Tag Archives: Startups
This week, United Technologies (UTX) announced that the company is breaking itself into three, separating out its Otis and Carrier divisions from the core business. In doing so, UTX is following other industrial companies — including DuPont, GE and Honeywell — in undoing the era of mega conglomerates.
This begs the question: What has changed, and what does it mean for businesses today? The short answer is that today’s market is more demanding and segmented than ever before, and that mega corporations can’t keep up.
Here’s what growing companies can learn from watching the big guys fall down on the job of creating top shareholder value.
1. It’s hard to be all things to all people.
Before this move, United Technologies was making everything from helicopters to elevators, airplane engines and HVAC systems. That’s a broad range of technology to keep track of. Splitting the company up will make it possible for each new business to focus on its core area, set appropriate priorities and ultimately make the best decisions for each unique set of customers.
This statement by the company’s chairman and chief executive, Gregory J. Hayes, says it all: “Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth.”
I know that in our own business, when we decided to scale back the number of services we offered and focus on a few core areas instead, our growth rate doubled within the next six months. We had underestimated the real costs and distractions of being in many different businesses.
2. Economies of scale are no longer paying off.
Historically, many mega conglomerates came into being to take advantage of bulk buying and shared resources. The rationale was cost savings and reduced overhead — but operational costs have come way down over time.
Cloud-based technology has reduced the need for companies to invest in servers and other hardware, which used to be a major expense. And many non-core functions can now be outsourced, including payroll, human resources, training, travel and information technology. In fact, the majority of our operational expenses at Acceleration Partners are on a per head or per seat basis today, there are very few fixed cost investments that we make.
Finally, marketing has moved away from big-budget print ads to online advertising, and sales are increasingly conducted online.
3. Specialization sells.
Customers — including business-to-business customers — increasingly use the internet to find exactly what they want at the price they want to pay. No longer blindly trusting of the biggest brands or best-known names, people today are looking for experts. They want more control and more choices than most giant companies are willing or able to provide.
Look at what has happened to television. More and more households today are cutting the cord on cable service, unwilling to pay for packages that include a lot of channels they don’t want. Instead, they are choosing to purchase only the apps and shows they want directly from content providers such as HBO and Hulu.
Similarly, in our industry, the agency of record (AOR) concept in which marketing agencies sell large integrated projects and then find other firms to deliver that work and mark up those services is quickly becoming obsolete.
4. Smaller organizations are more nimble.
The pace of business today is fast and getting faster. Large, bulky bureaucracies simply can’t keep up.
Look at how quickly Uber disrupted the entire U.S. taxi business. Markets evolve quickly, and companies need to be lean and nimble, not bogged down in the internal politics and exhaustive procedures so common to mega corporations.
It’s also way easier today to be small, since businesses can team up via a concept we at Acceleration Partners call “Performance Partnerships” — making deals with other companies to supply non-core functions, while collecting a commission or referral fee. A company can outsource marketing and sales, for example, or pass off the hassle of worrying about delivery and fulfillment — while keeping all its most critical functions in-house. As a study by Bain Capital has shown, companies benefit most when they divest themselves of non-core businesses and focus their time and capital on growth areas.
The bottom line is that today’s business landscape is no longer rewarding generalists — those companies that provided just-OK goods or services across a wide swath of areas. Companies today need to be best-in-class, responsive and 100 percent focused on the customer. That is the blueprint for success going forward.
This is a guest post by Applico CTO and Principal Tri Tran. Prior to joining Applico, Tri was the co-founder and CEO of Munchery.
After years of public battles with Uber, San Francisco has learned some valuable lessons.
This time around, three electric scooter rental companies – Bird, Lime and Spin – are trying to roll out their service in downtown San Francisco. But the city is fighting back. As I happen to live in San Francisco and work in downtown, I’ve been able to witness this battle first hand.
As a startup entrepreneur, I quickly recognized the strategies that these three companies have taken to maximize business traction in as short a time as possible:
- Flood a certain limited geography (such as downtown San Francisco) with a lot of scooters.
- Get as many people as possible using them, very quickly. Once certain critical mass is reached, perhaps leverage them and their loyalty to fight off any regulations.
- The default is seeking forgiveness afterward instead of seeking permission prior to operating. Let the city take any actions it needs to, assuming it’s historically very slow to react anyway.
I would not be surprised if these three companies also employ “fake” users and have them ride the scooters around town to create buzz, and thus word of mouth referral.
The City Fights Back
To my surprise, the city worked quickly and City Attorney Dennis Herrera issued cease-and-desist orders to all three companies.
The city wants the scooter companies to take actions to:
- Keep users from riding scooters on sidewalks
- Keep scooters from blocking sidewalks when parked
- Ensure that riders use helmets
It’s all in the name of public safety. Until then, the city will impound these scooters and may issues fines of a minimum of $ 125 for each violation. That is unless the companies can abate the problem within 30 days or prevail in an appeal hearing.
