November 5th, 2011

How Entrepreneurs Can Create Their Own Luck

horseshoe

I’m in even worse trouble now. A few weeks ago I had to speak at Barry Ritholz’s conference but that turned out to be “only” a panel. It was a great panel but I knew I would only have ten minutes of time so wouldn’t need to prepare much although even then I was worried.

Now I’m speaking for one hour at Defrag in Boulder, Colorado next week on November 9 and I’m terrified. For one thing, all of the other speakers are smarter than me. Right before me is Roger Ehrenberg speaking about “big data”. I’m not even sure what “big data” is so right off he’s smarter than me. Then Paul Kedrosky is speaking later in the afternoon about god knows what. Paul has an excellent blog obsessed with everything from economics to weather data. So despite my expertise in speaking I’m finding I’m a bit nervous.

I could open up with the same line I used on Barry’s panel, “When I was walking over here I had an erection. Not so easy for a 43 year old without any stimulation whatsoever.” But this might not be the exact crowd for it. → Read More

August 27th, 2011

The Long Hard Road To The Edge

SunEdgeLogo

A Year In The Life Of An Entrepeneur

1. July 2010: Ready: Set: Delaware, the state with the lowest highest point. David Argentar, a biochemist by training and bioinformaticist by trade, has launched a startup. Of sorts. Well – more of a hobby, he’d be the first to admit. He has no business plan, no investors, no employees. All he really has, in fact, is an idea and a pending patent. And as everyone is eager to tell you these days, ideas are a dime a dozen, and patents are practically a scam.

It gets worse. Much. His idea is hardware. A new kind of solar concentrator, to be exact, made mostly of water. His first version was too heavy; but he thinks his redesign could conceivably, in his wildest dreams, drive down the cost of solar power by quite a lot. But—come on, now, really—a hardware startup? With only one founder?

Hardware is hard. It allows for no binary abstractions, no digitized purity to protect you from the real world. It is the real world, in all in its vicious and unforgiving glory, perpetually at the mercy of a hundred unexpected environmental factors. And almost by definition it is incredibly expensive to develop. I should know: I myself have a degree in electrical engineering – but I fled to the warm embrace of software as soon as I graduated. Hardware was much too temperamental for me.

Argentar, fortunately, is made of sterner stuff.

Good thing, too. Over the next year he’s going to need everything he’s got. → Read More

June 13th, 2011

What To Do When A Tech Giant Decides To Eat Your Lunch

800 pound tech company

Editor’s Note: This is a guest post by (@msuster) Mark Suster, a 2x entrepreneur, now VC at GRP Partners. Read more about Suster at Bothsidesofthetable

Any company who develops products reliant on iOS spends weeks crapping their pants before WWDC. No vacation schedules allowed for weeks before or weeks after. The announcements come out in one day and then even if you survive the annual release announcements you often still have to scramble to make sure your product is ready to work on time.

It’s madness. → Read More

May 28th, 2011

Is There A Peak Age for Entrepreneurship?

Editor’s note: Adeo Ressi, is the founder of The Founder Institute and TheFunded.com In this guest post he argues against ageism when it comes to to entrepreneurs. Ressi is 39.

The recent articles proclaiming that 25 is the peak age for entrepreneurship deserve a considered and factual response. The demographic and racial profiling that has plagued venture capital and tech entrepreneurship has a new friend—ageism. This has to stop. → Read More

May 20th, 2011

You Need to Win the Battle for Share of Mind

Startup dude

Editor’s Note: This is a guest post by (@msuster) Mark Suster, a 2x entrepreneur, now VC at GRP Partners. Read more about Suster at Bothsidesofthetable

Are we headed for a long era of innovation in which startups are the new norm? Are we seeing a time in which pre-revenue companies are more valuable than our offline institutional brands?

Yes, there is unprecedented innovation. The era of cheap cloud computing plus open-source software plus digital natives unleashed upon society is creating some truly amazing products that will challenge the way we do business and the way we live our lives.

No. It’s not all sunshine and candy canes. In a way, startups have become kind of like the video game industry. New stuff gets created, it’s fun to play with and talk about. You want to use it because your friends are doing it and you want to find out what it’s all about. You want to see what’s new.

You play with it for a few weeks or months. Then you stop. You stop because it was game like; temporal. Non valuable. Not really helping you do something better. Not improving your life or business.

If you want to build a meaningful startup, you need to win “share of mind.” Not enough entrepreneurs think about the sustainability of share of mind these days.

Here’s why you should … → Read More

April 3rd, 2011

Women of Color in Tech: How Can We Encourage Them?

