Why do startups fight city hall?

This past weekend, I had a brief discussion about Uber, France, tech startups and the need to “fight city hall”. It all started after I posted a story about an upcoming Paris taxi strike, which is designed to send a warning message to the French government and French people from a highly entrenched monopoly.

The message is “Don’t support something that threatens our monopoly or we will shut down the city.

The key thought in the article was that French government’s handling of the Uber situation is an illustration of what’s wrong with entrepreneurism in France and that the situation affects all French startups rather than solely impacting Uber.

It seems the laws in France are designed to frustrate entrepreneurs attempting to enter established markets, if not to suppress all new business entries. The article goes on to make note that all of this goes on while France’s leadership talks about how they want to encourage entrepreneurship.

Why care about what happens in Paris?

What in the world does this have to do with small business in the U.S.?

Similar things occur here in the States and in many cases, startups end up feeling forced into a situation where they are left with no choice but to fight city hall – often because the alternative is to be legislated out of business with the help of an entrenched competitor. Sadly, this “competitor” isn’t the least bit interested in competing. They’re happy to use the local and regional governments’ desire to protect the citizenry as a means of raising the bar into entering “their” market.

Most U.S. based entrepreneurs tend to avoid such battles because they are expensive, frustrating and quite often do nothing more than waste a business owner’s time and money.

Yet startups like Uber are often found doing that very thing – taking on governments to eliminate protections that were once created due to a public safety interest but have been perverted into something that seems perfectly designed to preserve and protect entrenched businesses not only from new entrants into the marketplace – but from their clientele as well.

Why startups?

Why are tech startups picking on established markets? And why do so many of them seem to want to fight city hall?

They often do this because that’s where the market is. We talk about the opportunity you create simply by improving service to clients here on a regular basis – and do so because it is one of the easiest ways to transform your business. Service – one of the essential things a business delivers – has gone from a foregone conclusion to a differentiating factor.

Uber is perhaps the most obvious and the easiest example to make note of, but they are far from alone on this one. Part of their attraction to consumers is how easy they make it to use their services when compared to most of their competition. Even now, their obstacle isn’t that cab companies all over the world have increased the quality of their cars, the ease of booking and paying for a ride, etc. No, their biggest obstacle is local / regional governments, many of whom have fought to keep Uber out.

The thing is, it isn’t really about Uber. They’re simply today’s easiest and most visible example to understand. What this is really about is creating more barriers to entry into a market.

Old rules that favor one company or one technology are what start ups deal with every single day. In fact they often focus on those areas because they make the market attractive. Markets with poor service often slowly become that way because of a lack of competition created by artificially created barriers to entry. Often companies in those markets treat their customers so poorly that people do business with them only because have no other choice.

These are markets that have repeatedly sent a message to their clientele that they need to be taught a serious lesson. Most local entrepreneurs can’t afford to fight City Hall. Only those who are highly capitalized have that luxury in most situations – the luxury of out-waiting and perhaps, out-spending city hall, something no small business owner can do.

As any small business owner knows, there are plenty of barriers to entry as it is. Be careful not to ask your representatives to help you create more of them, as the next time, it could be your business that’s targeted the next time. Each one of these barriers that is successfully installed makes it easier to create another one.

Starting a new business is hard enough as it is. Let’s not create more barriers.

Why small business should care about Meeker’s slides

Mary Meeker’s annual Internet Trends report came out today, so I thought I’d offer a few comments about it and how its findings are likely to (continue to) affect small businesses, including small software companies.

The Slideshare version is rather slow right now,  so I suggest you check out the PDF version of the Meeker report.

Psst, thank you Mary.

Tablet sales

52% annual year over year growth. For software companies, this matters just a bit. Web apps that work great on phones don’t always translate to the tablet form factor. Do the work to make your UX good on both.

Context: There are 789MM laptop users globally and 743MM desktop users globally – this is after decades of computer sales. Tablets – despite the modern tablet only having been around for a few years, there are already 439MM globally. Ignore them at your own risk.

