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Why a (gray) guy like me is in a (co-working) place like this
As you can tell by the hair on my chinny-chin-chin, I’m not a San Francisco twenty-something. My goatee is gray. Yet I share my workplace with people my daughter’s age. I may actually be the oldest living occupant here.
So what’s a guy like me doing in a place like this?
The place is Citizen Space, a San Francisco co-working location and one of the first of some more than 3,000 similar shared office operations that have sprouted up around the world just since 2005. And for sure, I’m part of a rapidly expanding cohort — by 2013, there were more than 160,000 space sharers like me — up from zero just 9 years ago.
What’s behind the growth? Coworking is a cost-effective alternative, for sure. But consider three other more inconspicuous, but inexorable, trends.
- Burgeoning number of independent workers. The number of consultants, contractors, and so-called “solopreneurs” will have soared 50 percent from 2011 by the time they reach an estimated 24 million in 2018, according to an annual workforce report by MBO Partners.
- Rise of micro-enterprise. We’re more productive because we’re so much more connected and technologically enabled. Duh. But not so duh is this: The average size of a small business is shrinking from about 7.6 employees in 1991 to about 4.7 in 2011, or so says the U.S. Bureau of Labor Statistics. You don’t have to be a MBA to see why co-working makes so much sense to startups and other micro-enterprises like my own MediaArchitechs.
- Emergence of the ‘sharing economy.’ After this last great recession, we’re all being forced to do more with less. And a number of new, disruptive ventures have arisen out of finding ways to match demand with hyper-economical or underutilized supply — witness Airbnb, Lyft, Uber, TaskRabbit, ODesk, and, yes, coworking spaces, too. My company has sprouted out the same landscape. Only instead of vacation housing, rides, or personal, contract services, or shared office space, we’re building targeted exchanges for expert advice. The first of these: Our CloudBase3.com, a contextually relevant, magnet media property devoted to helping the nation’s 28M SMBs connect with the 1 million consultants, independent IT service providers, and tech contractors who can provide one-to-one advice for buying services in the $174B cloud-computing market. (Did I just give an elevator pitch?)
But that doesn’t explain why I’m such an unlikely member. Which brings me to the real reason. It’s this: “If you really want to enjoy life,” my favorite novelist Mark Helprin wrote, “you must work quietly and humbly to realize your delusions of grandeur.”
I might share space now, but once I didn’t. I held lofty titles at big companies that bestowed me with my own comfy digs on the upper floors of soaring corporate office towers. It all changed when I did something extraordinarily bold — or certifiably stupid. I started my own company — and at a time when many of my peers are starting to smell the roses of retirement.
So now I spend my days sans the Aeron chair, the ergonomically correct desk, and the door to my own domain. But here’s the thing: I’m fine without these appurtenances, because I’m finding something better in their place — networking with a raft of new contacts far beyond the insular world I occupied at companies such as Yahoo and CNET. And while your expertise and character are keys to success, don’t downplay another key factor, kids — your ability to build relationships.
So now I’m hanging with people like Citizen Space owner Toby Morning, a fellow entrepreneur who has his fingers in as many businesses, I swear, as Warren Buffet. Or take Manish Panjiar, who’s building a disruptive new telemarketing platform. Or how about Sebastian Zontek. He’s an entrepreneur from Poland who’s building a predictive advertising platform. In his case, I’m connecting him, because I spent more years in the media business than I want you to know.
What’s a guy like me is doing in like this? Here’s what: He’s turning away from the cosseted corporate confines that once possessed him and turning to a place where he consorts with others as young at heart, as full ambition, and teeming with hope as he is.
(Patrick Houston the Founder and CEO of MediaArchitechs, a San Francisco Bay Area startup devoted to unleashing the power of free enterprise by making one-to-one advice affordable and accessible to the smallest enterprises in every corner of the world.)
Written By: Alexander Torrenegra
Instead of earning equity from the businesses they accelerate, accelerators could earn royalties from the revenues of such businesses. This could enable accelerators to help entrepreneurs grow and bootstrap their business instead of forcing them to raise capital.
My wife and I co-founded the Voice123 brand ten years ago. Today, it’s a successful business with 30 employees. Its success didn’t depend on angels, accelerators, or venture capitalists (VCs). In fact, had we listened to any of them, Voice123 would not exist today. There are thousands, maybe millions, of entrepreneurs like us out there. The current model made popular by Silicon Valley is suffocating many of them and killing startups that could also become successful. This article explains how and offers an alternative.
