angel investor, passionate entrepreneur, investor, technology junkie, 1. fc kaiserslautern fanatic, apple and (good) espresso fan // Benjamin Rohé
currently I’m setting up a posterous blog to switch soon from www.makeastartup.com to blog.makeastartup.com
The site it self (makeastartup.com) will become the destination for my professional work, while the blog will be around the venture business, innovation and other interesting business stuff.
hope it will work well 
I was thinking about the service “behind” the domain makeastartup.com / make-a-startup.com for more than 10 years to finally admitting to myself: this is the perfect BLOG URL.
Hence I’ve decided to switch from lebenbildet.de (translated meaning: educated by life) to makeastartup.com. This is a more international recognized and understandable domain name for such a website.
Now I hope to increase the posting frequency on this site
This amazing image about social media spread via the internet (here and here) in the past days. Here is the decrypted version where the different letters come from:
i : twitter
w : twitter
a : ebay
n : msn
t : youtube
m : gmail
y : yahoo
L : blogger
i : flickr
f : facebook
e : ebay
b : blogger
a : yahoo
c : facebook
k : flickr
! : yahoo
Especially during an economic downturn bridging the so called “valley of death” for any business is hard. very hard.
And you won’t find your self in a better circumstance working on a disruptive innovation. Every business has a start-up and growth face, but disruptive innovations (sometimes) even need to build a market.
Clayton Christensen distinguishes between “low-end disruption” which targets customers who do not need the full performance valued by customers at the high-end of the market and “new-market disruption” which targets customers who have needs that were previously unserved by existing incumbents.
Lesson 1: in times like these, it is easy and better to focus on new-market opportunities since they usually develop faster out of the recession.
Mostly, a “new-market disruption” results out of long term research or a emerging market development, mostly driven by the first mover it self. Let’s take Linux in the OS market and the famous iPhone in the mobile device market. Linux was released initially in 1991. During 18 years in the “emerging market” of OS, meanwhile the product has reached a market-share of 87,8% on worlds 500 fastest supercomputers. The iPhone has reached in Q1/2009, according to Gartner, 10,8% of the global smartphone sale.
But how have they survived the “valley of death”? How could they explore and develop a market?
In the case of Apple’s iPhone it was, like I call it, the “Microsoft” approach: “Throw money!”
Apple spent nearly as much on development of the iPhone as it did on its Leopard OS, according the company’s 10Q filed with the SEC. From the notes: “In the second quarter of 2007, the Company determined that both Mac OS X version 10.5 Leopard (“Leopard”) and iPhone achieved technological feasibility. During the second and third quarters of 2007, the Company capitalized approximately $27 million and $26 million, respectively, of costs associated with the development of Leopard and iPhone.”
This was a bold and strong move. Why? When the iPhone came out in 2007, there where several risk for apple to loose big time:
—From the iPhone section in risk factors: “This is a highly competitive industry with several large, well funded, and experienced competitors, and the Company may not be able to compete successfully. This industry has aggressive pricing practices, frequent product introductions, evolving technologies, rapid adoption of technological and product advancements by competitors, price sensitivity on the part of consumers, and a large number of competitors with substantial experience and technological and financial resources. The Company’s operating results and financial condition may be materially adversely affected should it be unable to effectively compete in this industry.” For disruptive innovations, it takes time to create a market and to get to a huge customer acceptance:
—Another risk factor: the reliance on a single carrier in the U.S.: “If AT&T Mobility cannot successfully compete with other wireless carriers in areas such as quality and coverage of wireless voice and data services, performance and timely build-out of advanced wireless networks, and pricing and terms of end user contracts, or if for any reason AT&T Mobility customers experience service interruptions, future sales of iPhone may be materially adversely impacted.”-
Overall, Apple demonstrated how big corporates can take bold initiatives for groundbreaking disruptive innovations in a (satisfied) market with dominating players.
next Posting: Lesson 2 - it takes bold people to do bold moves
So long: I’ll leave the last word to Woody Allen’s character in his film Love and Death… “I shall walk through the valley of the shadow of death. In fact, now that I think of it, I shall run through the valley of the shadow of death, ‘cos you get out of the valley quicker that way.”
