Firstly let me start by saying that this is not about corporate VCs. I will say though that – like anywhere – there are some very good corporate VCs that “get it” (Google, SAP, Intel, T-Venture, etc etc) and some very bad ones that don’t.
This is about the tsunami of corporate accelerators and incubators that is upon us. In general I am very happy for corporates to take a shot at helping folks build companies through their accelerators / incubators.
Good vs bad accelerator
There are some good folks out there that understand the old corporate agenda won’t work when working with very early stage companies. These folks also understand that a corporate accelerator is about getting exposure to some fresh ideas, chaos, new tech trends, pieces of technology, having their own employees take a shot, etc …. but, realistically, probably not much more.
And then there are corporate accelerators that “…don’t want to miss another Facebook…” or “…want to build the next twitter”. Those are the ones that are going to end in tears. Those are the ones you probably want to steer well clear of as an entrepreneur.
It is close to impossible for corporate accelerators to be a success, if you measure success by expecting a large category defining multi billion company to make its way out of your programme. The reasons are so painfully obvious I am not going to detail them here.
Easy come, easy go
However even the good ones need to prove they are here for the long-term, because they have an easy come, easy go problem.
Running an accelerator for some of these companies costs the same or maybe less as renovating the lobby of their headquarters. For a multi billion revenue company desperate for innovation it is a no-regret move to set up a corporate accelerator. The problem is shutting it down again is also a no regret move.
It is not the core business, it will not impact revenues or margins, it will not disgruntle large customers (or any at all), “the programme is not meeting our cost of capital”… you can just see the discussion a few years down the road.
Corporate accelerators are low commitment players in a high commitment game. That’s a problem.
So I’m welcoming everyone to the table, but I want to see how you deal with that problem. Long term.
The key learning from this may be that if you are building something incredibly simple, if you do just one thing really well, have a lot fewer features than your competitors, understand that design and emotions matter a lot and build something folks want to use at home and at work – well that just may be the DNA of next generation software companies and platforms.
That’s our bet. Keeping it simple.
What is innovation? Why jetpacks and flying cars are overrated and the internet deserves a Nobel peace prize.Posted: November 6, 2013
From a pure practical point of view jetpacks and flying cars appear overrated to me. But that isn’t going to be the subject of this post today. The subject is that both objects of desire come in very handy as a concept to claim that – because we are all not whizzing around in them by now – we are not really innovating anymore; and in addition that the speed of innovation and change is slowing.
Whereas I like the discussion because we should always be questioning our depth and speed of innovation (is the internet sucking up all entrepreneurial talent and venture capital?) I feel it falls short of what is actually going on.
Let me jump right to the conclusion:
- The internet has achieved that we are heading in to an era where everyone and everything is connected
- This is one of the most astonishing achievements of mankind because networks of computers, things and people are going to supercharge the development of the human race and spark innovations across every space imaginable or even outside of our imagination (be it in medicine, nutrition, energy, etc – i.e. also ‘outside of the internet’)
- 142 characters, an easy way to share a picture, cloud file storage systems, etc have been fundamental to the creation, adoption and growth of networks – they therefore represent fundamental innovations critical to creating a social and economic behavior that will allow for increased speed of innovation in other areas
- A healthy tech ecosystem cannot just focus on producing black swan innovators or social entrepreneurs. It requires a broad group of folks building a broad group of companies leading to general economic prosperity
To make it short: we live in a day and age where the most fundamental innovation is that established and – maybe more importantly – new networks of computers and people will improve close to everything. We are at the 0.1% stage of seeing the impact of these networks on hardware, medicine, nutrition, fight on poverty, human rights, etc.
But why have a lot of folks raised concerns that we aren’t innovating anymore in a fundamental way? Because it’s very tricky to spot it short to mid-term and even more so when you are in the middle of it:
1) Innovation is not evenly distributed at any point and time
Computing power has increased exponentially over the last decades. An iPhone has more computing power than many spacecraft had. Over the same period cancer treatment seems to have developed at a much slower rate. Yet there was a time in history when medicine was arguably witnessing more innovation than computing or even wider mathematics.
I can continue with countless examples of some areas moving quicker than others over a certain period of time. Not everything moves at the same speed over the same period of time.
Innovation does not align itself across sectors and spaces. Although I would point out that the exponential growth of computing power (and wait for quantum computers – and networks thereof – to join the foray) probably brings innovation cycles closers across industries as it impacts close to every area of innovation.
2) Innovation comes in step functions
The Gutenberg book press. Penicillin. The semiconductor. The internet. When these innovations came they – in historic terms – changed things over night. Individually these were not smooth lines where you could sit at the sidelines and watch innovation do it’s magic year over year. Innovation largely comes in extreme surges over historically speaking short periods of time.
3) Only when you zoom out over a reasonable time period, do a bunch of step functions at different times and gradients give a smooth, exponential growth curve of human innovation
Now we can argue what is the right time period to figure out if our ‘overall innovation curve’ is still exponential – but my guess is it is not 10 years, but rather several decades future historians will be looking at. My strong guess is our time will be considered as being on a steep, exponential innovation curve.