What Will Happen Next
It is not clear what these companies would do next, but here’s my take:
- These three companies don’t have the operations to meet the city’s demand for the above described points
- Limiting riders from sidewalks and ensuring unused scooters not block sidewalks is too tall of an order
Technically, it’s entirely possible to track riders on where they ride and whether they had left the scooters on sidewalks. They can even issue fines to riders who disobey such rules. But these rules would be a direct conflict to the convenience of ride-wherever and park-wherever, and thus would greatly reduce the attractiveness of using their scooters in the first place.
So what should they do? San Francisco has clearly established that it can move fast to regulate AND has created a repeatable process to impound these scooters.
Not complying will simply be too costly. More importantly, San Francisco also provides a model for all other cities to copy if/whenever the service rolls out to their cities. That’s bad news for Bird, Lime and Spin.
Ultimately, the service that these scooter companies provide is convenient, but not nearly as convenient as Uber was when it first arrived and replaced the painful taxi experience.
Additionally, the immediate public disruption of a horde of unfamiliar vehicles taking over sidewalks is much more apparent. Scootering on the streets has its own dangers as well when mixed with automobile traffic. The bike accident rate in San Francisco hasn’t changed much in the past few years. Relatively few people will brave their lives for that convenience.
Thus, these scooter companies will not have similar leverage nor political power from their small user bases to what Uber had when it fought against regulation attempts.
Based on the above, my prediction is that this service will go down into history as a fail, at least in major U.S. cities. It’s not necessarily a bad thing as these entrepreneurs will have learned a lot from the experience. They may find better, more sustainable businesses as a result. Cities are still grappling with what the future of transportation looks like, as are entrepreneurs. Scooters may not be it.
LONDON (Reuters) – Low on cash but high on hope, Iran’s technology entrepreneurs are learning to live with revived hostility in the United States and growing suspicion – or worse – from hardliners at home.
Their startups and e-commerce apps are flourishing, driven by government infrastructure support and young Iranians educated both in the country and abroad. Some are even drawing foreign investment in a way that Iran’s dominant oil industry has yet to achieve since most international sanctions were lifted early last year under a nuclear deal with world powers.
Life remains tough despite the easing of Iran’s international isolation. The atmosphere in Washington has soured again, with President Donald Trump signing legislation tightening domestic U.S. sanctions on Iran and threatening to pull out of the nuclear accord.
On top of this, Google and Apple have withdrawn some services temporarily or indefinitely for Iranian users in recent months for reasons including the U.S. sanctions.
Still, the absence of U.S. giants such as Amazon and Uber has allowed their Iranian equivalents Digikala and Snapp to grow rapidly. Many other local internet firms are following suit.
Ramin Rabii, chief executive of Turquoise Partners, which facilitates foreign investment in Iran, said Trump’s rhetoric could paradoxically help the tech sector.
“If he keeps talking about sanctions, that would increase the risk of investment in Iran, but at the same time it will keep a lot of competition out,” he told Reuters in a telephone interview from Tehran. “Major global players are not here.”
No figures are available on foreign investment in Iranian tech firms. Rabii, however, estimated it at hundreds of millions of dollars since the nuclear deal came into force.
By contrast, an expected rush into Iran’s huge energy reserves has yet to materialize. French group Total is investing in a gas project but Tehran has yet to seal any major oil deals with international partners.
Foreign investment in Iranian tech remains modest compared with regional mega-deals such as Amazon’s purchase in March of Dubai-based retailer souq.com. Amazon did not reveal the price but beat off a rival offer worth $ 800 million.
Still, Rabii sees a bright future. “Many foreign investors ask me what is the best performing sector in Iran for the next decade. I always name e-commerce and the tech sector,” he said.
After the relative isolation of the international sanctions era, the tech sector has attracted many young Iranians back from the United States, Canada and Europe. They hope to marry their experience of the startup scene with locally-educated talent.
Reza Arbabian left Canada, where he went as a teenager, to join his family textile business in Iran. But in 2012 he launched Sheypoor, the Iranian answer to Craigslist, a U.S. classified advertisements website.
Sheypoor now employs 200 and recently marked its fifth anniversary. Cash, however, remains tight.
“Many foreign companies are still hesitant and Iranian investors don’t understand the value in e-commerce. They cannot accept that they need to wait for five years for a startup to make profits,” said Arbabian.
Some outside Iran, especially in Europe where the sanctions net is not quite so tight, are nevertheless willing to take the plunge. Swedish-based Pomegranate Investment, for instance, has taken a 43 percent stake in Sheypoor.
On a larger scale, Sarava, Digikala’s main shareholder, is 45 percent-owned by foreign investors. These include Pomegranate, which raised its stake to 15 percent with a 41 million euro ($ 48 million) investment in 2016.
