Babbling VC

Corporate Innovation's Dirty Little Secret

There’s a dirty little secret amongst those who know how to run corporate incubators/accelerators/labs and it’s one hardly anyone would openly discuss. The lifespan of these departments is always finite. Some may only make it one or two years. Some may make it to ten years. Nevertheless, none will survive much longer and very few will ever get past five years of existence. If we go back a couple of years you’d be hard pressed to find even one that is ten years old and still doing what it initially set out to do. Many have pivoted away from their original goals and have either become business units still labeled as such yet behaving just like any other unit. Or they have absolutely nothing to do with startups or pursuing innovation. They are marketing and PR at best or where tired executives are put out to pasture. The days of a Bell Labs or Xerox PARC are long gone and very few managers at large corporates are even able to think and behave in a manner that would allow them to plan for long-term existence of these units. 

Yet there is also another reality that one has to accept when involved with corporates nowadays. The times have changed. Just as I wrote in my previous post about VC behaviour, so too have the corporates changed. Further, their innovation efforts have had to adapt. Hence it is not all doom and gloom when you look at it….it’s simply inevitable. Cycles have compressed and the speed of innovation has increased to such an extent that you can hardly plan more than a couple years out. The majority of these labs/incubators/accelerators are so closely tied to the people running them as well as the management championing them that even the slightest change throws everything for a loop. Further, the compensation schemes often put in place within these organisations are bound to fail, regardless of success or failure. It’s unfortunately a Catch-22 because if you don’t perform, or don’t perform fast enough you will be shut down. If you do perform, the expectations get out of whack and you are ultimately again failing instead of succeeding. Or you’re initially a threat to the organisation and everyone works against you until you perform. Once you perform though, everyone wants to stick their fingers in your success. Regardless, you constantly are pulled away from what you were initially mandated to do…innovate. 

The tragedy of this situation is that in order to survive as one of these organisations, you have to constantly be adapting and cutting off limbs or mutating. There is only so long where you can successfully pull this off without tripping up. Your team will eventually tire and therefore you have to be continually replacing people. Finally, you as management ride the emotional rollercoaster daily and will burn out. You have to accept that the gig has a set lifespan and avoid focusing on all the hurdles. If you want to start one of these organisations or plan to join one, shut off your rational brain and become completely focused on the task at hand. You have to be able to see the end goal, innovation, as the main driver and filter out the noise. “Noise” will be politics, the legal department, accounting, HR, the Board and the endless myriad of corporate activities. I am not advising you to break the law but you have to be comfortable living in the grey area. You need to believe that you are a special ops group who will be sacrificed if necessary to achieve the corporates goals. When you realise that you will ultimately only be measured on the innovation that you deliver will you be able to focus laser-like on the task at hand ignoring the noise. Finally, make sure that if you aren’t “killed” along the way, you know when to get out. Simply be aware of your own limits…go beyond them. Yet know when you will snap. Taking it out on management or your employees (or with drink, drugs or excessive sports) will only shorten your time with this organisation or will just get the whole thing shut down.

Not many people are made out for this kind of role. If it is your task to set up this organisation, make sure you know what kind of people you are looking for. They are not your typical corporate animal. They’re also not your typical startup person. They are a hybrid of someone who likes to accept new and different challenges constantly. They know how to navigate in the startup world yet are comfortable with corporate boards. They can go from product meeting to contract negotiations to a stage presentation all in the same day. They know how to be a part of a team yet can thrive as individuals alone in the field. And most importantly, they have proven most of this in previous roles at multiple organisations. These are not folks who have spent too much time at any company because they tend to get bored by the norm.

Update: in order to avoid any confusion, no, this is not my departure note from Liquid Labs. I, as well as my team, remain just as dedicated to what we set out to do as ever. Nevertheless, I live what I preach and we strive to focus on innovation and performance at Liquid Labs and not on simply surviving in the corporate environment. We continue to learn and adapt our approach to what we do and have mastered not being too distracted by the noise. 

