Startups – the future F500′s

Looking at the future of F500′s, startup survival rates are not that strong, either. I’d classify the real survivors of this category a rare breed – like the big grey humpback whale. If you see one on the street, be sure you hug him or post a photo on your facebook timeline: me and my new friend, Moby Dick. Stats show that once a startup business is established, the clock starts to tick and by the end of year one, 25% of them is gone already. By the end of year four, 50% disappeared. Comes year ten and 71% is gone. What makes this even more depressing is to realize how many startups survive the initial idea-to-business act, so that they can start their risky year 1. No wonder where the word “venture” comes from in the term “venture capital”.

It’s you who create the statistics

OK, enough from the depressing facts: do I have to remind you that these are only statistics? And who creates these statistics? Yes, we are. You are. We create our own statistics with our decisions, with our deeds. How do you structure your team? How do you hire people? How do you craft your product, service, business model, company culture? How much autonomy, freedom of choice you give to people? These questions and many more will shape your business and set its life expectancy. Whether you’re at a multi-national, a small business or a startup, let you be the CEO, a team leader, an advocate, sales or receptionist – you have an impact and it’s never too late. If you make an impact as a CEO, board member or investor, you’re called an entrepreneur. If you make the impact in a larger company further down in the food chain, you’re called an intrapreneur. Either way, similarly to your own health, the way you do your business contributes to your company’s life expectancy.

Kongō Gumi: a business that survived 1,400 years

The picture below was taken at the beginning of the 20^th century. At which point the company was already 1,300 years old. It’s the first photo of the company though as previous visual records were only paintings since the company has been established in 578. It’s a pity to operate in times with no computers, camera and electricity … but for 1,300 years?

The founder of this construction firm in Japan established the company for building a Buddhist church in 578. Instead of taking orders from the prince, he insisted on establishing his own business. Most probably, he was one of the first known entrepreneurs to the world. Over the centuries, Kongō Gumi participated in the construction of many famous buildings, including the 16th century Osaka Castle. Not losing focus, they specialized in building Buddhist temples until in World War II, the temple building industry stalled for a while. That’s where they needed to change and adapt quickly, so this company started making coffins instead for a while. At this point they demonstrated one of their survival skills: adapt to change. 50 years after WWII, the company fell on hard times in 2006 as a result of the Japanese economic crisis. So, they got absorbed by a larger construction company at which point, they had 100 (!) employees and annual revenue of ¥7.5 billion ($70 million). The last president was Masakazu Kongō, the 40th Kongō to lead the firm. Today, they are still operating as Kongō, but a wholly owned subsidiary of Takamatsu – the company who acquired them.

U Fleku

If you’ve ever been to Prague in the Czech Republic or you’ve read the amazing book Svejk the Brave Soldier, you surely heard of this pub called U Fleku. In case you didn’t, I created a little brief for you:

Established in 1499, this pub today is a 500-year old business and it went over change after change, got acquired, then nationalized in World War II, then privatized. What hasn’t changed is the taste of the beer and the atmosphere.

Lloyd’s from café house to insurance to a legend of good faith

Let’s have a look at Lloyd’s as an example in the modern world. Today, Lloyd’s is the world’s leading insurance business with headquarters in London. London was growing in importance as a global trade center, which led to an increasing demand for ship and cargo insurance. In 1688, Edward Lloyd’s Coffee House became the place to purchase marine insurance. 300 years later, they become the world’s leading insurance specialists in a wide range of areas.

In America, Lloyd’s most famous moment came at the time of the San Francisco earthquake of 1906. After the earthquake, Lloyd’s underwriter Cuthbert Heath said: “Pay all of our policy holders in full irrespective of the terms of their policies”. This message has since passed into insurance legend – although it was an expensive decision ($50 million in 1906, the equivalent of about $1 billion today), they knew what they were doing.

Re-inventing the wheel?