Following the Amazon model, Digikala has grown into Iran’s biggest internet company with a market share of 85-90 percent, according to Pomegranate. Staff numbers have leapt in the past two years from 800 to more than 2,000.
Iran came late to mass internet access but has invested heavily under President Hassan Rouhani, hoping to attract foreign cash and create more jobs.
According to the Measuring Information Society of Iran, a government-linked portal, more than 62 percent of households were connected to the internet by March 2017. This was up from only 21 percent in 2013, the year Rouhani took office.
Smartphone ownership has also rocketed. Iran, a country of 80 million people, had only two million smartphone users three years ago but the number hit 40 million in 2016.
Such developments encouraged Kamran Adle, an Iranian born and raised in London, to move to Tehran last year.
“Iranian infrastructure has dramatically improved in recent of years. 3G and 4G is much more commonplace than it was a couple of years ago,” said Adle, whose firm Ctrl+Tech invests in early stage startups and helps them to develop apps.
Some Iranian apps are copies of foreign equivalents, made out of the reach of international lawyers. But the years of isolation also forced domestic talent to be more innovative, and Adle says there is no shortage of app developers.
One such is Farshad Khodamoradi, who has designed the app for a job-hunting startup being launched this month. Unlike traditional sites, “3sootjobs” will use an algorithm-driven matching system to connect candidates with the right employers.
Khodamoradi complains about difficulties in accessing foreign tech services, many of which are U.S.-based. “The main problem is that the global services Iranian startups are using can be cut off overnight,” he told Reuters from Tehran.
He cited Google’s Firebase, a platform used to generate push notifications – such as messages to passengers that a taxi has arrived to pick them up – without their having to open the app.
This was unavailable in Iran on a number of occasions in June and July, disrupting startups including taxi hailing apps, he said. Google did not respond to Reuters requests for comment.
Although technology firms can gain exemptions from the sanctions, U.S. corporations appear unwilling to risk involvement in Iran. In August, Telecommunications Minister Mohammad Javad Azari Jahromi threatened to take legal action over Apple’s removal of Iranian apps from its app stores. Apple did not respond to Reuters requests for comment.
MESSAGE FROM OBAMA
All this seems in contrast to U.S. promises after the nuclear deal. In March 2016, in a message to the Iranian people, then President Barack Obama said ending international sanctions “would mean more access to cutting-edge technologies, including information technologies that can help Iranian startups”.
Since that message, anti-U.S. Iranian hardliners have followed the growth of startups suspiciously, branding them as vehicles of enemy infiltration. Two foreign-based tech investors have also ended up in prison.
Nizar Zakka, a Lebanese information technology expert with permanent U.S. residency, was jailed in 2016 for 10 years for collaborating against the state. He had attended a conference in Tehran the previous year at the invitation of one of Iran’s vice presidents, only to be arrested by the Islamic Revolutionary Guards Corps as he was going to the airport to leave the country.
Iranian-American businessman Siamak Namazi also got 10 years in 2016 on charges of cooperating with the United States. While under arrest, Namazi appeared in an Iranian documentary seen by Reuters in which he said his mistake had been to accept money for his startup from an organization linked to the U.S. Chamber of Commerce.
The Revolutionary Guards, a military force that runs an industrial empire, largely control telecommunications in Iran.
However, tech entrepreneurs say the environment is generally supportive. “We haven’t come across any of those governmental push-backs,” Adle said.
In the longer term, the sanctions would make using the souq.com model to cash in on Iranian investments much harder.
But Eddie Kerman, of London-based Indigo Holdings which links retail investors to Iranian tech firms, is optimistic.
“American companies like Amazon might not be able to enter the Iranian market, but there is a significant possibility that European or Asian companies buy the larger Iranian players,” he said.
Reporting by Bozorgmehr Sharafedin; editing by David Stamp
The next war on drugs will be fought by bureaucrats. A new strain of startups is making sure legal marijuana businesses are ready. The post The Pot Startups Prepping for Jeff Sessions’ New War on Drugs appeared first on WIRED.
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SAN FRANCISCO — IBM’s Watson supercomputer is coming to San Francisco to do more business with Silicon Valley startups.
The company will be opening a new cognitive computing hub for Watson, called Watson West, next year in San Francisco. IBM’s Senior Vice President Mike Rhodin announced the news during an event in San Francisco Thursday
The goal of the center is to make it easier for local developers, startups and venture capitalists to tap into Watson’s cognitive computing abilities
As IBM continues to expand its Watson business, opening up an official Bay Area presence represents a big opportunity for the company. Rhodin noted that there are already many startups whose products rely on Watson’s technology.One fantasy sports startup, called Edge Up Sports, for instance, uses Watson APIs to help users make decisions for their fantasy teams Read more…