Rethinking My Startup Investment Strategy

Crains just published a piece on my new venture Southbox and how we’re experimenting with the early-stage investing and incubation model. An excerpt:

When you are an investor in tech startups, to a degree, you operate in a particular way, which is what I had been doing over the past three years. I was putting money into companies that were all at the early stages, where they were trying to get their first customers, build their product and make it sure it worked, and all that other fun stuff that happens when you are trying to start something from nothing.

The observation that I made towards the end of last year happened when I was working with a much larger fund that had probably 300 companies in its portfolio. As I was looking at all the companies that didn’t make it, I noticed that they all seemed to fail for the same reasons. They didn’t have the ability to share resources beyond capital, and were sort of left on their own to find their first customers, hire their first software developers — all of those early stage problems.

If you’re a VC, and are effectively funding all of these companies to solve for all the same problems, it’s way cheaper for you to allow the companies to share resources and collaborate. 

Read the full story at Crains

Six Posts to Read Before Reaching Out to a VC

I get a lot of emails from young, upcoming founders who want advice, help, funding or many other things. If that’s you, or you’re about to reach out to me or some other investor please take the time to read the following articles first:

  1. Jason Calacanis does a great job of telling people what it takes to get funding with his post “When You Should You Reach out to Investors?”
  2. Fred Wilson does a great job of explaining how to build a minimal pitch deck and why that’s often preferred in his post “Six Slides”
  3. Steve Bowman offers an interesting counter-point to Fred about doing a longer, more elaborate, pitch deck.
  4. Guy Kawasaki is somewhere in the middle on the subject.
  5. DJ Patil writes about what it takes to succeed in his post “Failure is Our Only Option”
  6. This post over at Less Wrong tells you to just “Shut Up and Do The Impossible”

The first four of these are pretty quick reads, the last two are longer reads. Still they are worth it. So read them. If you can’t invest a few minutes of reading into your company, you’re either wildly successful already or you’re doing something wrong.

The last one I’ll add is one from myself for entrepreneurs who feel they are at a disadvantage because they are a minority.

Guess what? You are and no one gives a shit.

Being a great entrepreneur means tearing down the hurdles that others put in your way, no matter that they are. Here are my even more candid thoughts on the matter: “The (Bad) Advice You’ll get as a Minority Startup Founder”

Updated 6.8.2017: Changed ‘Five Posts’ to ‘Six’ and added Guy Kawasaki’s

Join Myself, Media and Tech Executives at Pivot Con 2015!

I’m excited to be hosting the upcoming Pivot Con 2015 at the Dream Hotel in New York City. I’ll be accompanied by executives and staff from the industries leading media companies to discuss the future of tech and media.

The pace of business transformation accelerates year over year as new
technologies emerge and best practices evolve. Pivot exists to create a
community of leaders from innovative brands and companies, and to
provide this community with a roadmap to navigate the increasingly
complex modern business landscape. From product development, to customer
experience, to internal operations Pivot provides the insights and
connections you need to remain agile and impactful in a Social/Digital
world.

The one-day conference will combine dramatic keynote
presentations with interactive roundtable conversations to leave you
inspired and ready to take action.

Join us at the Dream Hotel in New York, NY on October 29th for Pivot Con!

Grinding

Yesterday I had the pleasure of giving a talk at Startup Grind Philly.
Startup Grind is a nationwide speaker series that invites some of the
best investors, entrepreneurs, and innovators to a fireside chat style
session – basically a mixture of interview, Q&A, and presentation

In the session I spoke about my journey, from my initial foray into making comics, then into the music industry, then film, then tech.

But mainly I gave advice to upcoming entrepreneurs that I’ve learned over the years. Here is the TL;DR version….

