tag:stream.growthink.com,2013:/posts Growthink: The Stream 2014-07-23T21:24:18Z Growthink tag:stream.growthink.com,2013:Post/717759 2014-07-23T21:24:17Z 2014-07-23T21:24:18Z The Majority Of Today’s App Businesses Are Not Sustainable

By Sarah Perez

Though the app stores continue to fill up with ever more mobile applications, the reality is that most of these are not sustainable businesses. According to a new report out this morning, half (50%) of iOS developers and even more (64%) Android developers are operating below the “app poverty line” of $500 per app per month.

This detail was one of many released in VisionMobile’s latest Developer Economics report(for Q3 2014), which was based on a large-scale online developer survey and one-to-one interviews with mobile app developers. This report included the responses from over 10,000 developers from 137 countries worldwide, taking place over 5 weeks in April and May.

That mobile app developers are challenged in getting their apps discovered, downloaded and then actually used, is a well-known fact. But seeing the figures associated with exactly how tough it is out there is rather revealing. It seems the “1%” is not only a term applicable to the economy as a whole – it’s also taking place within the app store economy, too.

The report’s authors detail the specifics around the trend where a tiny fraction of developers – actually, it’s 1.6% to be exact – generate most of the app store revenue. Slyly referencing the “disappearing middle class of app developers,” the report’s analysis groups the estimated 2.9 million mobile app developers worldwide into a handful of different categories for easy reference: the “have-nothings,” the “poverty-stricken,” the “strugglers,” and the “haves.” And, as you can tell, most of these categories don’t sound too great.

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Have Nothings

Accounting for 47% of app developers, the “have nothings” include the 24% of app developers – who are interested in making money, it should be noted - who make nothing at all.

Meanwhile, 23% make something, but it’s under $100 per month. These developers are sometimes unable to cover the basic costs of development PCs, test devices, and an account to publish apps, the report states. However, in case you’re wondering why so many developers still go iOS first, it’s because those who prioritize iOS app development are less likely to find themselves in this group, with 35% earning $0-$100 per month, versus the 49% of Android developers.

There’s also a portion of the app developer population (35%), some of whom aren’t interested in making money. The report refers to these part-timers as “hobbyists” or “explorers,” who may be just testing the waters, or working on apps that have yet to launch. Still, more than half of this crowd is interested in making some money from their applications, while less than half make $0 per month.

Poverty Stricken & Strugglers

Meanwhile, 22% are “poverty stricken” developers whose apps make $100 to $1,000 per app per month. At this rate, the companies behind the apps couldn’t afford standard app developer salaries. 15% of developers make between $100-$500 per app per month and 7% make between $500-$1,000 per app per month.

When combined with the above “have nots,” that means 62% of developers are below the “app poverty line” of $500 per app per month, and some 69% can’t sustain full-time development.

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The “strugglers” are a bit more fortunate. 19% of developers earn $1,000 to $10,000 per app per month, which could either be a supplement to full-time work or even a something of a good living, if in the high-end of that band. But these apps also tend to be more complex, requiring more development effort, and possibly ongoing server costs which can cut into the developer’s bottom line.

Winner Takes All: The “Haves”

Finally, there are the “haves.” The top 12% make more than $10,000 per app per month. 17% of iOS-first developers are in this group versus 9% of Android-first developers. To give you a sense of this group’s members: a rank-100 grossing game on iOS in the U.S. would expect to make $10,000 per day.

However, states the report, only the top 1.6% of developers make more than $500,000 per app per month, but of those who do, some are earning tens of millions per month. The next 2% – those who make between $100,000 and $500,000 per month – are making more than 96.4% of the rest of the app developers out there.

“More than 50% of app businesses are not sustainable at current revenue levels, even if we exclude the part-time developers that don’t need to make any money to continue,” states the report. “A massive 60-70% may not be sustainable long-term, since developers with in-demand skills will move on to more promising opportunities.”

As Apps Disappear, Will They Be Seen As Disposable?

The interesting thing about these numbers, besides just indicating how hard it is to have an app really hit big, is that the market economics are actually encouraging developers and users alike to see most apps as disposable things, not businesses you remain committed to long-term.

These days, many mobile app startups look more like resumés for developers who will soon abandon their work following acqui-hire M&A deals. And the continuous exits and new launches – where some startups are even being scooped up pre-launch – are creating an app consumer user base which thinks of apps as things that will quickly disappear (if you’re not Facebook, I suppose).

That makes it harder for many users today to buy into claims that an app wants to be your go-to home for important, lasting communications – like messaging clients aimed at businesses or the apps that want to store all your precious photo memories. And of course, most games have limited life-spans, too.

But on the flip side, today’s younger consumers are wired differently from their Gen X or Y (and older) counterparts. They’re fine with impermanent messages, deleting their social media accounts at will, data loss be damned. This group of consumers is an ideal audience for the increasingly disposable nature of mobile apps – at least while the current consumer app gold rush continues.

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Luke Brown
tag:stream.growthink.com,2013:Post/713254 2014-07-11T23:36:29Z 2014-07-17T20:50:55Z Growthinker's on the Ground in China!
Growthinker's Jeff Jones and Sam Park travel to China for client retreat.

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Jeff Jones
tag:stream.growthink.com,2013:Post/713214 2014-07-11T20:30:55Z 2014-07-11T20:30:55Z NEA busiest VC firm in hottest market since 2001; Here's the rest of Top 20 Cromwell Schubar

Senior Technology Reporter-Silicon Valley Business Journal

New Enterprise Associates averaged a U.S. funding deal every three days in the first half of this year, the hottest six months for the industry since the end of the dotcom boom in 2001.

Not far behind NEA's 64 first half deals were Kleiner Perkins Caufield & Byers (54), Andreessen Horowitz (52) and Google Ventures (50), according to a report from investment database research firm CB Insights.

An interesting fact from the report is that NEA wasn't involved in any of the huge deals that went down in the most recent quarter, nearly all of which happened here in the Silicon Valley and San Francisco area. That includes Uber ($1.2 billion), AirBnB ($500 million), Lyft ($250 million), Pure Storage ($225 million) Intarcia Therapeutics ($200 million) and Pinterest ($200 million).

CB Insights only tracks deals that include venture firms, so it doesn't factor in any of the big late-stage fundings that came entirely from hedge fund and private equity investors.

The firm said that investors poured 39 percent more capital — nearly $24 billion — into 11 percent more deals than had been recorded in the first three months of the year, the hottest quarter since the second quarter of 2001.

After Q1’14 saw venture capital investment hit its highest quarterly mark since Q2’01, investors deployed 39 percent more capital across 11 percent more deals. In aggregate, H1’14 saw U.S. VC funding leap to $23.87B, a 71 percent increase versus H1’13.

Overall, there were more than 300 funding deals and more than $4 billion invested in each month in Q2.

Among Kleiner Perkins' 54 deals in the second quarter was the $40 million funding of Palo Alto-based Big Data company RelateIQ, which was acquired Friday by Salesforce.com for $350 million.

Here is CB Insights' full list of the most active venture investors in the first six months:

— 1. New Enterprise Associates: 64.

— 2. Kleiner Perkins Caufield & Byers: 54.

— 3. Andreessen Horowitz: 52.

— 4. Google Ventures: 50.

— 5. 500 Startups: 47.

— 6. Khosla Ventures: 40.

— 7. SV Angel: 35.

— 7. Accel Partners: 35.

— 9. Sequoia Capital: 33.

— 10. First Round Capital: 32.

— 11. Greylock Partners: 30.

— 12. Lerer Hippeau Ventures: 28.

— 12. Foundry Group: 28.

— 14. True Ventures: 25.

— 15. General Catalyst Partners: 25.

— 16. Battery Ventures: 24.

— 16. Atlas Venture: 24.

— 18. RRE Ventures: 23.

— 19. Lightspeed Venture Partners: 22.

— 19. Intel Capital: 22.

— 19. InterWest Partners: 22.

— 19. Bessemer Venture Partners: 22.

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Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink


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Melissa Welch
tag:stream.growthink.com,2013:Post/713083 2014-07-11T15:05:08Z 2014-07-11T15:05:08Z Beware the ‘Edifice Complex’ — and 9 Other Ways to Damage a High-Growth Startup

BY MARC ANDREESSEN

Here are 10 ways to damage your fast-growing tech startup – and hurt the perception of Silicon Valley in the process. None of these are specific to any one company; they’re general patterns we’ve observed across multiple cycles of tech startups.

#1 Only hiring — or training/motivating/incenting your managers to hire — without focusing on firing. Or on performance management and efficiency optimization.

#2 Selling too much of your own personal stock too quickly, which alienates employees and leads people to question your long-term commitment as a founder. On a related note, letting private stock sales by employees get out of hand creates a “hit-and-run culture” — and forces your company to take on the burdens of being public before actually going public.

#3 Diluting the crap out of the cap table by being sloppy and undisciplined with stock grants to early employees. This also plants hidden “morale landmines” for later employees.

#4 Maximizing absolute valuation of each growth round, which not only makes later rounds harder and harder to achieve but can trigger a disastrous down round.

#5 Letting investors (including, occasionally, private equity firms and hedge funds) suck you into terrible structural terms on growth rounds. You’re guaranteed massive trauma if anything goes even slightly wrong there.

#6 Going public too soon! Going public before you’re a fortress, before you can withstand all assaults leads to a stock-price death spiral and ends up in a train wreck for everyone.

#7 Pouring huge money into overly glorious new headquarters — “The Edifice Complex” — then repeating two years later. There’s also a danger in signaling to employees “we’ve made it, we’re amazing” (and while everyone hates the cramped but collaborative space when they’re in it, they miss it terribly after the move).

#8 Assuming more cash is always available at higher and higher valuations, forever. This one will actually kill your company outright.

#9 Confusing the conference circuit — and especially the party scene — with actual work. This also creates a toxic culture on multiple fronts by encouraging alcohol/drugs and valuing so-called “ballers” over other important, less “loud” contributors.

#10 Refusing to take HR seriously! This issue isn’t specific to just tech-heavy environments; it’s prevalent in any highly creative, highly skilled workplace. At a certain company size, you need both the ability to manage people and an effective HR person. (Even though it is absolutely worth training company leadership in good HR practices, most managers are dangerously amateur at doing actual HR). Without smart, effective HR, terrible internal managerial and employee behavior leads to a toxic culture that can catalyze into a catastrophic ethical — and legal — crisis.

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Luke Brown
tag:stream.growthink.com,2013:Post/710066 2014-07-02T22:26:32Z 2014-07-02T22:26:33Z This quarter had the most venture capital invested since Q1 2000 Venture's Q2 surge: Dollars, deals and dominant players

Cromwell Schubarth Senior Technology Reporter-Silicon Valley Business Journal

Valuations on venture-backed companies jumped again in the second quarter as the number of IPOs and the amount VCs invested in startups both hit post-dot-com highs, a new report from PitchBook Data shows.

The total amount invested has climbed steadily each quarter in the past year, jumping from $12.8 billion in Q2 of 2013 to $21.5 billion in the same period this year. The $13.9 billion raised in 76 new venture funds is also a recent high.

Sequoia Capital invested in the most companies in the quarter — participating in 35 deals — and tied with New Enterprise Associates for the most exits with eight.

The big deal for the Menlo Park firm was Facebook's $19 billion acquisition of WhatsApp, which was announced in the first quarter but closed in the second quarter.

That deal also skewed the total amount of capital exited, which jumped from between $16 billion and $19.2 billion in the previous three quarters to $37.9 billion in the second quarter.

The biggest deals Sequoia participated in were the $100 million round for South Korean e-commerce company Coupang, a $100 million round for Chinese content distributor Toutiao and a $75 million round for San Francisco identity management company Okta.

After Sequoia's 35 deals, Andreessen Horowitz was the second most active with 31 deals, followed by Accel Partners (29) and Kleiner Perkins Caufield & Byers (27).

Pre-money valuations were also up compared to last year's second quarter, ranging from a 34 percent jump to $6.2 million at the seed/angel stage to a 122.2 percent jump in Series D and later rounds.

The length of time between when a startup was founded and when it paid off in an acquisition (the vast majority of exits) was about 6.4 years. PitchBook reported 193 of those deals in the quarter.

The average time to exit for the 47 IPOs in the quarter was 10.8 years. That number has been hovering between about 10 and 11 years since 2009. That's up markedly from prior years when it was typically between seven and eight years between launch and going public.

The average time to exit for the 15 private equity buyouts in the quarter was 11.3 years.

Software companies had by far the most exits, with 107 of the 255 exits reported in the second quarter. That is double the 28 exits each reported in the two sectors that were next — commercial services and biotech/pharmaceuticals.

