June 13, 2014
John is funny and says it as he sees it. Here is a story of John working on a book with a publisher and then working on another book by himself. The talk highlights whats wrong with the publishing business. I think it outlines the challenges most established businesses have with the advent of the new networked model of connected consumers, businesses and value drivers. I think we are on the verge of a break out in rethinking business models and the ways we do things.
To give more data to support the notion that the publishing business is broken, read this post by Brad Feld on why he launched a brand new publishing company called FG Press
May 11, 2012
This is a follow up post to “How to fix any business“. I am a big fan of VCs – Value Creators. I have been following, reading and absorbing everything successful VCs do for the past 3 years. I have learnt a lot and I continue to learn a lot from this very smart, hyper networked, visionary group. I am not that smart or have the track record or success to call my self a Venture Capitalist but I call myself a Value Creator (do you see the trend I keep repeating Value Creator until it becomes the definition of a VC :)). There is a lot of perspectives and reactions in the blogsphere to what Fred Wilson said, Fred is a very very smart guy… in case you did not know and I have taken him as my virtual mentor since I started on this journey to make mission in life is to help and serve Entrepreneurs, I am continuing the figure out the economic business model for myself part that is for another post. Fred suggested alternatives to the traditional growth of Venture Capital Fund is nicely summarized here:
Fred’s view of where VC is going are:
- Given all the new pools of funding, he said, it doesn’t make sense for VCs to continue aggregating capital. And considering the industry’s inability to generate returns on more than half of the current investment in venture capital, he added that the allocation aspect is another area ripe for rethinking.
- Still, he continued, VCs, can keep on adding value as board members, advisors and resources on exits and governance.
- Going forward, VCs have a few options on the table, including becoming more selective, shrinking, halting investment of instutional capital or taking more equity for the governance and advisor services they provide, Wilson said.
- But one of the more compelling ideas he floated was building a business on top of crowdfunding.
“If these crowdfunding markets really do develop into these vibrant markets… maybe the answer is to leverage that capital and do something interesting there as opposed to going out and raising money from the institutions,” he said….And, as a last resort? Quipped Wilson, “We can just retire.”
Successful VCs will tell you that, they are really lucky but one needs to be smart and in the right field to be lucky. IMHO, the biggest Value Add VCs bring to their portfolio companies besides negotiating a value for the company by buying shares in the company with real money is their wisdom, network relationships and connections. They open doors for them in terms of business deals, customers, exits and as being mentors they provide the coaching the team needs. As fiduciaries and Board members they ensure that proper governance frameworks are in place to build sustainable companies. In addition to all that they have an opinion on the direction of where the market is going so they try to ensure their companies have aligned their sails to make the winds of change work for them. Crowd funding solves only one of those problems i.e the value determining and money part, it is an important part but all the other things that follow are far more important and still needs to be done. I am not sure who leads a crowdfunding round for a company using a crowdfunding platform, hypothetically it should not matter but for those of us who have raised money, gone through funding rounds it is a process and it takes time and it is not that simple. I don’t believe we know all the challenges in front of us in terms of Crowdfunding but VCs should play a very major role in doing the Value Add to CrowdFunding. My suspicion is that they most definitely will do. Here is a good talk by Mark Suster about Entrepreneurship and Venture Capital, I like his disruption story and making it happen.