4) We are really bad at recognizing fundamental innovations short-term
Semmelweis was the laughing-stock of the medical community for suggesting that washing hands could boost hygiene and decrease mortality rates in hospitals. Most ground breaking mathematical advances took decades if not longer to trickle through to having an impact on our lives. When the first www sites went up – who really knew where we would be just a few years later?
There is crushing evidence we can’t recognize significant innovations while they are staring right at us. What makes us think we are so much better at recognizing innovation now?
5) We think too much of tangible technical solutions vs. social and economic solutions
As Brad Burnham put it in one of our recent discussions (not quoting exactly) – the internet first was a technical engineering challenge to create networks of computers. Now it’s a social and economic model engineering challenge to harness the power of consumers and enterprises engaging on the internet – creating and growing networks.
Without the social and economic engineering part, the technological innovation is pointless.
The social engineering part may be one of those fundamental innovations that has just reached 0.1% of its potential. And it’s very easy and tempting to say that this is not ‘real’ innovation because it, you know, it doesn’t involve flying objects or immediate health benefits.
Networks of people and companies are cutting down on information asymmetries and inefficiencies; and are creating more efficient economies and new markets on the way. This is essential to continued economic prosperity, which fundamentally is a key driver – or better breeding ground – for innovation.
There are so many obvious spill overs into so-called ‘real problems’: what can networks of highly connected and sharing scientists achieve?, what can connected computer networks with machine learning algorithms do for cancer research in DNA sequencing?, how has a connected world changed how something like charity: water got of the ground? Etc etc – the list could go on and on.
6) We struggle to see the butterfly effect / cross-pollination
At f.ounders there was a panel where Ben Rooney kicked off the innovation discussion by giving an example of a new app allowing teens to take pictures of their skin impurities and get feedback from the app when they can expect things to clear up again – is this innovation or not? Alexia Tsotsis was quick to point out that their next iteration could be to add skin specialists on the other side and all of a sudden you have a network of patients and doctors solving dermatology problems that can be applied to other skin diseases.
Today’s silly sounding app or photo sharing technology (and don’t forget the social engineering part – the learned sharing behavior) may empower tomorrow’s exponential improvements in skin cancer survivability.
It’s not obvious, so again we are very bad at factoring these things in. But the internet is firing off these butterfly effects at an astonishing rate.
7) We look for black swans, but rely on bread and butter innovations too
Of course SpaceX is cooler than an AirBnB for pets (ok stretching it here to make a point). But a healthy entrepreneurial culture / ecosystem will see different personalities pursue different entrepreneurial challenges. We really need folks also to go after what they think will be a ‘good business’ even if it does not involve an underlying fundamental innovation. Only such a culture will ensure wider economic prosperity, which in turn fuels our capability to fund fundamental innovations.
8) There are more invisible innovators than visible
White LEDs? Carbon fiber composites? The researcher who discovered that Helicobacter pylori causes stomach ulcers and that thus antibiotics will work better than cutting out people’s guts? In the tech scene / press we are obsessed with the obvious, big players close to our ecosystem. But for everyone one of those there must be hundreds, if not thousands of quiet innovators who’s impact we will only get to see much later and who’s heroes remain unsung. The same applies to internet based innovations. It is naïve to assume we have a complete picture.
Nobel Peace Prize for the Internet
There’s another thing. It may be the biggest. The internet and it’s networks (and low-cost air travel, to be fair) have broken down cultural barriers and are chipping away hard at information asymmetries. My generation but much more so the generations below will be living in a world where it is very difficult for governments / organisations to paint the picture of other states or cultures being enemies – we can educate ourselves, we are connected to friends around the world, information spreads like wildfire. Surely this must set us up for a more peaceful world? How have social networks already helped to create real change in countries around the world?
And if I look at the list of historic Nobel peace prize winners, I would make a strong case that there couldn’t be a more deserving bunch than all the people who have helped make the internet what it is.
P.S.: This post was inspired by recent panel I had with a few folks over at Dublin Web Summit. If you want to watch the full discussion you can go check it out here.
Last week I had a great discussion about the next evolutionary steps of democracy: real-time, algorithm adjusted, pre/post a potential singularity, etc etc – it was exhilarating. I should add that I had this discussion with the backend engineering team of one of our companies.
It reminded me of one of the true delights of working in the tech community: more often than not you deal with curious, open minded and well / broadly educated folks. However it is very tempting and easy to be fully consumed by what is going on in the tech community; you can spend your entire (little) spare time easily just staying up to date on what’s going on in our little world.
I think it can be very valuable to not do that. You need to step outside for a breath of fresh air. I’ve had to develop a bit of a routine to help me do that:
- When I wake up I always listen to the radio while making coffee & checking emails. I make a point of alternating stations between NPR, BBC and newstalk. Helps me stay up to date with global affairs and politics.