Wistful Thinking in VC

I read a blog post the other day from a well respected VC. This is someone whom I know and whose blogging I have been following religiously for years at this point. Nevertheless, I was for the first time turned off by what they had written. The reason is that this VC was quite wistful in his thinking and honestly was completely off. Were you to go to any VC nowadays and exhibit behaviour as recommended in this post, you wouldn’t come far. Your employees would too question your strategy and you’d have trouble motivating your managers. The advice seemed “spot on” and you could easily mistake it for sound advice. It was almost romantic in it’s nature, alluding to the “good old days” when things were done right. Yet it sounded like a dad talking about cars of the past which you could still work on with your own hands. Sure, those engines were simpler and you could repair everything yourself with a hammer and wrench. Yet, you know what? Those cars wouldn’t even be allowed on the road today were they not classified as antiques. The same goes for companies and some of the advice floating around out there. Remember, we now have airbags and electronics and you need a computer to repair a car…not just a wrench and hammer. 

I’m not going to name names since this person happens to still be a hundred times smarter than me and crazy successful. I also genuinely like the person but I do have to admit that they are getting older. Hence, we have a problem. This person is not alone in looking at the world through rose-colored glasses brought about by age, success as well as financial freedom. They are of a generation which included a ton of folks with great success as VC’s, who all are reaching a certain age together. Further, they all were around early enough to get into blogging and create a long history of posts. Unfortunately, I am now seeing the trend and maybe only because I too am getting older. 

The advice they are giving may have worked in the 80’s or 90’s yet it no longer is prudent to follow it. Many things never change and we all know that. Fortunately, some things do and I’d posit that certain things about management, especially at start-ups have adapted to the times. You have to take a different approach when building a business now and manage accordingly. Startups themselves have far more sophisticated tools available to them. Founders are coming in with extensive experience and deeper segment knowledge than 10 or 20 years ago. Change and evolution of a business happens significantly faster. Customers and partners too have adapted and aren’t necessarily stuck in the past. Some corporates even are as agile as startups and definitely don’t behave like the slow moving cargo ships of the past. Cycles are coming to an end and new ones are kicking off. 

What I don’t mean to argue is that advice of older VC bloggers is wrong. They still have a lot to offer and some of these bloggers have a body of work on their sites which every founder is recommended to read. Nevertheless, be careful about blindly taking advice and adapting your mindset and strategy to everything you read on a successful VC’s blog. Just as they were the young guys ten, twenty or thirty years ago and broke things, you too have to at times forge your own path. 

Cameraphones Gone Wild

I changed gyms about a year ago due to logistics. Nevertheless, one very odd thing occurred to me at the new place which dumbfounded me for quite some time. A lot of people came into this gym and didn't shower after working out. This seemed very odd to me....on top of being kind of disgusting. Were all the people coming by bike and showering at home? Were they ashamed of showing their imperfect bodies in the shower? Is there a new trend I missed...the Paleo of showering or something along those lines? Well, no, it's far simpler. 

I actually asked a bunch of people what is up? In hindsight it became quite clear. After I knew what the problem was I also realised it was a mostly younger demographic of members who weren't hitting the showers. The reason behind this you ask? Cameraphones! Way too many of these kids were scared of some douchebag taking a pic of them while in the shower and posting it to Facebook or some other social media channel. I would of never figured this out. It's simply something that was not an issue when I was in school. Obviously it's a big enough problem now that kids are completely skipping the shower for fear of being outed via some social channel. Ridiculous!

This also had me thinking about the fact that a B-list celebrity works out at my gym. Having had some time on a stationary bike next to him, I asked his thoughts on this. Considering he too would have something to lose were some idiot to post him naked to the Internet, he's a target. Simple enough....he works out hard and trains MMA. His theory is basically that most people wouldn't risk getting their ass kicked to post his pic. I'm quite sure though that not every celebrity nor kid has this option. Further, what happens if he's filmed kicking someone ass?

Just as a I posted a couple days ago about the problems with online reputations, cameraphones are surely having an unintended impact on many things. Sure, the constant surveillance aspect of everyone having a camera in their pocket has its benefits. But seriously, not being able to take showers due to idiots taking pics is truly an unfortunate consequence. I wonder where this goes in the future. Are we truly headed into a Big Brother future where we have to fear everyone around us too? Does a cameraphone make every individual a potential threat?  

