Author Archives: Hervé Lebret

Silicon Valley, 20 years ago

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Twenty years ago, I entered the VC and startup world. What an anniversary! It was fun and exciting. I would have forgotten it if I did not have a lunch two days ago with people from Logitech. When we talked about Logitech offices in Silicon Valley, I told them I had a document from Businessweek which showed that Logitech was considered as Stanford’s Progeny.

I had to find that document and it was fascinating to go through this 50+ page special issue of Businessweek dated August 18, 1997 and entitled: Silicon Valley, The People, the Deals, the Culture, The Future – How it really works. So let me go through it again.

First the cover. This is a nice little quizz. How many people do you recognize? The answer is at the end of the post.

Second, the table of content. It could be the same today. So things have not changed so much. For example, the migrant factor; the craziness of the area, because of cost, stress; and the invisibility of women, this “subtle sexism every day”.

Third, the recurrent question of why the efforts to duplicate Silicon Valley have all failed…

There are the classical arguments: local governments offer tax incentives or small investments but have no hand in inventing or commercializing technology. And there is an interesting piece: Even private efforts to clone the Valley have fallen flat. Terman, the father of Silicon Valley, was hired in the 1960s to recreate the magic in New Jersey and Texas. He focused on establishing strong research institutions, like Stanford, that could provide a petri dish for bright ideas. But Terman was hired by large organizations, including Bell Labs and Texas Instruments Inc., and few company men were willing to chance a startup. ‘He failed, in part, because he overestimated the importance of academia and in part because he was hired by large companies with no entrepreneurial traditions.’

Finally, what are the lessons learnt? Well known and still valid today…

If you want the pdf, just ask me. This would be a private gift. Whereas putting the full document onlien would be copyrigth infrigement…

Answer to the quizz: A dozen of the Valley’s brightest stars: (top row, left to right) Larry Ellison, Oracle; Marc Andreessen, Netscape; Andy Grove, Intel; Al Shugart, Seagate Technology; Gordon Moore, Intel; John Chambers, Cisco Systems (bottom row, left to right) Steve Jobs, Apple Computer, Pixar; Scott McNealy, Sun Microsystems; John Doerr, Kleiner Perkins Caufield & Byers; Larry Sonsini, Wilson Sonsini Goodrich & Rosati; Lew Platt, Hewlett-Packard; Jim Clark, Netscape.

The top US and European (former) start-ups in 2017

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Since I published my book in 2007, I have regularly been doing the exercise of comparing the largest US (former) start-ups and their European counterparts. You can look at my data in 2016 in The top US and European (former) start-ups in 2016. Here are my update lists:

Things have not changed that much. Yahoo is out. Rovio is in…

Is Switzerland a Startup Nation?

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This is the question I was asked to answer at the EPFL Forum today. Well it was even “Is Switzerland the Startup Nation?” I did not answer the question but tried to provide food for thought and I invite you to look at the slides below.

Now that you may have read them, I will add two points I did not mention in my talk:

First Swiss newspaper Le Temps analyzed the issue: Are we, too, a start-up nation from the point of view of the Israelis? ‘I have a message for Switzerland, Dov Moran announces: you do not have enemies and so you do not have to spend 20% of your GDP on your protection. If you’re less entrepreneurial than us, it’s not that bad.’

Then again Orson Welles about creativity and war… “In Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace – and what did that produce? The cuckoo clock.” in The Third Man, said by Holly Martins to Harry Lime…

Just food for thought.

Rovio (Angry Birds) is going public

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Rovio, the Finnish start-up creator of the famous Angry Birds game, will fly to the Helsinki Stock Exchange next week. Apparently it should be a success as the offer is oversubscribed and has just been closed despite the recent challenges the start-up had to face, as the next figure shows.

I will not comment more but just add my usual capitalization table.

Hopeful Monsters

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‘What are hopeful monsters?’ I said ‘They are things born perhaps slightly before their time; when it’s not known if the environment is quite ready for them.’
Hopeful Monsters, by Nicholas Mosley [P. 71]

Hopeful Monsters could have been startups, but it is a novel, a marvelous novel written in 1990 and that I am reading again these days. I had read it in another century, when there were only books in paper and independent bookstores still existed. I had bought it in the late Black Oak Books in Berkeley, California.

