Archive for July, 2012


The Startup Scene that’s Really Cooking–Food Trucks!

Posted on 16. Jul, 2012 by in blog, Coworking, Foodie, Local News, SOMA, Startups

What’s more basic than eating?  Maybe that’s why the growing legions of little rolling restaurants have something fundamental to teach us.

One of the hottest spots for startups isn’t just in the incubators of Silicon Valley.  It’s also on the streets nearby. Literally. As in where the Goodyears meet the macadam.  And for the price of lunch, it can provide you with a glimpse into some of the market’s most important new technologies, market trends, and business models as they blend, bake, and stew into commerce as it’s coming to be.

I’m referring to food trucks.  There’s an exploding number of the serving up meals in San Francisco–and in Chicago, Austin, and other metros, too.  Unlike the “roach coaches” that classically cater doughnuts and coffee at construction sites or the push carts dishing up dogs, these are new concept, rolling restaurants going by names such as Le Truc, Eire Trea, and JapaCurry.

Study Results. I’m calling your attention to this phenomenon not just because I’m a foodie. Instead, it’s because I got a jump on the preliminary results from study by a husband-and-wife market research team exploring the phenomenon as part of their ongoing work into the swiftly changing nature of the small business economy, such as the rise of independent workers and what I’ve previously identified as the “cell-sized enterprise.”

They’re Steve King and Carolyn B. Ockels, who are partners at Emergent Research, which has been providing forecasts for companies such as Intuit, SAP, and American Express.  As they started to describe their early food truck findings, it became clear there were broad and important parallels to be noted for other startups — and even established companies, big and small.

Because the food truck phenomenon is so new the evidence surrounding it is largely anecdotal.  But even at that, it’s clear something’s cooking. Steve and Carolyn found the City of San Francisco has now licensed about 250 food trucks–compared to just 20 four years ago. While the number represents a fraction of the city’s thousands of brick-and-mortar restaurants, it doesn’t mean it’s insignificant.  Remember: This is the kind of trend-spotting that can lead you to first-mover advantage that’s won the day in so many markets and for so many companies.

Based on their reckoning, the food trucks represent directions that, when passed through my prism, mean three important things to you.  And they are:

  • Be mobile, local, social. To me the local-social-mobile chant resonates of the blah-de-blah I keep hearing mostly from consultants, analysts, and especially smartphone application developers looking for even more reasons to tangle us in connections we don’t need or want. Checking in on FourSquare makes me want to gag myself with a spoon.  But when it comes to food trucks, then these imperatives look more like concrete business practices to be broadly applied to real commerce.  Food trucks go to their customers. They’ve gotten savvy at reaching them virally where they live, work, and, of course, eat.  More than anything, Steve and Carolyn note, the increasing public appetite for locally grown, prepared, and provided food attests to the changing nature and growing importance of neighborhoods and community.  That people are seeking more real–as opposed to virtual–connections to each other holds major implications about the way any business operates anywhere.
  • Growing importance of prototyping. This is another post-recession practice gaining momentum.  Many food truck owners want to open their own traditional restaurants, Carolyn and Steve point out.  Because capital is so scarce–and expensive–they’re using their trucks to hedge their bets.  In many cases, they’re relying on their trucks to “test concepts, neighborhoods and recipes” before they commit themselves to their grander a real brick-and-mortar eatery, says Steve King. In the same way, many of the startups I’ve encountered, and an increasing number of established companies, are dispensing with the brash “go-big-or-go-home” way of doing business. Even when it involves a technology platform or an application rollout, more and more companies are validating their efforts in small baby steps.
  • Emphasis on opex.  Some of you will recognize this as one of the factors driving businesses to the cloud. What applies to data centers also works for restaurants too: Rather than expending capital on server farms or storefront space, which take longer to write off, food trucks also represent the more flexible financial advantages and the faster tax deductions that come with tilting money away from fixed expenses to variable costs. The shift reflects a broad reality of the post-recession economy.

As I think of it, maybe food trucks are coming to represent more of the way companies, of all sizes, need to operate in today’s complex and fast-changing marketplaces, and even when it comes to IT: You need to be able to move fast and flexibly through twists, turns, and bottlenecks to meet your customers where and when they want you to satisfy their most basic needs in ever more palatable ways.

Patrick Houston is the co-founder of MediaArchitechs. He is a former SVP for a new media startup, a GM at Yahoo, and editor-in-chief at CNET.com. He can be reached at patrick.houston@mediaarchitechs.com.

 

 

 

 

 

 

 

Be Lean, But Don’t Buy It as a Silver Bullet

Posted on 10. Jul, 2012 by in Developers, Funding, Startups

Yes, there’s a lot to like about ‘lean’ startup methods.  But don’t gulp it without question.