How much do we all adapt our behaviour when out and about since we may be filmed at any time? It's easy enough for someone to record you saying something stupid or taking a pic in some uncompromising situation. Further, things can so easily be taken out of context or edited in such a way that you are screwed. Cameraphones....love 'em or hate 'em!?!? 

The Downfall of Reputation

A couple of years back I was enamoured with the idea of reputation and the reputation economy. I even came close to joining a startup focused on reputation but am glad I didn't. I even had an idea to start my own business around the management of online reputation. Unfortunately, I don't believe that the evolution of our online behaviour is healthy when it comes to reputation. I'd actually think twice about starting a business based on reputation now because I'm quite concerned where everything online is headed. 

We've all started influencing our online behaviour based upon the fact that we've realised nothing is ever forgotten online. Repeatedly we see people in the media and our industries getting slammed for something they have done online. Things creep out and can be downright damaging as standalone issues....porn, drugs and so forth or can be so misconstrued online (opinions) that they become a disaster for said person. At times, it is justified that things "come out" in our digital world but it's a slippery slope. 

Certain businesses have become completely entwined with reputation. Here's a scenario that many are living daily: you meet someone online using something like Match.com or Tinder. Before you meet this person, you've probably Googled them and researched them on social media. Right there, you've already started forming an impression based upon reputation. Further, on the day of the date, you take an Uber to pick up your date and then, after leaving the car rate the driver and they you. All of this is a reputation transaction. Then you go into a restaurant which you chose based upon Yelp reviews. Hence you're eating in this restaurant based upon it's reputation. After you've eaten, to influence your reputation online, you go ahead and rate this place on Yelp. While on your date, you tweet some things out, post some fotos to Instagram or update your Facebook profile and/or check-in on Foursquare. All of these actions are driving your reputation. 

Here's the nightmare scenario that I see evolving. Due to the fact that reputation is playing an ever greater role in our online behaviour I fear for it's genuineness. If I know that I am rating everything and at the same time, myself am being rated back, how do I behave? Most likely, everything will be neutered down to the extent that it's basically worthless. You already see the effect when using Facebook. Everyone is creating an optimised self via their timeline. Openly voicing an opinion can lead to shitstorms which become far worse than anything you may have said. Further, not sharing a generally held opinion segregates you from the masses, pushing you to the fringe. This has you keeping your mouth shut to stay in the eye of your "friends" and/or "followers". You start assimilating for the "likes" on Facebook or for the "retweets" on Twitter. 

The less you care about reputation online, the more you become an outsider and we all know where that leads. Yet I fear for an online world where everything is neutered down and no one is being their true self. I also feel like I am seeing fairly opinionated folks online becoming quite bland for fear of tarnishing their reputation. Many things I really enjoyed because of the "mess" that open discourse leads to have become quite boring, including Facebook and Twitter. There's far less edginess to everything online and political correctness leads to the Disneyfication of everything. I miss the messy, open online world of days gone by. Or maybe I'm just getting old. 

Blindly Trusting Market Data

This shouldn't come as a surprise to anyone but it bears reminding. Never blindly trust market data regardless of whom it comes from. I remember all the years of reading business plans and seeing market data referenced. So and so market is so large and so forth. Such and such is booming right now. Useful at times but usually bullshit. At best, it was skewed only slightly but most likely totally off. Relevant to you is the fact that the provider of the data doesn't give a shit about your performance. It is there for the publisher's benefit. The only person who can truly source market information is you yourself. Search out the reports but always do a gut check. If it sounds too good, it probably is. Conversely, if it sounds really bad, it usually isn't. 

The reason the topic of this blog post comes to mind is because I recently read a market report by a company where I have inside info. I know exactly why this market information appeared as such and why the specific timing. It has nothing to do with the actual market. There is a back story to why this company is presenting this information at the moment and a ton of people are reading it. Most importantly, it is completely in their own interest and has nothing to do with providing information. You could actually argue that it is disinformation. It fits their strategy and is a self-fulfilling prophecy if people follow their guidance. 

