Founder Quorum

The Post Post-PC Era: Will Apple, Google, Samsung, Amazon Or Microsoft Win?

Wed, 20 Feb 2013 16:12:50 -0800

Note From Peter: This post originally ran on TechCrunch.com

Editor’s note: Peter Relan is a formerdeveloper and Oracle’s former VP of Internet Division, a serial entrepreneur since 1998, and a Silicon Valley angel investor. Relan founded YouWeb Incubator in 2007, spinning out a string of successful mobile and gaming companies. Follow him on Twitter @prelan.

Even before Apple’s 10 percent stock dip, it was clear that one battle was already over. Put down your arms – Android has won the smartphone OS marketshare war. The competitive drama of the smartphone battle has already unfolded to a large extent and is well understood: Android dominates unit shipment volumes, while iPhone dominates profits associated with smartphones. It may seem like too early a claim, but history tells us Google’s Android distribution model puts the large part of the smartphone market in its corner. No other OS has seen a reversal of fortune this late in the game (think Windows in the early ’90s and Nokia with feature phones in the early aughts).

And yet, many unknowns remain in the larger post-PC-era war, which has only just begun and has already seen an explosion of devices and form factors, all competing to fill the void of the now-ancient desktop computer: tablets, smartphones, minis, phablets, ultrabooks, hybrid laptops. As the market evolves, these devices will be competing to fulfill niche needs, with certain devices bound to flourish and others bound to fail. A number of factors will influence which device types will survive through 2015:

Consumer and worker choice
Device distribution channels
Platform ecosystems
Technology advances
Economic development in BRIC

1. CONSUMER AND WORKER CHOICE

So what happens to PCs and laptops? The obvious answer is that the tablet will take over, but there are multiple form factors. Current designations include the large tablet, the mini tablet, and the hybrid tablet (think the Microsoft Surface — a tablet with a removable keyboard and OS designed for both leisure and productivity).

Consumers will be sticking to their large and small tablets for email, Facebook and watching movies; let’s call them leisure activities requiring a light and easy-to-use second screen. These home consumers don’t need a physical keyboard nor do they want it, and at a $250-$600 price point, tablets are hard to beat. Hence the success of the iPad. And the iPad mini with a Retina display could even be the “next big thing.” The Nexus 7 is already in the 7.X-inch form factor, so the mini tablet wars are just getting started.

Prosumers on the other hand, use laptops across different use cases: leisure combined with light productivity work, such as creating documents and presentations. Some prosumers might opt for the ultrabook and mini-tablet combo, but for most, the hybrid tablet will play a crucial role in the coming years. The hybrid tablet is where portability meets leisure meets work-related tasks. However, a consumer tablet in the home will still exist for these families.

Professionals tend to follow the same patterns as the prosumer, although they wait for more proven solutions to emerge. With BYOD allowing professionals to make their own choices for leisure, some might opt for the simplicity and ease of the hybrid, allowing them to use their devices for both work and play. On the other hand, there are a large number of professionals who use high-power software and will continue to use laptops or ultrabooks. In this case, power matters, and hybrid tablets won’t reach the necessary threshold before 2014.

2. DEVICE DISTRIBUTION CHANNELS

Smartphones. The reason Android phones dominate unit shipments in smartphones is simple: Telecom carriers such as AT&T and Verizon love to give away phones and make money on data plans. Android makes this possible because the OS is free and because hardware manufacturers can commoditize the hardware. Even with the carriers giving away the iPhone 4 now with two-year contracts, the power of distribution channels to carry 50 different Android phone varieties with all kinds of (possibly meaningless) features still wins. More open-source challengers will arrive but are unlikely to take off. But carriers are not the best managers of app stores and ecosystems, which are a critical element of the power for distribution leverage. And Apple remains king here from its curated App Store to its high-traffic Apple Store.

Tablets. Tablets are a different story. The distribution channel is obviously not your phone company, but rather the Apple Store, or your electronics store, or online store. Eighty percent of tablets are Wi-Fi-connected, so the carrier has far weaker distribution power. With the competition playing out in stores rather than through carriers, and with Android again offering a larger spectrum of choices over Apple, this will be a close one. Android has the cheapest, most flexible platform, but being three years behind will be hard to overcome in 2013. Look at schools and enterprises today: the iPad dominates.

Laptops. Although Chrome seems to be at the forefront of Google’s enterprise strategy, when it comes to laptops, the Chromebook doesn’t have the enterprise design chops to dethrone Windows 8 yet. Not to mention Windows is already working on bringing its productivity software to the cloud, which was Google’s Trojan horse. Similar to Android and the carriers, Microsoft has an even longer established presence among laptop manufacturers. The “laptop” channel will be fought out between three operating systems: OS X, Win8 and Chrome. OS X gets a great shot in the enterprise because BYOD brings with it iPhones and iPads.

3. PLATFORM ECOSYSTEMS

Apple will continue to dominate the app ecosystem to win the minds of consumers for the “premium” smartphone and tablet market, especially if the iPad mini gets a Retina display. A hybrid tablet is unlikely from Apple, given their distaste for the hybrids produced by the Microsoft camp (although they did say the same about the 7-inch tablet).

