Last week I went down to the Computer History Museum to check out IBM's SmartCamp Silicon Valley 2013. Anybody who's anybody is running a startup accelerator these days and this is Big Blue's version. I was only able to attend the final round of pitches on Friday after the startups had gone through their clinics but it was still worth the trip. I make my usual pithy comments in italics.
The folks from IBM's Venture Capital Group led off with a description of their Global Entrepreneur Program. This is the kind of program I'd wish I'd jumped into instead of spending two years on a worthless MBA from the University of San Francisco. IBM's resident experts know what startups need to do to be successful. They have partners with VCs all over the world and the startups that went through their program have attracted $120M since 2009. IBM's clients want innovation and this program is the company's way of delivering entrepreneurial talent to a broader ecosystem and connecting its internal program managers with new technology. IBM's venture group does not invest its own money but that's okay. The judging panel from Silicon Valley Bank, Hummer Winblad, and Garage Technology Ventures brought plenty of their own financial power.
The VC panel had some thoughts to share before they started judging pitches. This is apparently a great time for startups with tremendous room for growth in APIs, open source, cloud, mobile, and smart sensors. I think it will be even greater for startups when the economy tanks and inefficient companies are forced to liquidate. Recessions and depressions are IMHO really the best times for startups because talent and assets can be obtained cheaply. Anyway, the panel thought the "open innovation" philosophy has transitioned from Valley-based companies to other global companies that are now more willing to bring startups into their enterprises. Startups that can solve corporate pain can get into sponsored development programs. Small companies now have access to analytical tools that big companies have traditionally used. Launching a startup is faster, easier, and cheaper than ever but that means competition is more intense. The speed of competition forces big corporations to be more careful about giving a firm commitment to a startup.
The VC panel liked gross margins as a KPI. That reminded me of what Guy Kawasaki shared at the Cleantech Open Academy this year: "Sales fixes everything!" One panelist mentioned "Analytics 3.0" as a the merger of Big Data with cognitive computing. The best source I have found is the International Institute for Analytics' description of the Analytics 3.0 concept. Successful entrepreneurs have passion and drive; they are focused and strategic; they find a beachhead and differentiate themselves. They key to success is whatever makes people fall in love with your product or concept. That just goes to show that even the smartest people in the room are non-rational! Human beings makes decisions with their emotions and then rationalize them afterwards by selectively fitting facts into their prearranged narrative. This is how dumb ideas get approved and why attractive-looking salespeople can get away with manipulating a client. The VC panel finished up by telling us to leverage our relationships with corporate partners that are willing to work with startups. This also makes me think back to what Guy Kawasaki said at the CTO Academy about startups who tout "partners" instead of results, i.e. sales. I suspect that corporations don't all think the same way as VCs. The VC way is to rapidly scale revenue to make 5x-10x ROI. Corporate metrics are probably less stringent because they are mainly after a technology they can acquire.
The startup pitches came next. I liked OnFarm the best because IMHO they have a very cool way to bring Big Data into agribusiness. They would definitely benefit from SARTA's AgStart program. I'll summarize the lessons the judges imparted as they considered the pitches. Know your competitors. Know the length of your sales cycle. I think the 10/20/30 format for pitches would have made a lot of sense for some of the startups in the program. They're welcome to use the sample pitch I put on my Alfidi Capital Special Reports page. Knowing your competitors' price points determines whether your product is cheaper. A go-to-market strategy means first knowing your ultimate customer. Regulatory risk (Obamacare, energy/carbon trading, etc.) provides paths to disruption. Knowing how your tech works means having third-party data validation, such as use case data or peer-reviewed scientific studies. Know the KPIs that will drive sales from an app or web portal. That means knowing how impressions become conversions and knowing the cost of each step in the sales cycle.
The judges retired to their deliberation chamber while another presenter from IBM introduced the rest of us to Design thinking. User-centered design is how technologists achieve differentiation from competitors' products. IBM thinks products compete first on availability, then price, then quality, and finally design. Okay, I get it, design is the ultimate value-added finishing touch for high-end products that do not wish to be mistaken for commodities. A startup's elegant design ethic can scale to meet the needs of an acquirer if it focuses on usability. It sounds like IBM just gave its small partners a big hint about what they need to create if they want to get into IBM's program. If you're not sure how to make it work, check out this video Jim Henson made for IBM in the 1960s before he created the Muppets. Cookie Monster eats that digital coffee machine like there's no tomorrow. If you get stumped on a project, just eat your coffee machine. Stanford's d.school does lots of design thinking, presumably without exploding coffee machines. I think even national security applications can benefit from good design. Palantir is a lot more user-friendly than DCGS-A even if it doesn't have immediate access to the entire suite of intelligence community capabilities. Most analysts in the field have made their preference for Palantir known.
The keynoter from Guidewire Labs gave us a version of the "go forth and do well" talk common at academic commencement ceremonies. Here it comes, paraphrased. Entrepreneurship is like a marathon inside a triathlon inside a decathlon. What about the pentathlon? LOL. VC-backed startups have a 1-in-10 success rate. Don't wait for someone to tell you what to do. Startups don't have time for the luxury of multiple mentors, so rely on your instincts instead. Do something every day to move your business forward. Take action. The Valley's "fail fast" mentality is okay if you stop doing what wasn't working. Examine failures for lessons. Live with integrity. Be honest and compassionate. Don't wait to do good; be good now with generosity and philanthropy.
I like those words of wisdom. Some entrepreneurs are sufficiently autodidactic to incorporate good advice from these conferences into their character. Most aren't, which is why most businesses fail. I keep my notes and blog about these events because I'm serious about success. Startups that get serious can join SmartCamp or use IBM's Social Business tool suite for enterprises. I use my own cheapskate tools because Alfidi Capital doesn't need to scale to IBM's size. If you can scale your own business, I'll see you at IBM's SmartCamp Silicon Valley next year.