We all inherently know not to blindly trust information. The internet has made this even worse and I am shocked at how often people follow guidance simply because they read it on the internet. This is the case regarding not just market information but basically any information online. Think twice what getting this stuff wrong can do to your business. 

In a best case scenario you have the time and resources to do your own research. If not, consult multiple sources and never depend on just one. Even if resources and time are limited, do some research nevertheless. You may be worse off simply reading one report verses completely skipping any research. You can always dig around easily to paint your own picture. Further, it's pretty easy nowadays to find people who understand markets. Call them and ask them what their opinion is. Again, speak to more than one person. A couple conversations really don't take that much time and it's indirectly an opportunity to network on the side. 

Why Everyone is Wrong About Wearables

There have been multiple angles when it comes to reporting on wearables. They were all "dying" after a report came out last year. Now again, people are arguing that the days are numbered for wearables. Unfortunately, two years in a row people are getting it wrong and will continue to do so. 

Let's start off with a definition. For me and the purpose of this post, I am referring to "wearables" as encompassing anything you wear to either track fitness, get notifications or measure health, etc.. I am splitting out a category of wearables I'll broadly refer to as "smartwatches", even though at this point you could basically write iWatch since few others matter. Remember to keep these two separate in your mind. 

Both wearables and smartwatches continue to evolve at a fast clip. People are missing the point though that they are evolving in different directions and can exist in parallel. You won't in the future wear a smartwatch on one wrist and a wearable on the other. (There may be use cases dependent on features but let's just presume this won't be the case). What you will do though is sport a wearable on one wrist and a mechanical or luxury watch on the other. You may also completely forgo the watch completely and just wear the wearable. It will always remain a case of "the other wrist". Do you put something on it or not and if so, what. 

I, for one, am not buying a smartwatch as I am a wristwatch geek. I collect high-end mechanical watches and love them for their engineering and artistry. At the same time, I'm a fitness freak and have worn Jawbones and Fitbits in the past. Currently, I don't have a wearable on and my other wrist is free. I am not happy with the quality of the products Jawbone and Fitbit have been putting out. Yet, I miss features that they offer like reminders to get up and move. I also miss the sleep tracking and could put heart-rate monitoring to good use in my workouts as well as during the day and night. I am sure the quality and durability will get better and these wearables will become bombproof on the wrist. I will for sure in the future have a wearable on one wrist and a traditional watch on the other. 

Why do I think people are getting it wrong in regards to wearables? Well, in addition to being perfect measuring tools, they too can be easily used for notifications, the simplest being alarms and notifications. Further, with technological innovation they can become input devices, either via voice or taps. I will continue carrying my phone (iPhone in my case) around with me for quite some time in the future. Personally, I don't need a smartwatch for the extra screen. At the same time, if you look at the current Fitbit Charge, you can receive call notifications on it. There are many simple use cases beyond health and fitness for wearables. Many of these use cases don't require a screen and when you do want to see a screen, you can reach for your phone. The computing horsepower will remain in the accompanying phone. 

I find it overkill to have a smartwatch and a phone. Too many things overlap and the smartwatch is competing for wrist space. Were we to evolve fashion-wise to clothing without pockets and never carrying a bag around, I'd believe we'd evolve quickly to a pure smartwatch interface. I just don't see that happening any time soon and when you add in battery life and computing power, I don't see our need to have a phone with us disappearing any time soon. 

Therefore, I see wearables evolving in terms of features that they have and being sold alongside smartwatches. There will be niche solutions and each brand will find their customers. iWatches will be bought by those who want to be on the cutting edge. Cheaper competitor versions will also evolve. Jawbone and Fitbit will focus more on the fitness community but they too will continue adding features that aren't purely about fitness and will find their place on "the other wrist". Hence, I don't see them dying out. We may not see the growth from a couple years back but as additional features are added, folks like myself who went away for a while will come back. We'll see the wearables market continue to grow alongside the s smartwatch industry and each will settle in their place. 

