While catching up on my reading over the New Year’s weekend, I stumbled upon this gem via Cafe Hayek:
Adding yet more interventions and taxes which discourage the formation of new fortunes will simply provide additional opportunities for the current elite to avoid the ‘creative destruction’ characteristic of unfettered market competition.
One of my main disagreements with the OWS movement is their general assertion that greater regulation and onerous taxation will unseat the current financial and political elite. Pennington is absolutely correct in recognizing that any increase in regulation and taxation brought about by the OWS movement will likely fall victim to the same rent seeking that created the mess we are currently in.
There is no doubt that our current system is corrupt and broken. A culture of privatized gains and socialized losses continues to pervade our entire financial system. Giants like GE use their lobbying pull to avoid paying a single penny in corporate income tax, even as the regulatory burden for startups and small businesses becomes worse every year.
There is nothing the current elite fears more than the ability of creative destruction to wreak havoc on their political and economic power. Only by removing the barriers America’s entrepreneurs face in the “formation of new fortunes” can we hope to bring about true change to the system we are all so dissatisfied with.
Over the past several weeks, I have been winding down my responsibilities at Onswipe. Starting tomorrow, I will be joining the team at Taykey, a trend buying platform for advertisers.
Making the decision to leave Onswipe was one of the most difficult choices I’ve ever made. Above all else, I am tremendously grateful for the opportunity given to me by Jason and Andres to work alongside them on the early stages of the building Onswipe into a great company. While I was at Onswipe, our organization grow from 4 people to 16 in just 7 months. We went from a $1 Million seed financing to a $5 Million “Series Awesome”, and established partnerships with a series of amazing brands and publishers: Hearst, Washington Post Group, Ziff Davis, Thomson Reuters, as well as Sprint and American Express.
I am also incredibly thankful for the amazing team I was able to work with and learn from every day. People often compare the early stages of a startup to “going to war”. After months of long hours, hard work, and the emotional roller coaster inherent in any early stage business- I can truly say that every person I had the privilege to work with is now a close friend.
As compared to Onswipe, Taykey represents a very different (and very compelling) challenge. While my work at Onswipe consisted of laying the foundation for a growing company, Taykey is now confronting the challenges inherent in scaling around a repeatable and robust business model. Although my nominal “department” (Operations) will be the same, my role at Taykey can simply be described as this: identifying and solving problems that are preventing the company from growing at peak efficiency.
As the transition becomes “official” tomorrow with my first day at Taykey, I am very grateful to everyone who has helped me through this process. Many thanks to the entire Onswipe team, who have been very understanding of my decision. To my friends and mentors who guided me through the decision making process, thank you. Most importantly, thank you to Amit Avner and the Taykey team for this opportunity- I look forward to contributing as Taykey continues to grow and thrive.
The recent announcement that Amazon has released an Ad Supported Kindle was greeted with little fanfare in the tech world. There isn’t anything sexy about an ad supported version of an existing (and relatively unexciting) piece of hardware. Yet this release may have marked an important first step in the progression towards a limited form of the mythical “post scarcity” economy.
As Amazon continues to progress towards their (unconfirmed) goal of a free Kindle, we get closer to the first time that a piece of physical hardware can be subsidized entirely via the delivery of paid, digital content. Unlike phone subsidies tied to the signing of a long term (and overpriced) contract, the Kindle subsidy is tied entirely to the postulated lifetime value of a Kindle customer.
The concept of Post-Scarcity Economics has intrigued me for years. A (very) theoretical offshoot of mainstream economic thought, its primary focus is exploring the potential consequences of an economic reality no longer tied to scarcity in the procurement of physical resources. The hypothesis is that this would lead to the prioritization of knowledge and creativity as capital, rather than of tangible or strictly monetary (in the contemporary sense) goods.
While those most interested in the field tend to skew towards a theoretical and utopian perspective, I think the core tenets of the theories hold some valuable insights for our current era of increasing digital consumption. Specifically, by further questioning the relationship between creative/physical capital, we can gain a better understanding of how we value and consume goods and services.
