Tag Archives: startup

Uber For…

google-search-uber

There’s an Uber for pet-sitters (Rover). There’s an Uber for dog walkers (Wag). There’s an Uber for private jets (JetMe). There are several Ubers for alcohol (Minibar, Saucey, Drizly, Thirstie). In fact, enter the keywords “Uber for…” into Google and the search engine will return “Uber for kids, Uber for icecream, Uber for news, Uber for seniors, Uber for trucks, Uber for haircuts, Uber for iPads (?), Uber for food, Uber for undertakers (??)…” and thousands of other results.

The list of Uber-like copycats, startups and ideas is seemingly endless — a sign, without doubt, that we have indeed reached peak-Uber. Perhaps VCs in the valley should move on to some more meaningful investments, before the Uber bubble bursts.

From Wired:

“Uber for X” has been the headline of more than four hundred news articles. Thousands of would-be entrepreneurs used the phrase to describe their companies in their pitch decks. On one site alone—AngelList, where startups can court angel investors and employees—526 companies included “Uber for” in their listings. As a judge for various emerging technology startup competitions, I saw “Uber for” so many times that at some point, I developed perceptual blindness.

Nearly all the organizations I advised at that time wanted to know about the “Uber for” of their respective industries. A university wanted to develop an “Uber for tutoring”; a government agency was hoping to solve an impending transit issue with an “Uber for parking.” I knew that “Uber for” had reached critical mass when one large media organization, in need of a sustainable profit center, pitched me their “Uber for news strategy.”

“We’re going to be the Uber for news,” the news exec told me. Confused, I asked what, exactly, he meant by that.

“Three years from now, we’ll have an on-demand news platform for Millennials. They tap a button on their phones and they get the news delivered right to them, wherever they are,” the editor said enthusiastically. “This is the future of news!”

“Is it an app?” I asked, trying to understand.

“Maybe. The point is that you get the news right away, when you want it, wherever you are,” the exec said.

“So you mean an app,” I pressed. “Yes!” he said. “But more like Uber.”

The mass “Uber for X” excitement is a good example of what happens when we don’t stop to investigate a trend, asking difficult questions and challenging our cherished beliefs. We need to first understand what, exactly, Uber is and what led to entrepreneurs coining that catchphrase.

Read the entire story here.

Image courtesy of Google Search.

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First, Order a Pizza. Second, World Domination

Google-search-pizza

Tech startups that plan to envelope the globe with their never-thought-of-before-but-cannot-do-without technologies and services have to begin somewhere. Usually, the path to worldwide domination begins with pizza.

From the Washington Post:

In an ordinary conference room in this city of start-ups, a group of engineers sat down to order pizza in an entirely new way.

“Get me a pizza from Pizz’a Chicago near my office,” one of the engineers said into his smartphone. It was their first real test of Viv, the artificial-intelligence technology that the team had been quietly building for more than a year. Everyone was a little nervous. Then, a text from Viv piped up: “Would you like toppings with that?”

The engineers, eight in all, started jumping in: “Pepperoni.” “Half cheese.” “Caesar salad.” Emboldened by the result, they peppered Viv with more commands: Add more toppings. Remove toppings. Change medium size to large.

About 40 minutes later — and after a few hiccups when Viv confused the office address — a Pizz’a Chicago driver showed up with four made-to-order pizzas.

The engineers erupted in cheers as the pizzas arrived. They had ordered pizza, from start to finish, without placing a single phone call and without doing a Google search — without any typing at all, actually. Moreover, they did it without downloading an app from Domino’s or Grubhub.

Of course, a pizza is just a pizza. But for Silicon Valley, a seemingly small change in consumer behavior or design can mean a tectonic shift in the commercial order, with ripple effects across an entire economy. Engineers here have long been animated by the quest to achieve the path of least friction — to use the parlance of the tech world — to the proverbial pizza.

The stealthy, four-year-old Viv is among the furthest along in an endeavor that many in Silicon Valley believe heralds that next big shift in computing — and digital commerce itself. Over the next five years, that transition will turn smartphones — and perhaps smart homes and cars and other devices — into virtual assistants with supercharged conversational capabilities, said Julie Ask, an expert in mobile commerce at Forrester.

Powered by artificial intelligence and unprecedented volumes of data, they could become the portal through which billions of people connect to every service and business on the Internet. It’s a world in which you can order a taxi, make a restaurant reservation and buy movie tickets in one long unbroken conversation — no more typing, searching or even clicking.

Viv, which will be publicly demonstrated for the first time at a major industry conference on Monday, is one of the most highly anticipated technologies expected to come out of a start-up this year. But Viv is by no means alone in this effort. The quest to define the next generation of artificial-intelligence technology has sparked an arms race among the five major tech giants: Apple, Google, Microsoft, Facebook and Amazon.com have all announced major investments in virtual-assistant software over the past year.

Read the entire story here.

Image courtesy of Google Search.

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Farm in a Box

Freight-FarmsIf you’ve read my blog for a while you undoubtedly know that I have a rather jaded view of tech startup culture — particularly with Silicon Valley’s myopic obsession for discovering the next multi-billion dollar mobile-consumer-facing-peer-to-peer-gig-economy-service-sharing-buzzword-laden-dating-platform-with-integrated-messaging-and-travel-meta-search app.

So, here’s something refreshing and different. A startup focused on reimagining the production and distribution of fresh food. The company is called Freight Farms, their product: a self-contained farm straight out of a box. Actually the farm is contained inside a box — a standard, repurposed 40 ft long shipping container. Each Leafy Green Machine, as it is called, comes fully equipped with a vertically-oriented growing environment, plant-optimized LED lighting, recirculating hydroponic plumbing and finger-tip climate control.

Freight Farms may not (yet) make a significant impact on the converging and accelerating global crises of population growth, climate change, ecological destruction and natural resource depletion. But the company offers a sound solution to tackling the increasing demand for locally grown and sustainably produced food, especially as the world becomes increasingly urbanized.

Please check out Freight Farms and spread the word.

Image: Freight Farms. Courtesy: Freight Farms.

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Re-Innovation: Silicon Valley’s Trivial Pursuit Problem

I read and increasing number of articles like the one excerpted below, which cause me to sigh with exasperation yet again. Is Silicon Valley — that supposed beacon of global innovation — in danger of becoming a drainage ditch of regurgitated sameness, of me-too banality?

It’s frustrating to watch many of our self-proclaimed brightest tech minds re-package colorful “new” solutions to our local trivialities, yet again, and over and over. So, here we are, celebrating the arrival of the “next big thing”; the next tech unicorn with a valuation above $1 billion, which proposes to upend and improve all our lives, yet again.

DoorDash. Seamless. Deliveroo. HelloFresh. HomeChef. SpoonRocket. Sprig. GrubHub. Instacart. These are all great examples of too much money chasing too few truly original ideas. I hope you’ll agree: a cool compound name is a cool compound name, but it certainly does not for innovation make. By the way, whatever happened to WebVan?

Where are my slippers? Yawn.

From Wired:

Founded in 2013, DoorDash is a food delivery service. It’s also the latest startup to be eying a valuation of more than $1 billion. DoorDash already raised $40 million in March; according to Bloomberg, it may soon reap another round of funding that would put the company in the same lofty territory as Uber, Airbnb, and more than 100 other so-called unicorns.

Not that DoorDash is doing anything terribly original. Startups bringing food to your door are everywhere. There’s Instacart, which wants to shop for groceries for you. Deliveroo and Postmastes, like DoorDash, are looking to overtake Seamless as the way we get takeout at home. Munchery, SpoonRocket, and Sprig offer pre-made meals. Blue Apron, Gobble, HelloFresh, and HomeChef deliver ingredients to make the food ourselves. For the moment, investors are giddily rushing to subsidize this race to our doors. But skeptics say that the payout those investors are banking on might never come.

Even in a crowded field, funding for these delivery startups continues to grow. CB Insights, a research group that tracks startup investments, said this summer that the sector was “starting to get a little crowded.” Last year, venture-backed food delivery startups based in the US reaped more than $1 billion in equity funding; during first half of this year, they pulled in $750 million more, CB Insights found.

The enormous waves of funding may prove money poorly spent if Silicon Valley finds itself in a burst bubble. Bill Gurley, the well-known investor and a partner at venture firm Benchmark, believes delivery startups may soon be due for a rude awakening. Unlike the first dotcom bubble, he said, smartphones might offer help, because startups are able to collect more data. But he compared the optimism investors are showing for such low-margin operations to the misplaced enthusiasms of 1999.  “It’s the same shit,” Gurley said during a recent appearance. (Gurley’s own investment in food delivery service, GrubHub, went public in April 2014 and is now valued at more than $2.2 billion.)

Read the entire article here.

 

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The Pivot and the Money

Once upon a time the word “pivot” usually referred to an object’s point of rotation. Then, corporate America got its sticky hands all over it. The word even found its way in to Microsoft Excel — as in Pivot Table. But, the best euphemistic example comes from one of my favorite places for invention and euphemism — Silicon Valley. In this region of the world pivot has come to mean a complete change in business direction.

Now, let’s imagine you’re part of start-up company. At the outset, your company has a singularly great, world-changing idea. You believe it’s the best idea, since, well, the last greatest world-changing idea. It’s unique. You are totally committed. You secure funding from some big name VCs anxious to capitalize and make the next $100 billion. You and your team work countless hours on realizing your big idea — it’s your dream, your passion. Then, suddenly you realize that your idea is utterly worthless — the product looks good but nobody, absolutely nobody, will consider it, let alone buy it; in fact, a hundred other companies before you had the same great, unique idea and all failed.

What are you and your company to do? Well, you pivot.

The entrepreneurial side of me would cheer an opportunistic company for “pivoting”, abandoning that original, great idea, and seeking another. Better than packing one’s bags and enrolling in corporate serfdom, right? But, there’s another part of me that thinks this is an ethical sell-out: it’s disingenuous to the financial backers, and it shows lack of integrity. That said, the example is of course set in Silicon Valley.

From Medium:

It was about a month after graduating from Techstars that my co-founder, Lianne, and I had our “oh shit” moment.

This is a special moment for founders; it’s not when you find a fixable bug in your app, when you realize you have been poorly optimizing your conversion funnel, or when you get a “no” from an investor. An “oh shit” moment is when you realize there is something fundamentally wrong with your business.

In our case, we realized that the product that we wanted to create was irreconcilable with a viable business model. So who were we going to tell? Techstars, who just accepted us into their highly prestigious accelerator on the basis that we could make it work? Our investors, who we just closed a round with?

