It was tough not to add the Geneva invasion by the Space Invaders after the one in Lausanne (After Banksy in NYC, Space Invader in Lausanne). But this one is far from perfect, many images are missing and I did not take the time to go on site.
Still, you can download my pdf compilation of what I found online as well as a Google map of the places.
Afficher Space Invader Geneva sur une carte plus grande
Following my recent post about Wasserman’s book, The Founder’s Dilemmas, let me react about recent (and less recent) events related to Swiss start-ups and founders. Do we have here the same dilemmas Americans face, that is building a company which is either control-oriented or wealth-oriented? If you do not know what I mean, read the blog or let me just add that there is this binary model of either slowly creating value with your customers and partners with not much investor money or taking the risk of fast growth with investors, in anticipation of customer demand.
The ultimate example of this in Wasserman’s book is Evan Williams who founded Blogger, Oddeo and then Twitter, with diverse strategies. Paul Graham addresses the issue often (for example in Startup = Growth or in How to Make Wealth) and for a young entrepreneur, getting a million can be very important. At the macro-economic level, there is also a debate which I honestly never really understood. I think an ecosystem is (or should be) interested in fast growing companies, and slow growth should be less of a focus, not because it would not be important, but because it has always existed and will continue to exist with or without public support… However, because there are many SMEs in Switzerland, the support to small firms seems to be important. So is the situation very different from what I know in the USA? Let me try a simple description.
Sensirion is a very succesful Swiss start-up which is a good illustration of the debate. In an article written in 2008, its co-founder, Felix Mayer wrote about “How to finance the Growth? Being somewhere in the middle between the “US American” who is shooting for the moon and the Swiss who develops his technology on the cash flow of a one man company we did not choose the classical venture capital path to finance the first growth phase of the company but were able to find a private investor. In Switzerland, if you look for private investors, you may find experienced entrepreneurs who are willing to invest into a promising business. They are also known as “business angels”. It took quite a while to get from a prototype to a product family or from 1 to 10 to 100 as described before. You need knowledgeable and patient partners to survive this phase with many ups and downs. Usually, it takes longer than you expect. Nevertheless, at the end of the day, you have to get to the point where you generate growth by your own cash flow, which Sensirion reached 6 years after its incorporation. Since then, we generate enough cash flow to finance our yearly growth of around 30%-40%. In order to manage this growth we are of course continuously looking for excellent people!”
Is Sensirion a different model? I went to the Swiss register of commerce and looked at Sensirion financing (the Canton of Zurich is offering very detailed information). It was not an easy exercice and I am not sure about the accuracy (You will see the figures differ slightly!). I tried also to show the dilution of founders over time:
and here is Sensirion employee growth since its inception
Sensirion is clearly a success story, but is it that different from the US model? There might be no VC, but the private investor(s) have put a total of CHF13M with a valuation of CHF190M at the last round. The growth was as fast as many VC-backed start-ups, so I am not sure the investors were more patient and the exit might be less of a priority. This is very similar to many US start-ups… But Sensirion is often mentioned as an example that start-ups would not need venture capital (hence investors). There is not that much difference between a private investor and a VC (or is there?)
Now it is true that many of the Top 100 Swiss Start-ups raise very little money with business angels In the order of CHF1-2M. Recently EPFL’s Jilion has been acquired by Dailymotion for an undisclosed amount and the local press mentions Jilion had raised about one million. Optotune in Zurich is a similar model with 200’000 raised according to the register of commerce. Techcrunch was concerned recently about BugBuster (small) CHF1M A round. Dacuda raised about one million too at a CHF7M valuation. LiberoVision raised CHF200k with Swisscom at a CHF2.5M value before being bought for about CHF8M (it might have been more with upsides). Netbreeze was acquired by Microsoft after raising about CHF5M from one group of investors which owned 80% of the company. Wuala was acquired by LaCie 2 years after its creation and it was totally self-funded. And the list is nearly endless.
