Launch a company

About:
Marketcetera Inc provides open source software for automated trading systems. With 10,000 software downloads and more than 20 production deployments, Marketcetera provides maximum flexibility and technology choice to financial services institutions of all sizes. Marketcetera’s platform lets brokers and traders build effective automated trading systems, develop proprietary algorithms, create order management solutions and manage risk faster, easier and at much lower cost than with closed platforms.

Whats hot about this start up?

- Industry’s first Open source Trading Platform. Total Market size is around $ 1 Billion US Dollars.
- Multiple potential revenue streams ( Services, Market Data, Brokerage(commissions per trade).
- Fast time to deploy
- Zero licensing cost to the customer as the software is Open source.

Founders: Co-Founded in 2006, by Stanford Computer Scientists, Graham Miller (CEO) and Toli Kuznets (CTO). Both founders have over 10 years experience managing trading platforms and strategies for wall street hedge funds.

Venture Capital: $4 million from Shasta Ventures

Potential Risks/Pitfalls:

Although the company claims that it actually helps drive down costs for hedge fund trading firms, Given the current market turmoil, it will be interesting to see how this company does.
Also, in addition to the product’s code being heavily open source itself, the code also leverages other open source apis such as QuickFIX. This introduces some element of risk for the company, for 2 reasons, a) It now has a heavy dependency on the quality and performance capabilities of the 3rd party open source libraries. If these apis degrade in quality or performance, Marketcetera can get adversely impacted. b) If the 3rd party APIs /Vendors cease to exist, it will need to react fast or develop its architecture such that its easy to operate in a plug and play model and is not tightly coupled to these providers

I came across this article which lists Gartner’s top 10 strategic technologies for 2009. Gartners top 10 strategic technologies for 2009.

1.      Virtualization

2.      Cloud computing

3.      Servers (beyond blades)

4.      Web oriented architectures

5.      Enterprise mashups

6.      Specialized systems

7.      Social software / networking

8.      Unified communications

9.      Business intelligence

10.  Green IT

In 2008, Gartner released the Tech Hype Cycle Graph below:

The explanation of the hype cycle in the article is as follows: The hype cycle says that interest in a new technology enters a phase of “excited speculation about all the benefits new technology will offer” which eventually reaches a peak of “inflated expectations.” This is followed by a cold, hard “trough of disillusionment.” Eventually some practical business applications emerge – but which business applications, leveraging what technology, is hard to say.

As you can see in the technology hype cycle in 2008, Green IT and Social computing were in the “Peak of inflated expectations”, moving towards “Trough of disillusionment” and Gartner lists them in the bottom of the top 10 strategic technologies for 2009.

What does this mean for tech entrepreneurs? Why should we care about the Gartner tech hype cycle?

IMHO, the hype cycle is a good reference, to determine the business viability of your big idea..where on the Gartner hype cycle does your big idea lie? If its not listed on the hype cycle, based on your market research and analysis, where do u think your big idea lies?

Jumping into a business area for which the hype is at its peak, is certainly risky..However, not jumping in then may also mean lost opportunity and risk of not being the first mover..Catch 22..

I presume most entrepreneurs start exploring an opportunity in the “Technology Trigger” phase, when most of the research, prototype development is done and are well positioned to capitalize on the potential opportunity by the time there is a lot of excitement and publicity in the marketplace and media.

I cant help but wonder, what risk mitigation approaches do entrepreneurs need to account for when jumping onto a path breaking solution area?

While reading through my previous post 2009 tech pioneers, you may have noticed how many start ups listed in the top 36 were actually based outside the US.

It made me wonder, will America will continue to be the epicenter for entrepreneurship few years from now?

For decades, America has been on the forefront for entrepreneurship and innovation.The best ideas originated here in America, were provided the right level of support from the government, investors, and the consumers to fuel early stage companies into world class companies.

The examples of such successes are numerous. In the software world, American companies pretty much dominate this space with well recognized brands such as Microsoft, Oracle, Google , eBay to name just a few. However, in the changing world landscape and economic conditions, its quite likely that the lead America has enjoyed will likely to face some competition, not just from other developed economies but from emerging economies as well.

That said, America may continue to be the market place of the world..Americans and Corporate America will still continue to be the early adopters of technology. However, there seems to be a shift in the origin of the products/services offered to the American consumers.

Emerging economies like India and China, have traditionally been known for their outsourcing services. While corporate America is raging about the loss of American jobs to such countries, they have to soon wake up to another reality: Companies in such countries are also working furiously towards building innovative technology solutions that are delivered to a world market over the internet.. With a bright talent pool available, companies in India such as Toufee that provides an online tool for easily developing flash movies for your website are just a start.

