Tag Archives: Silicon Valley

Feb14

Growing Your Business in the U.S.

Posted on by
Standard

By Sheridan Tatsuno, Executive VP, TruNorth Global; Partner, DFM Ventures

The U.S. is probably the most competitive market in the world because of its openness and rapid innovation. Offering great products and services is not enough, even for U.S. companies.  For newcomers, the challenges of language, regional and cultural diversity, and state and local regulations can be bewildering.  What is the best way to start growing your business in the U.S.?  What are the pitfalls?

Build Local/Sell Global.  For young companies, I recommend developing your products and services initially at home to maintain R&D control, minimize costs, and get user feedback.  Keep your engineering team at home since U.S. costs can be very high.  In late 2010, Rovio’s Chief Marketing Officer Peter Vesterbacka said Rovio did all engineering in Finland since Silicon Valley salaries were about three times higher, about $180,000 vs. $60,000 for a comparable engineer. Rovio had a hard time competing with Google, Apple and Facebook in attracting top Silicon Valley engineers since they have a wide choice of higher-paying jobs.  By contrast, Finnish engineers are more loyal, especially due to the massive Nokia layoffs.

To minimize costs, do your engineering initially at home and hire sales and marketing managers in the U.S.  Listen carefully to your U.S. marketing/sales team and avoid “remote control management” where your headquarters makes all the final decisions. A San Jose State University professor found a 85% failure rate among foreign companies deciding marketing/sales from home. Financial and legal issues can be handled by local firms.  In terms of finance, legal issues and marketing/sales, “do as the Romans do.”

In 1994, I advised Nokia’s digital phone launch team, which consisted of about 50 young people between 21 and 27 years of age, on the consulting team of Strategos, headed by London School of Business Professor Gary Hamel.  They had little or no experience marketing overseas, so I advised them to hire the top marketing managers in each target market, train them in Nokia’s technologies, then do what they suggested.  Nokia was doubtful about their chances for success since no Finnish electronics company had ever succeeded abroad.  But they listened to their offshore marketing managers and become #1 in 3.5 years, beating Motorola, which sent shock waves through Silicon Valley.  So it is possible for newcomers to dominate global markets in several years with the right products and brilliant marketing and sales. 

Rovio is the latest example.  Peter Vesterbacka said Rovio thinks big and global. They want to become the next Disney, so they’re building the Angry Birds franchise into movies, webisodes, theme parks, etc., like Disney did.  Recently, they launched a Star Wars version with Lucas Entertainment.

Minimum Viable Company – What is the minimum you need to get started?  Initially, you can set up operations by traveling to the U.S. for up to 90 days to find an attorney, accountant, and a marketing/sales representative or manager.  Your marketing/sales rep can work from home.  If you want local visibility, you can rent a desk at one of the many incubators or accelerators, which charge around $300 to $400 a month for a desk and access to WiFi, conference rooms, and events.  Local startups can suggest the best deals.  Don’t waste your money on trying to look impressive.  Save your money for airfare and showing your product at the many local events.  Make sure to collect business cards and always follow up immediately to build your visibility and brand.  Think lean!

Professional Service Costs – Legal and financial advisers can be very expensive, especially for large firms that charge up to $500 or more per hour.  To minimize your costs, ask local entrepreneurs and professional associations who can recommend small firms or individual professionals, which can cost half as much. 

Marketing/Sales Expenses – These costs are variable since everything is negotiable.  Although you can find marketing/sales reps willing to work for commission-only (success) fees, it’s easier to find a rep if you pay a retainer of $2,000 to $3,000 a month, plus sales commissions.  For startups, you can offer stock options, typically 1% to 10%, which can be “vested” (given) to the rep over four or five years.   Determining sales incentive programs is probably the most challenging since there is so many options mixing base salary, sales commissions and stock options.  Get advice from other entrepreneurs to get a feel for the incentive rates.  If you hire someone, there are plenty of HR (human resource) firms that can quote you current salary rates.  

