What’s going on lately in this world ?
Are we indeed in the Matrix ?
Last month, with everything that happened in our tiny piece of the earth, many of my Israeli friends felt that they are living in a ‘not so well directed’ movie. The movie was well equipped with the best side effects and even new actors alongside with the old ones but something felt as if we saw it before and will see it again.
Right next door in Syria there is an ongoing screening of a horror movie with massive amount of casualties that no one seems to care about yet they keep broadcasting it just in case.
In the meanwhile, “someone” in Russia takes over Ukraine, decides to take down a plane and kills hundreds of passengers including the world’s top HIV researchers.
This “movie” seems to be better directed and presents many improvised scenes.
Back to our side of the planet, a fiction movie became a documentary movie when a huge force of evil was instantly created forming a new state (!) calling it “The Muslim State” and immediately starts annihilating everyone who objects it and rape any “infidel” young girl on its way.
In the meanwhile, this is "us": people who think they live in modernized Western countries, think they really have freedom and are sophisticated and fortunate. We develop new technologies to prolong our time on earth and more importantly produce pleasure.
We see the news and feel sorry for all the bad things that are out there in the “none sophisticated” world with the poor people that from some reason can’t manage to built for themselves what we have built for “us”.
This is "them": people who have nothing to lose, who live every day for a “bigger cause” than life itself. This “bigger cause” is usually preached to them with a disguise of a religious person (male) who is getting rich by doing so. We see them in the news recently with new and old names: ISIS (Daash) , Hamas , Al-Qaeda , Boko Haram.
"They" seem to fear of nothing and as long as someone will provide them with weapons, water, basic food and an infidel woman to rape every once in a while, they will continue to do what they do.
Can’t “they” stay in their own movie and stop bothering us watching our movies?
NO, unfortunately it does not work this way.
1. Resources poorly allocated: “they” don’t create much economical value in their day-to-day, so they need someone else’s resources in order to keep buying weapons and pay salaries. Unfortunately for “us”, there are some people and industries that are enabling “them” for important reasons such as egos (the royalty of Qatar) or financial gain (the weapon and media industry). Many European cities now discover that “they” took advantage of the generous European welfare system to fund themselves and their ambitions.
2. Inequality: the world is not equally fun for everyone, like for “us” as 40% of the world’s wealth is directed to only 1% of its population. Billions of people lack water, electricity, healthcare and job security so it is easier to become part of “them” and not part of “us”. This is a major ongoing trend that will create more and more people who have nothing to lose and would like to gain back somehow the notion of self esteem and dignity - and guess who will provide them with an alternative way?
3. Loneliness and feeling of Isolation: it is a known trend by now that is correlated to materialism and to the use of technology as a social tool. The more things people buy the higher is their depression .The more time people spend on social media and virtual life , the higher is their depression and isolation. So by now you got the formula , more depressed people, more people who feel lonely in the Western materialistic world, that only wait for the right invitation to be part of something, anything, and gain back some sense of livelihood.
1+2+3 = you got it !
What about all of “us” living in “fun countries” / safe / friendly / not involved countries? Can we continue drinking our wine and eating our cheese without having anything to do with these movies?
NO (well, Yes , for a while but not in the long term).
1. The bad combination of the world being flat for a while with limited resources, together with the growth in inequality and people’s depression dictates a scenario where more and more people in more and more countries (yes, “they” tried to relocate to the “fun countries” to make a better life for their families, but then they met inequality) will part away from “us” and become “them”. It will happen sooner than you think and right next door.
2. New media is actually fueling these notions and helps “them” know that there are many more people like “them”, where to meet them and how to provide support (remember that “us” watch social media and may hit the like button every once in a while, or chip in with a few $$ for a donation while dumping an Ice Bucket on our heads , but this is the most active thing “us” will do about with social media). We like to think of how social media is creating revolutions and how YouTube is enabling free journalism that creates global activity and support … but the people in Syria don’t feel this way anymore. So the cool technologies we created to help the world become a better place are actually accelerating “them” while making “us” more numb and lazy while our brains are busy watching “reality shows” and play angry birds or candy crush on our smart phones.