Just in the past 10 years, Apple and Netflix are well on their way to eliminating the physical scarcity of our media consumption. They have taken one step further the scalable, mass reproduction of plastic discs, and replaced it with the nearly infinite scalability of bits and bytes. As the cost of data transmission continues to fall, eventually the cost of delivering entertainment will effectively be zero.
At this point, we will have approached (at least in this specific industry) the utopian ideal of the post scarcity world: Entertainment will be valued solely on the expense of envisioning, creating, and recording a single instance of it. Afterwards, the cost of duplicating and transmitting it (legally) will actually be zero.
Yesterday, amidst the buzz surround LinkedIn’s $8+ billion post IPO valuation, Barnes and Noble quietly fielded an acquisition offer that valued the company at $1 billion. Barnes and Noble controls 1300+ physical retail locations, in addition to owning millions of dollars in physical book inventory, while LinkedIn’s only physical assets might be the desks and chairs in their offices.
When you put it that way, the idea of a “post-scarcity” economy doesn’t sound so crazy, does it?
Even though I love consuming as much startup related content as possible, I consistently make an effort to ensure that my media time is never purely startup focused. On my iPad, I spend just as much time reading the Economist as I do the great startup blogs like A VC and How To Make It As A First Time Entrepreneur. On my Kindle, I make sure to devote just as much time to reading Gary V’s “Thank You Economy” as to Orson Scott Card’s “Enders Game” (On which I have a great post percolating by the way).
I find incredible value in getting outside the Startup Bubble (No, not that Bubble) and exploring other works of both fiction and nonfiction. My most recent Kindle read, “Barbarians At The Gate” was especially valuable in encouraging me to step outside of the current startup funding paradigms, and really evaluate the way that shifts in financing models can dramatically alter an industry.
A bit of background on “Barbarians at the Gate”: The story of one of the largest Leveraged Buyouts in History, “Barbarians” follows the twisting narratives of the various players attempting to complete the $25 billion buyout of RJR Nabisco. More importantly, it also explores the incredible phenomena that was the LBO craze of the 1980’s. This shift would eventually have enormous consequences for resource allocation, corporate organization and institutional investing. The book is a phenomenal (if lengthy) read, and I highly recommend it.
The book does a great job of following the deeply personal stories of executives and investors who are watching every semblance of “normalcy” in their industry get flipped upside down. Reading these stories of disruption really got me thinking about how the Startup world would handle such a similar disruption.
I’m not referring to a bubble bursting (we’ve seen that before), or to relatively minor disruptions like the rise of seed stage financing. Instead, i’m talking about a wholesale shift in the very core of how startups are built, funded, and acquired. What if institutional investors leave the venture capital world en masse as pension funds take an enormous hit in the coming entitlement crisis? What if a new class of fund comes into existence that seeks to aggressively acquire startups along a specific vertical or horizontal chain of integration? (UberMedia 2.0?) Will the second and third tiers of consumer web startups be aggregated into modern “conglomerates” in a search for relevance and profitability?
I recognize that these “What-ifs” may seem odd or impossible, but thats exactly the point. If you had told a room of corporate executives in 1979 that the next decade would see the $25 billion dollar Private acquisition of an enormous food and tobacco conglomerate, they would have laughed you out of the room. My goal is not to predict these potential shifts, or to even pretend to understand their potential implications. In fact, Black Swan theory would argue that nobody has the ability to predict the way these coming changes will happen. The only guarantee that anyone can make is that the current model will not last forever. Bubbles will come and go. Minor disruptions will alter the valuation environment. Eventually, the entire underpinnings of startup finance and acquisitions will see massive changes.
Of course, in the end, the only important question is this: When the Startup world gets flipped upside down, which side of history will you be on?