The software sector also had by far the most fundings in the quarter, accounting for 641 of the 1,590 deals reported.

-- 

Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink


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Melissa Welch
tag:stream.growthink.com,2013:Post/709596 2014-07-01T16:58:00Z 2014-07-01T16:58:00Z McKinsey Quarterly: Strategic Principles for Competing in the Digital Age

Digitization is rewriting the rules of competition, with incumbent companies most at risk of being left behind. Here are six critical decisions CEOs must make to address the strategic challenge posed by the digital revolution.

The board of a large European insurer was pressing management for answers. A company known mostly for its online channel had begun to undercut premiums in a number of markets and was doing so without agents, building on its dazzling brand reputation online and using new technologies to engage buyers. Some of the insurer’s senior managers were sure the threat would abate. Others pointed to serious downtrends in policy renewals among younger customers avidly using new web-based price-comparison tools. The board decided that the company needed to quicken its digital pace.

For many leaders, this story may sound familiar, harkening back to the scary days, 15 years ago, when they encountered the first wave of Internet competitors. Many incumbents responded effectively to these threats, some of which in any event dissipated with the dot-com crash. Today’s challenge is different. Robust attackers are scaling up with incredible speed, inserting themselves artfully between you and your customers and zeroing in on lucrative value-chain segments.

The digital technologies underlying these competitive thrusts may not be new, but they are being used to new effect. Staggering amounts of information are accessible as never before—from proprietary big data to new public sources of open data. Analytical and processing capabilities have made similar leaps with algorithms scattering intelligence across digital networks, themselves often lodged in the cloud. Smart mobile devices make that information and computing power accessible to users around the world.

As these technologies gain momentum, they are profoundly changing the strategic context: altering the structure of competition, the conduct of business, and, ultimately, performance across industries. One banking CEO, for instance, says the industry is in the midst of a transition that occurs once every 100 years. To stay ahead of the unfolding trends and disruptions, leaders across industries will need to challenge their assumptions and pressure-test their strategies.

Opportunities and threats

Digitization often lowers entry barriers, causing long-established boundaries between sectors to tumble. At the same time, the “plug and play” nature of digital assets causes value chains to disaggregate, creating openings for focused, fast-moving competitors. New market entrants often scale up rapidly at lower cost than legacy players can, and returns may grow rapidly as more customers join the network.1

Digital capabilities increasingly will determine which companies create or lose value. Those shifts take place in the context of industry evolution, which isn’t monolithic but can follow a well-worn path: new trends emerge and disruptive entrants appear, their products and services embraced by early adopters (exhibit). Advanced incumbents then begin to adjust to these changes, accelerating the rate of customer adoption until the industry’s level of digitization—among companies but, perhaps more critically, among consumers as well—reaches a tipping point. Eventually, what was once radical is normal, and unprepared incumbents run the risk of becoming the next Blockbuster. Others, which have successfully built new capabilities (as Burberry did in retailing), become powerful digital players. (See the accompanying article, “The seven habits of highly effective digital enterprises.”) The opportunities for the leaders include:

  • Enhancing interactions among customers, suppliers, stakeholders, and employees. For many transactions, consumers and businesses increasingly prefer digital channels, which make content universally accessible by mixing media (graphics and video, for example), tailoring messages for context (providing location or demographic information), and adding social connectivity (allowing communities to build around themes and needs, as well as ideas shared among friends). These channels lower the cost of transactions and record them transparently, which can help in resolving disputes.
  • Improving management decisions as algorithms crunch big data from social technologies or the Internet of Things. Better decision making helps improve performance across business functions—for example, providing for finer marketing allocations (down to the level of individual consumers) or mitigating operational risks by sensing wear and tear on equipment.
  • Enabling new business or operating models, such as peer-to-peer product innovation or customer service. China’s Xiaomi crowdsources features of its new mobile phones rather than investing heavily in R&D, and Telstra crowdsources customer service, so that users support each other to resolve problems without charge. New business or operating models can also disintermediate existing customer–supplier relations—for example, when board-game developers or one-person shops manufacture products using 3-D printers and sell directly to Amazon.

The upshot is that digitization will change industry landscapes as it gives life to new sets of competitors. Some players may consider your capabilities a threat even before you have identified them as competitors. Indeed, the forces at work today will bring immediate challenges, opportunities—or both—to literally all digitally connected businesses.

Seven forces at work

Our research and experience with leading companies point to seven trends that could redefine competition.

1. New pressure on prices and margins

Digital technologies create near-perfect transparency, making it easy to compare prices, service levels, and product performance: consumers can switch among digital retailers, brands, and services with just a few clicks or finger swipes. This dynamic can commoditize products and services as consumers demand comparable features and simple interactions. Some banks, for instance, now find that simplifying products for easy purchase on mobile phones inadvertently contributes to a convergence between their offerings and those of competitors that are also pursuing mobile-friendly simplicity.

Third parties have jumped into this fray, disintermediating relationships between companies and their customers. The rise of price-comparison sites that aggregate information across vendors and allow consumers to compare prices and service offerings easily is a testament to this trend. In Europe, chain retailers, which traditionally dominate fast-moving consumer goods, have seen their revenues fall as customers flock to discounters after comparing prices even for staples like milk and bread. In South Korea, online aggregator OK Cashbag has inserted itself into the consumer’s shopping behavior through a mobile app that pools product promotions and loyalty points for easy use across more than 50,000 merchants.

These dynamics create downward pressure on returns across consumer-facing industries, and the disruptive currents are now rippling out to B2B businesses.

2. Competitors emerge from unexpected places

Digital dynamics often undermine barriers to entry and long-standing sources of product differentiation. Web-based service providers in telecommunications or insurance, for example, can now tap markets without having to build distribution networks of offices and local agents. They can compete effectively by mining data on risks and on the incomes and preferences of customers.

At the same time, the expense of building brands online and the degree of consumer attention focused on a relatively small number of brands are redrawing battle lines in many markets. Singapore Post is investing in an e-commerce business that benefits from the company’s logistics and warehousing backbone. Japanese web retailer Rakuten is using its network to offer financial services. Web powerhouses like Google and Twitter eagerly test industry boundaries through products such as Google Wallet and Twitter’s retail offerings.

New competitors can often be smaller companies that will never reach scale but still do a lot of damage to incumbents. In the retailing industry, for instance, entrepreneurs are cherry-picking subcategories of products and severely undercutting pricing on small volumes, forcing bigger companies to do the same.

3. Winner-takes-all dynamics

Digital businesses reduce transaction and labor costs, increase returns to scale from aggregated data, and enjoy increases in the quality of digital talent and intellectual property as network effects kick in. The cost advantages can be significant: online retailers may generate three times the level of revenue per employee as even the top-performing discounters. Comparative advantage can materialize rapidly in these information-intensive models—not over the multiyear spans most companies expect.

Scale economies in data and talent often are decisive. In insurance, digital “natives” with large stores of consumer information may navigate risks better than traditional insurers do. Successful start-ups known for digital expertise and engineer-friendly cultures become magnets for the best digital talent, creating a virtuous cycle. These effects will accelerate consolidation in the industries where digital scale weighs most heavily, challenging more capital- and labor-intensive models. In our experience, banking, insurance, media, telecommunications, and travel are particularly vulnerable to these winner-takes-all market dynamics.

In France, for instance, the start-up Free has begun offering mobile service supported by a large and active digital community of “brand fans” and advocates. The company nurtures opinion-leader “alpha fans,” who interact with the rest of the base on the Internet via blogs, social networks, and other channels, building a wave of buzz that quickly spreads across the digital world. Spending only modestly on traditional marketing, Free nonetheless has achieved high levels of customer satisfaction through its social-media efforts—and has gained substantial market share.2

4. Plug-and-play business models

As digital forces reduce transaction costs, value chains disaggregate. Third-party products and services—digital Lego blocks, in effect—can be quickly integrated into the gaps. Amazon, for instance, offers services that let businesses “insource” logistics, IT services, and online retail “storefronts.” For many businesses, it may not pay to build out those functions at competitive levels of performance, so they simply plug an existing offering into their value chains. In the United States, registered investment advisers have been the fastest-growing segment3 of the investment-advisory business, for example. They are expanding so fast largely because the turnkey systems (including record keeping and operating infrastructure) they can purchase from Charles Schwab, Fidelity, and others give them all the capabilities they need. With a license, individuals or small groups can be up and running their own firms.

In the travel industry, new portals are assembling entire trips: flights, hotels, and car rentals. The stand-alone offerings of third parties, sometimes from small companies or even individuals, plug into such portals. These packages are put together in real time, with dynamic pricing that depends on supply and demand. As more niche providers gain access to the new platforms, competition is intensifying.

5. Growing talent mismatches

Software replaces labor in digital businesses. We estimate, for instance, that of the 700 end-to-end processes in banks (opening an account or getting a car loan, for example), about half can be fully automated. Computers increasingly are performing complex tasks as well. “Brilliant machines,” like IBM’s Watson, are poised to take on the work of many call-center workers. Even knowledge-intensive areas, such as oncology diagnostics, are susceptible to challenge by machines: thanks to the ability to scan and store massive amounts of medical research and patients’ MRI results, Watson diagnoses cancers with much higher levels of speed and accuracy than skilled physicians do. Digitization will encroach on a growing number of knowledge roles within companies as they automate many frontline and middle-management jobs based upon synthesizing information for C-level executives.

At the same time, companies are struggling to find the right talent in areas that can’t be automated. Such areas include digital skills like those of artificial-intelligence programmers or data scientists and of people who lead digital strategies and think creatively about new business designs. A key challenge for senior managers will be sensitively reallocating the savings from automation to the talent needed to forge digital businesses. One global company, for example, is simultaneously planning to cut more than 10,000 employees (some through digital economies) while adding 3,000 to its digital business. Moves like these, writ large, could have significant social repercussions, elevating the opportunities and challenges associated with digital advances to a public-policy issue, not just a strategic-business one.

6. Converging global supply and demand

Digital technologies know no borders, and the customer’s demand for a unified experience is raising pressure on global companies to standardize offerings. In the B2C domain, for example, many US consumers are accustomed to e-shopping in the United Kingdom for new fashions (see sidebar, “How digitization is reshaping global flows”). They have come to expect payment systems that work across borders, global distribution, and a uniform customer experience.

7. Relentlessly evolving business models—at higher velocity

In B2B markets from banking to telecommunications, corporate purchasers are raising pressure on their suppliers to offer services that are standardized across borders, integrate with other offerings, and can be plugged into the purchasing companies’ global business processes easily. One global bank has aligned its offerings with the borderless strategies of its major customers by creating a single website, across 20 countries, that integrates what had been an array of separate national or product touch points. A US technology company has given each of its larger customers a customized global portal that allows it to get better insights into their requirements, while giving them an integrated view of global prices and the availability of components.

Digitization isn’t a one-stop journey. A case in point is music, where the model has shifted from selling tapes and CDs (and then MP3s) to subscription models, like Spotify’s. In transportation, digitization (a combination of mobile apps, sensors in cars, and data in the cloud) has propagated a powerful nonownership model best exemplified by Zipcar, whose service members pay to use vehicles by the hour or day. Google’s ongoing tests of autonomous vehicles indicate even more radical possibilities to shift value. As the digital model expands, auto manufacturers will need to adapt to the swelling demand of car buyers for more automated, safer features. Related businesses, such as trucking and insurance, will be affected, too, as automation lowers the cost of transportation (driverless convoys) and “crash-less” cars rewrite the existing risk profiles of drivers.

Managing the strategic challenges: Six big decisions

Rethinking strategy in the face of these forces involves difficult decisions and trade-offs. Here are six of the thorniest.

Decision 1: Buy or sell businesses in your portfolio?

The growth and profitability of some businesses become less attractive in a digital world, and the capabilities needed to compete change as well. Consequently, the portfolio of businesses within a company may have to be altered if it is to achieve its desired financial profile or to assemble needed talent and systems.

Tesco has made a number of significant digital acquisitions over a two-year span to take on digital competition in consumer electronics. Beauty-product and fragrance retailer Sephora recently acquired Scentsa, a specialist in digital technologies that improve the in-store shopping experience. (Scentsa touch screens access product videos, link to databases on skin care and fragrance types, and make product recommendations.) Sephora officials said they bought the company to keep its technology out of competitors’ reach and to help develop in-store products more rapidly.4

Companies that lack sufficient scale or expect a significant digital downside should consider divesting businesses. Some insurers, for instance, may find themselves outmatched by digital players that can fine-tune risks. In media, DMGT doubled down on an investment in their digital consumer businesses, while making tough structural decisions on their legacy print assets, including the divestment of local publications and increases in their national cover price. Home Depot continues to shift its investment strategy away from new stores to massive new warehouses that serve growing online sales. This year it bought Blinds.com, adding to a string of website acquisitions.5

Decision 2: Lead your customers or follow them?

