Archive for February, 2007
I’ve not bloged in a couple of weeks now – mainly because I’ve now completely lost any sense of time and the rate at which it passes/flies by. So a lot has gone on since I last blogged so I’m starting this post with the intention of doing another post right after it (hopefully today but we’ll see). Before I start though I want to point out two awesome resources you should check out:
- <a href=”http://news.ycombinator.com”>news.ycombinator.com</a> – This is essentially a digg/reddit type site but only for stories related to startups and the web. This is a good way to quickly find out what the most interesting web stories of the day are and Paul Graham also has plans to turn this into a virtual “recruiting” ground for his future YC investments – you can read more about that <a href=”http://ycombinator.com/announcingnews.html”>here</a>
- <a href=”http://startupping.com”>startupping</a> – An online resource for web entrepreneurs, includes wiki’s but what I find the most useful is the forum. This needed setting up for a while (perhaps even a social network built on top of it?) and I’m glad Mark Fletcher has been the one to do it.
Ok so the title of this post probably gives away what I want to write about. After Kul’s article for the BBC there’s been a lot of talk of the Silicon Valley vs the rest of the world – some people arguing no one can replicate SV and others saying it doesn’t have a strangehold on innovation. Saul Klein wrote an interesting post here about the growth of innovation in Europe and there have been a number of spin-off posts around the place about the topic. Since I’ve been out here I’ve blogged indirectly about SV vs the UK (based on my experiences obviously) without directly writing a post about it. I feel like I have some stuff to say about the topic so I’m going to do that now.
One thing I think it’s important to lay down before talking about the issue is the problem of over-generalisation. The speaker at our last Y Combinator dinner was Paul Buchheit – employee #23 at Google and also the founder of Gmail. His talk was definitely the least conventional of the talks we’ve had so far – he began by telling us to ignore the advice of other people because ultimately “people are just talking monkeys”. The point he was making is this – people generally give advice based on their own experiences and as a result they inevitably end up over-generalising about things. I think that applies hugely to the context of the Silicon Valley debate – people can only write about their own experiences and so a lot of the time they end up taking this all or nothing position which really doesn’t do justice to all of the issues involved. So with that in mind I want to lay out some variables that will inevitable lead to some degree of generalisation by Kul or I when we write/talk about our experiences of the UK v SV:
- We had a very hard time trying to raise early stage funding for our venture in the UK. There are a number of different reasons why that could be the case and they don’t all lead to the conclusion that the UK will never give birth to a Google or Yahoo. The point is that was our experience so that’s all we can talk about. The best way to show that our experience can;t be used to make generalisations from is to show everyone a group of young entrepreneurs, just out of university, with early stage funding for their ventures.
- We came out to the Valley to take part in Y Combinator which instantly handed us a fantastic network to draw upon. Not everyone who moves out to the Valley will have access to immediate angel funding + the YC partners + a massive group of people their age who are also starting companies and feel a sense of loyalty to each other. We’re lucky to be in that position but we know that isn’t the case for every single person starting a company in the Valley. The telling thing is that to find a Y Combinator set up we had to move out to the Valley.
- On a personal level we already had a network out here before we came – largely due to the annual Silicon Valley comes to Oxford event held by the Said Business School, Oxford. It’s through that event that Kul met Evan which is how we’re now working from the Obvious offices, he’d also worked closely and is good friends with Bob Goodson of Yelp. It’s at the same event that we met Chris Sacca of Google and we also had one of our friends Kirill, working out here on Slide (Max Levchin’s venture). All of those contacts were obviously a great help to us and shape our experiences of the Valley. The most powerful thing to take away from that though (at least for me) is the fact that we probably had a stronger network over here while we were still in the UK and that’s not something we engineered – it just happened but the fact it was easier for us to make contacts in the Valley than in London must be indicative of something.
The point I’m trying to make my laying these things out is that I don’t think there’s a right or wrong answer to the question of what’s better for each individual – starting their tech company in SV or somewhere else. It’s perfectly feasible you might find a fantastic group of people to work with and an angel investor you have an awesome relationship with if you’re based out in the Isle of Man. If that’s your situation then great for you but statisically speaking, however it’s far less likely that you’ll have that set up somewhere outside of Silicon Valley. That’s just a fact and one that can’t be argued with – if you were to look at things completely objectively and wanted to give yourself the mathematically best possible chance of making your startup a success you would want to be based in the Valley. Of course statistics are statistics and both Kul and I are fully aware of the fact that coming to the Valley does not magically guarantee you success and nor does staying in London make failure inevitable.
