I have been writing a lot about Entrepreneurship and Startups, but I am not a big fan of the Clusterconcept primarily because getting established companies to be Entrepreneurial is very hard because they look at different metrics and the incentive for the established companies to participate in Cluster building is a long term game, however established companies are relatively short term focused because they are trying to increase their yield on invested capital by getting more efficient on the operation, sales etc. On the other hand a startup in the same sector is more or less not too focused on efficiency, they are trying to exploit a weakness or a problem in the existing solutions, therein lies the challenge. It would take visionary leaders in established companies to harness, foster and encourage the building of a ecosystem around the sector that their companies are built in. This is exactly what Dr.Thor Sigfusson has done with his startup/project Seafood Cluster a.k.a Sjávarklasinn in Icelandic. It is fascinating to see how he has convinced established companies in the Seafood sector and new emerging companies to co-located in a building in harbor of Reykjavik. He has ambitious plans to expand the facility to allow more startups and established companies to have meetup spaces. It was exciting for me to watch this because Seafood is the sector that is as traditional as they come, we are talking about really established fishermen looking into working with young new startups, mentoring them and seeing if they can improve the established methods using new technology.
There is a wealth of information and reports around the concept, I have not read all the reports but I believe this is something that I believe can work. I like the idea and the execution of the fact that if you put new companies and established companies near each other and once they start talking magic usually happens. In addition, the same location has some support services like legal, marketing and publishing etc Think of this as an Accelerator for a startup in the Seafood Sector. I think the missing piece is what typical accelerators do which is a 3 month bootcamp like environment that basically focuses on the validation of the new startups and also getting investors to be part of the project. I think Dr.Thor Sigfusson has already done that because the Seafood sector or the Fishermen are the richest cohort in Iceland and they are starting to see the value of having such a place and are investing in this.
We have invited Dr.Thor Sigfusson to be a Speaker in Startup Iceland 2013, I think this concept needs to be communicated in the Startup Iceland platform, and he has agreed to do that. In addition, it would be interesting to learn from his talk what were the challenges, opportunities and road block that he had to cross to get this project off the ground. If you are interested you should definitely buy the tickets soon as they tend to run out fast.
I started on this journey to build a Startup Community in Iceland right after the Financial Collapse of 2008. What is needed when you need to create a lot of startups is an acceleration platform and I searched tirelessly for it and I bumped into TechStars and the first video I saw of TechStars I knew that is what we needed to have right here in Iceland. Here is that video:
And then I started viewing all the videos in the Founders – Techstars – Boulder. I was so inspired 3 years back and I went and met with everyone that I could to get Techstars to Iceland. I was extremely pleased to see that dream come true when Arion Bank took the initiative to launch Startup Reykjavik, which is part of the Global Accelerator Network which is the network of accelerators that is part of the Techstars program. If you have not watched the videos, I really encourage you to check out the TechStars TV channel in YouTube. Go to the videos that were loaded 3 years back. I get really inspired even today when I watch those episodes. What is this got to do with Startup Reykjavik? well there is only 6 more days to apply for Startup Reykjavik. If you are stuck in a dead end job and really don’t enjoy what you do here is a fantastic opportunity to go build a business. It is also for those of us who have always been saying that one day we will be our own boss (actually that never happens because you are always reporting to someone, either your board or investment committee or whatever but thats not the point, its about taking ownership of your destiny).
The 2012 program was the first accelerator in Iceland and I was very happy to see to complete and as far as I know many of the companies are still in existence and trying to create a business some have actually made more progress than others. It is a marathon and not a sprint, so I am looking forward to seeing some of these companies build a sustainable business in the future.
I volunteer as a Mentor in Startup Reykjavik and in every other Startup or Entrepreneurship related activity in Iceland because I have made that my life purpose. I want to help Entrepreneurs no Serve Entrepreneurs… I think that is a pretty good goal. Anyways enough about me. Have you applied yet? if you have been telling yourself you want to do something this is your chance like Nike says Just Do It.