Even for U.S. companies, finding and keeping great marketing/sales people is very difficult but U.S. professionals will work initially for less money if you have a great product/service and they have much freedom and autonomy to set marketing/sales strategies.

Important Qualities for U.S. Success – Listening carefully to local marketing/sales managers like Nokia initially did and acting boldly like Rovio are critical since U.S. companies are much louder, bolder, aggressive and fast.  Think of the U.S. like the Olympic Games; only the top teams win.  To survive, let alone thrive, you must listen, be bold and constantly innovate.  Avoid becoming smug like Nokia.  Complacency kills!

Podio of Denmark is the latest success.  I met its CEO a year ago when he searched for angel funding, but I told him it would be difficult to raise if he had no local presence and team.  He marketed himself actively and was recently acquired by Cytrix in less than half a year.  Not all startups can get acquired that fast, but if you have great products, you can always find buyers in the U.S. since we have so many M&A (mergers and acquisitions) firms and aggressive companies seeking hot technologies. 

Going public is much more difficult, even for U.S. companies, so plan on generating sales fast and building incrementally. Your goal should be to build a solid company, not just seek M&A or IPO.  Most U.S. companies remain private to maintain control.  

Solid Business Model – The biggest error that foreign entrepreneurs make is to focus exclusively on their products and services, not business models.  U.S. investors want proven business models that have been validated by customers, either three or four enterprises or several hundred thousand consumers.  Without market traction or validation, it’s very hard to raise angel or VC funding. So focus on finding customers first!

Initial Startup Costs –  To get started in the U.S. market, allocate at least $20,000 for air travel (2 trips), lodging (couchsurfing with friends is best to save money), event fees, and marketing/sales retainer salaries for six months.  Your goal should be to find corporate clients or generate consumer sales as fast as possible to validate your business model.  Ask startups about their costs; many entrepreneurs are fairly open since they want to learn best practices from other startups.   

If you’re not getting customers within two months, immediately revise your product plans and tailor your product or service based on customer feedback.  Don’t waste time trying to raise angel money until you get positive feedback.  Basically, think like a “lean” company:  move fast and keep your costs as low as possible. For ideas, ask startups from your city who are expanding into the U.S. how they’re doing.

Entering the U.S. market is only for bold entrepreneurs and companies who are willing to work hard, minimize their costs, and work closely with their customers.  You can succeed if you constantly revise your product or service until you get positive feedback, then start building since investors will become very interested. 

Dec22

3D Printing: How Soon and How Big?

Posted on by
Standard

Recently, 3D printing has become a big topic in Silicon Valley because of the rise of “boutique manufacturing”, which combines engineering and IT design skills in new ways.  Desktop 3D printers from Mojo and ThingLab have stirred the imaginations of hobbyists, developers and researchers alike:  http://binged.it/VYT9BI; http://binged.it/UYjfpt

Are these just hobbyist toys or will they revolutionize business and society as visionaries believe?   The truth is somewhere in-between.  Short-term, 3D printers will probably be limited to leading-edge ventures, researchers and other early adopters, just as the PC and desktop publishing were during the 1980s.  However, over time 3D will go mainstream, especially if Apple developers introduce 3D design templates and apps. 

What does this 3D printing future look like?  How soon will it be? 

As Wikipedia notes, 3D printing is already used in a few early adopters in jewelry, footwear, industrial design, architecture, engineering and construction (AEC), automotive, aerospace, dental and medical industries, education, geographic information systems, civil engineering, and many other fields.  Source:  http://en.wikipedia.org/wiki/3D_printing

To see examples, use Google and Bing image search for 3D printing. 

The early applications are rapid prototyping and rapid manufacturing.  In December 2012, at a Silicon Valley Innovation Institute program (www.svii.net), a local designer from Ponoko showed a variety of artificial legs created using 3D printers, including designer legs with mesh designs.  http://blog.ponoko.com/wp-content/uploads/2011/11/deb_5527_FPO_0.jpg 

Among hobbyists, ornaments, gears, coat hooks and other simple designs are common. But software is rapidly enabling more complex designs.  The open source Fab@Home project has developed printers for general use and , as Wikipedia notes, research into advanced applications is moving fast. 

