By James Santagata
Principal Consultant, SiliconEdge I came across this interesting Silicon Valley Business Journal article entitled "Why do startups fail? Here are the top 20 reasons" which summarizes a large post-mortem analysis of startup failures conducted by CB Insights One quick takeaway to highlight: "After reading through every single of the 101 post-mortems, we’ve learned two things. One — there is rarely one reason for a single startup's failure. And two — across all these failures, the reasons are very diverse." Here's the top twenty reasons: (Note: percentages don't add up to 100 because sometimes there are multiple reasons for failure) 1. Building a solution in search of a problem: Falling in love with an idea or building it out with market validation. 42 percent cited this. 2. Cash Out. No Mas: We'll assume this wasn't due to financial mismanagement or malfeasance but a natural outcome of a sane burn rate over an extended period with trailing revenues of a lean nature. 29 percent reported this. 3. Wrong team: Lacking key members or skill sets This was cited by 23 percent of the companies. 4. Beaten by the competition: About 19 percent of the companies reported this. 5. Pricing/cost issues: Reported by 18 percent in the study. 6. Poor product: This was reported by 17 percent of the companies. 7. Need/lack business model: A lack of a viable model killed 17 percent of these companies. 8. Poor marketing: Knowing how to code or build good products isn't enough. Reported by 14 percent of the companies. 9. Ignoring customers: 14 percent of the companies in the studied pointed to this. 10. Mis-timed product (releases): 13 percent of the companies in the survey reported this. A Calxeda employee told CB Insights, “We moved faster than our customers could move. We moved with tech that wasn't really ready for them... We were too early.” 11. Lost focus: 13 percent reported this. 12. Founder/investor strife: Creative tension is far different than toxic infighting. 13 percent of the companies succumbed to this. 13. Pivot gone bad: As has been said, "The pivot used to be called the f****up". 10 percent pointed to this. 14: Lack passion: The passion to stick it out, to execute. 9 percent identified this as the reason. 15: Bad location: For hiring/retaining talent, customers, investors and so on. This was cited by 9 percent. 16. No financing/investor interest: This was pointed to by 8 percent. 17. Legal challenges: Cited by 8 percent of the companies. 18. Don't use network/advisers: Again cited by 8 percent of the companies. 19. Burnout: Never a good thing, many reasons why a team can burn out. 8 percent pointed to this as the culprit. 20: Failure to pivot: As has been said earlier, "The pivot used to be called the F****up" and while that may be true it doesn't change the fact that continuing down the same messed up path is going to get your any place faster (other than bankruptcy court) and certainly no where better. 7 percent cited this.
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By James Santagata Principal Consultant, SiliconEdge Yesterday I came across what I felt to be a provocatively brilliant quote by Elon Musk which I subsequently posted into my LinkedIn Update and Facebook Status feeds. "The reason I haven't taken SpaceX public is the goals of SpaceX are very long-term, which is to establish a city on Mars." -- Elon Musk The next day, I awoke to find this little gem of a comment from my friend Chikako Uchinami of synopsis.TODAY below it: "Elon is instructive of the principle of Divine Right. He's not always right, but when he is he is the most interesting man in the world. You can't inherit Divine Right- you take it." -- Chikako Uchinami Besides being incredibly insightful, Chikako brilliantly articulated the concept and application Divine Right
Divine Right. And that's what it is. It 's not given. It can only be taken. The right can only be asserted. Think about the power of those statements. Now think about the power and effectiveness of any leader (including you) who not only understands but lays claim to and assertively wields Divine Right. By James Santagata
Principal Consultant, SiliconEdge The Sun Also Rises (陽はまた昇る || Yō wa mata noboru), starring Ken Watanabe (foreigners will know him from his appearances in The Last Samurai and Inception) is a riveting drama that captures the development in Japan of the nascent and soon to be ubiquitous VHS video format. Starting as a stealth or more accurately, an unapproved Skunk Works projects within JVC (Nihon Victor Corporation) it culminated in the development and release of the new VHS standard to the industry. On top of that, JVC's new format was royalty-free and competed directly against Akio Morita and his uber-powerful Sony Corporation (when you think of Akio Morita, think about Steve Jobs before Steve Jobs was even on the scene) and their Betamax. Lots to takeways from this movie in terms of government pressure and cronyism in the form of MITI (Ministry of International Trade and Industry / 通商産業省 / Tsūshō-sangyō-shō) officials who had backed Betamax and, therefore, wanted JVC to deep-six their VHS format. Other key takeways: - Intrapreneurship - No Box Thinking - Technical Innovation - Market-Focused Feedback Loops to ferret out new Use Cases - Tenacity / Being Relentless - True Leadership - New Business Models (royalty-free industry standard) In summation, this docu-drama really demonstrates Japanese business ethics, working styles, attention to detail and cultural expectations. By James Santagata
