by tomnora | Jul 19, 2011 | founder, Scalability
From July 2011,,.
California. Most of my 25 year career has been in California; about half of those in Silicon Valley. I’ve been involved with several amazing companies throughout Northern and Southern Cal; I have expanded, launched, M&A’d, relaunched, liquidated, succeeded and failed, you name it.
I’ve also had the good fortune to operate and sometimes live in several other fledgling tech corridors – Cambridge, NYC, Portland, Boulder, Santa Fe, Austin, Dallas, SLC, Frankfurt, Paris. In every case these other places aspire to be a self sustaining baby Silicon Valley of their own – Silicon Alley, Silicon Prairie, Silicon Coast. But they don’t quite make it. Some come close, like New York or now Boulder but it’s still not quite the same.
The term Silicon Valley is now a misnomer – it has moved way beyond silicon and way beyond the original Santa Clara valley to spread all over California. The new hot spots are San Francisco, Los Angeles, San Diego, the east bay, etc.
San Francisco
San Francisco has actually successfully co-opted the Silicon Valley magic and even surpassed it in some ways (Twitter, Salesforce.com); it’s again a very hot place to be right now and this will continue. Talk about scalability! If you plop your company here, great things could happen. It wasn’t always that way – in the 80’s and much of the 90’s San Fran was a sub-par runner up to SV, trying to catch up. Great PR and finance firms, but not many startups. Houses were cheaper, you couldn’t get good engineers, etc. That has all changed. Now companies have bidding wars for office space amid a major national recession.
There’s a magic and complex dynamic to the combination of things that make California so different. Just say the word and people take notice. There’s a seriousness, a buzz, confidence, reliability, completeness, professionalism. An assumption that you’ll more likely make it there.
Southern California
The “Silicon Basin” – – With the convergence of social media, the Internet, and digital entertainment, Southern California is now humming as a great startup region. In 2003 Electronic Arts actually moved their headquarters from Silicon Valley to Playa Vista, an crazy move at the time, and accelerated their growth as a result. Several smaller software groups, vfx studios and creative design labs are now benefitting from the movement south. Yahoo, Microsoft, Facebook, Google and others are growing their employee base and presence in L.A. Venture Capital from Northern and Southern Cal is flowing into the L.A. basin. It has the key catalyst – several excellent universities spitting out young engineers and business people. It has a strong and growing angel investor base, tapping one of the largest concentrations of individual wealth in the world.
There are exceptions to the California phenomenon; several amazing companies have emanated from these other areas, always have, and many of these ecosystems are now of course self sustaining, but they’re not the same as California. Countless companies have moved there for this advantage, reference Mark Zuckerberg/Facebook. Good move. If you’re somewhere else, it’s because you’ve made a tradeoff, a compromise. I know as I’ve done it myself several times and I’m glad I did. I’ve rooted for other places to approach California’s ecosystem, but I know they’ll never come close.
If you want maximum scalability for your business, you should be in California. If you the best capital providers, the best people, the highest valuations, you gotta be in Cali. You could get more advantages from a couple of visits to a coffee shop in Palo Alto than spending a year in some other town. @tomnora @cowlow
by tomnora | Feb 25, 2011 | CEO Succession, Revenue Growth
Long Term Stable Growth
There is much fascinating debate these days about Google(GOOG) vs. Facebook, reminiscent of some of the greatest battles in Silicon Valley over the past 40 years. In these two we have a classic Silicon Valley clash of the titans, meaning we can’t predict a winner, or even if there will be one. This battle has very high stakes for both. Googles current valuation is $200 billion; Facebook is estimated at $50 billion – both big numbers that have continuously soared since their early days. History says the eventually one or both of those numbers will go down, based on which of these two has the leadership to maneuver through the battlefield into more stable, balance long term growth.
First, Google
Google is the older, more mature of the 2, with a much wider footprint, domination of the Internet users life, a new way of thinking by maximizing freemium and claiming karmic high ground. The New Silicon Valley. They have also sustained growth for a decade, distinguishing them from 99% of Silicon Valley startups.
Of course, google has all the inherent problems of many years of success – bloat, too many products, too many markets, too many layers of management, too many employees, too much employee turnover, major fixed expenses, bureaucracy, fading of their “hipness factor”, aging architecture and growing insecurities about their position as King of the Hill. Classic. As long as net income continues to grow, they can overlook or rationalize these problems, but the negative effect of the above issues will eventually hit them; it hits everybody. The magic trick is to come out the other side better. Swapping out their CEO could be a good or bad thing, but that’s often a nervous reaction on both sides of the boardroom table. Google is also too dependent on one source of revenue, ads, taxing one of the oldest rules in the book “Don’t get too much revenue from one place”.
So I believe Google will hit a wall and wobble over the next 3 years. They will make changes, restructure, sell some toys, start looking at numbers very carefully. The first phase will no longer work.
Now baby brother Facebook
Facebook, on the other hand, is the classic up and comer, the position Google was once in. Not just a lucky little brother, but an extremely competent, precocious adolescent that has invented something totally new from what existed. They have thus far methodically monetized and structured their revolution for long term growth better than pioneers like Netscape did in the 1990s. they discovered something that everybody wants, and Mark Zuckermann is proving to be a true long term leader.
But they are a revolution currently, and revolutions eventually end, settle back into normal life. Facebook’s challenge will be to make that transition without stumbling. How will they diversify past their main product once it gets a little tired and some day surpassed? Can they? Facebook’s success has come from a multi-year rollout of membership to their club, one product. Brilliant product. Nothing has grown around the world like this since Coca Cola. There is still plenty of territory to roll out to, but the clock is ticking. What is the follow-on act? This is a tough one to pull off. They may do it, I don’t underestimate Zuckerberg and his team, but it will be very difficult not to become another MySpace or Yahoo.