May 9, 2012
Peter Singer makes a case for finding a business model that would make it fair for content creators in his article “The Ethics of Internet Piracy“. He goes on to say that he is fortunate enough to make a living off his salary that he does not need royalties of his work. It is an interesting argument, I wonder if every author starts out having 1 billion potential customers of their content. The economics of the Internet is not complex it is just different, it is hard to fit a model that has worked before into the new world. There have been many instances of debates and opinions around this and more recently by Open Rights Group with the title “We don’t have to choose between freedom and copyright“. There have been independent voices that say that most I mean 90+% of consumers on the internet would willingly pay for content, whether it is a scientific paper, music, video, movies or whatever the biggest challenge on the internet is determining the reservation price. To remind myself on what I learnt in Economics 101, that reservation price of a good is the price a consumer is willing to pay for that good. This is the basis for all of economic theory, the downward sloping demand curve, etc. The power of the network skews this model quite a bit. I am not smart enough to define a theory that would work for the Internet, but I can make some observations and try to tinker with the model. Lets take a first time author, what are the chances of her work being found and consumed on the internet when she publishes her work through her blog? well, depending on how big her network is and how good the content is and how many of the relationship she can influence to share, it can spread exponentially. So the pricing of the content should be a function of the network that her content is distributed through. Traditionally, the distribution mechanisms were monopolies, driven by the economic strength of movie studio, record production company or the circulation of a newspaper. That model is still valid and relevant but that model does not work for the millions no billions of bits of content that is being created by everyone who has access to the internet and an input device.
I fundamentally believe that those who create content and do not want to have it distributed through the internet should resort to the old mechanism of publishing, whether it is records, CDs, DVDs or paper books. But most of this content is going to be digitized by someone and distributed on the Internet, if the original distributor was not capable of using the Internet as a medium to find the right pricing to reach the billions of people online then too bad. Figure out a model, pricing plan to make the Internet work for you. I believe most of the people on the Internet would like to pay for content, but given the network effect, the pricing has to be driven by the network. Think of iTunes and the App Store by Apple. I believe they have solved the network pricing problem, 0.99 cents seems small enough that one can appeal to a large target audience and if the content is relevant to the target audience then it should enable the content creator to monetize the work profitably. I am not trying to say Copyright infringement is good or one is ok to steal on the internet, all I am making a case for is that the Problem is not out there, the problem is always with the content creator. If we start with working on ourselves, it actually leads to positive change in the environment. I want wrap this blog post with a quote “when morays are sufficient, laws are unnecessary. When morays are insufficient, laws are unenforceable”.
April 23, 2012
Since I published my Status Report on organizing the Startup Iceland Conference, there has been very good discussions and feedback and criticism of the message of the Conference on facebook and by my wife. I am extremely thankful for all the feedback and discussion, I will work with those helping me to fix all the challenges. In the end, I want to see a successful conference organized in Iceland and it becomes a yearly festival of celebration of Entrepreneurship and Startup culture in all our activities. I agree that the website could do a better job of communicating the message. I agree that most of the links, posts and items so far has been focused on the startup community.
Here is what I believe:
- Startup Iceland Conference is not about Startups but about building an Entrepreneurial Ecosystem.
I believe that Iceland has gone through a difficult phase and we are not out of the water yet but what we need is an Entrepreneurial Renaissance, what does this mean? How does this look? I want everyone in the world to believe that anything is possible as long as we set our minds to solving it, starting here in Iceland. Entrepreneurs know the feeling, I wanted to organize the conference so we can hear from those who have successfully walked the path. Is the message only for Entrepreneurs and Startups? Absolutely NOT! everyone, including those working in Civil Service, Government, Pension Fund, Venture Funds, People Reading and Writing Business Plans (thanks Toti), Educational Institutions, Financial Institutions, Laborers working in Construction and in Aluminum Smelter and those venturing into the deep sea to fish, Students, Bankers, former bankers etc… everyone can learn the life skills of Entrepreneurship. When one walks the path of an Entrepreneur, one learns to let go of the comfort zone, why is this important? well, it teaches us to take on any challenge and not hide behind our jobs or our position or our skill set or lack thereof.