It turns out, our Techstars family, our friends, and the angels (literally) who invested in us became our greatest allies, supporters, and advocates as we navigated the treacherous, terrifying, uncertain, and ultimately wildly liberating waters of a pivot. So let’s start at the beginning…

In February of 2014, Lianne and I were completing our undergrad CS degrees at the University of Colorado. As we were reflecting on the past four years of school, we realized that the most valuable experiences that we had happened outside the classroom in the incredible communities that we became involved in. Being techies, we wanted to build a product which helped other students make these “serendipitous” connections around their campus?—?to make the most of their time in college as well. We wanted to help our friends explore their world around them.
We called it Varsity. The app was basically a replacement for the unreadable kiosks full of posters found on college campuses. Students could submit events and activities happening around their campus that others could discover and indicate they were attending. We also built in a personalization mechanism, which proactively suggested things to do around you based upon your interests.
A few months later, the MVP of the Varsity and a well-practiced pitch won us the New Venture Challenge at CU, which came with a $13k award and garnered the attention of Techstars Boulder.
The next couple of months were a whirlwind of change; Lianne and I graduated, we transitioned to our first full-time job (working for ourselves), and I spent a month in Israel with my sister before she left for college in Florida. We spent a good amount of our time networking our way around Techstars?—?feeling a little like the high school kids at a college party?—?but loving it at the same time. We met some incredible people (Sue Heilbronner, Brad Berenthal, Zach Nies, and Howard Diamond, to name a few) who taught us so much about our nascent business in a very short time.
We took as many meetings as we could with whomever would talk with us, and we funneled all of our learnings into our Techstars application. Through some combination of luck, sweat, and my uncanny ability to say the right things when standing in front of a large group of people, we were accepted into Techstars.
Techstars was incredibly challenging for us. The 3-month program was also equally rewarding. Lianne and I learned more about ourselves, our company, and our relationship with each other than we had in 4 years of undergraduate education together. About half-way through the program we rebranded Varsity to Native and started exploring ways to monitize the platform. The product had come along way?—?we had done some incredible engineering and design work that we were happy with.
Unfortunately, the problem with Varsity was absolutely zero alignment between the product that we wanted to build and the way that would bring it to market. One option was to spend the next 3 years grinding through the 8-month sales-cycles of universities across the country, which felt challenging (in the wrong ways) and bureaucratic. Alternatively, we could monetize the student attention we garnered, which we feared would cause discordance between the content students wanted to see and the content that advertisers wanted to show them.
Soon after graduating from Techstars, someone showed us Simon Sinek’s famous TED talk about how great leaders inspire action. Sinek describes how famous brands like Apple engage their customers starting with their “why” for doing business, which takes precedence over “how” they do business, and even over “what” their business does. At Native, we knew our “why” was something about helping people discover the world around them, and we now knew that the “how” and “what” of our current business wouldn’t get us there.
So, we decided to pivot.
Around this time I grabbed coffee with my friend Fletcher Richman. I explained to him the situation and asked for his advice. He offered the perspective that startups are designed to solve problems in the most efficient way possible. Basically, startups should be created to fill voids in the market that weren’t being solved by an existing company. The main issue was we had no problem to solve.
Shit.
250k in funding, but nothing to fund? Do we give up, give the money back, and go get real jobs? Lianne and I weren’t done yet, so we went in search of problems worth solving.

Read the entire story here.

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Myth Busting Silicon(e) Valley

map-Silicon-Valley

Question: what do silicone implants and Silicon Valley have in common?  Answer: they are both instruments of a grandiose illusion. The first, on a mostly personal level, promises eternal youth and vigor; the second, on a much grander scale, promises eternal wealth and greatness for humanity.

So, let’s leave aside the human cosmetic question for another time and concentrate on the broad deception that is current Silicon Valley. It’s a deception at many different levels —  self-deception of Silicon Valley’s young geeks and code jockeys, and the wider delusion that promises us all a glittering future underwritten by rapturous tech.

And, how best to debunk the myths that envelop the Valley like San Francisco’s fog, than to turn to Sam Biddle, former editor of Valleywag. He offers a scathing critique, which happens to be spot on. Quite rightly he asks if we need yet another urban, on-demand laundry app and what on earth is the value to society of “Yo”? But more importantly, he asks us to reconsider our misplaced awe and to knock Silicon Valley from its perch of self-fulfilling self-satisfaction. Yo and Facebook and Uber and Clinkle and Ringly and DogVacay and WhatsApp and the thousands of other trivial start-ups — despite astronomical valuations — will not be humanity’s savior. We need better ideas and deeper answers.

From GQ:

I think my life is better because of my iPhone. Yours probably is, too. I’m grateful to live in a time when I can see my baby cousins or experience any album ever without getting out of bed. I’m grateful that I will literally never be lost again, so long as my phone has battery. And I’m grateful that there are so many people so much smarter than I am who devise things like this, which are magical for the first week they show up, then a given in my life a week later.

We live in an era of technical ability that would have nauseated our ancestors with wonder, and so much of it comes from one very small place in California. But all these unimpeachable humanoid upgrades—the smartphones, the Google-gifted knowledge—are increasingly the exception, rather than the rule, of Silicon Valley’s output. What was once a land of upstarts and rebels is now being led by the money-hungry and the unspirited. Which is why we have a start-up that mails your dog curated treats and an app that says “Yo.” The brightest minds in tech just lately seem more concerned with silly business ideas and innocuous “disruption,” all for the shot at an immense payday. And when our country’s smartest people are working on the dumbest things, we all lose out.

That gap between the Silicon Valley that enriches the world and the Silicon Valley that wastes itself on the trivial is widening daily. And one of the biggest contributing factors is that the Valley has lost touch with reality by subscribing to its own self-congratulatory mythmaking. That these beliefs are mostly baseless, or at least egotistically distorted, is a problem—not just for Silicon Valley but for the rest of us. Which is why we’re here to help the Valley tear down its own myths—these seven in particular.

Myth #1: Silicon Valley Is the Universe’s Only True Meritocracy

 Everyone in Silicon Valley has convinced himself he’s helped create a free-market paradise, the software successor to Jefferson’s brotherhood of noble yeomen. “Silicon Valley has this way of finding greatness and supporting it,” said a member of Greylock Partners, a major venture-capital firm with over $2 billion under management. “It values meritocracy more than anyplace else.” After complaints of the start-up economy’s profound whiteness reached mainstream discussion just last year, companies like Apple, Facebook, and Twitter reluctantly released internal diversity reports. The results were as homogenized as expected: At Twitter, 79 percent of the leadership is male and 72 percent of it is white. At Facebook, senior positions are 77 percent male and 74 percent white. Twitter—a company whose early success can be directly attributed to the pioneering downloads of black smartphone users—hosts an entirely white board of directors. It’s a pounding indictment of Silicon Valley’s corporate psyche that Mark Zuckerberg—a bourgeois white kid from suburban New York who attended Harvard—is considered the Horatio Alger 2.0 paragon. When Paul Graham, the then head of the massive start-up incubator Y Combinator, told The New York Times that he could “be tricked by anyone who looks like Mark Zuckerberg,” he wasn’t just talking about Zuck’s youth.

If there’s any reassuring news, it’s not that tech’s diversity crisis is getting better, but that in the face of so much dismal news, people are becoming angry enough and brave enough to admit that the state of things is not good. Silicon Valley loves data, after all, and with data readily demonstrating tech’s overwhelming white-guy problem, even the true believers in meritocracy see the circumstances as they actually are.

Earlier this year, Ellen Pao became the most mentioned name in Silicon Valley as her gender-discrimination suit against her former employer, Kleiner Perkins Caufield & Byers, played out in court. Although the jury sided with the legendary VC firm, the Pao case was a watershed moment, bringing sunlight and national scrutiny to the issue of unchecked Valley sexism. For every defeated Ellen Pao, we can hope there are a hundred other female technology workers who feel new courage to speak up against wrongdoing, and a thousand male co-workers and employers who’ll reconsider their boys’-club bullshit. But they’ve got their work cut out for them.

Myth #4: School Is for Suckers, Just Drop Out

 Every year PayPal co-founder, investor-guru, and rabid libertarian Peter Thiel awards a small group of college-age students the Thiel Fellowship, a paid offer to either drop out or forgo college entirely. In exchange, the students receive money, mentorship, and networking opportunities from Thiel as they pursue a start-up of their choice. We’re frequently reminded of the tech titans of industry who never got a degree—Steve Jobs, Bill Gates, and Mark Zuckerberg are the most cited, though the fact that they’re statistical exceptions is an aside at best. To be young in Silicon Valley is great; to be a young dropout is golden.

The virtuous dropout hasn’t just made college seem optional for many aspiring barons—formal education is now excoriated in Silicon Valley as an obsolete system dreamed up by people who’d never heard of photo filters or Snapchat. Mix this cynicism with the libertarian streak many tech entrepreneurs carry already and you’ve got yourself a legit anti-education movement.

And for what? There’s no evidence that avoiding a conventional education today grants business success tomorrow. The gifted few who end up dropping out and changing tech history would have probably changed tech history anyway—you can’t learn start-up greatness by refusing to learn in a college classroom. And given that most start-ups fail, do we want an appreciable segment of bright young people gambling so heavily on being the next Zuck? More important, do we want an economy of CEOs who never had to learn to get along with their dorm-mates? Who never had the opportunity to grow up and figure out how to be a human being functioning in society? Who went straight from a bedroom in their parents’ house to an incubator that paid for their meals? It’s no wonder tech has an antisocial rep.

Myth #7: Silicon Valley Is Saving the World

Two years ago an online list of “57 start-up lessons” made its way through the coder community, bolstered by a co-sign from Paul Graham. “Wow, is this list good,” he commented. “It has the kind of resonance you only get when you’re writing from a lot of hard experience.” Among the platitudinous menagerie was this gem: “If it doesn’t augment the human condition for a huge number of people in a meaningful way, it’s not worth doing.” In a mission statement published on Andreessen Horowitz’s website, Marc Andreessen claimed he was “looking for the companies who are going to be the big winners because they are going to cause a fundamental change in the world.” The firm’s portfolio includes Ringly (maker of rings that light up when your phone does something), Teespring (custom T-shirts), DogVacay (pet-sitters on demand), and Hem (the zombified corpse of the furniture store Fab.com). Last year, wealthy Facebook alum Justin Rosenstein told a packed audience at TechCrunch Disrupt, “We in this room, we in technology, have a greater capacity to change the world than the kings and presidents of even a hundred years ago.” No one laughed, even though Rosenstein’s company, Asana, sells instant-messaging software.

 This isn’t just a matter of preening guys in fleece vests building giant companies predicated on their own personal annoyances. It’s wasteful and genuinely harmful to have so many people working on such trivial projects (Clinkle and fucking Yo) under the auspices of world-historical greatness. At one point recently, there were four separate on-demand laundry services operating in San Francisco, each no doubt staffed by smart young people who thought they were carving out a place of small software greatness. And yet for every laundry app, there are smart people doing smart, valuable things: Among the most recent batch of Y Combinator start-ups featured during March’s “Demo Day” were Diassess (twenty-minute HIV tests), Standard Cyborg (3D-printed limbs), and Atomwise (using supercomputing to develop new medical compounds). Those start-ups just happen to be sharing desk space at the incubator with “world changers” like Lumi (easy logo printing) and Underground Cellar (“curated, limited-edition wines with a twist”).

Read the entire article here.

Map: Silicon Valley, CA. Courtesy of Google.

 

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Creative Destruction

Internet_map

Author Andrew Keen ponders the true value of the internet in his new book The Internet is Not the Answer. Quite rightfully he asserts that many billions of consumers have benefited from the improved convenience and usually lower prices of every product imaginable delivered through a couple of clicks online. But there is a higher price to pay — one that touches on the values we want for our society and the deeper costs to our culture.