Will this movie ever end, or we will keep seeing more of these episodes?
Unfortunately, NO, it will not end anytime soon.
Why not !?
1. Research indicates that poor countries tend to stay poor regardless of “us” sending them support and money, and regardless of the hope “they” will suddenly build schools, factories and infrastructure. Legal and government infrastructure in these countries (or tribes) where “they” live is as such that it was built to serve the pockets and the egos of the non-democrat rulers (hint: the reason Yaser Arafat had $1B in his bank account or the reason why Mr. Mashal of Hamas net worth is over $2B is not due to exiting a successful startup or taking their venture IPO). As long as the state, its governing infrastructure and culture will not change, we should expect more and more episodes of the same type of movies. Each episode is going to me more horrifying than the last one.
2. Resources: As long as billions of dollars in cash or other worthy resources will keep being poured into funding “them” or their ambitions, this will never end. Having the EU or UN send donations of concrete to Gaza, only to become a chain of underground terror tunnels, or having the US send armed trucks to help the democracy in Iraq, only so they will become deadly weapons for ISIS, or having the UN using tax payers’ money to build schools in refugee camps that educate for hate - the wheels will keep going in the same direction. More depression, more hate, more death. Imagine what could have happened if 10% of the oil and gas revenues of some kings and princes ( that goes to 1% of the people) would be invested in producing food and water and then in education and technology. Unfortunately these kings and princes are funding some terror groups in the same way they fund soccer clubs that glorify their names and egos. The Weapon Industry , the same one that is stronger than the US president and keep the US households the most armed in the world) is also having a blast watching the “show” with signing new billion of dollars worth of annual contracts with both “us” and “them” and fueling the creating of more death and more viral visual materials to be sent over social media.
3. “We” are numb and our socially oriented democracies are not built to protect them from themselves. The laws in the US and EU (unlike Russia for example) are built as such that “they” can take advantage of being treated as equal citizens till they become a massive voting power and then change the laws in a democratic way. “They” also know that once “they” took over a European city or certain neighborhoods of such city, the local police will stop enforcing the laws in such zones as the Policemen are part of “us” and have kids and families and things to lose so they will avoid a conflict.
Is there anything we can do as individuals in this matrix ?
Yes , but this will be a topic of a whole new post :) In the meanwhile you can each think about what you can each do in your personal capacity to try and make a difference.
"The situation is too desperate to handle our destiny to the people who are desperate" David Grossman
"Why wouldn’t Google develop what you do in one week and beat you to market? “
I am sure many fellow entrepreneurs have heard this question from many VC investors. Many, less experienced investors, do ask this question because they are actually afraid of the consequences of Google dropping all their other tasks and focusing on beating you to market. Other, more experienced investors, do expect you to provide a strong answer regarding your competitive advantage or what Warren Buffet refers to as Moats.
Thousands of academic hours per year are spent worldwide on discussing how come Yahoo did not build Google, Nokia did not invent the iPhone, how come Facebook did not build Whatsapp or Instagram and had to overpay $20B for the two assets. We heard the same question of “why wouldn’t Google or Gettyimages develop your image processing platform at PicScout " and "why wouldn’t eBay develop the simple social feature you built at The Gifts Project ”. We hear the same questions now regarding Zebra-Med.
So the word is out there that it took less than 10 hours to develop the fastest growing app ever called YO. We can assume that a more focused team that will actually spend time to make the app more secured and well tested , could have done it in
12 hours ,say, 24 hours.
If it was proven to be so viral (aka - address a weird, yet real human communication, need) and it takes only 24 hours to build a less hackable, more stable version of this killer app, why don’t we see corporates launching many versions of YO? Companies who have access to 100m+ mobile users and are craving to be back on the innovation-radar and get some PR buzz, corporates who appointed a chief innovation officer to find what kinds of mobile related “things” consumer want and budgeted this in millions of $$ - why do they prefer to sit on the fence and not invest these 24 hours ?
