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 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.
Find me on Twitter.
by tomnora | Jan 27, 2011 | Revenue Growth, Scalability, venture
REPOSTED 2013
:: An ominous title for a blog post, but “Grow or Die” has been one of the most basic rules in the high-growth startup world for decades. And by growth I mean revenue growth.
The first trick is to offer something that the world will need more and more over the next few years (growing market), without that it doesn’t matter much anyway; your product/service/thing must “catch on”. This can be somewhat manipulated by your successful marketing execution (i.e. why one iPhone app succeeds vs. another).
If you do have something compelling, you’re either running as fast as you can to catch up to something bigger or to stay ahead of those below you. Lack of growth will encourage others to come along and knock you off the track, attack you; they will smell blood. Inconsistency in growth can do the same thing. Millions are currently watching boastful high flyers like Zynga, Google, and Facebook to see if they stumble. If you’re not offering something in a growth market, it doesn’t matter so much; you become either a zombie/lifestyle company or shrink slowly then die.
If you’ve got something hot, the idea is to spread your footprint quickly and prevent others from knocking you off (first mover). Growth means bigger and more complex barriers to entry – more advertising, products, support and security for your users/buyers, advanced services, etc. And protection form death. And gasoline to create more growth.
Flat to negative revenue growth is a real red flag, especially for early stage companies. Your stakeholders start to wonder what is going wrong? Did we build the wrong product? Are we becoming passé? Time for a new CEO? And all those other depressing clichés. If you’re venture funded, things get kind of ugly -unhappy board members, cut off from communications, down- rounds to keep you going, or no more funding.
Many early stage founders aren’t sure how to handle this requirement for success. What about users? Eyeballs? Hits? Press Mentions? Those are all nice and should be designed impact revenues, but usually aren’t a real measurement (unless you’re Twitter). Revenue growth must be the core strategy and drive all other strategies.
Continued growth becomes more and more difficult for larger companies, you must “feed the monster” as it grows. Many companies are currently hitting the wall after strong growth, like MySpace, Yahoo, Dell, Fedex. Even Google is starting to struggle due to a slowing growth rate, and attracting attention for this problem – losing employees to Facebook, trying across the board 10% raises, switching out their CEO of 10 years.
But the focus here is not big companies, it’s startups in their first years of revenue. Companies that hit their “first millions” then get stuck, and often panic. I was once VP of Sales for a startup that went from zero to >$10 million in one year, then back to zero the following year. Talk about panic! That’s an extremely contracted timeline for up then down the growth curve, but the general trend is not that unusual in startup land – up then down quickly. In our case we didn’t have our internal house in order, and didn’t know how to handle our sudden success – no strategic planning and thereby no adherence to such a plan.
The bottom line is that continuous growth, at a good rate, is imperative for long term scalability. If this is a hole in your business strategy, don’t ignore it. Put your heads together, hire expertise, call your advisors, revisit your business models, sacrifice sacred cows, and respect this key piece of your success.
But make sure you deal with it.
![THE “WEEKEND” STARTUP – – – SCALABLE?]()
by tomnora | Jan 19, 2011 | early stage, Scalability
There’s a recent phenomenon in the startup world, the quickly built startup, where as few as 1 or 2 engineers can hatch an idea in code and deploy a new web-based company within a few days or weeks. Also known as startup-lite, startup-in-a-box, the 90 day startup, hackathon, etc., the proliferation of these quick startups are the result of many converging milestones in high-techdom – advanced simplicity in web design, “little or no-programming” visual technologies, extremely low cost of entry, an explosion of micro-funding and some shining examples of dream-come-true companies/people like Facebook/Mark Zuckerberg.
Groups like Techstars, Y-Combinator and several others are fostering this trend with “summer camp” like gatherings to help young entrepreneurs get a new company up and running, with a team of world-class mentors, paid lodging and often funding, in less than 3 months. Techstars alone graduates 30-40 companies per year in 4 different cities. What a concept!
The advantages of this trend are obvious – democratization of the process (anybody can do it), low barriers to entry, minimal overhead (a laptop and free dev tools), almost instant revenues, easy leverage of the social graph for push-button marketing. This new bridge between the haves and have-nots, or techs and tech-nots is inspiring many to start their own web/app companies as never before. Any undergrad at Stanford or Harvard or any other college must be constantly thinking about this – “What company am I going to start?”. There are countless people in their early 20s these days that are on their 3rd or 4th startup already. Mark Zuckerberg was on hs 4th (Synapse, Wirehog, Facemash) at 19 when he started Facebook.
So it’s clearly easier to build and easier to discard one that doesn’t take off and move on to the next. And the next. Amid all this excitement, what is the long-term track record of these mini-companies? How many survive after 12 months? 24 months? How many never achieve revenue at all? There is a naturally high failure rate in startups that we know about, ~90%, so is this new generation more or less likely to make it long term? There are no proper records for the many unknown startups that never make out of the bedroom or off the living room couch, but the throw away rate is probably very high. Techstars actually keeps statistics of its graduates on its website – alive after 12 months, 24 months, funding, acquisitions <$2 million and >$2 miilion, etc. But remember, Techstars rejects over 500 companies every year. How are those accounted for?
Does it matter? Maybe not, this is almost more experimentation, practice than pass or fail – Zuckerberg still holds all night hacking sessions at Facebook to stay sharp and connected to the keyboard, to promote discovery. There are hackathons, hacker spaces and other informal Internet company formation vehicles everywhere you look. The world has clearly changed.
But back to Scalability… are these entities scalable over time? In most cases, probably not.
Let’s measure the Idea plus the Implementation:
- The more amazing and unique the idea, the more likely it will grow into a sustainable company. Most quick-Internet company ideas don’t have much longevity.
- The faster (i.e. very few engineering hours) something is put together, the lower its barriers to entry for others to knock it off.
- The personal investment and passion are typically much less in a quickly built site.
There are exceptions to these rules of course (twitter), but generally it takes a lot of work to design, build, implement, adapt and polish something into a must-have application for the masses.
An Exception to these rules
A great example of an exception to this rule is Twitter. The first Twitter (Odeo) interface was by design extremely simple, and drawn on a piece of paper by Jack Dorsey:
And the rest is history. It turned out to be an extra-amazing idea that grew enough as a name brand before it could be knocked off. Although some people still aren’t sure what to do with it, Twitter is clearly now a must-have for 100s of millions, myself included. A fairly simple idea, quick to implement (it took 3 months). But an amazing addition to our world.
