Why Silicon Valley?
Merja Karhapää, Boardman -partneri
I participated in Boardman’s trip to Silicon Valley in September 2015. I have selected some insights that could be useful to know and understand. There is a Finnish saying used by Finns working in Silicon Valley that roughly translates as ”Don’t piss in Paradise”. It is one rule over other rules. It means means ”Don’t ruin a good thing” or ”Don’t bite the hand that feeds you”. Secret of Silicon Valley is in a strange combination of sharing and competing.
There is one rule over other rules: ”Don’t piss in the paradise”.
Secret of Silicon Valley is in a strange combination of sharing and competing. In the 30 miles long, 15 miles wide area there is an amazing concentration of diversity, skill and money. And yet, what really makes it different from countries like Finland and the Netherlands, also with an abundance of skill and relative wealth, is the mindset. Disruptive culture flourishes when more than a half of the population comes from outside of the U.S., the state does everything it can to remove obstacles in front of the investments, academia works closely with businesses, and corporations have a physical presence close to one another and there is an abundance of money: a half of all the investments are made in the Valley.
In practice, it means that in the Valley you have an access to more investors, all potential B2B customers are present and advisory firms are more equipped to support companies. When all that matters in the end is speed, not only can you meet more people in a shorter time, but you have an access to the latest information because people share even secrets in return for secrets if there is a sufficient level of trust. Trust is based on not only knowing others in person, but not wanting to become an outcast if you are caught by not respecting the rules.
Valley is a small place, as basically everyone knows everyone. Once you have the idea, and have done your ground research to know the market, to know your likely competition and to understand who can help you on your journey, all that matters is the speed of execution. But you wish well to your rivals as their success would only grow the size of the paradise. If one loses, everyone loses. Mindset like this is a crucial element in the success of the Valley. This is the time for start-ups also elsewhere than just the Valley. It means more and more brain drain for corporations.
Phases of Internet specific investments are like in biotechnology:
- Seed stage – mostly provided by angel investors
- Early stage – more and more corporate investors > later stage too late so more competition move up
- Expansion stage
- Later stage – prices sky high
If a big company can bring cash, channels and brand name, and a small company can bring people, technology, and new dna (culture), the success of an integration depends on how focused the deal is on the expected fit. It determines which stage of investments are the best to create the fit, and what would be the best model for integration.
Ability to scale fast becomes the key
Instead of TAM (total addressable market) or SAM (serviceable addressable market), focus should be on RAM, rapidly addressable market in view of getting as quickly as possible from idea to product – from product to local – and then scale in local market – access global – and scale in global market.
How to raise capital?
Here are practical tips to make a successful pitch that works not only in the Valley but also in raising internal money:
- Know the investor to make sure you fit
- Arrive with introduction (LinkedIn!)(Conspire)
- Keep your pitch in 10 min
- Three slides growth strategy, user acquisition strategy, metrics (proxy) (points of data to prove there is a need for the product through surveys etc)
- Promise milestones and not time (3-7 milestones) that are clear and concise
- Be prepared to give a meaningful stake (Percent they own with 1-3mio investment needs to be meaningful (angels 10-20% & vc:s 20-30%)
What comes next after ”digitisation”?
Block-chain – fully distributed systems are based on security of the crowds (like bitcoin) & VR (virtual reality).
Block chain is new distributed architecture to support application dev’t to do the following:
All things are going to be smart devices because it is cheaper to make things smart than stupid. So no ”business case” is required for making things smart. This will soon change how societies function as at the moment most assets are under-used.
Virtual reality will bring a totally new dimension to how we interact with one another (Oculus, Half Moon). What would it be like to work in a virtual office? Who sells advertisements to the virtual walls?
Storytelling – emotions are the killer app!
The way to get started is to take use cases and put them into a story. The clues to a great story are such that they touch me, they teach me something new and they present content in ways I’ll never forget. So also commercial content should do at least one of the following:
- Make me care.
- Take me with you.
- Be intentional.
- Let me like you.
- Delight me.
It’s all about fulfilling customer needs and UX & CX design
The key is to understand the REAL needs of the user so the context is everything. Content is good, getting money from it even better (commerce). But understanding the relevance of communities is a big step forward, and getting the context right is where we should be. This is where the role of data is big, but not everything, as you cannot get even the community right if you do not move from a product/service (content) focus to customer focus.
Customer focus makes you understand which brands or which needs are relevant for each group of customers, forming communities. Only this twist in approach enables you to define the relevant context, when and why customer needs what and how. This is why one should always start product development from UX design and from understanding what one’s value proposition is. Only then one should invest in building the supporting software/systems/technology. Like when building a house: first you hire an architecture and don’t build foundations before you have a blue print of your house. Otherwise it is a waste of too much money as you cannot optimise different elements from value and UX perspective.
The role of data continues to be more and more relevant also for the purpose of knowing your customer’s customer, e.g. even today HP wearables business approach fashion designers with demographic study and brand study because fashion industry do not know their customer (!) due to not having collected relevant importance of customer data! Too often we assume that our potential customers would know how to benefit from our new services. If you have better data, even a slightly better insight (data) can be a seed to win in the market by simply being the first one to accumulate more data. And often first one takes it all.