I’ve been following–or practicing–“cutting edge” business methods for longer than I want you to know. Try this.  You’re familiar with “agile development,” right? But how about quality circles?  Or Total Quality Management?  How’s about Six Sigma? I’ve lived through them all. And I can attest to the fact they all shared something in common with the latest “lean startup” methodologies buzzing around the cubicles, incubators, and co-working spaces we inhabit: All promised revitalization, growth, and great, good fortune.

But those early panaceas did something else:  They came, and then they went.

So whenever I encounter a similar silver bullet these days I just wanna reach for one–as in the kind that stars in a beer commercial. If I popped the top on a cold one every time I heard someone say “pivot,” “persevere,” and “minimum viable product” I’d have a drinking problem.

Those are  terms popularized by Eric Ries in his best-selling book, “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.”  You must know him.  He currently enjoys guru status in entrepreneurial circles.  He’s been lionized most recently in a Wired magazine profile, which also noted how his philosophy is currently making its way out of the startup scene and into big blue-chip companies such as General Electric. Even Harvard Business School is offering a course based on his work.

I’ve read the book. I’ve recommended some of its practices.  I’ve embraced some too as my own startup conceives, develops, and consults to technology-fueled media startups. I confess I concur  with the precept at the heart of the lean approach: Even the most brilliant and experienced people don’t know enough to outwit newly emerging, rapidly changing, and increasingly complex markets, especially when it comes to products and business models without precedent. That’s especially why a startup is based more on faith and less on fact. The market hasn’t spoken. As a result,  the only prudent way to give birth to a business is to test and test and test.  According to Ries, it’s about deploying the  same scientific method we learned in grade school:  State a hypothesis and then experiment to prove it.

Humility counts. This inherently more humble approach to business represents a refreshing contrast to the entrepreneurial hubris that typically struts its stuff down the streets of Palo Alto. Or the egotism that fills executive suites throughout the business world, for that matter.  I’ve personally been witness to monumental miscalculations by the best and brightest who couldn’t have been more certain of themselves, what with their MBAs, lofty titles, fat salaries, and corporate perks.

Still, I’m just not–n-o-t, not–willing to become a flag-waving member of the lean startup “movement,” which Ries started calling it as soon as Page 14 of his book. A movement? Really? Like civil rights?  Environmentalism? The Arab Spring?

When someone touts a practice as a movement that’s the telltale sign of fad surely destined to fade because it invariably over-promises.

While they’re rare, others refuse to guzzle the zero-calorie Kool-Aid, too.  The Wired profile pointed out one certainly worth noting: Respected Silicon Valley venture capitalist Ben Horowitz who’s said in his own blog post that, to hell with skinny, startups need to be fat–monied and rapaciously profligate enough to dominate a market before someone else does.

Brit fit. One of the most outspoken and quotable curmudgeons I found lives from Silicon Valley–in Surrey, South of London, in fact.  Maybe distance makes the head grow stronger, because 47-year-old Nick Pelling, a serial entrepreneur, pulls no punches.  Consider his screed on the 10 reasons why “lean startups suck”

For all its reliance on the scientific method, Pelling declares that “lean” isn’t science at all; it’s only validation is anecdotal. But Pelling’s main rap is that it’s naive. “A lean startup is only really self-fundable,” he says. And the reason is that, in the real world, people aren’t willing to give their money to someone who wants to conduct “experiments” with it. Instead, someone willing to stake a business wants confidence, comfort, and proof you know what you’re doing

“What kind of a ‘contract’ can you have with a business angel by taking this approach?” Pelling asks. “It’s a key disconnect with the way people actually behave.” The sources of capital “don’t want to fund your industrial education,” he says, concluding that Ries doctrines “are much more about learning than about leaning.”

I’m not as strident. There are “lean” methods and tactics you might well find applicable and fruitful. Nevertheless, I won’t, and you shouldn’t, take the approach for what it’s not—and it’s not a silver bullet.  There’s only one of those that delivers on its promise, and I’m about to pop the top on it right now.

Patrick Houston is the co-founder of MediaArchitechs. He is a former SVP for a new media startup, a GM at Yahoo, and editor-in-chief at CNET.com. He can be reached at patrick.houston@mediaarchitechs.com.

 

The Rise of the Incredible Cell-Sized Enterprise

Posted on 01. Jul, 2012 by in blog, Coworking, SOMA, Startups

In starting my own small company, I’m joining the ranks of millions of “microenterprises” portending epidemic changes in the business environment.

When Facebook went public in May, I had a moment – and I bet you did, too.  I found myself in one of those wistful reveries, wishing, gee, damn, if only Mark Zuckerberg had been my boss, so I could have had a piece of that windfall.  But then I remembered.  I’m already working for the best boss in the world.

My boss is me.

Yep, after 20 years of working for someone else, I’m now working for me.  The LLC papers arrived from the CorpNet filing service last week, replete with my very own company stock certificates and, oh yeah, the very own company embossing stamp.  You can’t get more official than that.