Over the last five years, I have taught more than 300 really smart students. One of the smartest, at the Masters of Engineering Management at Duke University, was Viva Leigh Miller, a black woman. She had the ambition of moving to Silicon Valley after she graduated last year. I expected she would become a hotshot CEO.

But Viva couldn’t get a job in the Valley—despite introductions that I gave her to leading venture capitalists. I have never understood why. During my tech days, I would have hired Viva in a heartbeat. She had the determination, drive, and education that all tech companies look for.

It raised a red flag in my mind.

You can’t take one anecdote and extrapolate from that. It could just be that Viva didn’t connect with the right companies at the right time.

But the harsh reality is that there is a dearth of women in tech. Just look around Silicon Valley—you don’t see many blacks there, or Hispanics either. Until recently, I didn’t know of even one black woman CEO (though I had heard a rumor that one or two existed). Yes, I know that few women and members of ethnic minorities study engineering; that some women can’t deal with the stress and just want to raise children; and that this is not Mike Arrington’s fault. It is noteworthy that blacks and Hispanics constitute only 1.5% and 4.7% respectively of the Valley’s tech population—well below national tech-population averages of 7.1% and 5.3%. → Read More

March 26th, 2011

Friends Don’t Let Friends Get Into Finance


After having been a tech executive for many years, I needed to take a break, and I wanted to give back to society. Duke University engineering dean Kristina Johnson gave me a great spiel about how the school’s Masters of Engineering Management program churns out great engineers, and how engineers solve the world’s problems. She said that I could make a big impact by teaching engineering students about the real world and encouraging them to become entrepreneurs. I felt so excited that I joined the university without even asking for a proper salary. That was in 2005.

I was shocked—and upset—when the majority of my students became investment bankers or management consultants after they graduated. Hardly any became engineers. Why would they, when they had huge student loans, and Goldman Sachs was offering them twice as much as engineering companies did?

So when the investment banks tanked in 2008, I cheered because engineering had become sexy again for engineering grads (read my BusinessWeek column).

But thanks to the hundred-billion-dollar taxpayer bailouts, investment banks recovered and went back to their old, greedy ways. And they began offering even more money to engineering grads (and themselves). → Read More

March 4th, 2011

My Ordeal—and the Firestorm—in Boston

As TechCrunch readers know by now, I speak my mind and don’t shy away from controversy. I am even more provocative when I talk to students. My goal is to make them think outside the box. I encourage students not only to challenge authority, but also to challenge me. I tell them that with my research on globalization, entrepreneurship, and U.S. competitiveness, I am learning as I go; no one has all the answers; I could be wrong. In some talks, I present the available data; in others I just discuss what I have learned.

Over the last ten days, I have lectured at four universities: Columbia, Emory, MIT, and UC-Berkeley. The discussions were all lively, and I received very positive feedback from students.

But my talk at MIT, last Monday, seems to have set off a firestorm. → Read More

January 8th, 2011

What Exactly is a Business Model?

Everyone in the tech world talks about business models. But I’ll bet that if you quizzed a random sample of these people, you’d find that they really don’t know what a business model is. I did just that with my students at UC-Berkeley. Most raised their hands, and MBA student Blake Brundidge’s attempt to answer the question was a valiant one—but none of them really had a clue.  The only one who got the answer right was Lionel Vital, a Stanford student gatecrashing my iSchool class.

The reality is that discussions of business models are like discussions of teenage sex: everyone talks about it all the time; everyone boasts about how well he or she is doing it; everyone thinks everyone else is doing it; almost no one really is; and the few who are are fumbling their way through it incompetently.

I’ll tell you what a business model is, in case you are quizzed by your investors.

But first, let me answer the big question that is surely on your mind: what is a Stanford student doing at Berkeley? → Read More

December 18th, 2010

Chile’s Grand Innovation Experiment


Regions all over the world have spent millions—sometimes billions—of dollars trying to create their own Silicon Valley. They drank the same Kool-Aid and used the same recipe: start with a research university; build a fancy tech park next it; give tax breaks to chosen companies to locate in the park; attract venture capital by offering matching investments; and watch the magic happen.

Unfortunately, the magic never happened, anywhere.

All government-sponsored (top-down) tech-cluster efforts—everywhere in the world—either have failed or are on life support (though some pretend they are not). That’s because they all used the wrong ingredients. It isn’t real estate, universities, or VCs that make innovation happen; it is entrepreneurs. To create a tech center like Silicon Valley, you need to first attract smart entrepreneurs from all over the world. Then you have to create entrepreneurial networks; instill a spirit of risk-taking and openness; and build mentoring systems. You also need to provide seed financing to startups. The money is easy; everything else requires a change in culture that usually takes decades. → Read More

November 6th, 2010

How China’s Entrepreneurs Are Helping It Win

Bob Compton and I finally have something to agree about.

