7 years, 11 months ago

Whence, Angels?

As you’ve read over past couple of years, we’ve started investing in a hybrid Angel/VC model.  Lots of risk, lots of upside, and lots of fun new things to learn.  Applying Capability Driven Methods to management from the start has been both f…

9 years, 1 month ago

Discipline Is Not a Curse

For those of us in the Enterprise Architecture, impressing the value of discipline on the world that is incentivized to ignore it, is par for the course.  Whether it’s due to great expectations, unrealistic timelines, lack of coherent planning, or all of the above, ensuring and enabling others to follow a method or process with trust that success will not come from taking shortcuts is a Herculean task.

So when we transitioned to a Capability-Driven Startup Incubator model, we essentially doubled down on the belief that if done in a disciplined way, we can help entrepreneurs launch companies that are successful, profitable, and not hampered by capability debt (debt of suboptimal decisions made for expediency or based on incomplete information, or by wrong people in wrong positions.)  You’ll see the results of that bet start appearing in the public light next quarter so you can judge whether our bet is paying off.

It is from a discipline perspective that I ran into a very curious piece on Chicago digital startup community that appeared in PandoDaily.  It centers around defining the “Midwest Mentality” of pragmatism, as follows:

Pragmatism is defined as dealing with issues on a practical level, rather than a theoretical one. What does this mean in the context of startups? Well, it means that there is no “let’s build a cool tool and then figure out the business model”. No. In fact, if you do that here, you don’t belong. That’s a plain fact that I have found very few people disagree with.

And while the author (Trevor Gilbert) goes on to provide both pros and cons of pragmatism, he spends the majority of the article blasting pragmatism in context of digital startups.  He delves into working hours, missing the point that amount of work doesn’t usually correlate to success.  Those of us with kids don’t just stop working once we go home – I see many of my married with kids counterparts firing up the laptop after their kids are in bed.  But we can debate whether parents working 9pm to midnight is more productive than their single counterparts spending that time having fun at a bar – either is simply anecdotal and should be taken with several grains of salt.  It’d just be nice if Trevor thought to research his arguments a bit more.

And in that failure of discipline, he makes and then fails to expound on the major point of why Chicago startup community is so different from Boston or Silicon Valley:

Without hot startups, you are left with the problem of attracting investment and talent with names observers don’t truly know.

Here Trevor inverts the causality in support of his argument.  That is shoddy at best, sensationalist at heart, and substandard thinking at worst.  The cause of few “hot startups” is not our pragmatism.  It’s the fact that there is a “problem of attracting investment and talent with names observers don’t truly know.”

If Trevor actually listened to the Chicago VC community, their investment dollars usually go to people they have built a relationship with – over several years.  It’s not that talent, intelligence, adaptability, and stick-to-it-itiveness of the idea don’t play a role.  It’s that in order to be rated on these measures, the prospective entrepreneur has to clear a very high barrier to entry of building a relationship with the prospective funders.  Perhaps it’s a throwback to the old Chicago politics paradigm of “we don’t want nobody nobody sent.”  But perhaps it’s not strictly a Chicago issue (here’s a WSJ article bemoaning that fact nationwide), just more pronounced here.  Regardless of cause, this state of affairs limits our city to be the backwater of seed investment dollars.  Either way, I’m not sure that “Midwestern Mentality” has much to do with it.

AAB

9 years, 1 month ago

Discipline Is Not a Curse

For those of us in the Enterprise Architecture, impressing the value of discipline on the world that is incentivized to ignore it, is par for the course.  Whether it’s due to great expectations, unrealistic timelines, lack of coherent planning, or all of the above, ensuring and enabling others to follow a method or process with trust that success will not come from taking shortcuts is a Herculean task.

So when we transitioned to a Capability-Driven Startup Incubator model, we essentially doubled down on the belief that if done in a disciplined way, we can help entrepreneurs launch companies that are successful, profitable, and not hampered by capability debt (debt of suboptimal decisions made for expediency or based on incomplete information, or by wrong people in wrong positions.)  You’ll see the results of that bet start appearing in the public light next quarter so you can judge whether our bet is paying off.

It is from a discipline perspective that I ran into a very curious piece on Chicago digital startup community that appeared in PandoDaily.  It centers around defining the “Midwest Mentality” of pragmatism, as follows:

Pragmatism is defined as dealing with issues on a practical level, rather than a theoretical one. What does this mean in the context of startups? Well, it means that there is no “let’s build a cool tool and then figure out the business model”. No. In fact, if you do that here, you don’t belong. That’s a plain fact that I have found very few people disagree with.