From the Guardian:

During every minute of every day of 2014, according to Andrew Keen’s new book, the world’s internet users – all three billion of them – sent 204m emails, uploaded 72 hours of YouTube video, undertook 4m Google searches, shared 2.46m pieces of Facebook content, published 277,000 tweets, posted 216,000 new photos on Instagram and spent $83,000 on Amazon.

By any measure, for a network that has existed recognisably for barely 20 years (the first graphical web browser, Mosaic, was released in 1993), those are astonishing numbers: the internet, plainly, has transformed all our lives, making so much of what we do every day – communicating, shopping, finding, watching, booking – unimaginably easier than it was. A Pew survey in the United States found last year that 90% of Americans believed the internet had been good for them.

So it takes a brave man to argue that there is another side to the internet; that stratospheric numbers and undreamed-of personal convenience are not the whole story. Keen (who was once so sure the internet was the answer that he sank all he had into a startup) is now a thoughtful and erudite contrarian who believes the internet is actually doing untold damage. The net, he argues, was meant to be “power to the people, a platform for equality”: an open, decentralised, democratising technology that liberates as it empowers as it informs.

Instead, it has handed extraordinary power and wealth to a tiny handful of people, while simultaneously, for the rest of us, compounding and often aggravating existing inequalities – cultural, social and economic – whenever and wherever it has found them. Individually, it may work wonders for us. Collectively, it’s doing us no good at all. “It was supposed to be win-win,” Keen declares. “The network’s users were supposed to be its beneficiaries. But in a lot of ways, we are its victims.”

This is not, Keen acknowledges, a very popular view, especially in Silicon Valley, where he has spent the best part of the past 30-odd years after an uneventful north London childhood (the family was in the rag trade). But The Internet is Not the Answer – Keen’s third book (the first questioned the value of user-generated content, the second the point of social media; you get where he’s coming from) – has been “remarkably well received”, he says. “I’m not alone in making these points. Moderate opinion is starting to see that this is a problem.”

What seems most unarguable is that, whatever else it has done, the internet – after its early years as a network for academics and researchers from which vulgar commercial activity was, in effect, outlawed – has been largely about the money. The US government’s decision, in 1991, to throw the nascent network open to private enterprise amounted, as one leading (and now eye-wateringly wealthy) Californian venture capitalist has put it, to “the largest creation of legal wealth in the history of the planet”.

The numbers Keen reels off are eye-popping: Google, which now handles 3.5bn searches daily and controls more than 90% of the market in some countries, including Britain, was valued at $400bn last year – more than seven times General Motors, which employs nearly four times more people. Its two founders, Larry Page and Sergey Brin, are worth $30bn apiece. Facebook’s Mark Zuckerberg, head of the world’s second biggest internet site – used by 19% of people in the world, half of whom access it six days a week or more – is sitting on a similar personal pile, while at $190bn in July last year, his company was worth more than Coca-Cola, Disney and AT&T.

Jeff Bezos of Amazon also has $30bn in his bank account. And even more recent online ventures look to be headed the same way: Uber, a five-year-old startup employing about 1,000 people and once succinctly described as “software that eats taxis”, was valued last year at more than $18bn – roughly the same as Hertz and Avis combined. The 700-staff lodging rental site Airbnb was valued at $10bn in February last year, not far off half as much as the Hilton group, which owns nearly 4,000 hotels and employs 150,000 people. The messaging app WhatsApp, bought by Facebook for $19bn, employs just 55, while the payroll of Snapchat – which turned down an offer of $3bn – numbers barely 20.

Part of the problem here, argues Keen, is that the digital economy is, by its nature, winner-takes-all. “There’s no inevitable or conspiratorial logic here; no one really knew it would happen,” he says. “There are just certain structural qualities that mean the internet lends itself to monopolies. The internet is a perfect global platform for free-market capitalism – a pure, frictionless, borderless economy … It’s a libertarian’s wet dream. Digital Milton Friedman.”Nor are those monopolies confined to just one business. Keen cites San Francisco-based writer Rebecca Solnit’s incisive take on Google: imagine it is 100 years ago, and the post office, the phone company, the public libraries, the printing houses, Ordnance Survey maps and the cinemas were all controlled by the same secretive and unaccountable organisation. Plus, he adds, almost as an afterthought: “Google doesn’t just own the post office – it has the right to open everyone’s letters.”

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This, Keen argues, is the net economy’s natural tendency: “Google is the search and information monopoly and the largest advertising company in history. It is incredibly strong, joining up the dots across more and more industries. Uber’s about being the transport monopoly; Airbnb the hospitality monopoly; TaskRabbit the labour monopoly. These are all, ultimately, monopoly plays – that’s the logic. And that should worry people.”

It is already having consequences, Keen says, in the real world. Take – surely the most glaring example – Amazon. Keen’s book cites a 2013 survey by the US Institute for Local Self-Reliance, which found that while it takes, on average, a regular bricks-and-mortar store 47 employees to generate $10m in turnover, Bezos’s many-tentacled, all-consuming and completely ruthless “Everything Store” achieves the same with 14. Amazon, that report concluded, probably destroyed 27,000 US jobs in 2012.

“And we love it,” Keen says. “We all use Amazon. We strike this Faustian deal. It’s ultra-convenient, fantastic service, great interface, absurdly cheap prices. But what’s the cost? Truly appalling working conditions; we know this. Deep hostility to unions. A massive impact on independent retail; in books, savage bullying of publishers. This is back to the early years of the 19th century. But we’re seduced into thinking it’s good; Amazon has told us what we want to hear. Bezos says, ‘This is about you, the consumer.’ The problem is, we’re not just consumers. We’re citizens, too.”

Read the entire article here.

Image: Visualization of routing paths through a portion of the Internet. Courtesy of the Opte Project.

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Silicon Death Valley

boo-com

Have you ever wondered what happens to the 99 percent of Silicon Valley startups that don’t make billionaires (or even millionaires) of their founders? It’s not all milk and honey in the land of sunshine. After all, for every Google or Facebook there are hundreds of humiliating failures — think: Webvan, Boo.com, Pets.com. Beautyjungle.com, Boxman, Flooz, eToys.

The valley’s venture capitalists tend to bury their business failures rather quietly, careful not to taint their reputations as omnipotent, infallible futurists. From the ashes of these failures some employees move on to well-established corporate serfdom and others find fresh challenges at new startups. But there is a fascinating middle-ground, between success and failure — an entrepreneurial twilight zone populated by zombie businesses.

From the Guardian:

It is probably Silicon Valley’s most striking mantra: “Fail fast, fail often.” It is recited at technology conferences, pinned to company walls, bandied in conversation.

Failure is not only invoked but celebrated. Entrepreneurs give speeches detailing their misfires. Academics laud the virtue of making mistakes. FailCon, a conference about “embracing failure”, launched in San Francisco in 2009 and is now an annual event, with technology hubs in Barcelona, Tokyo, Porto Alegre and elsewhere hosting their own versions.

While the rest of the world recoils at failure, in other words, technology’s dynamic innovators enshrine it as a rite of passage en route to success.

But what about those tech entrepreneurs who lose – and keep on losing? What about those who start one company after another, refine pitches, tweak products, pivot strategies, reinvent themselves … and never succeed? What about the angst masked behind upbeat facades?

Silicon Valley is increasingly asking such questions, even as the tech boom rewards some startups with billion-dollar valuations, sprinkling stardust on founders who talk of changing the world.

“It’s frustrating if you’re trying and trying and all you read about is how much money Airbnb and Uber are making,” said Johnny Chin, 28, who endured three startup flops but is hopeful for his fourth attempt. “The way startups are portrayed, everything seems an overnight success, but that’s a disconnect from reality. There can be a psychic toll.”

It has never been easier or cheaper to launch a company in the hothouse of ambition, money and software that stretches from San Francisco to Cupertino, Mountain View, Menlo Park and San Jose.

In 2012 the number of seed investment deals in US tech reportedly more than tripled, to 1,700, from three years earlier. Investment bankers are quitting Wall Street for Silicon Valley, lured by hopes of a cooler and more creative way to get rich.

Most startups fail. However many entrepreneurs still overestimate the chances of success – and the cost of failure.

Some estimates put the failure rate at 90% – on a par with small businesses in other sectors. A similar proportion of alumni from Y Combinator, a legendary incubator which mentors bright prospects, are said to also struggle.

Companies typically die around 20 months after their last financing round and after having raised $1.3m, according to a study by the analytics firms CB Insights titled The RIP Report – startup death trends.

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Failure is difficult to quantify because it does not necessarily mean liquidation. Many startups limp on for years, ignored by the market but sustained by founders’ savings or investors.

“We call them the walking dead,” said one manager at a tech behemoth, who requested anonymity. “They don’t necessarily die. They putter along.”

Software engineers employed by such zombies face a choice. Stay in hope the company will take off, turning stock options into gold. Or quit and take one of the plentiful jobs at other startups or giants like Apple and Google.

Founders face a more agonising dilemma. Continue working 100-hour weeks and telling employees and investors their dream is alive, that the metrics are improving, and hope it’s true, or pull the plug.

The loss aversion principle – the human tendency to strongly prefer avoiding losses to acquiring gains – tilts many towards the former, said Bruno Bowden, a former engineering manager at Google who is now a venture investor and entrepreneur.

“People will do a lot of irrational things to avoid losing even if it’s to their detriment. You push and push and exhaust yourself.”

Silicon Valley wannabes tell origin fables of startup founders who maxed out credit cards before dazzling Wall Street, the same way Hollywood’s struggling actors find solace in the fact Brad Pitt dressed as a chicken for El Pollo Loco before his breakthrough.

“It’s painful to be one of the walking dead. You lie to yourself and mask what’s not working. You amplify little wins,” said Chin, who eventually abandoned startups which offered micro, specialised versions of Amazon and Yelp.

That startup founders were Silicon Valley’s “cool kids”, glamorous buccaneers compared to engineers and corporate drones, could make failure tricky to recognise, let alone accept, he said. “People are very encouraging. Everything is amazing, cool, awesome. But then they go home and don’t use your product.”

Chin is bullish about his new company, Bannerman, an Uber-type service for event security and bodyguards, and has no regrets about rolling the tech dice. “I love what I do. I couldn’t do anything else.”

Read the entire story here.

Image: Boo.com, 1999. Courtesy of the WayBackMachine, Internet Archive.

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Life and Death: Sharing Startups

The great cycle of re-invention spawned by the Internet and mobile technologies continues apace. This time it’s the entrepreneurial businesses laying the foundation for the sharing economy — whether that be beds, room, clothes, tuition, bicycles or cars. A few succeed to become great new businesses; most fail.

From the WSJ:

A few high-profile “sharing-economy” startups are gaining quick traction with users, including those that let consumers rent apartments and homes like Airbnb Inc., or get car rides, such as Uber Technologies Inc.

Both Airbnb and Uber are valued in the billions of dollars, a sign that investors believe the segment is hot—and a big reason why more entrepreneurs are embracing the business model.

At MassChallenge, a Boston-based program to help early-stage entrepreneurs, about 9% of participants in 2013 were starting companies to connect consumers or businesses with products and services that would otherwise go unused. That compares with about 5% in 2010, for instance.

“We’re bullish on the sharing economy, and we’ll definitely make more investments in it,” said Sam Altman, president of Y Combinator, a startup accelerator in Mountain View, Calif., and one of Airbnb’s first investors.