Looking at these amazing companies, what strikes me is that they all did something remarkable but they never came up with a new invention. Most of these oldest businesses do commodity services: hotels, restaurants, breweries, financial services. They remind me to Marcel Proust, who suggested that instead of re-inventing the wheel over and over again, why don’t we simply buy a new pair of glasses to see the world in different colors?

“The only true voyage of discovery is not to go to new places, but to have other eyes” – Marcel Proust

Looking at the biggest inventions, most of them have been around for tens of years if not longer. Take fax machines for example. Giovanni Castelli already did a successful fax transmission in 1860 while fax became commercially available only in the 1970′s. Could Proust’s advice be an important ingredient for success? If it is, then William Gibson is also right when he says:

“The future is here. It’s just not evenly distributed yet” -William Gibson

Who’s to distribute it? Again, us – you, my friend.

Is long life good for me?

This question comes up every time when discussing this topic. You might say that you wouldn’t care how long your company survives as you’d like to exit 3 years from today, anyway. Keep in mind that living a healthy life means feeling well every day. You can make those 3 years more enjoyable and more successful by setting up your business for a long and healthy life now. Looking at the startup stats, making 3 years isn’t easy, either. Even the funkiest parachute business will benefit from having a strong base and setup for potential long-term success.

If you liked the topic, do read the book The Living Company from Arie de Geus and you’re welcome to post your comments and thoughts here.

David Szabo, Intrapreneur at Microsoft, startup-addict and LEGO SERIOUSPLAY facilitator. Follow me on Twitter!

Straight to the point: what does it take to reach 1 million downloads for a mobile app? – I asked Manos. Well, you must know first that I love playing Blackjack. I was looking for a live multi-player Blackjack app and guess … I couldn’t find any in the Android store. It was clearly a (market) gap and I was sure that I wasn’t the only person on earth who missed the game. Once launched the game, downloads started, got featured within the top 10 USA Online Casino games, then thousands of users started flooding in our door. The game was very enjoyable and entertaining and addressed a clear need. As of today, we have over 1 million users.

Then, we’ve built on top of this success and launched more apps: Live Poker, Live Roulette, Hot2Slot (Slot Machine) building the ‘Hub of Fun™‘ mobile social casino, now reaching over hundred thousand users and got a steady revenue, too. Users win or purchase chips and have great fun using our games.

What strikes me guys is that users do buy chips to play games, while there’s no way to turn the chips won into cash. So, you must have created a great “stickiness factor”. Yes – that’s the point David – says Manos. Make every minute of the game entertaining and help people compete and benchmark. People love the benchmarking effect – we love it, too!

How do you get people to come back and play again several times? I know that Blackjack is a fun game, but is this enough? This is hard work 24/7 to continuously entertain our users, give them offers to buy unfair advantages, apply humor and come up with something new every day.

Dimitris looked a bit quiet so far, but now he chimed in. … And we haven’t stopped here. Although we’re not running a casino, we do have the games in online casino quality. So, the next phase in our journey is to package and launch the base games as white label versions licensed to online casinos. Casinos focus on running the casino, we focus on running the game. We already have good traction here, too.

If you’d believe that this is the end of the story, I have to disappoint you. These guys still have energy left to launch an incubation house and help bright startups climb up. They are giving back. If I look at their story, it reminds me to some of the most successful entrepreneurs: Identifying an obvious need, assessing the market and realizing the potential, launching a product quickly and in quality and moving on to the next venture. Giving back.

Abzorba Games is a US-registered company with R&D in Greece, a member of Microsoft BizSpark. The Hub of Fun™ is available on most mobile platforms.

David Szabo, Intrapreneur at Microsoft, startup-addict and LEGO SERIOUSPLAY facilitator. Follow me on Twitter!

