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If the Shoe Fits: Innovation vs. Marketing

Friday, September 18th, 2015

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mThere is a myth out there that large companies aren’t creative and don’t innovate.

Not only is it a myth, it’s pure BS.

Watch this video for a look at pure innovation as done by Samsung.

So why the persistent myth?

There’s a great answer in the comments.

In two years Apple will come out with the same thing for their semis, call it iPass, and be lauded as innovators. –CommanderCorner

It used to be that if you built a better mousetrap the world would beat a path to your door, but these days the mousetrap matters less than the mystique of the builder and the skill of the marketers.

Image credit: HikingArtist Video credit: Leo Burnett

Entrepreneurs: Think Security from Day One

Thursday, July 30th, 2015

https://www.flickr.com/photos/centralasian/8261449212

There are dozens of startups working on wiring everyday products to become part of the Internet of Things (IoT) and a few weeks ago I cited an article that raising money in that arena was tied to building security into a product from the beginning.

Security used to be a function to which consumers gave little thought, but that is rapidly changing.

Anything can be hacked, but awareness was heightened recently when security experts hacked a Jeep’s entertainment system and took control of vital driving functions.

The result of their work was a hacking technique—what the security industry calls a zero-day exploit—that can target Jeep Cherokees and give the attacker wireless control, via the Internet, to any of thousands of vehicles. Their code is an automaker’s nightmare: software that lets hackers send commands through the Jeep’s entertainment system to its dashboard functions, steering, brakes, and transmission, all from a laptop that may be across the country.

And if none of this makes IoT startup founders rethink their cavalier attitude towards building tough security into their initial design, perhaps this comment from Colby Moore, a security research engineer at the cybersecurity firm Synack, will make them think twice.

“Really, the state of security on these things right now is pretty atrocious… A lot of these device manufacturers are just not security people and they really just don’t have security people on staff, especially when it comes to IoT start-ups. What they are doing is phenomenal with all of these new uses for technology. But security isn’t a concern for everybody. It’s ship now and patch later mentality.” (…)  If you are worried about it then don’t put yourself at risk. It’s kind of up to us to demand a higher security standard and hold the manufacturers to it.”

Flickr image credit: centralasian

Hacking Colorblindness

Tuesday, July 21st, 2015

Business Insider published an article today about glasses that let colorblind people see color, including the video below.

I’m sharing it to help along the effort for it to go viral, so more people will learn about this technology.

And also why you should never take anything for granted.

Entrepreneurs: the Truth about Warm Intros

Thursday, June 18th, 2015

https://www.flickr.com/photos/alexxx-malev/18559606430

The questions on Quora provide a fascinating look into today’s mindset, which makes for a giant time-suck, so I rarely allow myself the luxury.

However, Why are VCs so adamant about warm intros? caught my attention, because I am asked it so often.

Most of the responses were justifications from VCs, but two provided a refreshing dose of reality.

Not surprising that neither are VCs.

The reason they want warm intros is because they are too lazy to research things themselves and many of them don’t know anything about starting a company or building one. The smart experienced guys at the top who have actually done something are too busy so they have the dime-adozen MBAs they hire do grunt work. Since the d-a-d has never actually built anything, and doesn’t really know what you do, they want a “warm” intro. Warm means someone else they can blame if they screw up yet again.David Feldman, CEO, ZF Micro Solutions, Inc.

Classism. No further to look than that. Let’s not make it complicated by trying to avoid the unpleasant.Michael O. Church

The ‘warm intro’ investor bias is one of the worst, because it raises the funding bar to almost insurmountable heights, which limits the entrepreneurial pool and even reduces the chances of success.

Whether it’s laziness, fear of the unknown or insecurity outside of their comfort zone doesn’t matter — the result is the same.

Too many good founders/companies don’t get funded.

Flickr image credit: Alexx Malev

If the Shoe Fits: the Power of Working Alone

Friday, June 5th, 2015

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mMore and more research is showing that real creativity is a more solo function than a team effort.

Susan Cain spells this out in a thoughtful LinkedIn post that is well worth your time, especially if you are a young founder raised on social media, with a penchant for crowdsourcing and Yelp.