- On my way to work, I’ve started listening to audio books – last week it was “The Swerve: How the World Became Modern” – a must read / listen! I try to stick to history here.
- In the evening time if I have time to kill I will definitely head over to TED, Vice or youtube to watch a short talk or documentary on whatever catches my eye. Usually I enjoy social and medical topics.
- Later at night before I go to sleep I listen to an episode of Astronomy Cast – you know that stuff just blows my mind
Now I won’t make this every day, but often enough. Also due to time constraints it usually is just max. 15 minutes at a time. But it helps me put what I am doing every day in context. I think that makes me better at my job, better to work with.
Oh and when I walk home, I just clear my mind with something like this:
That’s important for me too.
Last week I was hanging out (the google way) with Fred Wilson and we quickly got going on what is driving the entrepreneurial shift to urban inspiring environments (SF, NY, London, Berlin). We talked about a few obvious elements tech communities should have, before arriving at a final point I am going to call a “welcome to the team” attitude. Let me explain what that is by giving 2 examples of the opposite.
I grew up in Munich and love the city. However there is this attitude that you need to be 3rd generation born & raised in Munich to be “truly” from Munich. That does not make people new to town feel particularly welcome. We just made our first investment in Paris and love the French scene, yet if you aren’t really on top of your French you are pretty likely to be in for some rough treatment here and there in every day life. That does not make people new to town feel particularly welcome.
This is what makes SF, NY (any many other cities in the US), London and Berlin stand out just that little bit more: the minute you arrive you can melt in to the city, you can make the city yours, you are not a stranger. The minute you arrive you are part of the team.
This is a serious competitive advantage when the key to success is attracting the best international talent.
So to everyone who just joined the tech community in SF, NY, London, Berlin or anywhere else today: welcome to the team.
One of the really important things to have at a company is a good meeting and discussion culture. You should check up regularly if that is the case.
If you do this well you will get to better decisions faster; and maybe even more importantly uncover tough issues well ahead of time.
So you may want to ask yourself questions like this every now and then after an important discussion:
- was there a good / balanced discussion where various views were explored and no one bullied out?
- was everyone being honest (this includes intellectual honesty – i.e. it is the real truth; not a derived supporting truth of an argument) or was there confirmation bias, blind position argumentation, etc going on?
- was it of high intellectual quality – i.e. were people “getting it”?
- did we really have all the data we needed?
- was it intense and focused or lame?
There are more. Point being it is very hard to notice when your discussion culture slips and it’s easy to get comfortable. So make you sure you check after important discussions that lead to even more important decisions that you put your best foot forward before arriving there.
But Florian is getting more than a sharp haircut there.
Each time Florian tells the hairdresser what kind of people he is looking to hire and the hairdresser will immediately know a few developers, designers, etc that are his customers too. The hairdresser will then let these folks know that EyeEm is hiring & hook them up with Florian. The hairdresser is a marketplace and database for talent.
I am hearing the same about other hair dressers, taxi drivers, real estate agents, etc.
This is what happens when you live in a place where entrepreneurship has the center stage. This is great.
Startups never have enough time, money, people. That’s why the best startups are like the honey badger. Because honey badger don’t care.
Henry Ford’s “If I had asked people what they wanted, they would have said faster horses.” is one of the most widely used and probably the most misused quote we have in the startup world.
It’s often used as an excuse – especially at early stage companies, making it even crazier – to not carry out proper, structured user feedback. I still like the quote, because it shows you need to be really careful with user feedback. The right conclusion from user feedback on horses would have been “People want to move faster / more comfortable / in groups / etc” and not “want better horses”. But most importantly: that horses simply have their limits so it does not make sense to work on faster horses.
A key thing is to really see the big picture in user feedback. It’s very easy to react to individual input especially if its from face to face user feedback which is way more impactful than looking at data. Of course the art – or actually science – is to combine both. I wrote about user feedback / data during the beta phase a while back so I am going to skip some details here.
Last Friday evening I swung by one of our companies to discuss what a week of intense user feedback had yielded. There are a million ways to do this but the team kept on updating this board as user feedback rolled in:
Observation. Problem. Solution.
Each observation and problem could have been fixed by an individual, stand-alone solution. But the amazing thing was that after structuring the feedback, kicking out low quality data points and fringe cases, comparing it to data and constantly making sure to “zoom out” 90% of the problems were fixed by just 2 very simple changes in user flow.
You have no excuse not to listen to your users. It’s how you use – or decide not to use – that feedback is what makes it meaningful, or not.
We frequently question ourselves and the track we’re on. Are we making the right investments?
The ideal venture investment has a few characteristics:
product / market fit
potential to be a category leader in a very large market
capital efficient scalability
a great syndicate
fits your investment thesis
There are many more but you get the drift.
But venture capital is when 3, if you’re lucky maybe 4, of the points above are fulfilled when you invest.
That’s why success rates are so low and returns are so high when you do get it right. That’s also why it’s a long term game and return is positively correlated with ridicule.
We have to keep on reminding ourselves of this. There are no easy answers in this business.