Well, my wife – the other founder – has been working a lot with 3D models – says Sorin on the left. She’s been always bugging me to buy stronger computers because she didn’t have the patience to wait for hours or a day for a complex model to render. With the kids having a nap for an hour or two, time gets precious, you know. I wanted to help her and went searching for the big rendering service on the internet but couldn’t find none that does it for this particular 3D format (Blender). So, cursing silently, I opened a cloud subscription and simply ran her 3D renderer command-line tool on a strong VM – then on several VMs … and got enlightened by the idea. By now, we have built a cool and simple web UI around the rendering tool and built algorithms to intelligently break down the rendering work to chunks that can be processed in parallel – says Marius. Simple and genius, isn’t it?

Then comes the typical questions from the startup addict who grew up in the enterprise: so, where do you take off from here? How do you take over the world? How will you build those super-complex parallel processing algorithms that no-one else does and requires an entire R&D team that you obviously can’t afford today? Well, David, you know, we don’t want to re-invent the wheel. All we want is to let people save time rendering and help them save money by not buying unnecessary hardware for occasional rendering jobs. You know, to better utilize those 1-hour slots while kids sleep. Nothing more than that … yet. You know … the minimum viable product theory … The more the capacity the more we can grow.

Of course, we’re also looking to cover other 3D formats, that’s what we’re working on right now – but our key focus is on our current customers to make sure that they are happy. The more time we invest into understanding our current niche, the more we learn about them and the more exciting our story gets. We have regular users rendering all types of stuff – they found us for their own reasons and we’re happy that we can be part of their success.

Render.st is a Microsoft BizSpark startup, check them out at www.render.st

David Szabo, Intrapreneur at Microsoft, startup-addict and LEGO SERIOUSPLAY facilitator. Follow me on Twitter!

Zoli Herczeg, my partner in hunting and crime in Romania drove me to their hiding place. Their office is in a special area in Bucharest, surrounded by tall post-communist block houses. Their modern office building sticks out like a time machine that’s been teleported there by accident. 10 gals and girls standing at the door, smoking – I shook hands friendly with each one of them, smiling and mumbling my name and trying to memorize the ten local names in return. Once finished with the operation, Elvis, our host kindly added that these guys had nothing to do with Mavenhut, they were just standing at the entrance, smoking. Making up to their office, I find myself in an all-glass place, a total of cca 20-25 people working in 3 glass-walled rooms, everywhere. You guys have such a big team already – starting a conversation. No, two of those rooms are a different company, they do outsourced development, we just happen to share the space. They might come handy in times when we’ll need a few more extra developers.

Stepping in Cristi, the other right-side of this doubly right-sided brain team. Kindly smiling, relaxed, we shook hands – I, at this time with the right guy. Elvis looks after technology and I look after business – we’re partners. Everything started in the Startup Bootcamp in Dublin, Ireland, co-located in the U2 studios in Dublin Docklands – an inspiring place. Something must have been radiating from the ground when they had this crazy idea. Same with U2.

Yes, we have more than one hundred thousand users by now – continues Cristi. We put a lot of emphasis on keeping the game living by pushing out updates, little changes every single day (!). Updates are built in parallel, we have a dev for building updates on Mondays, Wednesdays and Fridays and another dev guy who covers the rest of the weekdays. This way, we push out new features every day but have 2 days to properly write code, test and deploy. Risk of failure? We don’t know what you’re talking about. Wow.

Business model? Yes, we’ve thought of it already and we know that it will come just in time – they say confidentially. Looking at facebook and a few other success stories, they are dead right – they still have plenty of time to figure out how they can create a win/win business model with over one hundred thousand and growing active (!) users. We start having a critical mass of users and start to grasp who they are and how we can give them even more fun moments. We even have plenty of paying customers. Tell me guys – I asked – what’s in the core of your business? What’s that one thing that if I’d taken out, Mavenhut would collapse? They answer without thinking much: our agility and ability to do stuff. To do the daily updates, change directions, even the fact that we’ve launched this game within 3 weeks. One more wow. For a moment, Elvis moves and his tattoo flashes out – an arm-sized MavenHut label. Determination.