Amazon will be the commoditizer of the tablet market with the hope of selling services and content at cheap hardware price points, but 2013 will be a tough year for Kindle as the iPad mini and Android cannibalize the e-Reader, and with Amazon failing to attract a large number of apps to its app store. Music and video will be important, but having software choice is becoming a baseline necessity for consumers. Amazon will find itself in even more trouble when hybrid LCD and e-ink devices hit the market in the coming two years.

Samsung is the one supplier that will drive Android tablet sales and become a strong competitor to the Apple tablets. They have demonstrated the ability to produce a great device with the Galaxy series, and they have both the big tablet and the “phablet” form factor in the market. Plus Samsung is HUGE in Asia, and it owns the entire vertically integrated stack except for the application software ecosystem. Borrowing that from the Android ecosystem works for now. So the real winner of the platform ecosystem remains Google. Samsung only helps to drive volume, and volume attracts developers to Google’s platform since Samsung doesn’t have a developer ecosystem yet.

Microsoft, with the introduction of the Surface this year, has really stumbled onto something. Microsoft will continue working on this hybrid tablet, but inevitably its manufacturing partners will out-innovate the company and Microsoft will do what it does best: sit back and watch someone build their product — just faster and more efficiently.

The “others” are not to be underestimated. Mobile web OSes are the new, new thing. Mozilla and possibly Facebook are trying to figure out how to get the mobile web jump-started. They don’t have app stores and frankly they don’t like app stores. They would love to go back to the future of the web. But HTML5 continues to disappoint them in user experience, so it will be hard to get developers behind the mobile web, at least for another couple of years. In the longer term, the mobile web OSes may well rise to fight the app stores.

4. TECHNOLOGY ADVANCES

There will obviously be advances in both hardware and software over the next two years, but there are three advances that are in development now that will completely change the world of personal devices and technology in general forever: augmented-reality products, smart-home devices and gesture interfaces.

Augmented reality products like Google Glass are the direction in which this kind of innovation is heading. Google Glass has not yet been released and the competition is already gearing up, with Microsoft filing patents for augmented reality glasses set to display real-time information during events. Wearable form factors will change the way business is done and meetings are held; the way we communicate with our loved ones and book plane tickets; the way we see the Internet.

Smart-home devices, such as televisions, are another massive opportunity that have yet to be tackled. With the rumored Apple TV never showing up, this might take longer than expected. Still, we’re seeing early signs of innovation wars coming to the living room.

The gesture interface, kicked off by Xbox Kinect, is picking up steam and should soon be coming to a smart TV near you.

But, none of the above will be the x-factor in the next couple of years.

5. ECONOMIC DEVELOPMENT IN BRIC

Last but certainly not least, the economic development around the world will play an absolutely crucial role to the development and distribution of devices in the post-PC era. The biggest emerging markets – Brazil, Russia, India and China – are exploding as millions move into the middle class. In areas where cost is a major issue, there is incredible opportunity. In India, the feature phone is still by far the most dominant form of phone. And not only phone – it is the mostdominant form of Internet access used by consumers. Major suppliers, including Nokia, Apple and Android OEMs are aggressively duking it out.

All of these markets are expanding, with a massive wealth shift creating millions of newly minted consumers. Apple has its sights set on China, and it is entering India with local (meaning lower) pricing for digital content. But the developing world likely belongs to Android, the most versatile platform in the world working on almost any device in the world (other than Apple, of course).

CONCLUSION

With the compatibility and accessibility of the Android platform and the move toward mobile-focused UIs, I predict that in 2015 an Android OS will power nearly 70 percent of all computing devices.

Based on the above, it seems as if Google will continue to reign supreme and snatch markets from Apple, Microsoft and Amazon with the help of its partner Samsung.

Stages Five, Six, and Seven of Founding a Company: Committing, Minimal Viable Product, and User Traction

Mon, 17 Dec 2012 09:47:00 -0800

In my last post, “stage four of founding a company,” I discussed the “re-thinking” phase where founders must be able to confront their “first brush with failure.” At this point, if you feel like the prototype you have built works, and the user experience and technical risks are all looking good, then you’re ready to commit (stage 5) and then build a minimally viable product (stage 6).

Committing:

I’ve seen one major trend in this phase: the founders that think about product distribution before building their MVP are much more likely to succeed than those that don’t. You have to understand how your product will be distributed because that will fundamentally change how you architect it. When you commit capital and resources to building a MVP product, you are shortening your runway. Every start-up has a limited runway, regardless of how much it has raised. Considering this point, every start-up may as well maximize the opportunities of the product gaining traction, before the inevitable pivot to another idea.

To make the most of that limited runway, every founder must think hard about how their product will gain traction or distribution. Traction can come from a variety of sources: it may come from the uniqueness of the product itself, a business partnership, a social strategy, a platform specific strategy; whatever it is, think about it before committing to building that minimally viable product, because this will determine the strategy around which you building your product.

This post is really for those founders that have committed to building their product and but have not yet started.

The MVP Product Phase

From my experiences, the most important quality of a founder is the ability to think big and act small. Architect a big product — but deliver a small one, and add later. These founders will make small hacks on their product to increase functionality. Some hacks are awful and will actually hurt the product. If you design elegantly and small, while continuing to think big, you will get a MVP product with some runway left for you next stage. Instagram is a great example. It started small as a simple photo app. Later, it added more filters, integrated with Twitter and Facebook, all of which helped it grow tremendously.