The Washington, D.C.–based venture capitalist produced a provocative documentary, 2 Million Minutes, which tracked six students—two each in the U.S., India, and China—during their senior year of high school. It showed the Indian and Chinese students slogging to learn mathematics and science, and the Americans partying and playing video games. Bob concluded that the Indians and Chinese will eat our children’s lunch since they are better educated. I was featured in the documentary and agreed that Indian and Chinese children do indeed work much harder than American children; that they are brought up to believe that education is everything and will make the difference between success and starvation; and that most of their childhood is spent memorizing books on advanced subjects. I argued, however, that things aren’t nearly as dire for U.S. competitiveness as they might appear to be in the documentary. My team’s research into global engineering education showed that more than 95% of Indians and Chinese do not receive a good education, and even those that do receive one take much longer to develop crucial real-world skills than do Americans. Yes, U.S. teens work part-time, socialize, and party. But the independence and social skills they develop give them a big advantage when they join the workforce. They learn to experiment, challenge norms, and take risks. They innovate from the get-go. → Read More

October 31st, 2010

Are You A Pirate?

I read blog posts by Don Dodge and Glenn Kelman today about people jumping from Google to Facebook and it got me thinking about entrepreneurs.

Most people have an aversion to risk, my college economics professor told me. Which means they have to be rewarded to take on that risk. The higher the risk, the higher the possible payout has to be for people to jump.

We make risk/reward decisions every day, all day. Do I go skiing, and enjoy the rush of flying downhill even though there’s a small chance I’ll blow out a knee? Should I go to college or just get a job and start earning money now? Should I eat the high fiber and generally healthy thing on the menu, or go for the cheeseburger? Should I hit the restroom before the movie starts? Etc. → Read More

October 23rd, 2010

The Goldmine Of Opportunities In Gov 2.0


Seeing a need to help 60 million Americans manage their $4 trillion dollars in retirement accounts, Mike and Ryan Alfred launched BrightScope in 2008. They headed to Washington, DC, to obtain electronic data on 401K plans from the Department of Labor. They assumed that since every employer is required to provide the government with this information, it would be readily available to any citizen.

But the brothers were wrong. Labor Department officials first said that they didn’t have these data; and when challenged, they offered to provide millions of pages of printed reports—at a cost of five cents a page. The entire data set would have cost a fortune, filled 1400 boxes, and been impossible to use. Undeterred, Mike and Ryan started a lobbying campaign. With the help of several Senators, they caused the government to relent and give them electronic copies of the reports they needed. → Read More

October 17th, 2010

Japan: To Fix Your Economy, Honor Your Failed Entrepreneurs


After visiting Okinawa, Japan, and meeting with global experts on innovation, I’ve come to the conclusion that Silicon Valley’s greatest advantage isn’t its diversity; it is the fact that it accepts and glorifies failure. Like many other countries, Japan has tried replicating Silicon Valley. It built fancy tech parks, provided subsidies for R&D, and even created a magnificent new research university. Yet there are few tech startups, and there is little innovation; Japan’s economy is stagnant.

There is a reason for this stagnation.

In any country, innovation and economic growth come from startup ventures. But most Japanese don’t want to take the risk of starting a business. Indeed, the social stigma and financial repercussion of failure are so great that the founders of failed businesses become social outcasts; no one will work with them again or fund them; and all too often they end up committing suicide. → Read More

October 10th, 2010

Men and Women Entrepreneurs: Not That Different


In any debate, it is easy to revert to anecdote and highlight examples that exemplify one point of view. Recent TechCrunch posts about women in tech have done just that. The latest of these claimed that women don’t want to run startups, because they’d rather have children. I can understand why: TechCrunch and its editors focus on the Silicon Valley/Web 2.0 world. In this world, most startups—or at least those that get attention— are founded by young white males; aggression and arrogance are considered positive traits; companies need to be grown very fast—even recklessly—because markets change rapidly; and venture capitalists pay promising students to drop out of school to start companies that will likely fail and wreck their careers. So if you’re debating this tiny slice of the tech universe, it is fair to say that women and minorities can’t—or don’t want to—compete. But this isn’t representative of the larger tech world; and it certainly isn’t representative of American industry.

Take the issue of whether the desire to have kids or just run lifestyle businesses makes women averse to running startups. This is an accurate description of some women: they just aren’t cut out for the rough-and-tumble world of entrepreneurship—which requires extremely hard work and in which most startups fail. But it’s the same with men: men too avoid entrepreneurship because they fear risk and aren’t ready to put in the long hours. There is no black or white: many women with children have succeeded with startups, while other successful women entrepreneurs have chosen not to have children. → Read More

October 3rd, 2010

Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?