But there are also fast growing companies. Covagen, GlyxoVaxyn, GetYourGuide, InSphero, Molecular Partners, Nexthink, TypeSafe, UrTurn have raised a lot of money with VCs. And people who would say Switerland is about health related firms will see it is more diverse…
| Company | Field | Money raised | Latest valuation | Investors |
|---|---|---|---|---|
| Covagen | Biotech | 56M | NA | Gimv, Ventech, Rotschild |
| GetYourGuide | Internet | 16M | 50M | Highland |
| GlycoVaxyn | Biotech | 50M | 37M | Sofinnova, Index, Rotschild |
| InSphero | Biotech | 4M | 16M | Redalpine, ZKB |
| Molecular Partners | Biotech | 56M | 115M | Index, BB Biotech |
| Nexthink | Software | 15M | NA | VI, Auriga |
| Sensirion | Electronics | 13M | 190M | Undisclosed |
| TypeSafe | Software | 16M | NA | Greylock |
| UrTurn | Internet | 12M | 36M | Balderton |
And of course, the founders have been diluted. I will not specifically show the dilution in each company but anonymously illustrate this with the data I could found online (non confidential data).
| Company | Founders | Seed | A | B & Later | ESOP |
|---|---|---|---|---|---|
| 1 | 9% | 26% | 65% | ||
| 2 | 30% | 33% | 31% | 6% | |
| 3 | 34% | 32% | 33% | ||
| 4 | 40% | 7% | 12% | 41% | |
| 5 | 43% | 47% | 10% | ||
| 6 | 35% | 11% | 27% | 28% |
I am not sure, with all this data, that Switzerland is qualitatively that different… I will finish with an interview of Daniel Borel, the co-founder of Logitech: “The only answer that I may provide is the cultural difference between the USA and Switzerland. When we founded Logitech, as Swiss entrepreneurs, we had to enter very soon the international scene. The technology was Swiss but the USA, and later the world, defined our market, whereas production quickly moved to Asia. I would not like to look too affirmative because many things change and many good things are done in Switzerland. But I feel that in the USA, people are more opened. When you receive funds from venture capitalists, you automatically accept an external shareholder who will help you in managing your company and who may even fire you. In Switzerland is not very well accepted. One prefers a small pie that is fully controled to a big pie that one only controls at 10%, and this may be a limiting factor”
Click on picture to enlarge
Another post which does not have much to do with my favorite topic, start-ups. But after discovering Banksy’s work in New York, I saw his movie Exit Through the Gift Shop. A very loose link is Space-Invader, another street artist, who appears in the movie. Another loose link is that Space Invader has produced some work in Lausanne where I work. So I looked for his invaders and the result is that attached pdf: Space Invader and Spaceramik in Lausanne (Note that it is a rather large 24Mb pdf document)
An unidentidied Lausanne Invader
I am far from the first one to do this. For example Alain Hubler blogged about it in 2007 and helped me in finding the final place I was struggling with (thanks!) And I nearly know nothing about Street Art. But it was fun to look for his work.
As a strange coincidence Xavier Delaporte on French Radio France Culture had an interesting chronicle last Friday about our new ways to walk in the street in the Internet Age, Les nouvelles façons de marcher (avec nos outils numériques) This is just another example!
Space Invader, just like Banksy and many other Street Artists, remains anonymous. He has his own web site, www.space-invaders.com. He has his fans like Monsieur Chat who follows his production in Paris and many others who put pictures of his work online. Unfortunately, most of the work has disappeared, either the buildings have been destroyed, or the art has been stolen and/or replaced by others. There is also a second artist, Spaceramik, who put his own video on YouTube. The picture I put above might not be from Space Invader neither from Spaceramik, hence the term “unidentified”.
A final point here is the Google Maps of Invaders in Lausanne.
Display Invaders in Lausanne directly on Google Maps
PS: (February, 8, 2014) Pierre Corajoud and Space Invader
Pierre Corajoud is famous in Lausanne for publishing very nice little books about walks around Lausanne. I learnt through Mirror Mosaic Man that he had published such a booklet about Space Invader in Lausanne. I thank Pierre Corrajoud here again for offering me a copy of his book because unfortunately, many works have been destroyed or stolen after its publication and Corrajoud took his book out of the shelves.
PS: (December, 24, 2013) A year of Street Art
The Founder’s Dilemmas is at the same time a fascinating and frustrating book. Fascinating because it’s providing very seldom seen (and mostly unknown) data about founders and high-tech start-ups. Frustrating because it is also seldom providing answers to the dilemmas founders may face. It took me the full reading of the book to finally understand that the answer Wasserman provides is that there is no best solution for a founder facing a problem, but that if he knows all possible situations, he might better decide based on his own motivation and … personality. So she or he might decide, not on rational criteria but more because of his personal inclinations!