Yet at least a few dozen sharing-economy startups have failed since 2012, including BlackJet, a Florida-based service that touted itself as the “Uber for jet travel,” and Tutorspree, a New York service dubbed the “Airbnb for tutors.” Most ran out of money, following struggles that ranged from difficulties building a critical mass of supply and demand, to higher-than-expected operating costs.

“We ended up being unable to consistently produce a level of demand on par with what we needed to scale rapidly,” said Aaron Harris, co-founder of Tutorspree, which launched in January 2011 and shuttered in August 2013.

“If you have to reacquire the customer every six months, they’ll forget you,” said Howard Morgan, co-founder of First Round Capital, which was an investor in BlackJet. “A private jet ride isn’t something you do every day. If you’re very wealthy, you have your own plane.” By comparison, he added that he recently used Uber’s ride-sharing service three times in one day.

Consider carpooling startup Ridejoy, for example. During its first year in 2011, its user base was growing by about 30% a month, with more than 25,000 riders and drivers signed up, and an estimated 10,000 rides completed, said Kalvin Wang, one of its three founders. But by the spring of 2013, Ridejoy, which had raised $1.3 million from early-stage investors like Freestyle Capital, was facing ferocious competition from free alternatives, such as carpooling forums on college websites.

Also, some riders could—and did—begin to sidestep the middleman. Many skipped paying its 10% transaction fee by handing their drivers cash instead of paying by credit card on Ridejoy’s website or mobile app. Others just didn’t get it, and even 25,000 users wasn’t sufficient to sustain the business. “You never really have enough inventory,” said Mr. Wang.

After it folded in the summer of 2013, Ridejoy returned about half of its funding to investors, according to Mr. Wang. Alexis Ohanian, an entrepreneur in Brooklyn, N.Y., who was an investor in Ridejoy, said it “could just be the timing or execution that was off.” He cited the success so far of Lyft Inc., the two-year-old San Francisco company that is valued at more than $700 million and offers a short-distance ride-sharing service. “It turned out the short rides are what the market really wanted,” Mr. Ohanian said.

One drawback is that because much of the revenue a sharing business generates goes directly back to the suppliers—of bedrooms, parking spots, vehicles or other “shared” assets—the underlying business may be continuously strapped for cash.

Read the entire article here.

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The Persistent Self

eterni-screenshot

Many of us strive for persistence beyond the realm of our natural life-spans. Some seek to be remembered through monuments, buildings and other physical objects. Others seek permanence through literary and artistic works. Still others aim for remembrance through less lasting, but noble deeds: social programs, health initiatives, charitable foundations and so on. And yet others wish to be preserved in frozen stasis for later thawing and re-awakening. It is safe to say, that many of us would seek to live for ever.

So, it comes as no surprise to see internet startups exploring the market to preserve us or facsimiles of us — digitally — after death. Introducing Eterni.me — your avatar to a virtual eternity.

From Wired (UK):

“We don’t try to replace humans or give false hopes to people grieving.” Romanian design consultant Marius Ursache, cofounder of Eterni.me, needs to clear this up quickly. Because when you’re building a fledgling artificial intelligence company that promises to bring back the dead — or at least, their memories and character, as preserved in their digital footprint — for virtual chats with loved ones, expect a lot of flack.

“It is going to really suck — think Cleverbot with weird out-of-place references to things from that person’s life, masquerading as that person,” wrote one Redditor on the thread “Become Virtually Immortal (In the creepiest way possible)”, which immediately appeared after Eterni.me’s launch was announced last week. Retorts ranged from the bemused — “Now that is some scary f’d up s**t right there. WTF!?” — to the amusing: “Imagine a world where drunk you has to reason with sober AI you before you’re allowed to drunk dial every single person you ever dated or saw naked. So many awkward moments avoided.” But the resounding consensus seems to be that everyone wants to know more.

The site launched with the look of any other Silicon Valley internet startup, but a definitively new take on an old message. While social media companies want you to share and create the story of you while you’re alive, and lifelogging company Memoto promises to capture “meaningful [and shareable] moments”, Eterni.me wants to wrap that all up for those you leave behind into a cohesive AI they can chat with.

Three thousand people registered to the service within the first four days of the site going live, despite there being zero product to make use of (a beta version is slated for 2015). So with a year to ponder your own mortality, why the excitement for a technology that is, at this moment, merely a proof of concept?

“We got very mixed reactions, from ecstatic congratulations to hate mail. And it’s normal — it’s a very polarising topic. But one thing was constant: almost everybody we’ve interacted with truly believes this will be a reality someday. The only question is when it will be a reality and who will make it a reality,” Ursache tells us.

Popular culture and the somewhat innate human need to believe we are impervious, has well prepared us for the concept. Ray Kurzweil wants us to upload our brains to computers and develop synthetic neocortexes, and AI has featured prominently on film and TV for decades, including in this month’s Valentine’s Day release of a human-virtual assistant love story. In series two of British future-focused drama Black Mirror Hayley Atwell reconnects with her diseased lover using a system comparable to what Eterni.me is trying to achieve — though Ursache calls it a “creepier” version, and tells us “we’re trying to stay away from that idea”, the concept that it’s a way for grieving loved ones to stall moving on.

Sigmund Freud called our relationship with the concept of immortality the “real secret of heroism” — that we carry out heroic feats is only down to a perpetual and inherent belief that our consciousness is permanent. He writes in Reflections on War and Death: “We cannot, indeed, imagine our own death; whenever we try to do so we find that we survive ourselves as spectators. The school of psychoanalysis could thus assert that at bottom no one believes in his own death, which amounts to saying: in the unconscious every one of us is convinced of his immortality… Our unconscious therefore does not believe in its own death; it acts as though it were immortal.”

This is why Eterni.me is not just about loved ones signing up after the event, but individuals signing up to have their own character preserved, under their watchful eye while still alive.

The company’s motto is “it’s like a Skype chat from the past,” but it’s still very much about crafting how the world sees you — or remembers you, in this case — just as you might pause and ponder on hitting Facebook’s post button, wondering till the last if your spaghetti dinner photo/comment really gets the right message across. On its more troubling side, the site plays on the fear that you can no longer control your identity after you’re gone; that you are in fact a mere mortal. “The moments and emotions in our lifetime define how we are seen by our family and friends. All these slowly fade away after we die — until one day… we are all forgotten,” it says in its opening lines — scroll down and it provides the answer to all your problems: “Simply Become Immortal”. Part of the reason we might identify as being immortal — at least unconsciously, as Freud describes it — is because we craft a life we believe will be memorable, or have children we believe our legacy will live on in. Eterni.me’s comment shatters that illusion and could be seen as opportunistic on the founders’ part. The site also goes on to promise a “virtual YOU” that can “offer information and advice to your family and friends after you pass away”, a comfort to anyone worried about leaving behind a spouse or children.

In contrast to this rather dramatic claim, Ursache says: “We’re trying to make it clear that it’s not replacing a person, but trying to preserve as much of the information one generates, and offering asynchronous access to it.”

Read the entire article here.

Image: Eterni.me screenshot. Courtesy of Eterni.

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Under the Covers at Uber

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A mere four years ago Uber was being used mostly by Silicon Valley engineers to reserve local limo rides. Now, the Uber app is in the hands of millions of people and being used to book car transportation across sixty cities in six continents. Google recently invested $258 million in the company, which gives Uber a value of around $3.5 billion. Those who have used the service — drivers and passengers alike — swear by it; the service is convenient and the app is simple and engaging. But that doesn’t seem to justify the enormous valuation. So, what’s going on?

From Wired:

When Uber cofounder and CEO Travis Kalanick was in sixth grade, he learned to code on a Commodore 64. His favorite things to program were videogames. But in the mid-’80s, getting the machine to do what he wanted still felt a lot like manual labor. “Back then you would have to do the graphics pixel by pixel,” Kalanick says. “But it was cool because you were like, oh my God, it’s moving across the screen! My monster is moving across the screen!” These days, Kalanick, 37, has lost none of his fascination with watching pixels on the move.

In Uber’s San Francisco headquarters, a software tool called God View shows all the vehicles on the Uber system moving at once. On a laptop web browser, tiny cars on a map show every Uber driver currently on the city’s streets. Tiny eyeballs on the same map show the location of every customer currently looking at the Uber app on their smartphone. In a way, the company anointed by Silicon Valley’s elite as the best hope for transforming global transportation couldn’t have a simpler task: It just has to bring those cars and those eyeballs together — the faster and cheaper, the better.

“Uber should feel magical to the customer,” Kalanick says one morning in November. “They just push the button and the car comes. But there’s a lot going on under the hood to make that happen.”

A little less than four years ago, when Uber was barely more than a private luxury car service for Silicon Valley’s elite techies, Kalanick sat watching the cars crisscrossing San Francisco on God View and had a Matrix-y moment when he “started seeing the math.” He was going to make the monster move — not just across the screen but across cities around the globe. Since then, Uber has expanded to some 60 cities on six continents and grown to at least 400 employees. Millions of people have used Uber to get a ride, and revenue has increased at a rate of nearly 20 percent every month over the past year.

The company’s speedy ascent has taken place in parallel with a surge of interest in the so-called sharing economy — using technology to connect consumers with goods and services that would otherwise go unused. Kalanick had the vision to see potential profit in the empty seats of limos and taxis sitting idle as drivers wait for customers to call.

But Kalanick doesn’t put on the airs of a visionary. In business he’s a brawler. Reaching Uber’s goals has meant digging in against the established bureaucracy in many cities, where giving rides for money is heavily regulated. Uber has won enough of those fights to threaten the market share of the entrenched players. It not only offers a more efficient way to hail a ride but gives drivers a whole new way to see where demand is bubbling up. In the process, Uber seems capable of opening up sections of cities that taxis and car services never bothered with before.

In an Uber-fied future, fewer people own cars, but everybody has access to them.

In San Francisco, Uber has become its own noun — you “get an Uber.” But to make it a verb — to get to the point where everyone Ubers the same way they Google — the company must outperform on transportation the same way Google does on search.

No less than Google itself believes Uber has this potential. In a massive funding round in August led by the search giant’s venture capital arm, Uber received $258 million. The investment reportedly valued Uber at around $3.5 billion and pushed the company to the forefront of speculation about the next big tech IPO — and Kalanick as the next great tech leader.

The deal set Silicon Valley buzzing about what else Uber could become. A delivery service powered by Google’s self-driving cars? The new on-the-ground army for ferrying all things Amazon? Jeff Bezos also is an Uber investor, and Kalanick cites him as an entrepreneurial inspiration. “Amazon was just books and then some CDs,” Kalanick says. “And then they’re like, you know what, let’s do frickin’ ladders!” Then came the Kindle and Amazon Web Services — examples, Kalanick says, of how an entrepreneur’s “creative pragmatism” can defy expectations. He clearly enjoys daring the world to think of Uber as merely another way to get a ride.

“We feel like we’re still realizing what the potential is,” he says. “We don’t know yet where that stops.”

From the back of an Uber-summoned Mercedes GL450 SUV, Kalanick banters with the driver about which make and model will replace the discontinued Lincoln Town Car as the default limo of choice.

Mercedes S-Class? Too expensive, Kalanick says. Cadillac XTS? Too small.

