Monthly Archives: May 2014

Not focusing on revenue – the F(l)ounders dilemma

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Being in Silicon Valley again after a few years away reminded me of the danger of taking business models from the US and transferring them to the UK.

Most US VC’s want to invest in things that are going to be big – and put money to work that supports this (their funds are usually quite large). They do this by betting early on success and following every round of investment of successful companies. It’s a great strategy but one that doesn’t particularly translate well to the UK (and Scotland especially)

The reason why it works is that there is a large wall of money that just isn’t available in the UK unless you are a absolute success (when you usually don’t need the money!)

But one of the cardinal sins I see is copying the “let’s grow users” and worry about monetisation later strategies.

Again this works very well in the US – only if you can prove that having large user bases can be monetised later (think Google, Facebook, Twitter). In general the market lead you are going to generate is worth sacrificing the short term reliance on revenue, but they are just deferring the day they are going to focus on revenue – and the growth better be HUGE!

The worse trap to get caught in is not focusing on revenue and not growing users – which I have seen quite a lot. You can’t be stuck in this path.

Also raising money isn’t always the sign of a successful company – in fact there are hundreds of companies that have raised large amounts of capital and then failed. Reading The Hard Things About Hard Things isn’t a bad introduction to this strategy

If you are based in the unique ecosystem of Silicon Valley then good for you – thinking about revenue later is a luxury of your location and access to capital. For the rest of us, let’s work out if anyone wants our product and the best way to do this is to charge for it!

Tesla Factory visit

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I was lucky enough to have a spare morning in San Francisco this week.

Since I am eagerly awaiting my Tesla S P85+ delivery in July, I arranged a little trip to the Fremont Tesla factory.

They offer a one hour tour of the facility, that gives you first hand experience of the scale of production at Tesla.

You are not allowed to take any photographs, video or in touch anything in the facility (I think more for the WIlly Wonka effect than trade secrets), but just in case the PR machine at Tesla is watching I have NOT taken any pictures inside the facility.

I do however have a few external shots from the car park.

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The first thing that strikes you from the freeway is the sheer scale of the operation. Although they only plan to produce 35,000 cars this year for worldwide demand, the site is vast. I have spend the last 24 hours looking out for Model S in the wild in Silicon Valley but have seen virtually none, once on the Tesla site there are tons! Including a bright orange model from the bods down the paintshop at Tesla.

It is pristine beyond clean. The inside of the factory gleams and the staff exude the same “I have made it” feeling that I experienced at Google in 2002. The tour was quite short and staged, giving you a view of the facilities of Tesla but not any real feeling of the culture or production techniques. Something that I would have liked, but I do understand there is a large audience and the schedule is quite tight.

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I haven’t been to any other car production facility, but certainly in a traditional silicon valley way, Tesla stands out for the uniformity of staff style and the general enthusiasm for all involved in all things Tesla.

The gleaming Aluminium pieces really do glisten as the automated assembly process presses the items together to form an amazing engineering masterpiece.

Having seem the car in the ‘buff’ I really would love to strip the paint away and sport the natural aluminium undercoat that looks so ‘American airlines’ but it would stick out and blend in too much for most people!!

If you are in the vicinity and have ordered a car, it’s really worth spending an hour of your time experiencing one of the most incredible tours you can imagine.

The hard thing about hard things

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I have just finished Ben Horowitz recent book The Hard Thin About Hard Things. It is really an excellent no management speak book about the rise and fall, and rise again of Ben’s startup career.

I really like the way it really demonstrates that there are sometimes decisions that you are forced into. No startup plans to make some decisions (like going public!) but specifically for Ben, he has a stark choice – close the company down or go public.

There are so many lessons to learn in this book and any CEO or manager should read it. I really like the fact that it talks about some of the things I have seen again and again, here are some of my favourites:

  1. He won’t make it as CEO

There is no course for becoming a CEO, you have to be given the time and space to learn how to become one. There is a distinct difference of being a great manager and being a great CEO. A CEO has to create the strategy out of thin air, while constantly adjusting it to avoid failing. A manager has to execute the strategy – usually set for many years and tested thoroughly.

So you need to 100% support your startup CEO, point out the errors, guide on experience, but don’t do their job – or think anyone else could do it better.

  1. We need some grey hair

This one is sort of true, experience is a great asset, but isn’t enough on its own. You need a balance of experience, risk taking and quick decision making, so don’t be scared to change the strategy if it isn’t working. Surround yourself with people that you trust and understand their strengths and weaknesses.

  1. It’s always going to be hard

It never get’s easy, if it does you are not pushing the company forward. You sometimes think it will get easier just to be kicked somewhere that it hurts. Great CEO’s and founders don’t quit when the going gets tough. I personally quit when I was a CEO of a public company after years and years of hard work. It is probably one of my biggest regrets and I don’t plan to make it again!

Start with the customer and work backwards…

This is not my line, by the Jeff Bezos, founder of Amazon.

It’s a great and simple concept. Think about what the customer wants and make sure that they get it.

If you grew up in the Hospitality business like me, the customer is always right (no matter what people say) and feedback is essential to working out what they want.

Of course, you need to distill the information that you get to make sure you don’t go off in the wrong direction, but that’s what you are paid for.

Amazon hasn’t just revolutionised books, Amazon Payments, Amazon Prime, Amazon Web Services and many more technologies have come out of this retailer (Market Cap $141B).

I would highly recommend you read the Amazon shareholder letters, they are a source of many gems for e-commerce and beyond.