Incumbents too have opportunities for launching disruptive strategies. One European real-estate brokerage group, with a large, exclusively controlled share of the listings market, decided to act before digital rivals moved into its space. It set up a web-based platform open to all brokers (many of them competitors) and has now become the leading national marketplace, with a growing share. In other situations, the right decision may be to forego digital moves—particularly in industries with high barriers to entry, regulatory complexities, and patents that protect profit streams.

Between these extremes lies the all-too-common reality that digital efforts risk cannibalizing products and services and could erode margins. Yet inaction is equally risky. In-house data on existing buyers can help incumbents with large customer bases develop insights (for example, in pricing and channel management) that are keener than those of small attackers. Brand advantages too can help traditional players outflank digital newbies.

Decision 3: Cooperate or compete with new attackers?

A large incumbent in an industry that’s undergoing digital disruption can feel like a whale attacked by piranhas. While in the past, there may have been one or two new entrants entering your space, there may be dozens now—each causing pain, with none individually fatal. PayPal, for example, is taking slices of payment businesses, and Amazon is eating into small-business lending. Companies can neutralize attacks by rapidly building copycat propositions or even acquiring attackers. However, it’s not feasible to defend all fronts simultaneously, so cooperation with some attackers can make more sense than competing.

Santander, for instance, recently went into partnership with start-up Funding Circle. The bank recognized that a segment of its customer base wanted access to peer-to-peer lending and in effect acknowledged that it would be costly to build a world-class offering from scratch. A group of UK banks formed a consortium to build a mobile-payment utility (Paym) to defend against technology companies entering their markets. British high-end grocer Waitrose collaborated with start-up Ocado to establish a digital channel and home distribution before eventually creating its own digital offering.

Digital technologies themselves are opening pathways to collaborative forms of innovation. Capital One launched Capital One Labs, opening its software interfaces to multiple third parties, which can defend a range of spaces along their value chains by accessing Capital One’s risk- and credit-assessment capabilities without expending their own capital.

Decision 4: Diversify or double down on digital initiatives?

As digital opportunities and challenges proliferate, deciding where to place new bets is a growing headache for leaders. Diversification reduces risks, so many companies are tempted to let a thousand flowers bloom. But often these small initiatives, however innovative, don’t get enough funding to endure or are easily replicated by competitors. One answer is to think like a private-equity fund, seeding multiple initiatives but being disciplined enough to kill off those that don’t quickly gain momentum and to bankroll those with genuinely disruptive potential. Since 2010, Merck’s Global Health Innovation Fund, with $500 million under management, has invested in more than 20 start-ups with positions in health informatics, personalized medicine, and other areas—and it continues to search for new prospects. Other companies, such as BMW and Deutsche Telekom, have set up units to finance digital start-ups.

The alternative is to double down in one area, which may be the right strategy in industries with massive value at stake. A European bank refocused its digital investments on 12 customer decision journeys,6 such as buying a house, that account for less than 5 percent of its processes but nearly half of its cost base. A leading global pharmaceutical company has made significant investments in digital initiatives, pooling data with health insurers to improve rates of adherence to drug regimes. It is also using data to identify the right patients for clinical trials and thus to develop drugs more quickly, while investing in programs that encourage patients to use monitors and wearable devices to track treatment outcomes. Nordstrom has invested heavily to give its customers multichannel experiences. It focused initially on developing first-class shipping and inventory-management facilities and then extended its investments to mobile-shopping apps, kiosks, and capabilities for managing customer relationships across channels.

Decision 5: Keep digital businesses separate or integrate them with current nondigital ones?

Integrating digital operations directly into physical businesses can create additional value—for example, by providing multichannel capabilities for customers or by helping companies share infrastructure, such as supply-chain networks. However, it can be hard to attract and retain digital talent in a traditional culture, and turf wars between the leaders of the digital and the main business are commonplace. Moreover, different businesses may have clashing views on, say, how to design and implement a multichannel strategy.

One global bank addressed such tensions by creating a groupwide center of excellence populated by digital specialists who advise business units and help them build tools. The digital teams will be integrated with the units eventually, but not until the teams reach critical mass and notch a number of successes. The UK department-store chain John Lewis bought additional digital capabilities with its acquisition of the UK division of Buy.com,7 in 2001, ultimately combining it with the core business. Wal-Mart Stores established its digital business away from corporate headquarters to allow a new culture and new skills to grow. Hybrid approaches involving both stand-alone and well-integrated digital organizations are possible, of course, for companies with diverse business portfolios.

Decision 6: Delegate or own the digital agenda?

Advancing the digital agenda takes lots of senior-management time and attention. Customer behavior and competitive situations are evolving quickly, and an effective digital strategy calls for extensive cross-functional orchestration that may require CEO involvement. One global company, for example, attempted to digitize its processes to compete with a new entrant. The R&D function responsible for product design had little knowledge of how to create offerings that could be distributed effectively over digital channels. Meanwhile, a business unit under pricing pressure was leaning heavily on functional specialists for an outsize investment to redesign the back office. Eventually, the CEO stepped in and ordered a new approach, which organized the digitization effort around the decision journeys of clients.

Faced with the need to sort through functional and regional issues related to digitization, some companies are creating a new role: chief digital officer (or the equivalent), a common way to introduce outside talent with a digital mind-set to provide a focus for the digital agenda. Walgreens, a well-performing US pharmacy and retail chain, hired its president of digital and chief marketing officer (who reports directly to the CEO) from a top technology company six years ago. Her efforts have included leading the acquisition of drugstore.com, which still operates as a pure play. The acquisition upped Walgreens’ skill set, and drugstore.com increasingly shares its digital infrastructure with the company’s existing site: walgreens.com.

Relying on chief digital officers to drive the digital agenda carries some risk of balkanization. Some of them, lacking a CEO’s strategic breadth and depth, may sacrifice the big picture for a narrower focus—say, on marketing or social media. Others may serve as divisional heads, taking full P&L responsibility for businesses that have embarked on robust digital strategies but lacking the influence or authority to get support for execution from the functional units.

Alternatively, CEOs can choose to “own” and direct the digital agenda personally, top down. That may be necessary if digitization is a top-three agenda item for a company or group, if digital businesses need substantial resources from the organization as a whole, or if pursuing new digital priorities requires navigating political minefields in business units or functions.

Regardless of the organizational or leadership model a CEO and board choose, it’s important to keep in mind that digitization is a moving target. The emergent nature of digital forces means that harnessing them is a journey, not a destination—a relentless leadership experience and a rare opportunity to reposition companies for a new era of competition and growth.

http://www.mckinsey.com/insights/strategy/strategic_principles_for_competing_in_the_digital_age

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Luke Brown
tag:stream.growthink.com,2013:Post/708788 2014-06-29T16:42:34Z 2014-06-29T16:42:35Z The IPO is dying. Marc Andreessen explains why. By Timothy B. Lee

Twenty years ago, a 22-year-old Marc Andreessen co-founded Netscape, the company behind the first commercially successful web browser. Netscape went public the next year, making Andreessen wealthy and marking the start of the dot-com boom of the 1990s.

Today, Andreessen is a prominent venture capitalist at the firm Andreessen Horowitz. I asked him to talk about how the stock market has changed over the last two decades. In the 1990s, it was common for small companies to have initial public offerings (IPOs), in which they offer their shares for sale to the general public. But today, companies wait a lot longer to hold their IPOs.

For example, Netscape went public when it was worth a little more than $2 billion, and this wasn't unusual. For comparison, Twitter waited until it was worth about $25 billion before it went public last year. Facebook was worth more than $100 billion when it had its IPO in 2012.

Many companies aren't going public at all. For example, Google bought the home automation company Nest earlier this year for $3.2 billion. Two decades ago, Nest would have been more likely to hold an IPO.

In this interview, conducted on June 12, Andreessen offers his thoughts on why companies are waiting longer to IPO. He argues that the shift is bad for ordinary investors, who no longer have the opportunity to invest in fast-growing technology firms. He also offers his thoughts on the work of Thomas Piketty, a French economist who has studied the growing gap between rich and poor.

The transcript has been edited for length and clarity

Timothy B. Lee: The day you took Netscape public in 1994, it was worth around $2.2 billion ($3.5 billion in today's dollars). Recently, companies have been waiting a lot longer to go public. What do you think has changed?

Marc Andreessen: There's been an absolutely dramatic change. What you say is exactly right. Twenty years ago, IPOs had gotten democratized. You had Microsoft able to go public at less than $1 billion valuation. If you invested in Microsoft's IPO and held you had the prospect in the public market of a 1,000-times gain. There were a whole bunch of other comparable situations over the years. With Oracle, most of the gain was in the public market. In prior eras, the same was true of IBM and Hewlett Packard. These companies primarily grew up in the public market.

Ironically, you just had a much calmer market. You had a much bigger percentage of mutual funds instead of hedge funds, and you actually had more individual participation in the market a lot of the time. It's dramatic how much individual participation has dropped relative to funds. Individuals who wanted to be in growth stocks, institutions like mutual funds that wanted to be in growth stocks who would be longs. [E.g. they were buying assets and holding them in hopes of long-term investment returns.]

You also had a relatively benign regulatory environment, pre-Sarbanes-Oxley [corporate governance legislation enacted in the wake of the Enron scandal] and before all the other kind of corporate reforms that had taken place. In that environment it was actually quite hospitable [to be a public company].

Basically that all started to change after 2000. A whole set of "closing the barn door after the horse had run out" kind of things happened. Sarbanes-Oxley happened. The irony of Sarbanes-Oxley was that it was intended to prevent more Enrons and Worldcoms but it ended up being a gigantic tax on small companies.

Timothy B. Lee: What is it about Sarbanes-Oxley that makes it so burdensome?

Marc Andreessen:The compliance and reporting requirements are extremely burdensome for a small company. It requires fleets of lawyers and accountants who come in and do years of work. It's this idea that if you control everything down to the nth detail, nothing will go wrong. It's this bizarre, bureaucratic, top-down mentality that if only we could make everything predictable, then everything would be magic, everything would be wonderful.

It has the opposite effect. It's biased enormously toward companies that are big enough to hire fleets of lawyers and accountants, biased against companies that are very young and for whom there's still a lot of variability.

The second thing that happened is Regulation Fair Disclosure. The idea is that as a company officer, you are not, under extreme penalties, permitted to give one shareholder information that another does not have. It has really curtailed the ability of companies to communicate with shareholders. It puts everything under more scrutiny with a lot more risk.

You might say that's a good idea, shareholders should be treated equally. The problem is the shareholder base itself has changed dramatically. You've had a dramatic rise in hedge funds. Very short-term trading and dramatic rise in short-selling [investors betting that a stock's price will fall]. If you're a public company, you become the shuttlecock between warring longs and shorts. They bat your stock around like it's a chew toy.

Most American retirement savings is invested in the public stock market. That raises the societal question of how are we going to pay for retirements.

The shorts will just make stuff up. They will make up rumors and innuendo and stuff you wouldn't believe. I went through this personally myself. Crazy levels of personal rumors, all kinds of just horrendous things. There's this tremendous gaming of the stock price. They use Yahoo message boards and chat rooms.

So then you're the company, and you're dealing with these crazy rumors and all this crazy activity every day. A rumor comes out that your executive is ill. A rumor comes out saying that you lost a big contract. A rumor comes out that you're running short of cash. Normally someone would call you up, [ask if the rumor was true], and you'd say no. But under Regulation FD you can't do that. So the running joke is what you need to start putting out a daily fact sheet saying here's all the things that are said about us that's not true.

It's technically illegal to manipulate the market. But there are hardly ever any cases [enforcing these laws]. Basically the hedge funds run absolutely wild and do whatever they want.

And then there's like 8 more of these things. There are these really abstract, theoretical approaches to corporate governance that wind up being embedded in your business. And the rise of continuous internet journalism, so you're in this continuous 24-hour news cycle about everything involving your company.

Timothy B. Lee: Why is a fluctuating stock price such a big deal? Can't the CEO just ignore it?

Marc Andreessen:This comes across like I'm complaining about how hard it is to be public and of course the answer is that you need to suck it up.

But for young companies, everything is connected: stock price, employee morale, ability to recruit new employees, ability to retain employees, ability to sign customer contracts,  ability to raise debt financing, ability to deal with regulators. Every single part of your business ends up being connected and it ends up being tied back to your stock price.

