Author Archives: C. DAY

So You Want To Be An Entrepreneur?

Only 10% of working Americans are entrepreneurs. It’s a surprisingly small number considering the amount of money self-help gurus make selling the myth of entrepreneurial elitism.

There is an ideology popular among business gurus that proclaims everyone who doesn’t work for themselves is a wage slave in need of entrepreneurial redemption. Many claim entrepreneurs are the “American Dream”, and unless you are self-made and in charge, you are nothing but a cog in someone else’s vastly more important wheel.

Reality is significantly different than this ideological myth. Self-employment isn’t always an option, it could very well make you miserable, broke and in a worse spot than you were when you were working. Relationships can become strained, your sense of self-worth can be reduced to nothing, and simply trying to pay your bills can be an enormous challenge.

If you ignore the falsehoods and stereotypes perpetuated by our culture and accept the fact that most people who choose this form of employment fail on a regular basis— being an entrepreneur quickly loses its sex appeal. In many cases, keeping your job, and investing your money wisely, provides a far greater chance of achieving financial freedom than risking it all on a hunch.

As children, we learn how to investigate the world around us. We learn simple deductive reasoning, the “five w’s” and the “1 H”. Many adults forget these early lessons and act on impulse or emotion rather than reason.

When it comes to changing your career, whether you are switching jobs or contemplating a radical change such as self-employment — the first question you have to honestly ask yourself is why.

Why do you want to try your hand at entrepreneurship? Are you out of work and desperate? Do you think you have an idea that nobody else has? Do you hate your cubicle at work? Are you worried about getting laid off? Do you feel like you aren’t getting the pay you deserve and think you can make more money on your own?

There is no right or wrong answer — you simply have to be completely honest with yourself. Typically people seek freedom or money. If you’ve been working for any length of time, being honest with yourself may be more difficult than you think. If it is money you seek its important to recognize that you likely will never find it — and if you do — it will likely take a long time.

I started my first business at 18. I was on my own at a young age and had nothing but a half-empty apartment. The jobs I was qualified for at the time were in glorified sweatshops full of miserable people. The reason I became an entrepreneur was survival. My resume didn’t match my skill set because of my circumstances. I couldn’t afford to go to school to become a Doctor or a Lawyer — I needed to survive — which was almost impossible earning minimum wage.

The question of where is an essential one. You can be an entrepreneur anywhere but that doesn’t mean all business ideas will work anywhere. Just like with real estate, many businesses are all about location.

I lived in one of the largest cities in North America in the 90s. The city was littered with “dot com” startups that no longer exist. I tried to get funding from Venture Capital a number of times without success. Eventually, I ended up pitching my idea to an incubator. I had written a business plan to create a mobile computer repair service, which was unheard of at the time. They liked the idea — but they didn’t think it was a good long-term bet, they invited me to join another project because they thought that computers would eventually fix themselves and my idea would be obsolete. As a teenager, I was able to pitch to a board of directors like my survival depended on it (because it did). I never ended up funding the business — but it was a minor speedbump in a city of millions. Thankfully, I turned down the offer to join one of their incubated companies, none of them made it past the dot-com crash let alone into the 21st century— ironically “Geek Squad” did.

The question of when was never an issue for me because I started so young. My apartment was wallpapered with post-it notes full of ideas. As disturbing as this was to my friends — I didn’t own a computer. I was forced to use the library system at a time when the internet was gaining traction and “normal people” were paying monthly for it. I was young, and I had nothing but a few boxes worth of belonging. It would have been a different story if I was mid-30s with a family and bills to pay.

When you work a job, you sometimes feel like a prisoner. The same can be said of being an entrepreneur. No matter what your situation is, you will have partners, customers, and suppliers that are essential to your livelihood. Being self-employed affords you some additional freedoms that other forms don’t, but it certainly does not free you from all obligations — no matter how much money you have.

When you have nothing you have nothing to lose.

When you work a job, you sometimes feel like a prisoner. The same can be said of being an entrepreneur. No matter what your situation is, you will have partners, customers, and suppliers that are essential to your livelihood. Being self-employed affords you some additional freedoms that other forms don’t, but it certainly does not free you from all obligations — no matter how much money you have.

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Combined Design Thinking, Lean Startup and Agile

What is the difference between Design Thinking, Lean Startup and Agile?

I often get asked what the difference is between those terms. “Is lean startup opposite of design thinking? oh no, maybe it is the same?” and “Ah ok.. so you mean agile?” or “I think Agile is a better word for it”. Those are some of the comments I get whenever I talk about one of terms above.

Design Thinking, Lean Startup and Agile can be combined as shown in the picture below.

  • Empathize, Define and Ideate through Design Thinking
  • Turn ideas into Business models following the lean startup
  • Build and deliver the product incrementally and faster through Agile processes.

Design thinking

Design thinking is an iterative process in which we thrive to understand the user’s pain, challenge assumptions, redefine problems, in order to create new strategies and solutions.