This stage is for technical founders to feel like they are in their “zone” while creating their MVP. It’s also a difficult stage. Before the runway is out, a founder must juggle features and resources, while leaving enough time to gets users excited and measurable traction to build. Once that runway ends, things better have taken off.

Sounds simple, but I’ve seen way too many founders struggle with decisions during this phase and it’s not all that simple. Facebook had a minimal mobile product for years. Turned out it wasn’t viable. Google hangouts is a very viable product, but it’s not minimal enough. These are just two examples from very successful companies with very technical founders that both miss the mark of MVP. Instagram on the other hand is an epic success as a MVP. Juggling the hacks with time make an MVP.

Product Traction - The Final Stage

If you have a big hit like Instagram or Draw Something, you don’t have to worry about traction, but 99% of founders won’t have those hits. Twenty percent of founders will have a great product, but how do they know if they have traction?

Product traction is measureable. It should be based on the distribution strategy you’ve picked or a lucky one you’ve discovered. It’s important to incorporate qualitative user feedback like product reviews. Remember this: beware of false product traction. It’s easy to recognize no traction: your app is downloaded only five times a day. This is not good. The distinction blurs when you are spending 10K on buying incentivized installs, but only seeing 1k downloads a day? Is that traction? Hmm…What if your app goes viral for a week and then drops precipitously in the charts? Is that traction? Most of the founders I work with find these to be hard questions.

The best measure I’ve seen is engagement. If users engage deeply with your product—you are set. Engagement means that for a certain section of the audience the product satisfies a deep need. The potential market might be small or big, you won’t know. If you satisfy a deep need, even for a small niche, then at least you have a product and a market. Consider the cell phone. When it was first introduced it was a very small niche for stockbrokers only. With time it satisfied a deep need to communicate in real time, even though call quality sucked. This is traction.

4 Most Important Qualities of an Entrepreneur

Mon, 10 Dec 2012 09:38:14 -0800

[Note from Peter: This was originally posted to Inc.com by writer Minda Zetlin, after she spoke with me a couple of weeks ago. It’s a great piece which summarizes some of my major thoughts on entrepreneurs. Enjoy!]

Forget about your business idea—most of them don’t pan out anyway. Here’s what it really takes to succeed.

Are you cut out to be an entrepreneur?

Peter Relan, founder of YouWeb Incubator, believes that the personality of the entrepreneur is a bigger determinant of a new company’s success than the idea itself. “If an entrepreneur says, ‘I want to build a company around music licensing,’ I would look at that space and advise that it is a good space to solve a problem,” he says. “But before I did that, I’d say, ‘Let’s talk about what’s motivating you to start a company.’”

Since most ideas go nowhere, he looks at the entrepreneur’s personality when deciding whether to offer a spot at YouWeb. “I look for the four qualities that define an entrepreneur and it’s almost independent of the idea,” he says.

So what are these four all-important qualities?

1. Intelligence

You’re here reading Inc.com, so we already know you’re intelligent. But Relan draws a distinction between general intelligence and “entrepreneurial intelligence.” He says the latter combines a high I.Q. with street smarts. “There’s a difference between an inventor and an entrepreneur,” he says. An inventor isn’t interested in the commercial aspects of the business. On the other hand, he says, a pure salesperson may not be right either. “There has to be a balance of the two.”

How can you tell if you’ve got the right combo? Relan counsels aspiring entrepreneurs to read four books:

Return to the Little Kingdom about Steve Jobs and Apple
Hard Drive about Bill Gates and Microsoft
The Difference Between God and Larry Ellison
Only the Paranoid Survive by Intel founder Andrew Grove

Once candidates have read the books, Relan asks them to say which qualities of which of the four entrepreneurs they identify with. Each represents a different entrepreneurial archetype, Relan says. “Grove is a great strategic manager. Ellison is a great competitive athlete. Gates is a great business modeler. Jobs had great product vision. Talking about it in these terms makes it very concrete and very easy to have those discussions.”

2. Attitude

In the TV series Gilmore Girls, when a nay-sayer warns Lorelei Gilmore that most new businesses fail within two years, she replies: “Then we’ll have the most exciting two years of our lives.”

That’s the kind of attitude Relan wants in aspiring entrepreneurs. “A relentless passion to solve problems is what we look for,” he says. “You have to be prepared to fail. Don’t come into an incubator assuming you’re going to succeed.” All new businesses, including incubated ones, encounter tough times and times when they don’t have the money to fulfill their goals. Successful entrepreneurs need the passion to get through those times without giving up, he says.

“And all of this has to be fun. If you’re slogging away thinking, ‘I can’t wait till I get through with this,’ don’t do it. Every moment you spend as an entrepreneur should be a wonderful moment you’ll never forget.”

3. Leadership Skills

“I distinguish between people who are great leaders and people who are great managers,” Relan says. “Leadership means having big ideas and the ability to communicate them.” This includes communicating them to people who don’t work for you. “You have a lot of people around you you have to convince.”

That doesn’t mean that YouWeb will only consider proven business leaders, he adds. “Tell me about an idea you had where you convinced people. Some people have done it in high school. I met a guy who had convinced his parents to let him drop out of high school and start a tech consulting company, and he convinced people to pay him for his work. Some people have ideas and they’re so enthusiastic and persuasive that you can’t help but follow them.”