Principal Consultant, SiliconEdge "October: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February." - Pudd'nhead Wilson's Calendar There is no doubt that the stock market can be a very unforgiving institution but does the SEC's tactics if not self-described mandate of breaking the legs of Entrepreneurs and rolling over little Retail Investors make it any safer? This is highly doubtful as the SEC has arguably become a poster child for the economic concept of regulatory capture, having moved from their initial role of investment information disclosure in the 1960's to their current role of supposedly "protecting investors" since the 1990's. There is also the issue that the existence of the SEC and what I term to be their "SEC-anointed" stocks injects moral hazard into the system. But who, prey tell (spelled as intended), is the SEC protecting? Surely it isn't the little retail investor who has had to contend with the like of SEC-anointed fraud stocks and scammers like Enron, Global Crossing, the Steve Jobs Options Backdating Scandal and, of course, the Big Daddy himself, Bernie Madoff. What's most amazing about Bernie Madoff's fraud is not just that he got away with it, but that the SEC had no intention of stopping him! That may sound like an outlandish or unsubstantiated allegation until one considers the documented facts. Starting in 2000 then again in 2001, and 2005, a forensics accountant by the name of Harry M. Markopolos repeatedly notified the SEC of Bernie Madoff's fraud both verbally and in writing. Markopolos provided detailed supporting documents only to be ignored by the SEC again and again. Here is Markopolos' complaint to the SEC regarding Madoff where he identifies 29 Red Flags:
Now it appears that the SEC is continuing their assault on both individual investors who want better returns than are available through the retail market or whom just want to invest their own money as they see fit (if they can blow their money in Vegas or on penny stocks, smokes or state sponsored lotteries why not stocks?) as well as entrepreneurs looking to raise funds for their companies. The SEC is doing this by considering to raise the financial requirements for being designated an accredited investor. Currently, an individual accredited investor is defined as follows:
Apparently, too many Americans have now become cashed up and have too easily overcome this financial hurdle. In the last go round, the SEC changed the rules so that an individual's home was excluded but apparently that wasn't enough to keep out the amount of new individuals looking to invest wholesale (as opposed to retail). To remedy this our "protectors", the SEC, now want to index the SEC's individual accredited investor's financial requirements to inflation. Here is a comparison of the current requirements and what the future requirements would mean: An individual accredited investor is now defined as someone with $1 million in net worth, minus the value of their primary residence, or with annual income of $200,000 in each of the two most recent years and with a reasonable expectation to bring in the same income level in the current year.. The inflation indexed requirements would be about $2.5 million of individual net worth while the annual income requirement would rise to $450,000. The SEC is offering some protection no doubt, but for whom? It seems this protection is more likely to benefit fraudsters and incumbent wholesale investors than entrepreneurs looking to raise money and the little retail investor. http://m.bizjournals.com/sanjose/news/2014/05/20/more-than-half-of-angel-investors-could-be-barred.html By James Santagata Principal Consultant, SiliconEdge After Facebook's massive $19 billion USD acquisition of WhatsApp, two question have arisen. The first is my question. How exactly did the Tech Cheerleader Press miss out on WhatsApp? That is, after countless posts over the years pimping Quora as "it", Twitter and others, where was the love for WhatsApp? This is actually a rhetorical question so no reason to answer it. The second question is now coming from the Tech and even Business Cheerleader Press. "Where's The Next WhatsApp", they ask. Take a couple seconds now and do a quick search on that phrase and you'll be greeted by almost a dozen recent articles that are predicting or searching for the next WhatsApp. You'll also find that these articles specifically target audiences ranging from the tech community to business folk, ad agencies and the general public. That is to be expected, of course, when such large amounts of money such as $19 billion USD are thrown around. I can live with that. In fact, I expect that from the Cheerleader Press. It's just par for the course.
