Now that business is for real, the level of stress increases…
to this level
It’s also time to move…
to new serious offices
or is it?
You will also check that Silicon Valley is not about software and web or mobile apps only…
though I am not sure it is good news, if not for us…
at least for our heroes
Now that they have money, our heroes need to spend it. Will they follow the “team” structure of Episode 1 when hiring: “There is always a tall skinny white guy, a short skinny asian guy, a fat guy with a ponny tail, some guy with crazy facial hair, and then an east indian guy.” Unclear from who they interviewed…
While PiedPiper hires, Hooli strategizes and everyone knows in Silicon Valley that merit comes 1st…
You will also learn about the 3-comma club! And the importance of solving team tensions.
Biocartis might have been a Swiss success story but most of the company is now based in Belgium. Probably not a decision of investors (as people think when company move) but from management! One of the founders is from Belgium and an impressive serial entrepreneur: Rudi Pauwels. Here is what you could read in the IPO document:
Still the numbers are interesting. The company has raised more than €200M before its €100M IPO this week. Despite such huge amounts the founders have kept about 5% of the company. Its IPO prospectus is available on the company web site. It has signed deals with Philips, Hitachi, Biomérieux, Abbott, Janssen and Johnson & Johnson and counts Swiss-based Debiopharm among its mains shareholders. Here is my usual cap. table:
(click on image to enlarge)
I have to admit episode 10 was full of s…- I have never seen a VC stealing ideas neither a major corporation suing a start-up. Whatever SV is fun. So when you have the choice between sell or die, should you choose?
or maybe do neither.
– “You should pursue your dream, not for profit, not for valuation or material wealth but for the good of humanity”.
– “Easy to say when you are a billionaire”
– “Billionaires are people too.”
Here SV uses the strange real episode from Tom Perkins.
“Do not do what you should do. Do what you want!”
(But our hero is not very gifted with Japanese food, or is he stressed?).
Let us listen (in fact read here!) Monica: “Every successful company can look back at a defining moment early on where they would have died, had it not been for the courage and the tenacity and maybe the insanity of one visionary person who put it all on the line, even though it seemed like a huge mistake at the time, a moment where all the metrics and the numbers did not mean anything; it was all about the emotion, it was about belief, rational or irrational and I think, I hope, that I was just like that.”
War is preparing though!
There is something well-known and little known at the same time in the start-up world: a deal is never guaranteed until the money is on your bank account. Our heroes will learn it the hard way. Now they are less arrogrant with the VCs…
but then what about being stolen ideas during due diligence…
and what about the cost of IP litigation. I will let you discover it…
I did not know much of the background of the Samwer brothers beyond the names associated with them: Alando, Jamba, the European Founders Fund, Zalando and Rocket Internet. So I was surprised to be mentioned (thanks Kevin!) a book by Oliver, one of three brothers, America’s Most Successful Startups.
America's Most Successful Startups: a thesis by Oliver Samwer and Max Finger (1998)
Even if now more than 15 years old, it is a good book at least from the first 30 pages I have read so far. It reminds me the advice from Steve Blank. Just one example about founders: “The first thing you have to make sure when you put tagether a team of founders is that all founders share the same vision and the same values. The group can be heterogeneous, but the founders cannot have a different vision or a different set of values, because they will probably be partners for many, many years. You absolutely need to make sure that the goals of the founders are all aligned. Each of the founder has to be very sensitive what each of the other founders’ objectives are. You have to recognize these and try to incorporate them, because otherwise you will have people from day one heading in fundamentally different directions. Only if you get a team of really great people together, who share the same vision, and work together well as a team, you will create a very strong foundation for the company. Because everything in the company originates from the founding team and will grow out of that”. [Page 30]
Additionnally, concerning their roles: “Fourthly, depending on the business model, a high-tech company should typically have at least three key people: It should have a market visionary, someone who understands the market, the customer and the problem the customer has. It also has to have a product or technology visionary, who understands the product and technology and how it might be applied, but does not necessarily understand all the problems that the market has. And it needs a business execution person, because the idea itself if worth zero. It is the execution of the idea.” [Page 31]
Another interesting comment about Equity sharing: “Last but not least, the founders should hold equal stakes in the company so that they are in every respect equal partners. No matter who the idea bad and who contributed what in the founding process, the founders should split the company equally among them. Otherwise some founders will feellike second-rate founders, which produces a flaw from the very beginning and which might have a strong negative effect on the way.” [Page 31]
Marc, Oliver and Alexander Samwer
Finally, I also liked their point of view on what you should do when at school: “Also, you need to try actively to get an educational background and experience that supports the venture. This really has to be an active approach. You have to put yourself in a position where you get involved in startups, you have to go to the places where entrepreneurs are, you have to go to places where you can get inspired, you have to meet people of similar spirits and build a network. In school you might participate in the business plan competition, take the classes where you will write a business plan, and take the entrepreneurial track at business school. That is where the people who want to do it are. […] Through such activities you will be meeting partners and ideas incidentally.”
Time to see our old friends
and the team fighting to be “Chiefs”
Of course Silicon Valley is what it is… just have a look
or read this: “I don’t want to live in a world where someone else makes the world a better place better than we do.“
But reality is taking money can be dangerous: “You take money from the wrong dudes, you’ll get smoked as bad as I did.” But also never think you have the money until you have it in your bank account…
America’s movie industry have always adapted the story when an actor disappears… then the fun begins. Negotiating with VCs can be hard. “There is a linear correlation between how intolerable I was and a higher valuation…”
But then listen to Monica’s advice… A high valuation can be a very bad deal. Believe her…
And the final minute is great…
HBO’s Silicon Valley is back and hopefully this second season will be as interesting as the previous season…
The self-citation is a delicate exercise but as it does not happen often that I give my point of view in the media, I guess this is acceptable… Newspaper Le Temps asked for my point of view related to the recent acquisitions of EPFL spin-offs. I extract some messages.