Opposed to “Brainstorming”, Design thinking promotes “Painstorming”, in order to fully understand the user’s pain.

The usual Design thinking phases are the following:

  • Empathize with your users
  • Define your users’ needs, their problem, and your insights
  • Ideate by challenging assumptions and creating ideas for innovative solutions
  • Prototype to start creating solutions
  • Test solutions

According to Tim Brown, CEO of IDEO: “Design thinking is a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.”

Lean Startup

“Lean startup is a methodology for developing businesses and products, which aims to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning.” — Wikipedia

Globally, 90% of startups fail (Forbes) and the number one reason is market failure: “They make products no one wants.” (Fortune).

The lean startup methodology was born in Silicon Valley in the 90s, but the use of the word “lean” has its roots to Toyota’s lean production system. Toyota’s lean manufacturing system was used to build things efficiently, yet it doesn’t tell what should be built.

Using Eric Ries words: “The Lean Startup provides a scientific approach to creating and managing startups and get a desired product to customers’ hands faster. The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration. It is a principled approach to new product development.”

Agile

Agile is a way of working, based on an iterative development, incremental delivery and ongoing reassessment of a product.

As mostly used in software development, it is based on a clear idea of the product’s concept and its market.

Contrary to the idea of focusing on a set of features to be developed, agile focuses on the high value features first.

Agile is all about producing tangible, working results after each iteration. According to the 12 principles of the Agile Manifesto, “Working software is the primary measure of progress.” Deliver a rough draft, then revise based on your editor’s suggestions. Never deliver the entire piece all at once!

Why combining?

If 90% of startups fail because they produce products nobody wants, combining those methodology drastically reduce this risk of failing.

As you probably noticed, all the three methodology take the final user into account, through direct feedback. This feedback loop makes sure that no product is created without a purpose to the final user. This is clearly against the old way of planning on paper and then starting building a real product based on a list of pre-decided features.

By Nicolò Mantini in Medium Daily Digest’s Xplor8.

Secrets and Lies in a Silicon Valley Startup

How venture capitalists rushed to judgement and blind ambition can hurt the public.

The story of Theranos is the Silicon Valley equivalent of the Enron scandal replete with bold claims, high valuations, defrauding of investors and terrible corporate governance. Theranos promised to revolutionize healthcare by painlessly performing hundreds of tests on a single drop of blood.

In 2015, Theranos was a unicorn valued at $9 billion. By 2018, the company shut down and Elizabeth faced a ten-year ban from serving as an officer of a public company. Theranos serves as a cautionary tale of what can go wrong with a ‘fake it till you make it’ approach to building a company.