So what is it?

“OK, I’m glad you asked,” Kalanick says. “This is going to blow you away, dude. Are you ready? Have you seen the 2013 Ford Explorer?” Spacious, like a Lexus crossover, but way cheaper.

As Uber becomes a dominant presence in urban transportation, it’s easy to imagine the company playing a role in making this prophecy self-fulfilling. It’s just one more sign of how far Uber has come since Kalanick helped create the company in 2009. In the beginning, it was just a way for him and his cofounder, StumbleUpon creator Garrett Camp, and their friends to get around in style.

They could certainly afford it. At age 21, Kalanick, born and raised in Los Angeles, had started a Napster-like peer-to-peer file-sharing search engine called Scour that got him sued for a quarter-trillion dollars by major media companies. Scour filed for bankruptcy, but Kalanick cofounded Red Swoosh to serve digital media over the Internet for the same companies that had sued him. Akamai bought the company in 2007 in a stock deal worth $19 million.

By the time he reached his thirties, Kalanick was a seasoned veteran in the startup trenches. But part of him wondered if he still had the drive to build another company. His breakthrough came when he was watching, of all things, a Woody Allen movie. The film was Vicky Christina Barcelona, which Allen made in 2008, when he was in his seventies. “I’m like, that dude is old! And he is still bringing it! He’s still making really beautiful art. And I’m like, all right, I’ve got a chance, man. I can do it too.”

Kalanick charged into Uber and quickly collided with the muscular resistance of the taxi and limo industry. It wasn’t long before San Francisco’s transportation agency sent the company a cease-and-desist letter, calling Uber an unlicensed taxi service. Kalanick and Uber did neither, arguing vehemently that it merely made the software that connected drivers and riders. The company kept offering rides and building its stature among tech types—a constituency city politicians have been loathe to alienate—as the cool way to get around.

Uber has since faced the wrath of government and industry in other cites, notably New York, Chicago, Boston, and Washington, DC.

One councilmember opposed to Uber in the nation’s capital was self-described friend of the taxi industry Marion Barry (yes, that Marion Barry). Kalanick, in DC to lobby on Uber’s behalf, told The Washington Post he had an offer for the former mayor: “I will personally chauffeur him myself in his silver Jaguar to work every day of the week, if he can just make this happen.” Though that ride never happened, the council ultimately passed a legal framework that Uber called “an innovative model for city transportation legislation across the country.”

Though Kalanick clearly relishes a fight, he lights up more when talking about Uber as an engineering problem. To fulfill its promise—a ride within five minutes of the tap of a smartphone button—Uber must constantly optimize the algorithms that govern, among other things, how many of its cars are on the road, where they go, and how much a ride costs. While Uber offers standard local rates for its various options, times of peak demand send prices up, which Uber calls surge pricing. Some critics call it price-gouging, but Kalanick says the economics are far less insidious. To meet increased demand, drivers need extra incentive to get out on the road. Since they aren’t employees, the marketplace has to motivate them. “Most things are dynamically priced,” Kalanick points out, from airline tickets to happy hour cocktails.

Kalanick employs a data-science team of PhDs from fields like nuclear physics, astrophysics, and computational biology to grapple with the number of variables involved in keeping Uber reliable. They stay busy perfecting algorithms that are dependable and flexible enough to be ported to hundreds of cities worldwide. When we met, Uber had just gone live in Bogotè, Colombia, as well as Shanghai, Dubai, and Bangalore.

And it’s no longer just black cars and yellow cabs. A newer option, UberX, offers lower-priced rides from drivers piloting their personal vehicles. According to Uber, only certain late-model cars are allowed, and drivers undergo the same background screening as others in the service. In an Uber-fied version of the future, far fewer people may own cars but everybody would have access to them. “You know, I hadn’t driven for a year, and then I drove over the weekend,” Kalanick says. “I had to jump-start my car to get going. It was a little awkward. So I think that’s a sign.”

Back at Uber headquarters, burly drivers crowd the lobby while nearby, coders sit elbow to elbow. Like other San Francisco startups on the cusp of something bigger, Uber is preparing to move to a larger space. Its new digs will be in the same building as Square, the mobile payments company led by Twitter mastermind Jack Dorsey. Twitter’s offices are across the street. The symbolism is hard to miss: Uber is joining the coterie of companies that define San Francisco’s latest tech boom.

Still, part of that image depends on Uber’s outsize potential to expand what it does. The logistical numbers it crunches to make it easier for people to get around would seem a natural fit for a transition into a delivery service. Uber coyly fuels that perception with publicity stunts like ferrying ice cream and barbecue to customers through its app. It’s easy to imagine such promotions quietly doubling as proofs of concept. News of Google’s massive investment prompted visions of a push-button delivery service powered by Google’s self-driving cars.

If Uber expands into delivery, its competition will suddenly include behemoths like Amazon, eBay, and Walmart.

Kalanick acknowledges that the most recent round of investment is intended to fund Uber’s growth, but that’s as far as he’ll go. “In a lot of ways, it’s not the money that allows you to do new things. It’s the growth and the ability to find things that people want and to use your creativity to target those,” he says. “There are a whole hell of a lot of other things that we can do and intend on doing.”

But the calculus of delivery may not even be the hardest part. If Uber were to expand into delivery, its competition—for now other ride-sharing startups such as Lyft, Sidecar, and Hailo—would include Amazon, eBay, and Walmart too.

One way to skirt rivalry with such giants is to offer itself as the back-end technology that can power same-day online retail. In early fall, Google launched its Shopping Express service in San Francisco. The program lets customers shop online at local stores through a Google-powered app; Google sends a courier with their deliveries the same day.

David Krane, the Google Ventures partner who led the investment deal, says there’s nothing happening between Uber and Shopping Express. He also says self-driving delivery vehicles are nowhere near ready to be looked at seriously as part of Uber. “Those meetings will happen when the technology is ready for such discussion,” he says. “That is many moons away.”

Read the entire article here.

Image courtesy of Uber.

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To Hype or To Over-Hype, That is the Question

The perennial optimists who form the backbone of many tech start-ups and venture capital firms, which populate California’s Silicon Valley, have only one question on their minds: should they hype the future, or over-hype it?

From the NYT:

These are fabulous times in Silicon Valley.

Mere youths, who in another era would just be graduating from college or perhaps wondering what to make of their lives, are turning down deals that would make them and their great-grandchildren wealthy beyond imagining. They are confident that even better deals await.

“Man, it feels more and more like 1999 every day,” tweeted Bill Gurley, one of the valley’s leading venture capitalists. “Risk is being discounted tremendously.”

That was in May, shortly after his firm, Benchmark, led a $13.5 million investment in Snapchat, the disappearing-photo site that has millions of adolescent users but no revenue.

Snapchat, all of two years old, just turned down a multibillion-dollar deal from Facebook and, perhaps, an even bigger deal from Google. On paper, that would mean a fortyfold return on Benchmark’s investment in less than a year.

Benchmark is the venture capital darling of the moment, a backer not only of Snapchat but the photo-sharing app Instagram (sold for $1 billion to Facebook), the ride-sharing service Uber (valued at $3.5 billion) and Twitter ($22 billion), among many others. Ten of its companies have gone public in the last two years, with another half-dozen on the way. Benchmark seems to have a golden touch.

That is generating a huge amount of attention and an undercurrent of concern. In Silicon Valley, it may not be 1999 yet, but that fateful year — a moment when no one thought there was any risk to the wildest idea — can be seen on the horizon, drifting closer.

No one here would really mind another 1999, of course. As a legendary Silicon Valley bumper sticker has it, “Please God, just one more bubble.” But booms are inevitably followed by busts.

“All business activity is driven by either fear or greed, and in Silicon Valley we’re in a cycle where greed may be on the rise,” said Josh Green, a venture capitalist who is chairman of the National Venture Capital Association.

For Benchmark, that means walking a narrow line between hyping the future — second nature to everyone in Silicon Valley — and overhyping it.

Opinions differ here about exactly what stage of exuberance the valley is in. “Everyone feels like the valley has been in a boom cycle for quite some time,” said Jeremy Stoppelman, the chief executive of Yelp. “That makes people nervous.”

John Backus, a founding partner with New Atlantic Ventures, says he believes it is more like 1996: Things are just ramping up.

The numbers back him up. In 2000, just as the dot-com party was ending, a record number of venture capitalists invested a record amount of money in a record number of deals. Entrepreneurs received over $100 billion, a tenfold rise in dollars deployed in just four years.

Much of the money disappeared. So, eventually, did many of the entrepreneurs and most of the venture capitalists.

Recovery was fitful. Even with the stock market soaring since the recession, venture money invested fell in 2012 from 2011, and then fell again in the first half of this year. Predictions of the death of venture capital have been plentiful.

For one thing, it takes a lot less money to start a company now than it did in 1999. When apps like Instagram and Snapchat catch on, they do so in a matter of months. V.C.’s are no longer quite as essential, and they know it. Just last week, Tim Draper, a third-generation venture capitalist with Draper Fisher Jurvetson, said he was skipping the next fund to devote his time to his academy for young entrepreneurs.

But there are signs of life. Funding in the third quarter suddenly popped, up 17 percent from 2012. “I think this is the best time we’ve seen since 1999 to be a venture capitalist,” Mr. Backus said. He expects the returns on venture capital, which have been miserable since the bust, to greatly improve this year.

“Everyone talks about the mega win — who was in Facebook, Twitter, Pinterest,” he said. “But the bread and butter of venture firms is not those multibillion exits but the $200 million deals, and there are a lot of those.” As an example he pointed to GlobalLogic, which operates design and engineering centers. It was acquired in October in a deal that returned $75 million on New Atlantic’s $5 million investment.

Better returns would influence pension firms and other big investors to give more money to the V.C.’s, which would in term increase the number of deals.

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Gnarly Names

By most accounts the internet is home to around 650 million websites, of which around 200 million are active. About 8,000 new websites go live every hour of every day.

These are big numbers and the continued phenomenal growth means that it’s increasingly difficult to find a unique and unused domain name (think website). So, web entrepreneurs are getting creative with website and company names, with varying degrees of success.

From Wall Street Journal:

The New York cousins who started a digital sing-along storybook business have settled on the name Mibblio.

The Australian founder of a startup connecting big companies to big-data scientists has dubbed his service Kaggle.

The former toy executive behind a two-year-old mobile screen-sharing platform is going with the name Shodogg.

And the Missourian who founded a website giving customers access to local merchants and service providers? He thinks it should be called Zaarly.

Quirky names for startups first surfaced about 20 years ago in Silicon Valley, with the birth of search engines such as Yahoo, which stands for “Yet Another Hierarchical Officious Oracle,” and Google, a misspelling of googol,? the almost unfathomably high number represented by a 1 followed by 100 zeroes.

By the early 2000s, the trend had spread to startups outside the Valley, including the Vancouver-based photo-sharing site Flickr and New York-based blogging platform Tumblr, to name just two.

The current crop of startups boasts even wackier spellings. The reason, they say, is that practically every new business—be it a popsicle maker or a furniture retailer—needs its own website. With about 252 million domain names currently registered across the Internet, the short, recognizable dot-com Web addresses, or URLs, have long been taken.