 

"Skate to Where the Puck is Going to Be"

As a former hockey player, I love using this Wayne Gretzky quote from my title.....too often at times. Yet, It reminds me over and over of how to think in business. There's been this exit in the German market announced officially yesterday that has received quite a bit of press, including my own. One of the aspects that hasn't yet been written about is what the founders did to get to this exit. 

I guarantee you that this happens to be one of the steps that every successful founder I have had the pleasure of witnessing in Germany has done perfectly. They were where the puck was going. In regards to their exits (or further fundings) this was the US and specifically the Valley. There are two types of founders. Those who do everything possible to allow serendipity to happen and those who don't. They are travelling to where the VC's are, where the action is and where potential buyers happen to be. This is outside of Germany, outside of Europe and usually in the US (some smartly went to Asia). Sure, exits happen inside of Germany or Europe with local buyers but not at a relevant scale and you limit your chances by not being global. 

Be it the current 6Wunderkinder exit or the ten other German companies I've seen sold to US companies, one commonality stood out. They were all constantly in the US (or at least a lot). You simply have to travel. You need to be where the action is. You have to speak "their" language. Even if you sell locally, you need to have an international footprint to drive exit valuations. People need to see you. They need to feel comfortable that you "get it". You have to be a player and as much as that sounds like putting lipstick on a pig, you need to play the game. 

Yes, it's tiring constantly going back and forth, usually on a startup budget. Crappy hotels and economy flights on international routes suck. You will be at a ton of events that may add zero value to you short-term. At the same time, if you aren't making the right connections you will never be part of the in-crowd. Don't waste time just going to random events. Have a strategy of where you need to be and whom you need to meet. Get intros, bump into people, be present and be visible. Ever more founders are realising this but I am still surprised how often people just don't put in the effort. Avoid this mistake if you can. 

Fools and Mercenaries

Someone made a comment this morning about offering large amounts of equity at the early stages of a start-up's life to find employees. It went along the lines of labelling the folks that are incentivised by equity as either fools or mercenaries. It basically implies that you are either dumb or tactical to take a large equity stake early as your main motivator. 

I don't necessarily disagree about the part referring to motivation. If profiting from equity is your main reason for joining a start-up, you will most likely be disappointed. There are one-off opportunities to strike it rich but the same is the case for the lottery. Pick your poison!

Nevertheless, there is one reality about joining early stage start-ups. You're a fool one way or another. Don't forget Steve Jobs famous quote "Stay hungry, stay foolish!" I've come to understand this more and more having been on the company building side this past couple of years. I'll openly admit how little I understood what that quote originally meant. Sure, each person has their own interpretation but for me it's pretty straightforward.

Going into a start-up, you're a fool. It's irrational, risky, hard, emotional and so forth. There really is no way to argue that it makes sense. To be honest, it either does make sense to you or it doesn't. Not everyone is cut out for startups and the ups and downs associated with them. But even more so,  those who aren't able to foolishly dive in head first most likely won't succeed in them. Those who are foolish enough to do so at times reap the rewards. Or they fail. Some will still refer to this as "foolish" but they're missing the point. 

Further though, you have to be somewhat of a mercenary when at a startup. There's nothing standardised in the startup world. You make up the rules as you go. At times, you have to be a mercenary. You are hired to serve (if you aren't the founder) an army. This army is going into "war" and none of your opponents are playing by the rules. They too are breaking the rules and/or recreating them. I am not a proponent of being unethical but you have to be aggressive in a startup all the while being smart. See the other part of the above quote: "stay hungry!" I interpret this as be aggressive and keep pushing. 

In summary, I'm with the fools and mercenaries.....the ones motivated to win and not just "earn".

Courting Mike Butcher

I wrote a tongue-in-cheek tweet this morning after seeing someone post slides Mike Butcher was presenting at an event.

pjozefak Want to get on @TechCrunch? @mikebutcher explains how. http://t.co/wKjOiLPv7n OR pro tip: be smart & say "I'll sponsor your next event!" ;-) 22/02/15 10:58

He was discussing how best to get bloggers to write about you and I agree with everything he said. If you want to get written about, heed his advice...he's been at it a while. Yet there's one thing a blogger really can't say without coming across like a dick. 

Get to know them!

