Lots of money, less logic

There’s a lot of capital in circulation, but it’s not always in the right places. Sure, an investment is a strategic gamble, that’s the nature of the beast. Maybe I’m cynical, but it seems like investors are overly optimistic and entrepreneurs have delusions of grandeur, at a time when both should be getting smarter. The startup world isn’t the game / fad as it was a few years ago, this is the present and future of global small businesses, this is modern economics.

Magic beans are being sold, investors are outlaying capital, crap is being built that doesn’t need to be built, and companies are eventually getting rolled up that shouldn’t have existed in the first place. Angel investors are less savior and more angel’s of death, giving false hope and unfocused bosses to founders / startups rather than a reality check.  At this point, problems aren’t being solved as much as more layers to the problems are being created.

Startups are seemingly moving in the direction of banking in the late 90’s and somewhat comparable to the subprime mortgage crisis. Everyone knows it’s foolish and too good to be true, but the money is moving nevertheless. Luckily when the rug gets pulled out, it won’t necessarily send the economy in a spiral.

Maybe I’m being overly cynical observing the trends of the startup scene, or maybe this is reality. Regardless, let’s tighten up that investment criteria boys.

Avoid the Comparison

Comparisons can provide a frame of reference, but they can also limit the effectiveness of your message by bringing another entity into the picture.

We operate in an age of unprecedented competition and correlation. Through the beauties and capitalism, easier access to education, lower barriers to entry into markets, and the fad that is saying you have a startup, differentiation is difficult. However, this differentiation can be critical to overcoming the competition and carving out a niche in which to build you empire. This is generally acceptable for the third part to make the generalist remarks, but not for the persons involved in the business.

Unfortunately, trying to explain a new business or technology product to someone who has not used it before is difficult, even if you’re the one who built it. You know how it works, you understand where it fits in the market, but you want to frame it in a way that is easy to grasp.  What do we often do? We compare. How many times have you heard “the Uber for”, “the Facebook for”, etc? A good founder understands the value proposition and uses that to frame their explanation.

While this is an easy way to get a general point across, it also diminishes the value of your product. A pitch is a few sentences opportunity to explain why you stand out, how you’ve got it figured out, so take that opportunity. A good founder has identified the pain points that they’re solving, figured out how to position the brand to address the solution to the pain point, and can explain without comparison.

This is not to say that you can’t start a purely competitive business to operate in an existing market. That find, but you can still generate a solid value proposition. Don’t compare, because you’re just devaluing your business and providing free marking. Understand who you are, what you’re solving for and why you’re better than the rest. Stand out, win emotions and appease intellects. How would you sell yourself?

Developers are not a commodity

Developers have been commoditized to a degree, but they are certainly not a commodity.  This dangerous reality puts the startup world and its many nascent businesses at serious risk of failure.

There are two types of players in this dynamic. The US based developer and the foreign developer. For all intents and purposes there is a divide, but at the same time code is code no matter where it’s written. The break comes with the quality, the thought and the leadership, but for this argument, let’s focus on the leadership and quality.

During the advent of the internet, a developer was someone viewed as a nerd who worked in the dark and had trouble socially adapting. However, as the technical and digital world’s grew, these people became rockstars and the access to the ability to learn these technical languages has increased. These developers have been able to ascertain large salaries, industry defining responsibilities, and a seemingly endless supply of jobs. It is a good time to be a developers. Quality drives value, as well as the technologies chance of success. Investment in quality code, no matter where the developer is, will be a deciding factor for the products future.

The need for developers has increased as more nontechnical and also unqualified founders enter the market. This has given rise to what I perceive as the secondary market for development. This has no geographic boundary, as it could be some chop shop type of operation in America or an outsourced service in Mumbai. As supporting cast members led by a quality team, there is somewhat of a chance of success, but without leadership and architecture, failure is the only reality.

This secondary market is what feeds the scalability of the startup industry, considering the limited supply of rockstar coders relative to the demand. This is the gray area where non technical founders, fair weather entrepreneurs, and the ill advised often make their perceived strategic plays and cost savings. However, they aren’t exactly realizing cost savings as much as they are increasing future cost outlay.

My argument is that the low quality founder has given rise to the perception that code is a commodity and therefore so is the tech talent behind it. At the end of the day, “nickel-and-diming” you own business without the proper infrastructure establishes a lackluster precedent and is indicative of the founders lack of foresight. If costs need to be decreased, then consider minimizing the scope of the MVP to get to market sooner and validate the market. This is most definitely the more strategic solution than building more at a lower quality.

Developers are not a commodity. Code quality is king.

Quick Thoughts / Big News: Apple & Beats (and a $175bil rainy day fund)

First off, Apple currently has upwards of $175bil sitting in cash and is a notoriously meticulous company, so its not surprising that this acquisition was a big one.