I usually get really worked up when I am speaking with some employees in a bank about Startups and Entrepreneurship, they immediately say that it is Risky. I always ask them could they please tell me why they believe Startups are risky? Their usual answer is well 90% of all startups fail, which is anecdotal evidence because there is no way anyone has documented all the startups in the world and calculated the failure rates. I have written a lot about how we as humans are wired to be fooled by statistics and we just underestimate the risks associated with many things. What is even fascinating is that those same people from the bank were still working in the bank when the entire financial system in Iceland collapsed. I think banks are bigger risks than startups, atleast with Startups you know the risk of failure will only wipe out what you invested, whereas with Banks it can wipe out the entire equity base of Iceland. No wonder, Warren Buffett called Banks sit of Weapons of Mass Destruction. The risk on banks are exasperated by leverage, were as Startups run on equity which means what you put in is what you loose if the company goes under. Typically Startups that I have been pounding the table on require very little capital to validate, build a Minimum Viable Product and get market traction.
I have written about the books that really changed my perspective on Risks and I have Nasim Nicholas Taleb to thank for. I listen to audio books all the time and I think this is the 100th time that I am listening to his classic book “Fooled By Randomness“. There are so many pearls of wisdom in that book that I discover something new every time I listen to it. The only positive aspect of risk taking is in the Startup world because a black swan event ie. the chance of finding a Google or Facebook or Twitter or Amazon is very low but when it does happen it usually results in such a positive impact I don’t know why not everyone invest a small portion of their investment egg in this asset class. The monstrous returns that are possible can only be achieved if one takes enough bets but the size of the bets are usually very small and thats the point of doing this.
GreenQloud Booth – Career Day Reykjavik University
We had our planning meeting yesterday and Stefan suggested that we should have the startups from Iceland and around the world come and setup a booth during the Hackathon and UNConference event. We all thought that it would be a great idea so we are going to market and allow Startups from Iceland and all over to setup a booth space. This would be a perfect setting where more than 350 people who are interested in Startups, Entrepreneurship and Startup Communities will be present and a great audience to present one’s startup idea
pitch.
Remake Electric – UTMessan 2013
I have felt that it is a great way for people who are starting up to tell a story about their vision. The original idea was to give a 5 min slot to a handful of startups to present during the conference, which is too short a time and does not give enough depth to a startup and the audience will not have time to absorb why they should be interested in the company. So we are calling all startups to contact us by sending an email to booth at startupiceland dot com and reserve your space. This is a perfect opportunity to practice your pitch and who knows maybe you will find your angel investor. Let us know what you think of the idea as well.
Logo Open Source Initiative (Photo credit: Wikipedia)
Steve Blank has been one of the bloggers, Entrepreneurs and Gurus who has been writing about and teaching entrepreneurship in Stanford and a number of universities all over the world. He has compiled a blog post that has all the resources that any entrepreneur can use in this blog post with the Title “Open Source Entrepreneurship“. I am a big fan and I hope we all can use the wisdom and knowledge that has been aggregated in this blog post.
Have I mentioned to you that Nicholas Nassim Taleb was the man responsible for me to jump into the world of Entrepreneurship and Startups? well, he did. He is by far the most brilliant mind and thinkers that we have in the world today. He has a new book out and I could not wait to get my hands on it, and thanks to Technology and Kindle, I got it the first day it was released. I love the Internet. The title of new book is Antifragile. I have not been able to put the book down, I can really see where he is coming from and his conclusions about Risk and calculating the odds of rare events (which all Risk Managers and Banks tend to do… even today!) is a fools errand. You cannot predict or calculate the risk of failure, the world was not build that way. What is the property that can enable systems to flourish and grow under uncertainty and risk?