- Alexander Osterwalders workshops is one of the hottest learning experiences in the world today. The book written by the team is used by the best of the best, global thought leaders and management consulting companies like Capgemini (I know, I used to work for them!), Deloitte, PwC, 3M, Ericsson etc I think it is important to bring attention to how we got Alexander to agree to visit Iceland. Alexander Richter contacted Alexander Osterwalder in 2009 and built a relationship with him, the same way I have been stalking Fred Wilson and Brad Feld‘s blog for the past 3 years. These people notice when someone is persistent and they want to help. That is why they have agreed to come to Startup Iceland Conference. We have an opportunity to attend this class right here in Reykjavik without getting on a plane, how cool is that?
- The Business Model Generation workshop is not just about rethinking your company or business model, it can be applied to rethink about your career. Alexander has written a book with the title “Business Model You – A One Page Method for Reinventing your Career“, the philosophy, the methodology and the core concepts are all the same. Who would not want to reinvent their career?
I want to see Entrepreneurs Win… I work hard everyday to make that happen. If that sounds corny you should listen to my “I have a Dream Speech!…”
April 4, 2012
If you asking this question, my answer is another question… Why not? Why cannot we build world class companies out of Iceland? There are examples like Ossur, CCP Games. The cynic always says we need more examples and more track record, Iceland is small, we don’t know how etc etc I don’t agree! and I don’t agree that it should take 18 years or 20 years to build world class companies. The reason we have not seen more world class companies come out Iceland is because no-one is asking, investing and mentoring companies to be world class players. When I speak to people who are investing in compnaies they always say it takes a long time and it takes a lot of money, those may be true but it would be even more true and will not happen if we are not aligning the ecosystem to build these kinds of companies. The Ecosystem needs a few ingredients, I have written about it before. While we are building the Ecosystem for Entrepreneurs and Startups in Iceland it is also importan to understand the transition an Idea goes through before it is made into a company. There is no short cut to this process, understanding the process helps you accelerate it when you see the right indicators. Here is a video of Steve explaining Passion and Purpose and Teams.
There are specific stages in the development of a company. Steve Blank has a fantastic post explaining the transition from an Idea to a Startup to a Company. I have written a lot about the inflection point we are in, basically in terms of technology being the great enabler for Entrepreneurs. I think the biggest challenges many of the stakeholders face while looking at startups or ideas is that they evaluate the team as though it is a smaller version of a big company which is very far from the truth. Startups are NOT smaller versions of Big Companies. They need to be organized differently, their focus is different and their metrics are different. I don’t understand how one can be an investor in Startups and not know this difference. Startups are searching for a repeatable business model, they may change it many times along the way, more popularly called a pivot.
The team that can do this cannot be from a traditional organization because team members who are from traditional organizations are measured on efficiency of execution not on efficiency of search. Steve’s article very clearly lays this out Search vs Execution. Obviously, startups need to execute but on totally different goals and milestones than if they have found the repeatable business model. The biggest risk startups have is in finding the Product to Market fit or Repeatable Business Model, call it what you may. The method that is employed to address this risk comes in different flavors The Lean Startup is the new fashion, Steve created the Customer Development Methodology. All fancy words to basically define something very simple, are you creating something of value and is there someone who has a need to use that value and is willing to pay you for it. If you are able to answer that question then you have the first part of the question answered now how can you make this transaction repeatable? once you have answered that question then you move on to the next thing how efficiently can we execute that. The team that does the last task is what we all know from traditional businesses, the skillset, the mindset, training and development, team dynamics everything has to be different. Fred Wilson has written a lot about the Management teams in his MBA Mondays Section, look at Table of Contents links
- Scaling The Management Team
- The Management Team – While Building Product
- The Management Team – While Building Usage
- The Management Team – While Building The Business
- The Management Team – Guest Post From Matt Blumberg
- The Management Team – Guest Post From JLM
The above resources are valuable in building your team dynamics. I keep emphasizing the team because I fundamentally believe we invest in People, it is not the Idea, it is not the economy, it is not the currency that drives progress, people do. So why are we not spending more time developing the team?