At face value, acquisitions aren’t really in Apple’s wheelhouse. They prefer building self contained products that seamlessly integrate across their platform, rather than building a holding company of third party tools (looking at you Facebook).  If you watched or read about the announcements at WWDC, you’ll notice that Apple have taken another massive step towards building and integrating a wide variety of self contained features within this Apple iOS ecosystem. This ultimately limits the reach and threatenes the well-being of companies like Skype, Dropbox and iPassword, which Apple couldn’t care less about. In the long run this “build instead of acquire” methodology could have one of two outcomes. One is that Apple ends up providing a relatively full service and integrated mobile experience without the need for any outside software or apps. On the other hand, they could balloon into an oversized and cluttered mobile world that is clunky rather than efficient and ultimately drive users away. In reality, they will probably land somewhere closer to a self sustained OS.

Bears – BEATS – Battlestar Galactica
It is important to remember that Apple isn’t just a technology company. They are somewhat of a social movement and their products are status symbols. In my opinion, beats and Apple have some similarities in their models. They sell devices that aren’t really that great technically … but they look cool and stand as industry defining social status symbols, continually flying off the shelves. So why does Apple step out of their cave to make this deal?

  • The first obvious reason is product, Beats headphones are everywhere.  They aren’t at the level of technical quality that Bose prides themselves on, but they are wrapped around millions of heads, especially with those who seek to emulate the athletic and hip hop culture.  From a product perspective, millions of users stream their music from iPhones (or at the very least iTunes) to listen with their Beats headphones.  Therefore it does make sense to diversify offerings, essentially owning all of the components of an entire use-case, considering that Apple hasn’t really ventured into “big headphone” territory. I’m all set with the ear-buds that come with my device or a pair of cheap Skull ear-buds, but apparently a large portion of the market wants to spend extra money on another variation of the product.
  • The second obvious reason is Beats brand / community.  This is something that overlaps with Apple heavily, but not completely.  There are similarities to the brand and their perception, but it would be another angle of the same market that Apple could exploit. Every acquisition in tech has some level of interest in expanding a user-base, so this probably is one of the considerations for the acquisition..
  • The less obvious reason is the founders.  Generally speaking with acquisitions like this in tech, an acqui-hire is targeted towards a development team.  However, in this case the pseudo-acqui-hire could be for the network and industry clout.  Admittedly, it may seem outlandish to say that Apple needs connections since they are already massive and influential in the music space.  However, Dre (despite how how clueless and immature he may be during a business transaction of this magnitude) is on a different level, being a pioneer and leader in the rap scene and music scene in general.  This tells me that Apple may have ambitions for next steps within the music industry and they value Dre’s connections, brand and influence enough to spend $3bil on him and his company. The beats streaming userbase isn’t something to throw a party for, but maybe Apple sees an opportunity to leverage his potential influence for a revamp of iTunes or some other new product.

Whatever it is, this is an interesting and uncharacteristic move for Apple.  I don’t expect this to follow the trend of many of their counterparts acquisitions that are eventually shut down, but instead continually pursue a focused goal.  This is probably also project that has been on Apple’s road map for years, with this being just another piece of the puzzle.  Right now, somewhere in tech heaven, Steve Jobs is either sliding on a pair of Beats headphones … or cursing Tim Cooks name.  In the meantime, don’t forget about D.R.E


Being a Young Entrepeneur: Not Being a Guru

I realize more every day that being a young entrepreneur isn’t about knowing everything.  I see a lot of people trying to brand themselves and come off as kickass world changing entrepreneurs who have it all figured out, but that simply isn’t the case.  To be under 30 and considered a subject matter expert is (arguably) wildly outlandish.  While there are the anomalies, the brilliant young entrepreneur that can seemingly do it all,  even the most successful young entrepreneurs aren’t experts.  Moreover, anyone who tries to come off as they are the smartest guy in the room, generally has a misguided perception of entrepreneurship and business in general.

Most blogs, publications and the like try to put out lists such as “Top 10 Ways to Become a Successful Entrepreneur”, “2013 30 Under 30”, etc in an attempt to create both a mystique and a formula around entrepreneurship.  This magical formula simply doesn’t exist and anyone who says that there is one is delusional.  Despite what many people try to claim so in order to gain a few clicks, its not a science and not something a top 10 list or Meetup can teach you.  At the end of the day, it is a combination on past experiences, passion, learning experiences, mentorship, networking, hard work and luck.

Through all of this, becoming a young entrepreneur (and a successful one at that) is all about putting yourself in great situations and being smart enough to figure it out as you go, making it work in your favor. The answers can come through research, leaning on your mentor / network, making use of resources, or whatever gets thrown your way.  Just find something you love, work hard and work smart.  Granted this is Social Darwinism at its finest and many will not succeed, but its the only way to find out.  Hell, I don’t even know if I’m going to succeed.