Accenture Startup Ecosystem

How To Replicate Silicon Valley

Summary:

This blog post will provide an overview of what it takes to clone Silicon Valley. I will also review Yachay, the latest Ecuadorian effort to replicate the Valley and in order to provide more in-depth understanding of the current startup landscape, I reflect on Andreesen’s thoughts on creating 50 different valleys as well as an essay by Vivek Wadhwa on how the Silicon Valley can’t be replicated in combination with other resources like Paul Graham’s essay about buying Silicon Valley.

Also, to explain Silicon Valley’s culture to those who don’t live here, I list my top reasons why the Valley works and what other parts of the world should be doing to make it work (see table below). We will look at the mindset during California’s Gold Rush and match it to the current “software-eats-world” era to establish the underlying entrepreneurial culture that is at the core of innovation. I also talk about my personal experience starting Tangelo by building a high caliber team that has helped launch three startups and has delivered over 200 technology projects for our clients.

Silicon Valley thrives in a Gold Rush mentality. Silicon Valley has found gold in software development and technological innovation and everyone around the world wants a piece of it. It just seems so easy from far away to make a quick fortune in only a few years by selling a startup or going IPO. Let’s look at the history of the San Francisco Bay Area and the monumental Ecuadorian initiative to clone it.

For the past few decades, Silicon Valley has attracted top talent from all over the world. Highly skilled people move here with hopes of working for a high growth startup. The motivations vary widely. Some are looking to tackle the ultimate technological challenge and others are comfortable working as hired guns looking to cash in the crazy exuberance of startups loaded with venture capital.

During the original California Gold Rush in 1849, people from all over the world came to northern California in search of fortune.  The first few got lucky and made quick fortunes. Just as it happened during the Gold Rush, a few of the top tech companies of our day got lucky as well. Companies such as Yahoo!, Facebook, Google, and Twitter to name a few have grown to become sustainable high-growth companies.

But for every smashing success there are thousands of losers. As it happened during the gold rush, not everyone found gold but everyone drank the kool-aid and wanted in. According to American History, the Gold Rush made some extremely rich, but not necessarily who you might think:

The first lucky arrivals were able to find nuggets of gold in the streambeds. These people made quick fortunes. It was a unique time in history where individuals with literally nothing to their name could become extremely wealthy. The gold was free for whoever was lucky enough to find it. It is no surprise that gold fever hit so heavily. Yet the majority of those who made the trek out West were not so lucky. The individuals who became the richest were in fact not these early miners but were instead entrepreneurs who created businesses to support all of the prospectors. It is easy to think of all the essentials the sheer number of new inhabitants would need in order to live. Businesses sprang up to meet their needs. Some of these businesses are still around today including Levi Strauss and Wells Fargo.

San Francisco represents an opportunity for people now as it did in 1849 and it continues to capture the imagination of entrepreneurs.

But sometimes it is better to sell the shovels than to look for gold and that is exactly what Levi Strauss and Wells Fargo did and they became extremely successful by clothing the hopefuls and securing the money they made.

This Gold Rush is different. Software can be created anywhere in the world and that possibility ignites people’s imagination. They don’t have to necessarily come to Silicon Valley to make it happen anymore. Chile, Brazil, Argentina, Colombia, Canada, Germany and a long list of countries are actively trying to clone Silicon Valley.  The same is happening in American cities such as New York, Miami, Chicago and many others.

One of the main hurdles to success is that they are trying to replicate Silicon Valley’s surface not its culture. To paraphrase Steve Jobs, what matters is not how it looks, it is how it works. There’s is nothing inherently special about the geography of the Valley. If anything, the location of Stanford and Palo Alto in reference to San Francisco or San Jose is inconvenient and the suburban sprawl often makes the commute unbearable.

But then there’s Silicon Valley’s culture –– the things that you don’t see on the surface, the things that you learn only if you’ve been here and have started a company or have joined an early stage startup.

Marc Andreesen, the co-founder of Netscape and Andreesen-Horowitz recently wrote an article about Silicon Valley and what it would take to create valuable models and not just worthless copies. He argues that the value lies in specialization rather than governmental support or controlled innovation:

…the freedom to create new technologies without having to ask the powers that be for their blessing. Entrepreneurs can take advantage of the difference between opportunities in different regions, where innovation in a particular domain of interest may be restricted in one region, allowed and encouraged in another, or completely legal in still another. For example, the laws and guidelines for using drones or taxing bitcoin already vary widely across the globe, just as they do for ride-sharing services across different cities in the U.S.

I largely agree with this framework. If a country reduces the regulatory hurdles to starting and growing a company and it has an inviting immigration policy, it can benefit immediately from the digital revolution.  There’s no better way to illustrate this than a current and real life example.

Yachay And The Ecuadorian Bet For Technological Supremacy

There is a small country on the equator, abundant with natural resources, that has a burning desire to leapfrog into the wealth-generating era of technological innovation.  The President of this tiny but fiery country is the visionary-in-chief and he has set aside one billion dollars to fund the implementation of this technological paradise.

This utopian scenario is happening in Ecuador, the place where I was born. I have been living in Silicon Valley for over 14 years and I am extremely excited to see this idea take shape. Though my hope is high, I have a great deal of concern that the vision can sink in a sea of highly inefficient processes and policies that are so typical of any South American country.

There are things that make Silicon Valley’s innovation engine fire sparks and that is largely due to the culture.  This culture would not have been able to flourish without the support of the government.