These are some the voices that will talk inside the corporate minds:
- “we will discuss it in our next all-team meeting and make a better decision regarding the right way to approach it” ( by then YO might have 10m users )
- “someone in R&D will do it for sure. I am certain they are on it! “
- “we can’t risk our brand with such a silly app”
- “Our legal will never approve this app , it is for sure a patent or copyright infringement of some sort”
- “YO is for sure an offensive name in China or Japan or the East or the Iraq, so this will be the other reason why our legal team will not allow us to do it”
- “If it’s so easy to develop , everyone else will do it and I will look stupid in the next management meeting. We can always buy them in few years when it will be more proven”
- “Our support team is not able to manage millions of new users all at once, while keeping our brand equity and excellent customer support processes”
- ” I am sure our new Chief innovation Officer is on the mother-F#$%!, and will deploy a better product to the million of users we have so we can beat YO to market next week ! ..or as soon he is back from the off-site”
- “I can’t believe such a low level developer did it in 8 hours (!) and will become billionaire while I will still be in my office cubic till they will do another re-org and fire me “
While I am sure that the new kings of the technology and social world (Google, FB, Twitter, etc) teams are going to take a more entrepreneurial look at investing the needed 24 hours to develop a kind of YO, it is interesting to watch the behavior of the other very resourceful and cash heavy companies with access to tenth of millions of mobile phones (each) deciding not to even try.
Yo might end up being a "Draw Something" but if you are in the business of reaching millions of mobile consumers and get them engaged , it says a lot about your corporate culture and future if none of your team members dares to even give it a try in the next coming weeks.
yo - just my 2c :)
This week was my last week (at least for the foreseen future) as a Venture Capitalist with Pitango. There was a nice party with gifts and speeches and we reflected about the past fifteen months and the many milestones that were achieved.
I am personally very proud of the new Pita&Go! theme that includes both a new and refreshing early stage investments platform and a line of events where the Pitango partners meet hundreds of young entrepreneurs every year from the various accelerators programs. Beside Pita&Go! I did my best to consume as much of the Pitango-6’s fund while I was there :) and was quite amazed by the rate of good investments in great companies - Taboola, Ubimo, Formlabs, Carambola and Keepy to name a few.
While we are gearing up (founders wise and family wise) to start something new soon, many friends and partners were asking: “so Gura ,how was it on the dark side?” and “what can entrepreneurs do differently” and of course “how can we make VCs act differently?”.
So here is my take on what can be done on both sides to get closer to ever-lasting peace and harmony (or at least decrease the uneducated bitching about the other side).
What else can VCs bring to the table:
- "Added Value" - in an angeList and LendingClub world, where early stage capital is being commoditized, it is easy to feel and measure the added value your investor brings to the table. VCs willing to provide entrepreneurs with extra *real and operational* resources will get to see the better teams coming at their door and therfore better returns. Within Added Value scope we can mention: (a) relevant introductions to people who can actually help the company (and no, this does not include time wasters consultants and vendors) , (b) pro-active approach (emphasis on *active*), helping the founders meet their first real customers and hire the needed talent that will essentially build the company’s DNA and (c) smoothly connect your VC’s partners’ network and existing content (research , artciles , lessons learnt) to be at the service of the founders and help your portfolio companies to connect as well - the amazing thing you will see is that the founders will simply take it from there and magic will happen.
- Quick response - be it a Yes or a polite NO, being able to provide the founder with the right notion of where he/she is in the process, as soon as possible, can win any VC many credit points. The founders will of course need to understand the right context (see below on the founders list) so lets add more language to “we like the company but it is too early for us”
- Operational reasoning : It is a well-known fact that many VCs came from a financial or consulting background and have not experienced a single “startup hell day”. It’s is less of a known fact that from a VC’s returns perspective it was not proven that these guys generate less returns comparing to VCs who were startups CEOs. Having said that, it will be beneficial for both sides if the VCs will better relate to the current situation the founder is facing (NO, its not reflected in the spreadsheet yet and YES, it makes the founder lose sleep at night) and have the operational background or relevant resources in the fund to help the founder face the challenge in an optimal manner.