But here's the part that no one or at least very few will tell you. The next WhatsApp is already out there and it's running fine. It may even be LINE for all I know. But it doesn't matter, because whatever it is, the Cheerleader Press probably won't find them until they make it and even if they did, they wouldn't understand them due factors such as trait ascription bias. Further, just like WhatsApp, the future WhatsApp may be running their operation out of a moldy warehouse and they probably aren't or won't be at Launch or Disrupt or any other events. Why? First because many of these startups have very little capital reserves and they are more concerned about eating and keeping the lights on. It's prioritizing capital outlays vs expected returns. Second, even if they have the funds, they are most likely focused on building and refining their product while engaged in customer acquisition, retention and growth, perhaps employing Lifetime Value analysis or a traditional RFM model. Going to conferences takes not only time but energy. It's draining. And what again, is the ROI? That's just the way it is. And that's why people are or were like, "Hey, who the hell are the WhatsApp guys?" Where did you guys come from? How did you build this thing? Why haven't we heard about you? And now, suddenly they are treated like rock stars, as they should be. And yet the Cheerleader Press will never get it,because they are victims of drinking the Kool-aid cocktail of social proof, the halo effect and various cognitive biases while subscribing to the standard Myths and Memes. By James Santagata
Principal Consultant, SiliconEdge That Japan like any country, be it developing or developed, has her share of problems is not in the least bit surprising or at least it shouldn't be. However, what has surprised me over the years is how many foreign "Japan watchers" and "Japan pundits" always seem to miss the crux of what's really going on on the ground in Japan and more importantly what's going on in the mind of the Japanese. When articles are written or comments made about the supposed dearth of Japanese startups, the author or speaker almost always boils this down to several factors such as Japan's Shima-guni mentality (Island Nation / 島国), the so-called Galapagos Effect (which as I've continually pointed out is really just a misnomer for an industry or marketplace rife with ossified, rent-seeking incumbents and regulatory capture), Japan's supposed lack of talent, Japan's supposed lack of diversity and Japan supposed lack of creativity. In the past, I've written about and either fully debunked these myths and memes or I've put them into a context in which they are far better understood. With that said, there is another popular myth and meme that comes up regarding the lack of Japanese startups and that is the idea that the Japanese have an almost in-born fear of failure. I'm not here to argue that Japanese don't have a fear of failure because they do. We all do. Just as most other peoples around the world do, including those in the US and even including those working in Silicon Valley. People fear failure. But to hear the pundits tell it, "Japanese need to get over failure and embrace it". These pundits act like the fear of failure in Japan is simple a psychological construct* like it is in parts of the West like in the US. (*For the record, even in the US failure is more than just a psychological construct, there are still real financial, social and psychological penalties, set backs and damage that can and do come with it. But this is so much less than what is faced in Japan) Now I am here to tell you, that in Japan this "fear of failure" is not simply psychological but real. Depending on the failure level there are material penalties that can accrue or hit one hard and if you are to strike out on your own or with a small group of friends, launch a company and it fails it is not like Silicon Valley where you can walk down the street and pickup a paycheck at a top firm while your lick your wounds, get on your feet and start again or even just resume your pre-startup career. In Japan, the damage and risks include and span the following:
