April 14, 2013
I was at the Seed Forum this year, but I could not participate for the whole day but I attended the cocktail hosted by the British Embassy in Iceland. It was fascinating to see the British Ambassador pitching to the startups to look at UK to locate or move their startups when they scale out of Iceland… he even went to the extent of saying moving to the US was not a good idea I am happy to see different countries pitching to startups and entrepreneurs in Iceland to move to their country, it is good for the Entrepreneur and it is good for the Startup Ecosystem that there is growth path out of Iceland. I got a good impression of all the teams that were pitching. I have written about why Startups should not be focused on raising money. I am going to repeat this until I turn blue, the focus of the startup should be to solve a really itching problem, win customers and raise capital from the customer first. As much as I support the initiatives like Seed Forum, I really believe that it muddles the real issue facing startups and entrepreneurs. The Seed Forum this year had a famous Icelandic Entrepreneur and Cofounder of Opera, Jon Von Tetchner, actually he lived and worked in Norway but he is Icelandic. He had a very good talk and Q&A session about being an Entrepreneur. His advice and the advice given by Brad Feld and every other entrepreneur who has walked through the fire of creating a company and successfully transitioning says the same thing – Delay taking money from Investors as much as you can. Sometimes it is not possible i.e if you need machines, or equipment or buildings you need Capital but with startups in Software you dont need any of that or Capital to get started… that is one of the reasons that I am so bullish on the fact that Software based companies that are building solutions on top of the new Infrastructure of Cloud Computing, Google, Apple, Amazon, Twitter, Facebook, LinkedIn, Pinterest etc will be able to bootstrap much better, faster and get through the valley of death without pledging your soul to the devil, no, not all investors are bad but there are different incentives if you are an investor vs if you are an entrepreneur.
In other news, Klak and Innovit merged into Klak Innovit… I am happy to see some movement in the Accelerator, Incubator and Institutions that help entrepreneurs collaborate and optimize in Iceland. Accelerators are a key ingredient in the Startup Community development and I believe Kristjan Kristjanson the new CEO of the merged organization has his heart in the right place. He also runs Startup Weekend, Startup Reykjavik and has been of great help to many startups since he started working with entrepreneurs in 2007-8 I think.
March 29, 2013
twitter fail image (Photo credit: Wikipedia)
I like Data as much as the next guy, but I am troubled by all the empty promises of big data. I think data is good but too much data is unwieldy and it becomes hard to separate the noise from signal. It does not matter how sophisticated our data sifting mechanism become it is still ugly. What worries me even more is our inherent ability to see patterns in tea leaves that could lead to hypothesis and theorizing based on Big Data. Nicholas Nassim Taleb in his book on Antifragility talks about this problem:
In business and economic decision making, reliance on data causes severe side effects – data is now plentiful thanks to connectivity, and the proportion of spuriousness in the data increases as one gets more immersed in it. A very rarely discussed property of data: it is toxic in large quantities- even in moderate quantities.
… noise and randomness can also use and take advantage of you, particularly when totally unnatural, as with the data you get on the Web or through the media.
The more frequently you look at data, the more noise you are disproportionally like to get (rather than the valuable part, called the signal); hence the higher the noise-to-signal ratio. And there is a confusion which is not psychological at all, but inherent in the data itself.
The world of Twitter and capturing every search by Google, we are fooling ourselves into believing that more data is better actually it is worse given the frequency of our observation. Maybe if we can spread the time variable out it could elicit some interesting dynamics. Anyways, it has been a lot of fun to read Antifragility the last couple of days… and fortunate to be in a place that is tranquil and peaceful, where inspiration is easy, all I have to do is look outside the window or walk out the door. I am in our summer house in Thingvellir, surrounded by mountains, lakes and glaciers and just pure nature, Icelandic Style.
Here is a troubling consequence of big data: Surveillance
March 4, 2013
Cover via Amazon
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.