One of the most interesting discussions at TechCrunch’s Disrupt conference was the debate between the “super angels” and VCs. No, I’m not referring to “AngelGate” or the question of which investor group squeezes entrepreneurs the most. Despite what they say, all investors are in the game for personal financial gain; it’s not about nurturing entrepreneurs or doing good for the world. The most interesting discussion—for entrepreneurs—was about whether a startup should raise lots of venture capital and go for the billion-dollar exit, or raise less money and be happy with a few million.

This issue is much more important than it seems: it affects the way you grow your company, and the focus you place on products and customers. When you go for the billion-dollar exit, you have to start with a master plan for owning a significant slice of a multi-billion-dollar market. You need to develop grand products for grand markets. This is good—you need a vision and a long-term focus. The problems begin when you start raising capital and racing to grow at all costs. And that is where the real chasm between the “super angels” and VCs is developing. → Read More

September 25th, 2010

Students: You Are Probably Not Mark Zuckerberg, So Stay In School

Instead of another boring lecture, last week my students at UC-Berkeley got quite a treat: a lively discussion with TechCrunch founder Mike Arrington. I once described Mike as a cross between Oprah Winfrey and Howard Stern; so I was ready for a little controversy. But he ended up lighting such a big fire, that I’ve been bombarded with questions from students about their education and careers. The questions aren’t just coming from Berkeley; after the discussion was posted on TechCrunch, students at Duke asked me to discuss this at a keynote I am giving at their entrepreneurship symposium on Wednesday; and students at other schools, from as far as India and Singapore, have asked for advice.  So I’ll just respond here in the hope of quenching this fire. → Read More

September 12th, 2010

Can Russia Build A Silicon Valley?


A few months ago, I wrote about why I believed that Russia’s planned “science city” was destined for failure, in my BusinessWeek column. I predicted it would follow the path of the hundreds of cluster development projects before it. Political leaders would hold press conferences to claim credit for advancing science and technology; management consultants would earn hefty fees; real-estate barons would reap fortunes; and as always happens, tax payers would be left holding the bag. You don’t read about the failures of tech clusters all over the world—in countries like Japan, Egypt, Malaysia, and in many regions of the United States—because they die slow, silent deaths. But that is the way nearly all government sponsored innovation efforts go.

Given my scathing criticism, I had expected the Russian Federation to declare me persona non grata. Instead, I got an urgent call from Ellis Rubinstein, president of the New York Academy of Sciences. He said that the Honorable Ilya Ponomarev, head of the high tech subcommittee of the Russian State Duma (Russia’s parliament) had asked the academy to prepare a detailed report on this subject. And they wanted my input. Ellis also asked if I would accompany his team to Russia to discuss the issue. I wasn’t sure if this was an elaborate scheme to have me locked up in a Russian gulag, but I hold Ellis in such high regard that I agreed. → Read More

September 4th, 2010

Tech Industry Managers: Little Men in Big Shoes?


When I was ready to transition from computer programmer to project manager, my employer, Xerox Corporation, sent me to its huge training center in Leesburg, Virginia. Over two weeks, the people there taught me some of the skills I needed in order to succeed in my new role: managing projects, motivating people, complying with employment regulations, and preparing status reports and presentations. The company also encouraged me to complete an MBA, on a part-time basis, at New York University. It gave me lots of time off and paid for the tuition.

Tech companies in the internet era offer their employees some great perks. But do you think that Facebook, Groupon, or Zynga provide budding professionals with any serious management training? Not at all. Given the way tech companies grow and the HR challenges they face, management training and career development are more important than ever. But few have the time—they are too busy surviving. → Read More

August 28th, 2010

Silicon Valley’s Dark Secret: It’s All About Age


An interesting paradox in the technology world is that there is both a shortage and a surplus of engineers in the United States. Talk to those working at any Silicon Valley company, and they will tell you how hard it is to find qualified talent. But listen to the heart-wrenching stories of unemployed engineers, and you will realize that there are tens of thousands who can’t get jobs. What gives?

The harsh reality is that in the tech world, companies prefer to hire young, inexperienced, engineers. And engineering is an “up or out” profession: you either move up the ladder or face unemployment. This is not something that tech executives publicly admit, because they fear being sued for age discrimination, but everyone knows that this is the way things are. Why would any company hire a computer programmer with the wrong skills for a salary of $150,000, when it can hire a fresh graduate—with no skills—for around $60,000? Even if it spends a month training the younger worker, the company is still far ahead. The young understand new technologies better than the old do, and are like a clean slate: they will rapidly learn the latest coding methods and techniques, and they don’t carry any “technology baggage”. As well, the older worker likely has a family and needs to leave by 6 pm, whereas the young can pull all-nighters. → Read More

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