First of all – who or what is Venn?:
Venn Diagram: n. a diagram that uses circles to represent mathematical or logical sets pictorially inside a rectangle (the universal set); elements that are common to more than one set are represented by intersections of the circles [After John Venn (1834-1923), British logician.]
As you can see on my example, my worlds have many “touch points” hence I can focus on more things at a time and rely on the “overlapping”:
This results to a very strong and unique “Venn spot” feeded with fund raising know-how, marketing experience, startup scene insights and true innovation.
recently I’ve read many articles about how hard the recession is hitting the startup scene or, whether the scene will profit from it and there is just the usual write-off phase for investors.
Do you remember the remarkable amount of startups in 2006 that were captured in this picture? Now there is a updated version from the same author, marking flipped companies (green circle) and shut-down startups (purple crosses).
What does it mean?
Some have been to early, some have communicated wrong, some made a good deal by selling to big corporates and some went into the market with too high ambitions. In the end, no big surprise and a normal free market procedure.
What does it mean for the startup industry? Well, investment bankers are still gone (for good) and only the strong entrepreneurs are holding out for a market change. It might be to early to predict a recovery, but looking at the latest funding and acquisition activities, the market is clearly going back up again. Slowly but steady.
In the end, I don’t understand hysteric reactions and claims like web 2.over – for those who haven’t been out there during 1998 – 2001: there is much more potential in the market today and the “big bang” 2000/2001 influenced the scene much more. Now there is a clear opportunity for everyone out there to come back strong and bold in a much shorter time. Companies (almost) failed in 2000/2001 took 5-6 years to recover. This time it will go much quicker. Everyone is waiting for the next big wave. Be smart and catch it first!
Whether you are already a bootstrapper or planing to quit your job to run for your own startup, I’d like to refer to big wave surfer guidelines:
Big wave surfing is the extreme frontier of a fairly extreme sport. Big waves, or waves over 20 feet in height, add a whole new element to surfing that requires special boards, skills and methods of dropping into the wave. The rewards of surfing big waves are as big as the waves themselves, but with those big waves and thrills comes serious risks
1) Work up to big waves
= stay in the cold water, paddle, work and never ever give up!
2) Get the right board
= get good advisors, let them help you to complete your team – get people “infected” with your idea
3) Tow in
= partner as early as you can with companies that help your startup to grow faster
4) Learn to wipe out
= if your business case is not working out, rethink your business! never more than now, a business model is something that needs to change over time and can be changed so rapidly – you need to add value to a market (see Jeff Jarvis at 2:00 – 3:45).
As Paul Graham writes: “Don’t get too deeply into business models.” It’s good to talk about how you plan to make money, but mainly because it shows you care about that and have thought about it. Don’t go into detail about your business model, because (a) that’s not what smart investors care about in a brief presentation, and (b) any business model you have at this point is probably wrong anyway. If you’re solving an important problem, you’re going to sound a lot smarter talking about that than the business model. The business model is just a bunch of guesses, and guesses about stuff that’s probably not your area of expertise. A VC who came to speak at Y Combinator talked about a company he just invested in: He said their business model was wrong and would probably change three times before they got it right.
Holding on to innovation might not make you rich in the short term, but can change the world in the long run.
And the most important thing:
PS: if you are also interested into surfing, check out the big wave surfing rules
Highlights of Nouriel Roubini’s keynote speach about the “long and dark night”:
- The recession will take approximately 24 months
- The recession started started dec. 2007 – so we are now in the 16th month of it
- Total losses for loans & securities originated by US Financial institutions may total $4 trillion
- It will take twice as long as the previous recession and end at earliest end of 2009
- The financial system, in aggregate, appears insolvent
- Either the markets will take a U (and we are already at the lower part of the U) or the markets perform like a L (as the Japan markets did)
- We can either go the route of Sweden (nationalization) or Japan (Zombie financial system)
what do you think?