- Funding: Ha? we just funded the company so we are off the hook - well, not so fast. It is easy to expect the young founder to go and raise capital for the startup, in higher valuation than we invested, of course, (because we “added value”). However , as we all know, there is much of an art into fundraising and similar to B2B sales, it takes time and requires a strategy and relevant leads. Being pro-active about it means to direct the young founder to the most relevant partners in the most relevant VCs (that have capital to invest!) and timeline the process so that it will not wait for the last moment. Young founders are not familiar with such process, and in many cases assume that their trusted VC on board will do it for them when the time comes. Another important point about funding is the “founder liquidity” issue. By this time sophisticated VCs have already learnt to be pro-active about it, in order to make sure the founders’ (and spouses’!) interests are aligned.
- Funder’s Single Focus: while us VCs have “so many things to worry about”, the founder in front of you didn’t sleep last night because of his/hers own single little startup. So, try to zoom-in and be with him/her , listening and thinking together. When you think you know the business better than the founder - think again! When you feel an urge to check messages on your mobile device during a meeting with the founder - just stop it! my friend Gil has created a good conduct list for this purpose.
What else Founders canbring to the table:
- Do your homework - In an era where there is abundance of high quality information (like this awesome blog…) about venture creation and all its stages , there is really no excuse to come less than ready to meet your potential investors (NO, we are not signing an NDA before the first meeting and YES, we are invested in a competing company as we mentioned clearly on our website).
- Understand the VC ADHD - very simple yet very hard to understand , the VC’s attention and portfolio are diversified while the founders’ focus (as their spouses may know) is dedicated to one single company. The VC partner on your board is on many other boards beside yours, some are of very successful and growing companies (where they are expected to put as much attention to maximize the fund’s returns) and some of companies that might suffer from a management or market hurricane. Once this is well grasped, you can better work together by (a) preparing your partner on time for important millstones (be it a coming term-sheet or a sharp drop in revenue) so he/she can work out a resolution *within* their fund (b) provide context: don’t assume that when you mention a name of one of your employees or a random customer your VC partner will be able to quickly add value to the conversation - help them zoom in first.
- Understand the decision making process within the fund you are engaged with and the actual role of the fund representative you work with - this might not be an easy one but worthwhile exploring, so you will not be surprised later on (VPs , Principals , Managing Directors and even Partners are not always what you assume)
- Understand the VC’s KPI: VCs expect you to understand your business’ KPIs but you also need to understand their business KPIs. It is very common that founders are disappointed the VC didn’t like the fact they are planning to get to $10m in revenue and exit at a $50m valuation - this is a *LOT* of money! whats wrong with them? - well, while a micro VC or a group of angles might be satisfied with this outcome, a professional VC must not invest in such a company. Here is why - in very rounded numbers - if a $200m fund wants to create a 3X return for its investors, it needs to generate $600m in exits. And if the fund has 20% of your company’s shares when you exit (which rarely happens), the fund needs to see an overall exit about of $3B (with a B!) so that it will meet the needed $600m for itself (keeping rough numbers and excluding management fees and preferred interests calculations). What you may perceive as a fantastic outcome of $50m means that the VC partner will need to be investing in 300 (!) companies such as yours (remember that most startup are not getting to the $50m exit line) so 60 companies per each partner in a VC with 5 partners - i think you are getting the point. more about this in an industry view, here .
- Be pro-active - similar to the energetic way you are charging on new markets and new product features, you can maximize the value you get from your VC partner. Learn about their network , tell them explicitly what type of help you need this month and which one of their portfolio companies can be of help to you.