March 29, 2012
Saw this post on Facebook about Mr.Thordur Magnusson, the Chairman of Eyrir Invest. Eyrir has been one of the private venture investors in Iceland and they have strong track record in their portfolio like Caldiris, Marorka, Ossur, Marel etc all household names in Iceland. They have a strategy of Buy and Build, which means the Eyrir team takes an active role in the running of the company, actually it is an oxymoron I don’t know of any Private Equity or Venture Investor who is hands off, anyways, that discussion is for another day. I liked one of the statements Thordur made which is Eyrir’s overnight success has been 11 years of hard work. Again, those who have not done this always get surprise how long it takes to start, build, scale and make a company resilient and sustainable. All things take time, especially when you are building things, because a startup is an experiment and it takes time to really figure out the product to market fit, developing a sales and economic engine, constantly fine tuning the business model, keeping people motivated about working for a purpose than money etc I am amazed when we start listing these things there are so many intangibles that have to be in place and if we slack on anything it would lead to the ultimate demise of the effort. As much as I want to believe that it takes time to build something, it does not have to that way, when we want to learn a skill we take a class or practice it and get better at it by repeatedly doing it. Of course it takes time to get really good at it, Why cannot the same thing be applied to startups and entrepreneurship? We all don’t have to re-invent the wheel, lets just learn and adopt the wheel making strategy and try to improve on it. I really like Brad Feld and David Cohen‘s book “Do More Faster“, I think it aligns and sequences a lot of things in place when you want to do a startup, combine that book with the “4 Steps to Epiphany“, “The Lean Startup” and “Business Model Generation“, you have all the required knowledge in place. But these books cannot teach you discipline, persistance, resilience and just being a hustler (street skills, which is getting stuff done!). This is where the team comes in, I have written a lot about Team Composition and how picking startups to bet on is an Art and not Science. You should have been in picking teams business for a long time to understand how team dynamics work and picking the right skill set. Fred Wilson wrote about this a couple of days back on how betting on startups in like playing poker, and to get really good at poker you need a lot of skill, practice and I guess Chutzpah.
I want to disprove this myth that it takes a long time to build a company because there are many examples where that is not the case. It takes a long time to build a successful global companies but resilient and sustainable companies can be built in a shorter period of time. I like to invest in the mess like Fred says.
March 24, 2012
There is a fundamental difference between a business model and business plan. A Business Model defines how you will make your product or service economically viable. A business plan describe how you are going to make your business model work. One does not always know how the plan is going to evolve, so building detailed plans although a great thought or intellectual exercise adds no real value because you are wasting time making assumption about the world out there and hope that your strategies or “plans” will address those assumptions and hypothesis. The truth could not be far from it. Most people confuse this with the product development road map and the classic example I get is people saying “hey, Steve Jobs did not go and interview his customers before he created the iPod, iPad, the Mac Air or any of the products that has come out of Apple…” to that I have only one answer, unfortunately there was only one Steve Jobs and how do we know that Steve did not do that? he had a keen eye for design and detail, he spend considerable amount of time in Silicon Valley being part of the information
revolution and he had many fails to learn from. I try to remind those I am talking to that they need to spend 30 years in Silicon Valley, formed 2 or 3 multi-billion dollar companies, have the same network and experience of Steve Jobs before being able to compare themselves to what Steve Jobs did.
There is a simpler way, Steve Blank, has written books, taught classesand has done many things to showcase the Customer Development Methodology, which is nothing but a Business Model. If you approach problems with the Customer Development method, you can build a pretty good hypothesis and once you have an hypothesis, it can be validated and based on the results you can build a business. The trick is to get through that cycle as fast as you can and then execute based on the learning. It is never simple and straight forward you have change your hypothesis several times and build and re-build your business model that is why it is a startup.