Bruno held out his hands to the flames and talked to them in an unintelligible language. Minna said ‘What do you say to the fire?’
Bruno said ‘I say “Come on up! Do as I say or I’ll punish you!” ’
Minna said ‘And does it?’
Bruno said ‘If it wants to.’

The first 3 chapters begin this way:
Chapter I – if we are to survive in the environment we have made for ourselves, may we have to be monstrous enough to greet our predicament?
Chapter II – if we are talking about an environment in which the acceptance of paradoxes might breed, then this can happen in an English hot-house, I suppose, as well as in a melting-pot of Berlin streets.
Chapter III – if, for the sake of change, old ground has to be broken up, one or two seeds lie secret – what terrible opportunities there were during those years!

I had never read a novel which mixes philosophy and science with beautiful story-telling. Not an easy read. Not sure it is a masterpiece either, though…

“Don’t f**k it up” – Advice to founders

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I should not like “Don’t f**k it up”. Just because I am not a big fan of “how to” books in high-tech entrepreneurship. There is another reason why I should not like, i.e. the subtitle: “How Founders and Their Successors Can Avoid the Clichés That Inhibit Growth”. Usually I think foudners should not have successors. But I did not hate les Trachtman’s book at all. The reason is Les gives good advice to founders, the main one being “Trust and Empower”.

Let me give you examples:

I know that every founder believes his company is special, exceedingly complex, and unique. I can assure you that the challenges confronting you are just not that different. Ninety-five percent of your problems are shared by other founders, which is good news because it means your problems are solvable. They’ve been seen and handled many times before—all that is required is the smarts and the courage to address them. [Page 2]

“Employees who are taught to mistrust their own instincts are not very likely to trust their colleagues’ instincts, either.” Fear of failure can easily poison a company culture. Team-building efforts are useless when everyone’s first imperative is CYA — cover your ass. [Page 12]

The process of building a team is not that different from raising a healthy, self-sufficient child. […] You want them to learn from their mistakes and the
resulting painful consequences. [Pages 15-16]

Micromanaging can often be an excuse for not developing and committing to mid-range and long-range goals. It can also serve as an excuse, changing your mind about what’s most important from one day to the next. A lot of founders run small companies that way, and they never scale those companies because it’s impossible to run a larger company on the basis of what the founder is feeling that particular day. [Page 20]

and his advice to foudners is to give more and moe importance to strategy by [Pages 31-33]:
1. Track your time.
2. Decide what not to work on, and stick to it.
3. Plan for the unexpected.
4. Write down your goals and revisit them quarterly.

More in another post…

Mathematics again: Unexpected, Inevitable and Economical

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“La libertad es como un número primo.” Roberto Bolaño, Los Detectives Salvajes

Michael Harris’ mathematics without apologies, I said it elsewhere, is a must-read if you are interested in mathematics. And probably even more, if you are not. But again, it is not an easy reading.

After the claim in his Chapter 3 that mathematics was “Not Merely Good, True and Beautiful”, Harris goes on with provocative and thoughful arguments about the relations that mathematics have with Money (Chapter 4 – Megaloprepeia), with the Body (Chapter 6 – Further Investigations of the Mind-Body problem), with Foundations (Chapter 7 – The Habit of Clinging to an Ultimate Ground) and even with tricks (Chapter 8 – The Science of Tricks), Harris finally comes back to Apologies after a personal chapter about inspiration and work (Chapter 9 – A Mathematical Dream and Its Interpretation).

The author made me discover, shame on me, that “apology” does not mean only praise, but also excuse or defense. Difficulty and confusion of the vocabulary, indeed a recurrent theme of Harris’ book. Let me be quite clear again. I did not understand everything and I imagined Harris could have created a new index. As you may know if you read my blog, I mention Indices from time to time, like the Erdős Index, the Tesla Index. This new Index could be 0 for Maths Giants or Supergiants, humans who could be awarded the Fields Medal, the Abel Prize or equivalent, 1 for those who can understand (everything) that has been written in mathematics by those with 0 Index; then 2, for those who can understand (everything) that has been written in mathematics by those with 1 Index, etc… I do not know where the index would stop and perhaps it already exists… I would like to believe that I was at the Index 3 but not sure! But then I made my discovery about “apology”, I put myself down at Index 5…

Harris goes even stronger than Hardy with his “No Apologies” even if he quotes him: Irony has not spoken its last word on the flight from utility [of science], even when utility is understood, with Hardy, as that which “tends to accentuate the existing inequalities in the distribution of wealth”. [Page 296] I think harris has written a very useful book about mathematics. I add another example on the nature of mathematical beauty: “there is a very high degree of unexpectedness, combined with inevitability and economy” [Page 307].