Governments in various countries such as China, India, Russia, Israel are working hard to provide the level of support required to these companies. Venture capitalists, including some well known US venture capital firms have set up shop there. These countries have some barriers to overcome, but it may be a matter of time..

The first wave of innovation started by following the US lead on innovation, and improvising it for local markets. Chinas Google equivalent Baidu.com is one such example.

However, The internet has flattened the world, and thereby provided the platform for companies all over the world that are plugged in to serve the world marketplace. Take for example, Israels software start up Zend. The company developed Zend Studio, which is a Integrated development Enviroment (IDE) for building Rich internet applications using Ajax.

Do you know of other successful software startups who are based on innovations developed abroad and marketed worldwide?

Check out this link of tech startups in 2009.. 2009 tech pioneers

which one is your favorite?

Most of you must have heard the term ‘ Do your home work’ ; when it comes to the world of start ups, this typically refers to researching the market, understanding your competition etc.

It is absolutely essential to understand if there is demand for your service, how much money is
spent in your target industry, barriers to entry and differentiate yourself from competition.

The key is to get a sense upfront if your ‘brilliant idea’ is really worth taking to the next step ..And not discovering this half way or worse when you are about to close shop..

Thats all well and good..but how do u really get this valuable data? I read that school libraries and local libraries have some free stuff..have to start there..ill let u know if i find anything worthwhile
this route..There are more expensive options available for those willing to shell out more moolah..such as Gartner reports, Lexis Nexis etc. You can also get some data from business mags such as business week or PC week.

I found a really good chapter in the book ‘ Harvard Business Review on Entrepreneurship’, which talks about how to write a great business plan.

This chapter highlights that most business plans focus on providing financial projections which are crafted out of thin air with no real analysis or backing.

This chapter talks about a framework for writing good business plans which states that every good business plan should include details related to the following 4 aspects:

a) The People: A great business plan talks about who the founders are, where they have worked, been educated, what skills and abilities they have that is directly relevant to the opportunity being pursued.

b) The Opportunity: In addition to some of the previous inputs on identifying the viability of a potential business, its important that entrepreneurs make sure that they are entering an industry that is large and or growing and detail how the company will build and launch its product or service in the marketplace. A great business plan also highlights how an opportunity can grow i.e expand its range of products or services, customer or geographic base. Bottomline, entrepreneurs need to understand that investors are looking for businesses in which management can buy low,sell high, collect early and pay late and a great business plan, highlights how the opportunity in question provides just this.

c)The Context: The big picture/macro economic environment such as regulatory environment, interest rates etc. This can have tremendous impact on opportunities, either create opportunities or make it difficult to convert the opportunity into a viable business. A great business plan should acknowledge the context in which it plans to operate and how the context helps or hinders the business. The business plan should clearly highlight how the management can handle an unfavorable context or how management can influence the context in a positive way.

d) Risk And Reward: Risk is part of every entrepreneurs life. Entrepreneurs need to acknowledge in the business plan how they can deal with moving targets such as people, context and opportunity. Similar to a well executed project, a good business plan is one which analyzes and identifies potential risks upfront and details its risk mitigation plan. As far as reward (for the investor) is concerned, multiple exit options should be presented.

My all time favorite start up success story.. Hats off to Larry Page and Sergey Brin

As you begin to do some market research and narrow down to specific business ideas, Heres some great questions to ask yourself on business viability of your product /service
(Reference: Software Product Management Essentials , Alyssa S.Dver
And Harvard Business Review on Entrepreneurship)

a) Why is the product unique?
b) What benefits does it bring to the people who use it? What happens if they don’t use it?
c) What other products are available that compete directly or indirectly with the product?
d) Are there other ways for potential customers to achieve the same results if they don’t use the product?
e) What type of people will buy the product? What other products do these people buy? How do they make decisions about buying this product or service?
f) How will the product/service be priced?
g) How much does it cost to produce the product (manufacturing cost), cost to acquire a customer?Cost to support a customer? Retain a customer?
h) Reach all identified customer segments (Marketing).

I have been busy reading up on a few articles and resources on how to start a software or high tech company and decided to share the resources i obtained :

Books:

a) High Tech Start Up, Revised and Updated: The Complete Handbook For Creating Successful New High Tech Companies

b) High-Tech Entrepreneur’s Handbook: How to Start & Run a High-Tech Company

c) Zero-to-IPO

d) Betting It All: The Technology Entrepreneurs

I will be posting reviews of these books shortly.

Also, here are some great articles from the web:

a) Building your own startup technology company part 1

b)Building your own startup technology company part 2

c) Building your own startup technology company part 3

d) Building your own startup technology company part 4

e) Business basics for Engineers-Great read