The best illustration of this is Evan Williams who was a founder of Blogger, and then of Odeo (and then after the book was designed of Twitter). Williams had a very different behavior with the two start-ups. He was “control-oriented” with Blogger, hiring people in his close network, taking friends and family (and close network) money only and keeping management control to the point of firing everyone including his former co-founder and girlfriend. With Odeo, he had initially a “wealth-oriented” attitude, taking VC money and having a different hiring strategy. His inclination made him however buy back his investor’s stake, as he needed to control his start-up again.
Wasserman shows that the “3Rs” (Relationships, Roles & Rewards) are key features for decisions about the key dilemmas founders may experience. These dilemmas are classified according to the chapters of the book: Career, Solo-vs.-Team, Weak vs. Network, Positions, Compensations, Hiring, Investors, and Succession. Wasserman explains (or better-said describes) the various dilemmas founders face when taking decisions and shows that their decisions are very often dependent upon their motivation. Do they want to be Kings (power or control-oriented) or Rich (wealth oriented)? He does it with anecdotes (not so good and quite well-known) and with statistics (very good and not so well-known)
In summary I saw it more as a book for academics than for entrepreneurs and founders who apparently will not take better decisions after reading this book as they will be driven by their motivations, not their experience! At least they will be aware of it. It may be another illustration that youth and enthusiasm are as important as experience and rational behaviors!
One interesting puzzle Wasserman addresses is why individuals decide to become entrepreneurs, often thinking that they will become wealthy whereas this is entirely wrong. This has to do with control vs. wealth. You will need to read Wasserman if you want to know more.
Here are some more notes taken when reading. The next table is probably an essential part of the control-vs.-wealth dilemma.
Table 1.2 (& 11.1) – Wealth-versus-Control Dilemmas
Wasserman has many more interesting data and let me show a small sample:
– There are no real pattern in becoming a founder (age, experience, childhood influences, personality, family status, economic status), however early influences and natural motivations seem to be important.
– About age, he has seen a wide variation with an average of 14 years of work experience before becoming a founder (higher in life sciences). There is a specific group of founders with 0-4 years of experience.
– The main motivations are either control or wealth, but having an impact counts.
– Wasserman shows strong differences related to gender correlated with age. This is a must read but too long to be explained here…or are they, let me try [pages 33-35]
Tables 2 – Motivations of male and female entrepreneurs
– Ethnic homogeneity occurred 46 times more often than not (and still 27 times more often to control for family ties). And it diminishes conflicts risks, they are therefore more stable.
Size of founders’ teams
Founding with friends…
– 40% of teams had prior professional relationships and 17% family ties.
– Each such relationship added a 30% likelihood of founder departure.
– As a summary
“A friendship built on business can be glorious, while a business built on friendship can be murder.” [Page 104]
Jobs and Wozniak is a good example: they did not clarify crucial issues and “he got paid one amount, he told me he got paid another. He wasn’t honest with me, and I was hurt… But you know… he was my best friend, and I feel extremely linked to him.” They eventually parted ways. [page 109]
About decision making: “Two people at the wheel is the worst way to drive. You end up going straight when either a right or a left would be better.” A reason why being three might be good.
Equity sharing
Woman compensation
There is a much greater gap in the preponderance of women than in their compensation. Only 10% were C- or VP-level (17% in life sciences) and 3% and 7% were respectively CEO. But the compensation was 5% below.
Investors
On BAs vs. VCs, Wasserman shows the usual dilemmas. Dick Costolo about too many BAs: “It was a recipe for disaster. I had 13 people who, now that they had $20’000 invested, wanted to call me and ask about […], taking 45 minutes of the CEO’s time when he should be running the business.”
Succession of CEO
Conclusion
Wasserman strangely mentions here: “What is entrepreneurship? A widely used definition is a process by which individuals pursue opportunities without regard to the resources they currently control”. It sound even romantic, but it has a dark side: founders are 60 times more likely to be resource-constrained than have all the resources they need. Lack of resources lies behind all the dilemmas described. [Page 333]
Founders who had kept control held equity stakes which were [half] as valuable as those held by founders who had given up both CEO position and board control.