4. Knowledge

This is the least important of the four qualities, Relan says. “If you’re going to start a technical company, you have to have a technical background and some knowledge of the tools you’ll use.” But, he emphasizes, he wouldn’t take a subject matter expert who’s lacking the other qualities.

What if you don’t have Relan’s four qualities but you still want to start a business? Should you give up and go back to your day job? Not necessarily, Relan says, some of these qualities can be acquired. But he advises that you set modest goals. For instance, give yourself four months to raise $10,000 from investors—not your family and friends. Your chances of success may be low, he says, but “You’ll have put yourself through start-up college.”

And, he cautions, “Don’t convince yourself that you have to be an entrepreneur. Like buying a lottery ticket, you have to know there’s a good likelihood you will fail, and you have to be 100% OK with that. Not everyone has that mindset.”

90% Of Incubators And Accelerators Will Fail And That’s Just Fine For America And The World

Mon, 29 Oct 2012 09:15:48 -0700

This post originally ran on Techcrunch.com

Incubators are now an industry segment in their own right. Before starting YouWeb Incubator in 2007, I began to explore the idea of an incubator with friends and colleagues. Most people told me that Idealab and CMGI had tried the model in the 1990s and didn’t really work out (with the exception of Overture, which spun out of Idealab). CMGI imploded in the dot-com bust.

However, I noticed one model gearing up: Y Combinator by Paul Graham. At least in Silicon Valley, YC was pretty much the only well-known incubator. Today the total number of incubators (broadly defined to include incubators, accelerators, and “seed starter funds”) must be in the hundreds, each one slightly different from the other — versus a few years ago, when the space had YC, TechStars, YouWeb, Idealab and a couple of others.

I would like to present the claim that 90 percent of incubators will fail. By “failing,” I mean they don’t return (or don’t exceed) the money that was put into them. On what basis do I make my claim? Well, the hundreds of incubators are really startups, and the oft-cited rule of thumb is that 9 out of 10 startups fail.

Is there any reason why incubators would be different from other startup spaces? Just as we’ve seen with daily deals, mobile apps and games, it’s clear only a few (maybe four or five) will become leaders in the category. The rest will absorb more capital than they can return, shut down, or pivot into something else.

Here’s why:

1. Too Many Companies, Too Little Mentorship

Simply having a portfolio of companies and providing access to capital is not enough for most incubators to get off the ground. It’s important for inexperienced entrepreneurs to learn the ins and outs of the game. A great idea will fall by the wayside without being properly executed.

Take a recent startup, Goko, for example. They had a great idea and a great, well-publicized launch, only to find two days later that there were serious issues with their product. So mentorship is everything. It’s how you build products, sell your products or businesses to big corporations, hire, market, do PR — everything. Time matters. It’s crucial that you explain all facets of the business, share war stories and help them — especially when they are on shaky ground.

Mentorship aside, too many companies still go after the same concept. Hundreds of startups innovate in every “white space” available, each one with a different angle or a twist that the founder believes will make their startup come out on top. This convoluted process of differentiation causes many companies to lose sight of the fact that, first and foremost, they need to solve a very compelling problem. Then overcrowding naturally leads to too much capital, which leads to bubbles and busts. Daily deals anyone?

2. No Clear Funding Path After The “Program”

During the incubator program or at demo day, start-ups can expect a flood of funding. However after this initial phase, I see too many companies struggle with continuing the flow of funds.

People who run incubators are often professional fundraisers; it’s what they do. The silent crash you are not hearing at the moment is the sea of seed-funded companies that won’t find the light of day into a Series A. Why? Not enough traction, a valuation that is too high and too much noise in their particular segment. Many start-ups are just features. They are not products, let alone businesses.

3. Lack Of Business Development Resources

Business development muscle and track record are huge factors for entrepreneurs picking between sources. SV Angel famously creates the partner list of everyone in the Valley, while other early-stage groups appoint business development partners. BD gets you your first client, your next financier and potentially your future acquirer or a good investment banker for an IPO. Incubators with the best exits and IPOs under their belts will have the best shot.

90% Failure Rate And Why This Is Still Great For America And The World

America needs new ideas, and citizens can’t expect the government to foster tomorrow’s disruption. With diminished funding and donor pools, public institutions can barely scrape by. So private institutions, like MBA programs, are creating their own programs in fear of becoming marginalized by these incubators. Every region and vertical could benefit from a new business acceleration approach.

Incubators have become a pathway to achieve this approach; they give people an opportunity to make their dreams come true. And even if most of these ideas fail, they will still create innovations that can be reflected in the product technology in other spaces.

And incubating companies is cheaper than ever. With lower risks for investors, incubatees can benefit from the network effect of the incubator. One incubator startup’s success raises the prospects of others.

The culture of American innovation has changed rapidly over the past few decades. Being accepted into an incubator is beginning to hold the same weight as being accepted into a university – and like universities, there are different tiers: the Ivy’s, private schools, the state schools and all the rest. We are creating a new education system, one where relevant real-world experience has begun to trump degrees. The right program can provide the same connections that accompanied acceptance into the right university 15 years ago.