And while the author (Trevor Gilbert) goes on to provide both pros and cons of pragmatism, he spends the majority of the article blasting pragmatism in context of digital startups.  He delves into working hours, missing the point that amount of work doesn’t usually correlate to success.  Those of us with kids don’t just stop working once we go home – I see many of my married with kids counterparts firing up the laptop after their kids are in bed.  But we can debate whether parents working 9pm to midnight is more productive than their single counterparts spending that time having fun at a bar – either is simply anecdotal and should be taken with several grains of salt.  It’d just be nice if Trevor thought to research his arguments a bit more.

And in that failure of discipline, he makes and then fails to expound on the major point of why Chicago startup community is so different from Boston or Silicon Valley:

Without hot startups, you are left with the problem of attracting investment and talent with names observers don’t truly know.

Here Trevor inverts the causality in support of his argument.  That is shoddy at best, sensationalist at heart, and substandard thinking at worst.  The cause of few “hot startups” is not our pragmatism.  It’s the fact that there is a “problem of attracting investment and talent with names observers don’t truly know.”

If Trevor actually listened to the Chicago VC community, their investment dollars usually go to people they have built a relationship with – over several years.  It’s not that talent, intelligence, adaptability, and stick-to-it-itiveness of the idea don’t play a role.  It’s that in order to be rated on these measures, the prospective entrepreneur has to clear a very high barrier to entry of building a relationship with the prospective funders.  Perhaps it’s a throwback to the old Chicago politics paradigm of “we don’t want nobody nobody sent.”  But perhaps it’s not strictly a Chicago issue (here’s a WSJ article bemoaning that fact nationwide), just more pronounced here.  Regardless of cause, this state of affairs limits our city to be the backwater of seed investment dollars.  Either way, I’m not sure that “Midwestern Mentality” has much to do with it.

AAB

10 years, 7 months ago

The Startup Crash and Burn Cycle

Entrepreneur: I have this great idea for a website. I know it’s going to make a ton of money.
Developer: I know [python, .NET, Java, Ruby]. I’ve done this before.
Entrepreneur: I can see that you have, great. Let’s get started.

The entrepreneur, trusting the developer, begins to feed him a couple of ideas. The developer asks questions whenever they get stumped. Weeks and/or months later, behold, a website arises!

But this is not the happy ending – it’s only the beginning. Now the fun part begins.

Because when the entrepreneur gets close to some potential enterprise customers and they ask about such mundane concerns as security, integration and website customization. Uh, what? Worse, they want monitoring and tracking – as does the entrepreneur since he needs reporting on a per/customer basis to understand sales and site usage.

Only the developers have since checked out – either physically or mentally. They weren’t interested in maintaining the site. Their brilliance is only appropriate to building the site. Too bad they never did any maintenance programming, ever. If they could have seen the brilliance of others their effort may have been the better for it.

Now what? It’s unusual for developers to document well in such circumstances, and the entrepreneur doesn’t read [python, .NET, Java, Ruby], nor is he particularly interested in learning how to read them. Of course he could hire someone who does but then he knows how that turned out.

On the plus side, what the entrepreneur has, is a demo capable website. He can sell it.  And, with luck, it’s a stepping stone to something that will stand up to the heavy traffic required to make a “ton of money.”

The problem is that without an analysis of client needs against the strength of the code he doesn’t know. Even if all is well, he knows he has to take a step back to take two forward.

But all is not well – even a cursory analysis shows that the code is not rationalized on the back end – because there is no back end. All the code is in the equivalent asp/jsp server, meaning that, in the end, testing costs will be much higher for changes than is sustainable. All the website text is embedded in the code which equals the need for changes and that there’s no way to easily customize the site to each customer’s content requests. There’s no service or facility to upload large data sets for the corporate customer. There’s no separation between the primitive reporting interface and the operational data store meaning that every time the entrepreneur wants a report it will impact his site’s performance. Oh, and tokens representing sign-on are sent in the clear, and that’s the extent of the security framework. This, in turn, limits the entrepreneur’s top line revenue possibilities, as larger and more established companies require these issues to be addressed prior to considering a purchase or licensing agreements.

At SenseAgility we’ve seen this pattern over and over. It’s not necessarily wrong – it is even encouraged by the Private Equity community who is more interested in a smaller up-front investment than long-term viability. The entrepreneur does have a functional website that he can sell and that might even support a few customers. But by this time, they have usually invested several hundred thousand dollars into what is essentially a throwaway. Was it worth the investment?

You decide.