March 22, 2012
Hallfríður Ólafsdóttir came to our Rotary Club and spoke about her journey in creating Maximus Musicus, a little mouse and a very popular character with children in Iceland and 6 other countries. She is an accidental entrepreneur because she is the lead flutist with the
Icelandic Symphony Orchestra and she recalled just waking up one morning with the idea to use a Little Mouse character to get Children engaged in Classical Music. She shared with us her adventures and development of her business. Two books with music examples have been published and the third is on the way. She is on her way with the Iceland Symphony Orchestra to perform her Maximus Musikus at Kennedy Center in 2013 at the Nordic Cool festival! It is fascinating to think about the teachings and learnings that goes on in an Orchestra and most children don’t really know what happens behind the scene until they are taken to a show. Hallfridur, has through her books, symphony composition, songs, apps and other media has connected with Children and during the first symphony orchestra that was conducted in Iceland, there were more than 600 children in the audience and they already knew about the Maximus and they followed through the entire narrative, the music and the experience of being in an Orchestra concert.
It was great to hear Hallfridur talk about how the energy of the children invigorated the musicians and the performers. There were a number of questions, and the most popular one is how did you find the time to keep your day job and also produce the music score, the books, the stories, the art works, the website etc etc etc and Hallfridur’s answer was very simple, She just knew she had the energy to do this because she was so passionate about the project… sounds familiar! The common trait of every entrepreneur, there is something that we cannot explain that drives us, it is not riches, it is not money it is something far more important… a sense of Purpose. It was inspiring to hear Hallfridur’s journey, but what was even more interesting to me was her success has be curtailed by Content Brokers i.e Book Publishers, for example the English version of the books are not available in Iceland but only available in Australia although it would probably sell the most in Iceland because of all the tourists who come to Iceland would like to take something as a local gift to their children, grandchildren or nieces and nephews. All the tourists visit Harpa where there is a Maximus Musicus Corner, but the tourists probably will not buy an icelandic version because they don’t speak Icelandic.
She was passionate about the creation but did not have a very good advisor against the group that relies on “Scarcity as a Business Model“, Fred Wilson has written about it. I just don’t get it! why the heck can’t the book publishers understand that their customers should dictate how they want to consume the books rather than them dictating how they will allow the content to be consumed? Such a waste, I bet Hallfridur is probably loosing a large amount of sales that she could possibly do in Iceland during the peak tourist season. I can think of so many ways to market and sell this great product. They have games and apps in the app store etc. So go check it out!
March 16, 2012
DataMarket.com is a startup out of Iceland. I have met with Hjalli a couple of times, spoken to him quite a bit and used DataMarket services on some of the presentations and have been following the company. The company started in June 2008 and Hjalli has been around the block in the startup journey a couple of times, he successfully created and sold a company in Iceland and I believe he is a 3rd time entrepreneur. You can read all about him in his blog, he has a distinct voice within the Icelandic startup culture and he is a big proponent of Transparency and DataMarket was way to address that issue. Although a lot of his opinion and comments are in Icelandic, so I glaze over them :)
Initially, I really felt that DataMarket’s business model was weak because you don’t see the light of the day if you are an intermediary for data and given the advent of new visualization technologies it is quite easy to hack a graph from structured data. The customers of data want data from reliable sources and you had to be a source of data to be able to sell data and typically people buy data from a Credible and Authentic Source like the IMF or the World Bank or The Economist etc. I believe the market for data is big but probably getting smaller with all the publishing tools out there. I could not put my fingers on the Value Proposition of DataMarket.
DataMarket just announced that their portal and services can be utilized by third parties to publish data, I believe that is a very interesting value proposition
. In addition, they are getting credible sources to use DataMarket’s portal to channel their data. I don’t know the financial performance of DataMarket to comment whether they are able to make progress or not but given that they just announced they were able to secure a significant round of funding in Icelandic terms, I presume they are on track. I think breaking into the international market
needs a different kind of thinking. The team composition that Hjalli has put together needs work IMHO
. I have a big issue with Startups who emphasize to much of their importance on the idea
and very little on the team, the strategy for customer acquisition and putting together a truly international team.