Consider the words of Steve Wozniak in his memoir iWoz.

Most inventors and engineers I’ve met are like me—they’re shy and they live in their heads. They’re almost like artists. In fact, the very best of them are artists. And artists work best alone where they can control an invention’s design without a lot of other people designing it for marketing or some other committee. I don’t believe anything really revolutionary has been invented by committee. If you’re that rare engineer who’s an inventor and also an artist, I’m going to give you some advice that might be hard to take. That advice is: Work alone. You’re going to be best able to design revolutionary products and features if you’re working on your own. Not on a committee. Not on a team.

Then read, digest and tweak Cain’s ideas to fit your situation, then put the concepts to work in your company.

Image credit: HikingArtist

A Different Kind of Diversity

Monday, May 18th, 2015

https://www.flickr.com/photos/mrsdkrebs/7149966049/

I’ve had a lot of inquiries lately from managers who believe their teams have lost their edge.

Productivity is fine and they innovate, but in a predictable, prosaic way.

All were facing the same problem, but none could see that the source was themselves.

It is the same problem many bosses face, including Dan, whom I wrote about seven years ago.

So rather than spend my time and their money identifying the likely cause I sent each one this link and told them to call if they needed additional help.

So far I haven’t heard from any of them.

Flickr image credit: Denise Krebs

Entrepreneurs: Lessons From Founder Showcase

Thursday, May 14th, 2015

Ajo Fod

Today I attended The Founder Showcase.

There are a tremendous number of companies looking for access in the space of early ventures. It is hard to compete against all the din.

This year’s Founder Showcase included a few dozen interesting companies at the booths. So it is not strange how even a very sophisticated and advanced companies can get overlooked.

So, what do venture capitalists look for?

Each level of the selection process for a startup is brutal in its selectivity and uses a different filter. The filter applied at the Founder Showcase was one of popularity. This induces biases that businesses and investors wouldn’t have.

One  start-up, Quarrio, was the only company using AI to solve a hard problem – one of making data in tables accessible using plain English. It is a usable and complete product relative to others at the showcase. It was filtered out of the pitch competition.

The pitch competition included a selected few companies:

  • Makerblok: Making educational electronics for children.
  • Ampl: A bag that can charge all your devices so that you don’t have to worry about charging each device. Is cool but is too heavy.
  • Theo: MLS quality data (much more accurate in price compared to Redfin). Also there is an argument that there are many features/amenities that Real Estate agents desire.
  • keepe: This is a startup based in Seattle offering handyman services guaranteed in 1 hour.
  • Trato: This company serves up customizable legal documents to make it easier for the masses to do business.

The members of the VC panel are listed here.

On the Problem: VCs generally want to know how much pain is there in the problem. Who faces the pain and how much the solution removes the pain. How big the market is. 

Solution: They need to know how the startup solves the problem. How credible the solution is. If there is a technical moat around the solution. Sometimes the moat is market share. If so the biggest advantage is swift execution.

Scaleability: Building connections one at a time is hard. There has to be a plan to reach people quickly. There is a lot of noise around. There should be a plan to get the business past the noise.

Capital intensity: The question here is how much money needs to be invested in the solution before it starts cash flowing. High capital requirements increase the risk.

Team: Investors look for teams when investing. Teams increase stability and credibility. A team with a background in their field of expertise is more likely to create a moat of competence. Similarly a team that has worked together for a long time is likely to work well.

Generosity: Kickstarter is another example of a generous startup that has succeeded by making many other people succeed.

A life-sciences called Suntowater was voted the best in this Founder Showcase event overwhelmingly by both the crowd and the judges. It solves the problem of clean drinking water from the humidity in the air using electricity generated by a solar panel. This innovation is considered generous because it is most useful to the underdeveloped world.

The general recipe for a successful startup is to relate to people, then promise a great future and connect the dots.

Chamath Palihapitiya, Founder of The Social+Capital Partnership, had great insights to share about the makeup of a wildly successful startup in the future. One source of information is the trend in the tastemaker in society.

In an earlier era individuals and companies paid a lot to get attention from consumers through selection by the tastemaker: companies such as AOL who rented their landing page for millions or radio stations that chose the music to be played.