The problem is when your stock price gets hammered by any of this stuff, when your stock price gets hit by a false rumor, that in itself can destabilize your company. These companies that go public too quick are at risk of going into a death spiral at any moment in a way that's super intense and very difficult to get out of it because it becomes self-reinforcing.

And the kicker on all of this is: God help you if you ever need to raise money again. The shorts will drive your stock to zero to prevent you from raising money. So you are in extreme mortal danger if you're public and you need to raise money.

The result of all that is the effective death of the IPO. The number of public companies in the US has dropped dramatically. And then correspondingly, growth companies go public much later. Microsoft went out at under $1 billion, Facebook went out at $80 billion. Gains from the growth accrue to the private investor, not the public investor.

Most American retirement savings is invested in the public stock market. Most Americans can't invest in private companies and most Americans can't invest in venture capital and private equity funds. They're actually prohibited from doing so by the SEC. If you both prohibit them from investing in private growth and wire the market so they can't get into public growth, then you can't be invested in growth. That raises the societal question of how are we going to pay for retirements. That's the question that needs to be asked that nobody asks because it's too scary.

Timothy B. Lee: Do you think this is something that can be reversed?

Marc Andreessen:My belief is that there are a set of market reforms that could happen that would reverse all this. The problem is that all the political momentum is in the other direction. There's a reason for that. When there's a problem, the answer is presumed to be more regulation — even when the regulation was the problem in the first place. This is the central flaw in how the government operates.

This is so powerful in the conventional wisdom right now. I love the Daily Show like everyone else does. But literally [Jon Stewart's] answer to every issue is Congress should pass a law. [People think you can] solve any problem by passing enough laws.

I don't see the world getting less dramatic. I don't see the world calming down.

The loop we're in now is that people are getting upset and disappointed by the stock market. There are no growth stocks, which means there's no growth. Stock market returns have been weak for 15 years, which is exactly what you'd expect if you took all the growth out. Everyone is upset the stock market isn't performing. The worse the results get, the more regulation you get. It's in its own kind of doom loop. Unless something happens to shock the system a lot, our assumption is it gets worse, not better.

This has had a big influence on how we set up our firm. We've set up our firm to basically not have to take companies public. We basically have a 15-year lockup on our money, which is longer than you used to do with private capital. One of the reasons why our funds are so much larger than venture capital funds used to be is because we have to have the firepower to finance companies through the point of time where we take them public. For our investors this is kind of fine. Our investors are these big institutions, university endowments, high net worth family money, private foundations. They're fine. They can invest in us. They can invest in venture capital. Joe retiree, who works hard for 40 years and has his money in the public stock market, he can't do that.

Timothy B. Lee: This relates to another topic I wanted to ask about. You've had some harsh wordsfor Thomas Piketty, the French economist whose new book is trendy in liberal circles right now. Do you think he's right that we're going to see a growing gap between the rich and the poor in the coming years?

Marc Andreessen:The funny thing about Piketty is that he has a lot more faith in returns on invested capital than any professional investor I've ever met. It's actually very interesting about his book. This is exactly what you'd expect form a French socialist economist. He assumes it's really easy to put money in the market for 40 years or 80 years or 100 years and have it compound at these amazing rates. He never explains how that's supposed to happen.

Every investment manager I know is sweating the opposite problem, which is: what do I do? Where do I get the growth? I can't get into the public market, so I have to go into the private market. The problem in the private market is there isn't much growth. Maybe a dozen hedge funds. After that they're not that good. The returns degrade down to S&P 500 levels.

Timothy B. Lee: That's not so bad is it? The S&P 500 has returned 6 or 7 percent real growth for the last few decades.

Marc Andreessen:Yeah, 6 or 7 percent. But if you look at the last 15 years they're much less than that. Jeremy Siegel put out his book about how there's never been a 10-year period where you lose money in the stock market — right at the beginning of a very long period where you lose money for 10-plus years.

Piketty thinks it's really easy to compound capital at scale. There's just a lot of evidence that that's not true. The shining example of that is: where are all the big companies and the big families?

If you look at what's actually happening in the Forbes 400 and the Fortune 500, churn is accelerating. One year it's some real estate family, and then the next year it's like, "There's Larry Page, where did he come from?" Somehow Piketty looks through that to a world where all this change is going to just stop. [He has] this idea that normal is 18th-century feudal France, and we're going to go back to it.

He does this other dodge where the 20th century doesn't conform to his theory, but that's because of the wars and economic dislocations. And so it's like the 21st century is predicted to be much more peaceful and calm. I don't know about you but that's not what I see happening. I look around the world right now and I see exciting things happening that's causing a lot of changes.

It's not an accident that Piketty named his book after Das Capital. It's a very "capitalists are evil, it's all going to roll up to a few rich people" kind of thing.

The other irony in the book is that on the positive side, [people around the world are] rising up from what we would consider destitution, to what we would consider lower-class lifestyles on their way to middle-class lifestyles. Conversely, Iraq is falling again.

So I don't see the world getting less dramatic. I don't see the world calming down. I don't understand why that would be the expectation. At what point is all of this progress and change and disruption going to stop to basically let rich people cement their gains and then earn these great returns in perpetuity. When is that supposed to start?

Maybe that's what happening in France, but it doesn't map to anything I see. What's happening in France is the opposite, which is that all the rich people are leaving, as a consequence of the government he's advising. The irony here is very deep.

Timothy B. Lee: Piketty's argument doesn't require extraordinary returns, does it? He finds the historical return is around 5 percent. The long-run return in the US stock market has been higher than that.

Marc Andreessen:If you actually get regular compounding growth of stocks of that form, then basically what you have is an economic boom — a sustained boom in productivity. If the gains from the market exceed the gains from economic growth, the delta is productivity growth. That's the math. This is why I say he has so much more faith in the progress of capitalism that even the capitalists do.

What all the capitalists are worried about is where's the productivity growth. This is where Piketty's analysis is actually a very optimistic analysis. It suggests you're going to have a gigantic productivity boom. Isn't that the world we want to live in?

Think about what happens in that world, though. Unbelievable progress, unbelievable productivity growth, unbelievable increase in standard of living all across the planet. Somehow as a consequence of that, everything is going to stabilize and we're going to go back to feudal France. At that point it becomes Marxist logic.

There's a missing step in there where everyone but the hereditary elite gets screwed. And he never explains that part. Because if you're having all this economic growth, and everything is getting better, but somehow you're in this dystopian world where there's a few rich people and a lot of poor people, that doesn't add up. It's a really, really Marxist way of looking at the world.

It's not an accident that Piketty named his book after Das Capital. It's a very "capitalists are evil, it's all going to roll up to a few rich people" kind of thing. Marx was wrong. That's literally not what happened. For it to happen now, with the economy being the way it is now, which is so much even more dynamic than it was in Marx's time, [seems unlikely].

If you talk to anyone in the French socialist party, their worldview on how capitalism works is completely backwards from anything you see in the real world. Piketty has taken that and created abstract models and marshaled some data and presented it in book form.

Update: Andreessen originally told me that stock market returns had been "flat" for 15 years. While inflation-adjusted returns have been below average during this period, they have been positive (for example, S&P 500 returns averaged 2.2 percent from January 1999 to December 2013). With Andreessen's approval, I've changed it to say that stock market returns have been "weak" instead of "flat." ]]>
Luke Brown
tag:stream.growthink.com,2013:Post/708316 2014-06-27T16:46:31Z 2014-06-27T17:12:56Z Phil Chau Three Year Growthink Anniversary Today! Today is Phil Chau's THREE Year anniversary with Growthink.  Phil - it has been truly awesome to work with and get to know you these last three years, and to watch you grow into an amazing leader and executive. Thank you for all of the hard work and amazing attitude and the best is yet to come!

Jay

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Growthink
tag:stream.growthink.com,2013:Post/707611 2014-06-25T22:37:02Z 2014-06-27T13:06:37Z Our very own Jeff Jones at the Advanced Manufacturing Forum at USC The California Network for Manufacturing Innovation (CNMI) held an Advanced Manufacturing Forum on June 24, 2014 at USC Davidson Conference Center. This is the second event organized by CNMI in the past year. CNMI is a California statewide Innovation HUB (iHUB) and a broad-based collaborative that includes: the California Manufacturing Extension Partnership Centers (CMTC andManex), Lawrence Livermore National LaboratoryLawrence Berkeley National Laboratory , University of California IrvineEl Camino College,Centers for Applied Competitive TechnologiesUniversity of Southern California Center for Economic DevelopmentCity of Davis and i-Gate.

Our vice president Jeff Jones had the pleasure of moderating the Q&A session in the afternoon. Way to represent Mr. Jeff Jones!

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Simone Chen
tag:stream.growthink.com,2013:Post/707095 2014-06-24T15:59:56Z 2014-06-24T15:59:56Z What It Will Take to Create the Next Great Silicon Valleys (Plural)

Photo: Patrick Nouhailler/ Flickr

BY MARC ANDREESSEN

The popular recipe for creating the “next” Silicon Valley goes something like this:

*Build a big, beautiful, fully equipped technology park;
*Mix in R&D labs and university centers;
*Provide incentives to attract scientists, firms, and users;
*Interconnect the industry through consortia and specialized suppliers;
*Protect intellectual property and tech transfer; and
*Establish a favorable business environment and regulations.

Except … this approach to innovation clusters hasn’t really worked. Some have even dismissed these government-driven efforts as “modern-day snake oil.” Yet policymakers are always searching for the next Silicon Valley because of the critical link between tech innovation, economic growth, and social opportunity.

Previous efforts at such clusters failed for a variety of reasons, but one big reason is that government efforts alone simply don’t draw people. That’s why a recent crop of experiments has focused more on building entrepreneurial communities, urban hubs and districts, and hacker spaces. Still, we’re “splitting the logic” on how to create an innovation ecosystem, according to MIT expert Fiona Murray in Technology Review: We’re either going top-down by focusing primarily on infrastructure — plunking down an office park next to a university — or bottom-up by focusing on just the networks. None of these efforts successfully pursue both paths at once, with government, academia and entrepreneurial communities proceeding together in lockstep … as was the case in the development of Silicon Valley.

a16z_govtech-series2014

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But policymakers shouldn’t be trying to copy Silicon Valley. Instead, they should be figuring out what domain is (or could be) specific to their region — and then removing the regulatory hurdles for that particular domain. Because we don’t want 50 Silicon Valleys; we want 50 different variations of Silicon Valley, all unique from each other and all focusing on different domains.

Imagine a Bitcoin Valley, for instance, where some country fully legalizes cryptocurrencies for all financial functions. Or a Drone Valley, where a particular region removes all legal barriers to flying unmanned aerial vehicles locally. A Driverless Car Valley in a city that allows experimentation with different autonomous car designs, redesigned roadways and safety laws. A Stem Cell Valley. And so on.

There’s a key difference from the if-you-build-it-they-will-come argument of yore. Here, the focus is more on driving regulatory competition between city, state, and national governments. There are many new categories of innovation out there and entrepreneurs eager to go after opportunities within each of them. Rethinking the regulatory barriers in specific industries would better draw the startups, researchers and divisions of big companies that want to innovate in the vanguard of a particular domain — while also exploring and addressing many of the difficult regulatory issues along the way.

Why this approach? Compared with previous innovation-cluster efforts where governments contrived to do something unnatural, this proposal flows from what governments naturally do best: create, or rather, relax laws.

Another advantage of this approach is that it’s a way for clusters to differentiate from each other and successfully compete for resources. Think of it as a sort of “global arbitrage” around permissionless innovation – the freedom to create new technologies without having to ask the powers that be for their blessing. Entrepreneurs can take advantage of the difference between opportunities in different regions, where innovation in a particular domain of interest may be restricted in one region, allowed and encouraged in another, or completely legal in still another.For example, the laws and guidelines for using drones or taxing bitcoin already vary widely across the globe, just as they do for ride-sharing services across different cities in the U.S.

But the biggest advantage of the 50-different-Silicon Valleys approach isn’t just in what it affords isolated regions or entrepreneurs — it’s in accelerating innovation everywhere. Removing regulations across different regions allows multiple innovation categories to advance together at once, in parallel, without being bottlenecked by time or place.

So what are the risks? Well, there’s a real possibility that advanced regions will essentially outsource or “regulate away” their own risk at the expense of less advanced ones. To get ahead, poorer countries may become more tempted to take on the very things wealthier countries are fencing out of their borders. But as long as the innovations aren’t life-threatening — and many of the restricted domains aren’t (the restrictions are often protecting incumbent interests) — a model like this one provides a much faster and more feasible way for developing regions to catch up. Especially when you consider the advantage that previous innovation clusters didn’t have: mobile.