September 20, 2012
The world of software development is changing… there I have said it. Going with the thesis that “Software is going to Eat the World“, I believe it is important to give context to this notion. I started writing code a long time back, I am a closet geek i.e I like to make things and the command line does not scare me. I have seen the evolution of software development, adopted and been a pilgrim to a few religions only to learn that the market dictates which religious camp you should be part of. If you are with me so far then you understand what is going on in the software world. Lets continue on the context part, today everything that we do involves something to do with Software, you mobile phone, the car you drive, TV programs you are watching and how you get electricity into your home. Given the broad application of software, it is important to know that today the world of software is hyper connected i.e Software written in one environment talks to software written in another environment with small tweaks through what is called Application Programming Interfaces (API), the interoperability brings with it a huge network effects. This is not a universal phenomena because there are still those who believe that writing software that does not talk anyone who wants to talk to it is a viable business strategy, I think that camp is going to die… if you are working for a software company and your software product or service does not have an API, run to the hills because you will become the North Korea of the new world. I see you are still reading this post, which tells me that software is important to you, good.
I had interesting meetings with some software companies who still believe that they need to build walled gardens of applications that don’t interoperate with the external world through standard APIs. I pity those who think that way. In today’s world Open Transparant API is the currency because it expands your reach and product base and partnership. If your company’s value proposition is not tied to being open and interoperable, you are dead out of the door. The Open Source movement has spawned an army of software some that I use and would like to contribute to and others that I would not recommend to my mother. There is a wide chasm between what is usable and what is full of crap… that is the cost of open source, never the less the biggest value of open source is adoption and expanded ecosystems. Internetis the largest ecosystem we have today and it is evolving it is built on open source, standards based API.
This image was selected as a picture of the week on the Farsi Wikipedia for the 13th week, 2011. (Photo credit: Wikipedia)
Another new movement is the ability to have access to server environments at a negligible cost compared to what it was 10 years back. Today anyone can sign up with a Cloud Provider like Amazon Web Services or GreenQloud (disclaimer: I am the CEO of GreenQloud and the entire stack of software that runs on GreenQloud is built using Open Source software and the team has contributed a lot to the open source community through Cloud.com) and spawn a server environment, build an application and launch it on the internet and start selling it. All this has been made possible by Open Source software and Standard based API and the Internet. You don’t have to buy software you may still need to install some software in the server environment but for those who know what they are doing it is pretty straight forward. So, startups today when they say they need to buy Hardware ie. Server computers, it better have a compelling reason. Many of the standard services we use today are running in the Cloud, Google, Facebook, Twitter, Amazon, DropBox etc even Apple has a cloud offering called iCloud and Microsoft is following that strategy is launching their own versions of cloud services Office365.com, outlook.com, Skydrive etc to name a few. This new world is here to stay, there is no turning back, are there going to be hiccups along the way absolutely… I have no doubts but this hyper connected world with Services available through all the devices we carry and have on us is huge step forward. As we all like to say you have seen nothing yet!
July 29, 2012
A framework is more like a guide, it does not tell you how to walk the path but gives you guideposts on what you should focus on. Building great teams is the bedrock of building great companies. I have mentioned many times that when you are investing in a startup, the team matters a lot. Building great teams that execute is an important necessary condition. All other things you can change but the team dynamics is critical, it is hard to encapsulate and constant changes in team members and structure always leads to confusion and delays progress.
I believe the framework build by Jim Collins in his Good to Great book clearly articulates what I mean. The first stage in all great companies before they became great was the build up of disciplined people. Without disciplined people all other things falls apart, what do I mean by disciplined people? I can sum this up in one sentence, disciplined people are those who Make and Keep Promises. It is as simple as that. If you one can build a discipline to do that one can get disciplined in anything. There are a number of qualities that are required to be disciplined, I like :
- Respects other opinions
This is by no means an exhaustive list of attributes that comprise the winning team, however it is a good start. Paul Graham wrote a very interesting post about being relentlessly resourceful, he was of course referring to startup founders. I think the concept can be applied to anyone. I would like to be in a team that is relentlessly resourceful, that is resilient ie. when adversity hits the plan the team has a way to stand up and keep moving forward. Responsible is another word that I really like Dr.Steven Covey talks about this a lot in his books, the word responsible can be broken into Response-Able ie. have the ability to respond. Respecting others is not a nice to have but a must have quality. No-one knows everything if you want to win in the market place you need to bring people together who can compliment each others weakness. Thats the way winning is done! I wanted to leave this blog post with words of wisdom from a very famous philosopher Rocky Balboa.
