Daily Archives: February 26, 2010

The new worldwide startup

I’ve been traveling around the world studying how startups get formed. Yesterday I visited Bootup Labs in Vancouver. Last week I was at Startup Riot in Atlanta and while at the Olympics I’ve been hanging out with Saeed Amidi. He was recently profiled in Business Week and is CEO of Plug and Play, an incubator in Silicon Valley (he invests in, and rents to, more than 280 startups in Silicon Valley and now owns the building where Google and PayPal, among others, started up). I’ve been at YCombinator and Techstars events recently. I’ve visited London, and Paris in the last year to meet startups there. In April I’ll be visiting Israel again to study startups there in more detail.

There are some common trends.

1. Most everyone outside of the valley complains that they can’t get access to enough capital.
2. Most everyone outside of the valley complains that they can’t get access to enough PR.
3. Most everyone outside of the valley complains that their best startups get dragged to Silicon Valley once they get big and need more talent (Flickr, for instance, moved from Vancouver to Silicon Valley when it sold out to Yahoo — they sold in part because they needed help dealing with scaling issues, I’ve heard that story over and over from other companies and communities, too, like Atlassian who moved to the valley from Australia).
4. Most everyone outside of the valley complains that they don’t have the business infrastructure that they need to succeed. Mark Zuckerberg told me he moved Facebook to the Valley to have access to mentors, lawyers, PR people, and other people a fast-growing tech company needs.
5. Most everyone outside of the valley complains about lack of entrepreneurial culture. In Europe, for instance, failure is stigmatized. In other places there just isn’t the kind of culture that values wacky weird ideas. Go to a local coffee shop in your neighborhood, for instance, and ask people what Foursquare is. I guarantee you that in most Silicon Valley coffee shops you’ll find someone. Not so in most other places in the world.

But you already know these problems, among others. So, what’s changing? A lot.

1. The infrastructure needed to start up a tech company is now decentralized. You can use cloud servers from Rackspace, where I work, or Amazon or other companies. That infrastructure didn’t exist five years ago and before then if you wanted to start a web company you would need to build your own data center. Not every community has datacenters, but today everyone has access to the same cloud hosting services.
2. PR is being decentralized. Thanks to blogs, Skype, YouTube, Twitter and Facebook you can get onto TechCrunch no matter where in the world you are.
3. Costs are coming way down. Associated with first point. No longer do you need hundreds of thousands of dollars in servers to start up, you just need a few hundred bucks on a credit card to buy cloud servers.
4. A ton of startup accelerators/incubators have formed in past few years. I’ve listed a few on this post. They provide money, offices, mentoring, and other services you need like legal help.
5. Tech talent is growing around the world. Silicon Valley used to have a lock on geeks. That no longer is true as many universities around the world have educated tons of computer scientists and engineers.
6. Tax advantages. In Vancouver government officials told me this week that they are seeing a widening corporate tax rate gap. They expect that in 2012 their rate will be 25% while USA’s rate will be 40%. Other countries, like Ireland, have even lower rates. Plus, tons of countries want to help form tech zones. In Vancouver Bootup Labs officials told me they are working on getting some R&D subsidies from the Canadian government, (I’ve heard similar things from other countries, which can help even more businesses startup around the world).
7. Lower costs of living. In San Francisco it’s expensive to buy housing and health care needs to be purchased at sometimes great costs to families. Not so in many other communities around the world.

Even Silicon Valley folks are seeing these trends and are looking to capitalize on them. Saeed told me he’s looking to build Plug-and-play facilities in many communities in the world. I’m seeing other incubators/accelerators like YCombinator and TechStars do the same, spreading outside of their original communities to get deal flow from startups around the world.

I expect over the next few years these trends to speed up. I’m looking forward to it.

Are you noticing the same?

Palm’s small-screen bet doomed the Pre

Some of you might not know, but if I like a mobile phone I buy it. I have purchased several iPhones for my family and I own a Droid as well (I don’t recommend buying that one, instead I am telling my friends to get the Google Nexus One, which is a better device due to its speed).

Yesterday Palm announced that its smart phones are selling disappointingly poorly.

I’ve been doing a lot of thinking about why Palm didn’t get my money or get most of my friends excited. Yes, my friend Luke loves his Palm, but he just hasn’t been able to convince me.

Why not?

I believe Palm made a fundamental market miscall. They assumed that people would adopt a small phone with a decent experience and web browser.

They bet against the geeks. They bet against the web.

They bet wrong.

As I walk around Vancouver’s airport you can see why. A phone is no longer just a phone. People walk around holding their gadgets in front of them. Some, like Blackberry users, do email. Every Blackberry user I know wants a bigger screen.

But more and more I’m seeing iPhones and Android devices in airports. Most of the time these users are not on the phone, but are stabbing at the screen with their fingers doing various things.

Palm bet against these users by putting a small screen in their Palm Pre. What Palm didn’t realize is that users who actually go into stores and buy phones now need more than just a phone, they need a Web device.

By betting against the geeks they made a HUGE market misjudgment because the market follows the geeks. People get this wrong all the time.

It’s really a shame, too, because Palm has a very nice OS and a great stance toward developers.

But until they give me a device with a glorious huge screen with super high resolution they aren’t going to have a chance with the new users.

Compare to what Microsoft is showing off with its new Mobile 7 devices. Huge screen. Android devices? Huge screens. iPhones? Huge screen. Nokia N900? Huge screen.

These are the devices that are pushing the industry forward. It’s too bad that Palm’s CEO Jon Rubenstein made such a fundamental misjudgment. Why did he make that misjudgment? I think it’s because he probably did customer research and the research kept telling him that people wanted a great phone first.

See, customers lie about what they really want. Truth is, they don’t know what they want until you show it to them.

Remember what Henry Ford said? He said that if he asked people what they wanted they would have told him to build a better horse-drawn carriage. Well, we all know how that worked out.

Rubenstein shouldn’t have listened to the marketers. People want big screens with easy to use email and web. Palm didn’t deliver that and now it’s the loser.