Guys, what’s the age in average within the team? It depends … with or without Bobby? Without him, it’s probably 23, with him it’s statistically incorrect. Bobby, their CEO is the ex-MD of Yahoo! in Bucharest. Sorry that we couldn’t meet – next time.

Before you go, come and see the team – says Elvis. A cca 50 sqm (est. 500 sqft), rectangle-shaped, long room with a table running through in length, developers sitting on both sides like if they were doing a board meeting all day long. A guy drawing a cartoon character – kindly offering me his pen to ruin his work, another guy standing at the end of the table with a laptop high – like if he was the DJ. The laptop shows real-time statistics of Solitaire Arena. The look&feel of these stats look as professional as a large bank’s IT operations dashboard. Shoemaker’s shoe – ha?? A cupboard bookshelf at the end of the room, lot of matchboxes and little plane models. Looks like mini dream-company cars. And they compete a lot with Solitaire Arena within the team. These guys are living a dream – watch them close, they will grow big. I think, they’re looking for a 2^nd-round investment right now.

Solitaire Arena is a Microsoft BizSpark startup, check them out at www.solitairearena.com

David Szabo, Intrapreneur at Microsoft, startup-addict and LEGO SERIOUSPLAY facilitator. Follow me on Twitter!

So, what is a redundant software like?

Don’t look at me, I don’t know the answer. But I assume that a redundant software is built by two separate teams who are not supposed to speak to each other. They need to make sure that they solve the same problem - but differently. They take the same inputs and produce the same outputs. But do the work in between differently. Last decade was about hardware failures. Now, they are the past. This decade is when software comes to life.

What do you think? Any comments and conversations – welcome!

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David Szabo, SaaS Strategy Advisor, startup-addict, blogger at http://cloudstrategyblog.com and LEGO SERIOUSPLAY facilitator. Follow me on Twitter!

By asking questions, the questionnaire may help you discover opportunities to improve your SaaS business or just give you a peace of mind that everything is in order. I’ve created the questions by involving several SaaS gurus and social media professors and designed it in a way that it can be applied both in the idea stage as well as for established businesses. Here you go, it’s yours!

You can access the service here. Enjoy and let me know if you’ve any questions or feedback!

David Szabo, SaaS Strategy Advisor, startup-addict, blogger at http://cloudstrategyblog.com and LEGO SERIOUSPLAY facilitator. Follow me on Twitter!

The ongoing construction of LEGO models stimulate otherwise inactive parts of the brain which boosts creativity. The result is a great teamwork and reduced meeting times. The team leaves the full day workshop with extra portions of energy (unlike brain-sucking Marathon meetings). The process creates consensus among participants and seamlessly guides the team to work out the details of the strategy in one go, together. Everybody’s perspective is considered – there’s no such thing as a silent or loud LEGO player, everyone constructs. It might still feel crazy to play LEGO in the boardroom. If the promises above are true, would you try it at work?

I’ve recently conducted a workshop with a small group of young entrepreneurs who already got established businesses, a relatively large customer and user base. They came to meet me and ask my advice on their SaaS business strategy to grow and scale. The answers were already in their minds and LEGO helped them surface. This particular exercise consisted of building their ideal customers, themselves and relations, dynamics  between from LEGO. It’s amazing to re-discover from time to time that every little brick and figure has a meaning in a LEGO model and these meanings come from the builder’s unconscious mind as metaphors. Asking open-ended questions about the model they constructed, these young entrepreneurs discovered several opportunities to differentiate their businesses from the competition, further innovate their business model, discover new customer groups and understand where to focus their attention to achieve all these great things.

I’m planning to organise 1-to-many seminars in the next few months with the focus to polish the value proposition, target market and business model of your SaaS business. If you are interested to participate, please use the form below and let me know which country you live in, so that I know where is best to go.