There is a bit of a rebellious streak that runs deep in startup culture. A desire to “Think Different”, and a disregard for the pace of life that society attempts to dictate.
We see it in the stories of college dropouts who go on to found billion dollar companies. In the long hours that look brutal to outsiders but are relished in a startup.
Like many other staunchly independent communities, our separation becomes a point of pride. It can be all to easy to feel disengaged from friends or family who don’t share our passion. We dismiss those who aspire to mere “corporate” jobs, and we assume every one of our friends should be an early adopter of the latest cool tech.
But this isolationism is a dangerous thing. With the growth of a robust and enthusiastic startup community comes the tendency to withdraw completely into the jargon and lifestyle of the entrepreneur. Its easy to forget what a remarkably tiny segment of the population we represent. For entrepreneurs building consumer oriented products, this can be especially dangerous.
Thats why I am such a huge fan of the greater emphasis on “getting out of the office” and testing your product with real potential users. Just today, one of our Techstars companies was hanging out in Union Square, asking complete strangers to test their product. I love this because not only does it take guts (ever tried asking a stranger for anything on a NYC street?) but it also shows foresight and a dedication to the user that will help the company tremendously in the long run.
Appreciate and engage with the phenomenal startup community that we are lucky to have- but always be ready to walk out into Union Square and put your product in front of the real world.
Note: This is a repost of an article I wrote for PulsoSocial. Check out the original here.
One of the best lessons I have learned from working in New York is to “think big”. It sounds cliche’, but there is something about being thrown into this vibrant entrepreneurial community that dramatically expands your perception of the world and its opportunities. Everyone is hustling to build around concepts that have never been tried before, and “Can it scale?” is a question heard every single day.
What I have also learned is that there is no reason why every other entrepreneurial community should not be built around a similar “big picture” vision. The tools of the modern Internet mean that any startup can be bootstrapped to profitability while maintaining a similar global long term strategy. Rather than building localized versions of existing companies, or struggling to keep up with well funded competitors in crowded spaces, Entrepreneurs should build products focused on immediate profitability but geared towards a broad long term vision.
The Lean Startup methodology provides an excellent framework for this kind of thinking. (Anyone who is unfamiliar with Lean Startup should check out Eric Ries’ excellent blog) Although it has seen broad adoption among US Entrepreneurs, I believe the Lean Startup approach can be most valuable for entrepreneurs working out of emerging markets. Using Lean Startup style customer development, companies can build an understanding of their customers from anywhere in the world, and they can do it extremely cheaply and efficiently. A basic outline of the process could look like this:
- A founder or team creates an early hypothesis for a product
- The team creates a simple landing page and drives traffic to it to measure interest in the hypothesis
- If the market response is positive, the team should build a Minimum Viable Product (MVP) in order to further test the hypothesis. This is an early version of the product with the minimal feature set needed to gather customer feedback.
- Based on the response to this MVP, the startup can either continue with development, or “pivot” and adjust their hypothesis and start anew.
This is a bare minimum explanation of the Lean Startup concept, and I strongly encourage any aspiring entrepreneur to read as much Steve Blank and Eric Ries as possible. However, even at a basic level, the concept remains the same: using tools like Google Adwords and a simple landing page generator such as Unbounce, a startup can be testing receptiveness to a product in a just a few hours and for less than $100.
An excellent example of a startup following this methodology is current Techstars NYC company Onswipe (formerly known as Padpressed). The entire Onswipe development team was working out of Latin America, and they were able to prove traction and validate their concept before closing $1 Million in funding. Onswipe’s story almost perfectly parallels the Lean Startup Methodology:
- The Co-founders recognized there was an opportunity to make content more visually appealing on tablet devices
- The team created a simple WordPress plugin working with their development team in Mexico
- The market response was very positive, and their hypothesis was validated by the acquisition of a sizable number of paying customers
- Based on the response to this MVP, Onswipe was able to raise financing and move forward with the next iteration of their product.