The only practical solution, some entrepreneurs say, is to invent words, like Mibblio, Kaggle, Shodogg and Zaarly, to avoid paying as much as $2 million for a concise, no-nonsense dot-com URL.

The rights to Investing.com, for example, sold for about $2.5 million last year.

Choosing a name that’s a made-up word also helps entrepreneurs steer clear of trademark entanglements.

The challenge is to come up with something that conveys meaning, is memorable,?and isn’t just alphabet soup. Most founders don’t have the budget to hire naming advisers.

Founders tend to favor short names of five to seven letters, because they worry that potential customers might forget longer ones, according to Steve Manning, founder of Igor, a name-consulting company.

Linguistically speaking, there are only a few methods of forming new words. They include misspelling, compounding, blending and scrambling.

At Mibblio, the naming process was “the length of a human gestation period,” says the company’s 28-year-old co-founder David Leiberman, “but only more painful,” adds fellow co-founder Sammy Rubin, 35.

The two men made several trips back to the drawing board; early contenders included Babethoven, Yipsqueak and Canarytales, but none was a perfect fit. One they both loved, Squeakbox, was taken.

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Startup Ideas

For technologists the barriers to developing a new product have never been so low. Tools to develop, integrate and distribute software apps are to all intents negligible. Of course, most would recognize that development is often the easy part. The real difficulty lies in building an effective and sustainable marketing and communication strategy and getting the product adopted.

The recent headlines of 17 year old British app developer Nick D’Aloisio selling his Summly app to Yahoo! for the tidy sum of $30 million, has lots of young and seasoned developers scratching their heads. After all, if a school kid can do it, why not anybody? Why not me?

Paul Graham may have some of the answers. He sold his first company to Yahoo in 1998. He now runs YCombinator a successful startup incubator. We excerpt his recent, observant and insightful essay below.

From Paul Graham:

The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself.

The very best startup ideas tend to have three things in common: they’re something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.

Problems

Why is it so important to work on a problem you have? Among other things, it ensures the problem really exists. It sounds obvious to say you should only work on problems that exist. And yet by far the most common mistake startups make is to solve problems no one has.

I made it myself. In 1995 I started a company to put art galleries online. But galleries didn’t want to be online. It’s not how the art business works. So why did I spend 6 months working on this stupid idea? Because I didn’t pay attention to users. I invented a model of the world that didn’t correspond to reality, and worked from that. I didn’t notice my model was wrong until I tried to convince users to pay for what we’d built. Even then I took embarrassingly long to catch on. I was attached to my model of the world, and I’d spent a lot of time on the software. They had to want it!

Why do so many founders build things no one wants? Because they begin by trying to think of startup ideas. That m.o. is doubly dangerous: it doesn’t merely yield few good ideas; it yields bad ideas that sound plausible enough to fool you into working on them.

At YC we call these “made-up” or “sitcom” startup ideas. Imagine one of the characters on a TV show was starting a startup. The writers would have to invent something for it to do. But coming up with good startup ideas is hard. It’s not something you can do for the asking. So (unless they got amazingly lucky) the writers would come up with an idea that sounded plausible, but was actually bad.

For example, a social network for pet owners. It doesn’t sound obviously mistaken. Millions of people have pets. Often they care a lot about their pets and spend a lot of money on them. Surely many of these people would like a site where they could talk to other pet owners. Not all of them perhaps, but if just 2 or 3 percent were regular visitors, you could have millions of users. You could serve them targeted offers, and maybe charge for premium features.

The danger of an idea like this is that when you run it by your friends with pets, they don’t say “I would never use this.” They say “Yeah, maybe I could see using something like that.” Even when the startup launches, it will sound plausible to a lot of people. They don’t want to use it themselves, at least not right now, but they could imagine other people wanting it. Sum that reaction across the entire population, and you have zero users.

Well

When a startup launches, there have to be at least some users who really need what they’re making—not just people who could see themselves using it one day, but who want it urgently. Usually this initial group of users is small, for the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably already exist. Which means you have to compromise on one dimension: you can either build something a large number of people want a small amount, or something a small number of people want a large amount. Choose the latter. Not all ideas of that type are good startup ideas, but nearly all good startup ideas are of that type.

Imagine a graph whose x axis represents all the people who might want what you’re making and whose y axis represents how much they want it. If you invert the scale on the y axis, you can envision companies as holes. Google is an immense crater: hundreds of millions of people use it, and they need it a lot. A startup just starting out can’t expect to excavate that much volume. So you have two choices about the shape of hole you start with. You can either dig a hole that’s broad but shallow, or one that’s narrow and deep, like a well.

Made-up startup ideas are usually of the first type. Lots of people are mildly interested in a social network for pet owners.

Nearly all good startup ideas are of the second type. Microsoft was a well when they made Altair Basic. There were only a couple thousand Altair owners, but without this software they were programming in machine language. Thirty years later Facebook had the same shape. Their first site was exclusively for Harvard students, of which there are only a few thousand, but those few thousand users wanted it a lot.

When you have an idea for a startup, ask yourself: who wants this right now? Who wants this so much that they’ll use it even when it’s a crappy version one made by a two-person startup they’ve never heard of? If you can’t answer that, the idea is probably bad.

You don’t need the narrowness of the well per se. It’s depth you need; you get narrowness as a byproduct of optimizing for depth (and speed). But you almost always do get it. In practice the link between depth and narrowness is so strong that it’s a good sign when you know that an idea will appeal strongly to a specific group or type of user.

But while demand shaped like a well is almost a necessary condition for a good startup idea, it’s not a sufficient one. If Mark Zuckerberg had built something that could only ever have appealed to Harvard students, it would not have been a good startup idea. Facebook was a good idea because it started with a small market there was a fast path out of. Colleges are similar enough that if you build a facebook that works at Harvard, it will work at any college. So you spread rapidly through all the colleges. Once you have all the college students, you get everyone else simply by letting them in.

Similarly for Microsoft: Basic for the Altair; Basic for other machines; other languages besides Basic; operating systems; applications; IPO.

Self

How do you tell whether there’s a path out of an idea? How do you tell whether something is the germ of a giant company, or just a niche product? Often you can’t. The founders of Airbnb didn’t realize at first how big a market they were tapping. Initially they had a much narrower idea. They were going to let hosts rent out space on their floors during conventions. They didn’t foresee the expansion of this idea; it forced itself upon them gradually. All they knew at first is that they were onto something. That’s probably as much as Bill Gates or Mark Zuckerberg knew at first.

Occasionally it’s obvious from the beginning when there’s a path out of the initial niche. And sometimes I can see a path that’s not immediately obvious; that’s one of our specialties at YC. But there are limits to how well this can be done, no matter how much experience you have. The most important thing to understand about paths out of the initial idea is the meta-fact that these are hard to see.

So if you can’t predict whether there’s a path out of an idea, how do you choose between ideas? The truth is disappointing but interesting: if you’re the right sort of person, you have the right sort of hunches. If you’re at the leading edge of a field that’s changing fast, when you have a hunch that something is worth doing, you’re more likely to be right.

In Zen and the Art of Motorcycle Maintenance, Robert Pirsig says:

You want to know how to paint a perfect painting? It’s easy. Make yourself perfect and then just paint naturally.

I’ve wondered about that passage since I read it in high school. I’m not sure how useful his advice is for painting specifically, but it fits this situation well. Empirically, the way to have good startup ideas is to become the sort of person who has them.

Being at the leading edge of a field doesn’t mean you have to be one of the people pushing it forward. You can also be at the leading edge as a user. It was not so much because he was a programmer that Facebook seemed a good idea to Mark Zuckerberg as because he used computers so much. If you’d asked most 40 year olds in 2004 whether they’d like to publish their lives semi-publicly on the Internet, they’d have been horrified at the idea. But Mark already lived online; to him it seemed natural.

Paul Buchheit says that people at the leading edge of a rapidly changing field “live in the future.” Combine that with Pirsig and you get:

Live in the future, then build what’s missing.

That describes the way many if not most of the biggest startups got started. Neither Apple nor Yahoo nor Google nor Facebook were even supposed to be companies at first. They grew out of things their founders built because there seemed a gap in the world.

If you look at the way successful founders have had their ideas, it’s generally the result of some external stimulus hitting a prepared mind. Bill Gates and Paul Allen hear about the Altair and think “I bet we could write a Basic interpreter for it.” Drew Houston realizes he’s forgotten his USB stick and thinks “I really need to make my files live online.” Lots of people heard about the Altair. Lots forgot USB sticks. The reason those stimuli caused those founders to start companies was that their experiences had prepared them to notice the opportunities they represented.

The verb you want to be using with respect to startup ideas is not “think up” but “notice.” At YC we call ideas that grow naturally out of the founders’ own experiences “organic” startup ideas. The most successful startups almost all begin this way.

That may not have been what you wanted to hear. You may have expected recipes for coming up with startup ideas, and instead I’m telling you that the key is to have a mind that’s prepared in the right way. But disappointing though it may be, this is the truth. And it is a recipe of a sort, just one that in the worst case takes a year rather than a weekend.

If you’re not at the leading edge of some rapidly changing field, you can get to one. For example, anyone reasonably smart can probably get to an edge of programming (e.g. building mobile apps) in a year. Since a successful startup will consume at least 3-5 years of your life, a year’s preparation would be a reasonable investment. Especially if you’re also looking for a cofounder.

You don’t have to learn programming to be at the leading edge of a domain that’s changing fast. Other domains change fast. But while learning to hack is not necessary, it is for the forseeable future sufficient. As Marc Andreessen put it, software is eating the world, and this trend has decades left to run.

Knowing how to hack also means that when you have ideas, you’ll be able to implement them. That’s not absolutely necessary (Jeff Bezos couldn’t) but it’s an advantage. It’s a big advantage, when you’re considering an idea like putting a college facebook online, if instead of merely thinking “That’s an interesting idea,” you can think instead “That’s an interesting idea. I’ll try building an initial version tonight.” It’s even better when you’re both a programmer and the target user, because then the cycle of generating new versions and testing them on users can happen inside one head.

Noticing

Once you’re living in the future in some respect, the way to notice startup ideas is to look for things that seem to be missing. If you’re really at the leading edge of a rapidly changing field, there will be things that are obviously missing. What won’t be obvious is that they’re startup ideas. So if you want to find startup ideas, don’t merely turn on the filter “What’s missing?” Also turn off every other filter, particularly “Could this be a big company?” There’s plenty of time to apply that test later. But if you’re thinking about that initially, it may not only filter out lots of good ideas, but also cause you to focus on bad ones.

Most things that are missing will take some time to see. You almost have to trick yourself into seeing the ideas around you.

But you know the ideas are out there. This is not one of those problems where there might not be an answer. It’s impossibly unlikely that this is the exact moment when technological progress stops. You can be sure people are going to build things in the next few years that will make you think “What did I do before x?”

And when these problems get solved, they will probably seem flamingly obvious in retrospect. What you need to do is turn off the filters that usually prevent you from seeing them. The most powerful is simply taking the current state of the world for granted. Even the most radically open-minded of us mostly do that. You couldn’t get from your bed to the front door if you stopped to question everything.