Here’s a side by side comparison of what works in Silicon Valley when starting a company and the current policies in Ecuador

Silicon Valley Policy and Culture Current Ecuadorian Policy and Culture
Starting a company takes a few minutes and it can be done online for a minimal fee. Starting a company can take many weeks to months following many complicated steps.  Many fees and taxes are required and you have to prove a dollar value of the company before it has even been formed and have money in the bank to show you can support the company.
Hiring people is easy. There’s no red tape or any type of strict regulation. If you pay your taxes you are in good standing, the government will not interfere. There are many governmental protections for workers, so it is difficult to have a trial period for employees and and there are many restrictions in firing employees.  Firing employees can be cost prohibitive for a small company.  Long-term contractors are prohibited and must become employees of the company.
Investors and companies understand that traction trumps profits in the short term.  Highly valued companies such as Google, Facebook, Pinterest, Twitter reported losses and took many years to figure out how they would be profitable.  (Some companies are still figuring it out.) Companies that report losses for more than 5 years are shut down by the government.
Business processes such as hiring, paying taxes, accounting and banking is highly efficient and can be automated to a large extent. Many transactions must happen in person instead of online.  The entrepreneur is often concerned  about obscure regulations that can shut down the business from one day to the next.
Credit is easily accessible Interest rates are high and it can be extremely difficult to obtain loans.  There are even many obstacles in simply opening up a savings account.
Equipment is readily available and fixable and anyone can get computers and software quickly and efficiently.  For example, if I am starting a software company I don’t have to worry about my laptop failing and having to wait months to get a new one or to having to pay a government-driven protectionist tax on foreign goods. If computer equipment fails, people often must wait months to get for replacements and then they must pay high tariffs, or government-driven protectionist taxes on foreign goods.  The latest technology is not readily available.
Unless you are completely careless, the government will not shut down your business. The IRS wants the income from your business and does not want to shut you down. In South America, government officials are keen on “catching” noncompliant businesses and then shutting them down.
The entrepreneurial culture of the Valley gives entrepreneurs a ready-to-go support network where people help each other while at the same time competing against each other. Entrepreneurism is lonely and isolating and there is no vibrant community of support.  Corruption rules the culture.

How can Ecuador actually make this vision a reality? Start by systematically considering and creating their regulatory competitive advantage. Here are some points that can help make this happen:

Get the infrastructure right

Hector Rodriguez, the current General Manager, understands that a new city should include a robust university with comfortable amenities such as stores, health clinics, schools, child care centers, transportation and other basic infrastructure that will attract and foster a vibrant community.  Though the vision is extremely lofty, it is actually sound and comparable to other pie-in-the sky ideas set forth by folks like Peter Thiel and the Island Nation project he supports.

Build an ecosystem not only a university

Building a top tier educational institution that is at the heart of Yachay is a smart move that will attract top talent.  But that alone is not enough to spur an entrepreneurial culture. If you look at Stanford and the innumerable companies that its graduates have started, you can see how a top notch university helps fuel an entrepreneurial community.  However, without the support of investors these companies would have never existed.

Culture trumps location

Yachay is located two hours from Quito, the capital of Ecuador. The best parallel is Palo Alto, CA which is located in between two major US cities: San Jose and San Francisco. This small city became the capital of the world for startups and there were other factors that ignited the startup revolution in this area.  Yachay’s disadvantage is that the culture could become homogeneous. If you have a mix of people with diverse backgrounds and experiences, it helps to build a creative culture.  According to Vivek Wadhwa in an article titled “Why Silicon Valley Can’t Be Copied” he explains the success of  Silicon Valley and attributes it to culture malleability.

The reasons were, at their root, cultural. It was Silicon Valley’s high rates of job-hopping and company formation, its professional networks and easy information exchange, that lent the advantage. Valley firms understood that collaborating and competing at the same time led to success—an idea even reflected in California’s unusual rule barring non-compete agreements. The ecosystem supported experimentation, risk-taking, and sharing the lessons of success and failure. In other words, Silicon Valley was an open system—a giant, real-world social network that existed long before Facebook. 

Can Ecuador, or any other developing country copy the Silicon Valley startup machine? That is the question that Rafael Correa’s government is trying to answer right now as they embark in possibly one of the most ambitious South American initiatives.

Yachay’s Opportunity And What Ecuador Should Do

Ecuador is building Yachay, a standalone city that is currently an uninhabited Andean Valley. It’s a literal blank slate in terms of infrastructure, policy and human resources that can be an ideal location devoted to serve what  from M.I.T calls the unexotic underclass.

This is Ecuador’s attempt to leapfrog into the next economic frontier. The “City of Knowledge” as it has come to be known, is surrounded by mountains, Andean valleys and its purpose is to help Ecuador evolve from an oil-based economy into the innovation hub of South America.

In a recent article in the Miami Herald, Jim Wyss provides an interesting point of view into Yachay. His analysis, at no fault of his own, is similar to other articles written by CNET and other publications and it is reflected in the type of people that are interviewed for the articles. They are academics, not entrepreneurs and there is a big difference between both. Academics are great at analyzing markets, not at creating new ones. For instance, a civil engineer that is building noble malleable materials in a lab does not know how to actually build a construction company. Steve Wozniak designed the first Apple Computer but it would have been highly unlikely that he would have built Apple, the company. Academics fuel research, not entrepreneurship.

For this great experiment to work, there needs to be a complete culture shift and government reform to incentivize, not punish new businesses.  The great opportunity for Ecuador lies upon deregulation and specialization of resources that are available within the country.

This city can become a magnet for talent from across the globe and to entice the local and foreign talent to stay, the immigration and economic systems need to accommodate the new arrivals by welcoming them and not putting burdens to financial success.