But why stop at America? The world needs incubation just as much — if not more. In fact, cities with less tech culture could benefit from participation in a group of startups learning and earning together. Whether it’s Berlin, Rio or New Delhi, the future of urban development around the world will be impacted by the strength of incubators. We now see successful executives like those from Brazil’s mobile content powerhouse Movile going back to incubate tomorrow’s disruptors at the21212 accelerator.

If 90% Will Fail, Which Models Will Succeed?

There may be hundreds of incubators, but business models are much harder to come by. Most execute one of a few distinct business models, while some execute hybrid models. Here are a couple of examples of incubator business models that have been good for investors:

One business model that YC executed brilliantly is (as Paul Graham called it) the seed fund model. The thesis of the model is based on a combination of “high-quality filter” and “broad portfolio” approaches. The high-quality filter approach attempts to ensure that the very best minds, teams and ideas get into YC. After their acceptance, they spend three months getting to the next stage. On the other dimension, the broad portfolio approach, statistically, discovers a few breakaway companies, like Airbnb and Dropbox, in order to provide the big returns to investors. YC is funding close to 200 companies this year. So it is reasonable to say that a broad portfolio approach is fundamental to its strategy.

A second business model is the “high-quality tech founder” + “constant pivot” model. I’ve placed my bets on this model for YouWeb. YouWeb doesn’t accept teams, ideas or business plans. We only accept incredible hackers, developers and technologists. Entrepreneurs receive one year of program participation, versus the three months offered at seed starters like YC. The Entrepreneur-in-Residence spends time building a product, launches it and measures traction. If the entrepreneur gets no traction they will pivot to a new idea or space.

This pivot process can continue for up to a year. If the entrepreneur can find traction, we will spin out a company and fund it with $250K. We currently have nine companies but have executed at least 50 ideas. In a different world, they might as well have been 50 different companies. But I find it more efficient to kill ideas rather than companies, so we don’t spin a company out without traction. Jason Citron is a good example. He attempted three failed ideas before OpenFeint, the largest mobile social games platform in the world, was acquired by GREE last year.

Let’s not forget TechStars, BetaWorks, Obvious and others. They might be executing similar models, defining new ones, or combining models in creative ways. Which models succeed over the long term? Time will tell, but I’d love to hear your thoughts in the comments section.

Stage Four of Founding a Company: Re-thinking an Idea

Mon, 22 Oct 2012 09:13:00 -0700

In the last post I talked about prototyping an idea: either in order to remove the technical risks, or to get to the essence of the user experience. Once you have a prototype, hopefully after a couple of iterations, you get to the next important question:

Does this prototype reflect your original idea/concept? The odds are “not exactly”, which is just fine. It’s rare to see a founder create a prototype exactly as they envisioned it. The more important question is, did you capture the essence of the user experience to either your or your user’s satisfaction. If not, what did you learn? Is the concept fundamentally flawed? Or is the user experience difficult to get right? Ultimately user testing of a prototype is the best way to understand what you’ve created. If it’s a hardware product, I’ve seen some founders take their prototype from a 3D printer and even give it directly to customers.

If the prototype was a technical prototype intended to remove the technical risks in your concept, a parallel set of questions can be asked. Will the tech work only at low scale, or also at high scale? Did you uncover some gotchas in the functionality: if so, was the workaround a hack or solid? If it was a hack, do you have a path to something better? All of these questions come up all the time. I’ve seen technology in the prototype stage look very promising only to run into a major wall later. Look at the start-up Color. Who knows how much grief they might have saved themselves had they not gone straight to a product launch?

All these questions will make you re-think! Building a great product is not easy. There is a subtle art to blending your tech and user experience in a simple yet powerful way to deliver a great product. And if that product is not coming together, its time to re-think your prototype, and try again.

Sometimes, a prototype will give you the seemingly bad news that your idea won’t work. Don’t worry. It may be good news. Think of it this way: In a few weeks you just saved yourself a bunch of money, time and possibly turned yourself towards a path that will ultimately be more impactful.

Re-thinking during the prototype phase is a founder’s first brush with failure. Its better to fail early and fail often, than not to “fail” because you might be avoiding reality in “not failing”. Even if you have to go back to a brand new idea, and start from scratch, don’t worry. It’s part of evolving into an entrepreneur. Thomas Edison tried six thousand different filaments before he got the light bulb to work.

Stage Three of Founding a Company: Prototyping

Sun, 14 Oct 2012 12:43:32 -0700

In the last blog post I discussed the second phase of going from an idea to a company: mulling over your idea, wherein I wrote about how you have to find the balance between passion and intellectual honesty. Now comes the part where the rubber meets the road: can you build a prototype that eliminates the technical risks? Or if there are none, can you build a prototype that captures the essence of the user experience?

Prototyping your idea is a pretty iterative process. Imagine standing in front of a white board and drawing out a brand new user interface. You’ll probably be using the eraser quite a bit, until you feel like you’ve drawn it out close to the way it comes together in your mind. If you prototype your idea and do it just once, you maybe missing the point. The idea is to iterate on the technology and/or the user experience, especially the risky parts, the parts where there will likely be issues.

Today there are dozens of technology platforms and services available to use as a basis for your product or platform, so one aspect of this phase is to make decisions about underlying platforms and services. Which language/framework is the right one for your product strategy? I was recently struck by how Mark Zuckerberg described using HTML5 as the biggest mistake Facebook made in its mobile strategy, for two years. That’s a pretty big deal, given how important mobile is. In that case, HTML5 was a technology choice, but the impact was on user experience.