But if you’re looking for startup ideas you can sacrifice some of the efficiency of taking the status quo for granted and start to question things. Why is your inbox overflowing? Because you get a lot of email, or because it’s hard to get email out of your inbox? Why do you get so much email? What problems are people trying to solve by sending you email? Are there better ways to solve them? And why is it hard to get emails out of your inbox? Why do you keep emails around after you’ve read them? Is an inbox the optimal tool for that?

Pay particular attention to things that chafe you. The advantage of taking the status quo for granted is not just that it makes life (locally) more efficient, but also that it makes life more tolerable. If you knew about all the things we’ll get in the next 50 years but don’t have yet, you’d find present day life pretty constraining, just as someone from the present would if they were sent back 50 years in a time machine. When something annoys you, it could be because you’re living in the future.

When you find the right sort of problem, you should probably be able to describe it as obvious, at least to you. When we started Viaweb, all the online stores were built by hand, by web designers making individual HTML pages. It was obvious to us as programmers that these sites would have to be generated by software.

Which means, strangely enough, that coming up with startup ideas is a question of seeing the obvious. That suggests how weird this process is: you’re trying to see things that are obvious, and yet that you hadn’t seen.

Since what you need to do here is loosen up your own mind, it may be best not to make too much of a direct frontal attack on the problem—i.e. to sit down and try to think of ideas. The best plan may be just to keep a background process running, looking for things that seem to be missing. Work on hard problems, driven mainly by curiousity, but have a second self watching over your shoulder, taking note of gaps and anomalies.

Give yourself some time. You have a lot of control over the rate at which you turn yours into a prepared mind, but you have less control over the stimuli that spark ideas when they hit it. If Bill Gates and Paul Allen had constrained themselves to come up with a startup idea in one month, what if they’d chosen a month before the Altair appeared? They probably would have worked on a less promising idea. Drew Houston did work on a less promising idea before Dropbox: an SAT prep startup. But Dropbox was a much better idea, both in the absolute sense and also as a match for his skills.

A good way to trick yourself into noticing ideas is to work on projects that seem like they’d be cool. If you do that, you’ll naturally tend to build things that are missing. It wouldn’t seem as interesting to build something that already existed.

Just as trying to think up startup ideas tends to produce bad ones, working on things that could be dismissed as “toys” often produces good ones. When something is described as a toy, that means it has everything an idea needs except being important. It’s cool; users love it; it just doesn’t matter. But if you’re living in the future and you build something cool that users love, it may matter more than outsiders think. Microcomputers seemed like toys when Apple and Microsoft started working on them. I’m old enough to remember that era; the usual term for people with their own microcomputers was “hobbyists.” BackRub seemed like an inconsequential science project. The Facebook was just a way for undergrads to stalk one another.

At YC we’re excited when we meet startups working on things that we could imagine know-it-alls on forums dismissing as toys. To us that’s positive evidence an idea is good.

If you can afford to take a long view (and arguably you can’t afford not to), you can turn “Live in the future and build what’s missing” into something even better:

Live in the future and build what seems interesting.

School

That’s what I’d advise college students to do, rather than trying to learn about “entrepreneurship.” “Entrepreneurship” is something you learn best by doing it. The examples of the most successful founders make that clear. What you should be spending your time on in college is ratcheting yourself into the future. College is an incomparable opportunity to do that. What a waste to sacrifice an opportunity to solve the hard part of starting a startup—becoming the sort of person who can have organic startup ideas—by spending time learning about the easy part. Especially since you won’t even really learn about it, any more than you’d learn about sex in a class. All you’ll learn is the words for things.

The clash of domains is a particularly fruitful source of ideas. If you know a lot about programming and you start learning about some other field, you’ll probably see problems that software could solve. In fact, you’re doubly likely to find good problems in another domain: (a) the inhabitants of that domain are not as likely as software people to have already solved their problems with software, and (b) since you come into the new domain totally ignorant, you don’t even know what the status quo is to take it for granted.

So if you’re a CS major and you want to start a startup, instead of taking a class on entrepreneurship you’re better off taking a class on, say, genetics. Or better still, go work for a biotech company. CS majors normally get summer jobs at computer hardware or software companies. But if you want to find startup ideas, you might do better to get a summer job in some unrelated field.

Or don’t take any extra classes, and just build things. It’s no coincidence that Microsoft and Facebook both got started in January. At Harvard that is (or was) Reading Period, when students have no classes to attend because they’re supposed to be studying for finals.

But don’t feel like you have to build things that will become startups. That’s premature optimization. Just build things. Preferably with other students. It’s not just the classes that make a university such a good place to crank oneself into the future. You’re also surrounded by other people trying to do the same thing. If you work together with them on projects, you’ll end up producing not just organic ideas, but organic ideas with organic founding teams—and that, empirically, is the best combination.

Beware of research. If an undergrad writes something all his friends start using, it’s quite likely to represent a good startup idea. Whereas a PhD dissertation is extremely unlikely to. For some reason, the more a project has to count as research, the less likely it is to be something that could be turned into a startup. [10] I think the reason is that the subset of ideas that count as research is so narrow that it’s unlikely that a project that satisfied that constraint would also satisfy the orthogonal constraint of solving users’ problems. Whereas when students (or professors) build something as a side-project, they automatically gravitate toward solving users’ problems—perhaps even with an additional energy that comes from being freed from the constraints of research.

Competition

Because a good idea should seem obvious, when you have one you’ll tend to feel that you’re late. Don’t let that deter you. Worrying that you’re late is one of the signs of a good idea. Ten minutes of searching the web will usually settle the question. Even if you find someone else working on the same thing, you’re probably not too late. It’s exceptionally rare for startups to be killed by competitors—so rare that you can almost discount the possibility. So unless you discover a competitor with the sort of lock-in that would prevent users from choosing you, don’t discard the idea.

If you’re uncertain, ask users. The question of whether you’re too late is subsumed by the question of whether anyone urgently needs what you plan to make. If you have something that no competitor does and that some subset of users urgently need, you have a beachhead.

The question then is whether that beachhead is big enough. Or more importantly, who’s in it: if the beachhead consists of people doing something lots more people will be doing in the future, then it’s probably big enough no matter how small it is. For example, if you’re building something differentiated from competitors by the fact that it works on phones, but it only works on the newest phones, that’s probably a big enough beachhead.

Err on the side of doing things where you’ll face competitors. Inexperienced founders usually give competitors more credit than they deserve. Whether you succeed depends far more on you than on your competitors. So better a good idea with competitors than a bad one without.

You don’t need to worry about entering a “crowded market” so long as you have a thesis about what everyone else in it is overlooking. In fact that’s a very promising starting point. Google was that type of idea. Your thesis has to be more precise than “we’re going to make an x that doesn’t suck” though. You have to be able to phrase it in terms of something the incumbents are overlooking. Best of all is when you can say that they didn’t have the courage of their convictions, and that your plan is what they’d have done if they’d followed through on their own insights. Google was that type of idea too. The search engines that preceded them shied away from the most radical implications of what they were doing—particularly that the better a job they did, the faster users would leave.

A crowded market is actually a good sign, because it means both that there’s demand and that none of the existing solutions are good enough. A startup can’t hope to enter a market that’s obviously big and yet in which they have no competitors. So any startup that succeeds is either going to be entering a market with existing competitors, but armed with some secret weapon that will get them all the users (like Google), or entering a market that looks small but which will turn out to be big (like Microsoft).

Filters

There are two more filters you’ll need to turn off if you want to notice startup ideas: the unsexy filter and the schlep filter.

Most programmers wish they could start a startup by just writing some brilliant code, pushing it to a server, and having users pay them lots of money. They’d prefer not to deal with tedious problems or get involved in messy ways with the real world. Which is a reasonable preference, because such things slow you down. But this preference is so widespread that the space of convenient startup ideas has been stripped pretty clean. If you let your mind wander a few blocks down the street to the messy, tedious ideas, you’ll find valuable ones just sitting there waiting to be implemented.

The schlep filter is so dangerous that I wrote a separate essay about the condition it induces, which I called schlep blindness. I gave Stripe as an example of a startup that benefited from turning off this filter, and a pretty striking example it is. Thousands of programmers were in a position to see this idea; thousands of programmers knew how painful it was to process payments before Stripe. But when they looked for startup ideas they didn’t see this one, because unconsciously they shrank from having to deal with payments. And dealing with payments is a schlep for Stripe, but not an intolerable one. In fact they might have had net less pain; because the fear of dealing with payments kept most people away from this idea, Stripe has had comparatively smooth sailing in other areas that are sometimes painful, like user acquisition. They didn’t have to try very hard to make themselves heard by users, because users were desperately waiting for what they were building.

The unsexy filter is similar to the schlep filter, except it keeps you from working on problems you despise rather than ones you fear. We overcame this one to work on Viaweb. There were interesting things about the architecture of our software, but we weren’t interested in ecommerce per se. We could see the problem was one that needed to be solved though.

Turning off the schlep filter is more important than turning off the unsexy filter, because the schlep filter is more likely to be an illusion. And even to the degree it isn’t, it’s a worse form of self-indulgence. Starting a successful startup is going to be fairly laborious no matter what. Even if the product doesn’t entail a lot of schleps, you’ll still have plenty dealing with investors, hiring and firing people, and so on. So if there’s some idea you think would be cool but you’re kept away from by fear of the schleps involved, don’t worry: any sufficiently good idea will have as many.

The unsexy filter, while still a source of error, is not as entirely useless as the schlep filter. If you’re at the leading edge of a field that’s changing rapidly, your ideas about what’s sexy will be somewhat correlated with what’s valuable in practice. Particularly as you get older and more experienced. Plus if you find an idea sexy, you’ll work on it more enthusiastically.

Recipes

While the best way to discover startup ideas is to become the sort of person who has them and then build whatever interests you, sometimes you don’t have that luxury. Sometimes you need an idea now. For example, if you’re working on a startup and your initial idea turns out to be bad.

For the rest of this essay I’ll talk about tricks for coming up with startup ideas on demand. Although empirically you’re better off using the organic strategy, you could succeed this way. You just have to be more disciplined. When you use the organic method, you don’t even notice an idea unless it’s evidence that something is truly missing. But when you make a conscious effort to think of startup ideas, you have to replace this natural constraint with self-discipline. You’ll see a lot more ideas, most of them bad, so you need to be able to filter them.

One of the biggest dangers of not using the organic method is the example of the organic method. Organic ideas feel like inspirations. There are a lot of stories about successful startups that began when the founders had what seemed a crazy idea but “just knew” it was promising. When you feel that about an idea you’ve had while trying to come up with startup ideas, you’re probably mistaken.

When searching for ideas, look in areas where you have some expertise. If you’re a database expert, don’t build a chat app for teenagers (unless you’re also a teenager). Maybe it’s a good idea, but you can’t trust your judgment about that, so ignore it. There have to be other ideas that involve databases, and whose quality you can judge. Do you find it hard to come up with good ideas involving databases? That’s because your expertise raises your standards. Your ideas about chat apps are just as bad, but you’re giving yourself a Dunning-Kruger pass in that domain.

The place to start looking for ideas is things you need. There must be things you need.

One good trick is to ask yourself whether in your previous job you ever found yourself saying “Why doesn’t someone make x? If someone made x we’d buy it in a second.” If you can think of any x people said that about, you probably have an idea. You know there’s demand, and people don’t say that about things that are impossible to build.