- Build the relationship - timing is everything and if you want to maximize the probability to have a certain VC invest in your company, you need to help them get to know you (*follow* on twitter does not count) in advance and get constant updates about what you do in the most friendly and casual manner. In many cases when there is chemistry, things will happen, if not in this round, then in the next round or the next startup.
it takes two to tango :)
Innovate Israel - Lodon December 2013
World Health Organization says 280m people are visually impaired and for 80% of them this is of diseases that can be avoided. To begin with , developing and releasing such an app is great and even filling up the empty slots on remote doctors calendars will do the work. But what happens when the doctors are overbooked ?
A lil’ brain teaser for my entrepreneurs friends and entrepreneurship class students at Zell IDC:
Imagine this typical startup :
- The founders are 35ish years old with kids, when starting it, with minimal background in the specific industry (was it such a good idea to start this)
- The founding team background includes profound global sales and management experience, with P&L responsibilities, in the US and EU
- The founders also served in one of IDF’s Elite units (but not the one with the 82XX numbers.. and no dog and no silly T-shirts)
- The team has to invent new ways to penetrate and educate the market, and find customers and partners who were not so much around in the early days
- The founders had to keep raising more money every few years from the type of people who are “up there” and are managing “other people’s money” and care mostly about IRR and boring financial data
- The team made every mistake in the book, like every other startup, and even had to pivot after the WEB1.0 bubble burst (they carry the scars even today). The company even had to change its original name due to a forceful litigious US competitor
- As the team expanded , they had to find the right ways to work together (it does not mean they don’t still argue..) . Eventually they built a platform that is scalable and serves its customers well. Some of the customers keep purchasing the product even after 10 years and new customers are joining as well.
- The team stayed together through the good times and the bad times and grew from 2 to 4 to 6 and now around 30 people. Like in many growing startups, the junior people on the original team grew with the company and got promoted to take more responsibility
- While many competitors have emerged , they have discovered what every startup discover : “startups don’t kill startups” and as long as you focus on your business things turn out to be fine. The market ended up being big enough to obtain some of the competitor but many others got shut down.
- Like in many growing startups the organization became more complex and processes and routines had to be placed (tend to make things move a bit slower than what the founders had envisioned)
- When there was a problem with the product, the company was sometimes slammed in talkbacks like other startups (luckily, there was no Twitter in its early days ) and had to fix things and focus on making the customers happy.
- While having a strong presence in the US and an office in the Silicon Valley, The company also started to diversify its customer base in accordance to global trends and gained more and more customers from Asian markets
- Leading team members, branched out during the years to start their own startups and are now heading very successful companies in the same industry while keeping in good touch with the “mothership”
- The company volume grew 50X since inception but the founders insist on not selling it and keep focus on growing the business (don’t know when to quit?)
- The company put a lot of emphasis of helping minorities get better chances, is a strong supporter of the Tmura non-profit organization and an overall strong supporter of the Israeli Tech eco-system, where it keeps to focus.
- And lastly , the company started to offer its enterprise product in a more SAASi \ Light version as it tries to capture the growing trend of long tail partners and help them build their business till they are capable to work with the enterprise version
Any guess who is this company ?
if not , continue to read below —>
Ok , perhaps one more clue : The team members enjoy Judo, Yoga, Food trips, Humus eating, Sailing, Golf, Mountain Climbing, Kite Surfing and one of them is an avid blogger
Ok , Now, Any Guess who is this company ?
if not , i am not sure you should be reading this blog..
Ok , one more clue , this is the company logo:
So , maybe VCs and StartUps are the same ?!
No way they are ! … But maybe they are more similar to each other than what we use to think :)
Happy B-Day to Pitango#6 !
Israel ranked #4 —> Most efficient HealthCare : countries
As many of you readers know, I am an avid fan of Israel and the startup nation. It is always mind blowing to see the data points of our little country huge impact in terms of IP , export , innovation etc . But this post is not about our ongoing petting on the shoulder.