There are huge differences in how societies views failures and how you move on in terms of romantic prospects and relationships, platonic relationships and friendships, how your family views you, the support groups you have and, most importantly, the career risks which translate, in the end, to money - to financial issues. Although much has changed in Japan over the last 8 years, especially in the last 4 years or so, it is still no where near the levels of what we see in the West regarding some issues such as Mid-career hires. Now let's step back in time, to say 1995. In the US, for instance, much of the economy was still coming out a bad recession from a couple years earlier where housing prices were pummeled - in fact, I remember many saying they wouldn't buy a home again. As one specific example, I'll pick Silicon Valley as just one example, even in that economy, a person could have a massive failure and if they learned something and could present themselves well, they could easily land a similar or even better job by leveraging it. Even if they were fired. Conversely, even if they didn't learn anything, they still could land a similar job. Even if they were fired. People hired with a very open mind based on what the candidate could produce. In Japan, the idea of mid-career hires, although changing now, was really non-existent unless you had super skills, super connections or worked at a foreign firm (gaishikei), like Microsoft, Oracle, etc. who needed talent and hired among themselves. I can tell you, as just one example, when I met with Fuji-Xerox HR group back in mid-2008 to discuss their domestic hiring needs, although they were very polite and professional, it was made extremely clear they wanted new grads only and that they weren't set up to recruit mid-career hires. Did that mean that mid-career hires didn't happen at Fuji-Xerox? Of course not. But it did mean and it does mean that mid-career hires (a) were rare and (b) a special case. Which again leads to this risk factor of damage to one's career and so on. Coupled with this was a employee/candidate ethos that often considered working for a direct competitor "dishonorable" while on the company side, such a candidate applying for a position from a direct competitor would be seen as "suspect" or "suspicious". Again, I want to emphasize this has been changing for the better over the last 8 years and specifically the last 4 years or so but this hiring mentality exists and so does the economic and career damage fear among workers. I can also share with you some examples where I took top talent from various gaishikei firms (in this case, in the network & information security industry) and introduced the persons to other top companies, both domestic and gaishikei. Often what I heard was, "They are a job hopper". My thought: "Are you insane" or "What an idiot, can you not see how talented this person is to fill the position you've had open for the last 4 months...." My reply, "Uh, no. They aren't a job hopper. And regarding their changes, the last company they worked for went bankrupt and the other two companies before that, that the candidate worked for got acquired by huge multinationals. They left because they preferred a smaller work environment." The reply? "Well, that shows bad choices on their part." A bad choice? To know the firm would go bankrupt? To work at a startup or a company working in emerging markets or developing nascent technologies? This actual conversation took place in 2008. And I've had numerous conversations like this, from the mid 1990's, skipping through the dot com boom of 1999 to 2001 (in the US, the dot com bomb died out with the 2000 Nasdaq crash but Japan trailed about a year) to around early 2009. Then it thawed a bit. I should note that in the dot com bomb, Japanese firms were so scared by the hype and activity happening online that they did hire mid-hires and they did bring in foreigners, even non-Japanese speaking. Fear of the firm failure, spurned positive changes. In other words, competition is good. I should also add that this was within the fast moving, dynamic tech industry. I've also done work in very static sectors like industrial chemicals, and as late as 2008, it was not uncommon to have a HR manager or even the hiring authority (even the country manager) characterize a person who had stayed at each job less than 5 to 10 years was seen as a job hopper and also undesirable. Wrapping this up, it's not so much that Japanese have a greater fear of failure than, say, Americans, it is simply that the economic cost of a failure in Japan is much higher - financially, socially, psychologically. Once you understand, all the pieces begin to fall into place. By James Santagata
Principal Consultant, SiliconEdge Well, if you haven't heard the news yet the Valley M&A buying spree continues unabated, this time with Facebook snapping up mobile messaging company WhatsApp for a hefty $16 to $19 Billion USD (depending on which news source you reference).