There are hybrid paths, compromises between control and wealth, using “second-tier” solutions (hiring, investors) but Wasserman shows it is even riskier. Consistent decisions give a higher likeliness of desired output (either control or wealth).
So the answer to dilemmas is “it depends.” Be knowledgeable about options and consistent in your choices!
Wasserman opens new directions for research:
– Who are these special animals which obtain both control and wealth (Gates, Ellison, Jobs 2.0…)
– Serial entrepreneurs: they receive larger equity stakes, remain CEOs longer, negotiate better investment terms and might be more successful. Are they?!! (cf Serial entrepreneurs: are they better?)
– How often is a control-oriented founder able to sell a start-up for which he owns 100%, for $5M and how often is a wealthe-oriented founder able to sell for $100M a company of which he owns 5%…
– Wasserman is aware all this is specific to high-tech and the USA. What about outside these boundaries?
“Any honest model of a complex human phenomenon has to acknowledge many unknowns”
I plan to come back on the Founder’s Dilemmans with a look at recent Swiss start-ups situation…
Twenty years ago, I loved the Silicon Valley high-tech maps which were regularly printed. You could see the density of famous start-ups around Santa Clara, San Jose, Cupertino, Mountain View, Redwood City or Palo Alto, cities which would be unknown and uninteresting outside the technology world. Just have a look at some examples in the end of the post.
When playing with Banksy’s adventures in NYC, I used Google for building a customized map. And a few days later, I thought about doing the same for Silicon Valley unicorns. Remember the unicorns are the rare companies which reach a $1B valuation. According to the 2013 SV150 there are 94 such publicly-quoted companies. Too much for an interactive map. So I did the exercise with the $10B+ companies (I found 23 with their roots in Silicon Valley).
Choosing the market capitalization is debatable. I could have taken sales or profits. Companies such as Electronic Arts, Juniper, Xilinx, AMD, nVidia would have appeared but the group would have been similar. I just add to choose. You can open the map directly in Google maps for a better interface.
Diplay Technology companies on a bigger map
Again there is something fascinating about this density. People claim the center of gravity of the region is moving north to San Francisco because of the web 2.0. This remains to be seen over the long term…
Xavier Comtesse has just published an excellent report The Health of the Swiss innovation – Ideas for its strengthening, which he gave a summary on his blog, Innovation in Switzerland: it is primarily the domain of Health! This is a very interesting report and it is challenging for me because it “proves” that Silicon Valley is not and should not be a model for innovation in Switzerland: in his introduction he states that “the success of Switzerland in this area is still largely and for many people a mystery, especially since the only model actually known and studied is that of Silicon Valley and it does not fit, as we shall demonstrate, that of Switzerland. Although this model has made California the envy of all, it seems to have finally not been fully copied by anyone.”
But as Comtesse is a bit “Contrarian” (as I am also – my friends often accuse me of debating with myself), he cannot be satisfied with the health of the Swiss innovation. “As soon as the lines of the Swiss model will emerge, it will also show its weaknesses. This will allow us to propose changes to the current situation for a successful future evolution.”
He begins by showing the strength of R&D from the private sector – 75 % of the 16 billion spent in Switzerland. He adds that Roche and Novartis in pharma represent a large portion of this amount (approximately 30% of all R&D spent in Switzerland) and they invest more abroad.
A first point of divergence, R&D is not innovation … In simple terms, innovation is the creation, closer to entrepreneurship than to R&D. Apple has always innovated and much better than other companies, but its R&D ratio is very low.
(Click on image to enlarge)
Then he compares Silicon Valley and Switzerland: “Silicon Valley massively encourages the emergence of new actors (start-ups) in the field of information technology and communication (ICT) while the Swiss model promotes rather large incumbents in the field of health.” [Page 20] and even [page 25] “Silicon Valley has deliberately chosen the new technologies of information and telecommunications (including the Internet) as the innovative axis of its development.” He concludes with: “You could say that Switzerland is for health what Silicon Valley is for ICT.”
Second point of divergence: Silicon Valley is not the Mecca of ICT, but that of high-tech entrepreneurship. Genentech and Chiron were the leaders of biotech before being bought by Roche and Novartis respectively. Intuitive Surgical is a leading medical technology company, Tesla Motors could become a major player in the automotive industry and there are hundreds of other start-ups in the fields of energy (massively financed by funds like Khosla or KP), in clean technology and health. Furthermore Silicon Valley has also large established companies such as HP and Intel which are no longer startups.