TOP 20 INSIGHTS

  1. At the age of ten, Elizabeth Holmes was determined to become a billionaire entrepreneur, an ambition her parents strongly encouraged. To achieve this, she dreamt of designing technology that changed the lives of people.
  2. Elizabeth dropped out of Stanford to start Theranos. The vision was to build a portable device that would painlessly perform hundreds of tests on a few drops of blood.
  3. Steve Jobs was a huge inspiration for Elizabeth who called Theranos “the iPod of healthcare.” She began to imitate Jobs in her management style and even in wearing black turtlenecks every day to work. “Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.”
  4. Avie Tevanian, a board member, grew suspicious about Theranos. Revenue projections never materialized, documents for deals with pharma giants were not shown and there were consistent product delays. When Avie raised this with the board, Theranos threatened him with lawsuits and forced him to quit.
  5. When the board again received similar complaints, Elizabeth was asked to step down. However, she managed to win the board back, a difficult feat even for seasoned CEO’s. “When you strike at the king, you must kill him.” In this case, the queen survived and the complainant was fired next week.
  6. Toxic Culture: Elizabeth indulged in nepotism by hiring her romantic partner Sunny Balwani as the Executive Vice Chairman, a vaguely defined role with sweeping powers. The Board was not informed about their relationship and the vast scope of Sunny’s role. Elizabeth also hired her brother Christian and his friends, none of whom had any relevant background.
  7. Toxic Culture: Theranos blocked online communication and spied on employee conversations and social media posts. Sunny used a fear and intimidation-based approach harassing employees he disliked. Employees suspected of not being ‘loyal enough’ were fired on some pretense.
  8. Red Flag: Elizabeth managed to convince Pfizer to use Theranos devices in a patient trial. However, the collaboration soon came to an end as the devices had frequent mechanical failures, wireless transmission errors and poor temperature tolerance. There were issues with test results as well.
  9. Turning Point: Theranos landed mega-deals with Walgreens, a massive pharmacy store chain and Safeway, one of America’s largest supermarket chains. Both companies bet big on this collaboration. However, the partnership was marked by Theranos missing deadline after deadline.
  10. Red Flag: Theranos promised its devices could perform 192 different tests while they could barely do a dozen. To meet the Walgreens deadline, Theranos hacked commercially available blood testing devices and used them for testing. The test results had dangerously high error rates.
  11. Turning point: Theranos’s stellar board, the Walgreens and Safeway deals, a potential defense contract and highly inflated revenue projections raised investor expectations. A new fundraising round made Theranos a unicorn, valued at an astonishing $9 billion. Elizabeth, now worth $5 billion, became Silicon Valley royalty.
  12. John Carreyrou, Wall Street Journal journalist and the book’s author, discovered that Theranos’s performed its tests on hacked commercial machines. Doctors shared horror stories of faulty test results creating health scares and needless suffering for many patients. “The way Theranos is operating is like trying to build a bus while you’re driving the bus. Someone is going to get killed.”
  13. Theranos tried to scuttle John’s investigation by sending legal notices and threatening emails to his sources and Wall Street Journal. Elizabeth convinced Rupert Murdoch, the owner of Wall Street Journal, to invest $125 million in Theranos. Using this, she tried to get him to kill John’s story, but Murdoch refused.
  14. John wanted to publish quickly. But the paper’s editor advised patience. He likened investigative journalism to la mattanza, a Sicilian ritual where fishermen with spears would stand in the water for hours. When the fish grew comfortable and carelessly swam close, they would swiftly go for the kill.
  15. Turning Point: The Wall Street Journal carried John’s articles exposing how Theranos ran tests on hacked devices. Subsequent pieces revealed that Walgreens and Safeway had terminated their partnership with Theranos. Throughout all this, Elizabeth played the wronged visionary, claiming false allegations were the price she had to pay for being a pioneer.
  16. An investigation by Centers for Medicare & Medicaid Services (CMS) confirmed that Theranos used hacked devices and test results were highly unreliable. Theranos was forced to void over a million test results paying $4.65 million in reimbursements. What is unimaginable, however, is the damage that could have been caused had Theranos rolled out nationwide.
  17. Investors sued Theranos, Elizabeth and Sunny for deceit. Walgreens filed a lawsuit for violation of basic quality standards and legal requirements. The Securities Exchange Commission charged Theranos with fraud and barred Elizabeth from holding office in public companies for ten years. She was forced to give up voting control and most of her shares in Theranos.
  18. Red Flag: “Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry.” However, in healthcare the costs were far higher. Millions of lives were at risk as treatment decisions are made based on lab results.
  19. Culture Alert: Elizabeth knew exactly what she was doing and systematically manipulated people. Her ambition would not admit setbacks. She made disastrous decisions that cost Theranos, the investors and the general public dearly.
  20. The story of Theranos is a cautionary tale. Watch out for similar warning signs in your organization and the companies you work with. Your career or business might be at stake.

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What Traits Entrepreneurs Need to Succeed

 

Launching a startup and building it is fraught with unforeseen risks. It calls for passion and commitment that extend beyond business goals, according to participants in a panel discussion at the Wharton India Economic Forumheld recently in Philadelphia. Four startup founders spoke about how they began their entrepreneurial journeys, found the right partners, went about raising capital and scaled their businesses. They shared stories of struggles to keep their ventures afloat when failure seemed imminent; battles against gender bias; and threats to work-life balance.

Cisco chairman emeritus John Chambers noted in a recent Knowledge@Wharton interview that more than 70% of all startups fail. Sometimes, when death seems near, survival might well be within reach if the startup team is enthusiastically involved. That is a lesson that a near-death experience at his startup taught Gautam Tambay, co-founder and CEO of Springboard, a three-year-old firm that provides online education courses in “new economy” skills such as data analytics and AI/machine learning. A couple of years after its founding, Springboard faced a crisis. Tambay and his team realized that though they had a good product and decent user reviews, usage was dropping, revenues were flat or declining, and they had only enough money to survive three months. They determined that their distribution model was flawed, and the only way out of the crisis was to raise more capital. If they failed to do so, Springboard would have to close.

That was when the 20-person team — which was “young and hungry” — took Tambay and his co-founder, Parul Gupta, out to lunch. They said, “We’ve seen the numbers. They are not good, and you must be stressed. Why aren’t you involving us?” Tambay said he was afraid that sharing the firm’s troubles might have led the team to quit. The team members reassured the founders that “they wanted to be part of the story,” which is why they chose to work for a startup like Springboard and not for a big company. “That was one of the biggest lessons, [although] it was counter-intuitive to me at the time,” Tambay said. A more involved team then worked together to revive the firm’s fortunes, he added. He changed his approach from one of being “the umbrella to protect everybody from bad news” to one where “you let the bad news flow as soon as possible, so you get more people working on the problem.” With offices in San Francisco and Bangalore, Springboard has grown since that frightening experience. It has now trained more than 200,000 students in 77 countries.