KPCBMeeker2014Tabletuse

 

Advertising media

Meeker2014AdSpend

When reading the “Print is over-indexed” comment, keep in mind that most businesses who use print do so very poorly. They carpet bomb rather than snipe and they don’t track lead numbers or ad/media performance. I suspect they will do the same when advertising on mobile ad platforms and will complain that, just like print, advertising doesn’t work.

Don’t be that business.

Hey, nice network!

95%+ of networks are compromised in some way, and small business networks are likely worse than most of the ones Meeker is referring to.

Yes, yours is probably one of them *or could be*. It happened to Target (et al), it can definitely happen to you.

A quote from the slideshow: “Vulnerable systems placed on the internet (are) compromised in less than 15 minutes“. This doesn’t mean the internet is the big bad wolf, unless you have a pile of XP machines that aren’t properly taken care of and operated by staff (and management) who will click on any-old-thing.

Free shipping

47+% of orders include free shipping, vs. 35% five years ago.

Say this 3 times: “Lifetime customer value”. If this hasn’t reached your area – and in many cases, it may be a long time coming, consider beating the world to the punch. Leaders lead.

Cloud computing costs still dropping

A bit of Doctor Obvious, but the numbers are huge.

  • Compute (ie: CPU costs) – down 33% per year from 1990 to 2013.
  • Disk storage costs – down 38% per year from 1992 to 2013.
  • Bandwidth costs – down 27% per year from 1999 to 2013.

Where’s your competition?

Anywhere and everywhere, perhaps.

Meeker2014Competition

Vicarious video living

The highest volume video streaming site is Twitch – a site where people watch other people play video games. Presumably they do this to learn how to play better, I really don’t know why else you would do this. While this is of little specific relevance to me, Twitch’s numbers are certainly relevant.

Twitch has more user viewing minutes than WWE, Ustream, MLB.com and ESPN combined. Yes, COMBINED. 12 billion minutes per month.

How does video fit into your strategic plans?

As of January 2014, 43% of TV content viewing minutes were on non-live-TV. IE: DVR, DVD, streaming, mobile streaming, etc. They want it when they want it, not when someone says they must consume it.

How does *on-demand* video fit into your strategic plans?

The world is flat

As of January 2013: 9 of the top 10 producers of internet content are in the US, yet 79% of their monthly visitors are outside the U.S.

As of March 2014: 6 of the top 10 producers of internet content are in the US, and 86% of their monthly visitors are outside the U.S. 4 of that 10 have effectively zero US-based visitors. Yes, China.

Alipay’s “Yu’E Bao” asset management startup went from $0 to $89B in managed assets in 10 months. It is now one of the top 3 global money market funds based on assets under management. TEN MONTHS.

60% of the top 25 tech companies in the US were started by 1st or 2nd generation Americans. 1.2MM employees as of 2013.

Startup DNA

For those in the software / SaaS business, an interesting slide deck from a guy involved in some fairly high end startups.

The last third of the deck is not as impactful as the first 2/3rds, where in addition to his comments, the author offers some pretty helpful resources.

It’s worth a look.

What isn’t Amazon going to change?

During Amazon Web Services’ (AWS) November re:Invent conference, there were a number of interesting talks.

Psst…Don’t run away, not-interested-in-technology folks, this is barely about tech if you look closely.

I got the most out of the sessions centered around the strategic design decisions that Amazon.com (an AWS customer) and other AWS customers were making.

These discussions were all about making a system resilient, scalable and capable of reacting quickly and transparently to changes in the business – while keeping costs as low as possible and tied directly to the business’ actual resource usage.

Naturally, their point was that AWS helps provide this ability to people who build systems.

AWS streamlines server infrastructure the same way LTL trucking streamlines freight shipping.

LTL clients get to use a high quality transportation system without investing a fleet of trucks, warehouses, dispatchers, mechanics and drivers that they may not need two weeks from now. Yet all of those resources and jobs are necessary to get freight from point a to point b. Shippers pay for what they use, meaning less waste, more efficiency, better job security and better asset use.

As I said, this isn’t about tech.