  • Don’t let other people define success for you. Build something that works and that you’re proud of and own that as your success.
  • Build a strong company first, worry about investors later. You can torpedo a solid business neglecting operations and sales to raise capital.
  • Investors are fickle anyways. You can have customers, revenue, and a great product and still not be able to raise capital. Investors should be nice-to-haves, not need-to-haves.
  • Do one thing well first. A lot of startups fail by trying to ‘boil the ocean’ with features and serving all possible markets. Nail one first, grow into the rest.
  • The worst thing in the world, which I learned the hard way, is to have a wide set of features for a wide set of customers. Either narrow the product offering, or narrow the customers you’re targeting, or both.
  • Diversity in tech is about “who’s in the room”. Whoever is in the room, controls who else gets in the room. It’s that simple. We have to focus on nurturing more minority and female investors who are good investors first, minority investors second. By changing who’s in the room you eliminate some of unconscious biases that exist.
  • The best way to become fearless is to fail epically at least once. If you can bounce back, you learn that failure is usually worse in your mind than it is in reality. If you can’t bounce back, you’ve still learned a valuable lesson about what NOT to do again.

Thanks to everyone who attended!

Design for Better Outcomes

What is outcome design? Outcome Design is a methodology I developed to help companies, innovators and engineers design solutions that yield better ‘outcomes’ for society.

Why does this matter? Well to quote myself, “When you incorporate risk or disadvantage as part of your design,
you’re able to monetize what was previously not monetizable.“

Most innovators focus on features or sophistication of a solution, but
orienting design around outcomes can help reduce risk, eliminate
potential PR disasters, and ultimately make companies more profitable.

Below you’ll find the talk I gave at Maine Startup and Create Week with examples of how it works.

Slides:

Accompanying Text:

As a technologist I specialize in an area of called
Outcome Design. I work with organizations to help them best understand the
potential downside of the things they make. This helps them become better, more
profitable companies.

I myself am a software developer I spent the last
decade building software solutions that help corporations and technology
companies improve the way their innovations affect society. Initially, I did
this as a consultant to organizations that literally worked in areas of
disaster response – responding to wide-scale human disaster. Organizations like
the Red Cross, World Bank, United Nations, FEMA, Department of Defense and
others.  In 2010 I was working with a
team to deploy tech solutions in response to the earthquakes in Haiti, the
floods in Queensland, Australia, and in 2011 the devastating tsunami in Japan.

However, these days I mostly work as an investor and
consultant to corporations. I help enterprises and rising tech startups improve
technologies of all sorts. Way less stressful, but equally important. 

For investors this is important as identifying and
mitigating these risks early on can add a lot of value a young company as it
continues to grow. If I invest in your company, I want to know you’ve planned
for all scenarios, best case and worst case. For larger companies this helps
them avoid embarrassing public oversights or loss of shareholder value. 

However, before I talk to you about how to designing
for better outcomes I want to put into context why this matters to me.   We are living in a period of incredible technological
achievement and innovation. Some have gone as far as referring to this period
as a ‘Cambrian explosion’ of new technologies, apps, smart cars, bio-technologies,
and I could go on. These technologies are terraforming our world both
metaphorically and literally. 

Two examples. In the literal sense, wind and solar
farms offer the potential to change our skylines. In the not-so-literal sense,
when is the last time you visited a Blockbuster
video store? In both cases, new technologies have affected the physical
world as much as the way we go about our daily lives. It seems small and
insignificant but some people’s lives have totally changed because of these small proliferations. What was once a staple of family entertainment, the video
rental store, has been upset by streaming services like Netflix or automated
vendors like Redbox. 

I give those examples as a reminder that technology
has both a tangible and intangible affect on the world around us. These are the
outcomes I’m referring to in when I use the phrase ‘outcome design’.

And yet, if you’ve turned on the news lately there are
a number of sobering reminders that in some ways much of the world hasn’t
changed at all. Why does it seem that so little societal change follows all
this amazing technical innovation?  When Tim Berners-Lee and his peers at CERN created the
foundations of the Internet in the late 80s they imagined the internet would
become a great equalizer for communication, for commerce, for marketing, and
education. They succeeded exponentially, in ways that they couldn’t have even
hoped to have imagined at the time. As the internet developed others built on
that legacy, hoping that the internet would be come a democratizing force
globally.