Deciding to take the plunge into entrepreneurship and giving up the security of a regular paycheck is the first big challenge startup founders face. Before she began her entrepreneurial journey, Krishnan had worked in business and product development roles at large companies including Microsoft and Comcast, as a venture capital investor, and as an executive at venture-backed startups. “I had seen it being close to the founder, but not being the founder,” she said. For Krishnan, the prime driver was her passion to make an impact in the education space by using technology “to make learning more fun and engaging.” According to her, startup founders must ask themselves if they would pursue their venture even if they knew that they wouldn’t make “significant amounts of money. If that drives you, you will fight all the fights along the way to get to the end point,” she said.

Singhal’s entrepreneurial journey began in 1999 when he was a student at the Indian Institute of Technology in Kanpur where he won a business plan competition. He pursued his idea for seven years with little success before launching InMobi. “There’s no entrepreneurial gene in my family remotely,” he said, citing his middle-class upbringing; his father was a bank executive and his mother a homemaker.

“I had zero risk. The only risk was – what would my parents think about it? But that was manageable.” The security of a job could be compelling, he noted. “For all of us who think entrepreneurs are these geeky, rich people, the risk-adjusted probability return of a working professional is more than that of an entrepreneur.”

When Tambay had to choose between a career as a software engineer or becoming an entrepreneur, he followed a piece of advice someone had given him: “Find a person who is 10 or 15 years ahead of you or older than you and whose life you want – and then do what they did,” he said. That exercise didn’t take long: his models happened to be entrepreneurs. “I jumped right into it. I didn’t overthink it. If you want to be an entrepreneur, don’t overthink it.”

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The Best (Entrepreneurship) Books of 2018

This incredibly thought-provoking book describes the negative impact that social media and overparenting are having on today’s youth. It made me reflect on my own actions, as both a CEO and a parent, and what ways I’ve contributed to today’s “safetyism” culture. Its core message has stayed with me—and has led me to develop new ways to drive innovation and smart risk-taking at the office, while also helping me to encourage independence and resilience with my children at home.

Technology has already infiltrated every human interaction, but 2018 may be remembered as the year we truly started to grapple with the consequences. So perhaps it’s no surprise that when Bloomberg asked dozens of business leaders to name the best book they read this year, The Coddling of the American Mind, by Greg Lukianoff and Jonathan Haidt, received the most votes.

Also garnering several votes was John Carreyrou’s Bad Blood, the deep dive into the rise and fall of blood testing startup Theranos. PayPal’s Dan Schulman and Andreessen Horowitz’s Katie Haun both said this was their favorite book of 2018. Haun, who used to work as a Justice Department prosecutor (though not directly on Theranos), said it was fascinating to hear the other side of the story.

Practically overnight, Theranos went from being a $9 billion unicorn to losing it all. It’s a cautionary tale on what can happen when a captivating narrative distracts from business fundamentals—and the perils of squelching dissent at all costs. Carreyrou’s work also underscores the importance of investigative journalism, without which this story may well have never been told.Practically overnight, Theranos went from being a $9 billion unicorn to losing it all. It’s a cautionary tale on what can happen when a captivating narrative distracts from business fundamentals—and the perils of squelching dissent at all costs. Carreyrou’s work also underscores the importance of investigative journalism, without which this story may well have never been told.

Well-known technology executive and angel investor Elad Gil has worked with high growth tech companies like Airbnb, Twitter, Google, Instacart, Coinbase, Stripe, and Square as they’ve grown from small companies into global brands. Across all of these break-out companies, a set of common patterns has evolved into a repeatable playbook that Gil has codified in  Well-known technology executive and angel investor Elad Gil has worked with high growth tech companies like Airbnb, Twitter, Google, Instacart, Coinbase, Stripe, and Square as they’ve grown from small companies into global brands. Across all of these break-out companies, a set of common patterns has evolved into a repeatable playbook that Gil has codified in High Growth Handbook.

Inspired: How to Create Tech Products Customers Loveis a look at how successful technology companies such as Google, Tesla, and Netflix design, develop, and deploy attention-grabbing products. Discussions in this book focus on structuring staff and discovering/delivering technology products your customers will love. The client-centered approach mirrors what we do at Schwab; the emphasis on how successful teams work when the client is at the center echoes what we are undertaking within Schwab’s Digital Services team.

How do today’s most successful tech companies—Amazon, Google, Facebook, Netflix, Tesla—design, develop, and deploy the products that have earned the love of literally billions of people around the world? Perhaps surprisingly, they do it very differently than the vast majority of tech companies. In INSPIRED, technology product management thought leader Marty Cagan provides readers with a master class in how to structure and staff a vibrant and successful product organization, and how to discover and deliver technology products that your customers will love—and that will work for your business.

With sections on assembling the right people and skillsets, discovering the right product, embracing an effective yet lightweight process, and creating a strong product culture, readers can take the information they learn and immediately leverage it within their own organizations—dramatically improving their own product efforts.

Whether you’re an early stage startup working to get to product/market fit, or a growth-stage company working to scale your product organization, or a large, long-established company trying to regain your ability to consistently deliver new value for your customers, INSPIRED will take you and your product organization to a new level of customer engagement, consistent innovation, and business success.