With 5.9 billion smartphone users coming online in five years — largely due to the developing world — mobile acts not just as a leveler, but as a multiplier. As Tim Worstall argues:

One way of thinking about economic growth…is that it’s all about the adoption of new technologies of production. We could say that the introduction of electricity was itself economic growth, or that the adoption of smartphones will be. However, they’re both multiplying technologies: electricity allows more work to be done by replacing muscle power and, through light, enables work or study to be done for more hours of the day. The smartphone opens up the books of human knowledge to those who have never had access to it before. And that is seriously going to accelerate economic growth in just about every other field as well. That peasant farmer trying to manage his acre of maize using nothing but a hoe and a machete: sure, he’s not going to be the world’s greatest user of Facebook…but he will benefit massively from information about weather, market prices, and better farming practices.

Because of mobile, removing regulatory hurdles goes from being a potentially vicious cycle to a more virtuous one that can help millions of people climb out of poverty. And the next big companies wouldn’t be built in the U.S., but elsewhere in the world instead. For example, as mobile payment systems like M-Pesa create opportunities in banking, risk-sharing, and more, they’ve expanded to areas outside of Africa as well —including Europe.

Meanwhile, allowing more experimentation in financial services could help those in countries that don’t have stable currencies (let alone banks) to more easily save and move their money across borders; some of these places would leapfrog, innovation-wise, through something like bitcoin. As for other domains, if we think of airspace as the next Internet-like platform, lifting restrictions on drones is one way to give other regions a chance to become the next significant locus of innovation.

In fact, this kind of competition is probably the only way to create successful innovation clusters that can compete with the huge advantage Silicon Valley already has. In the United States, the “death of distance” due to improvements in communications technologies has historically benefited only ideas-producing places like New York, but not goods-producing ones like Detroit. That’s why turning Detroit into a commercial Drone Valley could draw the innovative people who in turn want to be near other innovative people around that domain.

It’s already happening in places like Brazil, which are becoming known for being commercial drone-regulation friendly. It’s also happening in other domains, as genetic reporting companies like 23andme are forced to explore opportunities abroad, athletes go to places like Germany for biologic medicine, and even Japan considers slashing regulatory red tape to attract more drug R&D. But these examples are more reactive than proactive; I’m arguing for cities, states and countries to more systematically consider and create their regulatory competitive advantage. (If you don’t know what that advantage is, the best place to start is with local universities. Have a special competency in materials science? Then begin there.)

This kind of regulatory arbitrage is already happening in the United States, too, through innovations like Google Fiber. Instead of the traditional model where telecoms competed to be in a particular city neighborhood, cities are the ones competing to get Google Fiber. And the ones most willing to relax their oft-arbitrary regulations and fees are the ones getting it.

That’s another advantage of the regulatory arbitrage approach: It helps shake upregulatory capture altogether. The best defense of regulation is its use in protecting consumer interests, but the reality is that agencies and incumbents tend to watch out for their own entrenched interests and extract rents instead.

* * *

There are cultural factors at play here, of course. After all, Silicon Valley isn’t just a place — it’s a state of mind.

But instead of arguing about whether the Silicon Valley mindset cannot or should be copied, we need to shift our attention to an approach that addresses what Silicon Valley alone can’t do, while also creating opportunities for a broader set of people. To do that we need 50 different Silicon Valleys, not 50 failed clones.


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Luke Brown
tag:stream.growthink.com,2013:Post/706828 2014-06-24T00:00:35Z 2014-06-24T00:00:35Z Business Intelligence Solutions for Manufacturers - LAEDC ft. D. Lavinsky LAEDC is hosting a webinar session featuring our president Dave Lavinsky!

Details:

June 26, 2014

12:00pm - 1:00pm (PST)

Free Webinar  

RSVP

Join us on June 26 for a discussion with Dave Lavinsky, President with Growthink. Guiding Metrics provides real-time business intelligence to help manufacturers move past cost cutting and lean manufacturing methods to become even more efficient, more competitive and more profitable.

The webinar provides a step by step walk through of the major metrics and systems Guiding Metrics has found in most clients and how the dashboard can be relevant to growing manufacturing businesses.The session will then be followed by Q & A.


This webinar is part of LAEDC's new Better Business Webinar Series.  

There is no cost to attend this webinar.   

Register to attend here.

Learn more about how the LAEDC can assist your company in coming to, expanding in, and staying within Los Angeles County.  

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Simone Chen
tag:stream.growthink.com,2013:Post/706668 2014-06-23T14:49:11Z 2014-06-23T14:49:11Z Here are the apps teens actually love, in 5 charts
June 19, 2014 11:20 AM 
Gregory Ferenstein
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Teens. Since the beginning of humanity, they’ve always represented what the future of humanity would look like. Now, thanks to a new survey, we have an idea of what kinds of websites, apps, and online services the future of humanity will enjoy– at least for the next few years of existence. Then, an entirely new crop of startups replaces the upstarts that recently rose to power.

Curator startup Niche conducted a sizable survey of 7,000 teens, and this is what it found:

Popularity in general

Dashboard_4

Facebook and Youtube reign supreme, with 61 percent and 55 percent of daily active users, respectively. Instagram and the Facebook-nemesis team over at Snapchat are neck-and-neck in the race for photo sharing apps (around 50 percent).

Signs are good for the beleaguered micro-messaging app, Twitter, with 35 percent, a trend that has seen dramatic growth over the past two years.

The sad panda award goes to Foursquare, with a self-reported zero-percent daily active userbase among teens (3 percent overall). Of course, there are certainly teens that use Foursquare daily, but not enough to be picked up in a pretty large survey.

Finally, no shocker: The largely unemployed slice of teens legally required to attend high school do not spend much time polishing their Linkedin Profiles (2 percent daily use) — this in spite of LinkedIn’sefforts to court college applicants.

The Atlantic’s Derek Thompson has a nice graph ranking all of the popular websites/services by daily use.

Screen Shot 2014-06-19 at 10.35.39 AM

News

Teens must love listicles and sideboob stories: 15 percent report reading Buzzfeed occasionally, and 21 percent visit the Huffington Post. The Onion and Reddit are tied for the semi-serious news gold medal, at about 10 percent of occasional users.

news

Entertainment

YouTube dominates video with 55 percent daily users. The fact that Hulu is at around 23 percent of daily users is more evidence that teens aren’t just watching TV online — they are watching traditional TV programming much less.

video

Pandora leads the pack on music (37 percent), meaning that discovery could be more important than random access(14 percent report using Spotify, and 32 percent, iTunes).

music

Story here

You can see the full survey here.

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Luke Brown
tag:stream.growthink.com,2013:Post/705585 2014-06-19T20:52:16Z 2014-06-19T20:52:16Z The Data Behind the CNBC Disruptor 50

Kleiner Perkins Caufield & Byers has invested in 20% of companies on the CNBC Disruptor 50. The companies on the list have raised a whopping $3.75B in 2014 already.

CNBC recently released its second annual Disruptor 50 list – a list of 50 private companies nominated by venture capital firms and accelerators that ranges from household consumer mobile apps like Uber and Snapchat to green tech firms including Cool Planet andChargepoint. Given interest around the list, we used CB Insights data to crunch the numbers behind the financing trends, most well-funded cos and top investors of CNBC’s selected private companies.

The data below.

It must be the money

CNBC’s list of companies includes a number of well-funded startups – with some, includingAirBnB and Pinterest, having raised war chests well into the hundreds of millions to date. The chart below highlights the deal and dollar fundraising trend by the CNBC Disruptor 50 from 2009 through 2014 year-to-date. Yes, companies on the list have increasingly raised huge sums of cash – already topping $3.75 billion (with a B) in 2014 alone behind mega rounds toUber, AirBnB and Dropbox.

cnbc1

Kleiner Perkins is top investor in CNBC 50 companies

Kleiner Perkins Caufield & Byers is the most represented venture capital firm on the list of CNBC 50 companies, with 10 of the startups in its portfolio including Shape Security,AngelList and Quirky. We’d earlier highlighted Kleiner’s robust list of Tech IPO Pipeline companies. SV Angel and Founders Fund round out the top 3 with 9 and 8 companies on the list, respectively. Interestingly, active tech mutual fund investor T. Rowe Price is tied for fourth most companies with late-stage investments including ApptioPure Storage andRedfin.

A list of all the investors with five or more companies on the CNBC Disruptor 50 is below.

cnbc50investors

Most well-funded – Uber on top

The chart below highlights the range of funding totals behind the 50 companies from under $20M (Kickstarter) to over $1B (Uber). 72% of companies on the list have raised between $20M and $150M, with 15 companies on the list raising between $50M-$100M and another 11 raising between $20M-$50M.

cnbc3

See below for the list of the CNBC 50 ranked by total funding raised (credit/debt, secondary transactions not included).
Uber
Palantir Technologies
AirBnB
Pinterest
Dropbox
Spotify
Pure Storage
MongoDB
Lending Club
10 DocuSign
11 SpaceX
12 Quirky
13 Moderna
14 Oscar Health Insurance Co.
15 Cool Planet Energy Systems
16 Apptio
17 Snapchat
18 Zuora
19 Stripe
20 Warby Parker
21 Yext
22 Twilio
23 Chargepoint
24 GitHub
25 Aereo
26 Redfin
27 Etsy
28 Skybox Imaging
29 Motif Investing
30 Bill.com
31 Birchbox
32 Fon
33 Shape Security
34 Wealthfront
35 Kymeta
36 EcoMotors
37 Personal Capital
38 Rent the Runway
39 Dataminr
40 BrightRoll
41 Betterment
42 Fullscreen
43 TransferWise
44 Coinbase
45 Hampton Creek Foods
46 Kumu Networks
46 Nebula
48 AngelList
49 Nexmo
50 KickStarter

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Luke Brown
tag:stream.growthink.com,2013:Post/705540 2014-06-19T17:52:39Z 2014-06-19T18:05:03Z Great job Growthinkers Anna Vitale & Melissa Welch!  Kudos to Growthinkers Anna Vitale and Melissa for receiving a nice note from their client! 

"Hey Team:
FANTASTIC. It's actually not just the best biz plan I have ever read, it's also a good read. VERY VERY WELL DONE."

Keep up the great work!!  
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tag:stream.growthink.com,2013:Post/705538 2014-06-19T17:51:03Z 2014-06-19T17:51:04Z Work hard, play hard - GTers know how to do it right! Last Thursday the Los Angeles team gathered at LMU's Bird Nest for our first major outdoor retreat.

There was joy to be had, insights to be shared and, ultimately, brilliant breakthroughs to start off the summer on a positive note!

Thank you all for coming out and special kudos to Justin Goodkind for securing this amazing venue!

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Simone Chen
tag:stream.growthink.com,2013:Post/705535 2014-06-19T17:44:12Z 2014-06-19T17:44:13Z Growthink president on the power of real-time BI Two weeks ago we had the honor of having Growthink president, Dave Lavinsky, in our Los Angeles office for a lunch presentation on the power of business intelligence and real-time dashboards.

Participants from various sectors had the opportunity to interact with Dave and walk through key metrics that should be more effectively tracked to contribute to better company success.

Thank you Dave for your time and look forward to many more of these sessions in the future!


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Simone Chen
tag:stream.growthink.com,2013:Post/705527 2014-06-19T17:04:58Z 2014-06-19T17:04:59Z Having big data is important but understanding the data is crucial to success BIG DATA SUCCESS: the sweet spot between uptime and bottom line

"It's not exactly breaking news that data analytics is a rapidly exploding field within Australian businesses, with different organisations and industries across the country at different stages of maturity. ADMA estimate that around 30% of Australian businesses are currently at some point on the big data continuum between data discovery and data commercialisation.

The potential value of all of the data available to enterprises and SME’s cannot be underestimated; fact is, in our Information Age the competitive advantage will rest with those businesses who are best able to harness their data in order to make real-time decisions that protect their customer base and grow market share. With this in mind, why is it then that only 30% of businesses are taking action with their data?"

For the rest of the article please visit: https://www.linkedin.com/today/post/article/20140617222618-21497568-big-data-success-the-sweet-spot-between-uptime-and-bottom-line?trk=tod-home-art-list-large_0

Though the article itself centers around the Australian market, the same concerns are readily observed across the globe.

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Simone Chen
tag:stream.growthink.com,2013:Post/700806 2014-06-05T21:35:03Z 2014-06-05T21:35:03Z Congratulations to Growthink client DNT Express on their recent approval for financing! Congratulations DNT Express on being approved for a $2.25 million loan! Excited to see what the future holds and how you'll continue to grow.