Q&A: Market Research and Business Plans?

Wed, 26 Sep 2012 12:14:01 -0700

Another question!

———-

I am planning build to build a start-up and I have few queries concerning two broad and primary issues to be successful:

1) How to perform market research and what potential factors we need to look into?

2) Is there any proven or successful method for devising a business plan?

Please refer me any good books or methods you think would help me.

———-

On market research, there really are two ways of “secondary research”: be an early follower by observing what other innovative start-ups are doing. then differentiate from them. in this approach you “trust” competitors to have done a reasonable job! not always the case, but based on the quality of the start-ups you may succeed

The second way is to watch how a large company is missing on some market trend. Look at the large players, and follow their moves and see what their challenges are. Read a book called Innovator’s Dilemma. Its helpful in explaining why large established players can simply NOT address certain needs of segments of their users.

Then there is primary research. Perhaps the best example is Intuit and Quicken. Scott Cook, the founder, used primary research, literally asking consumers what their bigger problem was in managing their finances. The answer from most was: it takes too much time. Hence the name of his first product: Quicken. Today, there are tools like survey monkey etc. But it is time consuming and you still have to focus on asking the right questions, because leading questions will give you the incorrect answers. Many entrepreneurs do a simplified way of primary research by just asking themselves and their close friends “Isn’t XYZ such a pain.. Shouldn’t there be an app for this or that..”

On your business plan question, there is no proven way to do a business plan other than to jump into the space, do a start-up and “discover your business”. Most business plans and financial plans I’ve seen are pure hypotheses, and almost never play out as envisioned. Start a company in a space where there is an unmet need, and then test your business plan hypotheses and iterate until you hit it.

Good luck!!

- Peter

Stage Two of Founding a Company: Mulling Over an Idea

Mon, 24 Sep 2012 12:12:00 -0700

In the last post I wrote about the “Conception” stage of an idea and how it must possess you from the inside, rather than from the outside as a market opportunity.

Today, its about the next stage: Mulling over an Idea.

I encourage the mulling stage — It is an opportunity to soak in the idea, feel it, intuit it, analyze it, hate it, love it, sleep over it, lose sleep over it. It takes me at least a few days to really get into an idea, and some ideas I’ve mulled over for weeks, if not months. At YouWeb, Spaceport.io (which is a cross platform development and deployment framework for “live’ mobile apps) took months to mull over. Whereas CrowdStar took a few days. With CrowdStar, it was obvious to us that when the Facebook platform opened up, games would be the biggest category of apps.

It’s a very difficult stage too, because there is a lot of competition in a founder’s mind for other ideas that are on the back-burner. At any time, one of these can jump in to compete for the founder’s attention and shove aside the main idea the founder is mulling over. How many of us have not been through this: felt really excited about an idea day one, and by day three we’ve talked to others about it and heard a hundred objections, complaints and criticisms? Very few. Some really good ideas sound highly improbable when you tell people about them. Others sound totally non-executable when you think about the resources and timing.

For example, the idea of one YouWeb founder, to stream “Flash-based apps from the cloud to iPads” instantly met a major objection: Apple will never approve it. They hate Flash. Yet, the founders pursued it, and Apple approved it, and today the company, Agawi, is streaming all types of apps from the cloud to tablets and televisions and has booked over $15M in revenues in just two years.

Take your time mulling over your idea. It requires a curious balance of intellectual honesty and blind faith, and this balancing, in itself, is a skill that will become very useful later on in various stages of your company, especially once you have investors. But don’t go into analysis paralysis either.

One of our founders spent so much time mulling over ideas that I had to remind him he only has a year! So ultimately he had to learn to “fish or cut bait” as well, in the mulling stage. Another great skill to develop!

Q&A: Going Beyond Stage One?

Mon, 24 Sep 2012 08:54:00 -0700

Here’s a question from an aspiring founder, after having read Stage 1 of founding a startup:

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Greetings! I found your blog as a result desperate google search, and boy am I glad I did! I happen to be a non-techie non hacker (sigh, I know I know) founder with a tech idea. And while I’ve taken a Fast Trac course and found a business mentor at my local small business technology development center I can’t seem to get past the conception stage… at the moment I seem to be stuck, but not to be discouraged I know there is a way to push on to the second stage I’m just at a loss as to how…

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You’ll just have to read the second stage, called mulling, which I’ll be posting soon. Once you do, make sure you balance intellectual honesty with passion, and see where you land.

- Peter

Stage One of Founding a Company: Conception

Mon, 17 Sep 2012 11:27:00 -0700

Last time I wrote about the 7 steps from Idea to Company. Today I begin my deep dive into each of the steps, in seven blog posts…

Stage 1. Conception:

This is the most serendipitous stage for a founder. Most people I’ve met think that ideas are constructed: thought up by the creative founder or visionary. I believe they are conceived, which is different — it’s equal parts timing, luck, and creativity — a perfect cocktail so to speak.