More generally, try asking yourself whether there’s something unusual about you that makes your needs different from most other people’s. You’re probably not the only one. It’s especially good if you’re different in a way people will increasingly be.

If you’re changing ideas, one unusual thing about you is the idea you’d previously been working on. Did you discover any needs while working on it? Several well-known startups began this way. Hotmail began as something its founders wrote to talk about their previous startup idea while they were working at their day jobs. [15]

A particularly promising way to be unusual is to be young. Some of the most valuable new ideas take root first among people in their teens and early twenties. And while young founders are at a disadvantage in some respects, they’re the only ones who really understand their peers. It would have been very hard for someone who wasn’t a college student to start Facebook. So if you’re a young founder (under 23 say), are there things you and your friends would like to do that current technology won’t let you?

The next best thing to an unmet need of your own is an unmet need of someone else. Try talking to everyone you can about the gaps they find in the world. What’s missing? What would they like to do that they can’t? What’s tedious or annoying, particularly in their work? Let the conversation get general; don’t be trying too hard to find startup ideas. You’re just looking for something to spark a thought. Maybe you’ll notice a problem they didn’t consciously realize they had, because you know how to solve it.

When you find an unmet need that isn’t your own, it may be somewhat blurry at first. The person who needs something may not know exactly what they need. In that case I often recommend that founders act like consultants—that they do what they’d do if they’d been retained to solve the problems of this one user. People’s problems are similar enough that nearly all the code you write this way will be reusable, and whatever isn’t will be a small price to start out certain that you’ve reached the bottom of the well.

One way to ensure you do a good job solving other people’s problems is to make them your own. When Rajat Suri of E la Carte decided to write software for restaurants, he got a job as a waiter to learn how restaurants worked. That may seem like taking things to extremes, but startups are extreme. We love it when founders do such things.

In fact, one strategy I recommend to people who need a new idea is not merely to turn off their schlep and unsexy filters, but to seek out ideas that are unsexy or involve schleps. Don’t try to start Twitter. Those ideas are so rare that you can’t find them by looking for them. Make something unsexy that people will pay you for.

A good trick for bypassing the schlep and to some extent the unsexy filter is to ask what you wish someone else would build, so that you could use it. What would you pay for right now?

Since startups often garbage-collect broken companies and industries, it can be a good trick to look for those that are dying, or deserve to, and try to imagine what kind of company would profit from their demise. For example, journalism is in free fall at the moment. But there may still be money to be made from something like journalism. What sort of company might cause people in the future to say “this replaced journalism” on some axis?

But imagine asking that in the future, not now. When one company or industry replaces another, it usually comes in from the side. So don’t look for a replacement for x; look for something that people will later say turned out to be a replacement for x. And be imaginative about the axis along which the replacement occurs. Traditional journalism, for example, is a way for readers to get information and to kill time, a way for writers to make money and to get attention, and a vehicle for several different types of advertising. It could be replaced on any of these axes (it has already started to be on most).

When startups consume incumbents, they usually start by serving some small but important market that the big players ignore. It’s particularly good if there’s an admixture of disdain in the big players’ attitude, because that often misleads them. For example, after Steve Wozniak built the computer that became the Apple I, he felt obliged to give his then-employer Hewlett-Packard the option to produce it. Fortunately for him, they turned it down, and one of the reasons they did was that it used a TV for a monitor, which seemed intolerably déclassé to a high-end hardware company like HP was at the time.

Are there groups of scruffy but sophisticated users like the early microcomputer “hobbyists” that are currently being ignored by the big players? A startup with its sights set on bigger things can often capture a small market easily by expending an effort that wouldn’t be justified by that market alone.

Similarly, since the most successful startups generally ride some wave bigger than themselves, it could be a good trick to look for waves and ask how one could benefit from them. The prices of gene sequencing and 3D printing are both experiencing Moore’s Law-like declines. What new things will we be able to do in the new world we’ll have in a few years? What are we unconsciously ruling out as impossible that will soon be possible?

Organic

But talking about looking explicitly for waves makes it clear that such recipes are plan B for getting startup ideas. Looking for waves is essentially a way to simulate the organic method. If you’re at the leading edge of some rapidly changing field, you don’t have to look for waves; you are the wave.

Finding startup ideas is a subtle business, and that’s why most people who try fail so miserably. It doesn’t work well simply to try to think of startup ideas. If you do that, you get bad ones that sound dangerously plausible. The best approach is more indirect: if you have the right sort of background, good startup ideas will seem obvious to you. But even then, not immediately. It takes time to come across situations where you notice something missing. And often these gaps won’t seem to be ideas for companies, just things that would be interesting to build. Which is why it’s good to have the time and the inclination to build things just because they’re interesting.

Live in the future and build what seems interesting. Strange as it sounds, that’s the real recipe.

Read the entire article after the jump.

Image: Nick D’Aloisio with his Summly app. Courtesy of Telegraph.

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Startup Culture: New is the New New

Starting up a new business was once a demanding and complex process, often undertaken in anonymity in the long shadows between the hours of a regular job. It still is over course. However nowadays “the startup” has become more of an event. The tech sector has raised this to a fine art by spawning an entire self-sustaining and self-promoting industry around startups.

You’ll find startup gurus, serial entrepreneurs and digital prophets — yes, AOL has a digital prophet on its payroll — strutting around on stage, twittering tips in the digital world, leading business plan bootcamps, pontificating on accelerator panels, hosting incubator love-ins in coffee shops or splashed across the covers of Entrepreneur or Inc or FastCompany magazines on an almost daily basis. Beware! The back of your cereal box may be next.

From the Telegraph:

I’ve seen the best minds of my generation destroyed by marketing, shilling for ad clicks, dragging themselves through the strip-lit corridors of convention centres looking for a venture capitalist. Just as X Factor has convinced hordes of tone deaf kids they can be pop stars, the startup industry has persuaded thousands that they can be the next rockstar entrepreneur. What’s worse is that while X Factor clogs up the television schedules for a couple of months, tech conferences have proliferated to such an extent that not a week goes by without another excuse to slope off. Some founders spend more time on panels pontificating about their business plans than actually executing them.

Earlier this year, I witnessed David Shing, AOL’s Digital Prophet – that really is his job title – delivering the opening remarks at a tech conference. The show summed up the worst elements of the self-obsessed, hyperactive world of modern tech. A 42-year-old man with a shock of Russell Brand hair, expensive spectacles and paint-splattered trousers, Shingy paced the stage spouting buzzwords: “Attention is the new currency, man…the new new is providing utility, brothers and sisters…speaking on the phone is completely cliche.” The audience lapped it all up. At these rallies in praise of the startup, enthusiasm and energy matter much more than making sense.

Startup culture is driven by slinging around superlatives – every job is an “incredible opportunity”, every product is going to “change lives” and “disrupt” an established industry. No one wants to admit that most startups stay stuck right there at the start, pub singers pining for their chance in the spotlight. While the startups and hangers-on milling around in the halls bring in stacks of cash for the event organisers, it’s the already successful entrepreneurs on stage and the investors who actually benefit from these conferences. They meet up at exclusive dinners and in the speakers’ lounge where the real deals are made. It’s Studio 54 for geeks.

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Image: Startup, WA. Courtesy of Wikipedia.

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How Do Startup Companies Succeed?

A view from Esther Dyson, one of world’s leading digital technology entrepreneurs. She has served as a an early investor in numerous startups, including Flickr, del.icio.us, ZEDO, and Medspace, and is currently focused on startups in medical technology and aviation.

From Project Syndicate:

The most popular stories often seem to end at the beginning. “…and so Juan and Alice got married.” Did they actually live happily ever after? “He was elected President.” But how did the country do under his rule? “The entrepreneur got her startup funding.” But did the company succeed?

Let’s consider that last one. Specifically, what happens to entrepreneurs once they get their money? Everywhere I go – and I have been in Moscow, Libreville (Gabon), and Dublin in the last few weeks – smart people ask how to get companies through the next phase of growth. How can we scale entrepreneurship to the point that it has a measurable and meaningful impact on the economy?

The real impact of both Microsoft and Google is not on their shareholders, or even on the people that they employ directly, but on the millions of people whom they have made more productive. That argues for companies that solve real problems, rather than for yet another photo-sharing app for rich, appealing (to advertisers) people with time on their hands.

It turns out that money is rarely enough – not just that there is not enough of it, but that entrepreneurs need something else. They need advice, contacts, customers, and employees immersed in a culture of effectiveness to succeed. But they also have to create something of real value to have meaningful economic impact in the long term.

The easy, increasingly popular answer is accelerators, incubators, camps, weekends – a host of locations and events to foster the development of startups. But these are just buildings and conferences unless they include people who can help with the software – contacts, customers, and culture. The people in charge, from NGOs to government officials, have great ideas about structures – tax policy, official financing, etc. – while the entrepreneurs themselves are too busy running their companies to find out about these things.

But this week in Dublin, I found what we need: not policies or theories, but actual living examples. Not far from the fancy hotel at which I was staying, and across from Google’s modish Irish offices, sits a squat old warehouse with a new sign: Startupbootcamp. You enter through a side door, into a cavern full of sawdust and cheap furniture (plus a pool table and a bar, of course).

What makes this place interesting is its sponsor: venerable old IBM. The mission of Startupbootcamp Europe is not to celebrate entrepreneurs, or even to educate them, but to help them scale up to meaningful businesses. Their new products can use IBM’s and other mentors’ contacts with the much broader world, whether for strategic marketing alliances, the power of an IBM endorsement, or, ultimately, an acquisition.

I was invited by Martin Kelly, who represents IBM’s venture arm in Ireland. He introduced me to the manager of the place, Eoghan Jennings, and a bunch of seasoned executives.

There was a three-time entrepreneur, Conor Hanley, co-founder of BiancaMed (recently sold to Resmed), who now has a sleep-monitoring tool and an exciting distribution deal with a large company he can’t yet mention; Jim Joyce, a former sales executive for Schering Plough who is now running Point of Care, which helps clinicians to help patients to manage their own care after they leave hospital; and Johnny Walker, a radiologist whose company operates scanners in the field and interprets them through a network of radiologists worldwide. Currently, Walker’s company, Global Diagnostics, is focused on pre-natal care, but give him time.

These guys are not the “startups”; they are the mentors, carefully solicited by Kelly from within the tightly knit Irish business community. He knew exactly what he was looking for: “In Ireland, we have people from lots of large companies. Joyce, for example, can put a startup in touch with senior management from virtually any pharma company around the world. Hanley knows manufacturing and tech partners. Walker understands how to operate in rural conditions.”

According to Jennings, a former chief financial officer of Xing, Europe’s leading social network, “We spent years trying to persuade people that they had a problem we could solve; now I am working with companies solving problems that people know they have.”  And that usually involves more than an Internet solution; it requires distribution channels, production facilities, market education, and the like. Startupbootcamp’s next batch of startups, not coincidentally, will be in the health-care sector.

Each of the mentors can help a startup to go global. Precisely because the Irish market is so small, it’s a good place to find people who know how to expand globally. In Ireland right now, as in so many countries, many large companies are laying off people with experience. Not all of them have the makings of an entrepreneur. But most of them have skills worth sharing, whether it’s how to run a sales meeting, oversee a development project, or manage a database of customers.

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