Filled with the author’s own personal stories—and profiles of some of today’s most-successful product managers and technology-powered product companies, including Adobe, Apple, BBC, Google, Microsoft, and Netflix—INSPIRED will show you how to turn up the dial of your own product efforts, creating technology products your customers love.

Entrepreneurship may seem risky, but many young people should consider taking that path 

Tom Simpson

Young adults are generally advised by their parents and teachers to pursue traditional career paths in various professions or trades. Schools provide the essential skills in reading, writing and math, while teachers and parents provide guidance with regard to job opportunities. The intent is to obtain the necessary education to pursue a specific field, get hired and attain success.

This template works well for many and is ideal for those who have a reasonably clear idea of what they want to do and are passionate about it. It does not work well, however, for those who are unsure about their career aspirations, don’t want to settle on one path or tend to think out-of-the box.

Josh Neblett, my co-founder at etailz, was a student of mine at Gonzaga in a class titled “Creating New Ventures.” The class exposed him, for the first time, to entrepreneurship and the key elements of starting and growing a company. Up until then, he was planning on joining his father after graduation as a financial consultant. He was so taken by the allure of being an entrepreneur that he instead leapt at the chance to take an idea I had presented to class and form a company. He’s never looked back.

I’ve often wondered what Josh’s career would have been like had he not taken my class. I also feel regret for other would-be entrepreneurs that were never exposed to the world of startups and did not realize that taking an idea, starting a company, forming a team and growing a business was well within their reach.

Most universities and colleges now offer programs in entrepreneurship. Yet I think college is too late. First, it excludes the young people who chose not to pursue education after high school. Secondly, the prospect of grooming innovators during their formative middle school and high school years is missed.

I regularly coach my students to start a company, or join a startup — if they are unclear about what they want to do when the “grow up.” My advice is generally not embraced by parents. Startups are viewed as risky, with little to no chance of meaningful success. Josh’s parents, for example, only endorsed his decision to start etailz if he agreed to simultaneously purse his MBA.

I believe starting or joining a new company is precisely what those who are not pursuing a standard career trajectory should do after college (or high school). My rationale includes:

BROAD EXPOSURE. Because employees of successful startups are required to be a “jack of all trades,” new ventures provide exposure to all functional areas — marketing, sales, development, operations, accounting, etc.

IMMEDIATE EXPERIENCE. Employees of early stage companies are afforded more responsibility and far greater authority to make decisions than counterparts in more mature businesses.

RAPID ASCENSION. As an early employee of a new venture, the potential for multiple promotions as the company grows is significant.

JOB SATISFACTION. Working in a startup can be very fulfilling as the fruits of one’s labor are quickly measurable. This is particularly true for those who are self-motivated, can succeed despite vague job descriptions, are able to juggle multiple tasks and are team players.

BUILD EQUITY. Early employees of startups have the opportunity to generate meaningful capital if the businesses is sold or goes public.

MINIMAL DOWNSIDE. Individuals fresh out of high school or college typically don’t have families to support and mortgages to pay — and if the venture is a failure they have plenty of time to pursue something new. And there is no stigma associated with entrepreneurial failure.

Longer term, entrepreneurs are afforded more flexible work schedules in terms of work hours and vacation time. In addition, they are only beholden to themselves — not to a specific industry, employer or company. This sense of freedom is the ultimate luxury.

Accordingly, I advocate for dedicated high school curriculums on the topic of entrepreneurship. The first objective is to introduce the notion of starting and running a company vs. going to work for someone else — and the lifestyle pros and cons of each. This alone, I suspect, would inspire many young people to consider becoming an entrepreneur and adds credibility to this career alternative.

The second objective is to teach the specific skills required to vet a new product or service, evaluate a market, establish profitable pricing, hiring and managing teams, raising capital, establishing budgets and monitoring performance.

Keep in mind entrepreneurial dreams come in many different flavors. Some aspire to form the next FAANG company, others desire to establish a clothing brand, socially responsible not-for-profit, a juice bar, etc. Neither objective is better than the other. They are equally fulfilling and valuable to the economy.

A curriculum along these lines in high schools would produce positive, long-term economic benefits. More innovative companies will be formed and entrepreneurs will be better prepared. ♦

Courtesy of America’s Best Read Urban Weekly, The Inlander by Tom Simpson

American Entreps Who Flocked to China Heading Home, Disillusioned

 

 

Steve Mushero, an American who founded ChinaNetCloud, in Shanghai this week.

SHANGHAI—Fifteen years ago in California, a tall technology geek named Steve Mushero started writing a book that predicted the American dream might soon “be found only in China.” Before long, Mr. Mushero moved himself to Shanghai and launched a firm thatAmazon.com Inc. and Alibaba Group Holding Ltd. certified as a partner to serve the world’s biggest internet market.

These days, the tech pioneer has hit a wall. He’s heading back to Silicon Valley where he sees deeper demand for his know-how in cloud computing. “The future’s not here,” said the 52-year-old.