DNT Express is a wine distribution company located at the Capital District Regional Market in Menands, NY.  The company was founded in July, 2003 by brothers Dan and Tim Nickels.  Early on, DNT hauled a variety of products, from pharmaceuticals to auto parts. Now the Company provides wine delivery services from Rockland County to the Canadian border.  It currently serves over 100 distributors by transporting their wines to over 3,000 wine retailers and restaurants.


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Simone Chen
tag:stream.growthink.com,2013:Post/700055 2014-06-04T15:16:23Z 2014-06-04T15:16:24Z New insights on how to use Twitter for your business
From the Twitter blog

One of the best ways to learn about marketing on Twitter is through real examples from small and medium-sized businesses (SMBs). Recently, we spoke with a group of these companies about how they use Twitter as a business tool, the results they’ve seen, and their tips for success.

We partnered with research firm DB5 to survey 1100 SMB owners and employees in the U.S. Those surveyed work on their company’s digital marketing strategy, and are active Twitter users and advertisers. Visual.ly helped us create an infographic to detail the full survey results, which revealed that SMBs see Twitter as an effective marketing tool that enables them to accomplish their advertising goals.

Interestingly, two-thirds (66%) of respondents believe that they have not yet fully maximized their Twitter presence.

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Luke Brown
tag:stream.growthink.com,2013:Post/699806 2014-06-03T22:04:07Z 2014-06-03T22:04:08Z Stock Offerings and Securities Laws - Broker-Dealer Registration

An emerging business seeking to raise capital by selling stock or other securities often does so without the assistance of an investment banker, relying instead on its own officers, directors and employees to conduct the offering. The “self-distribution” of securities by the issuer and its personnel may be undertaken because an investment banker cannot be attracted or because the issuer desires to avoid paying selling commissions. Whatever the reason for self-distribution, the process raises broker-dealer registration issues.

Broker-dealers must register with the SEC unless they are engaged solely in intrastate business or in the business of trading exempted securities. State securities laws also generally require the registration of broker-dealers.

The failure to register as a broker-dealer if required can result in government enforcement action and monetary penalties. In addition, there is a significant risk that the offering could be subject to rescission by investors whose purchase of the securities was induced by an unregistered broker-dealer.

Federal Law 
“Broker” is defined in the federal Securities Exchange Act to generally mean any person engaged in the business of effecting transactions in securities for the account of others. “Dealer” is defined to generally mean any person engaged in the business of buying and selling securities for such person’s own account, through a broker or otherwise.

With self-distribution, the issuer and its personnel are not likely to fall within the definition of dealer because typically they are not both buying and selling the security. While the issuer would not fall within the definition of broker because it is not effecting transactions for the account of others, the issuer’s personnel are doing so (i.e., they are effecting transactions for the account of the issuer) and might meet the broker definition, subjecting them to broker-dealer registration requirements. The principal question for the issuer’s personnel is whether they are “engaged in the business” of effecting transactions in securities for the account of others.

To avoid uncertainty about whether someone is “engaged in the business” of effecting transactions in securities for the account of others, Exchange Act Rule 3a4–1 was adopted by the SEC as a nonexclusive safe harbor from the definition of broker for personnel of an issuer who assist the issuer in connection with the offer and sale of its securities. Generally, under the rule, an “associated person of an issuer” (a term that includes, among others, any person who is a partner, officer, director, or employee of the issuer) will not be deemed to be a broker by reason of his or her participation in the sale of securities of the issuer if the person:

  • Is not subject to a statutory disqualification under Exchange Act §3(a)(39); 
  • Is not compensated for participation in the sale by the payment of commissions or other remuneration based on transactions in securities; and 
  • Is not at the time of participation an associated person of a broker or dealer.

In addition to the requirements enumerated above, to take advantage of the rule the associated person must meet one of the following conditions:

  • The associated person (1) primarily performs substantial duties for the issuer other than in connection with transactions in securities; (2) was not a broker or a dealer or an associated person of a broker or dealer within the preceding 12 months; and (3) does not participate in selling securities for any issuer more than once every 12 months, with certain exceptions; or
  • The associated person does no more than (1) prepare approved written communications and deliver such communications without oral solicitation of potential purchasers; (2) respond to inquiries initiated by potential purchasers so long as the response is limited to information contained in the registration statement or other offering document; and (3) perform ministerial and clerical work related to the transaction; or
  • The associated person limits participation to transactions enumerated in Rule 3a4–1(a)(4)(i), most of which would not generally be applicable to an offering by an emerging business seeking to raise capital but which include sales of securities that are (1) made to a registered broker or dealer, a registered investment company, an insurance company, a bank or savings and loan association, or certain trust companies and trusts; or (2) made in accordance with a bonus, profit sharing, pension, retirement, thrift, savings, incentive, stock purchase, stock ownership, stock appreciation, stock option, dividend reinvestment, or similar plan for employees of the issuer or one of its subsidiaries.

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Luke Brown
tag:stream.growthink.com,2013:Post/698306 2014-05-30T23:22:20Z 2014-05-30T23:22:21Z Bret Stewart Growthinker of the Week! Nice work Bret!

Bret Stewart
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Jeff Jones
tag:stream.growthink.com,2013:Post/698216 2014-05-30T19:53:36Z 2014-05-30T19:53:37Z Visually Will Tell Marketers Whether People Actually Cared About That Infographic

Infographic and “visual content” marketplace Visually is the latest startup trying to take a new approach to measuring the effectiveness of content marketing.

In the past month or so I’ve written about new analytics tools offered by Contently,Chartbeat, and Sharethrough, all based on the idea that content marketers and native advertisers need new sets of data to tell whether their efforts and money are actually paying off.

When I brought up those other companies, co-founder and CEO Stew Langille said Visually is taking a different approach with its new Native Analytics product. It will allow customers to look at how the full campaign or website is doing, but it’s really focused on revealing details about individual pieces of content, regardless of where they get published.

After all, a successful infographic won’t just show up on your website, but will also get published on other blogs and shared on Facebook and Twitter. Visually says it can track that content when it’s embedded on other sites, and also use OCR image tracking to identify other locations where the infographic has been posted. Visually can then tell customers how many times that piece of content has been viewed and shared and use third-party data to break down the people viewing the content into groups like “technophiles,” “movie lovers” and “shutterbugs.”

[Update: I asked Visually for a full list of all the data that it will provide, and this is what I got back — pageviews (on-site and off-site using embed code), social shares (on-site and off-site, no embed code required), top tweeters, press and blog pickups, social media referrals, viewer affinity group, viewer "in-market" intent, viewer demographics, average time spent viewing and total time spent viewing]

The new analytics tools are part of the larger launch of a product called Visually Campaigns. In addition to the company’s previous focus on providing a marketplace and tools for creating infographics, videos, and interactive graphics, Visually Campaigns also allows teams to plan their broader campaigns. Combined with the launch of Native Analytics, Langille said Visually now covers “the whole life cycle” of content marketing — with the exception of distribution, i.e. promoting the content and making sure it gets seen. (And Langille suggested his team will be getting to distribution eventually.)

At the beginning of this year, Visually announced that it had raised $8.1 million in Series A funding.
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Luke Brown
tag:stream.growthink.com,2013:Post/698168 2014-05-30T17:54:11Z 2014-05-30T17:54:12Z Turf Signaling Between Investors And Founders

By Semil Shah

This post is intended for founders, and it is a difficult topic for me to write on, so please bear with me. First, this isn’t meant to paint the relationship between founders and investors as antagonistic. Second, this isn’t meant to be a declarative statement, as there are always exceptions — yet, what’s written below comes up in conversation all the time, so I felt compelled to share it more broadly.

This post is about the importance of “turf” in fundraising. In any sales negotiation, turf matters.

Private investors are in the business of sales. They’re selling money, their knowledge, their experience, their partners, their networks, and their signal to the market. Founders seek funding from these investors, and to do so, often try to broker warm introduction to them. They build connections with these investors, and it can take quite some time to schedule a meeting. More often than not, those initial meetings occur at the investor’s offices or at a place of the investor’s choosing. The investors also dictate the time. And, most founders fall in line, patiently waiting for the meeting, the location, and the time, momentarily forgetting that while investors are paid to scout opportunities and meet many people, the founder’s time is also scarce, and even though there’s a very small chance at funding, they continue on. No one can fault them.

When this comes up in conversation with a founder who is frustrated by the process, I try to respond with a version of the following:

“The brutal truth is that some people can just raise money by virtue of who they are or who they know. For the rest of us, the signaling mistakes founders often make can set an irreversible tone in short- or long-term negotiations. For instance, if a founder hunts down an investor, and then agrees to a meeting, shows up at the investor’s office or location of their choice, at a time of their choosing, the founder is sending an implicit signal that they want something the investor has. Yet, the psychology of the investor is to sell their wares — not to be sold to. Therefore, if the founder is able to pull it off, the best entry point to an investor is to be working on something that an investor hears about through multiple channels to the point where they come knock on the founder’s door — where they come to the founder’s turf.”

“Turf” is important. There is so much non-verbal signaling going on when a founder shows up on someone else’s turf.

What are the signs that you have inbound interest from an investor? They’ll meet you at a place of your choosing, at a time what works for you. They’ll likely be on time. They’ll likely be prepared. They’ll be more likely to help you with key intros to kickstart the relationship.

If this is true in many cases, then the job of the founder is to create the atmosphere in which an investor leverages their own network to get in front of you and your company. I realize most folks won’t be able to do this, but it’s a good goal to shoot for. So, what helps? Having a product that people are using, and/or having others espouse the greatness of a product. It’s not all about explosive growth, it can be unusual engagement, a unique design or technology — something that stands out in conversation. It can’t be engineered out of thin air, but it also presents founders with an interesting question — if people aren’t knocking down your door (or email inbox), could that be a signal the offering isn’t differentiated for the investment climate? Again, there will be exceptions, but it’s an intellectually honest question to ask.

Essentially, this type of approach — to create enough of a gravitational effect to attract investors —  takes into account and exploits the motives and business model incentives facing institutional investors. I don’t want to discount the chance for serendipity in these meetings. But, I also want to lay out how I see “turf” factoring into these meetings, the nuanced signaling that happens as a result of who gets to control when and where a meeting occurs. As with anything related to leverage, the best position to be in is fielding inbound requests — by whatever means necessary. In such a competitive environment, it’s the best route to stand out.

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Luke Brown
tag:stream.growthink.com,2013:Post/697263 2014-05-28T20:01:53Z 2014-05-28T20:01:54Z Which Venture Capital Firms Have the Strongest Mobile Portfolio?

From CB Insights

Less than 100 VC-backed apps have ranked in the App Store top 1000 'Overall' ranks consistently over the past six months. Here's who's invested in the most.


There are 464 apps in the iTunes App Store that have ranked in the top 1000 every day for the past 6 months.  Of those 464, 91 are investor-backed (VC or other investors).  For reference, being ranked in the top 1000 for 6 months is no easy feat given the average lifespan of an app in the top 1000 is just 23 days.

Given the fickleness of the App Store, it should follow that investing in consistently high-performing mobile apps and their publishers is also extremely challenging.  Below is a breakdown of these consistent top-performers that covers:

  • What categories/genres tend to have the most stickiness in the top 1000?
  • How many of the top 1000 app publishers are VC-backed vs. bootstrapped vs. created by public companies?
  • Which VCs have the strongest mobile publisher portfolio?

Genre / Category Analysis

The chart below breaks down the respective categories of the apps who held a top 1000 overall rank in the App Store consistently over the last six months. As evident, ‘Games’ accounts for the largest share of apps that maintain a top 1000 overall rank over time, representing 28% of the apps. The next highest category by share was ‘Photo & Video’, which made up 11% of the apps and then ‘Lifestyle’ at 9%.

appdata1

The Publishers

Next, we broke down the consistently high-ranking apps by publisher type, separating them into four categories: 1) VC-backed 2) public company/subsidiary of a public company (eg WhatsApp, YouTube) 3) no known funding/bootstrapped or 4) other (joint venture, non-profit, government, holdings company, etc).

Interestingly, the highest number of consistently high-ranking apps fell under the public company or public company subsidiary category at 38.6% of the apps. Bootstrapped apps were close behind, making up 37.9% of the apps.  

Just under 20% of the top apps were those of venture or investor-backed companies from Uber and Snapchat to Lumosity and Flipboard.

