Strong Opinions @marksbirch

Random thoughts from a NYC entrepreneur and investor about start-ups, technology and the people that make it all happen. Also find time for good tunes and good food.
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This is my term for some of the more recent batch of startup accelerators that have been popping up recently. With the hundreds of facilities, organizations, and communities that are clamoring to support budding entrepreneurs and their various startups, the need to differentiate has become ever more important. With over 75 startup incubator and accelerators in NYC and its surrounding metro area alone (and another 60+ co-working spaces), it is easy to get lost in the crowd.

Backing up a bit though, what do I mean by an accelerator? The modern incarnation of the classic startup accelerator emerged during the mid-2000’s with the launch of Paul Graham’s Y Combinator in 2005 based out of Cambridge, MA, then followed closely by the TechStars in 2006 and SeedCamp in 2007. The idea was that by giving promising founding teams a small bit of capital, a network of experienced mentors, an intense program of “startup” education, and other resources, startups could have better outcomes and grow into successful companies. In exchange, the startups would give up a small bit of equity.

Since then, there has been a explosion of interest in tech startups and entrepreneurship. With the rise in the numbers of startups, many of which are quite credible, those first three programs have expanded and become much more competitive. That has opened up that market to many other similar programs around the country and around the world started by former entrepreneurs, investors, corporations , and even governments. If they had access to a network and investors and a prime bit of real estate, then opening up an accelerator was not all that difficult.

The problem is the value proposition for many of these programs is pretty shaky. What startups need most is funding, customers, and to a lesser extent, a network that can add some valuable expertise or useful connections. For some programs, these have been lacking and thus several accelerators have folded. Another challenge is that newer accelerators have struggled to attract top notch startups. Given the outsized attention and success of YC, TechStars, and a handful of other top accelerators, it is no surprise that those are the programs that snag the most promising startups. But perhaps a more salient point is that many founders are realizing that the classic accelerator model does not work for them.

That is where the Mixelerator comes in. They are following a different path by mixing up the equity, mentorship, and network combination. Some are taking no equity. Some eschew direct funding. Some act more as business connectors. Some are adding value outside of mentorships or traditional programming. Yet others are leveraging alternative sources for networks, plugging into schools affiliations, corporate networks, or industry associations. And many of these newer accelerators are focusing on a specific niche market whether industry, business model, product focus, or company stage.

In New York City alone, of the accelerators I know of, only a handful are of the generic tech startup variety like the successful ER Accelerator program. Most are focused on verticals such as financial service like ValueStream Labs or healthcare like Blueprint Health. Some deem themselves a post accelerator, such as Work-Bench, which leverages its relationship with the print giant RR Donnelley to help enterprise startups that are in a later stage of growth . Brand new ones are not even taking equity up front, like Grand Central Tech which is using its deep relationships with NYC area high schools and colleges to connect startups with a growing base of local talent. Then there are the many accelerators that are not even focused purely on software or even tech like the R/GA Accelerator which is focused on the Internet of Things.

It is inevitable that the trend should evolve into more specialization and more adventurous experimentation with different models. Even with the increasing number of startups, it could be argued that places rich with accelerators like San Fran and NYC are already at capacity with the current crop of generic programs. The goal then is not to sweeten the pot with more funding upfront or bigger rosters of mentors or cooler locations (though an accelerator in Maui might be pretty awesome). Already most founders are getting wise to the “equity for access” game which in many cases turns out to not be such a great deal. What is clear about the future of accelerators though is that there are going to be even more, they are going to be even more specialized, and the models themselves are going to likely change.

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Harry Nilsson,
Legendary Harry Nilsson

COVER FRIDAY: Everybody’s Talkin’ by Harry Nilsson (Fred Neil cover) - Most folks think of covers as songs that are already well-known, but it is more often the reverse.  This was particularly the case years ago when songwriters often wrote songs for other artists to perform.  Such was the case of folk artist Fred Neil, who wrote numerous songs and even recorded many himself.

One of those tunes came to the attention of Harry Nilsson who recorded it for the album Aerial Ballet.  It was the addition of the song to the Academy award winning movie Midnight Cowboy though that made the song an international hit and soon after earned Nilsson a Grammy.  In a way, I could hardly imagine the movie without the song.  At some point I will play the original that I heard earlier this evening, but for now I will leave you with its world famous cover which in turn launched many more covers soon after.

enhatch:

The Battle We All Face…With Enterprise Technology
Often times when we are speaking about Enhatch, people will ask why the user experience is so important.  ”The tech works today just fine” or “users have to use to anyway” or “we just use the carrot & stick approach”.  But what type of behavior is that encouraging and can you really trust the data going into the systems?  This is especially true of sales & marketing people.  You may mandate compliance, but all that does is to encourage the least amount of effort and data entry and useful information.  Salespeople are well adapt at avoiding work that does not help them close deals.
Instead of mandating and forcing and pushing technology that does not work for employees, wouldn’t we be better off giving them systems that help them do their jobs better?  Would it not be better to avoid the battles of user adoption all together by giving users technology that provides a better experience and immediate value?  Employees are already voicing their displeasure by bringing in their own devices and their own mobile apps to get their work done.  It is time companies started listening to their employees and taking their concerns about technology more seriously.  They do not need another CRM system, they need a system that makes them better at their jobs.

