Hedgehog vs Nifty Fox and Culture of Discipline

Jim Collins‘s work has influenced me quite a bit when I was working at Capgemini. I remember one of the partners/principals in our Houston office actually having a book club session on one of Jim’s book Good to Great right after it was released. Good to Great is a great book, it clearly outlines the strategies that have worked in the past for some companies that transformed themselves for the changing times. I am a big believer in principles, principles are natural laws they don’t change and the consequences of those natural laws also don’t change. I think Good to Great catalogues some great principles for building and running companies. So, why I am writing about this now? I believe those principles apply to any size of company or startups.

I get wide eyed expressions when I say a Startup is not a Company! A Startup is an experiement or a hypothesis, when you are going through the first phase of startup creation i.e figuring out the Product to Market fit, you do not know whether the startup can actually create a product or service that addresses a market need and fulfill a value proposition, when you are in that stage why bother calling yourself a company? A Company has figured out a product to market fit and has figured out how to do the repeated value creation part. When a startup is going through these two stages it is in the valley of death, typically when the startup figures out those two stages they are usually out of the valley and can be called a Company.

I really like two diagrams that is used to explain a couple of concepts in the Good to Great book, the first one is the Hedgehog Concept. I think this quite obvious for a startup but not always. So it is important to ask the questions that are in the circles:

  1. What are you DEEPLY PASSIONATE about?
  2. What can you be the BEST IN THE WORLD at?
  3. What drives your ECONOMIC ENGINE?

I believe every startup and every team member of a startup need to ask these questions for the company and for themselves. If you are unable to come up with answers to these questions you have a problem with the startup and what you are doing with your startup.

Another diagram that is used in the book communicates an important path every company and startup need to take and that is the Culture of Discipline. Typically, startups start in the bottom right corner and move towards the upper left corner. 

The Great companies that were startups to start with moved straight up. This communicates an important message, i.e High Ethics of Entrepreneurship is not nice to have but a must have to build sustainable companies but great companies have High Ethics of Entrepreneurship AND High Culture of Discipline. That is a tough act to follow. So when you are building a startup focus on how you can create a culture of discipline while you have high ethics of entrepreneurship. It is chaotic in a startup, the billing and invoicing does not work, the system is breaking down when a new customer wants to try something, your next release is 2 weeks away and you are fire fighting with your existing customers on the previous release. Your lead developer is putting on temper tantrums because he has some external issues, you are running out to funds in 6 months so you better get your traction up and also get new investors… the problems and issues are endless, how can you build a culture of discipline with all these things going on? well that is what great teams and companies do. So ask yourself how do you strike this balance and execute?

Whats timing got to do with success?

I was listening to Helga Waage yesterday in the Startup Stories organized by Startup Reykjavik team. Helga is the co-founder of Mobilitus, a mobile platform development company. Helga is a veteran in the startup circles in Iceland and is a mentor to many startup entrepreneurs. The other co-founder of Mobilitus is Toti Stefansson, both Toti and Helga were part of the original Oz team which was/is the failed success story out of a startup from Iceland. Helga had a fantastic picture that showed the number of startups that have been created by the original members of the Oz team. It was a great talk, Helga is funny, sarcastic and fearless… I really enjoyed listening to her. The story of Mobilitus is very interesting and there is something that she said that kind of registered with me, I am not sure if agree with her. She said timing was everything, that being a provider of Mobile services 10 years back just did not pane out to be a successful business for Oz but now Mobilitus is having great success with high profile clients like Sprint and Ticketmaster. I agree that you need to provide the right service for the need of the market, but would Mobilitus be as successful if Helga and Toti had not spent the last decade in building things for the Mobile platform? I believe we need to prepare ourselves to be ready when the time is right… I like the analogy of a surfer, it is not about catching the right wave, it takes time to get the skills so you need to practice A LOT, then you need to be in the ocean all the time and when you are ready and you notice the right wave you jump on it. I believe that is what has happened to Mobilitus and Helga and Toti. I think they form a great team and they are in the right sector at this time to take advantage of the opportunity in the Mobile platforms. Change itself happens instantaneously, but preparing to change takes time, effort, skill and patience. Being an entrepreneur is about that building a discipline of being patient working on creating value and constantly improving, so when the right deal comes along you are ready to take advantage of the circumstances. Only the prepared can jump on the moving train, so the advice I took from Helga’s talk yesterday was you need to prepare, be on the market all the time, build strong networks and relationships. I learn a lot talking to both Helga and Toti, they have been very generous to my constant loitering into the Mobilitus office which is next to CLARA‘s office space.