Staying power, of course, doesn’t necessarily mean investor or VC-backable.  Some of the apps that have maintained their top 1000 presence range from iPhone flashlights to photo collage tools to wallpaper makers.

appdata2

The Mobile Mafia – Top VCs

Which investors are behind the highest number of companies that have apps consistently ranked in the top 1000 overall ranking? Peeling back the top investors in non-exited companies with apps that meet the criteria, Sequoia Capital and Kleiner Perkins top the list of investors with 9 companies each. Sequoia’s companies include Plain Vanilla Games, Houzz, Whisper and Evernote while Kleiner’s include Shazam, Flipboard, Duolingo and MyFitnessPal.

In total, 15 VC investors have 5 or more portfolio cos that have consistently had an app ranked in the top 1000.  Others with strong mobile portfolio companies include Accel Partners, Felicis Ventures, Bessemer Venture Partners and Index Ventures.

Of course, this analysis just looks at the # of publishers each VC has in its portfolio and not the stage of entry or valuation of each. More on that in the future.

appdata7


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Luke Brown
tag:stream.growthink.com,2013:Post/697128 2014-05-28T15:28:20Z 2014-05-28T15:28:20Z Should I Leave A Voicemail?

By Doyle Slayton

I spent the early part of my sales career believing that leaving voicemail messages was a waste of time. Why? Because return phone calls are rare, and I preferred calling multiple times until I finally got a voice-to-voice connection with the decision maker. I felt like it kept me in control of the follow up process, and it was the most efficient way to crank out more calls throughout the day. I figured I’d save 15+ seconds per call by not leaving messages.

But the game has changed, prospects are hiding behind caller id and aren't answering their phone. No matter how often or what time of day, they just aren’t answering. When I call over and over again and never get an answer, it’s like spinning my wheels. So it got me thinking, “Am I really in control?” and “Am I really being more efficient?” I realized, if I’m going to regain control and gain traction over time, I have to leave messages.

So much of sales is about maintaining perspective. The goal of a voicemail is not to get a call back. The goal, is to be remembered. Here are seven reasons to leave a message...

Build Awareness

Leaving a message lets my prospect know that I exist. Leaving a message plants a seed. It is the first step in opening the door. The prospect knows, I have value added ideas, and I’m going to be searching for an opportunity to connect.

Generate Interest

One thing is certain, my prospect is getting hammered with sales calls all day long. That's why they aren’t answering their phone. Voicemail acts as a filter where sales people move themselves into or out of the picture.Leaving a message puts me in the game!

Introduce an Alternative

When calling on qualified prospects, they're looking for new solutions, upgrades, and alternatives. They might be in a meeting discussing options right now. Your messaging positions you as a viable option. There is nothing worse than finally getting the decision maker on the phone after months of calling and hearing, “Actually, we just signed on with one of your competitors.” That’s when you think, “dang, I should have left a message.”

Create an Opportunity

Most prospects knee jerk response is to say, “I'm not interested… we’re fine where we are.” Click... “Wait a minute!” you think, “I haven’t even said anything.” What good is it to finally get someone on the phone if they are going to hang up as soon as they realize you're a sales person? A series of strategic, targeted messages creates the opportunity for a welcomed conversation when they finally answer the phone.

Establish Credibility

One way to differentiate yourself is to consistently follow-up. While your competition is not following through, not using their CRM to build a pipeline, and turning over sales people left and right, you have to be the consistent consultative voice breaking through all the noise.

Demonstrate Expertise

Every voicemail you leave and every email you send should demonstrate that you are an industry expert. You understand your prospect's business challenges. You know how to solve their problems. You have experience and data to prove your abilities. Share value added, solution building content from your latest blog posts, white papers, case studies, etc.

Gain Influence

You need to have multiple influencers within the company, for example, leave messages for the CFO, Controller, and Director of XYZ. Let them to know you just left a message for their colleague. The goal is to have them sitting in a meeting or conversing over lunch about a problem and all of a sudden your name comes up!

A messaging strategy has to include a very specific set of five to eight targeted voicemail and email messages to leave and send over time. When you're dealing with targets that are difficult to reach, you have to prepare for a long term attack!

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Luke Brown
tag:stream.growthink.com,2013:Post/696417 2014-05-26T22:00:42Z 2014-05-26T22:00:43Z Here is What it Actually Takes to Make it as an Entrepreneur By Vivek Wadhwa

A young male who was born to be an entrepreneur drops out from a computer-science program at a prestigious university. He meets a powerful venture capitalist who is so enamored with his idea that he gives him millions of dollars to build his technology. Then comes the multi-billion-dollar IPO.

That’s the Hollywood version of Silicon Valley. But it is as far from reality as is Disneyland. Entrepreneurship is never that easy and the stereotype of the startup founder is not representative of the technology world. Yes, there are a few, such as Mark Zuckerberg and Bill Gates, who made it big. But they are the outliers—and they too don’t fit the stereotype. Here are six myths about what it actually takes to make it:

1. Entrepreneurs are a product of nature.

A common belief is that entrepreneurs are born and cannot be made. Venture capitalist Fred Wilson once said that he was shocked when a professor told him you could teach people to be entrepreneurs. He explained, “I’ve been working with entrepreneurs for almost 25 years now and it is ingrained in my mind that someone is either born an entrepreneur or is not.” Venture capitalist Mark Suster, with whom I once had a fierce debate on this topic, maintained the same.

They’re wrong. My research team found that, of the 549 successful entrepreneurs that we surveyed in 2009, 52 percent were the first in their immediate families to start a business; about 39 percent had an entrepreneurial father and 7 percent had an entrepreneurial mother. (Some had both.) Only a quarter of the sample had caught the entrepreneurial bug when in college. Half didn’t even think about entrepreneurship then, and they had had little interest in it when in school.

This sample doesn’t necessarily prove my point. But look at some of most successful entrepreneurs that we know: Mark Zuckerberg, Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Sergey Brin, and Jan Koum. They didn’t come from entrepreneurial families. Their parents were dentists, academics, lawyers, factory workers, or priests. I doubt they were writing business plans while in kindergarten or selling lemonade in grade school.

I know many ordinary entrepreneurs who also didn’t sell lemonade. I myself come from a family of government bureaucrats and teachers. I started my career as an I.T. professional and never dreamed of becoming an entrepreneur. But when I was 33, the opportunity presented itself to me to start a company that could impact the world. I made the leap and helped build a business that generated $120 million in annual revenue.

Silicon Valley luminary Steve Blank, who moderated my debate with Suster, adds another perspective. He says “Change the external culture and environment, and entrepreneurship can bloom regardless of its source—nature or nurture”. He’s right. Entrepreneurship flourishes in places where people can learn from and inspire one another, such as Silicon Valley and New York City.

2. The best entrepreneurs are young. If you’re over 35, you’re over the hill.

Silicon Valley investors openly tout their preference for younger entrepreneurs. One famous investor said, “People under 35 are the ones who make change happen … people over 45 basically die in terms of new ideas.”

My research teams documented that the average and median age of successful technology company founders when they started their companies had been 40. We learned that as many had been older than fifty as had been younger than twenty-five; twice as many had been over sixty as under twenty. Seventy percent were married when they launched their first business; an additional 5.2 percent were divorced, separated, or widowed. Sixty percent had had at least one child, and 43.5 percent had had two or more children. The Kauffman Foundation also researched the backgrounds of successful entrepreneurs and found similar results.

On a post on Quora, Jan Koum, the founder of WhatsApp—the most expensive technology acquisition ever—wrote “i incorporated WhatsApp on the day of my 33rd birthday. i had no idea i only had 2 years left.”

Look closer at the technology industry, and you will realize that VCs who say that older entrepreneurs are over the hill are misguided. For example, Marc Benioff was 35 when he founded Salesforce.com and Reid Hoffman was 36 when he founded LinkedIn. Reed Hastings was 37 when he founded Netflix; Mark Pincus was 41 when he started Zynga. Pradeep Sindhu was 42 when he founded Juniper Networks and Irwin Jacobs was 52 when he founded Qualcomm.

3. Dropping out is the way to go; education is merely a distraction.

PayPal billionaire Peter Thiel made headlines when he announced four years ago that he would pay students $100,000 to drop out of college. He wanted to prove that higher education is overpriced and unnecessary; that budding entrepreneurs are better off in building world-changing companies than in studying irrelevant courses in school.

His effort proved to be a dismal failure. Some Thiel startups received big media attention and adulation—such as one that announced it would be producing caffeine spray. But none were the successes that had been promised.

The Thiel Foundation quietly refocused its efforts on providing an alternative form of education to college dropouts, and several of its sponsored dropouts returned to school. That’s because there is no substitute for education. Yes, there are good alternatives to universities, but entrepreneurs need to learn the basics of business and management in order to succeed.

Indeed, my research team found that, on average, companies founded by college graduates have twice the sales and employment of companies founded by people who hadn’t gone to college. What matters is that the entrepreneur completes a baseline of education; the field of education and ranking of the college don’t play a significant role in entrepreneurial success. Founder education reduces business failure rates and increases profits, sales and employment.

4. Female entrepreneurs don’t have what it takes to cut it in the tech world.

Women-founded firms receive hardly any venture-capital investments; they are almost absent in high-level technology positions; they contribute to fewer than 5 percent of all I.T. patents and 1.2 percent of open-source software programs. This is despite the facts that girls now match boys in mathematical achievement; that 140 women enroll in higher education for every 100 men; and that women earn more than 50 percent of all bachelor’s and master’s degrees and nearly 50 percent of all doctorates in the United States.

Do female founders receive less VC backing because women are different? Not at all. Research by National Center for Women & Information Technology revealed that there are almost no differences in success factors between men and women company founders. Men and women are equally likely to have children at home when they start their businesses, though men are more likely to be married. Both sexes have exactly the same motivations; are of the same age when founding their startups; have similar levels of experience; and equally enjoy the startup culture.

It’s also not that women can’t cut it in the rough and tough business world. Women-led companies are more capital-efficient, and venture-backed companies run by a woman have 12 percent higher revenues, than others.

5. Entrepreneurship requires venture capital.

Many would-be entrepreneurs write business plans in the hope of finding a venture capitalist to invest in them, believing that, without this funding, they can’t start a company. And that view reflected reality a few years ago. Then, capital costs for technology were in the millions of dollars. But that is no longer the case.

A $500 laptop has more computing power today than Cray 2 supercomputers that cost $17.5 million in 1985. For storage, back then, you needed server farms and racks of hard disks, which cost hundreds of thousands of dollars and required air-conditioned data centers. Today, one can use cloud computing and cloud storage, costing practically nothing.

Sensors such as those in our smartphones cost tens of thousands of dollars a few years ago. Now they too cost a few dollars or cents. Entrepreneurs can build smartphone apps that act as medical assistants to detect disease; body sensors that monitor heart, brain, and body activity; and technologies to detect soil humidity and improve agriculture. And they can participate in the genomics revolution. It cost $100 million to sequence a full human genome a decade ago. It now costs $1,000. Genome data will soon be available on millions of people, and then billions—allowing entrepreneurs to research the causes of disease.

There are similar advances in robotics, artificial intelligence, 3D printing, and many other fields. These technologies too require no major capital outlays.

Venture capital follows innovation. If entrepreneurs build new technologies that customers need or love, money will come to them. They don’t need to wait for venture funding to start.

6. The tech world is for techies.

A common belief is that startup CEOs need to be engineers. Bill Gates argues that liberal-arts degrees don’t correlate well with job creation and that the humanities should be defunded in favor of science, engineering, technology, and mathematics. In Silicon Valley, there is a general bias against liberal arts and humanities. It is very hard for an artist or an English or psychology major to break in.

But note what Steve Jobs said when he unveiled the iPad 2: “It’s in Apple’s DNA that technology alone is not enough — it’s technology married with liberal arts, married with the humanities, that yields us the result that makes our heart sing, and nowhere is that more true than in these post-PC devices.” He taught the world that, though good engineering is important, what matters the most is good design. It takes artists, musicians, and psychologists working side by side with engineers to build products as elegant as the iPad. You can teach artists how to use software and graphics tools, but it’s much harder to turn engineers into artists.

My research at Duke and Harvard looked into the educational backgrounds of 652 U.S.-born chief executive officers and heads of product engineering at 502 technology companies in 2008. We found that only 37 percent held degrees in engineering or computer technology, and that just two percent held them in mathematics. The rest had degrees in fields as diverse as business, accounting, finance, health care, and arts and the humanities.

Critical thinking, communication, and scientific validation are skills that are in short supply in the tech world. And these are skills that are abundant in the humanities.]]>
Luke Brown
tag:stream.growthink.com,2013:Post/695527 2014-05-23T20:48:43Z 2014-05-23T20:48:44Z 22 Qualities of Entrepreneurs Likely to Fail

By Jeff Haden

I'm not an angel investor.