enhatch:

The Battle We All Face…With Enterprise Technology

Often times when we are speaking about Enhatch, people will ask why the user experience is so important.  ”The tech works today just fine” or “users have to use to anyway” or “we just use the carrot & stick approach”.  But what type of behavior is that encouraging and can you really trust the data going into the systems?  This is especially true of sales & marketing people.  You may mandate compliance, but all that does is to encourage the least amount of effort and data entry and useful information.  Salespeople are well adapt at avoiding work that does not help them close deals.

Instead of mandating and forcing and pushing technology that does not work for employees, wouldn’t we be better off giving them systems that help them do their jobs better?  Would it not be better to avoid the battles of user adoption all together by giving users technology that provides a better experience and immediate value?  Employees are already voicing their displeasure by bringing in their own devices and their own mobile apps to get their work done.  It is time companies started listening to their employees and taking their concerns about technology more seriously.  They do not need another CRM system, they need a system that makes them better at their jobs.

58 plays
Eric Gales Band,
The Eric Gales Band

Sign of the Storm by Eric Gales Band - I meant to post this during my Shred Week, but I never got a chance.  So instead of waiting till the next week of guitar shredding awesomeness, I am posting now.  Eric Gales was hailed as a guitar prodigy for good reason.  At the age of 16, he had a major label deal and was lauded as the best new talent across every guitar mag you picked up in 1991.  To this day, he is still dazzling with his blues shredding gun slinging that is this cross of Hendrix, Vaughan. and Satriani.

While still active, his later albums never seemed to catch the spark of his debut.  Nearly every tune is mind blowing showmanship and his band of brothers (literally) do an excellent job of supporting the real show.  The tune Sign of the Storm ended up being his biggest hit and also some of the finest guitar soloing on the album.

I recently read this in Ben Horowitz’s book The Hard Things About Hard Things (which is quite good by the way):

When I first met Bill Campbell, he was chairman of Intuit, on the board of Apple, and a mentor to many of the top CEO’s in the industry.  However, those things did not impress me nearly as much as his time running GO Corporation back in 1992.  The company raised more money than almost any other venture-capital backed startup in history and lost nearly all of it before selling itself for nearly nothing to AT&T in 1994.

Now that probably doesn’t sound very impressive. In fact, in probably sounds like a horrible failure.  But I’d met dozens of GO employees in my career, including great people like Mike Homer, Danny Shader, Frank Chen, and Stratton Sclavos.  The amazing thing was that every one of those GO employees counted GO as one of the greatest work experiences of their lives.  The best work experience ever despite the fact that their careers stood still, they made no money, and they were front-page failures.  GO was a good place to work.

This made me realize what an amazingly effective CEO Bill was.  Apparently, John Doerr thought that too, because when Scott Cook needed a CEO for Intuit, John recommended Bill even though Bill lost a ton of John’s money at GO,  And for years, everyone who ever came into contact with GO employees knew what Bill was about.  He was about building good companies.

When I think about building Enhatch, it is not just about building a great product or closing a ton of business.  Do not get me wrong, those things are incredibly important otherwise there is no company.  However, underlying all of that is making sure that along the way we are a good company that positively impacts the lives of its customers, employees, partners, and investors.  Ultimately, that is the legacy we are creating and what people will remember.

Some smart thoughts on the massive $357 billion transfer in IT spend that is about to happen as a new wave of enterprise business apps companies emerge.

enhatch:

mikebrownjr:

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Enormous changes are afoot in the C-suite at companies at every level of scale and growth. We built Bowery Capital on the thesis that roughly $357 billion would change hands over the next ten years through the swapping out of old technology for new. This perspective comes from years of seeing Internet natives becoming IT decision-makers, a concept on the rise, but this is something we are just at the beginning of.

When we look at the current state of enterprise tech, we also see a massive tectonic shift of technology dollars in the works.  We are not quite there yet mostly because we are in a generational leadership cycle where digital natives (and even more potentially disruptive mobile natives) are just entering the C-suite and enterprise has lagged somewhat in adopting the innovations brought in through the consumer tech space.  Enterprise 2.0 has been more of a whimper rather than a roar of disruption.

That being said, Mike brings up a couple of very critical points that will lead this shift towards a new generation of enterprise technology leaders:

  • Disintermediation of IT
  • Deep Verticalization

Consumer tech has influenced the enterprise in two ways.  First, it has made the general public much more savvy and hands on with technology.  You can thank Apple and the iPhone for that.  But even more so was the App Store and the idea of snackable apps that let anyone try unlimited numbers of apps for free or for just a few dollars.  This leads to the second key point which is that apps have taught consumers to expect better experiences.  When you had to pay tens or hundreds of dollars for software, consumers just gutted out poor user experiences because they had little choice but to use the software.  Now if an app does not meet expectations immediately, it can be deleted without a thought.