No one ever says

During a discussion on why AWS is always changing, Bezos summed it up simply: “No one ever says ‘Jeff, I love AWS but I wish it was more expensive.’ or ‘Jeff, I love AWS but I wish it was a little less reliable.’ or ‘Jeff, I love AWS but I wish you would improve it at a slower rate.’ ”

Is it any different for you? For the LTL trucking firm?

In a business where inexpensive, high quality delivery whose cost tied to usage is the focus, these changes simply don’t happen without high quality systems managing things.

Systems reduce inertia, eliminate obstacles and streamline processes so people can get the right work done faster at the same (or better) level of quality.

They aren’t about tech.

What’s the next hot thing?

When Bezos was asked about the difference between being an entrepreneur when he started Amazon (1995) and now, he said “the rate of change has increased substantially”.

He noted that people always ask him what the “next big thing” is and lamented “I almost never get asked ‘What’s not going to change in the next 10 years?’ “.

He likened businesses that address those long-standing needs to flywheels. They take time to spin up, but run smoothly and efficiently once at operating speed.

These days, solutions to these needs can be built anywhere. In a rural Montana community of 4000 people, Zinc Air has developed energy storage technology that makes dependable, scalable, portable power storage a reality.

Power availability in the developing world is a need of substantial scope as it is in places that would otherwise require months or years of infrastructure construction. It’s one more example of a need that isn’t changing anytime soon.

Is there a business there?

Not all that long ago, a substantial reason for chasing venture capital was the cost of server infrastructure. Using cloud computing like AWS, you pay for what you use as your business grows, rather than for massive infrastructure you may never use. A long-standing obstacle that impacted business development has been addressed.

Obstacles like those that LTL trucking, AWS and Zinc Air eliminate are the kind of change that Bezos was talking about when he spoke of businesses addressing long-standing inefficiencies, problems and barriers in things that won’t change over the next 10 years, rather than trying to figure out what the next big thing is.

Consider hunger. The short term solution is usually feeding people who can’t feed themselves. The long term solution is somehow enabling them to alter their economic situation so they no longer need help feeding themselves. Solving it might include some combination of jobs, medical care, child care, irrigation, clean well water, transportation, seed stock and better farming methods.

“The next big thing” might be your streamlined solution to just one small inefficiency in one area that makes hunger so difficult to extinguish. And it might be bigger than Amazon.

If you’re willing to be misunderstood for a long period of time, then you’re ready to start something new.” – Jeff Bezos, commenting on starting Amazon.

What makes an entrepreneur tick?

Lots of nuggets here for small business owners in this panel video from Stanford Business.

There isn’t much need to watch this, but certainly worth a listen for you as well as perhaps family members, managers and yes, even your line employees.

I like the diversity of the panel, from a guy who quit high school and sold his business for $40MM before he was 18, to an engineer, to a woman twice denied partnership.

It’s a bad time

Time Bandit
Creative Commons License photo credit: Ian Sane

Over the weekend, I had a brief conversation about a Wall Street Journal article I had posted to Twitter about the average nationwide earnings of a partner in a U.S. law firm.

I almost didn’t post the link because I had the feeling it would generate a political conversation. Politics was not the point of the post, but given the season…it was bound to go there.

The reason I posted it was to note that someone who typically has started at an entry level position and worked 60-80-100 hour weeks for a decade or more, was doing quite well for themselves and that this wasn’t just Wall Street lawyers.

The number is a nationwide average rather than a “gotta-live-in-a-city-of-5-million to make this kind of money” number. Successful firms with 15-20 lawyers – even those in a town of 50,000 people – will have partners. Maybe even junior partners, even if they aren’t at this “average” pay level.

Oh, the politics

The political end of the conversation was actually a good thing. It turned to us vs. them and executive vs new graduate – specifically that the executive rakes it in while the new graduate struggles to find a lawyer job.

Tell me, if you worked your tail off for a decade after going to college for seven years, would you expect to make what a new grad makes? Would you expect to make what the manager of a successful local restaurant makes? Probably not. When you make partner, you get a percentage of the firm’s profits in part because you are responsible for producing your fair share of them. Responsibility.