Its estimated that since 1991 the Internet has
generated $19 trillion dollars in value to the global economy, and even that
number that is probably a gross underestimation. The internet of things is
projected to add ten times more than that!

Yet we know that the internet has also been a
disruptive force that’s destroyed as many industries it’s helped to create. An
article in the UK recently said that there are 10 million jobs at risk due to
the advancement of internet technologies.

Software is eating the world venture capitalist as
Marc Andreesen once famously said. By this, he meant all industries are being
impacted by the internet. It doesn’t matter if you’re a doctor, a lawyer, a
music producer, an architect, a barista, some form of connected technology has surely
cemented itself in your professional or personal life. It’s true, software is
eating the world and the internet is eating software.

But every invention ever made has duality. A hammer
can be used to build a house or it can used to bash in a skull. A stone can be
used to build a wall or take down a giant. The internet can be used to bring
people closer together, or tear them apart.

The problem at most technology companies is that they
forget about the downside of innovation until it becomes a law suit, public
relations disaster, or a competitor exploits to oversight to steal business. 

So we’ve established that technology has the power to
terraform the world. We know this can be for better, we often forget it can
also be for worse.  

This is not a moral argument, although it certainly
could be. I help companies maximize their value by avoiding risk as part of the
design process. 

Ultimately, when you incorporate risk as part of your outcome design,
you’re able to monetize what was previously not monetizable.

Maine Startup and Create Week 2015

I’m embarrassed to admit when TEDster Adam Burk reached out
to me to Portland, Maine to speak Maine Startup and Create Week 2015 a few
months ago, I had no idea that Portland, Maine even existed. Everyone knows
Portland, Oregon but Portland, Maine was about as familiar to me as Paris,
Texas is to most people. Meaning not at all.

So I’m glad I decided to come for a number of reasons, but
the first is I learned about this new great place. On top of that, Portland, Maine is
pretty awesome (in the summer). I will definitely revisit. Startup and Create Week was a unique conference in that it wasn’t all tech oriented, there was also a food track and a general entrepreneurship track which brought in a lot more people than those who might attend the typical tech conference.

While there I was interviewed by the local NBC affiliate WCSH 6′s Caroline Cornish about my work as an investor and my ‘outcome design’
methodology which I use to help companies mitigate the risks of innovation.

You can view my interview on WCSH6 here.

Later I was interviewed by the team at the Knack Factory which can be viewed here.

The Unintended Consequences of Innovation

This past fall I had the pleasure of being invited to TED Global in Rio de Janeiro to deliver a talk on the unintended consequences of technology and innovation.

‘Trickle-Down Technomics’ is a phrase refering to the general assumption many technologists and engineers share – that if they build things for a small group of individuals, eventually the benefits will find their way into all communities. However technical innovation behaves a lot like wealth, the benefits tend to consolidate for the few. As technologists, we also bear responsibility of being ethical and empathetic innovators.

While clearly we can’t account for all unintended consequences we can be more thoughtful about the things we build and how these things affect the lives of others.

I always write my talks before I deliver them, the original written version appears below.

* * *

As a serial tech entrepreneur who’s worked on civic activism projects all over the world. I’ve been a champion for ‘tech for good’ for many years.

For instance, in East Africa I worked on software that circumvented government surveillance in 2010. Later in North Africa, I worked on projects that help activists stay connected when governments used information blackouts as a means of population control. And I’ve used data and visualization to assist agencies responding to disaster.

So many of us today are obsessed with the virtues of technology. We tell ourselves things like“if we build great, things will improve for everyone.” We like to think that technologies we design to aid efficiency and share information among the few will eventually help the many. Tech, we tell ourselves, will find a way to make the world a better place.

But over the years, as I worked on these projects I was always nagged by the question – what if we’re wrong? What if, in some cases, the consequences of the tools we build (intended or not) are actually making it worse?

