Launch a company

I came across a great article on Paul Graham and his latest endeavour YCombinator in the latest issue of Inc magazine. As you may know, Paul Graham is a successful serial tech entrepreneur. YCombinator provides funding to early stage start ups but Ycombinator is way beyond just another vc fund. It provides not just the funds, but is an incubator in all respects, where the entrepreneurs are provided with guidance/coaching, exposure to other vcs and investors, chance to present to potential customers, and the icing on the cake: Food : -)

YCombinator claims to have launched around 145 companies thus far of which several have been successful. Their claim to fame is to be able to mass produce a successful start up.

The concept of an incubator is not new. It has been around in university campuses all over the world. Both university based incubators and privately managed incubators have yieled decent results in the past.

This year with the Obama administration rolling out plans to support organizations that foster innovation and create jobs, this effort is gaining further impetus.

Heres a list of top tech incubators :

1) YCombinator ;
2) BetaWorks : Average Investment : $100K

3)ATDC -Georgia

4)Slingshoit Labs-Myspace

5) Capital Factory

6) Tech Stars

7) Shotput Ventures

Start At Spark

9) LaunchBoxDigital

10) Dream IT Ventures

I came across this great post on top 10 reasons why high tech companies fail:

Why High Tech companies fail

My favorite part about this post was the comment around conventional barriers to competition not being applicable to high tech companies. ‘Perception’ about your company in the minds of customers and prospects is the biggest competitive barrier.

It makes me wonder, what are the various steps a high -tech start up should take to improve in this arena.

How can a start up address the key perception issue around ‘ Buying from start ups is risky’? Due to this perception most customers fall into the ‘Early Majority/Late Majority’ bucket instead of the ‘ Early adopter’ bucket that is vital for start ups to succeed.

Here are some thoughts around building the right perception:

a) Communicate that your technology is NOT a ‘ Silver bullet’ for all their problems:

Focus on the specific issue that your start up is attempting to solve and clearly communicate and
acknowledge that your solution addresses perhaps a very small subset of the customer’s issues, albeit it very effectively solves that ONE problem. Many start ups get overwhelmed when customers bombard them with questions around does your solution do blah, blah and blah? Under pressure to not lose the customer, many start ups end up claiming that they have built a stairway to the moon, and back.. Its important to come across as genuine and set realistic expectations around what your solution does without going overboard

b) Over communicate with Customers :

With minimal resources and support available, handling the few beta customers in hand can be challenging. Product management will certainly be working overtime to get feedback from these customers to incorporate into future releases. What about the remaining parts of the organization? Have you or your management had conversations with folks who may not have had a direct say in the purchasing process? For e.g Have you talked to the accounting department to see how efficient was your invoicing process? Have you interacted with your customers help desk staff to see how manageable your solution has been?

c) Risk- No way: ‘RISK’ is a 4 letter word that makes most IT managers lose sleep at night. Give
them sleeping pills : -) not a headache..

What i mean by that is most start ups focus a lot on the solution, which is understandable, but customers want more than solutions..they often need the whole nine yards to put them at ease: Support is definitely one of them.. Most start ups cant afford to hire support staff upfront before they sign on customers..classic chicken or egg situation..Consider bringing on a third party provider who can be trained on your solution, and provide 24 X 7 support.. Outsourcing support helps not just with providing the required level of support but also with keeping capital expenses at a minimum..if for some reason your start up does not take off, you can always end the contract with the 3rd party support provider.
If your solution requires some customization or integration, offer to provide not just the initial integration /customization but an extended professional services solution which provides them with needed customizations on an ongoing basis..

In short, sweeten the pot as much as possible

d) ‘I Dont want the whole pie’:

As you may know, its difficult to find those precious gems or ‘Early Adopters’ as we call them..

Most Early majority customers will sit on the fence and watch the ‘Early adopters’ to see if they crash and burn or are truly seeing value.

How can you make them jump across the fence and join the party?

In some situations, you may be able to overcome the perception issue of ‘ this solution sounds great, but i dont want the whole pie, its too much for me ’.. Dont give them the whole pie’ .. What this refers to is ‘ Design your solution so you can provide some pieces of the functionality without giving them the entire solution’. This can be somewhat tempting to ‘ Pragmatists’ who dont want to take big risks and want to ‘wait and watch’.

In addition, the conventional approaches of industry selling/marketing and industry references go a long way.

Startups usually face several challenges while moving along the path from conception of an idea to launching a company, from getting initial funding to building the right team with budget constraints.

In this process the already daunting task of building a product management function gets lost or becomes all the more difficult.

Understanding what exactly product management function is and incorporating a defined process early on can help save lot of time and money on false starts.

The following article talks about pitfalls involved in creating a Product Management function at a company

Creating Product Management at a Startup

The following article talks about how a prototype based – product experimentation model normally used in the manufacturing industry can tremendously help in launch of new Software Products .

Startup Product Management

Contactless payment systems are credit cards, key fobs, smartcards or other devices which use RFID for making secure payments. The embedded chip and antenna enable consumers to wave their card or fob over a reader at the point of sale. Some suppliers claim that transactions can be almost twice as fast as a conventional cash, credit, or debit card purchase. Because no signature is typically required for purchases under US$25, some research indicates that consumers are likely to spend more money due to the ease of small transactions.