Comtesse is convinced that Switzerland is less fragile. “As amazing as it may seem, the Swiss model is more robust and efficient over the long term than Silicon Valley because it is less dependent on global rivalries and Silicon Valley may be under threat from Korea, China or any other part of the world. Switzerland is less so because the entry ticket in the field of health, namely the huge investment to develop higher education, university hospitals, research centers, the creation of companies producing blockbusters (products reaching the billion in sales) is so high that few regions can compete in this field.”
Third point of disagreement: I do see how Korea (through Samsung and LG) has indeed become a threat to Silicon Valley but I cannot see why it could not be in the field of health. Investments in electronics and telephony were also huge. Also, the higher and higher reluctance of emerging countries with intellectual property protection (patents) on drugs and the emergence of generics seem to me equally destabilizing.
Finally Comtesse also describes the weaknesses of innovation in Switzerland: “But the question that no politician really wanted to answer was the lack of good projects. If this question is asked the answer is obviously not the creation of science and technology parks, or even the transfer of technology, let alone coaching. It is the creativity that is lacking. How to make Switzerland and especially young people from higher education to be more creative?” Neil Rimer, from Index Ventures, said similar things: “There is innovation in Switzerland, but few entrepreneurs are ready to conquer the world” and “To attract [ … ] you need a critical mass of start-ups so that there are other options available in case of failure. […] Switzerland and its cantons seek to attract traditional companies or the administrative centers of large corporations. […] My biggest wish would be that the authorities encourage the creation of jobs creation in engineering, design, marketing and management. This is how we will attract a critical mass of professionals who create and grow start-ups in Switzerland.” (See L’innovation en Suisse d’après Neil Rimer).
There is a slight difference. Neil Rimer is not talking about good or bad projects, but about ambition. He even said on this blog a few months ago : “I continue to be amazed to hear that there is not enough support in Switzerland for ambitious projects. We and other European investors are perpetually in search of global projects from Switzerland. In my opinion, there are too many projects lacking ambition artificially supported by institutions – who also lack ambition- which gives the impression that there is enough entrepreneurial activity in Switzerland.”
Comtesse then returns to the role of government by distinguishing incremental innovation and disruptive innovation . “Indeed what matters to a nation is its overall innovation capacity including disruptive innovation. But if the State does not take all the risks, then nobody will do it. That is why it is urgent to give further instructions or guidelines to the CTI. Financing incremental innovation should not be its task, or only marginally.” [Page 27] “The Commission for Technology and Innovation (CTI) tends to support incremental innovation projects, which are less risky and easier to implement. These should be the prerogative of private companies and therefore should not benefit from government support. On the contrary, disruptive innovation, similarly to basic research, should be largely the responsibility of government.” [Page 30] “So on the one hand our innovation system is supported by large companies, and on the other hand by innovative SMEs as well, but those do not reach a sufficient critical mass to make often a difference. The idea would be not to finance individual projects as does CTI in general, but multi-partners programs led by one of the major Swiss companies.” [Page 28] “This approach does not preclude the emergence of new start-ups but these would be placed under the protective wing of medium and large Swiss companies. This would avoid start-ups to be immediately sold to the Americans (a phenomenon called “born to be sold”) or and help to counter the fact that they are never able to grow. It should be remembered that over 80 % of our start-ups do not perish in 7 years, while the “normal” rate is 50 % (one might well say that “never die” is another Swiss phenomenon).” [ Page 31]
I agree with him on the analysis, less on the implemention solutions. I find interesting the idea of giving priority of government support to disruptive innovation. It reminds me of the excellent analysis of Mariana Mazzucato about the Entrepreneurial State. I remain much more cautious about the idea of a consortium of major companies to develop and protect our start-ups. I understand the desire to reduce the risk of the sale, but I do not think the concept is realistic. Which real entrepreneur wants to be protected or controlled by a big even if nice brother… I also have some doubts about the ability and entrepreneurial desire of large corporations.
In a little artificial manner, Comtesse adds the idea of a tax incentives for innovation companies. “The Swiss tax system does not explicitly provide incentives for companies that conduct R&D. The simplest solution is the tax credit for innovation that would, in various ways, decease the burden of corporate tax based on their spending in innovation. Many large countries (the United States, Canada, England, Spain and France) have already implemented such an instrument. It is not, however, about encouraging any sector by this tool but rather to create an emulation for long-term innovation in the country. This device must provide to companies, especially SMEs, more freedom of maneuver to face the innovation process.” (See again Comtesse’s blog).