Google vs. Facebook = Expansion vs. Rollout
So who will win the growth war here? Even if they’re smart enough not to harpoon each other these two companies will be very busy over the next 2-3 years surviving and continuing to grow.
They both have a strong chance, but if I had to pick one it would Google.
Here’s why: Google has a diversified platform with many market leading products (because they are better products) in very competitive markets – Search, Mail, Mobile, App Dev Tools, Image, Storage, Video, Statistics, and Advertising. Google had to overcome existing leaders in every one of these markets.
Facebook, on the other hand, invented their own product and market, and nobody has been able to catch up, not even Google. But in many forms their piece of the pie chart will decrease over time as different services reinvent their market for them. They must shift from rollout to diversification, or face the bell curve.
Like Google, Facebook also is overly dependent on ad revenue, breaking the same rule of growth and stability, and we don’t actually know how stable their revenue/profit curves are. Whatever the numbers, Facebook will have to reinvent itself and break some molds soon without hiccups in their revenue growth. I’m rooting for them, but this seldom happens. Unless you’re Google.
by tomnora | Feb 9, 2011 | founder, Revenue Growth, venture
First revenue are a major validation milestone for a startup after much sweat and tears. You’ve gone through initial idea, sat at coffee shops or peoples houses brainstorming, discussed and executed the company formation, started building a product, are going through your launch, interacting with first users and maybe even have gotten some press, but none of that compares to people paying for something you’ve created from nothing. It also is the first “organic” fuel for the building process for your company.
Recent developments in web business models have made this hurdle much lower. For example Googles AdSense, Facebooks virtual economy, micro-payments and wide use of the Freemium web model. But it’s still quite a nice feeling to see revenues coming into your enterprise, and makes you want to figure out how to build upon it.
Revenue can change many things for you and your company – valuation, respect, confidence, negotiating position, attraction of other revenue and cash, retention of your equity, and the ability to attract key people and partners. If the revenue is significant, as in a major partnership that pays six figures or more, it can set in motion the next phase of your strategic planning.
Preparation, a Chief Revenue Officer
Also, you must be tactically ready for this step before it happens – know exactly how you want to accept revenue, prepare all required forms, build template legal agreements that may be required, seek help from experts where needed, have your banking in order.
But how to get these first revenues? Aside from the low hurdle examples above, there are many other ways. These days almost everything involves the web and automation, but there is an all important factor – human to human contact. Call it sales or marketing or bus dev, but the important piece is dedicating yourself to spending some time face to face with those you hope will be your highest consistent paying customers. Not “unpaying” users or beta testers, but strategic customers, partners, influencers, those who will take you to your first levels of success beyond investors. This is how you “get it going”, how you start the revenue ramp upwards.
For many startups this face-to-face part of revenue development is where they spend the least amount of their time, for hundreds of reasons, but mostly because they aren’t comfortable with this part of the process. If you can overcome that issue, you’ve overcome a major hurdle to growing revenues. The impact of hearing live from another human about your product is immeasurable, proven over generations of business.
One way to vastly increase your company face-to-face hours per week is to early on have a dedicated partner/co-founder who does only this – “Chief Revenue Officer” – talks to people, gets out there, constantly hunts for new money for the company and articulates the vision. In the beginning the rainmaker is usually the founder/de-facto CEO, but not always. Some startups bring in someone pre-revenue to take responsibility solely for getting the first revenues. I’ve actually been that person at a few startups; it’s a great job for the right person, whether you call it sales, business development or even CEO. The key is getting the right person/people, indoctrinate and empower. And get that first revenue.
by tomnora | Feb 3, 2011 | startup CEO
Orrick Startup Kit
by tomnora | Feb 1, 2011 | founder, startup CEO
The last blog entry I wrote [Who’s the Boss? What is a CEO?] made me think about overall business decisiveness and it’s critical role in growing a startup properly. There are many synonyms and attributes of decisiveness – certainty, determination, finality, resolve, authority. But there’s no single formula or magic combination for this quality.
Decisiveness is one of the key skills for the leader of a startup to succeed; not everyone involved, but definitely the leader/CEO. It’s fine if you’re not that type, just be honest about it and find someone to take role. An indecisive leader will get run over by the crowd quickly and lose the respect of those around him/her; better to let someone else run the show and focus on another task.
A strong CEO in an active startup should be making and implementing several decisions every day. The job of CEO of a real operating company includes many lonely times, no matter how many people surround you. But no matter what, the bullseye in on your head.
For most strong leaders decisiveness is an innate quality, a feeling of empowerment and confidence that comes from somewhere within as well as the support of those around you. Some people are just born with it, or into it. A great example is Sophia Amoruso.
You thrive on the pressure of making decisions. Inspiration comes from beating obstacles in your past, overcoming a hardship or two, intense desire to succeed, past (or current) poverty, or some other experience in life where correct decision making took you from bad to good. Also, a startup CEO is usually much more decisive in his/her 2nd or 3rd startup than the first. They’ve “been there before”, understand the forks in the road, have been hardened and/or humbled a little by mistakes.
Lack of decisiveness at the top impedes growth. Lack of decisiveness running a startup usually is related to lack of experience, a different personality, or lack of desire to be that person. Can decisiveness be developed or taught? I think so. Self-confidence?
Probably not so easily acquired. I was quite lucky early in my career to have several great role models (and a few bad ones). Examples and proactive mentoring came from several places for me, some quite early in my career. I’m now trying to give back by advising others and mentoring startups.
So be decisive as the overall leader of your startup and surround yourself with support to make better decisions. Find mentors, delegate, let go of details. Or be honest with yourself if this isn’t you and find find someone qualified whom you trust to take that role and let them run with it.
Your startup will be the winner.
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