Monday, September 30, 2013

Your Spouse Is The Most Important Backer In A Startup

Wil Schroter

Whenever I sit down with a soon-to-be startup founder or a prospective employee at my startup, I always ask one fundamental question:

“Is your spouse cool with what you’re about to do?”

In my book, it’s all that matters. Having the support of your spouse can make or break an entrepreneur or anyone working in the startup world.

Or, said differently, not having their support is a recipe for disaster.

You Can’t Fight Two Wars

Working at a startup is a grind that takes every ounce of your energy to create something from nothing. If you come home with even an ounce of energy to spare, it’s a gift.

So, if you walk through the door at home, and you’re presented with an entirely new war to fight, it sucks.

No one has enough energy to fight one battle during the day and another at night. You can’t fight two wars, and given enough time, those wars will destroy you.

Understanding Is Hard

Often the problem is that spouses don’t understand what you’re doing – and why would they?

You’re basically coming home saying “I’m going to quit my regular job to go on an adventure with little or no pay, work twice the hours, with no guaranteed payback – ever.”

If they sound confused and un-supportive, it’s because on the surface what you’re doing makes no sense. Therefore, it’s your job to make sure they understand why you’re doing this at a very detailed, emotional level. Because beyond that, the rest does sound completely crazy.

Your Spouse Is Your Lifeline

Very little about growing a startup involves certainty and reassurance. It’s riddled with doubt nearly every day.

That’s why having a spouse that absolutely supports what you do is a lifeline to sanity; someone to remind you that you’re good enough, you’re smart enough, and gosh dammit people like you.

Having that support is incredible. It helps you reload day after day, when everything else is depleting your physical, mental, and emotion stores. It’s your happy place you can rely on every day, to regather your strength and come back fighting.

It’s like having an emotional venture capitalist that will back you each and every day when you need that capital the most.

And for that reason, it’s the only backer that truly matters.

This is a repost of an article that appeared in Forbes on August 27, 2013

Thursday, September 26, 2013

The Boys are back in Town!

On Monday, September 23, 2013 there was another Hive53 Swarm at the Stage in Krakow. the main guests were Jakub Krzych and Lukasz Kostka.  Jakub and Lukasz are the founders of Estimote.  Estimote provides sensor for retail services as well as hardware.   They wanted to build a device that makes smartphones aware of your location and provide you with some added value information. (Video here)

Although they have an office in California, they are mainly based in Krakow.   The hardware and software are designed, programmed, and manufactured in Krakow.   They came back to report on their experience at the prestigious Y Combinator and to give inspirational encouragement to the Krakow startups.   

A colossal  problem that they had was the time difference between California and Krakow.  
Because of the 9 hour difference, getting things organized was very complicated.  A good project manager was essential for them.    Another challenge for them was that in California, nobody walks.  Everyone drives cars, whereas here in Krakow, people do walk to places.   They also had some difficulty getting used to American food.  

One of the most important difference between startup communities in the US and Poland is the atmosphere.  In the US, you have people who will encourage you to pursue your dreams.  In Poland, people may be too pragmatic for their own good.  They wanted to bring some of the supportive atmosphere which they got in Silicon Valley back to Krakow.  Things are changing slowly here in Krakow.  You have many local investors like Richard Lucas, Piotr Wilam, Barbara Lemercier, and Rafal Han giving startups the support and funding they really need.  You also have some local accelerators like Lifescience Klaster, Innovation Nest, Chance Academy, Google for Entrepreneurs, and Lean Startup Circle mentoring and guiding the startups to building their minimum viable product and making pivots when needed.   There are also events like the Swarms, Startup Stage, Lifescience Open Space and Open Coffee giving the startups a chance to collaborate.  Developments like these makes Jakub and Lukasz feel that we are doing something right.  

They were very positive about their experience in the YC.  However, much of what they shared was off the record.  What I can say is, that in YC you are expected to work, work and work.  And after that you work some more.  You are doing product development, customer development, networking, getting investors, and establishing partnerships.  All these are done under the guidance of the top names in business and tech.   The YC difference is access.  It would be difficult to have some face time with people like Mark Zuckerberg under any other circumstance.  

They feel that startups should try to do more bootstrapping in order to keep control of their ideas.  They would like to see a more extensive network of investors here in Krakow.  They advised us that if you have a chance to launch your product, you should.  Revenue and growth will solve many problems.  If there are some bugs, you can catch it and fix it because it is happening in real-world use.  This practical data is more valuable than any theoretical data.  They also advise us not to underestimate the power of good PR and buzz generation.  
Jakub and Lukasz really wanted to emphasize the fact that the talent in Krakow is not that far from the ones they have in Silicon Valley.  The difference is that in Silicon Valley, you are going to pay a premium price for talent but in Krakow, high caliber talent is still relatively inexpensive. Furthermore, Poland has built up a good brand in producing good technical people.  

Like Mr. Gola from Poznan, Jakub wondered out loud why are there so many good success stories in Silicon Valley and YC participants from Waterloo, Canada.  Many people as well a Kaufman research will point to the faxct that in these places there was already a solid presence of established tech companies.  In Waterloo, you have Research in Motion, In Helsinki you have Nokia, in Silicon Valley you have Google and others.  It is companies that act like a seed or a magnet to other startup firms.  And the big boys help foster the creation of startups.  Now, Krakow have Estimote and Aplicake.  My advice is since things are moving in the right direction, enjoy the ride!  