Here I can speak of complete disagreement. You can read again my analysis of Mazzucato denouncing tax optimization in this area. I never believed in tax incentives and I could be wrong. I understand the greater effectiveness of the approach, but I believe there are more perverse effects than real positive ones. Just look at the plight of the American Taxation system of the large technology companies.
Despite my criticism, this is an excellent report. Like all Contrarians, I focus more on disagreements but there are, in this analysis, extremely interesting points about the myths and realities of innovation in Switzerland. A short reminder as a way to end this post: Comtesse published a few months ago a Prezi presentation on the same topic, and you can read my comments about the Swiss model innovation : is it the best?
After reading the great New Yorker article about Silicon Valley and politics, I searched for “Silicon Valley” on the magazine web site and found two contrasting articles:
– the first one is a kind of introduction to my previous post, it was also written by George Packer (clearly a great and insightful writer) in 2011 and is about Peter Thiel, the famous libertarian entrepreneur and investor: NO DEATH, NO TAXES – The libertarian futurism of a Silicon Valley billionaire.
– the second one is much older and is about the early days of Google and Internet search: SEARCH AND DEPLOY by Michael Specter.
They are kind of contradictory because the second one is optimistic about what technology can solve (Google greatly improved our access to knowledge) whereas Packer shows Thiel’s pessimism with the outcome of technology even if he has great hope in it. In fact as mentioned in the previous article about SV and politics, he belongs to the group of people distrusting politics to the point that he believes technology might / must be the alternative.
Let me begin with the optimistic first: in 2000, Google was already seen as the winner of the Internet search race. Even if it did not have yet its business model, Google solved better our search on the Internet. Page and Brin did it by finding a better mathematics algorithm, the PageRank system based on the popularity and frequency of reference of web pages. As a funny side result, Google had less queries than other sites on porn: “About ten per cent of Google queries are for pornography. The figure is lower than that of most other search engines. This reflects the demographics of the people who use the search engine, but perhaps it also demonstrates one of Google’s obvious failings: porn sites are sought out by millions of Internet users but are rarely linked to prominent Web pages. Without links, even the most popular page is invisible.”
The credo of Thiel’s venture-capital firm: “We wanted flying cars, instead we got 140 characters.” Photograph by Robert Maxwell.
It’s been known that Thiel has been disappointed with high-tech innovation. Just read again my 2010 post, Technology = Salvation. I think you should read Packer’s article if you liked (or even if you did not) his Change the World. Both articles show the power and limits of these visionary people and the sometimes scary vision of technology vs. politics. There is something of Kubrick’s 2001: A Space Odyssey in all this. He brilliantly shows the strange nature of these people (a high concentration of Asperger syndromes and dyslexia – apparently two rather high frequency features of entrepreneurs). Again just short notes (you have to read it to see the broadness of the topics:
“Thiel believes that education is the next bubble in the U.S. economy. He has compared university administrators to subprime-mortgage brokers, and called debt-saddled graduates the last indentured workers in the developed world, unable to free themselves even through bankruptcy. Nowhere is the blind complacency of the establishment more evident than in its bovine attitude toward academic degrees: as long as my child goes to the right schools, upward mobility will continue. A university education has become a very expensive insurance policy—proof, Thiel argues, that true innovation has stalled. In the midst of economic stagnation, education has become a status game, “purely positional and extremely decoupled” from the question of its benefit to the individual and society. It’s easy to criticize higher education for burdening students with years of debt, which can force them into careers, like law and finance, that they otherwise might not have embraced. And a university degree has become an unquestioned prerequisite in an increasingly stratified society. But Thiel goes much further: he dislikes the whole idea of using college to find an intellectual focus. Majoring in the humanities strikes him as particularly unwise, since it so often leads to the default choice of law school. The academic sciences are nearly as dubious—timid and narrow, driven by turf battles rather than by the quest for breakthroughs. Above all, a college education teaches nothing about entrepreneurship. Thiel thinks that young people—especially the most talented ones—should establish a plan for their lives early, and he favors one plan in particular: starting a technology company.”