PR and working with the press is a long-term game. If you only address press every now and again when you need it.....fundraising, launching product, M&A and whatnot......good luck making it work effectively for you.

At little story now about Mike. Think what you will of him but I consider Mike a friend. I'm also not blowing sunshine up his ass to get him to write about my stuff. I owe him more than he ever will me and maybe he doesn't even know about it. 

I met Mike, if I remember correctly, in Belgium (or was it Luxembourg....I forget!) I forget because it was one of those nights. I met up with some people after an event and was going out for drinks and dinner. Mike happened to be part of the group. Or maybe it was actually he who offered for me to tag along (again.....one of those nights). Still it was a fun evening out and I made it a point to catch up with Mike whenever I saw him at events. I didn't hound him for press or just address him when I needed something. I genuinely like the guy.....he's been around just as long as I have in this game and he's absolutely tireless in his reporting on the EU scene. Further, I eventually did offer to sponsor some of his events....not to get press. I wanted the exposure of sponsoring and I wanted to give back. 

Ultimately, Mike ended up helping me in a great way when he kindly wrote a post when I was leaving Neuhaus Partners to set up Liquid Labs.....without my asking. This post ended up getting exposure for me in a very specific situation which indirectly led to really good things. I am forever in Mike's debt for that. 

Without setting off on too great a tangent, the summary of the story is build relationships with bloggers. You hope to be around for a long time. They too will most likely be around for a while. Get to know them. Offer them your stories when you have press, and follow Mike's tips. But be forewarned: if you don't know them, you are just one of thousands of people trying to get their attention. Ask yourself: "would my chances for exposure be better if I actually knew them?" I'll leave the rest up to you. 

P.S. I write of Mike in this post but there are many other great guys in the EU tech scene whom you shouldn't overlook....Robin Wauters & Martin Bryant quickly pop into mind but there are many others. 

P.P.S.: Mike corrected me that we first me via Twitter actually and then in person at Robin's PLUGG event in Brussels. 

The Bastardisation of the Entrepreneur-in-Residence

I've seen this happening over the years but it seems to have come to a fever pitch in the past year or so.  Ever more people I run across or who apply for positions have held the title of "Entrepreneur-in-Residence".....better known as EIR's. This has become one of the most loaded terms in the startup world. The majority of the folks don't realise that this is one of the most bullshit titles out there now. 

Back in the 90's, EIR's showed up in the Valley. Here's the thing though.....these were really entrepreneurs. Usually EIR's were guys who had already exited at least one if not more startups and were most likely venture-backed. After exiting (and deciding to not spend the rest of their lives on the beach in Fiji) they were looking for something to do. They knew they wanted to start something but didn't have an idea yet. Hence they asked for a desk at one of the funds they had worked with in the past, i.e. one of their investors.

Without having done a study on this I am sure they ended up with the VC whom they felt had added the most value over the course of the investment in the previous business. They also helped that VC out when sitting in his office in terms of screening deal flow. The VC usually found their feedback valuable when making new investment decisions. It was a mutually beneficial relationship which at times lead to said VC investing in the entrepreneurs next endeavour. Some EIR's didn't end up starting new businesses but instead went into portfolio companies of the VC where they were camped out to turn things around. Nevertheless, these were always entrepreneurs who were at the VC's office adding value and/or starting their new thing. 

What has the EIR now become? Well it's typically someone who's never started a business before. They don't tend to have sat at a known VC's offices working on their next gig or helping that VC with their portfolio. Typically they are at some kind of unknown incubator or accelerator. Even worse, they are somewhere where the concept of an EIR makes absolutely no sense. One way or another, they are coming from a position of zero or limited experience and are't doing anything that EIR's used to actually do. 

I highly recommend avoiding this term on your CV. If you come in to interview, I am going to ask you which business ideas you were working on or what potential investments you were helping VC's review. It's kind of funny that when I ask this question during interviews I more often than not get blank stares. EIR has become completely loaded as a title. In addition to all the other title-bloat out there, I'd basically say avoid this term and just write what you really are doing wherever you were....business development, pitch screening, office management or whatever. We all know that this is the case.