For years, American entrepreneurs saw a place in which they would start tech businesses, build restaurant chains and manage factories, making potentially vast sums in an exciting, newly dynamic economy. Many mastered Mandarin, hired and trained thousands in China, bought houses, met their spouses and raised bilingual children.

Now disillusion has set in, fed by soaring costs, creeping taxation, tightening political control and capricious regulation that makes it ever tougher to maneuver the market and fend off new domestic competitors. All these signal to expat business owners their best days were in the past.

The Trump administration is making a hard-nosed challenge to China using trade tariffs, investment controls and prosecution of technology thieves, and many in American business are cheering, if silently, having soured on the market after years of trying.

At a curry luncheon hosted a few times a year by Steven Bourne, a law professor and 13-year resident of Shanghai from Massachusetts, guests these days chew over shrimp samosas and exit plans. On a recent Friday, a Swedish maker of beauty products said he would move his family to Hong Kong, where regulations are clearer and taxes are lower. An American art dealer who suffered when his rich clients got pinched by currency controls was headed to California.

Another, Jack Tung, a 47-year-old who grew up near Philadelphia and had the costumes made for Hollywood movies like “The Painted Veil” and “The Great Wall,” said absorbing a sixfold rise in tailoring rates since 2003 changed China into a high-cost, low-profit, stressful hardship. He lost the feeling “it’s all happening” in Shanghai and will try Thailand.

Expats always ebb and flow, said Mr. Bourne, but for entrepreneurs “it’s harder for them to live here now.”

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How the Geography of Startups and Innovation Is Changing

 

 

 

 

 

 

 

We’re used to thinking of high-tech innovation and startups as generated and clustered predominantly in fertile U.S. ecosystems, such as Silicon Valley, Seattle, and New York. But as with so many aspects of American economic ingenuity, high-tech startups have now truly gone global. The past decade or so has seen the dramatic growth of startup ecosystems around the world, from Shanghai and Beijing, to Mumbai and Bangalore, to London, Berlin, Stockholm, Toronto and Tel Aviv. A number of U.S. cities continue to dominate the global landscape, including the San Francisco Bay Area, New York, Boston, and Los Angeles, but the rest of the world is gaining ground rapidly.

That was the main takeaway from our recent report, Rise of the Global Startup City, which documents the global state of startups and venture capital. When we analyzed more than 100,000 venture deals across 300-plus global metro areas spanning 60 countries and covering the years 2005 to 2017, we discovered four transformative shifts in startups and venture capital: a Great Expansion (a large increase in the volume of venture deals and capital invested), Globalization (growth in startups and venture capital across the world, especially outside the U.S.), Urbanization (the concentration of startups and venture capital investment in cities — predominantly large, globally connected ones), and a Winner-Take-All Pattern (with the leading cities pulling away from the rest).

These major transformations pose significant implications for entrepreneurs, venture capitalists, workers, and managers, as well as policymakers for nations and cities across the globe. 

The Great Expansion

The first shift is the Great Expansion, as the past decade has witnessed a massive increase in venture capital deployed globally.

The annual number of venture capital deals expanded from 8,500 in 2010 to 14,800 in 2017, for an increase of 73% in just seven years. The amount of capital invested in those deals surged from $52 billion in 2010 to $171 billion in 2017 — a gain of 231%. These figures represent historical records aside from the peak of the dotcom boom in 2000 (and may even exceed it). By all accounts, 2018 will be even bigger.

Globalization

The second shift is the accelerating Globalization of venture deals. For decades, the United States held a near monopoly on venture capital, where as late as the mid-1990s, the U.S. captured more than 95% of all venture capital investments globally.

That share has declined since then — gradually for the first two decades (falling to about three-quarters of the global total by 2012), and rapidly in the last five years (dropping to a little more than half by 2017).

A separate study by one of us and a colleague that looked at the factors associated with venture capital investment across U.S. metros found population size and density to be key. The only other factor that was slightly more important was high-tech industry concentration, which is what entrepreneurs and venture capitalists are aiming to create over the long run.

Winner-Take-All Geography

Startups and venture capital increasingly take on a winner-take-all patterngeographically. Venture capital investments are highly concentrated geographically. Just the top five cities account for nearly half of the global total, and the top 25 for more than three quarters of global venture capital investment. And, previous research one of us has done for the United States and globally, shows that even within cities, venture capital activity tends to be highly concentrated among just a few postal codes.

 

The geographic concentration of venture capital has also increased over the last decade. This is particularly the case at the very top, where the top 10 cities account for 61% of venture activity worldwide in the latest three-year period, but just 56% a decade ago. Given the large amount of underlying activity going on each year, even small percentage point changes represent meaningful shifts in concentration.

Forces Behind the Shifts

We can point to three major factors driving these trends, though there are others. The first is technological, as the confluence of high-speed internet, mobile devices, and cloud computing has made it possible to start and scale digitally-enabled businesses at a fraction of the cost. As these technologies have fallen in cost, they are within reach in more markets, meaning that it’s easier to create and grow these high-growth, high-tech businesses in more cities.