Now the mechanism of taste selection has become “likes” on Facebook where everyone has a say. The downside of this mechanism is the noise. Facebook is likely to face creative destruction as the pendulum swings.

Chamath thinks that the next generation of companies will have multiple lightly curated channels either selected by humans or by algorithms. An example is Patrion, where people support the art they like, similar to Italy during the Renaissance.

Fixing education is an interesting problem. Linda frames education as a way of learning skills. This is more enlightened than the idea of education for its own sake. Startups that solve a problem can expect better reception.

In the past software giants like Microsoft and Oracle were dominant.

There has been a shift towards SaaS.

The next shift is expected to be towards outcomes as a service such as Uber.

For the investors, Warren Buffets letter to shareholders says that he sat on money for over 1/3rd of the time.

Chamath expects a funding hiccup in 2-3 years. Many companies are raising a lot of money in the current bubble. The easy money has to end at some point. 

Companies that don’t have a sufficiently good product to market fit will suffer. But it’s mostly their employees who have given up pay to get stock options who will lose big.

Chamath’s advice to entrepreneurs is to raise money when the going is good and sit on it till the company figures out a good product to market fit.

Did you know that Peter Diamandis didn’t have 10M$ when he announced the 10M$ prize? Nobody asked about the money since he cleared the line of credibility. He had astronauts and the NASA chairman beside him when he made the announcement. Strangely, the winning team spent about 30M$ to earn the prize.

So, where did the money come from?

Peter approached about 150 people who declined to fund the prize. That is a lot of rejection!

Richard Branson declined to fund twice. After a lot of insecure moments, they found that there is insurance against unlikely events that could cover this event.

A private company going to space was considered unlikely, so he was offered a $3M premium to insure against the outcome. He negotiated it down to a 50k/month premium. Then it was a question of finding people who would support the bet on a monthly basis.  This spreads the pain out, but it lasted for ever.

Richard Branson marched in weeks before the prize was won with an offer of $250m to commercialize the winning tech so that he could have his picture taken with the winners.

… and that is how Venture Capital works.

Image credit: Alpha Sangha

The Chimp & I

Wednesday, May 6th, 2015

I often claim the label of Luddite and am know to my friends as a digital dinosaur (I spent the weekend upgrading from Office 2003 to 2007).

I’m not a lover of the Internet of Things, because I believe anything/everything can be hacked. (If you have evidence to the contrary, please share).

To me, the idea of hackable self-driving cars is a nightmare and drones make me cringe.

Obviously, I’m not the only one who feels this way.

It seems my revulsion is shared by my distant cousins.

However, if I react the same way I would probably be sued and possibly jailed.

The problem, of course, is that technology is light years ahead of society, not only on a moral/ethical level, but on a consideration of consequences — of which there seems to be none.

Video credit: Bergers’ Zoo

Entrepreneurs: Disrupting Complexity

Thursday, April 9th, 2015

James-Heskett

Entrepreneurs love to talk about disrupting.

Most recently they have been disrupting finance.

Harvard’s Jim Heskett posits the idea that tech itself is ripe for disruption, especially if you agree with Clayton M. Christensen, author of The Innovator’s Dilemma.

Tech is ungainly for many of us.

Too much of it is developed by the young for the young

Both hardware and software are built by techies in love with the bleeding edge for early adopters and people captivated by potential — whether they will ever have use for it is incidental.

We’re told that the typical user of information technology today utilizes less than 5 percent of the capability made available by today’s hardware and software. A small number of basic functions repeatedly are put to good use by the typical user. They are the need-to-have functions. The functions thought by designers to be nice to have may enhance marketing efforts and satisfy software engineers’ desires to make complex things, but they largely go unused. For some, they even make access to “need to have” functions more confusing.

While many companies add (expensive) bells and whistles to drive growth, others work to provide a more minimalist approach that crushes competitors.

Heskett uses Intuit as an example of a company that focuses on consistently making its software simpler.

It did it by providing simple and inexpensive solutions to everyday problems. Scott [Cook, Intuit co-founder] likes to say that Intuit had 47th mover advantage, in part because it adopted a strategy that identified the pencil as the company’s most important competitor.