We tend to think or feel that the Israeli startup\tech community is a separated bubble , almost a different nation , a local startUpNation star that exists in the global universe . We think that besides being in charge for half of the Israeli export and employing the best Israeli minds and pushing the economy forward ( they call us “the economy locomotive”) , startupNation does not have much to do with whats going on in the “rest of Israel”. This post presents a different point of view of two collision points with “the rest of israel” that we , as Israelis , need to carefully think about:
#1 - Racism
Few weeks ago , a group of jewish settlers gangsters have attacked two small arabic kids that were walking in Jerusalem with their nanny. The kids called their father and cried for help. Besides the life long trauma they got , the kids are now safe and the story wasn’t even too interesting to hit the main news for more than few seconds. Why? Because we got used to such Apartheid-like incidents. The israeli society turned indifferent and everyone has their own urgent issues to worry about.
What these settlers gang didn’t know is that while they were beating the poor kids, their father, was working on launching a major company that will have great impact on the life of many people in our region. The dad Is an, an experienced executive who just relocated with his family back to the region despite of his wife’s objections. He felt obligated to come back and make a difference and have been working hard to raise the capital and talent for the new venture. The Kids , their mom and the dad are now on their way back to North America. We lost many jobs that were supposed to be filled , many taxes that were supposed to be paid, and another piece of our dignity, us a state that once declared that such pogroms won’t happen anymore.
btw - the day this pogrom happend was Jerusalem Day.
#2 - ”Show me the money” Porn,Forex,Gambling,Toolbars and other clicks
One of our startup nation top ranking is in a matrix that we don’t like to discuss much - the Gini Inequality rank. Its also a known fact that Israel is one of the most challenging places in the world in terms of life style ( aka - your ability to save for an apartment or for your retirement and get good education for your kids ). Since it takes over 185 salaries in Israel to save for an apartment , comparing to 30 in Sweden , the Israeli young entrepreneurs-to-be are facing a brutal reality. When you are in your 20s in Israel , post army service and University, you still have 3-4 years to give it a shot to dream big and try to change the world . However if you are in your 30s and have kids and family to support , the day-to-day reality in Israel does not give you too many chances to shoot for the stars.
This is why when a group of very smart , x- intelligence unit team is gathered to create a startup they first think “how much of a hit” can our savings and families take and usually , in Israel , its a very short period of time. Very short comparing to other entrepreneurial hubs in the world.
So what do these A-teams do ? How do they deploy their brains to overcome this shortage of time ? Will they go and create healthcare algorithms that save lives ? will they work on a global business model that require b2b sales with long sales cycles ? Keep in mind that unlike the European or American entrepreneur the Israeli team do not have a regional market to sell to and experiment with.
For many of such teams the answer is simply NO . Many of them will create companies that play in the field between “let make the user click on something or download something he does not want” and “lets give the user a sense of control on the outcome of a currency exchange or casino so he can spend more money “. Many of you understand which companies fit to these categories.
The dollar numbers of this grey part of our industry are stunning and way passed $1B in revenues this year ( most are off-shore so don’t expect to see any capital gains in Israel ). Hundreds of such teams spend their best time and brains on launching more of these technologies. On one hand these companies now employ few thousands people in Israel who support their families and bring food to the table and create a derivative effect of skilled personel. On the other hand , imagine what this brain power could have done and how much impact it could add to the world if deployed on real world problems-to-solve. Big endings and unjust critic of big dreams such as Modu and Better Place are also pushing to this “show me the money” direction.
So , where do we go from here?
We got used to thinking of the state of Israel as a startup and as such it was “ok” to have some “bugs in the product” , not to have the best customer facing policy and blame all that on lack of resources or experience of Industry connections - sounds familiar ?
Israel is now a successful independent nation with over $60B (B!) in annual export as of 2012 . It is the most stable and sophisticated democracy in our crazy region. We have one of the best health systems worldwide and we even found enough natural gas in the sea to enable us to support the energy needs of other countries .In addition , we have a healthy venture industry that will support future growth and resources ( Israel is still far no.1 in terms of VC money per capita).
StartUpNation is not a startup anymore, and we cant afford ignoring these two issues mentioned above for our sake as Israelis and the sake of the future of our place in the global tech community. While the two issues above are not , by all means , a representation of the entire Israeli and tech community , their mere existence requiers our attention.