The second factor is economic. The world has just gone through the largest global reduction in poverty and concomitant expansion of the global middle class in history, and multi-national corporate giants are emanating from more countries, particularly in emerging markets. This has increased demand for many digital goods and services in more places, giving technologically-enabled entrepreneurs in more places a robust market to sell into.

The third factor is political. Many nations around the world are doing more than ever to compete on a global stage by improving their education systems and universities, investing more in research and development, and bending over backwards to welcome high-skilled foreigners and company founders. The United States, on the other hand, is sliding backwards on all of these fronts — and in our view, has become complacent with its long-held dominance as a monopoly for high-tech entrepreneurship.

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An exclusive look inside Google’s in-house incubator Area 120.

 

Google’s “20% time”–the long-standing perk that invites employees to carve off a fifth of their working hours to devote to personal projects that might have value to the company–is among its most iconic traditions. It’s given birth to some highly successful products, from Google News to the Cardboard VR headset. But Google’s demanding day jobs, it turns out, often don’t shrink to accommodate ambitious side hustles. There’s a sardonic joke inside the company: 20% time is really 120% time.

Twenty-percent time may be more ethos than inviolate corporate benefit. But as Google and its parent, Alphabet, have swelled to 89,000 employees, the company’s commitment to bottom-up innovation remains a foundational value. Which led Google to ask itself a question: What if Googlers with big dreams could devote their full attention to tackling them, with enough structure and resources to maximize the odds of success?

The answer it came up with is Area 120, a two-year-old in-house incubator whose very name slyly alludes to 20% time’s limitations. “We built a place and a process to be able to have those folks come to us and then select what we thought were the most promising teams, the most promising ideas, the most promising markets,” explains managing director Alex Gawley, who has spent a decade at Google and left his role as product manager for Google Apps (since renamed G Suite) to spearhead this new effort. Employees “can actually leave their jobs and come to us to spend 100% of their time pursuing something that they are particularly passionate about,” he says.

“There have been many, many kinds of corporate incubators over the years,” Gawley acknowledges. “We wanted to do something with a very specific Google approach to it.” Area 120’s open call to Googlers for ideas aims to democratize its startup-creation system and inject it with existing know-how from all over Google–a far cry from incubators, which typically get their founders externally and then intentionally wall them off from the rest of the company.

Even within Alphabet, there are multiple venues for exploring new ideas–the most high-profile of which may be X, the moonshot factory, formerly known as Google X, responsible for epoch-shifting gambits such as autonomous driving. Then there’s Google’s own Advanced Technology and Products Group (ATAP), which has engineered some out-there inventions, including the tech for a Levi’s denim jacket with embedded gesture control.

Area 120, by contrast, focuses on projects which, though ambitious, feel classically Google-esque. “The types of ideas that we’re interested in, fundamentally, are the types of ideas that are exciting to pursue inside Google,” says Gawley. “And the types of people that we’re looking for are people who are excited about pursuing those ideas inside Google.”

So far, Google employees have pitched more than a thousand projects to Gawley and his team of around 15 people, who have green-lighted around 50 of them. Staffers accepted into the program permanently depart their old jobs and work out of one of Area 120’s three office locations–San Francisco, Palo Alto, and New York City–and receive enough financial support to begin turning their brainchildren into real businesses, including the ability to staff up with recruits from within Google or outside the company. They run their own shows on a day-to-day basis, with consultation from Area 120 leadership, fellow founders, and relevant experts throughout Google. (Google doesn’t disclose how Area 120 founders are compensated.)

These enterprises aren’t about open-ended research. Instead, Area 120 is looking for concepts with the potential to pass what Google cofounder Larry Page called the toothbrush test: things that become necessities, not occasional niceties. That’s how landmark products such as Google Search, Gmail, and Google Maps grew to billion-user scale. “You want to build products that solve problems that people encounter daily,” says Gawley. Over time, the goal is to launch businesses capable of reaching Google scale–and to spin them out into the most appropriate groups within Google as they gain traction.

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Entrepreneurship (Capitalism) Saves Vietnam.

Saigon coffee shop meeting place for young Vietnamese out to make money because they can.

This Vietnam veteran returned to Vietnam on a cruise these last two weeks, and what a revelation it was.  Those places I visited regularly in Saigon (aka Ho Chi Minh City) are unrecognizable or gone.  They’ve been replaced by high rise buildings.  And the bicycles crowding the downtown streets have been substituted by 1000cc Hondo Dream motorbikes.  Affluent families have as many as three. 

The old Intercontinental Hotel is far left dwarfed by new development.

 

 

 

 

The Saigon River winds through a different city.

 

Communism, capitalism, and entrepreneurship…Vietnam followed China. When the cold war ended, and the Soviet Union broke-up, Vietnam was starving and 15 years of pure collective planning had failed. By opening the people to enterprise and allowing small business incentive, the government gave the gift of self-actualization and self determination.