Calling all Angels

I have been focusing a lot on writing about Entrepreneurs, entrepreneurship and what does it take to succeed as a startup. I think one of the key links in the sustainable startup ecosystem is a steady flow of capital into the startup ecosystem. Typically, in other regions an entrepreneur who has an exit invests the money back into the startup ecosystem and I think that is the sustainable way, so how do you do this when there are no successful exits? or if a region is just starting up or has had a collapse like what we have experienced in Iceland? We need a some Angels, who are willing to invest in a team and are willing to work on making that team succeed. I believe that is what Me and my partners did when we first invested in CLARA in late 2009. I met the team when they did not have a product or a market fit and I mentored them to be investment ready. The jury is still out if they will survive the onslaught of the market but I believe we have a great team and a good market that we have found a fit for our product. Now we just need to execute a repeatable business sales model. Anyways, I digress.. the key is to get new investors into the game. How do we do that? Just like we need new teams to jump into the startup bandwagon we need new investors as well. We cannot always rely on the usual suspects, i.e the Angels who have invested before and continue to participate.

New investors jump in only when they trust a system that is conducive for investing and has a clear education and track record, which according to many people is not the case in Iceland. I disagree but then again I have a long term view of the world so I tend to see things in a lot broader horizon than most people. Yes, there are a lot of challenges, the foreign currency control is a drag, the new bureaucracy in a pain, getting access to capital is even harder than it usually is et cetra et cetra et cetra… but I reject all these notions. They are only important if you are speculating in the short to medium term, I think we need to involve a new breed of investors in Iceland who take a long view i.e 10 years or longer and are not afraid of investing in that time horizon. It does not mean you invest, lock the box and throw away the key for that time period. We need active participation of the investor group in the companies that they have invested in making significant progress in the short term, medium term and long term. We need a community of Investors who can share, learn and contribute to improving the investment climate in the region they are part of.

There are a number of examples of how one put this community together. I got connected in Facebook to John Sechrest who has organized many Angel Conferences and formed Angel Investor groups to invest in a startups. I want to organize an event that is focused on Angel investors. There is a lot of debate on whether rise of Angel investing is bad or good for the startups, all this is heresy. I believe there is a role of Angels and VCs and everyone in between to make a sustainable startup ecosystem to function. What do you think? do you have any ideas or suggestions on how we can get new investors to participate in investing in Startups?

Startup Reykjavik

Startup Reykjavik is one of the pieces in the puzzle to transform the Icelandic economy. I was very pleased to see how quickly we were able to get this program going, I am one of the mentors in the program. I started writing about my vision for Iceland and Strategy and Execution of the strategy is happening as we speak. This is the Iceland that I know. People just do things rather than get into an analysis paralysis. There are many pieces to this puzzle. The Startup Reykjavik Website has got a face life so go and check it out. I have had a chance to meet with most of the teams and I see a lot of potential. Given that the program is being run in Iceland for the first time, I believe we will need to talk about what is happening. The Startup list is here, I think this initiative is extremely important piece to help entrepreneurs get started the right way. The Startup Reykjavik organizing team has assembled an impressive mentor list and 2 weeks into the program I hear that all the mentors have been spending time with the teams and guiding them. This is a BIG win for the Entrepreneurial Ecosystem in Iceland. The community participating in building the next generation of teams and companies is the most sustainable path to transforming a region. The next big challenge that we have is to get new investors to bet on the teams that are being mentored out of Startup Reykjavik and other programs like this that are bound to start in other places in Iceland. I have another blog post related to this and Angel Investing, I had an interesting short discussion with the team member who has come all the way from India to participate in Startup Reykjavik. The stigma of Angel investors, I have a very strong opinion that Angel investors should have Intrinsic Motivation to do what they do. Unfortunately, most of the wanna-be angel investors are extrensically motivated. The other interesting point of discussion was the role of Government and Government run programs, I personally don’t think Governments can run programs like this because you really need to take a long term view of the region and the world and you need a long term commitment, unfortunately, most Governments are very short term focused, but Governments are important stake holders in these kinds of initiatives, they can implement policies and develop infrastructure that supports Entrepreneurship and Startups.