I’ve thought this made my company special, in the way a parent regards a child they’ve brought into the world. But then I discovered my company is part of growing cohort of “microenterprises.” As we get more plentiful—and powerful—we’re also getting more attention.  The reason:  We’re different from the small mom-and-pop shops and other conventional small businesses that have typically fueled the U.S. economy.  And while we’re populating Silicon Valley, we’re not you’re typical tech startup either.

Thanks to cloud-based technologies, co-working spaces, and other enabling resources, even the smallest of companies, like mine, are able to operate with the scale and reach that only corporate behemoths once could.  And we’re able to operate anytime, anywhere.  Because we’re able to do more and more with less and less, we’re actually shrinking in terms of our average size.  And if you thought a startup of the past could be nimble, think of what it portends to markets when we’re sneaking up on their players like an unseen colony of bacteria.

Micro-enterprises like mine are being defined as those with less than five-employees, with seed capital of less than $50,000.  Though we’ve been around for a while, we’ve largely been ignored–most notably by government number crunchers and policymakers who confuse “small” with “insignificant.” But in April, just before its IPO, Facebook raised eyebrows by paying nearly $1 billion for Instagram, a two-year-old, the micro-sized photo-sharing startup. Then, in mid-May, New York Times columnist Tom Friedman–he of “world-is-flat” fame–waxed rhapsodically about us.

It’s “easier and cheaper than ever to publish your own book, start your own company and chase your own dream,” he proclaimed. “Never have individuals been more empowered, and we’re still just at the start of this trend.”

Of course, what Friedman recently discovered is what you and I have known for while: Cloud-enabled software services are picking up where the PC and Internet left off.  Even more simply put, the cloud is lowering the barriers of entry some of the world’s most lucrative market segments.

Yes, there are more and more of us. Just how many? Depends on how you define us. Dawn Rivers, the editor and publisher of the Microenterprise Journal, likes to think of us as companies that don’t employ anyone else but the owners. She cites a Census Bureau stat that numbers “non-employer” companies at 21 million. Others, like the American Association Enterprise Opportunity, the self-proclaimed “voice of microenterprise,” claims the fewer-than-five-employees, less-$50,000-in-startup-capital companies stands at 25 million establishments, providing work for some 32 million people.

Claudia Viek, the CEO of the California Association for Microenterprise Opportunity, which owns the aptly named “microbiz.org” domain, says that in the Golden State alone self-employment has increased by 25% in just the past five years.

But there’s something even more astonishing taking place—something hardly anyone else knows about.  In a paper published in March, two economists at the U.S. Bureau of Labor Statistics found that individual microbusinesses are getting even smaller. The average size of non-seasonal startups fell from 7.6 employees in the 1990s to 4.7 in 2011.

Do the math, and the decline accounts for an astonishing 38 percent plunge.

The significance, as Rivers so nicely distilled it, comes down to this: “The size at which a business reaches scale has gotten much, much smaller.”

And, yes, while the economy is hardly cooking, don’t think for a minute that the proliferation of the incredible shrinking enterprise is the offspring of soaring unemployment rates.

According to a survey conducted at the behest of MBO Partners, a company that serves “solopreneurs” with a suite of back office services, 55 percent of us made a proactive choice to become self-employed. I did. Nor are we card-carrying AARP members in the twilight of our careers. According to the MBO study the biggest single demographic group among us–48%–is comprised of Gen Xers, the group of 30 to 49-year-olds in the throes of adult responsibility.

To out it bluntly, we’re not “the second-class citizens” you may have once considered us. In fact, we represent a formidable talent pool, and the most enlightened companies are tapping into us. MBO CEO Gene Zaino told me he sees more and more companies creating special offices, tasked with staffing smaller component projects from the ranks of contract workers as an alternative to hiring a big, blue chip consulting firm for a huge engagement fee.

And here’s a stat to that’s going to give second, and third, thoughts to corporate cubicle rats: The MBO study found that 80% of us are satisfied with being on our own. Along with your rivals vying for a company’s best talent, you’ve got a lifestyle choice luring them too.

But the biggest reason to watch out for us resides in how readily we can be overlooked. Like the germs on your hands, you may not be able to see us.  But that doesn’t mean we’re not there. Now instead of competing with foes around the world, Zaino says, large enterprises have to start worrying about “new business models that pop up right in their down backyard.”

My boss and I have been talking it over.  We don’t think we’re as far away as your backdoor.  We prefer to think we exist right under your nose.

Patrick Houston is the co-founder of MediaArchiTechs, a consultancy that helps to conceive, develop and grows technology fueled, revenue-generating media businesses. He is a former SVP for a new media startup, a GM at Yahoo, and editor-in-chief at CNET.com. He can be reached at patrick.houston@mediaarchitechs.com


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