My friend Steve Naegele raises an interesting question in his blog.  What about rapid copying?   How can designers protect their 3D designs from piracy?   http://naegeledesign.com/emptypageblog/

As I mention in his blog, I think copyright and patent laws will be extended to 3D printing.  Designers could submit their files, which would be checked by users by accessing 3D design databases via smartphones.  Like chip designers today, designers could embed secret codes or design mistakes into their files as a way to catch copycats.  There would be no guarantee that this will protect 3D designers, just as designers are quickly copied today, but at least the legal framework is in place under WTO and international copyright laws. 

So how will 3D printing affect you and your family?  We may see a 3D printing boom, just like the desktop publishing boom, during the next decade.  Many entrepreneurs will build businesses around 3D printing services. Your kids will print out their own toys (Lego will make a fortune!). Small printers and manufacturers will install 3D printers to make and distribute popular products, with authorized dealers selling Star Wars, Spiderman and other franchise toys and accessories.  Instead of storing and shipping products, toymakers and other consumer companies will set up local 3D printing centers worldwide, run by subsidiaries or franchisees, to beat competitors to the market. The Christmas season, which is currently a huge bottleneck for gift manufacturers, will be where companies make huge profits since it will reduce their time-to-market, shipping and storage overhead, and marketing costs.  They would shift from produce-in-advance to print-on-demand.  Production would be determined by users, not manufacturers.   

With global networks of 3D printing centers, small businesses could go global and become major corporations overnight if they develop hit products.  3D printing will look more like Hollywood blockbusters; a few will dominate, while most designs will remain small in the “long tail.”  

So that’s my vision for the future of 3D printing. It’s fun thinking about the future and how it will create opportunities for many people.   I welcome your comments, ideas and suggestions.  

 

Nov26

Beyond the PC Cliff

Posted on by
Standard

Recently, Dell, HP, Intel and AMD announced lower earnings due to slumping PC sales.  Will this PC slowdown be gradual or abrupt?  As the title suggests, I think it will be a sudden cliff, with PC hardware, chipmakers and software vendors all toppling over together due to the rise of smartphones and tablets.

Where is the tech industry going?  Recently, I posted ”Beyond the PC Cliff” on my friend’s blog, which explores some of the emerging trends and industries coming — the Next New Things:  :http://www.cmodisrupt.com/#!blog/csdn

What new business opportunities do you see in the next few years?

For ideas, see the “Saving Intel” chapter in my new e-book:

http://www.barnesandnoble.com/w/in-the-valley-of-digital-dreams-sheridan-tatsuno/1111778075

Nov21

Can Intel Recover?

Posted on by
Standard

Intel and other PC-related companies face a “PC cliff” during the coming years as the iPad and tablets undercut PC sales.  With PC microprocessor sales declining, can Intel find another cash cow to drive its next generation of processors?

An Intel researcher said the company is focused on the “Internet of things” — embedding processors into everyday objects that Intel forecasts will reach billions of units a year.  My friend said that Intel has pretty much written off tablets and smartphones, which are dominated by ARM and Qualcomm.  Can Intel make the shift to machine-to-machine (M2M) businesses? And will the profit margins be enough to sustain its staffing, factories and overhead?  That’s the biggest question facing the valley now.

In 1985, I advised Intel to drop its memory business, which it had lost to Japan, and shift to PC microprocessors, which I wrote about in the chapter “Saving Intel” in my new e-book, “In the Valley of Digital Dreams.”   For a copy, check out Barnes & Noble:

http://www.barnesandnoble.com/w/in-the-valley-of-digital-dreams-sheridan-tatsuno/1111778075

Mar6

Job Creation Through Vertical Cloud Services

Posted on by
Standard

Job creation is probably one of the biggest immediate challenges facing most regions and nations.  With the global economy tilted toward benefitting the top 1%, the other 99% are asking:   How can we find and create jobs in this new global economy?  Manufacturing and even service jobs are vanishing at an astounding rate due to productivity gains and slowing global growth.  Where are the new jobs and how can they be stimulated?