The barriers to entry in the web ecosystem have become so absurdly low that there is quite literally no reason why any individual with an idea for a startup shouldn’t take the steps to explore their early hypothesis. If early feedback looks promising, a company can bootstrapped quite easily while pursuing further validation.
The startup journey will always be a challenge, and being an entrepreneur is not for the faint of heart. However, the old fallacy that only US based Entrepreneurs with access to venture capital can build successful Internet companies is dead wrong. As the Internet continues to achieve near global ubiquity, it is my hope that the next generation of entrepreneurs will have a similarly global flavor.
I have to say it first- I Love my Mom. Without a doubt, she is the most awesome, inspirational person in my life. I got the chance to have a long phone conversation with her today (something that doesn’t happen nearly enough), and we talked for well over an hour about her plans for starting a business.
See, my mom is truly an Entrepreneur at heart. For a lot of my childhood, the realities of being a single mother trying to raise three children meant that she was unable to pursue her entrepreneurial ambitions. She is now finally transitioning into being able to pursue her first big entrepreneurial venture, and I couldn’t be happier for her.
Mom has a passion for education, having been a teacher for many years. She thinks (rightfully so) that our education system is broken, and wants to focus her first venture on the education space. I completely agree with this goal, but in our discussion on the different ways to approach the market, I quickly became aware of the incredible generation gap that has shaped the way two fundamentally similar people approach the startup challenge. We both agree that education is broken. We both are searching for a way to get involved in the market while exploring growth opportunities. Where the generation gap manifests itself is in our approach to market entry.
To my Mom, starting an education business means crafting a business plan, renting a building, buying materials, marketing to families, and starting an after school enrichment/tutoring business.
To me, approaching the same problem would mean taking a completely different route to market. I would likely use the Lean Startup methodology to develop an exploratory web based business, hopefully one which could scale based on the sale of an information based product. I have an intense fear of businesses that require large amounts of capital investment before engaging a single customer, and just the idea of signing a lease gives me cold sweats (if there is a phobia related to non-bootstrappable businesses, I have it).
This isn’t at all meant as a criticism of the “real world” way of building a business. Quite the opposite actually: I think many of today’s entrepreneurs would do well to take a page from the old way of doing things, when you built businesses that provided a valuable product or service that people would pay for from day one.
Instead, I want to draw attention to the ways that the resources of the internet age allow entrepreneurs to experiment while dramatically decreasing the cost of failure. A startup today can test and vet a number of products, business models, and sales processes at an incredibly minimal cost. Experimentation is cheap, and failure can mean the loss of a couple hundred dollars and a few weeks of time (instead of thousands of dollars and months or years of effort).
What all this means is that there is absolutely no reason for us not to be raising a generation of entrepreneurs right now. The barriers to entry have been slashed so dramatically that literally any young person can explore the thrills of creating their own business.
My Mom had to postpone fulfilling her startup vision because of the fundamental limits of a pre-internet era. My hope is that the this generation of entrepreneurs will never be prevented from pursuing their dreams and ambitions- The pressure is on us to educate and provide mentorship so that this hope can become a reality.
Here at Techstars one of the most emphasized concepts is to always work from an implied position of trust. This makes a lot of sense in an organization that thrives on fostering an open dialogue between startups and mentors. Brad Feld had a great post on this a while ago called Why Most VC’s Don’t Sign NDA’s (He also referenced it in a more Recent Post).
Although Brad’s thoughts and the Techstars approach may seem to be very startup centric, I think they touch on a broad trend that has been catalyzed by the adoption of social media. One critical aspect of the social media revolution is that for the first time, mass amounts of people are sharing their intimate, accurate personal data online. I think this is an overlooked consequence of the shift from a model of the web which emphasized anonymity. Just compare the chatrooms and forums of the early internet with the pattern of interaction that occurs on Quora or even Twitter.
At the core of this change is the fact that people are now much less protective of their personal information and data. This transition is often criticized by privacy advocates, but I see much more to be gained from the trend. Of course, people still need to be aware of what they shouldn’t be sharing online (financial data, home address, etc), but those concerns should not prevent people from crafting accurate, intimate representations of themselves in the social space.
So how does this all circle around to the idea of working with trust? As i’m sitting here writing this, a friend just shared a one line business concept on Twitter, seeking feedback from his followers. A few minutes ago, I shared a link to a story about Uber with a friend who is attempting to build a company to provide late night rides to college students in Raleigh, NC. Both of these posts can be viewed and shared by thousands of people… and we know that. We also know that the internet is most powerful when ideas are shared freely and openly between people all over the world. If someone in South America happens to be passionate about an idea I am considering, I want them to have access to that idea. Maybe it will lead to a dialogue, or maybe they will even go on to start their own version of what I am considering- either way, the world ends up “richer” in the broad sense of the word.
In other news, dog bites man.
Seriously, why is it even considered discussion worthy when wall street analysts blow the sales projections for another piece of new tech? Other than the Apple devotees who love to play the “David V. Goliath” mentality any chance they get, who actually even cares about those projections?
We should know by now that the adoption rate of new tech products follow the Black Swan model… utterly unpredictable, belonging to the wild world of Extremistan. Analysts publish official sounding numbers because they are paid to do so, not because these numbers are any more reliable than the opinion of the average taxi driver.
In the fast moving tech world, being dependent on statistical predictions to make decisions is a critical mistake. The best hope is to identify broad macro-trends and build your plan of action around these basic concepts. A great example is the movement towards a more touch based interface experience. Although it is impossible to predict who the long term winners of this new form factor will be, it is possible to build a business around the larger shift that is occurring. A great example of this is Onswipe, the platform for “Insanely Easy Tablet Publishing”. Recognizing the massive growth of tablet devices, but not wanting to invest themselves completely in a single platform, Jason and Andres decided to build an entirely platform agnostic model that makes web content look incredible on any touch enabled device.
The takeaway? When building a business, don’t look to experts or statistical predictions for validation. Take the time to understand the broad trends occurring in the world around you, and move quickly to exploit them.
In true startup blog fashion (if TechCrunch can do it, so can I), I’ll start by talking about an awesome blog post by Chris Dixon this week. The TL;DR version of his title: The Internet Is Going To Screw With Everything.
He does a great job of explaining a paradigm that we all know to be true, but often gets forgotten in our focus on the current or next “big thing”: The power of the internet is an unstoppable and all-encompassing force for change. This means that not only will it continue to disrupt industries like news, music, and video, but that it will also disrupt as yet unconquered industries as well (Chris mentions real estate, politics, among others).
There is a constantly growing repository of “disruption energy” that is dispersed throughout the startup world. We see this in the incestuous nature of internet thought- someone creates a compelling model, others copy it and put their own spin on it, and we end up with lots of “my company is <web company A> meets <web company B>.” This is actually a healthy part of advancing the web ecosystem (in addition to making for really fun games of startup MadLibs). Startups today are able to draw various aspects of their business from previous innovation… which gives them more freedom to be incredibly disruptive in the core aspects of their business. A startup looking to change the way coaches consume, edit, and distribute game film (shoutout to TeamHomeField here) can build much of their business on existing data. They can look at how people naturally interact with video on Youtube, can borrow their revenue model from the innovation thats already taken place in SaaS… and focus on building one hell of a product to disrupt the sports film vertical.
As a (former?) student of economics, I see a lot of parallels between this process, and the process of international macroeconomic growth. We have seen over the last several hundred years that it is much easier for so called “emerging” economies to grow while they are still playing catchup to more developed nations. The United States at the turn of the 20th century, Japan in the 70’s and China today are all perfect examples of the power of being second. Much as emerging economies build on the successes of the developed world and then inject their own cultural perspective, web companies are free to borrow and learn from their predecessors- and then add their own disruptive mojo.