Source: Amazon.com
We live in a world that we don’t understand, but we act like we do and that causes the fragility of our systems. I could not agree more to the main theme of the book. I see a lot of lessons for Entrepreneurs, I think as an Entrepreneur one needs to be Antifragile which is an opposite of Fragile. The definition of Antifragile is a quality that I believe every entrepreneur needs to build just like building muscle or fitness or endurance. So what is Antifragile you ask?
Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. This property is behind everything that has changed with time: evolution, culture, ideas, revolutions, political systems, technological innovation, cultural and economic success, corporate survival, good recipes (say, chicken soup or steak tartare with a drop of cognac), the rise of cities, cultures, legal systems, equatorial forests, bacterial resistance… even our own existence as a species on this planet. And antifragility determines the boundary between what is living and organic (or complex), say, the human body, and what is inert, say, a physical object like the stapler n your desk.
I am halfway through the book but had to write this post. Do yourself a favor and go get the book and read it. Here is the man himself describing the Antifragile:
It is a complicated story how I got to meet Slovenian entrepreneurs and how I got connected with CEED. But it is worth mentioning that one of my favorite blogging tool Zemanta was founded by Bostjan Spetic, and he is Slovenian and his wife Gaja are big fans of Iceland as they traveled to Iceland twice this year. It was through them that I got connected to Slovenia. I was very impressed to see the green shoots of startup culture and critical mass of entrepreneurs wanting to start doing new things and change the ecosystem. Met with some of the leaders who are running accelerators or incubators or looking to start new mentorship driven accelerator like Startup Reykjavik in Slovenia. This event was very interesting for me as I can see the clash between the two groups, the hierarchical organizations and the small network based entrepreneurial organizations.
The main guest speaker of the event was Dr. Alexander Dibelius, one of the leading investment bankers and investment environment connoisseurs, Chairman of the Executive BoardGoldman Sachs AG; Head of Goldman Sachs Germany, Austria, Russia and CEE; and Global Head of Goldman Sachs Industrial Group. I really did not agree with a lot of things that Dr. Alexander was saying, but that is for another blog post. The young entrepreneurial community in Slovenia is at the same early stage as we have in Iceland and it was great to connect with this community. There are a number of similarities and challenges, so it was great to compare notes, get inspired and inspire the grass root to start doing things. Here is the link to the presentation that I gave, it was more about how I got started and why I do what I do etc I was humbled to see so many people inspired by the story of Iceland and what Iceland stands for, it gives me great strength to learn that we are on the right path in creating a sustainable startup ecosystem in Iceland and in my humble opinion we are just following what Brad Feld has documented in his book Startup Communities. I recommended the book to anyone who wants to learn how to build a startup community. I also met with a number of media outlets, TV channels and newspapers… it was interesting to learn about the challenges in Slovenia. I am really smitten by this country and I am sure I will come back again as I volunteered to be a mentor to any of the accelerators that would have me as one.
It fascinating to read Daniel Kahneman’s writing on Risk and Heuristics and human psychology. I have recommended his book “Thinking Fast and Slow”, the picture to the right is from the book on how we react to Gains vs. Losses and how our decision making is influenced based on the baseline from where we start. Prospect Theory was an improvement on a previous model developed by Bernoulli, in which states of wealth are the carriers of value, whereas Prospect Theory has psychological value of gains and losses. The graph basically depicts the “Loss Aversion” and diminishing sensitivity for both gains and losses. The two curves are not symmetrical ie the slope of the curves change abruptly at the reference point, which indicates the responses to losses is stronger than the responses to corresponding gains. This could explain the heard behavior we have in the stock market when the market starts going down everyone runs to the exit at the same time thereby causing a collapse.
There are a number of fallacies and pitfalls that is outlined in the book and most of them can be lessons for Entrepreneurs. I really like this passage
When forecasting the outcomes of risky projects, executives too easily fall victim to the planning fallacy. In its grip, they make decisions based on delusional optimism rather than on a rational weighting of gains, losses, and probabilities. They overestimate benefits and underestimate costs. They spin scenarios of success while overlooking the potential for mistakes and miscalculations. As a result, they pursue initiatives that are unlikely to come in on budget or on time or to deliver the expected returns- or even to be completed. In this view, people often (but not always) take on risky projects because tehy are overly optimistic about the odds they face. It probably contributes to an explanation on why people litigate, why they start wars, and why they open small businesses.