There are many lessons and takeaways from this acquisition but allow me to focus on just a few. 1. Ignore The Cheerleader Tech Press: WhosWhat? WhatsWho? WhatsApp! Personally, I wasn't aware of WhatsApp before this acquisition as I don't use the app and I'm mostly a user of Viber and Skype so I can be forgiven. However, within the Silicon Valley Cheerleader Press, especially Tech "Apple-Twitter-Quora" Crunch and even Pando Monthly and VentureBeat, I'm sorry but even as frequent if not habitual reader, I just didn't see the coverage. How could this be, how could they miss it, a huge multibillion dollar company? The answer is simple: Why would you expect the Cheerleader Tech Press to get it? 2. Companies Can't Pick Top Talent: It turns out that before co-founding WhatsApp, Brian Acton formerly worked at Yahoo in a quite senior / important position. After over a decade at Yahoo, he left to take some time off and then applied for a new position landing interviews with at least a few major valley tech companies such as Facebook and Twitter. However, he was rejected at both. Perhaps these rejections were due to Action being incompetent. Or perhaps Action interviewed poorly and no communication skills? Or is it perhaps more likely that these companies or at least the hiring authorities at these companies either (a) don't know how to select top-shelf talent and/or (b) allow office politics and threats to an incumbent employee's ego or career path to dictate who gets hired and who doesn't? Examples are where a senior person with top skills scares a younger or less experienced manager from making the hire -- doubt that? It happens all the time. All the time. And it costs companies millions if not billions per year. Oh and it makes you wonder, if Facebook had hired Acton, would they have gotten him to build WhatsApp for a lot less than the $19 Billion USD they paid for it? Or would WhatsApp never be built and fall into the "Innovation Lost" point below? 3. Leaderless Rather Than Leadership and Innovation Lost: Perhaps the biggest lesson is why Yahoo, which had him onboard for over 10 years didn't extract this value, this innovation It's possible that Yahoo was simply so completely leaderless and rudderless that they didn't even know what to have him do. Or perhaps he tried to be innovative and got his hands slapped. Whatever the reason, it's clear that Acton had some innovative ideas inside of him and more importantly he had the confidence and motivate to start and execute. But it's clearly not just a shame but a multi-billion dollar tragedy that Yahoo had him on the payroll all those years, had him suited up and yet would let him get in the game and swing for the fences. If you can create a company with the proper culture that has strong leadership, embraces innovation, empowers employees and hires top talent or solid talent, especially talent that either scares other firms (because it's too good) or is good inside but is a bit dinged on the outside, you're firm will do very, very well. http://techcrunch.com/2014/02/19/how-things-change/ By James Santagata
Principal Consultant, SiliconEdge Growth Hacking. Depending on who you listen to, it's either the fastest growing "new" field of marketing or one of the most over inflated of buzz words. My take as a "classically-trained marketer" is this: It ain't nothing new. It's just a form or better yet an updated framework for direct response advertising. That being said, I do think that term can be / could be useful as a short hand term for: "A super-focused, super-aggressive form of Direct Response Advertising where your ass, your paycheck and your company's survival is on the line everyday, and whereby the marketing campaigns that you develop and run must be done so on a compressed time scale with a limited to non-existent budget." Other than that, Growth Hacking can be said to be the same "stuff", different pile. No Box Thinking™: How To Beat Silicon Valley's (and other) Fast-Moving Startups At Their Own Game1/11/2014 By James Santagata Principal Consultant, SiliconEdge “Core competencies are different for every organization. But every organization needs one core competence: innovation.” - Peter Drucker
Secret Silicon Valley: Deconstructing Silicon Valley While Exploding The Myths & The Memes1/10/2014 By James Santagata Principal Consultant, SiliconEdge Business Is Simply Warfare Without The Pleasantries and Veneer of the Geneva Convention
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