The world ain’t all sunshine and rainbows, it is a very mean and nasty place and I don’t care how tough you are it will beat you to your knees and keep you there if you let it. You, me or nobody is going to hit as hard as life… but it ain’t about how hard you hit, its about how hard you can get hit and keep moving forward, how much you can take and keep moving forward… Thats how winning is done!
July 18, 2012
This is the first post of the “Welcome to Post on Wednesdays!” blog post in Startup Iceland. This post is a follow up post by Ashwin Bhambri and I think he has a point on trying to bring awareness, attention and glamour to the early stage investors. I am seriously thinking of including an award show as part of Startup Iceland 2013… what do you all think?
Image source: From Wikipedia, the free encyclopedia
Isn’t Angel Investing underrated or more so undervalued? The impact it can have on the global economy today is under estimated, as almost every third startup or small business requires to raise pre-revenue finance that banks or other organized institutions would typically not fund. Seed / angel investing is the only alternative left to the entrepreneur.
Angel investing is underrated simply because as a concept it is underutilized. There are just not enough proactive angel investors or money in angel / seed asset class for this activity to be considered mainstream or a serious factor in the building of economies.
Nevertheless, the potential of angel / seed financing and the overall impact it can create is colossal. If Peter Thiel had not to take a chance on Facebook it may not be the Facebook we all know today. Time and time again, those investors who took a leap of faith and invested in Angel rounds dramatically changed the course of history for many rockstar companies today starting from Google to Facebook to Twitter.
To be fair, Investing is also about capitalism and the simple theory if one does not see a return one will not invest applies. Arriving at an ROI from a pre-revenue start-up is not exactly pragmatic and an angel investor takes a huge risk here – What makes them invest is
a. They like the startup team, want to help and give back in the process
b. Their gut feel prevails over logic and tells them to go with a start-up.
Investors who repeatedly make angel / seed investments build the startup ecosystem and should be honoured with recognition and accolades for their contribution. There should be an attempt to glamorize angel investing and this could be the rocket fuel that catalysts more investors to join the angel bandwagon and can lead to more investment activity.
How do we do this? For starters there can be the Grammy and/or Oscar equivalent for investors or the Angel & Seed Investor Awards where active investors making investments are nominated and awarded, as investors are the early heroes of any startup ecosystem.
Glamour is also an amazing communication medium to a large audience and could convert traditional investors who typically invest in established listed companies to become angel investors.
Iceland could be the world’s accelerator of this initiative as the time & environment is optimum. Thus far I have not come across any Investor Awards event that is mainstream and it’s about time someone takes the initiative and makes it happen. If it fails it fails, if it succeeds it could do for the rise of angel investing what y-Combinator did for the rise of startup accelerators and that’s definitely a risk worth taking
June 21, 2012
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.
June 11, 2012
I was exchanging emails with a friend about Wifi access. I was tweeting yesterday on the way to the Keflavik Airport that it is cool that the Bus had Wifi in it and how I wish all airports and public transports provide free wifi service. My friend who moved from Iceland to Scotland said
Here in Scotland (and I assume the UK) nearly all inter-city, including commuter buses for shorter routes and some intra city buses have wi-fi. It’s really funny to see the generation gap on the buses. Those roughly over 45 almost never have a pad computer or iphone in use and nearly everyone from 15-30 yrs. are completely oblivious to the outside world while they hack away on their machines. Those who are 31-44 yrs. are a toss up as far as I can see (probably due to the fact that they are often with small children!).
