From Silicon Valley with Love… and Hope for Free Markets


I’ve just returned home to Atlanta from spending a week in Silicon Valley at a program called Founder Institute. Basically FI is a bootcamp for founders of mostly tech startups. We were a pretty diverse group of companies. One wants to put servers in space, one wants to help golfers establish handicaps and another seeks to help equipment rental companies join the mobile revolution. Some had raised $3 million in funding, others were doing hundreds of thousands of dollars a month in revenue while the majority were like me and running on past savings or paychecks. We were also a pretty diverse group of people with participants coming from around the world. In addition from the US, attendees came from Croatia, Australia, the Netherlands, Canada, Columbia, Vietnam and Puerto Rico. Finally, we were of a variety of ages as well, ranging from early 20’s to mid 50’s… weighing more heavily to the latter.

My goal in going out was to get a better insight into what makes for a successful startup. I’ve been working on one startup or another for 15 years, but I’ve yet to achieve what I consider a really successful exit. In addition, I was looking for angel investors to fund my latest startup, BrandScanned, a mobile rewards app for consumers, based on brands. (Think about how much of a pain in the butt it is to collect soup labels or boxtops for the various programs that provide resources to schools. Wouldn’t it be easier if they just put a unique code on the inside of each package that you could scan with your phone and the school automatically gets the points? Or how about those contests Kelloggs runs for movie tickets or Frito Lay runs for an Xbox where you have to register on their websites and type in some ungodly long number that’s hidden inside the package. Same deal… wouldn’t it be easier to just scan the codes with your phone? I think so, which is why I founded BrandScanned.)

While I didn’t come away with an investment, I came away with some great insights. The first is something I’d been told before but never really got. Success in Silicon Valley – at least as it relates to raising angel and venture capital – is very much driven by relationships. It’s your network… investors want to get to know you… want to trust you… know that you’re resilient, creative and of course, smart. And it’s more than just a cup of coffee… although that’s where it often starts. Investors usually want to know that they are not alone and that you’ve got other investors in your network. And the key to your network is, unsurprisingly… you! As such, investors are often open to making introductions, but you’ve got to sell yourself because if you’re going to create a spectacular startup, if you’re going to make them lots of money, you’re likely going to need a lot of help in the form of employees, partners and other investors… and it’s up to you to engage and inspire them.

Another of the insights I came away with was that if you fail in Silicon Valley, that doesn’t mean you’re sunk. On the contrary. It appears to be the case that if you’ve failed, that’s almost a badge to be worn as you storm into your next endeavor having learned some lessons from your previous bruising. For every Facebook that pretty much gets it right from the beginning are dozens more like Twitter that took a circuitous route to success through failure. Failure is the fertilizer that nourishes and spurs creativity, which in can and often does blossom into success.

Finally, in Silicon Valley they love to think big. Big success followed by big exits are what investors live for. If you’re interested in starting a restaurant or building a business that will do a couple million dollars a year in revenue, good luck, but Silicon Valley investors are not likely going to help you do so… although they might become customers. They want businesses that have the potential to do $50 or $500 million a year in revenue so they can have exits that number in the eight or nine or ten figures. Since investors lose money on 9 out of 10 investments they make, they need to be able to earn enough back from one big exit to cover the cost of investing in the other nine and still make a profit. So don’t expect venture capitalists to give you the money to open pool installation business…

At the end of the day, my trip to Silicon Valley and participation in the Founder Institute program made for a great experience. But this wouldn’t be my blog if I didn’t tie that experience into the larger picture.

At a time when the government seems to be doing everything it can to undermine free markets, private property and capitalism in general, it’s good to know that the spark of enterprise still exists. That people feel like they can build something. That investors and entrepreneurs are foolhardy enough to think they can change the world. And willing to take a leap of faith to do so. And not only in the United States, which used to be a bastion of freedom, but in places where you might not expect it, like Vietnam, Croatia and Columbia. The question is however, once the long national nightmare of Barack Obama and his Democrat cleptocracy are finally on the ash-bin of history, can the spark of possibilities that still exists in Silicon Valley find its way back to places like Pittsburgh, Detroit, Chicago and the rest of California, where much of the spirit of opportunity and the American Dream seem to have been replaced by a populist economic fascism seeking to “fundamentally transform the United States”? Sadly, that the cancer of progressivism seems to have infected much of the country despite the fact that the American convergence of free markets and limited government have driven a greater advance in prosperity around the world any system in history. Nonetheless, perhaps the Silicon Valley mindset of unabashed opportunity is the canary in the coal mine that suggests the American Dream may still be alive, despite even the tech crowd’s distinctly liberal, big government leanings. Only time will tell.