When looking for more information about harris, I found his web page which begins with the quote i give above from Bolaño. When I discovered Bolaño a few years ago, it was such a shock that I read everything I could find. Again without understanding everything. But if you read Harris’ chapter 9, you will undestand that “not understanding everything” may not be that important, compared to the impact that (apparent) confusion may create…

PS: I could have added that while I was reading Harris, a controversy arose around a new solution for the P vs. NP problem. More about this in a detailed pdf and on its author’s blog. I also should have mentioned the Langlands program and Alexander Grothendieck, whom I also mentioned here. But again Harris book is so rich…

Equity in Startups

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This is the third short report I publish this summer about startups. After Startups at EPFL and Stanford and Startups, here is (I hope) an interesting analysis about how equity was allocated in 400 startups, entitled Equity in Startups (in pdf). Here is the description of the report on its back page: Startups have become in less than 50 years a major component of innovation and economic growth. An important feature of the startup phenomenon has been the wealth created through equity in startups to all stakeholders. These include the startup founders, the investors, and also the employees through the stock-option mechanism and universities through licenses of intellectual property. In the employee group, the allocation to important managers like the chief executive, vice-presidents and other officers, and independent board members is also analyzed. This report analyzes how equity was allocated in more than 400 startups, most of which had filed for an initial public offering. The author has the ambition of informing a general audience about best practice in equity split, in particular in Silicon Valley, the central place for startup innovation.

I will let you (hopefully) discover this rather short report which could have been much longer if I had decided to analyze the data in detail. I will just right here my main results. A simple look at data shows that at IPO (or exit) founders keep around 10% of their company whereas investors own 50% and employees 20%. The remaining 20% goes to the general public at IPO . Of course, this is a little too simplistic. For examples founders keep more in Software and Internet startups and less in Biotech and Medtech. There could be a lot more to add but I let the reader focus on what possibly interests her.
Additional interesting points are:
– The average age of founders is 38 but higher in Biotech and Medtech and lower in Software and Internet.
– It takes on average 8 years to go public after raising a total of $138M, including a first round of $8M in VC money.
– On average, companies have about $110M in sales and are slightly profitable, with 500 employees at IPO time. But again there are differences between Software and Internet startups which have more sales and employees and positive income and Biotech and Medtech startups which have much lower revenue and headcount and negative profit.
– The CEO owns about 3% of the startup at exit. This is 4x less the founding group and depending when she (although it is too often a “he”) joined it would mean up to 20% close to foundation (assuming the founders would keep 80% and allocate the delta to the CEO)
– CEOs are non-founders in about 36% of the cases, more in biotech (42%) and Medtech (35%) than Internet (31%) and Software (25%), more in Boston (48%) than Silicon Valley (43%) .
– The Vice-Presidents and Chief Officers own about 1% and the Chief Financial around 0.6%.
– Finally, an independent director gets about 0.3% of the equity at IPO. If we consider again that the founders are diluted by a factor 8x from their initial 100% to about 12%, it means a director should have about 2-3% if he joins at inception.
– In the past universities owned about 10% of a startup at creation in exchange for an exclusive license on IP. More recently, this has been more 5% non-diluted until significant funding (Series A round).

Stanford and Startups

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Stanford is in the top2 universities with MIT for high-tech entrepreneurship. There is not much doubt about such statement. For the last ten years, I have been studying the impact of this university which has grown in the middle of Silicon Valley. After one book and a few research papers, here is a kind of concluding work.

A little less than 10 years ago, I discovered the Wellspring of Innovation, a website from Stanford University listing about 6’000 companies and founders. I used that list in addition from data I had obtained from OTL, the Stanford office of technology licensing as well as some personal data I had compiled over years. The report Startups and Stanford University with subtitle “an analysis of the entrepreneurial activity of the Stanford community over 50 years”, is the result of about 10 years of research. Of course, I did not work on it every day, but it has been a patient work which helped me analyze more than 5’000 start-ups and entrepreneurs. There is nearly not storytelling but a lot of tables and figures. I deliberately decided not to draw many conclusions as each reader might prefer one piece to another. The few people I contacted before publishing it here twitted about it with different reactions. For example:

Katharine Ku, head of OTL has mentioned another report when I mentioned mine to her: Stanford’s Univenture Secret Sauce – Embracing Risk, Ambiguity and Collaboration. Another evidence of the entrepreneurial culture of that unique place! I must thank Ms Ku here again for the data I could access thanks to her!