Duolingo.com

Union Square Ventures just announced their investment in Duolingo.com. The company founder Luis Von Ahn is so smart and has a track record of really creating valuable solutions on the time people spending doing boring tasks on the internet. As Brad Feld says, the machines have taken over, they are just making us enter information about ourselves into them, they are being patient and eventually the machines will run the asylum. Luis invented CAPTCHA and re CAPTCHA two technologies on the internet that everyone who is reading this blog had to do many times while signing up for service or posting a link to Facebook or Google or Twitter or any of the Web Services that we use to let the machines know that we are human. What we all probably did not know is that this “data entry” is used to digitize all the books in the world! How cool is that? Here is the TED talk that Luis gave which explains how they did this, more importantly he explains subtly WHY he did this. 

I believe this is incredibly smart investment by USV. The next frontier is language and sound, I have written about my investment thesis around sound and voice. The biggest problem we have with language is that machines don’t understand the semantics of translations and Luis is solving that using powerful motivators and incentives on the internet, the need of people to want to learn another language and making that affordable (read FREE) to everyone on the internet. Luis is nothing if not ambitious, but I have a feeling that he will be successful in translating the entire web. If you always wanted to learn another language and did not want to spend $500 to do it, Duolingo.com is the place to do it and BTW, you will be helping in translating the web which is 50% in english into a language that you are learning.

To Brad Burnham and the rest of the partners in USV, Congratulations! this ones a winner and keeper! you are really showing why USV is the top VC firm in the world.

Startup Iceland Video Channel

Startup Iceland Channel in Vimeo has been created thanks to the Innovation Center of Iceland which sponsored the whole video shoot and the channel. It is a great archive of talks related to Entrepreneurship, Startups and Building an Ecosystem. For those who could not make it to the conference this is an awesome replay of the events, although we cannot re-create the positive energy that we felt in the Andrews Theater on that day, the knowledge and experience that was shared on that day is now freely available for anyone to absorb. Please feel free to share the content to your networks. I am very proud of the team that worked on this conference. I have catalogued as much of the journey as I can on this blog. It has been one heck of an experience and I cannot wait to start putting the team, the program and the list of speakers together for the next year, so watch out for the blog posts and the emails that I will be sending out shortly. If you have any feedback or comments please post them on the blog post or contact me and I will be more than happy to respond.

Dr.Ted Zoller – Deal Makers and Startup Ecosystems the case of Iceland

Ted D. Zoller from Innovation Center Iceland on Vimeo.

An insightful look at the deal makers with the context of Iceland. Dr.Ted Zoller has been looking at Deal Makers for a while now and all his new work is based on that. Ted has become a good friend and I am looking forward to reading and listening to him on his work. It is very interesting to see how he has organized the data around deal makers and has brought a lot of insight into that information. I enjoyed and learnt a lot listening to Ted and I hope all those who were not able to attend the conference do the same by watching this video.

Efficiency != Sustainability

I started working with technology as an intern in India for a small startup which was building software for Financial Services companies. The network architecture that we were building then was client server, for those who are wondering what the heck is that click on the link. The servers were just another personal computer that was running the database application and the client was a proprietary software that was build onto of the database vendors technologies. The popular ones then were dBase III, FoxPro, Visual FoxPro, Oracle+Pro C, Lotus Notes etc I learnt a lot about how this technology worked and how this connected architecture delivered value to our clients. It was quirky, but did the job most of the time and we were a startup so we jumped off the cliff and built a parachute on our way down… for the most past it was a lot of fun and a lot of hard work. Fast forward to now, the technology landscape has dramatically changed. Internet and Mobile access has fundamentally changed everything about technology application in business.

