Category Archives: Innovation

It’s painful to do a tech startup in London

Dear London, it’s not you, it’s me. I left you for another women. Her first name is Silicon and her last name is Valley. I’m not sure why I believed you for so long, but you lied to me. You told me Tech City is the next Silicon Valley, and it isn’t. You told me you were going to lead the UK out of a slump and you didn’t. I wanted edgy. I wanted mobile. I wanted hip. I wanted cool. You were boring, conservative, and expensive. So what did I do? I left. I left you because my new girlfriend knows how to support me.

Ok, let’s tone down the drama for a second. I started the journey of launching my current venture, Compete Hub, in March of last year in London. I’m American, but had the opportunity to work and live in the UK under it’s fairly lax visa laws (relatively speaking). It was my home for awhile, so it felt natural to do so. When we launched our MVP in march my thoughts were “yes, let’s be part of this tech city revolution”. My thoughts now, “What revolution?”

Without sounding completely derogatory – London’s tech startup scene is very amateurish. That’s ok, all professionals were amateurs at some point, but I don’t see that changing anytime soon. Let me be clear, the developer talent isn’t exactly amateur. For example, take a stroll into a TechHub campus or the Innovation Warehouse and it’s buzzing. I met a number of young and hungry developers, technical and online savvy who struggled to find good companies to work for. Here in SV, that match is almost nearly always met. I even met a women tech founder, yes one of this “pink” unicorns SV is biting it’s hands off to use as a poster child, who lacked a support network. The bottom line is this – the right people aren’t leading the pack. I’m not suggesting a personal nomination, but it was still clear there aren’t enough of the right people in the system. Could have I waited it out and became one of those people? Sure, but one thing you learn in tech is that time is not on your side.

One of the foundations of Silicon Valley is its strong angel investing community and large amounts of high net worths. As far as I am concerned this community doesn’t exist in London. Are there high net worth individuals in tech investing in companies in London? Yes, but as a whole, it is neither the correct group nor right number of people to become critical mass.

For the longest time living London, I couldn’t tell if I was completely crazy or they were. Many, if not all, of these angels and advisors had never actually built, grown or sold a web software company, but they generally gave the impression they had. Actually I continue to fight with myself not to expose two individuals in particular who have been completely toxic to the very infant ecosystem which needs the exact opposite. Do these jokers exist in SV? Sure, but their efforts are usually quickly suppressed.

You see, ecosystems are built on values, and values are built on market dynamics. The market dynamic in London is to recycle money in the banker’s boys club, whereas SV recycles it in tech. In SV, this is all based on the value of a Pay it Forward™ economy. London is based on a forecasting spreadsheet. NYC has caught on, what gives London?

I’ve been in San Francisco for 23 days now. In these 23 days I’ve been here, I’ve met with some of the brightest names in technology angel investing, signed customers, partnered my company with a team of MBAs for an entrepreneurial project, and have had more productive business development meetings than in 10 months in London. I’m not a Stanford MBA but even I can calculate that return on investment. The bottom line is this – people are stupidly smart here and they are extremely helpful. There’s a common saying here and it goes like this: “How can I help?”

I hypothesize that there is one defining characteristic that London needs to adopt in order for Tech City to work: you can’t look at people like they are crazy when they tell you they are going to change the world (or the world your market exists in). You can’t build the next big thing with technology laggards – you need evangelists, lots of them. When someone looks at you with they scrappy, nonsense looking MVP, provide insight on “how this could be the next big thing”.

Let me be clear, not everyone here in SV is walking around with a fit bit, an Oculus Rift headset, Google Glass, iPhone 10, and a hover board. But, if I told someone in SV I was going to build a hover board, people might actually believe me. It’s call optimism and confidence; and it’s contagious. I love you Britain, but your pessimism and generally laggardness isn’t going to get you anywhere soon in tech. There is one thing you are good at – laughing at your own failures. Now take that energy and support it financially and with advice.

Do you sense a little bitterness? Sure. But for as much as it sounds like I wasted my time, I didn’t; I learned a heck of a lot. I learned that building a technology startup in London is painful, and when you’re building a business you can’t be in a place where painkillers are scarce. So London, how can I help?