This report is not a real conclusion. There is still a lot to study about high-tech entrepreneurship around Stanford. With this data only. And with more recent one probably too. And I will conclude here with the last sentence of the report: “How will it develop in the future is obviously impossible to predict Therefore a revisited analysis of the situation in a decade or so should be very intersting.”

Mathematics – Not Merely Good, True and Beautiful

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“It’s not the marbles that matter. It’s the game.” Dutch proverb

“In mathematics, the art of proposing a question must be held of higher value than solving it.” Cantor

Mathematics can be made simple, even obvious; and beautiful, and even useful. Just read my previous post about Ian Stewart’s 17 Equations That Changed the World. But there are other more provocative views. You just need to read Michael Harris’ mathematics without apologies.

Harris is certainly not as easy to read as Stewart. But it is as (maybe more) enriching. His Chapter 3 for example is entitled Not Merely Good, True and Beautiful. In this world of increasing pressure to justify the usefulness of science, the author fights back. “There is now a massive literature on the pressures facing university laboratories. These books mostly ignore mathematics, where stakes are not so high and opportunities for commercial applications are scarce, especially in the pure mathematics.” [Page 55]

But even Truth seems to be at stake.“If one really thinks deeply about the possbility that the foundations of mathematics are inconsistent, this is extremely unsettling for any rational mind” [Voevodsky quoted on page 58] and a few lines before “Bombieri recalled the concerns about the consistency, reliability, and truthfulness of mathematics that surfaced during the Foundations Crisis and alluded to the ambiguous status of computer proofs and too-long proofs.”

Finally Harris mentions some confusion about Beauty quoting Villani: “The artistic aspect of our discipline is [so] evident” that we don’t see how anyone could miss it.. immediatley adding that “what generally makes a mathematician progress is the desire to produce something beautiful.” Harris then quotes an art expert advising museum-goers to “let go of [their] preconceived notions that art has to be beautiful”. [Page 63]

Harris adds that “the utility of practical applications, the guarantee of absolute certainty and the vision of mathematics as an art form – the good, the true and the beautiful, for short – have the advantage of being ready to hand with convenient associations, though we should keep in mind that what you are willing to see as good depends on your perspective, and on the other hand the true and beautiful can themselves be understood as goods.” [Pages 63-4]

The short answer to the “why” question is going to be that mathematicains engage in mathematics because it gives us pleasure. [Page 68]

Maybe more in another post…

Instead of another post, here is a short section extracted from page 76 and added on August 27:

The parallels between mathematics and art

“Here the presumed but largely unsubstantiated parallel between mathematics and the arts offers unexpected clarity. Anyone who wants to include mathematics among the arts has to accept the ambiguity that comes with that status and with the different perspectives implicit in different ways of talking about art. Six of these perspectives are particularly relevant: the changing semantic fields the word art has historically designated; the attempts by philosophers to define art, for example, by subordinating it to the (largely outdated) notion of beauty or to ground ethics in aesthetics, as in G. E. Moore’s Principia Ethica, which by way of Hardy’s Apology continues to influence mathematicians; the skeptical attitude of those, like Pierre Bourdieu, who read artistic taste as a stand-in for social distinction ; the institutions of the art world, whose representatives reflect upon themselves in Muntadas’s interviews ; the artists personal creative experience within the framework of the artistic tradition ; and the irreducible and (usually) material existence of the art works themselves.
Conveniently, each of these six approaches to art as a mathematical counterpart: the cognates of the word mathematics itself, derived form the Greek mathesis, which just means “learning”, and whose meaning has expanded and contracted repeatedly over the millennia and from one culture to another, including those that had no special affinity for the Greek root; the Mathematics of philosophers of “encyclopedist” schools; school mathematics in its role as social and vocational filter; the social institutions of mathematics with their internal complexity and heir no-less-complex interactions with other social and political institutions; the mathematicians personal creative experience within the framework of the tradition (the endless dialogue with the Giants and Supergiants of the IBM and similar rosters); and the irreducible and (usually) immaterial existence of theorems, definitions and other mathematical notions.”

Maybe more in another post…