While we embark on this new journey, I feel the technology community is not doing a good job of communicating the challenges of technology to the main stream. Lets start with the use of data centers, most of the worlds largest data centers get their electricity from non-renewable power i.e. Coal, Oil or Nuclear. That is a fact and there is nothing wrong with that but this has serious implications for new hyper connected, big data, high performance computing requirements of today’s consumers and the applications they use. There are billions of devices connected to the internet and all of them creating, storing, processing data for various things that puts CO2 into our atmosphere. One can debate until the cows go home whether CO2 in the atmosphere is a bad thing I am not that intelligent, it is accepted that CO2 in the atmosphere is a bad thing and it causes climate change. It is estimated that 2% of the CO2 in the atmosphere is due to data centers. This trend is serious because if one measured the CO2 due to data centers 10 years back it would have insignificant and McKinsey estimates that by 2020 4% of the CO2 will be due data centers. Again doubling in just a decade, why is this important or bad… it goes back to the notion of geometric progressions, we humans are very bad at calculating the consequences of exponential or Power Law based systems. We mess up with risk calculations in financial markets because we don’t understand the convexity of risk in high order moments, but that has only economic impact, painful as it may be we can cope with it and recover, but large complex systems like climate are too serious a threat to be left to Governments to bail us out.

What are the industry leaders like Google, Amazon, Apple, Microsoft etc doing about this? They are changing the debate from Sustainability to one of efficiency. They argue that by making their data centers more efficient they are reducing the amount of energy used by them. Efficiency is a good thing but data centers becoming efficient does not reduce the CO2 emissions it actually accelerates it because the cost of using data centers becoming really cheap so it gives incentives for more use rather than less. This is a troubling trend. I have been a vocal about my dis-belief in setting up data centers in Iceland but when I see the arguments and reports and lobby coming out of the large enterprises I am compelled to reject that notion and I want to jump in and change the debate.

I have accepted a new role of CEO of GreenQloud of Iceland, we are going to change the debate. We are vehemently going to argue that Efficiency != Sustainability, we believe data centers should be using only renewable power and should not be buying power from dirty sources. That is the only way to sustainability. GreenQloud is the Worlds First Truly Green(tm) Public Compute Cloud Service. I want to make a truly world class compute cloud that does not charge a green premium, is Amazon compatible and it provides the same or better performance as any other cloud computing platform in the world and is also sustainable. I believe that is the only way to disrupt the trend that we are on. We want to make the choice to choose sustainability easier, we don’t believe we should expect companies to sacrifice anything (read pay more!) to choose sustainability.

I will continue to blog in the Startup Iceland blog about Entrepreneurship, Startups and resources for entrepreneurs, now I will have more real world examples because GreenQloud is a startup, however  I take the challenge of sustainability very seriously so I will be writing as well in the GreenQloud blog the emphasis there would be focused on what we are doing at GreenQloud. I will be recruiting other bloggers to write in the Startup Iceland blog because this is a platform that belongs to the Startup Community here in Iceland, I will continue to be a moderator and bar tender. Sustainability is a very powerful word, we will continue on that theme here in Startup Iceland. I will be sending out a small survey to all those who have shown interest and for those who participated in Startup Iceland 2012 to get feedback to improve the conference for next year.

The Brads Show – Interview with Brad Feld and Brad Burnham

PanelDiscussion from Innovation Center Iceland on Vimeo.

It was a great privilege and dream to meet with Brad Burnham and Brad Feld. To top that off I had a chance to ask them a bunch of questions related to building startup communities. As Brad Feld mentions in his answers I did have a laundry list of questions. It was great to hear them talk about their experience being part of communities and how the two they are part of is flourishing. I just returned from New York city and I cannot tell you how great the energy is for startups in New York. I know we can replicate that right here in Iceland.

Building bridges and entrepreneurship

Luis E. Arreaga from Innovation Center Iceland on Vimeo.

Ambassador Luis E. Arreage introducing Brad Feld and Brad Burnham and the importance of entrepreneurship and partnership between Iceland and the United States of America. I believe the best export out of the US is Entrepreneurship, there are so many recent role models that it behooves the US State department and the embassies around the world to promote entrepreneurship and build relationships. Ambassador Arreage has done just that and I am encouraged to see the level of engagement of the US Embassy in Iceland with the Universities and the Entrepreneurial community in Iceland. As I had mentioned before Ambassador Arreage was the second person who supported the effort to host a conference on Entrepreneurship in Iceland and found a way to sponsor Startup Iceland.