What I liked about a recent podcast I heard from the Future of Web Apps conference held recently, was when Saul Klein said it’s time we stopped worrying about why we’re (Europe) not Silicon Valley and started focussing on what we’re going to do to drive tech innovation. So the question becomes not how does Europe compete with Silicon Valley – incidentally one thing I have to say is that since I’ve been out here this notion of competing with SV has not been heard/seen once. I find that people don’t walk around with a “SV is the best place in the world” t-shirt each day because for them this is normality. SV wasn’t engineered it just happened and for people out here, this is reality and I myself have not encountered any smugness from people. Sure they accept the fact they’re lucky to be in such an amazing place but they don’t try and make out like they are the be all and end all of the web world. That notion is one I think has been fabricated more by external parties who take creative interpretations of articles about the Valley.
So if you were somewhere in the world and wanted to learn from Silicon Valley and set up a start up hub what would you do? Well my thoughts are this:
- Be prepared to lose a lot of money. There is no way of hiding from the fact that the majority of startups fail. When you’re talking about first time founders being involved those odds become incredible – it becomes incredibly unlikely that any startups from young founders will actually suceed. But the problem is that to institute a real startup culture it’s the young founders who need to be starting up companies. Silicon Valley is amazing because by the time people reach their mid-twenties they have already started a few companies. Some of them may have suceeded but most will have failed but the overall experience floating around will always be rising. Everything else builds off that – the more founders you have, the more startups = more startup opportunties for other young people = more networks forming = more success stories = more people doing startups. It’s not complicated but to get to that stage will not be cheap – those startups that are going to fail have to be invested in. Simple as that.
There is also a wisdom of the crowds theory at work here which is illustrated by drawing analogies to bees. Bees are good at finding nectar because a large number of bees will fly out and find the flowers they need – each bee who doesn’t find a flower creates a path that is then crossed off the list of potential paths to follow. The same applies to startups – for the really good ideas to take off it needs more people to be working on them. Every time someone tries an idea and it fails, that’s one less fruitless path for people as a whole to follow which has an overall net benefit on the ecosystem. I think failing startups are actually the backbone of what makes SV so successful.
- Stop focusing on getting the really motivated/”natural” entrepreneurs involved. I’m sure that in every city there will inevitably be some people who will naturally just gravitate towards startups and any hubs that are formed. Much like the early adopters of a website. You don’t need to expend too much effort on finding these people because they’ll find you. What you do need to focus on are the potentials – the people who have the potential to do a startup but just don’t realise it yet. I know the importance of these people because I was one. I was no Richard Branson and there was no sweet selling in the playground for me. I stumbled into startups (or was pushed into it by Kul) and now I can’t imagine doing anything else. But I am not alone – for every one person like me who ended up in startups, there are hundreds who did go through with that job offer and are now sitting behind a desk somewhere. Focus on those people and get their attention and make them think about what they can achieve. SV is amazing because it seems like the majority of these potentials do end up going into startups rather than getting safe jobs (it’s probably not the majority but it definitely feels like it).
- Get rid of the notion that startups are born from lightbulb ideas – it’s rubbish and it does no good. Google was not born because one day an angel from above came into Larry and Sergey’s dream and told them they should build an amazing search engine and then a few years later introduce adsense and then start taking over the world. Google started because those two guys wanted to do improve the search at Stanford, they did it and the rest is history. I recently read an article on the Guardian about the boom of online entrepreneurs in Britain. What depressed me most about it was how much it played up to the lightbulb stereotype. This is a bad thing because it puts people off – it’s too easy to hide behind the “i would do a startup I just don’t have the idea yet” excuse when you’re obsessed with those lightbulbs. If you read Jessica’s book Founders at Work, you’ll quickly realise that remarkably few startups orginate in this lightbulb way. They usually start because the founders buy into the idea of being their own boss rather than one specific idea – they start something and then go with the flow. If they’re (very) lucky it pays off otherwise they try something else. Without fostering that kind of culture, which flows through the Valley, I don’t think your startup hub is going to get the traction it really needs.