Those same expectations are driving user behavior in enterprises where users are voting with their smartphones and tablets the type of apps they will use.  The result is that they are avoiding the corporate sanctioned apps and using readily available apps from the app store that are much better and provide higher value of immediate value to employees.  This means that the corporate rollout of Salesforce gets passed over by sales reps for apps that actually give them immediate value and make their jobs easier.  It is not IT that is delivering value to user through technology, it is users themselves bringing in and owning the technology infrastructure.

The other trend that is accelerating is the desire for companies to seek industry specific versions of horizontal software.  At Enhatch, we have encountered companies in the medical device space, the building supply industry, and the big-ticket industrial manufacturing market that have CRM but have gotten little usage.  Why?  Because the software does not work for the people in the field and how they do business.  It is not as simple as changing labels on screens with industry appropriate lingo, it is about the workflow and processes that are specific to particular industries and how easy it is to mold those elements into the software.

With Enhatch, we have melded these trends of verticalization and disintermediation.  Our platform gives enterprises both the flexibility to create apps that users want while incorporating industry specific functionality.  That we do this in a way that gives the task of app creation to user themselves is what changes the entire dynamic of software delivery in organizations.  CMO’s and CSO’s have direct control over what and when and how of the apps that enable their business units.  That is where the real shift in tech dollars will be happening and why the Oracle’s and SAP’s of the world that control the CIO office today are going to be quaking in their boots.

Customer complaints generally have a loose but inverse negative correlation to return on invested capital,” Wolfe Research analyst Hunter Keay says, noting that well-liked JetBlue Airways (JBLU), Virgin America, and Southwest Airlines (LUV) lag financially. “The commitment to make the customer happy costs money.” Keay says the low-cost model rightly treats airfare as a utility. “There really does not need to be a service component attached to consuming airfare.

The Most Hated U.S. Airline Is Also the Most Profitable via BloombergBusinessweek

As painful as this is to read from someone that has spent much of his professional career touting the benefits of CRM, customer care, and the importance of fostering loyalty through superior service, there is an important truth.  The lowest cost providers in most sectors can also be financially successful. but it is a ruthless business where you are shaving costs everywhere to eek out margins.  Thus you are squeezing customer, employees, partners, vendors, and investors.  It becomes a numbers game where it is about delivering the least amount of value while still maintaining a steady stream of business.

Long-term however, it is hard to see how these models succeed given the massive churn.  For every other business that is not chasing the absolute cellar in terms of price and service, the best play is to invest in your customers and create a great experience.

There are many thoughts, essays, books,conferences and the like out there about how one can create a unicorn-like startup that takes the world by storm and changes the very foundations of humanity and how people relate to the world around them.  But much of the advice that is dispensed is often times contradictory or obtuse.  Can one even come up with a standard playbook as to how intrepid entrepreneurs can go about starting such impressively large and incredibly innovative companies?

We believe so.  After careful analysis over many months studying 100+ billion dollar technology companies started over the past 25 years, we at WeBirch Labs have distilled the most proven, most straight-forward sure fire path to creating your own massively disruptive, world-changing company.

  1. Pull together a super talented team.
  2. Build an awesome product.
  3. File for a much hyped IPO.

There you go, in three easy steps, you too can ascend the heights of tech aristocracy and spout fountains of sage advice at tech conferences worldwide.   I am looking forward to sharing more of our ground breaking research and illuminating insights in future posts on PandoDaily and TechCrunch.

40 plays
Brainstorm,
Firesoul

Firesoul by Brainstorm - Classic power metal has faded in recent years in favor of other metal sub-genres.  However, it has been kept alive and well in Germany thanks to bands like Brainstorm.  I have to admit that I did not know too much about this band compared with other bands like Edguy and Primal Fear and Gamma Ray, but they are one of the stalwarts of the metal scene since the early 90’s.  What really set them apart though is their lead singer Andy Franck, who has one of the best voices in metal today.

Their latest release Firesoul is simply excellent.  We are finally getting a slew of awesome metal albums coming out, but this is the one that has most caught my attention.  While I have a fondness for power metal, the songs here are several notches above anything I have heard recently in the genre and overall it is one of the best albums released so far in 2014.  While any song could do for today, I am going with the title track which best represents what you are going to get here.

130 plays
General Public,
All The Rage

80’S TUESDAY: Tenderness by General Public - There are so many songs that get lost to time.  So as I heard this tune the other day, I knew it was worthy of posting on my 80’s day.  The face of General Public, a UK new wave band, were Dave Wakeling and Ranking Roger of seminal 2 Tone ska band The Beat.  But I had forgotten all of that till last week.

General Public had a string of minor hits for the two albums they recorded in the 80’s.  But it was the song Tenderness that was the big song for them, appearing in a string of John Hughes movies and the movie Clueless.  For me though, it is the happy song, something that I could use as torrential rains fall this morning.  So just put on your headphones, listen to this song, and get yourself in your personal happy place!