I call this blind optimism for the net benefits of innovation ‘trickle-down techonomics’. Much of the tech industry throughout the world operates the same assumptions. That is – invent great technology for those who can afford it and eventually those innovations will find their way out into the rest of society for everyone to benefit.

But, Innovation doesn’t always trickle down. In fact, technology is remarkably like wealth – the benefits seem to increasingly consolidate in the hands of the privileged.

Is this actually the case? Perhaps, perhaps not, but here are a few examples we can learn from…

1- There’s a movement to make our populations healthier through connected devices like Apple’s HealthKit which tracks our steps & movements throughout the day in the form of a $400 dollar watch or iPhone. In turn, the medical industry in the United States is rapidly getting digital ready, building solutions that can connect with these devices and learn everything about an incoming patient in seconds.

But what good is a $400 connected watch or phone that tracks health to someone who can’t afford them. Where should the priority for technology fall for people who can’t afford to send their children to school with enough money for lunch? More importantly, how will doctors and hospitals respond to patients who don’t have these devices. When hospitals come to expect 1- click patient entry what will service be like for people with less resources, but who require the same (if not more) medical attention? Will the digitally visible be preferred over the digitally invisible?

2- Crypto-currencies like BitCoin are a revolution in currency. Never before has the world had a more efficient way of moving money across the globe. It could revolutionize remittances to poor countries, which account for over $436 billion annually as expatriated loved ones send money back home.

But if digital currencies do take off, they won’t take off evenly. No invention ever does. What happens to the value of any regional paper-based note when borderless digital currencies become the preferred currency?

Let’s also not forget that the barrier to entry – a connected digital device or phone – is far higher with digital currencies then simply holding paper currency in one’s hand.

3- Recently I was at the Free Library of Philadelphia which, like many libraries around the world, is facing an existential crisis. With public funding diminishing and costs rising, libraries have to downsize to stay open. Part of their strategy includes digitizing literature, text books, and magazines and moving them to the digital realm.

As the analogue world falls away, and brick and mortar libraries shut down, information will become available ONLY in digital form. Only those who have access to digital devices and connectivity will benefit. We have to ask ourselves what level of access will kids who aren’t growing up in ‘digital or mobile first’ households retain? What will their education look like?

4- One final example, there have been efforts across Africa and Asia to digitize land records of ownership to create a more transparent history of who legally owns various plots of land which are often in dispute due to poor record keeping, migrant populations, or conflicting claims.

Ironically, these repositories have become a boon for foreign investors, venture capitalists and wealthy individuals who can mine them and act on the information far faster than the typical citizen who doesn’t have access to the internet.

Like many civic technology efforts, these land record portals though well intentioned, have fallen short when it comes to ensuring the outcomes match the intent.

What these examples share in common is the unintended consequences of good intentions.

Technologists tend to prefer efficiency over efficacy. We tend to focus more on doing things quicker, faster, cheaper regardless of the consequences. But we have to change the fact that some of us have more empathy for the innovations we create than the lives that are ultimately affected by them. This is our responsibility as ethical technologists, hackers, makers, engineers, investors, and CEOs.

In the late 90s there was a big push for a focus on ethics in the financial industry. In 2014 I think we’re long overdue for that same level thoughtfulness when it comes to technical innovation –
an ethical pledge from those of us who make the technologies that increasingly control the world.

We no longer have a problem with the rate at which we innovate. We have a problem with the rate at which we make those innovations more accessible to the many.

So I encourage you, when you’re working on the next revolution in technology, that you think about those who don’t have access, those who aren’t your ideal user, and the potential unintended outcomes of the things you create.

The real innovation is in finding the way to include everyone.

Coffee and Capital (Feb 10)

I’ll be speaking at the University City Science Center at Philadelphia February 10th, 2015 to meet with a small group of entrepreneurs over coffee and a light breakfast for an informal Q&A session about funding and pitching. Sponsored by Dolfinger-McMahon Foundation.