The current Silicon Valley model has one major flaw – it creates an ecosystem that asks entrepreneurs to shoot for the moon rather than build a sustainable business. VCs won’t waste time working with companies that are likely to sell for less than $50 million (I don’t blame them as their business model needs such scale). Angels and accelerators exist because VCs exist. They work as a bridge between the startup and the VC. Although some angels prefer capital efficient businesses that don’t need much VC to avoid dilution, many angels won’t invest in startups that aren’t likely to scale to the $50 million valuation level because they’re afraid VCs won’t invest. Given that most accelerators follow the angel/VC/exit model too and measure their success based on the level of funding startups get, many entrepreneurs with great ideas and companies are being told to pivot to try “bigger ideas”. In fact, they don’t even consider bootstrapping, which actually works! Unfortunately, forcing first-time entrepreneurs to “dream big” and execute on $50 million ideas is no different than asking a first-time driver to compete in a Formula 1 race. It is very risky, to say the least. The concept of “Go Big or Go Home” may work for some, but it should not be a rigid mantra, especially in emerging economies.
I (and many of my colleagues) am fatigued from “demo days,” that, judging by recent trends, should be renamed “PowerPoint Days,” where panelists, primarily made up of investors, tell entrepreneurs that their companies are “not good enough” simply because their firms wouldn’t invest in them. I’m tired of VCs dismissing entrepreneurs because their startup is a “lifestyle business” (as if being a VC isn’t a lifestyle business!). I don’t want to continue seeing emerging economies trying and failing to copy the Silicon Valley model, teaching entrepreneurs how to raise angel capital when there are still few successful exits, if any (I’m looking at you, Colombia).
This should change. Entrepreneurs with good ideas, even if they are “not-so-big” ideas, should feel comfortable building “not-so-big” companies. This is especially relevant for first time entrepreneurs. It’s okay to build a bootstrapped company that “only” sells $1m per year and grows 20% year-to-year. Sure, no VC will get rich with them, but the founders will be happy and they can have a significant social impact.
Can angels and accelerators help? Unfortunately, their current business model depends on VCs. If a company they fund is not backed by a VC, it’s going to be very unlikely for the angel and/or the accelerator to get their money back. The solution? There could be many, but the one I’ve been thinking about for a few weeks:convertible royalties.
When an accelerator or an angel invests in a company (whether it’s cash or, more importantly, mentoring), they could start getting a small part of the company’s revenue as a royalty. Of course, the revenue may be insignificant initially, but after a couple of years and some growth, the revenue may be high enough to justify the original investment. As with convertible notes, convertible royalties could become equity upon the occurrence of certain performance or time-based milestones. For example, hitting a certain level of aggregate sales, receiving a certain amount of funding, or getting acquired.
I’m calling it convertible royalties because of its similarities with convertible notes. Unlike convertible notes, though, the business model of accelerators and angels wouldn’t depend on the company getting acquired to be viable. In fact, convertible royalties may open the door for accelerators to promote bootstrapping. The convertible royalties idea may allow accelerators and angels to invest in companies that nowadays are not even considered for acceleration: bootstrapped companies, companies that don’t need additional capital, service companies, non-for-profits, etc. It may even allow services like Kickstarter and Indiegogo to start offering some kind of return to crowdfunders. I dream of the day when accelerators stop forcing entrepreneurs to improve their pitch for investors, and instead help them improve their pitch for clients and sell more.
Some are experimenting with related concepts. Adobe Capital, a social venture fund in Mexico, uses subordinated debt that is repaid by collecting a percentage of sales. Some call this model “revenue capital”. Nevertheless, many entrepreneurs don’t need venture capital. They need education, mentoring, connections, and strategy.
Of course, the convertible royalty model won’t be perfect and may not work for every situation. For example, the royalties may need to be different for different companies depending on their business model. Royalty payments may need to be postponed initially to allow all company revenues to be reinvested into the growth of the business. Also, if royalties do get paid out, the equity or the potential conversion to equity, may need to be reduced so that the entrepreneur doesn’t need to “pay twice”.