Common Themes in the Despair of Entrepreneurial Success

I hated reading growing up. I read the cliff notes on everything just get to through class assignments, and don’t think I can safely say I ever enjoyed a single book for pleasure. When I started my first company (a digital design creative agency called SureFive), had literally no idea what I was doing. I barely read an economics book in college, and no one ever told me there was a handbook for starting a company (hint: there isn’t). I just did it. Me and my business partner went on to start FlyrOnline, which despite it’s moderate success in the aviation industry, wasn’t enough. I starting thinking to myself “why don’t I get this?”

So then I started reading – for pleasure.

I started reading something I genuinely have become very passionate about – entrepreneurism, business building, ya know…what’s considered “cool” now. Books like The Lean Startup, Personal MBA, Nudge, and Thinking, Fast and Slow.

As I read more and more about people who have “made it”, I realized I wasn’t alone on my journey. Several themes started matriculating, and here’s a short breakdown of the one’s that have stuck in my head.

The Crash – At some point everyone crashes. People burn out. For a growing organization, this is often called the pit of despair. Steve Jobs got fired from Apple at one point. Think about that for a second.

Engineering – There is no handbook, guidebook, or cookbook to starting a company. You can get all of the advice you want. You can read this post and get inspired. You can get an MBA. But none of this matters, because there is no single anecdotal, formulaic way to build a business. There’s a common theme in the startup world and it goes something like this: “I have no idea what I’m doing” 

Overnight success – These don’t exist. Literally. Do. Not. Exist. Did I mention they don’t exist?

Almost nothing scales except Facebook – There is a word in the english language called “exception”. Every company that reaches scale, eventually hits exceptions. CRM app doesn’t allow contacts to be imported via Outlook? That’s an exception. As soon as exceptions hit your business, things tend to get really complicated. A company that can continue to smoothly grow in spite of increasing exceptions is the only one that can truly scale.

Spam – At some point every company will resort to spam. Why? It works. Spam isn’t evil. It just sucks to be on the receiving end of it.

Customer acquisition trumps everything – Peter Drucker is quoted with saying “There is only one valid definition of business purpose: to create a customer.” What a brilliant way to express something so inherently complex in such so few words.

Fear – Fear is everywhere. Fear and risk are the two greatest combatants to success. Seth Godin calls this the “lizard brain”.

Blind ambition – Ever heard of Hamdi Ulukaya? He’s a Turkish Kurd who moved to the US with $3,000 and started Chobani. It’s now America’s largest yogurt company. This is blind ambition, and I wish I had more of it.

People matter, we don’t know how to rate people – Hiring sucks. Finding a co-founder sucks. There is only one solution to find out if someone is right for your business – just start working with them.

Embarrassment – I’m horribly embarrassed of some of the projects I’ve launched in my life. Every business that became big was at some point an embarrassingly simple project. The only thing that matters is launching. Everyone was a noob at some point.

Love what you do – I’ve struggled with this. Everyone does. I often dream that I could wake up one day and become the son of a rich oil tycoon, reaping the benefits of a quasi-feudalistic world, and then spend my money to create whatever I want. $10,00 triathlon bike, you say? YES PLEASE. You’d soon realize this wouldn’t be any fun. Building something from nothing is the most rewarding thing in the world.

Lastly – us entrepreneurs need a support network. That’s why I’m moving back to the US. I need the support network. It doesn’t exist like it does outside of the US.

Solving Perceived Problems

One of today’s golden rules of tech startups is to “solve a problem you have”. For example in Paul Graham’s essay How to Get Startup Ideas he states

Why is it so important to work on a problem you have? Among other things, it ensures the problem really exists. It sounds obvious to say you should only work on problems that exist. And yet by far the most common mistake startups make is to solve problems no one has.

He then goes on to list why so many people solve problems that no one has and some examples ot those. I would make one more caveat to this – work on a problem you and others are perceived to have.