I think I’ll stop there before this post becomes far too long. That basically sums up my thoughts on SV v the rest of the world but I deliberately haven’t framed it as good points of SV v bad points of everywhere else. That’s not where the debate needs to go so I don’t want to add to it. This stuff is really not that complicated. It’ll take a lot of money and time to see the full benefits so any notions of short term profits need to be put aside. Short termist investments or motivations are not going to get people anywhere.
Personally do I think it will happen? I’d like to sit on the fence and say it’s too early to tell but my gut tells me this. There isn’t going to be some sudden destruction of the Valley and in the next tech boom (not trying to imply there’ll be a bust in the meantime) I still think SV will be the hub of it. But I think the landscape will change and it’ll become flatter – like Greg McAdoo from Sequoia said, they are going further afield to make their investments than they have ever done. SV will always be the best place to start a tech company but it doesn’t always need to be the only place.
Then again what to I know? Like Paul Buchheit said, I’m just a talking monkey so you’re better off ignoring everything I say. Time for bed now. Night.Read Full Post | Make a Comment ( 5 so far )
Ok so yesterday I went through what was possibly the most terrifying experience of my life so far – Y Combinator demo day. Demo day is when each of the Y Combinator groups does a ten minute presentation to all the other groups demo’ing what they have done so far (5 weeks into the programme). That might not sound like a big deal – it’s only the other groups (and the YC partners) that you’re presenting to – and indeed I had generally been relaxed and not worrying about it much. That was until this weekend when the fear suddenly hit me and I realised – this was DEMO day and NOT presentation. Presentations Kul and I can do – we’ve made so many presentations and pitches to investors that I’ve lost count. We have it all nailed down, practiced and presented – from the opening “this is the problem we’re solving” to the “here’s how we plan on going after the market”. You’d think that presenting to VC’s and angel investors would be far more nerve wracking than to a group of hackers right? Wrong. Very wrong.
Demo day pretty much sums up the difference in attitudes to tech startups out here in the Valley and anywhere else. Out here people aren’t interested in your Powerpoint slides and the typical “The market we’re in is an X billion dollar/pound industry so we only need to take 1% of it to be worth a lot” lines. They want to see what you have done – they don’t want you to explain what you’re doing, they want you to show them. In all our time running boso in London (granted it wasn’t very long, 6 months full time for me and 10 months for Kul) not once were we asked to demo what we were doing. Sure we had plenty of longwinded conversations about our idea and what we wanted to do but not once did someone say “whip out a laptop, connect to the wifi and show me what you’re all about”. Believe me if people had that attitude we would have paid 100 times more attention to every single nook and cranny of our site.
To put it quite simply, when you demo your product there is no scope for bullshit. Either you have a product that works well and is impressive or you have a piece of crap that breaks every two seconds and it’s obvious no one would ever use it. There is no scope for fudging around the edges and making excuses – for those ten minutes you’re presenting the audience is not interested in how hard the fight to raise angel money has been or how you can’t find the right people to join your team. There is only one thing they are judging you on and that’s the projection on the wall that’s hooked up to the laptop from which you’re running your site. That’s a scary thing – peer pressure is a powerful thing and I was amazed at just how much I wanted to impress these people, who are all the same age as me and at the same stage in start-up life.
Well it all ended well, the demo went ok and we were voted as one of the top three most promising companies in the current YC batch (by the YC partners and fellow YC founders) which was quite nice. But it’s got me thinking a lot about the power of actually sitting down and taking someone through what you have built. The three hours before we had to leave for Mountain View (where the YC offices are based) were by far and away our most productive hours since being out here. We’ve been working hard but when you have the pressure of a demo it forces you to raise your intensity up a notch that you didn’t know existed. Kul and I spoke about this on the way back – if we had the mentality that we had to demo at the end of every day life would be a lot more stressful but it would also make us raise our game a whole new level. Maybe every day is too excessive but at the very least – I think getting into the habit of actually demo’ing things when you meet someone important i.e. someone you really want to impress is a powerful one. It also makes the meeting more productive, as the saying goes a picture paints a thousand words and that can be applied across here. A five minute demo gives a much clearer understanding of what you’re all about than half an hour of revenue projection and market research talk (that stuff is obviously very important but I think it’s more later stage – the first five minutes of a meeting are when you really need to engage and make people interested in what you’re doing. If you have a working product to demo you’re already one step ahead of the rest of the pack who are just talking). I’m going to suggest to my friends at Zenopy that they hold regular demo days for each other as I think it will have a big benefit.