Wednesday, September 25, 2013

Will Crowdfunding Drive a New Wave of Startup Investing?

By Sam Gustin

Venture capital investing has traditionally been the domain of the wealthy, but that could change with the passage of new legislation that will allow entrepreneurs to raise money from a much broader swath of the public — and give ordinary investors the chance to own a piece of the next Google, Facebook, or Twitter.

Tucked inside the Jumpstart Our Business Startups (JOBS) Act that passed the House of Representatives with bipartisan support Friday are “crowdfunding” provisions that would relax federal restrictions that have been in place since the 1930’s effectively barring the non-wealthy from investing in startups.

Crowdfunding has been a hot topic recently with the dramatic success of online platforms like Kickstarter, which allows anyone to donate money to a variety of projects. Kickstarter expects to distribute over $150 million in 2012, surpassing the annual budget of the National Endowment for the Arts. But Kickstarter is about philanthropy, not investing, because donors don’t receive a stake in the projects they fund.

Currently, federal securities law limits how, and from whom, startups can raise money. First, startups are prohibited from raising funds using the internet or broadcast media. Second, the pool of possible investors is limited to so-called “accredited investors,” who must have annual income of $200,000 ($300,000 for couples), or have a net worth of at least $1 million (not including the value of their home). Needless to say, this rule excludes the vast majority of Americans from being able to participate in startup investing.

These rules were designed to protect investors from fraud, but in the age of the Internet, there is a general consensus — including at the SEC — that it’s time to update them. Under the JOBS Act, startups will now be able to solicit funds using online crowd funding platforms. Entrepreneurs will be able to raise up to $1 million from ordinary investors who can put in up to $10,000. Entrepreneurs can raise up $2 million if they provide investors with audited financial statements.

The legislation would also allow startups to raise as much as $50 million from the public (up from $5 million now) before they have to register with the Securities and Exchange Commission, and increase the number of shareholders from 500 to 1,000 before SEC registration is required. As VentureBeat notes, this could be a huge boon for private equity exchanges like SecondMarket and SharesPost, because companies will be able to wait longer before going public, increasing the amount the activity conducted on these exchanges.

Of course, increasing the pool of potential investors involves the potential for abuse, as Amy Cortese pointed out in recent op-ed for The New York Times, but she argues that the benefits outweigh the risks.

The S.E.C. must balance its dual mission of facilitating investment and protecting investors, and as we all know, snake-oil salesmen are alive and well on the Internet. Furthermore, Wall Street banks are likely to fight any efforts to encourage crowdfunding because it cuts them out of the equation. But the potential rewards outweigh the risks. With such sums, the hazard to any single investor is limited. And information is more freely available today than in the 1930s, when the regulations were written.

Crowdfunding is clearly an idea whose time has come, one that has only been made possible by the network effect of the Internet. The fact that so many lawmakers recognize this bodes well for an untold number of entrepreneurs who will gain access to a vast new pool of investors if President Obama signs this legislation into law. Regulators, not to mention potential investors, must remain vigilant against fraud, but if the new legislation makes it easier for entrepreneurs to raise capital — while allowing ordinary investors to take small ownership stakes in fledgling companies — the real winner will be the U.S. economy.

Sam Gustin is a reporter at TIME focused on business, technology, and public policy. A native of New York City, he graduated from Reed College and Columbia University's Graduate School of Journalism.

This is a repost of an article that appeared on the Time Magazine website on March 13, 2012

Thursday, September 19, 2013

It’s Up to You, Entrepreneurs

Startup scenes are popping up in cities all over the world. Brad Feld is part of the reason.

By Antonio Regalado

The fever for startups is now planetary. Every city seems to have a growing scene of young software companies. And if they don’t, they want one.

It’s a practically a social movement, and a movement needs a theorist. That’s Brad Feld.

Feld is a partner at the Foundry Group, which invests in startups, and a widely followed blogger. And he believes he knows what it takes to create a vibrant startup community just about anywhere. Feld calls his theory the “Boulder Thesis,” after the Colorado city where he lives and that, with his help, has become a notable startup scene.

In his by-the-bootstraps guide, the 2012 book Startup Communities, Feld laid out a guru-ish, four-point plan for how to create a growing mass of startup companies. But his rules boil down to just one: entrepreneurs must be the “leaders.”  Everyone else—universities, governments, investors—are “feeders” that, though important, can’t kick-start a startup community on their own. Feld says if even fewer than a dozen established entrepreneurs team up and get serious—create an incubator, for instance—that nearly any city from Detroit to Cape Town can create a meaningful startup sector.

Feld’s principles have weight because he’s lived by them. He is a co-creator of TechStars, which gives startups seed money and three months of intensive training. Conspicuously absent from Silicon Valley, TechStars instead operates in seven other American cities, including Boston, Chicago, and Austin.

MIT Technology Review asked Feld what it takes to create a successful startup community.

People talk about technology clusters. You talk about entrepreneurial communities. What’s the difference?

Clusters or hubs are words that have very negative connotations to me. They describe things that governments try to create, and the vast majority of those efforts have not been successful. They are actually antithetical to what I believe in. So I’ve tried to focus on the idea of communities—it’s the notion of creating startup communities, which is a very bottom-up, very entrepreneur-led, organic phenomenon. It’s a profoundly different approach.

What’s the most important step an entrepreneur can take to create a startup community?

Just do stuff. It’s kind of that simple. It’s literally entrepreneurs just starting to do things. If you’re in a city where there’s no clear startup community, the goal is not raise a bunch of money to fund a nonprofit, the goal is not get your government involved. The goal is start finding the other entrepreneurial leaders who are committed to being in your city over the next 20 years. Then, as a group, get very focused on knowing each other, working together, being inclusive of anyone else who wants to engage, doing things that help recruit people to that geography, and doing selfish stuff for your company that also drives your startup community.

Let’s say you are the mayor. Would you rather bring Boeing to your city or have a startup scene?

I’d totally rather have a vibrant startup community. Governments spend all their time trying to get big companies to relocate their headquarters and they end up subsidizing the move with tax breaks. And companies that relocate their headquarters are often not meaningful job creators. What’s more, you’re just playing a zero-sum game with some other place. You’re not creating an environment that allows the next Google, Microsoft, Facebook, or Genentech to get creative.

You seem to think a top-down approach is pretty toxic.

It’s the difference between a network and a hierarchy. A hierarchical approach doesn’t recognize that the brilliance of what happens around innovation is, in many cases, simply due to a network. The way startups evolve in 2013 is very network-driven.

Think about what happened to a place like Detroit. A hundred years ago, Detroit was an incredible startup community. And a lot of why it’s been in decline has to do with culture and hierarchies and lack of innovation and all of the classic problems that happen when companies become very large incumbents. Part of the power of having startup communities is it continues to challenge the status quo. So for many of these cities that were once very important and powerful, that today are struggling, startup communities are a way for them to rejuvenate themselves.

What’s the evidence that startup communities can happen outside of traditional technology hubs?

There’s evidence of it in places like Boulder, but you’re starting to see emergence of this activity in Kansas City and Des Moines. Right now you have several successful startups in Iceland. Those are cities that historically you wouldn’t talk about, going back 20 or 30 years. They’re not the Research Triangle Park. They’re not a conventional cluster.

In your book, you say entrepreneurs need to make a 20-year commitment to a place. Does anyone really think in those time scales?

Do you plan to be in the city you are living in 20 years from now? Do you expect to still be an entrepreneur? If the answers are “yes,” then you can think on a 20 year arc. The thing that you hear all the time is, well, were there more jobs in Q1 2013 than in Q1 2012? Were there more financings in Q2 than Q1? That shit just simply doesn’t matter. And that’s the problem with so many organizations around entrepreneurship. They’re driven by metrics that don’t matter.

How would you measure the success of a startup community?

If I look at a company in Boulder that just recently went public, Rally Software, that company was started almost 10 years ago. When they were started it was one person and an idea; today it’s 500 people and worth $600 million.

Rally has had a significant impact on the Boulder startup community in terms of hiring people that have gone on to other startups, visitors who come through Boulder as clients, who make friends, eat in local restaurants. Those things are impossible to measure in any very discrete way. So the way I look at it is, don’t worry about year-to-year quantitative metrics. The focus should be whether significant, meaningful companies are being created.

In Kansas City you bought a house and handed it over to some programmers. What’s the idea?

There’s a whole series of houses that are getting set up as hacker houses because of the high-speed one-gigabit Internet in Kansas City [see “Google’s Internet Service Might Actually Bring the U.S. Up to Speed”]. There are four people living in my house. It’s rent-free. The company is called Hand Prints and they’re doing 3-D printer software that takes advantage of the very high-speed Internet. I’m hopeful that we’ll learn a lot of new things.

It’s also building what I call a “startup neighborhood.” The people that are moving in, even though they’re starving entrepreneurs, they like to hang out at coffee shops, they like to eat at restaurants, they bring an energy to the community. What’s also fascinating is you’re having a lot of people come through Kansas City, from all over the world, just to see what’s going on around Google Fiber at these fiber houses. This is a neighborhood that has been run-down, and all of a sudden, there’s this influx of young smart people into the neighborhood. 

This is a repost of an article that appeared in the MIT Technology Review on July 15, 2013

The Subtle Differences of Intellectual Property Laws in Europe

By: Paul Chen

In the United States, we take it for granted that everything is so lawyer'ed that you have to have blatantly obvious warning labels on different products.  For example, you will find a coffee cup with the warning that its contents are hot.  Or as Don from this week's episode of the Newsroom pointed out, a box for a iron will tell you not to iron your shirt while wearing it.   A crack in the sidewalk is seen as a law suit waiting to happen.  Here in Poland, people see things quite a bit differently.  There are endless amount of pot holes in the streets and cracks in the sidewalk.  I have had an amazing amount of debates with some Polish people about the legal problems of certain situations.  They almost always say that I was exaggerating.  

When it comes to startups, it is recommended that you have a lawyer from the get go.  This is the advice of Lukasz Wegrzyn a lawyer with many years in intellectual property law.  His CV includes the likes of Agora, the biggest media outlet in Poland, and MTV Polska.  He says that many startups here don't really consider having a lawyer until it is too late.  With communism less than 30 years in the past, Poland as well as her former Warsaw Pact neighbors are still quite green in terms of dealing with ownership.  The concept of ownership of an idea can even be a bit too abstract for some.  However, for programmers and content creators, this concept is the most important aspect of their business.  

Last night, Hive53 hosted their first ever Legal Swarm in the Google offices in Krakow.  The guest speaker was Mr. Wegrzyn.   He stated that lawyers aren't as expensive as one would think, but they are worth the investment.  Verbal agreements are worth as much as the air that is used to speak it, one must get everything in writing.  It doesn't matter in which form, be it a text, email, PDF, on paper, or on parchment signed with blood.  At the end of the day, when you go in front of a judge, he will want to have a proof of agreement.  Without it, everything is hearsay. 
Mr. Wegrzyn also recommends having the proper documentation such a intellectual property statement, copyright, trademark registration, employment contracts, and hard copies of codes.  In the United States, ideas can be patented.  However in the EU, it cannot be patented.  So the best way to protect your idea is to be the first one execute or implement it.  With a physical existence of this program, product, or service on the market, you are insured anyone that comes after might infringe on your intellectual property.  

While it is obvious, Mr. Wegrzyn recommends that you have all coding and descriptions be printed out on paper.  After coding is printed out on paper, it is copyright-able.  Anything that exist in your hard drive or in the cloud is not protected by the rules of copyright.  He also recommends having your company name and domain be registered.  Anything that is not registered can be used by others regardless how long you have been using the domain, name, or likeness.  

Any website that uses cookies should be very clear about the fact, or the owners can face some legal problems.  Mr. Wegrzyn also recommends that the startup have a policy when dealing with personal data of clients, non-disclosure.  He also reports that functionality are not protected by IP law.  In the US, a business model or processes can be protected but in the EU it is not.  Of course, company that wishes to operate in international markets are subject to all the laws of the jurisdiction in which it wishes to do business.     Mr. Wegrzyn also recommends selling and issuing of licenses rather than selling of the copyright.  It is better for long term gain.  

Even with all the warning labels and yellow caution tapes, sometimes legal advice can be worth their weight in gold.  We in the United States have been dealing with lawyers and intellectual property law even before the days of Napster and sampling by hip-hop artists but in Poland with the startups about to hit critical mass, awareness of intellectual property law is more important than ever.  It could mean the difference between successfully executing million dollars in deals or failure.  

Wednesday, September 18, 2013

Silicon Valley Can’t Be Copied

For 50 years, the experts have tried to figure out what makes Silicon Valley tick. The answer is people.

By Vivek Wadhwa

By 1960, Silicon Valley had already captured the attention of the world as a teeming technology center. It had spawned the microwave electronics industry and set a pattern for industry-academic partnerships. French president Charles de Gaulle paid a visit and marveled at its sprawling research parks set amid farms and orchards south of San Francisco.

Stanford University, which is at the heart of Silicon Valley, had given birth to leading companies such as Hewlett-Packard, Varian Associates, Watkins-Johnson, and Applied Technologies. These companies were pushing the frontiers of technology. There was clearly something unusual happening here—in innovation and entrepreneurship.

Soon enough, other regions were trying to copy the magic. The first serious attempt to re-create Silicon Valley was conceived by a consortium of high-tech companies in New Jersey in the mid-1960s. They recruited Frederick Terman, who was retiring from Stanford after having served as provost, professor, and engineering dean.

Terman, sometimes called the “father of Silicon Valley,” had turned Stanford’s fledgling engineering school into an innovation engine. By encouraging science and engineering departments to work together, linking them to local firms, and focusing research on the needs of industry, he created a culture of coöperation and information exchange that has since defined the region.

That was the mixture that New Jersey wanted to replicate. It was already a leading high-tech center—home to the laboratories of 725 companies, including RCA, Merck, and the inventor of the transistor, Bell Labs. Its science and engineering workforce numbered 50,000. But because there was no prestigious engineering university in the area, its companies had to recruit from outside, and they feared losing their talent and their best technologies to other regions. (Even though Princeton University was nearby, its faculty generally shunned applied research and anything that smelled of industry.)

New Jersey’s business and government leaders, led by Bell Labs, decided that the solution was to build a university much like Stanford. And that is what they hoped Terman would do.

Terman drafted a plan, but he could not get it off the ground, largely because industry would not collaborate. This history was documented by Stuart W. Leslie and Robert H. Kargon in a 1996 paper titled “Selling Silicon Valley.” They tell of how RCA would not sign up for a partnership with Bell Labs, how Esso didn’t want to share its best researchers with a university, and how Merck and other drug firms wanted to keep their research dollars in house. Despite common needs, companies would not work with competitors.

Terman would later try again in Dallas. But he failed for similar reasons.

In 1990, Harvard Business School professor Michael Porter proposed a new method of creating regional innovation centers—this time around an existing research university. He observed that geographic concentrations of interconnected companies and specialized suppliers gave certain industries productivity and cost advantages. Porter postulated that by bringing these ingredients together into a cluster, regions could artificially ferment innovation (see “In Innovation Quest, Regions Seek Critical Mass”).

Porter and legions of consultants following his methodology prescribed top-down clusters to governments all over the world. The formula was always the same: select a hot industry, build a science park next to a research university, provide subsidies and incentives for chosen industries to locate there, and create a pool of venture capital.

Sadly, the magic never happened—anywhere. Hundreds of regions all over the world collectively spent tens of billions of dollars trying to build their versions of Silicon Valley. I don’t know of a single success.

What Porter and Terman failed to recognize is that it wasn’t academia, industry, or even the U.S. government’s funding for military research into aerospace and electronics that had created Silicon Valley: it was the people and the relationships that Terman had so carefully fostered among Stanford faculty and industry leaders.

University of California, Berkeley, professor AnnaLee Saxenian understood the importance of people, culture, and connections. Her 1994 book Regional Advantage: Culture and Competition in Silicon Valley compared the evolution of Silicon Valley with that of Route 128—the ring around Boston—to explain why no region has been able to replicate the California success story.

Saxenian noted that until the 1970s, Boston was far ahead of Silicon Valley in startup activity and venture capital investments. It had a huge advantage because of its proximity to East Coast industrial centers. By the 1980s, Silicon Valley and Route 128 looked alike: a mix of large and small tech firms, world-class universities, venture capitalists, and military funding. And then Silicon Valley raced ahead and left Route 128 in the dust.

The reasons were, at their root, cultural. It was Silicon Valley’s high rates of job-hopping and company formation, its professional networks and easy information exchange, that lent the advantage. Valley firms understood that collaborating and competing at the same time led to success—an idea even reflected in California’s unusual rule barring noncompete agreements. The ecosystem supported experimentation, risk-taking, and sharing the lessons of success and failure. In other words, Silicon Valley was an open system—a giant, real-world social network that existed long before Facebook.

It also doesn’t hurt that Silicon Valley has excellent weather, is close to mountains and the ocean, and has a myriad of state-park hiking trails. These help foster a culture of optimism and openness.

Note that from 1995 to 2005, 52.4 percent of engineering and technology startups in Silicon Valley had one or more people born outside the United States as founders. That was twice the rate seen in the U.S. as a whole. Immigrants like me who came to Silicon Valley found it easy to adapt and assimilate. We were able to learn the rules of engagement, create our own networks, and participate as equals. These days, the campuses of companies such as Google resemble the United Nations. Their cafeterias don’t serve hot dogs; they serve Chinese and Mexican dishes, and curries from both northern and southern India.

This is the diversity—a kind of freedom, really—in which innovation thrives. The understanding of global markets that immigrants bring with them, the knowledge they have of different disciplines, and the links that they provide to their home countries have given the Valley an unassailable competitive advantage as it has evolved from making radios and computer chips to producing search engines, social media, medical devices, and clean energy technology.

The Valley is a meritocracy that’s far from perfect, however. And some of its flaws tear at the very fabric that makes it unique. Women and certain minorities like blacks and Hispanics are largely absent from the ranks of company founders and boards. Venture capitalists have a herd mentality and largely fund startups that produce short-term results—leading to a preponderance of social-media and photo-sharing apps. Real-estate prices are so high that most Americans can’t afford to relocate there.

All these things slow the Valley down, but they won’t stop it. The only serious challenge I see to Silicon Valley is, ironically, from the same government that once catalyzed its development. Silicon Valley is starved for talent. Restrictions on work visas prevent foreigners from filling its openings. The latest data indicate more than one million foreign workers on temporary work permits now waiting to become permanent residents. The visa shortage means some will have to leave, and others are getting frustrated and returning home.

This brain drain could bleed the life out of Silicon Valley’s companies. Then indeed we will have real competitors emerging in places like New Delhi and Shanghai. But it won’t be because they discovered some recipe for innovation clusters that finally works. It will be because we exported the magic ingredient: smart people.

Vivek Wadhwa is the author of The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent (Wharton Digital Press, 2012). Follow him on Twitter @wadhwa.

This is a repost of an article that appeared in the MIT Technology Review on July 3, 2013.

Tuesday, September 17, 2013

What Y Combinator Really Does for a Select Few

The UpTake: With its selective criteria, high-profile leadership and $1 billion examples of success, Y Combinator can easily make promises to aspiring startups. But it has the mentors and network to back it all up. The Polish founders of Estimote got one-on-one help from top U.S. startup founders, access to leaders at Google and Apple and intros to many of their target retail customers. Now they're easily raising dollars too.

The Polish cofounders of a startup called Estimote knew Y Combinator would be their ticket to the U.S. market—for funding, networking and introductions to the Fortune 500 retailers they hoped would use their unique sensor technology in stores.

What they didn’t expect was product guidance and retailer insight from Groupon’s founder and ex-CEO Andrew Mason, the technical expertise of Posterous founder Garry Tan and geo-location know-how from Sam Altman of Loopt. They also had easy access to Apple and Google, whose operating systems would have to communicate with the Estimote sensors. And they took advantage of office hours with Y Combinator founder Paul Graham.
Even with startup accelerator programs trending in cities around the world and far fewer barriers to starting a company in your own basement, Graham has managed to keep Y Combinator—the pioneer of accelerators—a top choice for launching and funding promising tech companies. And the Silicon Valley program seems to have just as much allure for the newest to join its ranks. An interview last week with Estimote revealed some inner workings of the program that inspired all the rest.

“It’s the best accelerator in the world, so we wanted to try and see if it would work,” said co-founder and CEO Jakub Krzych. “And it worked. It’s a world class brand, and a door opener when we talk to investors or customers or anyone.”

It wasn’t that the men needed much business help. Krzych built a Krakow, Poland ad network called AdTaily that was purchased in 2009 by the largest media group in the nation. His partner and CTO Lukasz Kostka is a computer scientist with expertise in smart cities and big data.

And it wasn’t that they lacked focus for their idea. Estimote is solving a problem that all retailers face. With so many products available online, customers often visit brick-and-mortar stores to see items in person and try them on, but head home to find a better deal or more options online.

Estimote’s network of wireless sensors on products within a store sense a shopper’s location and populate her smartphone screen with the product, its specs, color choices and sizes. There are deals personalized to the shopper and an option to pay for the item in the app and have it shipped home or delivered at the front of the store (for example, in an Ikea store).
The Bluetooth low-energy technology that makes the sensor operate automatically will be built into Apple’s new iOS 7 coming this fall and to mobile operating systems announced by Google and Nokia.

But the product advice that came from high-profile Y Combinator mentors was invaluable for getting the sensors into the hands of customers during the three-month accelerator. Thousands of $99 packs of three sensors have been sold online since July and Estimote expects to soon announce pilot projects with some of the companies on that Fortune 500 wish list.
Their key advice: Get the product into the hands of customers, and fast. And it fit pretty seamlessly with Y Combinator's motto (and the tagline on its hand-out t-shirts): Build Something People Want.

“Andrew (Mason) said that we should always start with the customer and try to understand what kind of problem they have when they walk in a Walmart or retail store, and try to solve that problem,” Krzych said.

Following his advice, they learned about the idea of “showrooming,” browsing, trying on and buying later online. They also learned of privacy concerns of retailers and shoppers (they’ll have to opt in to the sensor network). They built a prototype and tested it with customers daily throughout the program before manufacturing the first batch of sensors and selling them online.
“We think our sensor technology will build a bridge between the physical store and online,” Krzych said.

If he’d focused more on the customer in his previous company, it would have grown a lot faster too, he said.

All of the product testing has led to plenty of other applications for the sensors. Hospitals have reached out to use the network to track the location of doctors. Museums hope to provide supplemental information about exhibits (or perhaps to replace the audio recordings typically provided for a self-tour?).

The men have developed an operating system to go along with the sensors, and developed an API so apps can be developed on top of it. The sensors have their own processors, accelerometers and thermometers. Krzych is excited to see what people develop on top of it.
The final benefit of Y Combinator, the men are still realizing. Since Tuesday's Demo Day, they have fielded calls from all sorts of investors. They expect to close a round of convertible debt (they don't have a specific amount in mind) within weeks with investors strategic to the retail industry. They'll keep offices in Mountain View and Krakow.

“We didn’t expect Y Combinator to take our hand and show us everything,” Krzych said. “At the end of the day, we’re founders and we are the company and these are our decisions. But they have a network and experience, and it was up to us to take advantage.”

Laura Baverman is a business journalist newly relocated to Raleigh, North Carolina. Before her move, Laura spent nearly four years tracking Cincinnati's growing technology and startup scene for the Cincinnati Enquirer.

This is a repost of an article that appeared in Upstart Business Journal on August 26, 2013

Note: Jakub and Lukasz will be appearing at the YC Swarm hosted by Hive 53 on September 23, 2013 at 6:00pm at the Stage on Łobzowska 3.  Look for my report about the event next week.  

Monday, September 16, 2013

What It Takes to Create a Start-Up Community


Entrepreneurs exist everywhere, but start-up communities don’t. Some rise up organically and others are created deliberately — or at least people try to create them deliberately. Many hope to create the next Silicon Valley.

Brad Feld, who is known for helping to turn Boulder, Colo., into a robust start-up hub, which he wrote about in his book, “Startup Communities,” said entrepreneurs lead a community’s creation and everyone else feeds it. Those feeders include government, universities, mentors, investors, service providers and large companies. Start-up communities also need a steady supply of talent — engineers, yes, but designers, scientists, sales and marketing experts, management consultants and investors, too. Another essential is density — lots of people sharing ideas and collaborating — and lots of places for entrepreneurs to network and share ideas.

One recent example of a burgeoning community is a segment of Los Angeles that is becoming known as Silicon Beach. With a steady supply of engineering, business and creative talent from Hollywood studios and major universities like U.C.L.A. and U.S.C., plus lots of meet-ups, co-working spaces and start-up events, Silicon Beach — which includes the beach communities of Santa Monica and Venice, as well as downtown L.A. and Hollywood — has become a haven for start-ups that blend technology and media, especially gaming companies.

Richard Florida, co-founder of the Atlantic Cities blog, and an urban studies professor at the University of Toronto and New York University, said Silicon Beach is part of an interesting evolution happening in entrepreneurial activity — it’s moving from the suburbs to the cities. “During the Industrial Age, a lot of activity moved to the edge of cities and to the suburbs,” he said. “And we believed then cities had been supplanted. High tech was happening in suburban areas of Silicon Valley, and outside of Boston, Seattle, in the Austin suburbs, in Research Triangle. But in the past several years we’ve seen an incredible, accelerating shift in start-up activity back to urban centers.”

Population density, he said, allows for the serendipitous encounters that inspire creativity, innovation and collaboration. “Entrepreneurs are competitive,” Mr. Florida said. “But they are also looking for people to partner with, people they resonate with.” Boulder is an unusual example of density. The city has only about 100,000 people, but Mr. Feld has hypothesized it may have more entrepreneurs per capita than any other community in the country. “The number of people working for start-ups is off the charts,” he wrote in a 2011 blog post.

According to Mr. Feld’s site, Startup Revolution, Boulder has 191 start-ups today, six accelerators, three incubators, 35 investors (including angels, seed investors, venture capitalists and corporations), five meet-up groups and a host of events like Ignite Boulder, Startup Weekend and TEDx Boulder. The area has attracted lots of engineers as well as sales, marketing, management and finance professionals.

Mr. Feld told DealBook in December that the city’s start-up community has grown because Boulder is a place where people wanted to live, so they built a life around it. But can you create a start-up community in a place like Detroit or even Las Vegas? Both cities lack density, but they do have evangelists — someone with a vision.

Detroit has Dan Gilbert, founder of Quicken Loans. In Detroit today, the median house price is less than $60,000, household income is around $25,000 and the number of people living in poverty is more than three times the national average. Talent is leaving in greater numbers than it’s arriving — which runs completely counter to what a start-up community needs. But as you can read in this recent Times story, Mr. Gilbert has already spent $1 billion to try to change all of that.

Meanwhile, Tony Hsieh, the founder of Zappos, is investing $350 million to revitalize Las Vegas, with $50 million going to tech start-ups through the VegasTech Fund. (The Times Magazine wrote about Mr. Hsieh’s efforts in 2012.) Drawing start-ups to economically challenged cities like Detroit and Las Vegas is hard enough but once there, those start-ups still face the usual challenges — finding investors, hiring talent and connecting with their communities.

Those connections are essential, said Scott Case, chief executive of Startup America Partnership, a private-sector initiative that aims to encourage the development of high-growth start-ups. Mr. Case said that is one thing his organization is focused on, recruiting and making its members visible. And that’s why the presence of accelerators and incubators, as well as events like meet-ups and pitch fests, are vital for a community’s growth.

Over the next several months this blog will take a closer look at a variety of start-up communities nationwide — those that are established and that that are emerging, or perhaps even struggling — in an effort to learn more about  what makes these places work.

Do you think it’s possible to create start-up communities deliberately? Or do they have to happen organically? And which communities would you suggest we look at?

This is a repost of a post that appeared on the New York Times website on April 26, 2013

Friday, September 13, 2013

Building Bridges and Accelerating to the Future

By: Paul Chen

When you walk into the Innovation Nest office on Ludwinowska Street in Krakow, one of the first things that hits you is the amazing view of the Vistula River and the Wawel Castle sitting atop its ancient royal throne.  I was led into an enclosed glass box with two benches facing each other and was provided with a cup of tea I requested with two sugars.  Next thing I knew, a scruffy bearded man was sat across me in an unassuming sweater and jeans and a pair of sandals.  One might mistaken this man as some college professor in holiday attire.  Instead, it’s Piotr Wilam, a giant and one of the original pioneers of Polish digital media.   He along with the late Tomasza Kolbusza founded the website in 1995.  However, as a young man, he originally wanted to be a scientist.  That wasn’t to be, he was persuaded to become a businessman instead.  Early on, he was involved in the publication of Polish versions of popular travel guides like Rough Guide and Lonely Planet.  At some point, he became aware of the digital revolution so was born.  Currently it is the second most viewed site in Poland behind the auction site  Mr. Wilam sold his shares of the site a few years ago and became an angel investor. 

A couple years ago, he became aware that the Polish market, although quite large, is not big enough to do anything substantial.  He felt that local businesses needed to go global.  As a result, in 2011, along with fellow Onet executive and investor Marek Kapturkiewicz, founded Innovation Nest.  Innovation Nest is a seed round investor as well as an accelerator program.  It focuses on software as a service projects.  It organizes lean startup customer development workshops for startups.  It also organizes the local Startup Stage event about once every month.  The next one is September 19, 2013.   It offers mentoring to startups and also offers office hours.  It is when anyone with a good well thought out idea can go and get feedback from him or his team of experts.  After some satisfactory stages of development, a startup is sent to Silicon Valley to participate in various camps like Y Combinator to gain experience and feedback.  This collaboration with Silicon Valley is one of the essential elements of Innovation Nest’s operations. 