One thing I’ve learned (especially in sales) is that human beings are generally irrational beings. Our brains are easily tricked by our biases and fallacies. As a consumer looking at businesses I find myself constantly asking questions like “why on earth would someone want to sign up for that” or “who the heck would buy that”. The reality is that the justification for the solution to our problems are not universally the same for everyone.

This came to light to me roughly 1-2 years ago when I started asking iPad owners a very obvious, but generally awkward question – “What made you buy an iPad?”. The answer was hardly ever the same.

“It just so much more usable”

“I use it for writing email while I’m sitting on the couch”

“Oh you know…”

No one could tell me a legitimate answer for how it solved any specific problem. And if it did (“I don’t have to load up my computer when I’m sitting on my couch and I can browse the web”) seemed like such a small problem that it barely justified the price point.

What I’ve found is that there is a complete disconnect between what we determine is our problem and how it is described in written and oral form. This is an unique challenge that pretty much every startup and business has – what’s my problem and how do I articulate that problem to a larger audience. More importantly how is my solution specifically solving that problem. Because in fact that is all your startup is really doing, right? Solving a problem.

I’ve been reminded of this recently about a new blogging service called Ghost. In a Hacker News discussion, this was the response of someone defending the platform explaining why Ghost was superior to WordPress:

There are number of other reasons:

You want to avoid PHP.
You don’t need most of the feature bloat that comes along with WordPress.
You want to use Markdown.
You want to try something different.

This simply amazes me, not because it’s wrong per say, but because it just amazes me that these are people’s legitimate justifications. Are these really the biggest technology challenges we face in blogging today? (The perception is that yes they are) Since blogging platforms (and all platforms really for that matter) are simply tools, we then seep deeper in the Cyclical Nature of the Hammer Industry. As I’ve pointed out, the hammer industry continues to exist simply because we are convinced by good marketing and sales that we need to upgrade – when in reality it doesn’t actually solve our problem (and if it does, the marginal gain is so minute that it’s not worth it).

And thus this is where the lines between what problems we actually have and the ones we perceive are slowly getting blurred. No longer are the days of starting businesses that allow us to solve immediate and easily defined problems such as shelter and food. We’re now having to solve complex problems that neither can be articulated correctly or simply cannot be traced back to any basic human needs.

 

Tearing It All Down

In October of 1871, a fire swept over Chicago and killed hundreds and destroyed about 3.3 square miles. To give you an idea of the impact of how much of the city this affected, here is a map of the area affected.

Great_Chicago_Fire_map

It cost an estimated $3billion (in today’s dollars) to rebuild the city. We see disasters, either natural otherwise caused by humans, that can completely tear down systems, leaving people to rebuild them. Just look at cities such as Berlin and Warsaw that were rebuilt after large destructive forces tore them apart. One of the defining characteristics that I’ve noticed that separates a city like Chicago from a city like NYC (I’ve lived in both by the way) is that Chicago is cleaner, generally more efficiently mapped out, and more habitably than NYC. I believe this largely has to do with the fact that Chicago had the opportunity to be completely torn down and rebuilt because of the Great Fire.

I suspect, like all big cities, Chicago had a lot of problems previous to the great fire that lead to non-advancement of the city. Like most cases this is usually due to bureaucracy, politics, and corruption. But, it’s amazing the energy people will put into something when they’ve suffered a great loss.

Why am I talking about the Great Chicago Fire on a tech blog? It represents everything that is happening in today’s tech world. We are seeing a massive trend in creative destruction as being the norm to creating new business models, tearing down old ones, and generally as an advancement of our culture.

In 1998, an informal group called Mozilla set out to rebuild Netscape Navigator’s source code from scratch. Some people would argue that rewriting source code from scratch is the worst decision you can make, but judging by the success of Mozilla and the death Netscape, I think we can all agree that this has bee a good thing for us consumers.

I look back at my former employers and I see instances where destroying the company might actually be a good thing for the advancement of it’s mission, it’s employees, and ultimately it’s customers. But, as cognitively biased as we are, we are incapable of destroying our own selves, or doing nothing at all. Which often is the case in decision making, whereby doing nothing may actually more productive than trying to do too much. Our brains are wired to think that we always must do something, rather than nothing, and that creating a loss can never create a gain.