What do you think? What drawbacks do you think the model could have? If you’re an entrepreneur would you be willing to pay 0.5% in royalties instead of giving the traditional 5% equity to accelerators? If you’re an accelerator, would you consider using the model? Will it work in emerging economies? Will it work in Silicon Valley? Should the convertible royalty agreement have a deadline? Will this model encourage accelerators to push entrepreneurs to increase sales in the short term while sacrificing long-term strategy? Let’s start a conversation.
P.S. Wondering what makes me a qualified person to talk about this topic? To be honest, I don’t know if I’m experienced or articulate enough. Some may call me ignorant or wishful. They may be right. Nevertheless, here’s a little about me: I started my first business in Colombia when I was 14 and bootstrapped it to 25 employees. I moved to the US in 1998 and since, I’ve co-founded multiple companies here, including an incubator. We bootstrapped some of them. We raised angel capital for some. We raised venture capital for some. Some failed; some are successful. I’ve invested as an angel in several startups, as well. I’m co-founder of HubBog, the largest campus for startups in Bogotá, as well as co-founder of the two largest tech meetups of Latin America. I mentor many startups through several accelerators. I am the CEO of Bunny Inc (owner of Voice123, VoiceBunny, and BunnyCast), a successful bootstrapped company with 35 team members in Bogotá and San Francisco that is doubling sales this year. I never had an eight-digit exit, yet I am a happy entrepreneur.
Thanks to Leonardo Suárez, Shaun Young, Patrick McGinnis, Dan Gertsacov, Dan Green, and Tara Tyler for reading and commenting on drafts of this article.
This code camp though is not a “one day and your done” code camp. On the contrary, this FREE code camp is unique in that is it lasts ALL WEEKEND. That’s right; you have 2 days to make it out to this FREE event. The Silicon Valley Code Camp will be held this Saturday, October 3rd, 2009 and this Sunday October 4th, 2009 at Foothill College in Los Altos, CA.
There is slated to be 150 sessions at this year’s code camp covering over 75+ topics. Add to that there are already over 1,200 people registered for this year’s code camp. So if you live or will be in the Silicon Valley area and are interested in networking with other developers and learning new skills (and in this tough economy, who isn’t?), then you should make it out to the Silicon Valley Code Camp.
For more information, please visit: http://www.siliconvalley-codecamp.com
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 firstname.lastname@example.org.
Continuing to lead the way with Hybrid TV, Entone, Inc. is teaming with BTC Broadband to explore a new Broadband TV (BBTV) service model in Bixby, Oklahoma.
With FusionTV, BTC Broadband can offer a new BBTV service that combines live Over the Air (OTA) television programs and full digital video recorder (DVR) capabilities, with additional cloud-based media services that includes VUDU’s streaming library of over 50,000 titles and more than 50 popular online applications, such as photo sharing from Flickr and Picasa, and social media via Facebook and Twitter.
“Our FTTH deployment is a key technological differentiator for our services,” said Scott Floyd, Director of Sales, Product Development & Customer Services at BTC Broadband. “With a product like Entone’s FusionTV, we can leverage our high-speed network to bring next-generation, broadband-centric services to market while also increasing our overall customer satisfaction with a rich and compelling TV service.”
Entone’s FusionTV solution is a turn-key managed platform that includes software, equipment and service. FusionTV combines traditional TV service with OTT services and is delivered as an operator-branded offering. FusionTV allows operators to roll out a unique video-centric broadband service that can increase the average revenue per user (ARPU) and strengthen subscriber satisfaction, all without the upfront capital investment and content acquisition complexities of a full scale IPTV system.
“Operators are realizing that broadband is the anchor platform for delivering new revenue-generating services,” said Andrew Morton, Vice President of Broadband TV Solutions at Entone. “BBTV is the proverbial win-win. It offers a path for progressive operators like BTC to potentially upsell their broadband subscribers to a premium tier, and can also give BTC a way to offer a richer, operator-branded TV service for consumers who may otherwise cobble together their own suite of online video services that can neither be monetized or used to enhance the BTC brand.”
FusionTV is enabled by Entone’s 300 and 400 series of hybrid devices which integrates Broadcom’s advanced dual-core processor – providing a flexible platform for supporting an array of advanced video and hybrid TV applications.
Watch our for our next Code For TV event, get on the mailing list at www.codefor.tv