What worries me is that in Europe, I have never seen the birth of technology companies like Google, Apple or Cisco.
– Yet there is SAP in Germany or Internet service Skype…
– Yes, but [forgetting SAP] there was no big success in Europe in technology in the last fifty years. Microsoft has bought Skype for $8.5 billion and Logitech is worth $2B on the stock market with 6,000 employees. But in the United States, industry heavyweights are valued at over $170 billion and have more than 50,000 employees. There is a difference of a factor ten between the two continents and this has been disturbing me for over twenty-five years. I have doubts and fears about the future of Europe.
– How do you explain this difference?
– I think this is essentially cultural. A young engineer who listens to her parents will work with Nestlé and Novartis, and then remains there. Americans have parents or grandparents who were immigrants. The tradition of moving is digested and failure is accepted.
– What are the risks of such a situation?
– If it does not renew, it is the death of Europe. We are almost there, look at France. This is a concern I have for my two children. We must create a Google in Europe for the economy to evolve. Without the presence of a major technology group, innovative start-ups will be systematically acquired by American groups. Yahoo! bought French start-up Kelkoo, Danish Navision now belongs to Microsoft, the Swedish MySQL to Oracle and French ILOG to IBM.
For the spin-offs of EPFL, it is the same. Medical imaging company Aïmago was acquired by Novadaq Technologies for $10 million. Sensima Technology, active in the production of magnetic sensors, has been integrated in Monolithic Power Systems (MPS) based in San Jose, California. Only Jilion was bought by the French Dailymotion, which integrated their video technology on their site. And now it’s Intel. And when these companies are acquired, it’s expertise and jobs that may disappear. There is a risk of loss of wealth.
The rest of the article is available on Le Temps website.
The title of this post is the first sentence of the report published by the Kauffman foundation entitled Measuring an Entrepreneurial Ecosystem. And it is a critical question. For years, universities, cities, regions, countries try to assess if they are innovative and entrepreneurial enough. And unfortunately, this is often measured through inputs and not outputs. Sometimes for good reasons, because stakeholders can offer favorable conditions but in the end entrepreneurs perform and stakeholders help but do not act…
The Kauffman foundation is proposing a set of metrics to help in assessing your ecosystem. It is an ambitious proposal as these are not easy to obtain, but they look very interesting and I thought it would be worth describing them here. They are classified in 4 topics:
DENSITY
1- Number of new and young companies per 1,000 people,
where “young” can mean less than five or ten years old. This will tell you, in the most basic way, how the level of entrepreneurship changes over time relative to population.
2- Share of employment accounted for by new and young companies.
Entrepreneurial vibrancy should not just be measured by the number of companies — it also should include all the people involved in those companies. This will capture founders and employees.
3- Density of new and young companies in terms of specific sectors.
Some places already may have a particular economic sector that has been identified as the centerpiece of an ecosystem, such as “creative” industries or manufacturing. Again using population as a denominator.
FLUIDITY
4- Population flux, or individuals moving between cities or regions.
Entrepreneurial vibrancy means people both coming and going. From an ecosystem perspective, this means that the entrepreneurial environment must be fluid to enable entrepreneurs to engage. The obverse, of course, is that limits on fluidity will suppress entrepreneurial vibrancy.
5- Population flux within a given region.
Individuals also need to be able to find the right match with different jobs within a region. The pace at which they are able to move from job to job and between organizations should be an important indicator of vibrancy.
6- The number (and density) of high-growth firms,
which are responsible for a disproportionate share of job creation and innovation. A concentration of high-growth firms will indicate whether or not entrepreneurs are able to allocate resources to more productive uses. Importantly, high growth is not necessarily synonymous with high tech.
CONNECTIVITY
7- Connectivity with respect to programs, or resources, for entrepreneurs.
A vibrant entrepreneurial ecosystem is not simply a collection of isolated elements — the connections between the elements matter just as much as the elements themselves. The diversity of your entrepreneurial population is likely to be high, and a one-stop shop for serving entrepreneurs is unlikely to do much good in serving all of them. Entrepreneurs move through an ecosystem, piecing together knowledge and assistance from different sources, and the connectivity of supporting organizations should help underpin the development of a strong entrepreneurial network.
8- Spinoff rate.
The entrepreneurial “genealogy” of a given region, as measured by links between entrepreneurs and existing companies, is an important indicator of sustained vibrancy.
9- “Dealmaker” network
Individuals with valuable social capital, who have deep fiduciary ties within regional economies and act in the role of mediating relationships, making connections and facilitating new firm formation play a critical role in a vibrant entrepreneurial ecosystem.
DIVERSITY
10-Economic diversification,
an important concept because no city or region should be overly reliant on one particular industry. At a country level, research has shown that economic complexity is correlated with growth and innovation.
11- Attraction and assimilation of immigrants.
Historically, immigrants have a very high entrepreneurial propensity.
12- Economic mobility,
i.e. the probability of moving up or down the economic ladder between different income quintiles. The purpose is to improve the quality of life for your citizens, to expand opportunity, and to create a virtuous circle of opportunity, growth, and prosperity.