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Interesting read even for this non-techie brain.
Last weekend Fox Business had a John Stossel special about how much better the private sector does various things over when the gov’t does those same things.
FEMA got a drubbing!
Seems FEMA take huge amounts of money and basically spends it all on themselves; their snazzy hotel rooms, great meals, fine wines, vaca times, paperpushers and so on. (Like the GSA got caught doing.)
Meanwhile Red Cross and individual local churches as well as other people who just have skills and show up do all of the actual disaster clean-up, barn raising, feeding, clothing, sheltering and so on.
These private organizations are not huge and slow but rather are small and fast.
People who relied solely on FEMA for help after hurricane Sandy are still waiting! Some had even been accused of taking too much help and are being forced to pay FEMA back!

Great stuff.

What’s interesting to me is to see the startup or entrepreneurial culture that has developed. Some places like Silicon Valley and Boston have a history of providing an environment where startups are a common thing. And this culture has been spreading out to other cities and communities. The result is that people with new ideas can get the help they need to launch their idea, and venture capital has improved means in getting to where it is needed. These small ventures are critical to job growth in the future.

Meanwhile, the State is trying to crush entrepreneurs. The result is that the number of startups is one third of what it was just a few years ago. The impact of this on future growth is going to catastrophic.

Vince, congratulations for having the vigour and resilience it takes to be an entrepreneur — particularly in today’s very confused environment, so lacking in understanding of what freedom means, and what free markets means, and what capitalism is and isn’t, and etc. . . . We need to encourage as many entrepreneurial endeavours as we can if we are to continue to live in a stable and self-sufficient society. The trend right now is not good, mostly from rampant ignorance.

Couple of thoughts for you on Silicon Valley, or what it has come to be. Sandhill Road, Menlo Park, has become a valley of massively wealthy venture companies and individuals which act more like sheep than creative, or inspiring risk-takers. They make their moves in groups and are all connected to Wall Street bankers to make sure they find extremely profitable exits for themselves. Money is everything — friends, not so much. They don’t invest IN friends, but they invest WITH acquaintances, to share the risk and due dilli, etc. They’re not as bright as you are, so don’t be intimidated. Too many of these guys also got very, very lucky, but they don’t think they did. They are convinced it’s because they are brilliant and talented. Meanwhile, they sit in walled estates, riding around their spreads on horses they don’t understand, and need experts like Skook to help them.

If you are going to attempt to attract them to your project, the best approach, IMHO, is not to approach them directly, other than to “drop the hanky,” using PR, once you have proof of concept. Then you’ll be able to negotiate. You can only negotiate if you have a strong hand and they want what you have, otherwise, all you’re doing is “selling, selling and selling,” and that’s not negotiating. This applies not just to Silicon Valley’s Sandhill Road, but to all venture capital you might approach.

If I understand what you have developed correctly, you seem to have developed a very simple and easy to use application, and you’re addressing a known market, loyalty and coupon programs. As you know, simplicity and ease of use are critical to both your corporate clients and your end-users – that’s a major plus for your company.

How to make your “hanky” shiny and bright — if you can, in this case, find a few customers in your home city who are regional, sign them up, gift them the app for a few months or for a year, and then find slightly bigger clients using the first few for credibility. THEN, go and see every writer you can buy a coffee for in your county who might write an article on your venture. ONE of them will bite and you will turn that article in whatever media outlet it publishes, into 2 articles, and into 5 and into 10. That will help you create a “perception” and that perception will help you produce Cashflow, and/or attract investments from sources you might not have considered.

I’m sure I’m not telling you anything you don’t already know, but it’s just a reminder. And all best wishes in this endeavour. You’ll make it work.

This is a nice and different article. We need to stay focused and remember the roots that made America strong and unique. Articles like this illustrate the spirit and resourcefulness of the American entrepreneur. Good luck with your venture!

Thanks all!

@James Raider:

James, I definitely think you’re right about a lot of VC types, particularly with the guys who think they are geniuses… although some certainly are. What’s more, one of the reasons they have so much money to spread around is that Wall Street has been going gangbusters thanks to Quantitative Easing and the feds squashing small business competition. One has to wonder what will happen to venture investing once the bubble on Wall Street pops and investors start calling for their money back… You are right also about having s strong hand. I don’t quite have that yet, but I keep trying to plow through the patches until I get there…