Some entrepreneurs struggle with the creative part, and are constantly reading and scanning the market, adapting, tweaking and changing what they see to fashion their own idea. For example, I’ve heard founders say: “that company is doing X… that’s so stupid.. what they really ought to do is XY.” For example: Groupon is doing offers, but what is really needed is offers that don’t cannibalize the merchant’s business. Others say, “I’ve always wanted to change this about the world, and now the technology makes it possible.” I met Tony Lai, one of the people behind StartX the other day, and he wants to change the legal ecosystem for entrepreneurs, and believes that the tech makes it a realistic opportunity today. Yet others say, “Wow, look at this mega trend, I bet I could get a lot of users if I got ahead of the curve.” One of the founders at YouWeb is doing that with mobile commerce on tablets.

All approaches are valid as long as the idea is creative, differentiates itself from the pack and has the power to persuade your peers, mentors and, most importantly, the entrepreneur himself/herself. Ultimately, you have to be passionate about it. Opportunities abound, but I believe the best chance of success is when you feel it inside of you, not when the opportunity convinces you because its big and others are all excited about it.

Remember, founding a company is a journey, and you will live with your idea for years, and will need the internal strength to continue when things look bleak and others will run off to chase the “next big thing”. Even knowing that pivoting is a possibility, it’s important for you to feel the idea possess you from the inside, not the outside.

Q&A: Why Only Techies and Hackers?

Mon, 10 Sep 2012 13:01:00 -0700

Here’s our first QnA on FounderQuorum. Thanks to Damiano!

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I find awesome the idea of looking for people who develop and validate ideas, rather than simply ideas with people strolling along. Nevertheless my question is: why only techies and hackers and not people from all disciplines?

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Great question!

One of the reasons we invest in people and not the ideas is that they can quickly take an idea, build a product, and see if the idea has any value.

Hence it’s extremely advantageous to be a developer, because the issue of building out the idea into a product becomes relatively easy to solve. In my experience, if the founder is not a developer then I also need to solve the problem of finding them a developer cofounder to build the product. That is not easy because you have to worry about founder and cofounder chemistry as well. It’s possible sometimes to simply “rent a coder” So far, I have not found that to work out very well.

Regardless, someday I hope to be able to crack this problem!

The Evolution of an Idea

Wed, 05 Sep 2012 12:08:00 -0700

At YouWeb I only accept “single founders to be” who are awesome hackers or techies and I specifically don’t accept entrepreneurs who have a specific idea or business plan in mind. It has nothing to do with the quality of their idea. It might very well be a great one, or even the best one at the time. But at YouWeb we are trying something different: can we help a young aspiring entrepreneur start with nothing but himself/herself as the raw material, and then build something from cradle to exit?

Here’s an interview with VentureBeat with some more detail about what we do here at YouWeb: http://venturebeat.com/2012/7/13/youweb/

I’ll write a separate post about our interview process and how to measure the qualities of a founder to be. Beware: our interview involves reading five books and an all day hackathon! Both are not on the same day though!!

While only a handful ideas generated at YouWeb have actually turned into companies over the last five years, at least five times as many have been prototyped. We kill many more projects than we pursue- a hunter’s dream! Knowing when to axe a project is a strength an entrepreneur needs to develop. Death is as integral a part of evolution as is birth, and it allows for the “survival of the fittest” ideas to rise to the top. Darwin was no fool.

My role at YouWeb is not to generate ideas. My role is to help parse them and help choose the ones really worth exploring. Once we pick an idea I try to match the entrepreneur’s natural skills, intuition and passion. It is critical for these three things to match because an idea is typically organically “in tune with” an entrepreneur’s persona, and there are certain companies that are “natural” for an entrepreneur to build and others that he/she might struggle with.

Even the greatest entrepreneurs in one area struggled with a different area of innovation: for example Bill Gates’ deep understanding of the software business did not translate too well into internet business models. A side note: YouWeb was founded in the year Facebook opened up its platform and when the iPhone was launched. New platforms very very often find gaming as the killer application that drives them: hence the over indexing in YouWeb towards games ideas. Now we have e-commerce and productivity and social networking as well, but our first four founders all focused on gaming!

While I don’t come up with ideas, I do try to provide some guidance on what spaces are worth exploring. It is then up to the entrepreneur to decide which direction to go. For example, when the iPhone first came out, I told Jason Citron and Danielle Cassley (the co-founders of OpenFeint), that the future of gaming was going to change with the iPhone. I saw the inflection point, but they picked it up from there and built the first social game for the iPhone, Aurora Feint at YouWeb.

BTW later we pivoted the company to build the mobile social gaming network OpenFeint. Much has been said about pivots, so I’ll write more about pivots some day!

Having watched many of YouWeb’s Entrepreneurs in Residence try various things there are some patterns I’ve seen in the last five years in the evolution of an idea which are worth going into more detail (We give each EIR a whole year to experiment with different ideas and ask them to take up to three products to market while at YouWeb, one every 3 or 4 months, until they get traction with one. Sometimes it’s the first, and sometimes it’s the third, even the fourth idea that turns into a company!).

After five years, I’ve seen the following pattern a single idea goes through: I wish it were fewer, but it is 7 stages!! I suppose some might collapse this into 3 or 4, but I find it useful to separate each phase.