Here’s a feedback from the workshop:

“I joined David in Bucharest for a workshop on which we had little information about. We knew it was about Cloud only. He created for us an amazing experience on how to look at our business. For a couple of hours we played and we had incredible fun, and David observed and asked questions that helped us better understand where we are, where we should be, and what actions could we take. Through games he gave us a different perspective on our Value Proposition and positioning. However, what I am not sure David knows, is he gave us a fun way and an incredible tool to play with, to shape not only our business perspectives but personal ones as well. Thank you! It was one of the best business training moments I experienced lately, and ‘building worlds’ together was surely fun and insightful“

David Szabo, SaaS Strategy Advisor, startup-addict, blogger at http://cloudstrategyblog.com and LEGO SERIOUSPLAY facilitator. Follow me on Twitter!

I know my CEO friend – let’s call him “D” – for about a year. He has a technical background, he’s getting into CEO land by now, but still, he has techie roots. As such, he realised that he needs a good sales manager into his company, a guy who wears ties and can speak black belt business language. As far as I remember, he has already eaten 5-6 sales until he found the best guy who’s with the company for a year now. Let’s call this guy “L”.

Now, my friend D told me his story … “Although L is a great sales, in the past few weeks I’ve been disappointed by his performance. It happened recently that L was visiting a startup (but growing) company who wanted to look at our e-Commerce/CMS product. L met them twice and then he gave up on them. He said that I need to meet them instead. I wasn’t happy about it as getting rid of the sales role was my top priority for the last year. I didn’t understand it either, because L is so great in sales, I saw him in action many times – how on earth he needs me? I met the potential client, spent some time with them and enlightened. After a few conversations, I found that the CEO of this company was in the Early Adopters segment in Moore’s adoption curve. He didn’t care about sales, he wanted the technology, the Cloud and all advantages that come with it. L wasn’t a good fit as he’s used to deal with Early/Late Majority, larger established companies. L spoke about costs, benefits, business case and the like and this startup was annoyed by these. From now on, we know that L is perfect for medium/larger, established companies while me or someone else will have to take care of the Early Adopters who value my techie past and speak the language that they understand”.

I thought to share this with you. Since then, my friend D has split his company into 4 different groups of which surprisingly align well with Moore’s segments. Crossing the Chasm, personality matches, psychology and consciously pulling the right strings for the right client is what it’s about … Comments?

David Szabo, Intrapreneur at Microsoft. Startup-addict, blogger at http://cloudstrategyblog.com and LEGO serious play facilitator. Follow me on Twitter!

Startups are born into the Cloud era and they feel as comfortable with it as my 3-yr old with the touch screen. What’s the psychology behind this other than evolution and the cool behavior of generation X/Y folks?

When I joined the Cloud business, I made an assumption that Moore’s Crossing the Chasm technology adoption principle works for Cloud as well. I think, I was right. Looking at all the companies who I worked with since, I can place any of them on Moore’s technology adoption lifecycle and they exhibit the exact behavior Moore assumed they follow.

This is how the 5 “psychology prototypes” of technology adoption worked out for me in the Cloud business at Microsoft:

Innovators

Enthusiastic geeks who want to be the first to try new technology. Typical geeks, geniuses with no viable business model in mind. Most of the time, they build solutions for similar minded technologists – libraries, plug-ins, APIs, etc. Architecturally, implementation-wise perfect. What they really value is the outsider, business perspective. I apply the 6 questions technique a lot with these folks and really enjoy seeing the results.

Early Adopters

A typical startup profile. They want to use the Cloud for their business advantage, they take risks for rewards, no security questions or blockers whatsoever. They use the Cloud as simply as if they just upgraded their broadband to a faster one. This is the ideal profile for a quick boom. Only in the last 2 months I’ve seen investments of over a million US dollars into 3 of these startups amongst my friends. They are born into the Cloud era and they take advantage of it.