Pretty grim analysis, but it is not a big deviation from what Fred Wilson told me when I asked him what should I look out for embarking on the trail of Venture Investing and Entrepreneurship:
You have to be very patient and stockpile your capital. It always takes longer and more money
The best way to solve the above fallacy is to dedicate oneself to the truth, I wrote about it and I have also written about the motivation for being an entrepreneur. Most of the successful entrepreneurs who I have met, typically are not doing this with economic benefits in mind and this goes for the successful VCs as well. Being optimistic and pushing forward when all the odds are stacked up against you is the hallmark of Entrepreneurship but that should not lead to telling lies to yourself.
Entrepreneurship (Photo credit: Michael Lewkowitz)
Truth is reality. Reality can be distorted when we have wrong maps in front of us. To be part of a startup or running your own business there is nothing more detrimental than not dedicating everything about what is done in the company to truth. I believe Entrepreneurship is a Truth Game. You cannot lie to yourself that your product or service is great when your users don’t want to pay for it. The reality of running out of money hits you like a ton of bricks. Obviously it is hard, building something that is not yet there but getting someone to pay for it with all its limitations and crashes and bugs, but as long as you are honest about the status of things and are continually making progress you are doing the right thing. There is a reason why all investors want to see metrics, because metrics shows the reality of the performance of the team. So what are these metrics? Sarah Pervette, one of the speakers in Startup Iceland had this slide that she stole from Bessemer Venture Partners:
Source: Startup Iceland 2012, Sarah Prevette
These 6 metrics should be in front of every Entrepreneur, you need to measure this, monitor this and make sure that you are tracking progress on all of this. It is very easy to get caught up in the mix of things when you are doing a startup, there are million things you need to do and things are not working, people don’t show up because they are sick, whatever but being honest about the measurement of your business is the most important thing that you cannot take your eyes off from.
I always enjoy Steve Blank‘s blog, this one is a classic… I think, because he is talking about his personal experience of being in a War. I think we over emphasize the magnitude of the challenges we face while being an Entrepreneur, I think this blog post is a good reminder that there are things much bigger, more important or with much dire consequences than being an Entrepreneur. So the next time you are facing a really tough time reach out to this post and read the last few paragraphs.
Epilogue
Image Source: Steve Blank Blog via centurywings.com
Less then ninety days later the air war over Southeast Asia ended.
For the rest of my career when things got tough in a startup (being yelled at, working until I dropped, running out of money, being on both ends of stupid decisions, pushing people to their limits, etc.), I would vividly remember seeing that empty spot on the flightline. It put everything in perspective.
established companies to be Entrepreneurial is very hard because they look at different metrics and the incentive for the established companies to participate in Cluster building is a long term game, however established companies are relatively short term focused because they are trying to increase their yield on invested capital by getting more efficient on the operation, sales etc. On the other hand a startup in the same sector is more or less not too focused on efficiency, they are trying to exploit a weakness or a problem in the existing solutions, therein lies the challenge. It would take visionary leaders in established companies to harness, foster and encourage the building of a ecosystem around the sector that their companies are built in. This is exactly what Dr.Thor Sigfusson has done with his startup/project Seafood Cluster a.k.a Sjávarklasinn in Icelandic. 
It is fascinating to see how he has convinced established companies in the Seafood sector and new emerging companies to co-located in a building in harbor of Reykjavik. He has ambitious plans to expand the facility to allow more startups and established companies to have meetup spaces. It was exciting for me to watch this because Seafood is the sector that is as traditional as they come, we are talking about really established fishermen looking into working with young new startups, mentoring them and seeing if they can improve the established methods using new technology.