This made me think about the generation gaps that exists today. The younger generation (15 yrs and younger) has grown up always knowing about computers, mobile phones and the Internet. I was also reminded by Fred Wilson‘s post about “Life Liberty and Blazing Broadband“, the needs of the younger generation are dramatically different than what it was maybe a decade ago. I don’t have in-depth data but I think the image below is representative… it is the reach Startup Iceland Page has on Facebook. I know that Startup Iceland may not be very representative of how the reach of a topic needs to be but the fact is it still reached a higher portion of younger demography (18 – 24) than the 45-54 age cohort.
This gap is real, I wish the generation that is 35+ gets over it and jumps into the technology that is going to connect them back to the younger generation because I believe this is the biggest opportunity we have today. No point in time where you could say you have a friend who is 20 years younger than you but it does not sound creepy. I have tried very hard to keep up with the younger generation and that means giving up on some biases, being empathetic and jump with the flow. I have learnt a lot watching the younger generation that last 4 years while I have been helping entrepreneurs and also being an entrepreneur myself. I think it is great, I feel very good about the next generation atleast the ones that I have been interacting with are responsible, know where they stand and want to really change the world that fits their needs. I think Technology is a great enabler, but we need to embrace it and try to ensure that we are the masters of this domain. I try to use it to build relationships with people as diverse as you can get and it has made all the difference in the world. I would encourage anyone reading this, if you don’t have a Twitter account go and create one, if you don’t have FourSquare get one… if you don’t have a smartphone go get one. It may be the best investment you made in getting connected to the future.
May 20, 2012
I have always maintained that the killer mobile app of the Internet was Email. I know it is not cool but it is by far the most important backbone of communication channel. Email has become the infrastructure utility of the Internet. I think if one looks back the most prolific usage of a mobile application which resulted in creation and catapulting of Blackberry to super startdom was the email. I remember the time when we used to carry two mobile devices, Blackberry for email and a mobile phone for voice. Blackberry really came up with the solution by solving the two devices problem and that made them the de-facto device for the business professional. When I started my career with Ernst & Young, we had an intricate communication system called the E&Y Voicemail. It was a voice messaging system that you can use with any phone, you dialed into a standard number punched the 4 digit code of the person you want to leave a voicemail for and voila you did. It was used extensively within the company as the main communication channel when email was not sufficient. I wonder if they still use it, I know that all the Big 5 Accounting and Management Consulting companies had their own way of doing this asynchronous voice communication.
The motivation and idea to write this blog post came to me while I was reading a paper written by ANDREW ODLYZKO with the title “The Volume and Value of
InformationWhat is interesting in this table is that voice minutes have more or less plateaued, however Text messaging is exploding. This is not anything new and the growth of Twitter and 140 characters is a useful trend and it is the basis for the Texting communication. I have written about why I believe Voice and Sound are going to be next big thing. The idea for a killer app, I am sure there already exists one for voice messaging. You limit the size of what can be said with a simple interface and that voicemail gets delivered to any device of choice actually to all the end points of communication to the individual you want to communicate to. The author of the above paper alludes to such an app:
Human culture is largely oral, after all, and the huge revenues of voice telephony testify to the utility of voice communication. Voice messaging could provide a nice hybrid between the traditional telephony and email/texting, one that even illiterate people could use. Some voice messaging is taking place, but in clumsy forms, and what is needed is something really simple, such as a button on a handset that a person could press to ensure that after the called party number is dialed, a message is recorded and deposited directly in a voice mail system.) Or are there other social communication changes that are playing a role? However, the advantage of mobility that wireless offers is undeniable and may have implications for Internet traffic growth rates.
There you go, the next killer app of course the app becomes a killer app only when there is enough uptake to make the network effect work. Think of Instagram for Voice. I think some the text message startup that are out there could be the natural extension providers for this application. I am going to propose this problem when we have a hackathon in Reykjavik University on May 29th as part of Startup Iceland Conference to be hosted in Andrews Theater in Ásbrú Enterprise Park.