Ok so besides demo day this week we also went to the Powerset Series A funding party. I find Powerset to be a very interesting company – they’re going after what is an incredibly hard problem to solve, they’ve raised a lot of money (from very smart investors) and have generated a lot of hype around their prototype. It’ll be interesting to see what happens but I did have the feeling in the back of my mind that perhaps I was going to my first bubble party and would look back in a few years and think about the free food and drink that was offer and say that’s when the crash all began. Time will tell but people like Reid Hoffmann and Peter Thiel don’t invest in average start ups so I’m sure the Powerset guys have something special under the hood.
At the party though I ended up meeting a load of Facebook people – including Mark Zuckerberg himself which was pretty cool. It probably sounds a little pathetic but I was actually kind of star struck, I’m still adjusting to the fact that the guys who have started all these amazing start ups actually live in the same neighbourhood as me now and I’m going to bump into them every now and then. I was met Aditya (one of the first engineers at FB), Ruchi (another early engineer) and Jeff (who I knew from a house party in my first week out here). The first thing that struck me is just how young these guys were – they’re managing teams, making recruitment and strategic decisions and they’re only a couple of years older than I am. When you think of Facebook as being one of the most exciting companies in the Valley right now and then you realise it’s being driven by a young team it makes you question a lot of assumptions. So my “intended” career path had been law – where your pay and rank is determined purely by the number of years you have worked at the firm for. When you hit a certain age maybe you make partner and maybe you don’t. But the point is that age and experience rule in that culture and not raw ability. Why do we have to assume that we can measure the ability to perform well purely by the number of years someone has worked in a particular field? Mark Zuckerberg doesn’t have 10 years experience of running companies worth $1 billion but he’s doing a pretty good job of it so far (he obviously has an awesome team around him but he’s the one who put them together in the first place).
And that tapped into something else I’ve noticed since being out here in the Valley – age is nowhere near as a big a deal as it was in the Uk. I remember one of our first conversations with a Financial Director we brought on board for boso in the early days – it revolved around our next hires. Apparently we needed to get some grey hair on the team to give us credibility and make sure we didn’t make rookie mistakes. No. What we need were grey haired investors who would lend us their resources (of which money is only a small part) and leverage their experience where we needed it without trying to run the show. The management of the company had to come from us and so what if we’re just out of university/college. Why does someone who has spent 10 years analysing financial markets have a better chance of making a success out of an idea we live and breathe everyday? The attitude in the Valley is that your age is determined by the number of startups you’ve gone through – there are people here my age who have already started and scrapped a couple of companies. That gives them experience and all the “grey hair” they need.
If you want to replicate the Valley and develop and ecosystem you really need to start believing in young people. And believing in young people isn’t patting them on the back or giving them an Enterprise Week where they can network. It’s giving the money and telling them to go away and make something happen with it. Even the VC’s (the most risk averse of all investors) in the Valley do it (Sequoia invested in Loopt, of which the CEO Sam Altman was still in college at the time and the Youtube guys weren’t exactly planning their retirements when they raised VC).
It’s also why the Y Combinator set up is special – it focuses on smart young people and gives them just enough to go away and build things. It’s not complicated. What I’m realising everyday is that a lot of this stuff isn’t complicated. Building a startup is not rocket science and it doesn’t need 15 business analysts. It’s all the peripheral distractions (raising money, budgeting, investor relations, sales, etc) that are complicated and hard. The actual part of just building something and tweaking it until you’ve made something people want and need to use is actually fairly simple. You sit down and work and focus all your energy on that. Knowing what to do is not the hard part, actually doing it is. That’s why you can get away with Powerpoint slides but you can’t bs your way through a live demo.