Today’s law graduates are probably looking forward to that juicy partner salary, as they should. Unlike the made-for-TV movie where junior graduates on Friday and starts at $200K with a glass-walled office on the following Monday, the “average” new law grad is reportedly in a tough market, according to a June 2012 story in the WSJ.

What prompted me to write about this situation was the assertion that it is a “bad time” to graduate from law school and pass the bar.

In my mind, it’s a great time. Better than next year. Better than the year after that. Frankly, there’s never a bad time to pass the bar, given the gatekeepers that depend on checking that box.

It’s a bad time to be average

I do agree that it is a bad time for some things. It’s certainly a bad time to be an “average” law school graduate. Not because there are 18 quadrillion lawyers and the world doesn’t need another one. Not at all. The world could probably use thousands more great ones. What we don’t need is another average one.

Just like we don’t need another average anything else. Today, “average” means you’re going to struggle.

What else is it a bad time for? It’s a bad time to be average. At ANYTHING. Note: Don’t confuse average with inexperienced.

The conventional wisdom is that it’s also a bad time to start a business. Either the economy is bad or you should just be happy you have a job and wait things out rather than working toward getting a better one or egads, starting a business on the side. Waiting is comfortable. It’s easy.

Yet if you wait, a year from now you won’t be any closer to having that business. Hopefully you’ll still have the job.

The conventional wisdom says “Wait.”

It seems to make sense. “Don’t start something now when the economy is down and the holidays are coming.” Will the economy be better in a year? You have no idea. Oh, but there’s an election coming, so you should wait. Except that there’s another election after that.

Next year, all the people who are starting to look at buying what you would be selling will already have their first vendor. Taking someone away from another vendor is harder than being their first vendor, even if their current vendor isn’t making them happy.

Next year, you’ll have the same job and the same excuses (or corollaries to them) and your biggest regret will be that you didn’t start last year.

It is a bad time for one other thing. It’s a bad time to wait.

One way to create sustainable jobs

Recently, the Flathead Beacon published a story about a global tech-oriented business that continues to grow right here in rural Montana.

This business started from scratch and achieved critical mass…

  • Without tax breaks that often encourage unsustainable business models.
  • Without specially crafted laws that treat their industry or part of their industry “more fairly” than others. Rhetorical sidebar: What exactly is “more fairly”?
  • Without the work of half a dozen lobbyists in Helena or Washington.

In other words, they started just like your business likely did, probably using the same methods most small business owners use – the same thing that I suggested when we talked about the fitness center just a few days ago.

They found a need and they filled it.

Several years back, I remember sitting in a coffee shop next to someone interviewing a candidate for a job with what was then the startup roots of the company discussed in the article.

The discussion and the numbers I overheard told me they were serious, sustainable and positioned well. I’m really glad to see this business continue to grow.

In good economies and bad, your business model has to make sense on its own, no matter what’s going on in the state capitol and DC, and no matter who is in the White House.

Execution, Ideas and why “I need a programmer”

Design Is
Creative Commons License photo credit: kasrak

Every programmer, much less anyone who does something that startups need, has had these discussions.

However, that isn’t why it’s today’s guest post.

The thought process from idea to creation. The value of execution.

That’s why it’s a worthwhile read.

Startups, Apollo and head bobbing

Moon Dreams
Creative Commons License photo credit: jurvetson

This piece by Paul Graham talks about a survey of startup founders, but it reminds me very much of my software company days.

Too much, perhaps.

It may not describe the business you’re in – since it’s mostly talking about software businesses – but the attitude, expectations, “reason why” and much more is certainly something that should be on your radar.

Not altogether different than the energy this country had when it was racing to the moon.

Where is your business racing off to?

The new economics of entrepreneurship

Rink of Fire
Creative Commons License photo credit: C.P.Storm

Today’s guest post from Guy Kawasaki talks briefly about the current state of the economy and more importantly about the economics of starting your own business these days.

Guy’s post offers more reasons why I keep pestering local folks to start their own business – *especially* if they are currently laid off.