Nor am I likely to be providing venture capital anytime soon. So you would think reading a comprehensive guide to angel investing would be of little interest to me.

In fact, often the best way to approach a situation is from a totally different perspective. Say you want to build a thriving business. You could list everything you think is important in founding, building, and maintaining a startup, and build your company that way.

Or you could focus on what experienced investors look for--not because you want to attract outside capital, but because you want to evaluate the same key qualities an experienced investor looks for when deciding whether a business merits his or her money.

In other words, build a company that has all the qualities a successful angel looks for... and you've probably built a company with real legs.

The same approach can apply to you, the founder.

As David S. Rose, the CEO of Gust and the founder of New York Angels, says in Angel Investing: The Gust Guide to Making Money & Having Fun Investing in Startups:

"The number one thing I look at when making a startup investment is the quality of the entrepreneur. In this, I--and a majority of professional angel investors--follow the old adage: 'Bet the jockey, not the horse.' A great entrepreneur--especially one backed by an outstanding team--can tweak, improve and refocus a business idea as needed, while a mediocre entrepreneur is likely to ruin the promise of a brilliant business concept. If I have to choose between a great business idea and a great entrepreneur, I'll take the entrepreneur every time."

So what about you? Do you have all the qualities a successful angel looks for in an entrepreneur?

There's no need to guess. Although in the book, David describes certain behaviors of great entrepreneurs, he also lists a number of warning signs.

See if any of these apply to you:

  • Perceived lack of integrity
  • Unrealistic assessment of market size
  • Unrealistic assessment of competitive offerings
  • Unrealistic assessment of competitive advantages
  • Unrealistic assessment of execution challenges
  • Unrealistic assessment of execution costs
  • Unrealistic assessment of timing
  • Unrealistic financial projections
  • Unrealistic valuation expectations
  • Unrealistic declarative statements
  • Unrealistic fundamental business idea
  • Lack of execution track record
  • Lack of domain expertise
  • Lack of technical expertise
  • Lack of long-term vision
  • Lack of historical knowledge of the market space
  • Lack of perceived leadership capability
  • Lack of perceived communication skills
  • Lack of necessary operational skills on the management team
  • Lack of perceived ability to grow with the company
  • Lack of perceived willingness to accept advice or mentorship
  • Lack of carefully considered go-to-market strategy

Of course, you might say, "Wait. I don't plan to seek investors. So an inability to communicate effectively with potential investors is a nonissue."  Of course, you'd also be wrong; although communicating with investors may not be important, communicating with everyone else--employees, customers, vendors, etc.--is definitely important. Any entrepreneur who lacks solid communication skills is working at a huge disadvantage.

The same is true for all the other items on David's list of warning signs. If you can't lead, then your employees can't follow. If you can't grow with your business, then your business can't grow. If you can't identify and leverage your real (not imagined) competitive advantages, then you can't compete.

And although you think you may never be an angel investor, you already are, because you've invested in your business.

Viewing entrepreneurship and your business from a different perspective--especially an experienced perspective--is incredibly valuable, because it can help you identify weaknesses you must overcome...and just as important, strengths you can leverage.

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Luke Brown
tag:stream.growthink.com,2013:Post/695487 2014-05-23T18:54:24Z 2014-05-23T18:54:25Z The Art of Evangelism

By Guy Kawasaki

A long time ago I was a revolutionary at Apple. My job title was “software evangelist.” My responsibility was to evangelize Macintosh to software developers. Later my title was “chief evangelist,” and my responsibility was to evangelize Macintosh to anyone who wanted to increase productivity and creativity.

The Art of Evangelism

Post Apple, I’ve been many things: author, speaker, entrepreneur, venture capitalist, advisor, and father, but I’ve never used the title “chief evangelist” until today. This is because the title only works if your product can change the world—or at least a significant part of it.

Macintosh changed the world. It democratized computers. Google changed the world. It democratized information. eBay changed the world. It democratized commerce. After  two decades of looking, I found Canva. It can change the world by democratizing design, and that’s why I’m now chief evangelist of Canva.

Company vs Meaning

We’re big believers in “content marketing” at Canva. It means providing information that’s valuable to our readers and customers. We define “valuable” as something that you can make your life better as opposed to increasing our sales or profits. In this spirit, I’d like to explain how to evangelize a product or service.

1. Make it great.

It’s very hard to evangelize crap. It’s much easier to evangelize great stuff. I learned that the starting point of evangelism is a great product or service. Great stuff embodies five qualities:

  • Deep. This means your product or service has lots of features because you’ve anticipated what people need as they come up the power curve.
  • Intelligent. When people use your product or service, they see that someone smart understood their problem or pain.
  • Complete. A complete product is surrounded with everything you need. For example, great software is not just the downloadable file. It’s also the documentation, support, and string of enhancements.
  • Empowering. A product or service empowers people because it makes them better. Great stuff doesn’t fight you—it becomes one with you.
  • Elegant. This means that your product or service is not just functional, it’s also well-designed so that people could use it easily and quickly.

2. Position it as a “cause.”

A product or service, no matter how great, is a collection of parts or snippets of code. A “cause,” by contrast, changes lives. It’s not enough to make a great product or service—you also need to position it and explain it as a way to improve lives. Steve Jobs didn’t position an iPhone as $188 worth of parts. Evangelists need to seize the moral high ground and transcend the exchange of money for goods and services. 

3. Love the cause.

“Evangelist” isn’t a job title. It’s a way of life. It means that evangelists must love what they evangelize. No matter how great the person, if he doesn’t love the cause, he cannot be a good evangelist for it. If you don’t love it, don’t evangelize it. This has hiring implications too: a good education and relevant work experience are not sufficient. It’s just as important that an evangelist loves the product or service.


Evangelist Isn't a Job Title

4. Localize the pitch.

Don’t describe your product using lofty, flowery terms like “revolutionary,” “paradigm shifting,” and “curve jumping.” Macintosh wasn’t “the third paradigm in personal computing.” It simply (and powerfully) increased the productivity and creativity of one person with one computer. People don’t buy “revolutions.” They buy “aspirins” to fix the pain or “vitamins” to supplement their lives, so localize the pitch and keep it simple.

 

5. Look for agnostics, ignore atheists.

It is very hard to convert someone to a new religion when he worships another god. The hardest person to convert to Macintosh was someone who worshipped MS-DOS. The easiest person was someone who never used a personal computer before. If a person doesn’t “get” your product or service after fifteen minutes, cut your losses and move on.

 

6. Let people test drive the cause.

Evangelists believe that their potential customers are smart. Therefore, they don’t bludgeon them with ads and promotions. Instead they provide ways for people to “test drive” their products and then decide for themselves. Evangelists believe that their products are good—so good that they’re not afraid of enabling people to try before they buy.

7. Learn to give a demo.

“Evangelist who cannot give a great demo” is an oxymoron. If you can’t give a great demo of your product or service, you cannot be an evangelist for it. Demoing should be as second nature, even involuntary, as breathing. This is what made Steve Jobs the world’s greatest evangelist for Apple’s products.

Learn to Give a Demo

 

8. Provide a safe, easy first step.

The path to adopting a cause should have a slippery slope, so remove all the barriers. Examples: 1) revamping an entire IT infrastructure shouldn’t be necessary to try a new computer; chaining yourself to a tree shouldn’t be necessary to join an environmental group; and 3) speaking a foreign language and owning a special keyboard shouldn’t be necessary to register for a website.

9. Ignore titles and pedigrees.

Elitism is the enemy of evangelism. If you want to succeed as an evangelist, ignore people’s titles and pedigrees, accept people as they are, and treat everyone with respect and kindness. My experience is that a secretary, administrative aide, intern, part-timer, or trainee is more likely to embrace new products and services than a CXO or vice-president.

10. Never lie.

Lying is morally and ethically wrong. It also takes more energy because when you lie, it’s necessary to keep track of what you said. If you always tell the truth, then there’s nothing to keep track of. Evangelists evangelize great stuff, so they don’t have to lie about features and benefits, and evangelists know their stuff, so they never have to lie to cover their ignorance.

11. Remember your friends.

Be nice to people on the way up because you’ll see them again on the way down. One of the most likely people to buy a Macintosh was an Apple II owner. One of the most likely people to buy an iPod was a Macintosh owner. One of the most likely people to buy whatever Apple puts out next is an iPhone owner. And so it goes, so remember your friends.

Be Nice to People on the Way Up

12. Conclusion

People often ask me what the difference is between evangelist and salesperson. Here’s the answer. A salesperson has his or her own best interests at heart: commission, making quota, closing the deal. An evangelist has the other person’s best interests at heart: “Try this because it will help you.” Keep this difference in mind, and you’ll be on the right track.

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Luke Brown
tag:stream.growthink.com,2013:Post/695065 2014-05-22T21:43:24Z 2014-05-22T21:43:25Z Wisdoms from the HOW Design Live Conference I had the opportunity to attend the HOW Design Live Conference in Boston last week and must say that it was beyond anything I had expected. The quality of speakers, workshops and the genuine interactions that happened were unbelievable and it was truly a blessing to be able to attend.

The following are some key highlights from various speakers from the conference. Let these words inspire you to create something amazing and be different!

On finding success over failure:

Stanley Hainsworth said, "The most success I had in my career was when I took on things that I was not asked to do." 

Maria Popova said: "No specific routine guarantees success, just show up, day in and day out to achieve success." 

Christine Mau said: "Playing to not lose is not the same as playing to win. As a designer, play to win." 

On what the role of designers is today:

Malcolm Gladwell said: "Designers introduce balance into the way we see things by providing a new perspective." 

Dan Pink said: "Access to information has been replaced by curating information. Data is cheap; Value is in designing for focus and knowledge." 

Of course: Bob Gill said: "Go to the Dry Cleaners!" in other words get out from behind your computers and experience the products and services you are designing for. The answer is not in your head or your computer screen. 

Certainly the theme of making things was a big one. I do not have an example of this but lots of speakers touched on why you need to turn your inspiration into stuff and be creating frequently. 

On learning:

Dana Tanamachi Williams said: "It is what you learn after you already know it all – that really counts." 

And finally, Seth Godin said: "Design thrives when a human being wants to create work that, at its core, touches another."
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Simone Chen
tag:stream.growthink.com,2013:Post/694775 2014-05-22T15:13:15Z 2014-05-22T15:13:15Z Why You Should Always Make The First Offer In A Negotiation

Contrary to the commonly held wisdom, people who make the opening offer in a negotiation have the upper hand.

The advantage is owed to something psychologists call the anchoring principle. It's a cognitive bias where people rely too much on the first piece of information they have.

In a salary negotiation, for example, whoever makes the first offer establishes the range of possible variation from that anchor. If you start high, the hiring manager may adjust the figure down slightly. But that's typically a stronger position than starting low and trying to negotiate up.

"Most people come with the very strong belief they should never make an opening offer," says Northwestern University management professor Leigh Thompson. "Our research and lots of corroborating research shows that's completely backwards. The guy or gal who makes a first offer is better off." 

Marketers use the anchoring principle to trick you into thinking something is cheaper than it actually is. A "discount" tag that still shows the original price on a pair of pants is a prime example, since you tend to focus on the deal you're getting rather than the price you're paying.

In a negotiation, you can use that bias to your advantage. "Whoever makes the first offer essentially drops an anchor on the table," Thompson says. "I might say that your opening offer is ridiculous, but nevertheless, unconsciously, I've been anchored." 

What's more, the opening offer helps orient the other person's perception of the value of what's being negotiated for. An aggressive opening offer makes people consider the positive qualities of an object, since it forces them to decide whether it's worth the cost, says Columbia Business School professor Adam Galinsky. On the other hand, a low opening offer makes people stingily consider what might go wrong, since lower prices are associated with negative qualities. 

"My own research suggests that first offers should be quite aggressive but not absurdly so," Galinsky says. "Many negotiators fear that an aggressive first offer will scare or annoy the other side and perhaps even cause him to walk away in disgust. However, research shows that this fear is typically exaggerated. In fact, most negotiators make first offers that are not aggressive enough." 

To start with a high but not overly aggressive offer, you could just introduce a number--rather than explicitly ask for it. 

Harvard Law School's Program on Negotiation details why:  

"The most effective anchors further reduce risk because, rather than placing firm offers on the table, they merely introduce relevant numbers. A job applicant may state his belief that people with his qualifications tend to be paid between $85,000 and $95,000 annually, or he might mention that a former colleague just received an offer of $92,000. This assertion is not an offer; it’s an anchor that affects the other side’s perceptions of the zone of possible agreement."

The next time you enter a negotiation, don't play coy. Put your offer on the table first.


By Drake Baer

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Luke Brown