With a potential global market value of nearly $1 trillion in payments, this is not an area that cards issuers, acquirers or schemes can afford to ignore. The US has the greatest potential in terms of contactless payments, with low value cash transactions of $297 billion per year at present. The global contactless opportunity is $963 billion per year.
(Source

Contactless payment phones or Near Field Communications (NFC) enabled phones will become increasingly common, and a recent report highlights the following:

• Global mobile subscribers with NFC phones will reach 700m by 2013
• The market is currently dominated by FeliCa-enabled phones on the networks of NTT DoCoMo, KDDI and SoftBank in Japan, where we estimate about 50m FeliCa-enabled phones have been shipped to date.
• North America, Western Europe and Far East & China will be the leading regions by 2013, with each region having annual shipments in excess of 25% of total NFC phone shipments.
Source

Opportunities lie in mobile software for contactless payment and contactless point of sale readers

I have the privilege of working for a high tech software as a services company that has grown from a start up to a world class brand in 10 years and is continuing to perform exceptionally well.

We have reached the billion dollar annual revenues mark, have competitors who don’t really provide any competition, several thousand customers worldwide and are still growing in todays economy.

What helped our company reach its current level of success?

Heres my analysis on what it takes to build such a highly successful software company:

Top 10 traits of a successful software company :

1) Have a recurring revenue model:

The benefits of a recurring revenue model are phenomenal. In this model, you bill your customers
monthly and get paid monthly. Your customers typically sign a contract for a finite period of time :
for e.g 1-2 years, and they are LOCKED IN during this time, facing heavy penalty or legal action for
early termination. Very similar to a cell phone plan ..Whats great about this model, is that its a great way
for companies to avoid capital expenditures upfront, so its an easier sell.

2) Build a solution that has the ability to cut costs and potentially increase revenue for your customers

Most CIOs are tasked with not just cutting costs but identifying strategic technologies that can help
increase revenues as well. More so in todays economy, where most IT budgets are shrinking by the day.
If you have a solution that can be pitched as both cost savings as well as a revenue driver, its a sure win.
Help IT cut costs in areas such as Infrastructure(servers etc) or man power. Build a solution that will either
provide a new channel for sales or give a huge boost to an existing channel . The ROI model that you can build around this is very very compelling.

3) Have a deep moat: Strong competitive advantage in terms of non-reproduceability of solution.

You may have heard this term ‘ build a moat’ in various contexts. For e.g. thats Rule #1 when picking a good stock. What does this mean and how is it relevant for software companies? Our company built a solution that has a WIDE and DEEP MOAT. A moat was traditionally used to protect a Castle/Fort from enemy intrusion. the Wider and Deeper your moat, the more difficult is it for any one to attack you. How do you build such a moat in the software world? Well, for one , honestly , this is easier said than done. When building a solution, identify how hard it may be for someone else to replicate your idea. Do you have proprietary algorithms that power your solution? Or is your solution a simple web application that can be put together by a handful of web developers in a few weeks? If you are relying solely on your marketing/sales expertise, or your networks as a key competitive differentiator, you are in for trouble. The solution you build should be unique, powered by highly proprietary technology associated with appropriate patents that can take years for your competition to build out and figure out. That makes your moat WIDE.

4) How do you make your moat DEEP?By building an exception sales force, technical team and a support organization.

Invest in great/smart talent, hire the best of the best. Top Talent pays off like nothing else.

5) Customer is King: Listen to your customers and constantly evolve,Provide A + Support, training

Companies that are constantly seeking their customers feedback and incorporating it into the
products and services will emerge as a clear winner. Keeping the customer in mind when developing
your organizational model and go to market strategy. Ensure that not just pre-sales, but post sales as well the customer is well taken care of. Make them feel important, provide as much training as possible so they are comfortable with using your solution. Provide 24 X 7 support if required.

6) Multiple streams of income: Diversified product portfolio

Similar concept to the world of personal finance and investing.. Diversification is the golden word.
Ensure that your company does not depend on just 1 single product to bring in the money.. There is inherent risk in this approach. It may take a while to evolve into a multiple product line company, but getting there is essential. Develop solutions that solve different customer pains, and are not just a rebundled marketing message.

7) Flexible and Agile: Make quick decisions and take calculated risk

The beauty of a start up often is that they are not bound by rigid processes and procedures. Over
time companies can get pretty large and lose this golden nugget .. Its important to strike a balance.
Know when to stick with processes and when to jump on a customer thats ready to sign on the dotted line
and be up and running on your solution.

Ease of implementation

Theres nothing more annoying to a CIO who listens to a sales pitch and loves the technology, but realizes it could take months if not years to implement. Some solutions such as Large SAP implementations are that way and its inevitable.
But everyone loves quick wins and low hanging fruit. Identify an implementation strategy that can provide such quick wins and demonstrate ROI fairly quickly. Nothing like walking into a CIO’s room and telling them you can see visible ROI by end of the quarter.

9) Make strategic acquisitions:

When you have made it to a point where its time to look for further growth, making strategic acquisitions is a great way to grow your company. Make sure the rationale for acquisition is sound: Is this going to reduce competition? Does this bring a new product line to your company? Can you boost your existing product offering with this acquisition? Is it the right time to acquire?

10) Build an international customer base: Lastly but not the least, if you can build a solution that has international appeal, the growth prospects for your company will be tremendous. While US markets continue to be the early adopters, other regions are catching on and provide a great expansion point once you have captured the US markets. Revenues from international growth can be substantial 20-40% in some companies.

Great resources on what it takes to be a good product manager

Good product manager Bad Product Manager

Role of the product manager

Top 12 product management mistakes

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?