Right we’re running low on food and I need to shower so catch you all soon.Read Full Post | Make a Comment ( 4 so far )
So Kul (my partner in crime) was on the BBC Business News website today! He’s writing about how he’s finding life out here in the Valley and he’s considerably more concise than I am so make sure you check out his first article here.
I’ll be blogging about this week shortly, it was incredible day – it was Y Combinator demo day and my mind is buzzing with stuff to write about. Sitting in a cafe in Mountain View waiting for the train at the moment though.Read Full Post | Make a Comment ( 3 so far )
For anyone who wants to read how actual entrepreneurs (rather than wannabes like me) built their companies you really need to read Founders at Work by Jessica Livingston.
I’ll disclose now that Jessica is one of our investors but the book really is awesome and there’s no journalistic spin/waffle/crap – it’s just big name founders (Steve Woznial – Apple, Max Levchin – PayPal, James Wong – HotOrNot, Blake Ross – Firefox, Evan Williams – Blogger and a load more) talking about how they built their companies. It’s like having these guys pour wisdom into your heads – the book is a real must read and Jessica has put it together really well.Read Full Post | Make a Comment ( 3 so far )
So we’ve been here for a month now – still find it surreal saying that as the time has just flown past at a ridiculous rate. I had the time distortion effect during university terms (or if you prefer – semesters) but not to the same degree as it has been out here. Now would probably be a good time to just take a step back and reflect a little on how the time has gone so far. Well there is no doubt that from a personal growth perspective being out in the Valley has been incredible. I’ve found my energy levels are increasing continuously – last weekend I decided I still had a couple of higher gears to switch into and upped the intensity for this week. One effect of being on the Y Combinator programme, as a non-hacker, has been seeing just how intense building a product with a small team is. A lot of the guys are literally coding every minute they’re awake (Steve Huffman of Reddit said that the highlight of his YC programme was a powercut because “it was the only time I didn’t have to work”). When you’re around that level of intensity it forces you raise your game and that’s definitely what we’ve been doing.
In strange way when you shift to the mentality that you should always be working it becomes kind of liberating – if you know that you’re going to be working for the next 19 hours that gives you greater freedom over what you do at any particular point in time (time sensitive stuff excluded). At the last YC dinner Joe Krauss talked about how professional althetes get themselves “into the zone” where they can just blank everything out and be uber-productive. What it takes to get into that zone is different for everyone – for me I’ve realised it has a lot to do with exercise and sleep. I need to exercise every day and make sure I’m just slightly sleep deprived to be at maximum productivity.
But anyway I digress – so to sum up the time spent here so far. Well one thing I’ve realised is that when you’re running your own company your perceptions of a company lifecycle become quite distorted. When I think we’ve been here for a month and not reached any “magic” milestones I get uneasy – it feels like we should have had more success. But then when you think about it when will you ever feel like things have been a real success? When you have exponential growth without doing any more marketing? When you get VC? When you get an acquisition offer? All these things take time and when you start to get swept away by the general rush of web 2.0 it becomes tougher to remember that building a real company takes time. Not every business is a facebook or a youtube that can just explode at an incredible rate. Even MySpace has been around since the last quarter of 2003 – it just didn’t have any serious traction (I’m basing that on the Alexa graph so correct me if I’m wrong). I remember reading a blog post from Allen Morgan (investment partner at Mayfield) who said that people have started forgetting that building a company takes at least 5 years. When you’re riding the wave of your startup and you’re convinced it’s the next big thing, it’s hard to imagine why everyone wouldn’t just start using your product the second they lay eyes on it. Unless you strike really lucky that’s not going to happen – realistically you’re looking at a hard slog where you have to fight against the odds to keep your thing growing.
So that leads me onto the next topic of this post – this weeks YC dinner speaker was Evan Williams of Blogger fame and now Obvious (he’s the guy we’re renting desk space from in South Park). So he talked about his experiences of starups and the one thing you instantly notice when Ev speaks is how honest or open he is. He was totally open about all the shit he faced starting up Blogger (there was a lot of it – his whole co-founder team walked out and left him to keep the company alive by himself. He taught himself everything he needed to know to keep a website up and running and kept it afloat for a year). What was amazing to me was that Ev didn’t even have a clearly defined path when he was running Blogger – there was no 50 page business plan or revenue model. He basically just figured out what people wanted as he went along and gave it to them. And that is another MASSIVE difference I’ve seen in starting up a business here compared to back in the UK – people don’t have some set in stone path that they walk along come what may. The attitude here is that if you get smart, motivated people together and have them launch something – sooner or later they will figure out what people want.