I think the secret to the New Global Economy is “intelligence” — the application of information technologies (IT) to existing industrial sectors, not just to cut production costs, but to add value to products and services. 

For example, Maker Fairs for inventors are proliferating and now partnering with IT developers to develop new types of smart devices aimed at specific sectors, such as the blind, aging, dyslexic, paraplegic, etc.  There are plenty of sectors where smart solutions are badly needed, whether it be fresh water, sanitation or K-12 education.  The new jobs and industries will be created by those innovators who, as my mother once told me, “find a need and fill it.”

Back in the late 1990s, my Silicon Valley friends lamented that the age of the garage inventors like Apple was over.  The future would be controlled by major corporations.  Meanwhile, a Taiwanese American couple were building home WiFi sets from off-the-shelf parts purchased at the nearby electronics stores.  Their little startup, Linksys, was later acquired by Cisco Systems for $340 million.  My friends said “I could have done that!”  But the problem is that they didn’t because they thought it was impossible. 

Belief is probably the biggest obstacle facing innovators and job seekers.  If you believe something is impossible, you will not try and thus not innovate.  Others will do it first.  That’s probably the biggest lesson I’ve learned from growing up in Silicon Valley.  The future belongs to the believers and builders, not the skeptics. 

So how can people build businesses on the cloud?  Right now, sector-specific cloud services are booming because Facebook and Linkedin are too generalized, rigid and inflexible.  People want more flexible social and business networks where they can build community, attract advertisers, sell merchandise, etc.  In other words, people are seeking greater control over their business and social lives.  I think the future belongs to innovators who create specific business and social networks to address their main concerns, whether it be raising money for their local school, stopping suicides, or helping old people.

In Silicon Valley, we have have a favorite saying from Alan Kay, former Apple and Disney innovator: 

“The best way to predict the future is to invent it.”

May you invent the future by building your own cloud services and smart devices! 

Aug18

U.S. vs. European Entrepreneurial Thinking

Posted on by
Standard

In today’s Wall Street Journal, Kristof De Spiegeleer, CEO of Incubaid, a Belgian incubator argues that Silicon Valley startups are prone to a superficial approach because of the cultural and market forces in play in America.

http://www.forbes.com/sites/ciocentral/2011/08/16/do-europes-startups-think-deeper-than-silicon-valleys/

While it’s true that U.S. ventures tend to seek the “low-hanging fruit” to survive because of the intense competition, what De Spiegeleer is really addressing is the unipolar nature of the U.S. market vs. Europe’s multipolar markets. It’s easier to roll out products and services to a single, large U.S. market compared to a variety of European markets. Thus, European companies must find commonalities at a deeper level to bridge the cultural, language and economic gaps. But a multipolar approach is not necessarily better; it’s just an appropriate approach to a multifaceted European market. Fast, incremental innovation is more appropriate for the hyper-competitive, unipolar U.S. market.  But even in the U.S., marketers need to tailor their brand when selling to the fast-growing Hispanic and Asian Americans markets, so even the U.S. market is becoming more multipolar due to strong immigration.

In Silicon Valley,”Be fast or dead.” Most ventures die for lack of momentum and drive, not deeply-conceived technology. Pursuing a slower European approach might work in Europe, but in Silicon Valley that venture would be passed by fast-moving competitors. Google faced 47 search engine competitors, but it marketed itself much more aggressively.

One company that has learned how to market effectively is Rovio, the creator of the popular Angry Birds game. Started in Finland, it’s now growing fast in the U.S.. Rovio shows that European startups can start as “deep” companies (Rovio developed Angry Birds by studying its previous games) and grow fast in the U.S. by adopting a “superficial” (horizontal) U.S. marketing and development approach.  Thus, Rovio demonstrates that neither approach is better than the other. They’re just different adaptations to different markets or, as the saying goes, “Evolve or die!”.