then in the evening I met up with Magnus and Lasse from the Innovation Center Denmark to attend the Yammer tour event. Yammer is a 3 year old company that develops social networks for enterprise customers internally and externally. I must say the 3 hours of presentations were INCREDIBLY underwhelming! 

I mean wow. How can a three year old startup be SO boring and excited about mundane features. They announced the release of a news ticker (like Facebook), a watered down wiki system called "pages" (I believe) and collaborative same time editing for the pages (pretty useless). I am impressed at how boring and corporate a 3 year old startup can sound. 

Oh and not only were the features more than a little weak they were suppose to be demoing them. However the CEO simply played a pre-recorded video and talked about it! What is that all about. Not a little embarrassing to "demo" live features but not do a live demo for the audience during your big launch. They should keep that in mind next time.

So I am thinking "wow, you have to be kidding" and that I could not possible be the only one thinking how unimpressive this was, but no. I look around to see basically the whole room nodding in agreement and smiling! I must have missed something. I've worked in IT for over 7 years administering systems like this and network infrastructure so I HOPE the big deal is not what they talked about but rather the enterprise AD integration and auditing tools. I hope!

Oh and the company recently received 50 million dollars…yes $50,000,000 for this product. I guess if you say social media and app you get at least 20. I seriously do not understand but I am also not one of their high paying customers. 

Ok. Enough ranting and criticizing yammer. They are obviously doing something right. Besides that was just the first part of the evening. I have to give them two thumbs up for throwing a decent party afterwards. Good food and open bar plus some odd things (see photos) made for an entertaining rest of the evening. We Yammed it up the rest of the evening…we used verb variation of Yammer all evening. :)

Some pics from the night:

Thursday Nov. 10^th:

A good day today. I met up with Niki, whom I was introduced to through two good friends here in the bay area. She has worked in with PG&E for years and had tons of good advice. I meet her for lunch and she answered lots of questions but as the same time made me realize just how little i know about the energy industry. I have a ton more to learn if I want to build a business within this market. She also connected me with a Berkeley professor that has been working a ton on miro-grids here in the USA and China. I will meet him next week Thursday. 

It is crazy how quickly you can get in contact with people out here and the general attitude is very conducive to this. If you show a little interest and are not a jerk then people want to help and will often go out of their way. It does not feel like "networking" so much as meeting really interesting people that you want to know better.

Then it was such a gorgeous day I walked around a bit and snapped a few tourist pictures. Below.

In the evening I met Magnus from the Innovation Center Denmark and we took the  Bay Area Rapid Transit (BART) to Berkeley for a panel discussion on clean tech entrepreneurship. Unfortunately, due to some protests or riots in Oakland our train was delayed. This meant a very crowded, warm slow train that put us at the discussion a little late. However we were not the only ones so I do not think we missed much. The three companies represented were working with printing rechargeable batteries Imprint Energy, Tenrehte, and Primus Power. Primus Power has generated lots of startup capital by applying and receiving grants. This strategy should not be overlooked when developing a clean tech business or research based company. Lots of government money out there.

After we grabbed some local and very unhealthy american food. Way too much of it. We definitely are still used to Danish prices and quantity served. There also happened to be an Oakland vs San Diego football game on so the bar was enthusiastic to say the least.

During this trip I have definitely seen how important building, maintaining and expanding a strong network of smart people can benefit you and them. Also, the importance of gaining traction with customers and revenue is so important before pitching to investors. Another key is the ability to "pivot". This could be related to my class in getting to plan "B". Your original plan is simply a set of assumptions and through customer validation you alter your business plan until eventually you, hopefully, get to a successful version. The idea is to go through these "pivots" quickly and cheaply to reduce your burn rate.