Early Majority

Relatively young (5-10 yrs) ISVs or corporations. Or an Early Adopter management board trapped in the body of a large company. They build business cases and carefully think about existing customers, but sooner or later, they will use the Cloud for their advantage. One typical mistake they do is keep their existing business model once they transitioned into SaaS. They aren’t moving very fast, but their advantage (and sometimes this is also their disadvantage) is that they have a professional experienced staff and won’t do a lot of technical mistakes. Business-wise, they can use some coaching to adapt to the SaaS mindset.

Late Majority

Public sector, large corporations, Conservative ISVs. I meet these companies only once. No, that’s not true, I met one of them twice …

Laggards

I’ve never met them, but I guess, it’s good this way …

Simple, isn’t it?

The equation above may seem simple but I have to admin that I’ve left the most exciting variable to the end: the customer. The stronger in the equation, the customer’s preference dictates which way the solution is built and what way the ISV behaves.

Conflicts of ISV and customer beliefs

Sometimes, conflict happens, sometimes the customer is not aware of the conflict. There are ISVs who are already in the hosting business for years in a way that they host the SaaS version of their product and store their customers’ data. So, the customer is happy with their data stored outside of their company address to some extent. I’ve seen experiments of ISVs not telling their customers that they are switching over to the Cloud from their own data centre. The customer doesn’t even notice the change and everyone is happy. Not a nice way to convince customers, but yet another proof that negative PR is affecting cloud adoption.

Conclusion

Startups who target similar minded customers are very comfortable with the cloud – this is where the biggest booms will happen in the market. No doubt why we at Microsoft take this question very seriously (BizSpark) and Amazon does a constant startup competition, too. Startups are the ideal profile for the cloud. Don’t worry if you are not one of them … with a pinch of “startup mentality”, you can move mounts and are welcome to challenge Moore’s model.

David Szabo, Intrapreneur at Microsoft. Startup-addict, blogger at http://cloudstrategyblog.com and LEGO serious play facilitator. Follow me on Twitter!

Serial entrepreneurship seems to be a lifestyle of going from one venture to another – drive the idea to success and step to the next venture when you’re on the top. It reminds me exactly to what career coaches say we should do with our corporate careers – switch to the next level when you’re on top of you current role. It certainly works … Anyway, back to entrepreneurship …

One recurring theme in Marci’s story was that he was constantly ahead of his time. He was building a web shop in the end of the 90’s. He was focusing a lot of attention to the SEO of his web shop at the beginning of the century. He established a SEO tool company IndexTools at the time when there wasn’t yet a word for SEO. He wasn’t centuries ahead in the future, only 3-4 years, but this was just enough for potential buyers to understand the evolution that’s ongoing, grasp the idea and its importance and buy it. It also looks like that Marci was building products mostly to the early adopters group of Moore’s Crossing the Chasm philosophy.

As you may know, I work with many startups as an incubator and I see several attempts and stories of moving businesses to foreign markets.  I see startups completely re-brand their businesses and spend an awful lot of money and energy to find how differently the foreign country operates, how they have to re-shape their features, UX, marketing and so on. I wanted to hear Marci’s perspective to opening businesses in new markets, so I asked the obvious question: “how was the moving-your-Hungarian-business-to-the-US experience”? Marci’s answer was amazingly simple:

“Create your business in your target country from day one. Gradually expanding from your local country to your neighbors’, then to the region, then to the US is a bsht – or at least for innovative software startups”.

Thanks to Marci & Peter for the experience and lessons.

One note about Peter Zaboji . Although proud and very social, I see Peter as a humble person who likes to put others in the forefront. In other words, he likes to make other people great and this is what’s moving the entrepreneurship initiative in Hungary and in the region. As I told him already: behind every successful man, there’s a woman. Although Peter is certainly not a woman, he’s the housewife of entrepreneurship in Hungary and the region.

David Szabo, Intrapreneur, Firestarter and Rulebreaker at Microsoft. Startup-addict, blogger at http://cloudstrategyblog.com and LEGO serious play facilitator. Follow me on Twitter!