Does Heskett’s idea have legs? Is tech, in fact, ripe for Intuit-quality disruption?

If you have strong feelings or thoughts on the subject be sure to add your thoughts to the open forum; Even if you don’t comment it’s worth following; Heskett’s ideas always draw eclectic, well thought-through responses from his audience.

Image credit: Harvard Business School

Entrepreneurs: FinTech at Trading Show West Coast 2015

Thursday, March 12th, 2015

FinTech, the wedding between finance and technology, is a hotbed of startups and innovation, especially in London. Now it’s lighting the fires of the investment community in Silicon Valley, so I prevailed on Ajo Fod, who knows the FinTech world well, first as a quant and now as an entrepreneur, to attend the Trading Show and share his observations with you.

Ajo FodI had the pleasure of attending Trading Show West Coast 2015: West Coast’s leading quant, automated trading and big data event last week. This is one of the most legitimate trading shows I’ve seen and truly geared to professionals.

The first thing that caught my eye, was the surprisingly large majority wearing business attire; I was expecting some confusion. Google tried to hold down the fort of casual-at-work and a few people were dressed in jeans, with long-sleeved shirts for good measure.

But finance won over West Coast causal even in San Francisco. My decision to dress in a brown suit and a tie was just the right measure down from full business dress.

I was impressed by the balance between different groups of professionals. Quants / traders / investors / hardware / risk management and students were all well represented.

Different scales of enterprise from startups to micro hedge funds to medium sized funds, such as AXA Rosenberg, to industry titans like BNY Mellon Financial and Blackrock were there, too.

The mix of speakers, from hardware tech providing fast access to markets to macro thoughts from Lex Huberts, was good, especially considering the audience.

Systematic trading and HFT is no longer about the fastest execution. The marginal advantage from trading faster needs to be weighed carefully against the cost of the infrastructure, while the ability to forecast farther into the future is significant.

Apparently, the fastest access to markets is provided by Algo Logic. They sell machines that race the path from tick data reception to placing trades in 1.2micro seconds!

They achieve this by storing the logic in hardware in FPGA (field-programmable gate array). They include trading logic and risk checks on the chip to achieve this kind of reaction time.

The speed is used to grab favorably priced orders before anyone else can. The winners at any speed tend to be the ones with higher algorithmic sophistication. The direction of development in this field tends to be about adding computing power to the FPGA.

The discussion on Co-location vs Cloud Servers focused on the tradeoff between speed and algorithmic sophistication.

Pravil Gupta of Quadeye Trading and Bert Shen from SuperMicro are both suppliers of HFT technology. The difference is that one is about more sophisticated but still very fast trading while the other is at the higher speed end of the spectrum.

Speed is not everything in the HFT world. The incremental speed edge costs significantly. While there will always be fast traders that grab obviously mispriced orders over a short time horizon, others will play the game of taking the not so short-term bet.

The roundtables covered a list of varied topics. As expected the round table audiences in the Bay Area were largely focused on state-of-the-art in Big Data and deep learning.

These technologies could be the future, but I don’t see as much profitable application of these technologies as there is hype.

FinTech startups seem to be numerous in data services for the finance industry. iSentium: works on estimating the sentiment of tweets. Another works on interpreting SEC filings. Strategies are being fed information faster to produce more efficient markets.

The past was a speed race. The future is going to be about more information used in smarter ways.

For example, Alpha Sangha, my startup, combines information from a variety of data-sources using complex models/algorithms that maximize profitability while filtering out noise.

Acronyms come and go, so here are three relatively new ones stay aware of.

BRIC : Brazil Russia India China
MINT : Mexico Indonesia Nigeria Turkey
ESG: refers to the three main areas of concern that have developed as central factors in measuring the sustainability and ethical impact of an investment in a company or business

Ajo Fod is the founder of Alpha Sangha, which helps companies optimize complex forecasting models or algorithms based on large quantities of past data while avoiding the common pitfall of noise. They can further increase profitability by mining for model/algorithm variants that are better fits based on historical data.

Ajo previously worked as a quant at BGI/Blackrock and Mellon. He has masters degrees in both Computer Science (AI) and Operations Research (optimization). He earned a BTech degree from the prestigious IIT-Madras.

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