Obviously you need to start out with the core of an idea and know what general problem you’re trying to solve but there is a real feeling here that the first thing you launch is probably going to be way off base (Ev actually started out building project management software for big corporations – he then ditched it for Blogger which was the side project that showed more growth and promise). The trick is being able to accept that and continue iterating until you refine down exactly where the opportunity lies. The problem with this approach is the incredible level of stress it involves. People generally like stability and security so working in the an environment shrouded by that type of uncertainty and continual change is tough and requires a great deal of willpower and persistence. But from a logical perspective I think it makes a lot of sense – take the idea of the wisdom of the crowds. Now numerous studies have shown that when you ask a group of people to perform a task and collate their results, the group as a whole is usually smarter than any one person in it (that’s a very quick and dirty explanation of the theory).
That can be applied to startups I think – any one or two people trying to decide exactly what millions of potential users really want are always going to face a tough time. But what if they just launched something and got a few hundred people to use it – that’s definitely achievable. They could then use the feedback from those few hundred people to decide which direction they should go in next – with all that extra data they’re much more likely to find the right direction than when it was just two of them. Maybe that’ll take them to a few thousands users. Again they have more data than before and again can decide which direction to go in – if at any point they’re not picking up any new users then clearly they need to do something drastically different. You can see why that’s totally different to spending 6 months writing a business plan, raising investment and then sticking to that plan no matter what happens. It’s a big reason why the Valley has a much bigger hit rate than the UK – it’s not because people don’t have a clue what they’re doing when they start and frown upon thinking about revenue or financial projections. The point isn’t that the Valley is full of laid back people throwing money at anything. The point is that people here understand that change, and often quite dramatic change, is an inevitable part of business and they accept that. They don’t get scared when something doesn’t work – they get excited because they’re now that bit closer to finding out what does actually work.
Another word of advice Ev gave was to always build things you actually have a passion for and enjoy using. Initially that sounds like the most obvious thing in the world but it really isn’t. Let’s face it people do startups because they’re ambitious and they want to be rich. There are a million other reasons to start your own company but that’s ultimately what it boils down to. That is inevitably going to lead to people jumping on ideas they think are going to make them money without really understanding the market or the product itself in any great detail. But building something people want is seriously hard. Building something one or two people want is simple enough but building something with such mass appeal that you can make a viable business out of it is bloody hard. The only way that’s going to happen is if you know what it is that those people want. No one can predict that exactly, it’s not an exact science and you have to put something out there and adapt to what happens, but if you don’t have any understanding of the market you’re really shooting yourself in the foot.
Being honest that’s a problem we have with boso – yes we use the site to sell things and buy them but the real market we need to go after (in the early stages) is the hardcore seller. The kind of person who makes a living out of selling online and knows the ins and outs of every single online marketplace there is. I’m not an eBay powerseller and nor am I likely to become one any time soon but I do have a real passion for learning. That’s why Kul and I are getting our hands dirty – we’ve offered to help out some eBay powersellers with their work for free. Will it be mundane/boring work? Yep but will it give us an amazing insight into how people trade online – of course it will. I really think that if you don’t know the ins and outs of the area you’re in you better be prepared to get your hands dirty and do a crash course in it. It’s amazing how much power you give yourself when you can approach your own product as a potential end user and instantly spot the flaws in it that are going to bug a lot of people (though you’re obviously never going to get them all).
Ok I should go to bed now – we’re having an online focus group with our boso users at 1.30pm Uk time which unfortunantely means 5am West Coast time. Since it’s 2am now and I still need to write some more code (yes I’m actually writing real code now – with a lot of direction from Srini) tomorrow will definitely be interesting – the evening is a YC dinner which I’m sure I’ll be totally knackered for. Oh well, I suppose that’s what this startup gig is all about.Read Full Post | Make a Comment ( 8 so far )