So looking at today’s system, both human and technical, we see the everlasting cycle with the following behaviors:

  1. New system gets built, people rejoice!
  2. Someone breaks system, so system adapts and get’s updated
  3. System get’s too clunky because it tries to do too much, losing the interest of its members
  4. People leave system and create new one

There are some exceptions to this, such as 37Signals. They deliberately let customers grow out of their system.

We’d rather our customers grow out of our products eventually than never be able to grow into them in the first place.

As I’ve decided recently with my life, I’ve tore all of what I had established down and am rebuilding. But it doesn’t mean I forgot the important lessons I’ve learned in building the professional I sought out to do 7 years ago.

Which is Scarier – That the Rest of the World isn’t like Silicon Valley or Vice Versa?

I’ve been a HN (HackerNews) junkie for almost 4 years now. I’ve been living and breathing topics like MVP, lean start-up, Node.js, git, etc and am a very active person in the community. I truly believe in the customer development process and keeping things agile. Sadly though, I’ve come to the realization that the rest of the world simply does not think this way. I don’t live in Silicon Valley, but I “study” it constantly; trying to find the pieces of the culture that make sense and those that don’t. My impression of the SV startup view on the world is:

  • Anyone who builds a startup must follow lean start-up rules
  • It has to disrupt some business that already exists
  • It has to have to some sort of social 
  • It has to be featured in TC at some point to be worth something
  • If there is no mobile component it’s probably not worth pursuing
  • Pivoting is inevitable, so just plan for that ahead of time
  • Design/UX/UI is everything
  • Business networking is all done socially
  • You have to blog (tweet, etc) in order to be seen
  • Your business model can be based on zero revenues but be based on an exit

The reality is that there are so many companies out there being built outside of SV that do not incorporate these principles. In fact, I’d argue that companies that are built with this mindset represent an extremely limited and small subset of the overal startup spectrum. (note – there’s obviously no way to quantify that) The reality is – there is no one single way to build a successful business. There is no handbook, cookbook, or formula. Are there ways to reduce your risk? Are there some techniques that work well? Sure, but nothing in business is purely anecdotal.

SV start-up culture has an engineering mindset based on the belief that new business can be engineered, which I simply don’t believe to be true. More importantly I believe SV startup culture has actually created a larger culture (that includes myself) of people who hate to plan. For good reason, plans are usually thrown out in the first 5 minutes after reading them. But it doesn’t mean that plans aren’t important. My theory is that since the dot-com era, we are following a tolerance of failure curve inversely proportional to our adherence to plans. So, we’re do for a planning era when this 2.0 bubble bursts.

tolerancecurve

The problem I see is that the very few companies who do follow this pattern, only picked the pattern because they saw their idols successful at doing it. But just because these very few companies do become successful it doesn’t mean that everyone can build companies based on the same principles. For example: Twitter CEO, Evan Williams, is quoted for having said

“User experience is everything. It always has been, but it’s still undervalued and under-invested in.”

Point is – just because it worked for one company (and probably a handful of other ones) doesn’t mean it will work for every startup. So, while this advice is certainly good, it’s up to you to determine if it’s applicable to your business (web based or not).

Let’s take for example a company I used to work for: SAP. Most young people have never heard of SAP. Yet it does roughly $20bil in revenue and is probably used by at least one company that you interact with on a daily basis (including Apple!). It also has offices in Palo Alto, so it’s technically in SV. But you’re talking about an ecosystem of people who believe that a whole IT project has to be blueprinted several months (if not years) ahead of the actual build. SV startup culture says “screw it, let’s just build it”.

At the end of the day the important thing to remember is that companies like IBM, SAP, Twitter, SalesForce, AirBnB, Google, etc – all internet related businesses – have built successful business based on different priorities and principles. Just because IBM built and continue to grow their company in one way and Apple did it another way, the reality is that they all have proved one thing – they can create businesses and grow them.

Here’s my prediction for the future – we’ll continue to pretend like we can engineer successful businesses and continue failing at doing that. But it’s worth a shot right?