Currently is has a few projects in its portfolio.  One is, a tool for user experience design which started about a year and a half years ago.  UXpin is closing the funding round with an US investor at the moment.  Another is Cloud Your Car which will launch shortly.  It is a service which allows one to monitor a fleet of cars along with some key data points via the internet.  One can use his smartphone or laptop to receive data from a module which is plugged into the cigarette lighter. 

Mr. Wilam is happy about the fact that Krakow has a very vibrant Startup Ecosystem.  He likes that there is a collaborative atmosphere among the startups.  There aren't many startups that is trying to get one up on another. He also likes that there is a big focus on customer development.  He encourages startups and investors to come to Krakow have a visit and see what we are doing here.  We have lots of untapped talent here waiting to be discovered.

Thursday, September 12, 2013

Open Coffee Krakow #19 September 12, 2013

Hello readers,

This morning was the 19th edition of Hive 53's Open CoffeeKRK. The following startups made their pitch: - business service providing KPI data for SME’s – a website allowing people to contact eachother for sports-related activities.

Marek Ciesla showed us his project converting photos into VR environments. –Throskan Game

Wytwornia – a co working space

XpARTY – An expats festival featuring arts and music

Pami-AGH – A conference resulting from collaboration between AGH UST and the American 

Richard talked about his involvement in Industrial business machines project in Belarus, Leadership Camp for Kids, and Drones forAgriculture uses.

Required Reading: Paul Graham is an English programmer, venture capitalist, and essayist. He is known for his work on Lisp, for co-founding Viaweb, and for co-founding the Y Combinator seed capital firm.

Summary and Announcements:

As you can see, this was a pretty light edition of Open Coffee today.  However in October when the students and workers are back in town, things will really start to pick up. 

Hive53 will be hosting a Legal Swarm event next Wednesday 18.09,2013 at 6pm in the Google office on the Main Square. 

Next Thursday 19.09.2013 at 7pm there will be a Startup Stage event about Money on Lobzowska 3.

Next Friday 20.09.2013 at 2:45 there will be a live showing of TedxCity at Czuły Barbarzyńca on Powisle 11.

The next Open Coffee will be 26.09.2013.  

Thank you for your attention.  Have a nice day.


Wednesday, September 11, 2013

Getting Cut Without Getting Huge in Startups

   By: Paul Chen

You wake up at Seatac, SFO, LAX. You wake up at O'Hare, Dallas-Fort Worth, BWI. Pacific, mountain, central. Lose an hour, gain an hour. This is your life, and it's ending one minute at a time. You wake up at Air Harbor International. If you wake up at a different time, in a different place, could you wake up as a different person? 

Narrator, Fight Club

Like Fight Club the Lean Startup method is coming to a city near you.  It also wants you to change the way you have been thinking about how to well.."startup".  Some of the versions of this might be the Lean Startup Machine, Lean Startup Circle, or simply The Lean Startup.  What is this Lean Startup any way?

"Lean Startup" is a method for developing businesses and products first proposed in 2011 by Eric Ries. Based on his previous experience working in several US startups, Ries claims that startups can shorten their product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and what he calls "validated learning". Ries' overall claim is that if startups invest their time into iteratively building products or services to meet the needs of early customers, they can reduce the market risks and sidestep the need for large amounts of initial project funding and expensive product launches and failures

Wikipedia entry

The "Lean" part of the name means that you build your company, product, or service using very little starting capital.  Most of the work done during the initial stage of product development is done on customer discovery.  What the startup needs to do is to develop a comprehensive understanding of their customers: behavior, needs, habits, relationships, problems. To do this, one conducts customer discovery surveys to gain a better understanding of the needs of a particular market.  

Such data is then transferred on to a business model canvas which is a one page questionnaire where the scientific method is used to help develop a product or service.  One comes up with a hypothesis. This product or service for your hypothesis is then your MVP.  I don't mean most valuable player, it means minimum viable product. It is a"version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort." Then you conduct further surveys with different groups of people to test the hypothesis. The rational is to build a firm customer base by starting small and solving simple problems but doing it very well.  Basically taking the "if you build it, they will come", approach. 

By using this MVP, one doesn't need to have a large amount of startup capital and because the product might be simple the startup can make the pivot easily. This is done by the simple fact that since not too much money and resource had been invested in the solution, making the pivot will not be so painful.  It allows the startup to be more nimble and adopt quickly to the ever-changing needs of the market.   It is not about doing things cheaply, it is about doing it efficiently.   Another rational is that since you have a MVP that you can monetize quickly, the investors will come looking for you.  That is when you will have an opportunity to scale quickly and take off.  

One local "Lean Startup" practitioner is Ian Scarffe.  He is an entrepreneur from Australia with many years of experience.  (Linkedin Profile)  Recently, he has been providing mentoring to BaseConnect.  The idea is that it will provide a platform for students and student groups to connect with each other much like what LinkedIn is doing with professionals.   I would call it the missing link between Facebook and LinkedIn.  It presents a nice professional profile of a student or student group but does it in a fun way.    Ian is always on the hunt for new interesting ideas.  If you mention my blog, he has a special gift for you.