Capitalism from the ground up within a iron structure works. Who knew? The qualities of entrepreneurship, self-empowerment, initiative, creative expression, and opportunity enabled a failed country to flourish.  The place I left in 1971 has transformed itself into many motivated small business entrepreneurs proving the human spirit seeks expression, freedom, and profits.

Each Vietnamese family maneuvers their motorbike around Hanoi and Saigon like swans in a water orchestra. How each avoids the other is a miracle. It’s the ability to make as much money as they can that keeps the average Vietnamese happy. The government on the other hand lurches forward by taking fees and forming joint-ventures with the big guys.

This Vietnam veteran anticipated a visit to Hoa Lo prison (the so-called Hanoi Hilton), but alas 2/3 of it has been razed and replaced by a high-rise building built by Singapore investors. The photos above were taken from the 50th floor of the Texaco Saigon Tower.

From June 2010 USA Today article;

“The country has changed gear. Success like this is both extraordinary and worrying,” says Hung Pham, a senior consultant with a leading international auditor. He is worried the government may not be able “to tame the wild stallion” Vietnam has become. “How long will it manage to reconcile the communist system with a capitalist economy?” he asks anxiously.”

From April 2015 Guardian article:

“A month spent travelling there at the beginning of this year – talking to farmers, intellectuals, academic specialists and veteran fighters from both sides of the line – revealed numerous falsehoods and compromises that have been forced on the Vietnamese people by the powerful in pursuit of profit. The US has succeeded in promoting a false account of the cause and conduct of its war. In spite of losing the military conflict, the Americans and their allies have returned with the even more powerful weapons of finance, forcing the Vietnamese down a road they did not choose. Now, it is their leaders who are telling the biggest lie of all.

It is not clear how any economic model could have survived this hostile encirclement. Inevitably, Vietnam’s socialist project began to collapse. It adopted a crude Soviet policy that forced peasant farmers to hand over their crops in exchange for ration cards. With no incentive to produce, output crashed, inflation climbed back towards wartime levels, and the country once again had to import rice. In the early 1980s, the leadership was forced to allow the peasants to start selling surplus produce, and so capitalism began its return. By the late 1980s, the party was officially adopting the idea of “a market economy with socialist orientation”.

But from 2000, the rate of change accelerated and the political balance shifted. Reflecting persistent pressure from international donors and foreign investors, Vietnam now approved the sale of its state-owned companies. It also struck a trade deal with the US, and finally hit a peak in 2006 when it was given membership of the World Trade Organization, which meant it could reap yet more foreign investment and aid. Three decades after the communists emerged as victors in the war, it was now a fully integrated member of the globalized capitalist economy. The west had won after all. Transparency International last year reported that Vietnam is perceived to be one of the most corrupt  countries in the world, doing worse than 118 others and scoring only 31 out of a possible 100 good points on its index. Nobody claims that the corruption is new. There is a well-established tradition of public officials in Vietnam selling their influence and favouring their families. But the allegation is that it has hit new levels under the current leadership. People say that the problem was boosted specifically by the privatisation of Vietnam’s huge state-owned companies and the opportunities that provided some politicians and officials to appoint themselves and their families as executives. The British academic Martin Gainsborough, who spent years in Vietnam doing fieldwork for his research on development in south-east Asia, wrote: “Rather than being inspired by reformist ideals, officials have been motivated by much more venal desires … What we often refer to as ‘reform’ is as much about attempts by rival political-business interests to gain control over financial and other resources.”

The worst of this inequality is in the rural areas. Millions of farmers have been driven off their land to make way for factories or roads. In the early 90s, nearly all rural households (91.8%) owned land. By 2010, nearly a quarter of them (22.5%) were landless. A relentless tide of poor peasants has poured into the cities, where they have been joined by hundreds of thousands of workers who have been made redundant as the private owners of the old state-owned companies set about cutting costs. This wave of men and women has swirled into the “informal sector” – hidden away in sweatshops in private houses or sitting trading on the pavements – and into the sprawling network of new industrial parks and export‑processing zones.

Meanwhile, healthcare and schooling are no longer free. The World Bank report noted that “incomes are beginning to matter more for determining access to basic services”, and that the government was spending considerably more on hospitals for the better off than it was on communal health centres for the poor.

Vietnam is by no means a basket case. Its recovery from war is close to miraculous, particularly in cutting back poverty while developed nations such as the UK were increasing it. But the reality now is that it has ended up with the worst of two systems: the authoritarian socialist state and the unfettered ideology of neoliberalism; the two combining to strip Vietnam’s people of their money and their rights while a tiny elite fills its pockets and hides behind the rhetoric of the revolution. That, finally, is the biggest lie of all. Victorious in war but defeated in peace, the claim by Vietnam’s leaders to be socialist looks like empty propaganda. In the words of one former guerrilla who risked his life for this: “They are red capitalists (entrepreneurs).”