Always consistent with his thoughts, he “came up with the idea of giving fellowships to brilliant young people who would leave college and launch their own startups. Thiel moves fast: the next day, at TechCrunch Disrupt, an annual conference in San Francisco, he announced the Thiel Fellowships: twenty two-year grants, of a hundred thousand dollars each, to people under the age of twenty. The program made news, and critics accused Thiel of corrupting youth into chasing riches while truncating their educations. He pointed out that the winners could return to school at the end of the fellowship. This was true, but also somewhat disingenuous. No small part of his goal was to poke a stick in the eye of top universities and steal away some of their best.”
I am not sure I follow him too much (I am just too normal), for example in his quest for eternity, but I understand many of his visions. He is as much a dreamer as a doer, his fund had mixed results, but he is with Elon Musk (one of his his co-founders in PayPal) among the people who push “trying” to the limits without being afraid of failing.
My colleague Andrea just mentioned to me this exceptional article about Silicon Valley and its lack of interest, not to say distrust, for politics. It’s been published in the New Yorker in May 2013 and is entitled: Change the World – Silicon Valley transfers its slogans—and its money—to the realm of politics by George Packer.
“In Silicon Valley, government is considered slow, staffed by mediocrities, and ridden with obsolete rules and inefficiencies.” Illustration by Istvan Banyai.
All this is not so far from a recent post I published: The Capital Sins of Silicon Valley. George Packer’s analysis is however profound, subtle and quite fascinating. I will not analyze the article, you have to read it even if it is a vrey long article, and to encourage you in doing so, here are just five quotes:
– “People in tech, when they talk about why they started their company, they tend to talk about changing the world,” Green said. “I think it’s actually genuine. On the other hand, people are just completely disconnected from politics. Partly because the operating principles of politics and the operating principles of tech are completely different.” Whereas politics is transactional and opaque, based on hierarchies and handshakes, Green argued, technology is empirical and often transparent, driven by data.
– Morozov, who is twenty-nine and grew up in a mining town in Belarus, is the fiercest critic of technological optimism in America, tirelessly dismantling the language of its followers. “They want to be ‘open,’ they want to be ‘disruptive,’ they want to ‘innovate,’ ” Morozov told me. “The open agenda is, in many ways, the opposite of equality and justice. They think anything that helps you to bypass institutions is, by default, empowering or liberating. You might not be able to pay for health care or your insurance, but if you have an app on your phone that alerts you to the fact that you need to exercise more, or you aren’t eating healthily enough, they think they are solving the problem.”
– a system of “peer production” could be less egalitarian than the scorned old bureaucracies, in which “a person could achieve the proper credentials and thus social power whether they came from wealth or poverty, an educated family or an ignorant one.” In other words, “peer networks” could restore primacy to “class-based and purely social forms of capital,” returning us to a society in which what really matters is whom you know, not what you could accomplish. (…) Silicon Valley may be the only Americans who don’t like to advertise the fact if they come from humble backgrounds. According to Kapor, they would then have to admit that someone helped them along the way, which goes against the Valley’s self-image.
– “There is this complete horseshit attitude, this ridiculous attitude out here, that if it’s new and different it must be really good, and there must be some new way of solving problems that avoids the old limitations, the roadblocks. And with a soupçon of ‘We’re smarter than everybody else.’ It’s total nonsense.”
– “This is one of the things nobody talks about in the Valley,” Andreessen told me. Trying to get a start-up off the ground is “absolutely terrifying. Everything is against you.” Many young people wilt under the pressure. As a venture capitalist, he hears pitches from three thousand people a year and funds just twenty of them. “Our day job is saying no to entrepreneurs and crushing their dreams,” he said. Meanwhile, “every entrepreneur has to pretend in every interaction that everything is going great. Every party you go to, every recruiter, every press interview—‘Oh, everything’s fantastic!’—and, inside, your soul is just being chewed apart, right? It’s sort of like everybody’s fake happy all the time.”
A couple of colleagues informed me about Welcome To The Unicorn Club: Learning From Billion-Dollar Startups by Aileen Lee. I understand why. The article is closely connected to some of my main interests: high-growth start-ups and dynamics of entrepreneurs. Aileen Lee has analyzed start-ups in the Software and Internet fields which have reached a billion-dollar value while being less than 10 years old. She calls them Unicorns, whereas Super-Unicorns are companies which reached a $100B value!