1. Conception

2. Mulling

3. Prototyping

4. Re-thinking

5. Committing

6. Build MVP

7. User traction/Not —> back to Mulling/Conception

In my next post I’ll dive into each of these. Cheers…

Welcome to Founder Quorum

Tue, 04 Sep 2012 21:53:00 -0700

Welcome to Founder Quorum, what I hope will become a great resource to aspiring entrepreneurs and hackers everywhere. I thought it would be best to start with a little bit about me and why five years ago I started an incubator called YouWeb, which focuses on taking in hackers and programmers and helping them turn themselves into superstar entrepreneurs.

Beginnings: Programming

I consider myself a technical entrepreneur in that I’ve always been interested in hacking and programming.

I got a fairly late start in life. I was first exposed to programming when I was 16 and I didn’t start my first startup until the age of 35. By today’s standards, that’s ancient.

I began my programming career at UCLA where there wasn’t even a computer science program. Instead, I studied computer engineering and quickly realized that I much preferred programming to electrical engineering. I felt there was something creative about programming I couldn’t find in the other engineering courses. I immersed myself in it and pretty soon I was programming in three languages: Pascal, Fortran, and C. Of these, the C programming language was closest to my heart.

I discovered I wanted to seriously pursue programming. Unfortunately, I was on a foreign student visa so I had to get a degree first, which I got as quickly as possible. In 1984, the year I turned 21, the IBM PC had just come of age and I had started my first software developer job. I was fortunate enough to be mentored and hired by Carl Sunshine. His PhD thesis at Stanford under Vint Cerf was on the TCP connection protocol and so my technical expertise developed into networking and Unix.

Two years later, I was really getting impatient. I could see the immense opportunity that software brought to the world and I wanted to do something on my own but had no avenue to explore what that might be. Twenty years later, this feeling had become the inspiration behind YouWeb – helping hackers and developers in their 20s start companies.

Becoming an Entrepreneur

In the 20 years between then and now, I went to work at Hewlett-Packard after which Jerry Held, who used to run the database group at Oracle, hired me there. I spent four years at Oracle and ended up running the Internet server division. It was there that I truly got a feel for software and entrepreneurship.

Jerry was an early guy at Tandem Computer – a legendary early computing outfit in the 70s and 80s. Other guys from Tandem went on to start companies, like Ben Linder and Andy Laursen who created the WAP browser as part of a company called Unwired Planet; and Mark Moore who created Listen; and Evan Goldberg who went off to Larry Ellison’s support to create NetSuite; and the charismatic Mark Benioff (the best marketer I’ve ever met) who built Salesforce. And of course there was Larry himself. He was an incredible entrepreneurial force, always ready for a challenge to compete in almost any field.

By 1998, I felt like I’d seen and learned enough from these brilliant entrepreneurial minds to take the plunge into my own venture. Around then I was introduced to Louis Borders through Benchmark Ventures, who had founded and sold Borders Books and Music. We spent months discussing an ambitious idea he’d come up with, which later became WebVan. At the time, I knew very little about retail — let alone the grocery and home delivery — but I finally agreed to work with Louis and build the technology that would enable home delivery of groceries in a 15-minute delivery window.

In today’s world, watching Zynga and Facebook, it’s embarrassing to admit that WebVan went from Series A funding to IPO in two years.. that’s right, two years. Like some of the IPOs we’re watching today, it went through the roof and soon came down fast.

In 2001, I started my own company. This time, I went back to my roots and, with a couple of Oracle pals, developed a deeply-technical system related to stream-based query processing. We set out to tackle the problem of querying data flying through the Internet and we started with a seed angel around of $300k. It took us five years to achieve what we wanted, but we were able to build the technology and apply it to online fraud detection in real time. We raised venture capital from VCs on Sand Hill Road and sold the company to a public corporation in the security space in 2006.

The Founding of YouWeb

By this time I was feeling like a serial entrepreneur. The only problem was that I was interested in too many things. I felt like the serial nature of entrepreneurship made it impossible to cover all the different areas I wanted to be involved in.

Going back twenty years, I thought about the kids who were coming out of college: these are great hackers who didn’t know the first thing about starting companies, something that took me many years to learn. I started to think of how to go from serial entrepreneurship to parallel entrepreneurship, mixing my learnings in business and the ambitious talents of young programmers.

Surveying the space of helping early stage developers, I could see two models: Bill Gross at Idea Labs and Paul Graham at Y-Combinator. Bill was very focused on spinning up an idea into a company, while Paul Graham was funding small teams with business plans: like a seed fund. I thought about my own situation at 21: I had neither a team with a business plan nor a very good idea. It seems obvious to me that there were, and are, plenty of people like I was at 21!!

From there, the idea of YouWeb was born. Why not hire great hackers who had no business plans or co-founders, and work with them to build out awesome ideas they created, that seem maximally disruptive. This was the concept of parallel entrepreneurship and I loved the idea of it.

In Spring of 2007 we took the plunge. We began with four “entrepreneurs in residence”. Through their incredible efforts I have learned a lot, and in the 5 years since, I’ve tried to institutionalize this model of co-founding companies with one or two hackers every year. This model has allowed us to grow into what I hope is a billion-dollar incubator. With this comes a lot of insight into how ideas evolve, how entrepreneurs evolve, and how start-ups evolve.

My blog will focus on these topics and answering the questions of aspiring entrepreneurs, in order to serve the larger tech community of hackers and developers who I love to hang with.

I hope you enjoy!