Yachay’s system should be such that a company can incorporate quickly and start hiring local talent right away. The tax system should provide stability so that entrepreneurs can attempt to build moon shots without the concern that the government might come after them if they fail. Big corporations need to see the value of investing in innovation rather than stagnate in old school business and governmental models.

The opportunity is ripe for the taking and Ecuador has the opportunity to succeed where many have failed.

Tangelo, the company I founded over six years ago, is based on my personal belief that innately talented people from abroad can compete with top Silicon Valley companies. My job is to find those opportunities to prove it.  Over four years ago, we established a program called the Tangelo Startup House to bring Silicon Valley’s culture to Ecuador and Argentina and we are succeeding. We have built three companies from scratch that have been highlighted at conferences such as Google I/O and DEMO.

We have experienced the ups and downs of building an ecosystem around Tangelo and have learned an incredible amount about the intricacies of building an innovative team and we are eager to share it just as every other entrepreneur in Silicon Valley is eager to support a new one.

Accenture Startup Ecosystem

Accenture Startup Ecosystem

 

 

How Two Tech Moguls Are Reshaping Silicon Valley

“Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has.” –Margaret Mead.

The conference I just attended made me realize how quickly things are changing in the Valley technologically and culturally.

I’ve followed the debate on pattern matching and funding inequality closely and I was greatly disillusioned with the VC and Angel community. It just seemed so backwards and such an impenetrable boys’ club. The organizations and products that were being created emphasized that disparity even more.  The products, originally conceived as a channel to democratize access to content was suddenly becoming an invitation-only playground for the influential. Networks like svbtle and ‘LinkedIn Influencers’  deepened this divide even more by giving a bigger megaphone to the already loud and authoritative leaders.

It started to feel like my high school, filled with entitled  cliquey rich kids.  A country where the wealthy own all the opportunity and the poor and middle-class truly depend on trickle-down economics. The trickle-down is more of a slow and slimy drip to feed the masses.

Shortly after a period of  innocuous cultural revolution, a new crop of folks started to come out the woodwork. First, Marc Barros launched a Hardware Workshop and charged $50 bucks a head for a kick-ass hands-on workshop. Looking back, that was a faint signal of good things to come.

Then, out of the blue, Marc Andreessen, one of the smartest and most influential entrepreneurs (turned VC) started tweeting tirelessly and interacting mercilessly with the community. Twitter basically turned into “What is Marc Tweeting Now.” Marc pushes the edges of technological innovation beyond the comfort or social media iterative copy-cat innovation.

After that I get an email from Jason Calacanis about the LAUNCH Conference.

I’d forgotten about this event and I’d dismissed it as yet-another-twitter-love-fest with no depth. Boy, was I wrong.  It was fantastic, eye opening, engaging and most importantly, inclusive.  Startups from Atlanta, Detroit, Redwood City, New York and other cities showed up en masse.

There was one of particular happy accident that can only happen at conference like LAUNCH. A little Detroit startup called visionboards.co caught the attention of Marc Cuban as he walked down the startup corridor. The founder of Vision Boards told me that he tore up the interface but said that he liked the idea and left the door open to a possible investment.

That sense of inclusiveness and possibility is what is missing here and Marc Andreessen and Jason Calacanis  are renewing the dream with their actions.

This is at the core of what the Silicon Valley is and why people come here.

 

How TV Networks Fail Latinos And What Two Startups Are Doing To Win Them Back.

Over the past few months, two media companies (CNN and NBC) had two major failures in the Latino space. CNN and NBC shut down their media initiatives covering and serving U.S. Latinos.

Within the same time frame, two Latino-focused startups, Hispanicize and LSA, showcased  some major successes. They’re targeting the same market and with infinitely less resources they’ve been exponentially more successful.

Why the giants are failing and how the underdogs are winning will make you think twice about the power of this market and how to approach it.

There’s one thing that is important to understand. This is not by any means a reflection on the market or the journalists that worked for them.  It is rather a reminder that the news business is evolving at every level and for every demographic. This is especially true when you are targeting  Latinos, a demographic that is leapfrogging desktop in favor of mobile.

Let’s look at the giants’ failures first.

NBC and CNN hurried to join the flock into the Latino space. They joined Fox News, Fusion and UnoTV, an Internet-only TV channel back by Carlos Slim’s CARSO Group. NBC and CNN offered a lackluster and poorly designed experience from the start and within the first year of operations they were shut down.

NBC and CNN Latino were destined to failure due to a lack of commitment to the idea. They were the ugly stepchild at the newsroom and to add insult to injury, they were playing within the sandbox of a dying media business model.

The news business is evolving to be real-time, highly collaborative and relevant and the CNN and NBC Latino initiatives were anything but cutting edge.

There is a very interesting  post-mortem in BuzzFeed by an ex-staffer. It reads as a love letter to the tireless and penny-less journalist covering the poor and forgotten. I liked the prose but the analysis left much to be desired. We need critical views instead of romanticized story-telling.  One thing the author has going for him is that he had the good sense to have go work for a thriving media company where his journalistic voice gets amplified exponentially.

Now let’s look at the underdogs.

These startups are attacking the same demographic and they are having much more success with a different and refreshing approach.  Two of the best examples are Hispanicize and LSA (Latino Startup Alliance).

Hispanicize is a technology and marketing conference that has grown exponentially over the past few years. They have been able to secure big brands as committed sponsors including Google, Toyota, P&G, 3M and more.

Thousands of people attend the conference every year.

Hispanicize is lead by Manny Ruiz who built and sold Hispanic Wire prior to starting this conference. He has the drive, the experience and the passion to make things happen.

Then we have LSA or Latino Startup Alliance. LSA is a highly efficient  grassroots networking organization that connects top Latino innovators in the U.S. and abroad. LSA’s founders are more about actions than words.  LSA is lead by Jesse Martinez, a veteran of the technology startup community in the Silicon Valley.

LSA and Hispanicize are lead by tireless entrepreneurs that look at the Latino community not as a token word to accompany a well-known brand, but as thriving and growing community that is part of a multicultural country and not a subset of it and they treat it as such.

Screen Shot 2014-01-02 at 8.31.30 PM

How To Make Rules That People Will Follow

This post is in part inspired by the rules of a creator’s life posted by my good friend Leandro and by Jack Dorsey’s Dos and Don’ts for success, with an especially big emphasis on the don’ts.

I’ve defined myself as a person that defies rules. That rows upstream. Someone who aligns with the underdog. The last man standing.  I choose to stand in the line of fire.

But for someone who loves to defy rules, I’ve been making them for years.  Now, older and hopefully wiser, I’m looking  at my philosophy and adjusting course.  I’m making a conscious effort to be transparent about how rules are set and my guiding principles  are a key component of the process.

  1. Take care of family.
  2. Be healthy and stay healthy.
  3.  Always take action. Don’t expect others to do it.
  4. Be kind to strangers.
  5. Run for fun, as much as you can whenever you can.
  6. Always assume positive intent.
  7. Rest; but if you can’t, it is ok to be tired for a good reason.
  8. Cherish silence.
  9. Spend time with great friends.
  10. Keep up with good people.
  11. Make every attempt possible to cultivate the best in people.
  12. Stay grounded.
  13. Slow down.
  14. Shed the extra baggage continuously.

Finally, make sure to never forget where you came from.

ambato-ecuador-new-years-masks

Testamento de fin de año. (Edición 2013)

 El fin de año en Ecuador se lo celebra con la quema del Año Viejo.  Es una experiencia increíblemente liberadora ya que te da la posibilidad de empezar de nuevo. Te da la ilusión de poder remover los errores del año pasado y te da la oportunidad de ser mejor o peor dependiendo de tu inclinación, en el año venidero.  Para mi esto fue súper importante en mi juventud.  Sentía esto con fervor y esperaba la media noche con ansiedad.  Pero antes de continuar, permitan una pequeña aclaración. Cuando digo juventud, me refiero los últimos años de mi adolescencia y el principio de mis veintes. Pues yo espero ser joven de corazón para siempre.  Ya que estamos aclarando cosas, los hechos y personajes descritos en adelante son de ficción y cualquier semejanza con la realidad es pura coincidencia. Pero si la coincidencia es fuerte, me avisan.

Durante los 90s andaba caminando por las calles de Quito y veía tantos Viejos siendo quemados junto con tantísimas viudas despilfarrando lo que el Viejo les dejo. Tantas esperanzas renovadas. Pero un par de horas después la vida continuaba tal y como estaba, solo que con unas cuantas cervezas mas encima. (o puntas,  cuba libre o tu veneno de preferencia).  Eso si, no sin antes haber pretendido dejar atrás a todo lo malo a través del incendio de los monigotes. Estos representan el Año Viejo y todo lo malo que nos dejó.

En ese entonces teníamos cantidades industriales de asuntos de dejar atrás. Nos deshicimos de Abdala, Sixto, Mahuad y otros cuantos presidentes que solamente llegaban a llenarse sus bolsillos. Si, te cacho querido lector. Ahora parece ser lo mismo. Talvez lo es, pero el nivel es diferente. De lo que yo estoy hablando es de truhanes sin moral que ponían la plata del pueblo en fundas y se la llevaban en helicópteros al extranjero. También dejábamos atrás a la dolarizacion, a Juan Fernando Hermosa, al Monstruo de Los Andes, a Sendero Luminoso, a las FARC, a los secuestros diarios, a los golpes de estado, a los desaparecidos y a la policía de Los Restrepo. Que después no me pregunten que porque no confío en los chapas. En los testamentos de ese entonces no era necesaria la ironía.

También dejábamos atrás a Rico Suave. Gracias Gerardo Mejía por hacernos bailar al menos un poco. Por cierto, todo el mundo que pensaba ser medio aniñado tenia que “odiar” esa canción. 

Ahora ya mas viejo y supuestamente mas sabio, me las aguanto. Se que no va cambiar mucho de un día para el otro, excepto la fecha. A mi me toma hasta Febrero empezar a escribir el nuevo año en los cheques, lo cual me lleva a pensar que los Chinos le apuntan mejor ya que su año empieza alrededor de Febrero. Y los Judíos (yo incluido) celebramos el fin de año entre Septiembre para no dejar cosas sin hacer durante el año secular.

Pero la tradición a la cual estoy más allegado es a la quema del Año Viejo. Aun aquí en California me las arreglo para tener un Año Viejo y quemarlo antes de la media noche. Ahora ya con guaguas es un milagro si me aguanto hasta media noche a menos que sea por trabajo, por irresponsabilidad no planeada o por verme unos cuantos episodios de mi serie favorita del momento.

Ahora que todo es virtual y que ya estoy con mas canas, me dan ganas de allegarme a rituales mundanos. Por ejemplo, en la mañana me tomo un te antes de mi cafe con leche y tostada  con queso para que el cafe no pegue tan fuerte. Es un ritual que lo llevo consumando por aproximadamente cinco días. Esto lo se porque me lo dijo mi aplicación Lift, que por cierto no esta muy bien diseñada. Pero eso no es el punto, o si?

El punto no es poder. El punto es querer poder.

Jaime Guevara lo resume muy bien en su primer párrafo de su testamento:

Sé que el tiempo me ha alejado de mi juventud lozana; días, meses y semanas se han ido ya de mi lado. Pronto voy a ser finado a quien esa mala plebe quemará con muy aleve intención a fuego lento. Voy a echar mi testamento: soy el año [Dos Mil Trece].

Hay otros rituales mundanos mas serios. Como por ejemplo ser mas saludable, concentrarme mas en mis metas y no dejarme llevar por las tendencias que se dan en el lugar donde vivo.  Pero eso queda para otro entrada mas seria.  Así que sigamos con la Viuda.

La Viuda. Este personaje caracteriza a la esposa del Viejo y que por razones que no entiendo es representada de la siguiente manera: un tipo peludo con bellos hasta en los codos se pone un vestido de mujer negro muy apretado. La Viuda lleva una funda en la cual pide dinero para poder enterrar a su Viejo.

Me encanta la libertad de esa noche pero yo me pregunto, si Las Viudas pudieran ser como son todo el año, no serían más felices sin cadenas ni esposas?

Y para cerrar, el último verso del mismo Testamento por Jaime Guevara. Honestamente, no puse nada del resto pues no tengo conexión alguna con sus afanes y luchas políticas. Eso si, las respeto.

 Se aproximan ya las doce, lanzan mis viudas gemidos; a ustedes sólo les pido que luchen más que sollocen. Nunca sean pura pose y mantengan solidez; que en su shungo aún después los Vientos del Pueblo lleven. ¡Muera el año [Dos Mil Trece]! ¡Viva el año [Dos Mil Catorce]!

Lo quemare vivo a media noche en el último segundo de este año.   Saltare sobre el, y dejare atrás lo malo y aprenderé de lo bueno y lo malo pues ya no soy tan joven ni tan tonto.

Pero eso si, seguiré apuntando a las estrellas y empezando de nuevo. Cada vez mejor y con más experiencia.  

Es maravilloso tener una mentalidad de principiante. -Steve Jobs

Feliz 2014!

p.s. Sebastian Sierra: thank you for the picture. It looks great as as header.

2014: The year of hardware?

1963-jetsons-flintstones

A few days ago I attended the Hardware Workshop in San Francisco. It was a great way to speed up the learning curve by looking at what others have done and the obstacles they encounter. The simple truth I learned is that hardware is still much much difficult than software and that is hard to change unless technologies like 3D printing becomes pervasive. Also, I saw a world that considers software as a necessity rather than primordial need to differentiate and compete. From my point of view, the need for hardware will only increase but the fact is that software is indeed, eating the world.

This is a summary of what I learned. I am certain I missed something but as soon as Marc Barros, the guy behind this great program, sends us the presentations, I will post them in here –if he approves, of course.

Customer interviews matter.

The customer interviews can show you the problem from a different point of view. Maybe the solution you are thinking about is not a good match to the problem. Make sure to understand the problem well. For example, Lumo thought they were solving the problem of back pain but when they talked to customers they understood they actually knew they had a problem and (somewhat) how to solve it. They just needed more help. They wanted more resolution. The problem turned into solving “posture” for many reasons beyond back pain.

When you are asking the questions, make sure to start as general as possible. Don’t make assumptions about customers’ habits. Let them tell you. The questions will help you to avoid being a technology company chasing a problem. The solution should probably be as technology agnostic as possible. Getting users to give you feedback using Mechanical Turk, Task Rabbit, Craigslist and alumni network and others is key.

Describe, absorb and analyze the customer journey:

The customer journey has a beginning, during and after. Make sure to understand the issues the customers are trying to solve are aligned with the solution you are trying to build. Avoid premature optimization of your solution as you might start developing an overly complicated solution. That could be distracting. Lumo vs. Contour illustrate two different problems with two different approaches. Lumo was a brand new solution to an existing problem that had not been solved efficiently. Contour was a new camera that replaced solutions that users hacked on their own. Both products started as a efficient homemade “hacks.” Countour lost to more efficient and focused rivals. Lumo is succeeding but it is too early to declare victory.  As an interesting fact, Lumo’s the three founders did not have hardware experience so they found people that can help them. Interns from Stanford, advisors from design firms like IDEO.

Early stage venture fund for hardware startups –– Eric Klein from Lemnos labs:

I liked Eric’s presentation. He was down to earth and very straightforward. He had been at Sun Microsystems and that part of his experience shines through. There’s a very specific way in which former Sun Microsystems engineers tackle problems. I saw that over the four years I spent at the company.

How does the product create a revenue generating relationship with the customer. Your first product is the start of an ongoing mutually valuable relationship. For a successful development of a hardware product you can look at cost, features, quality and time. Thing is, you can lock 1 or 2 variables out of the four. There’s no such thing as a perfect product. Also, you have to able to define your customer at a high resolution. Avoid thinking that the crowdsourced customer is your target customer. Think about HHI (household income), age, ZIP codes and DMAs.

The Rise and Fall of Flip by Andre Neumann-Loreck

I never understood the appeal of the Flip. Maybe I was never the target market but I saw a low end camera with a USB cord attached to it. For me, that was interesting but not worth buying. It was so hot that a year later after launch, I decided to buy one, but by then the offering was so complicated with all the different types of Flips that I opted out. It was a great success nonetheless and below you can find a few notes from the talk that Andre gave at the Hardware Workshop.

Flip chose to go to the UK instead of going to China. The situation was that the Chinese market supported a high end video camera with all the features that they needed to capture their special moments. Flip fell somewhere in between the low and high end cameras. The UK was a better fit for Flip. The value proposition resonated more there and made it one of the best markets for Flip. For Flip the UK was 10% of the US revenue. France, Germany, Spain, Italy added up to another 10%, but why? In the UK, the US product has no import stigma. Also, it is probably easier to distribute in the UK. If you’re planning to go international, then think about the repercussions of your bottom line and operations.

How much should I charge for my product?

This is an example for consumer products. First, it has nothing to do with your COGS. Simply assume that you are going to get the “volume” pricing. Also, it doesn’t matter if you get to volume either. The perception of the consumer matters. For MSRP not ASP (average selling price)your pricing should be usually 3x or 4x of COGS. COGS need to include all operational and overheard costs. Distributors usually will cost between 5% to 10%.

How much do retailers vs. online retailers charge me?

50% is normal. If customer spends  $100 MSRP then your ASP is $50. For Amazon, 20% to 25% is normal. Some retailers give you MDF (marketing development funds) but that really is taking away from your margin. Retailers usually pay 30-60 days after product is received while you have to pay in full for production batches. Also, marketing is a real expense so you should be planning for 15% to 25% of revenue in the launch year.

Building ugly early, by Flextronics.

Innovation: Something different that has impact. The key is to think about the future needs of the user not the present problems. For that you have to find the fastest most efficient way to go to market.

Sketch, score, prototype.

The first step is to build an ugly sketch of what you’d like to build. When you do that you find early issues that can be fixed and this helps you make better decisions in terms of what to keep and what to throw away. Now you move onto an ugly prototype using materials that you can find at Staples or Fry’s. Tools that you can user are: strata sys, protomold, CAD, Fineline, makerbot, etc.

A picture is worth a thousand words. A model is worth a thousand pictures. You can do a 2X, 4x or 10X model if necessary.

Where to build your hardware product?

China is a low cost labor base. It goes up 20% year over year but it is still very affordable. The supply chain is tightly integrated as opposed to the US where it is more distributed. They have tremendous depth of manufacturing knowledge. The infrastructure is amazing. The distance, language and culture could be considered as negatives.  If you’re building less than 5,000 then it probably doesn’t make sense to go to China. Manufacturers are interested in volume not in your groundbreaking ideas.

The Lean Hardware Startup, by Cyril Ebersweiler from HAXLR8R

Life of a hardware startup:

Concept, Minimum Functional Prototype (MFP), Complete Functional Prototype (CFP), design to manufacture (DFM), First factory run (FFR) and retail. Remember that no hardware plan survives contact with factory.

Concept phase. Become the master of the problem. Talk to customers. While doing this, bootstrap with your own money because fundraising is almost impossible. Many investors want to see something that works.

MFP –– Finally works. Off-the-shelf, 3D prints, handmade parts. Your BOM is in the tens of thousands of dollars. Some cash is coming in from FFF but people will think it’s the final product. Be direct and tell them that at this point they are highly likely to lose their investment.

CFP — You’ve done a prototype that looks better. You’re ready to talk to suppliers. You’re still at the angel, bootstrapping level. Maybe join an accelerator. VCs are still far away.

DFM — You are ready to roll and to crowd fund. Identify suppliers, negotiate, reduce fees. Master your BOM and your profits. You’re still at the angel, bootstrapping level. You’ve joined an accelerator (or not). VCs are closer but still far from reach.

FFR — Making! You’re still at the angel, bootstrapping level. Maybe join an accelerator. VCs are closer than ever but they will need pre-orders to get involved.

Closing thoughts: A category leader requires a lot of capital. Pick your battle: single hit, portfolio, platform or ecosystem. In hardware, success is not binary.

Creating the right roadmap and what’s after the MVP?

Ariel, the co-founder of Flip Video. Simplicity and breaking away from the common design philosophy of packing in features. When building a roadmap, there are no rules. There are some considerations to keep in mind. Your roadmap is your strategy.

 

 

2013-05-15 08.22.35

Interesante.com: Demo Day At Google

It has been almost a year since we launched Interesante.com to the public. It continues to be a fantastic ride and there are a lot of things that we’ve learned that I’d like to share. The main thing we learned is to be clear, concise and truthful with our users, investors, and advisors. To that end, I’ve prepared this post that explains who we are, how we came to be, and where are we going.

Interesante.com Intro Slide

 

Interesante is the place where you can find the most interesting things in the world. A smart engine that learns from your culture, location and favorite activities. Interesante will change the way that people discover content and will allow brands and advertisers to have access to a largely untapped market of 260 million people across South America, Central America and North America.

Interesante Pitch v1.002

Before I go on, I want to clarify our approach and the way we see the Latino market, especially in the United States. To do that, I’d like to share two numbers with you. 80% of Latinos in the US are of Mexican descent. That number dwarfs whatever difficulty people  have understanding a seemingly complicated and multicultural US Latino market. Mexican-Americans dominate the so-called Latino market in the US and for a startup like ours, that delineates a path to user acquisition that is much more straightforward.  The other number is $58 billion dollars. That is the amount that Latinos spend in travel in the US alone. Interesante can help them find what they want, when they want it.

Interesante Pitch v2.003

If you are going after such a big market, you need a great team of smart  and accomplished folks that understand the problem and know how to build the solution. Our team is extremely diverse. 50% of our team is women. We have biologists working population ecology and artists building user interfaces.  We have folks that have worked for Accenture, Intuit, Sun Microsystems, Tangelo, Stanford and more.

Most importantly, we understand the problem. Most of our team is in Argentina so three times a year we all meet in Buenos Aires. Buenos Aires is a beautiful city with wonderful places to visit. But none of us live there so we would spend our free time after long coding hours searching for things that we like. Let me tell you, the first few trips were not as fun. We spent hours searching for places we  liked. There was no cultural, location, or interest layer that could help us discover people, places, or products that matched our interests. We talked to people and many had the same problem. Even the locals!

So, we built Interesante.

But a team, no matter how good, needs a set of advisors that have done it before. These are the people that have been with us from the start. These are the people that believed that we could do this even before we launched.

 

Interesante Pitch v1.004

You now know the team behind Interesante and the genesis of the idea.

Now let me dive into the problem. Content discovery is fragmented. For users it is hard to find the content they like.  Brands that want to reach this demographic have to resort to small buys in niche sites or large display buys across content producing networks. I mean, it seems that a new Latino-focused TV channel launches every week.

Interesante Pitch v1.005

Our solution distributes content based on geolocated moments and affinity. We start with creation by users and aggregation of content. We curate the content through algorithms and distribute it to our users based on their interests, location, and favorite activities.  We allow for discovery of people, places and products based on affinity. All this data is then turned into insights for the users themselves and for brands.

Interesante Pitch v2.006

 

What is the impact?

Interesante Pitch v1.007

As soon as we launched, we were covered by over 200 publications. Giovanni Rodriguez from Forbes was the first to write an article about Interesante. Over the past four months we’ve achieved a 20X traffic growth and we have over 500,ooo interests in our platform. Because of this, hotel brands came to us and wanted to use Interesante as a marketing platform to engage their guests at their properties. We have helped hundreds of hotels increase their traffic and reduce their bounce rate by 15 to 20%. We achieved that in the first week.

We offer this solution to the hotels as a freemium model. They can use the platform for free with ads or pay a monthly subscription for an ad-free platform.

Interesante Pitch v1.008

We have competition. Pinterest is a platform to share content, not for discovery. MercadoLibre is a person-to-person e-commerce platform but it is not a marketing or discovery platform. We are different because of the algorithms that power our discovery engine and the laser focused approach in our target market.

Interesante Pitch v1.009

We are Interesante.com –– where you can discover the most interesting things in the world. We closed a $425,000 seed round last December (2012) and we are bootstrapping right now. We are open to receiving investment and most importantly, to partner with folks that can help us grow faster.

Interesante Pitch v1.010

Why is Andy Kieffer in Mexico?

I was happy to see this post about Andy Kieffer in Pando Daily. He moved to Mexico after a successful exit in the Valley and  started Agave Labs.  I don’t know him, personally,  but I love what he’s doing and I wanted to add my perspective since I’m from Ecuador, I’ve been running remote teams from South America, and I’ve lived in the Silicon Valley for over a decade.

You see, I did the reverse as most people do. Techies come to the Silicon Valley to chase their startup dreams just as actors go to Hollywood to be discovered. However, many do not make it and the pressure and cost of living can be extremely prohibitive. We have our own version of 50 year-old waitresses still hoping to be discovered.

There are a lot of techies in countries like Mexico, Argentina or Ecuador that do not want to move to the United States or to any developed country for that matter. For millions of techies, quality of life in these countries is just too good to give it up.

A lot of folks in the Valley would find this statement completely preposterous.

I understand.

After all, the elite residing in the Valley has a completely skewed version of success– aiming to be the next Steve Jobs or follow in the footsteps of Elon Musk.  Truly, when you have a magnificent intellect and off-the-charts drive to make things happen then the Valley is the place for you.

This wasn’t the case in South America fifteen years ago. The best professionals from South America would jump at the chance of coming to work in the US. There was no concept of remote work and you worked for whatever pay the government or the private monopolies would give you. The internet was slow and completely useless. For years, the internet cafes would only allow you to visit two websites: Yahoo! and Hotmail. Nothing else. There was political and economical instability to the point that your money was worthless from one day to the next.

A lot has changed since then in South America.

Internet connections are faster. You can sit at your house for hours and do video chat over GoToMeeting and work with someone remotely and actually build a personal relationship. You have options. People’s minds are also more open to new things. A gringo is not seen as clueless tourist wandering the streets of a city, but as a person with a different culture. Still a bit clueless, but a person none-the-less.

Thousands of technical graduates see themselves as the generation that will change everything. They see the US as a resource, not as a goal. They are learning from the mistakes made here and building better and more localized products and services.

Finally, they wouldn’t give up a quality of life that makes them happy.

Most of my team is in Argentina and when I go there to run Startup Houses, which we’ve been doing before startup accelerators were popular in the Silicon Valley, we  rent a mansion for 15 people. We spend two weeks there, with copious food and drink for the entire crew, living in the best neighborhood in Buenos Aires.  We go on outings to excellent  restaurants. All of this for less than a third of your standard startup run rate.

We not only have a lot of fun, but we launch products.

When I ask them if they would move to the Silicon Valley, they answer,  “but why?”

And I, too, understand them.

 

 

Silicon Valley's Blind Spot

Silicon Valley’s Blind Spot

Silicon Valley’s Blind Spot

I think we are at a tipping point. The Silicon Valley has seen the waves of technology innovation from the exuberance of the 1990’s to the boom and bust of the dot com era and to a more sustainable boom of the past few years. We’ve come a long way in understanding how the world can be changed by technology and how to make the progress constant and exponential.

Hollywood and Silicon Valley are starting to build deep ties. This will have a huge impact when new products are launched. You saw a snippet of the possibilities when Sean Parker launched Airtime. From my point of view that was a test to measure the impact and the beginning of a collaboration with endless possibilities. I am sure we will see more of this in the near future after all Kanye just visited Shervin, so something is brewing. Super influential folks like Marcelo Claure and Arturo Duran are setting up operations here. You know big things are about to happen when they show up somewhere. They are innovators and a force of nature all in one. They play well and disrupt mentalities and processes. These are true and tried entrepreneurs who are not afraid to think different.

However, in the rush of speed and “move fast and break things” mentality, the Silicon Valley is leaving a few things behind. The diversity of  people and markets that can drive innovation and growth for years to come has not been an important topic at the entrepreneurs table. Frankly, there seems to be no need to think beyond the beautiful box that is the US mainstream market. That fosters a rather homogeneous way of doing things where you have the innovators coming up with the ideas, the imitators trying to cash in the innovation closely followed by the fools.  All of them targeting the same market.

“If you are looking where everyone else is for the next big thing, you are looking in the wrong place.” –– Mark Cuban in his blog post titled, Don’t live in the world you were born into.

So who is going after the unexotic underclass, as C.Z. Nnaemeka likes to call it? Basically no one in the Valley is doing this.

The entrepreneur’s profile in the Silicon Valley, though incredibly good, falls within a stereotype  that VCs call pattern matching, which is successful as long as the pattern followed keeps up with socio-economic progress and assumes an innate curiosity to understand people and markets beyond your close circle.

Because, at some point  patterns change, shattering old ones and disrupting markets and no market is immune.

But why should you care?  “You should care because the unexotic underclass can help address one of the biggest inefficiencies plaguing  the startup scene right now: the flood of  (ostensibly) smart, ambitious young people desperate to be entrepreneurs; and the embarrassingly idea-starved landscape where too many smart people are chasing too many dumb ideas, because they have none of their own (or, because  they suspect no one will invest in what they really want to do).  The unexotic underclass has big problems, maybe not the Big Problems – capital B, capital P – that get ‘discussed’ at Davos.  But they have problems nonetheless, and where there are problems, there are markets.” That is C.Z. Nnaemeka again.

Before you start looking to emerging markets, lets look at the US.

The numbers below tell a story of a market in the US that a handful of Silicon Valley startups are serving properly. Thanks to Isaac Cuevas, VP of Interactive Marketing at Grupo Arenas for the data below.

  1. 88% of the population growth among adults 18-34 coming from this group in the next 10 years. They will be consuming more technology than any other age group before them. The power and influence of this group in the U.S. will be driven by technology. Census data shows that 50% of population growth came from this group. They are early adopters of technology and  reaching them with culturally relevant information will be a must-have strategy for any political message or marketing campaign.
  2. Hollywood knows that they can be the deciding factor in opening weekend especially since this demographic is now outpacing teens as the biggest consumer of movies. The dollars that are spent in marketing blockbuster properties goes much further if the messaging is culturally relevant. Online and mobile is where they find information.
  3. Innovation and the growth of technology means products are better and more accessible at a lower price point. Products like mobile phones and tablets will be more accessible over the next few years. Data consumption will increase and their habits will be forming now and influenced by people in the same social circles.

The Valley continues to hit home runs and it will for a long time to come. However, competition is mounting and other countries are finally putting their money where their mouths are and they have no other option than to target the juicy US mainstream market in addition to the underserved markets that the Silicon Valley is not paying attention to and they have the advantage.

The Revolution Will Have An Accent

garcia-accents

I love the cadence of spoken word, the fast paced hip-hop lyrics, the realism of country music and the stickiness of pop. 14 years ago, when I first came to the US, I listened to NPR while commuting back and forth between Stanford where my wife went to school and San Francisco, where I went to school. I became obsessed with the nuances of pronunciation and I wanted to learn as much as possible about it. I would mimic the pronunciation of the word “what” hundreds of times. I would memorize the cadence and enunciation of their  canned intros. I was fascinated with the diversity of accents I would hear during my daily commute.

I knew I could be at home in a place where different is the standard and I knew that the last thing you want to do is to blend in. As Om Malik says “in most places in the world, outsiders like me don’t have that chance. That simple truth is what makes America so special. A chance – to be somebody even if you are nobody. America is a state of mind.” This is even more noticeable among Latinos,  especially those changing the face of America.

Here are some examples that are my role models and guiding rods. They are different. They have accents and they are successful.

Jorge Ramos

(…on the launch of Fusion, a TV station for US Latinos in English)

“What’s happening politically is also happening on TV,” Ramos said. “You can’t win the White House without the Latino vote and you can’t win the ratings war without Latinos anymore. It’s a parallel universe and it’s happening at the same time. The same way in which the number of Hispanic voters is growing, the number of Latinos watching television in English is growing. For political parties, and for television networks, and for digital platforms, it’s a matter or survival. If you don’t have Latinos, you’ll die. That simple.”

Pitbull

Pitbull is giving back by opening a charter school in the Miami neighborhood where he grew up.

The SLAM or Sports Leadership and Management school will focus on preparing young scholars for careers in the sports field.
Born Armando Christian Pérez, Pitbull explained that his own positive experiences with teachers inspired him to get involved in education.

Jennifer Lopez

Remember your block. Among the sea of blond-haired and blue-eyed leading ladies of Hollywood, Jenny from the Block has never forgotten her roots as a Puerto Rican Latina from The Bronx. In fact, she’s actively supported her community to further define her personal brand, and in doing so has broken down some notoriously strong stereotypical racial barriers in the entertainment industry. Fellow actress Jessica Alba has claimed the entertainer “opened doors for ethnic girls like me,” while Latin pop singer DeLuna also acknowledged how JLo “paved the way” for Latinas. Most recently, JLo has openly supported rising Latina teen artist Becky G. The key takeaway? Acting as a weaker version of someone great will rarely pave a path to a powerful personal brand, so be confident and embrace your DNA. Just as there is only one JLo, there should be only one you.