All this reminds me of my analysis of 2700 Stanford-related start-ups (you can check Serial entrepreneurs: are they better? as well as High growth and profits) and to a lesser extent about the link between age and value creation: Is there an ideal age to create?
Aileen Lee has interesting results:
– out of 10,000+ founded companies per year, there are 4 unicorns per year (39 in the last decade – that is .07% of total) and about 1-3 super-unicorns per decade,
– they have raised more than $100M from investors (more than $300M for consumer-related). They may have been lean in their early days, but they grow fat!
– it takes 7+ years for an exit,
– founders have an average age of 34,
– they have 3 co-founders on average with a long experience together, often back from school,
– 75% of the founding CEO lead the company to an exit,
– many come from elite universities (1/3 from Stanford),
– pivot is an outlier.
I found this article interesting, important, and I even felt empathy and let me tell you why. We have a tendency to underestimate the importance of hyper-growth and hyper-fast. Growth is extremely important for start-ups; reaching $100M in value is a success. Looking at the small group which reaches $1B and then $100B is interesting. You need money for this (VC), you do not need that much experience but you need trust from co-founders. The founders of super-licorns seem to be the explorer of unknown territories. You need passion and resources.
On Unicorns, I have done a similar analysis in “Is there an ideal age to create?” I also have an average age of 34 for 1st start-up experience of all founders, and regarding Super-Unicorns which I call Black Swans (highly unpredictable outcome according to Taleb), I have identified 10 Super-Unicorns (see below) and there are 1-4 such companies per decade since the 60s. The average age of their founders is 28 and even 27 if I count the 1st experience.
[My Black Swans – Ancestor: HP (1939); 60s: Intel (1968); 70s: Microsoft (1975), Oracle (1976), Genentech (1976), Apple (1977); 80s: Cisco (1984); 90s: Amazon (1994), Google (1998); 00s: Facebook (2004).
Age of founders: HP: Hewlett and Packard (27) – Intel: Noyce (41) and Moore (39) (but they had founded fairchild 11 years earlier). Andy Grove was 32 – Microsoft: Gates (20) and Allen (22) – Oracle: Ellison (33) – Genentech: Swanson (29) and Boyer (40) – Apple: Jobs (21) and Wozniak (26) – Cisco: Lerner and Bosack (29) – Amazon: Bezos (30) – Google: Brin and Page (25) – Facebook: Zuckerberg (20) – Cofounder was 22.]
Now more data and statistics based on the Stanford-related companies. You can have a look first at my past slides and then I look at the Unicorn statistics.
Basic analysis of Stanford-related unicorns
There are 3 super-unicorns in that group (HP, Cisco & Google). Out of 2700, there are 97 unicorns, which is a huge 3%! It probably means my sample is not exhaustive! Indeed Prof. Eesley estimates that 39’900 active companies can trace their roots to Stanford. This means now .2%. Now these are real exits whereas Lee includes private companies with no exit but a value provided by their investors. Whatever the ratio, unicorns are rare. Mine are less fat than Lee’s: they raise $30M with VCs.
I have less than 2 Stanford-related founders per company (but I do not count the ones with no Stanford link. It confirms Lee’s comment that many founders have roots back to school. It takes 8 years for an exit (fewer in recent years though) and 7 years for a graduate to decide about founding a company.
Unicorns and high-value creation is an interesting not to say important topic. Billion-dollar companies are not just a rare event, they tell us something about the impact of high-tech innovation & entrepreneurship. They are possible and desirable!
An unusual post, as it has nothing to do with start-ups. Strangely enough, another one was related to New York City and Obama. I mention from time to time that entrepreneurs have similarities with artists when they want to have an impact. And innovation is an art, not a science.
I followed Banksy‘s work in NYC from time to time last month and spent the last week-end compiling what I could find. Feel free to have a look at the pdf, which contains his 31 October days with pictures, maps and links to other sites as well as my own Google map of its locations. You can also download the Powerpoint slideshow by clicking here. It automatically launches all audios and videos (but it might depend on the ppt version you have if any).
Click on picture to download pdf
And here is the map of Banksy’s journey.
Afficher Banksy sur une carte plus grande
PS: June 1st, 2014: a short video summarizing Banksy’s residence in NYC: