Monthly Archives

January 2011

Robot with a biological brain

By | Innovation | 7 Comments

This Saturday I attended the Humanity+ conference in London which was packed full of incredible talks about the impact of technology on biology and what it might mean for medicine and human longevity (topics you might remember me covering when I wrote a series of posts on Kurzweil’s Singularity theory).

The second presentation was a standout from an instant impact point of view though.  Professor Kevin Warwick of Reading University has created a robot with a biological brain that learns.  We only saw videos, but they were incredible to watch.  The robot was built in 2008, so this is not new news, just new to me.

Prof Warwick and his team explain it all in the video below, but in a nutshell they:

  • grew a brain out of rat neurons – the neurons self-divided and multiplied
  • identified neural pathways with random testing
  • strengthened the pathways they found by repeat stimulus
  • connected the brain to electrodes which took input from sensors and controlled an electric motor
  • rigged it so the input from the sensors went into the pathways they had strengthened and the output from the pathway triggered the robot motor to stop/start/turn
  • put the robot in a tray where the sensors told it to turn when it got near a wall (equivalent to teaching a child to respond to a voice command ‘left’)
  • watched on as the robot got better at avoiding the walls itself – to start with it always respond to the sensors by turning, but as it practised more the neural pathways got stronger and the robot got better

Watch one of the videos below, it is amazing.

The first video is 3.5mins and has more explanation. If you are short on time the second video goes straight to footage of the robot in action and is only 58s.

The biological brain in this robot had 100k neurons. The next project is to build a brain with 30m. That is still some way short of the 100bn neurons in a human brain, but will be a hell of a step forward.

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Twitter Weekly Updates for 2011-01-30

By | Weekly Twitter digest | One Comment

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It’s a good time to be a tree – Amazon selling more Kindle books than paperbacks

By | Amazon | One Comment

image Amazon released their quarterly results yesterday and announced that they are selling 115 Kindle books for every 100 paperbacks – the first time their Kindle e-books outsold paperbacks.  Amazon lead the market here, and I doubt that any other book retailer is anywhere near this watershed mark, but mark my words this trend is only going one way.

Kindles are going to get better and it will become easier to use them to view and annotate other documents – e.g. work oriented PDFs.  Then collaboration becomes easier too.

Many people expected computers and emails to herald the end of paper, but as it turned out we all print so much that paper use has increased.  I’m thinking that trend will start reversing pretty soon.

Amazon is an incredible company, for their own brand store, for their marketplace, for the way they have pushed the Kindle, and for their cloud services.  This watershed moment for the Kindle is a testimony to the power of their vision and the quality of their judgement, and it comes as no surprise that it was announced alongside the news that they had their first $10bn quarter.

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Thick skin and sticking with a fundraising process

By | Startup general interest | 5 Comments

Jessica Livingston, one of the founders of Y Combinator wrote an article yesterday titled What stops female founders? which was partly about the under-representation of women in tech (4% of Y-C entrepreneurs are women) but also has a good slew of general advice for all entrepreneurs.

I particularly liked the section headed ‘Thick Skin’ which started with the oft repeated but worthwhile reminder that for most entrepreneurs the ability to continue on in the face of widespread criticism and lack of understanding is a pre-requisite for success.

Founders face all sorts of rejection in the early days. You are suddenly in a world where you get slapped around a lot, so if you take slaps personally it is going to be distracting. People will dismiss your idea, complain about the functionality of what you’ve built, or publicly criticize you.

What is also worth remembering is that there comes a point when the business has reached a certain scale (say 20-50 people, low seven digit revenues) when listening and taking on feedback become more important and carrying on doggedly can be a limitation.

Then Jessica turned to fundraising:

Lots of founders find the fundraising process totally demoralizing, too. When you have a hard time raising money it’s hard not to start believing yourself that your company is lame. But even successful founders often have to meet with lots of investors before finding the one that agrees to invest.

This is spot on, I have seen founders get demoralised by a difficult fundraising process, and once that happens it gets even more difficult.  VCs like enthusiastic entrepreneurs much more than ones that are tired and dispirited, even when the reasons are understandable.  That said, for most businesses it is equally important to remain alive to the possibility that there might not be an attractive funding option open at any given point in time, and to be prepared to call time when a process gets too difficult/distracting. The trick is to keep alternative options open (and there are nearly always alternative options) and then set a date for making an objective call on whether the fundraising process is likely to succeed.  Keeping the call ‘objective’ is often tough as the non-funding route is likely to be much harder work.

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How long will it take my company to raise venture capital?

By | 50 Questions, Startup general interest, Venture Capital | 11 Comments

Ninth in a series of weekly posts by myself and Nicholas Lovell of Gamesbrief which answer the fifty questions you should ask before raising venture capital.  We expect the series to run for a year after which we will collate the posts into a book.  You can find the rationale behind the series here, and the list of questions here.  We welcome your comments on any and every aspect of what we are doing.

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ScreenShot051 Up to now my posts in this series have largely dealt with the structure of the VC industry, the background if you like.  Now that the the fundamentals are explained I can turn to the more practical aspects of what it is like for entrepreneurs to deal with venture capitalists, starting with the question ‘How long will it take my company to raise venture capital?’.

The simple answer is that 6-9 months is a prudent amount of time to allow for raising money, although there is significant variation between companies (and over time).  My advice would be to allow more time than you think you need and to be honest with yourself about the extent to which you can hope to be faster than average.

Many companies that set out to raise venture capital fail in their endeavours, but usually only after trying for a year or more, but excluding these companies from the sample I would guess that the median time for a successful fundraising in Europe at the moment is probably around six months.  That means for the average company it is prudent to allow nine months from deciding to formally start raising money to the point when the cash is needed.  (I doubt there are any statistics on this as they would be very difficult to compile because startups that are planning on raising money at any point in their future should maintain an active dialogue with VCs at all times and there is unlikely to be a clear start point to a fund raising process.)

Nine months probably sounds like an awfully long time, certainly that is the feedback we get when we pass this message onto the CEOs in our portfolio, but it pays to be prudent.  Raising money in a hurry against a hard deadline (e.g. cash runs out) is a demoralising process that is unlikely to end with a happy result.  Investors can sense desperation, and it is not attractive.

You will have heard stories about companies raising money much faster than nine months, perhaps most famously Clickmango’s record of eight days to secure £3m back in the heady days of 1999, but that is very much the exception rather than the rule.  As I’ve said above the prudent course of action is to allow nine months, however, if your business/fundraising process has any of the following characteristics you might be able to get away with less (which will allow you more time to build value and get a higher valuation):

  • company and founders already well known to VCs – this is the biggest lever available to management
  • company performance is stellar on key metrics (typically either revenue or traffic growth)
  • market and/or sector is hot

A realistic assessment of these factors is critical and the vast majority of mistakes I’ve seen have been to err on the side of optimism rather than pessimism.  Most VCs have closed deals far quicker than 6-9 months and in early discussions will quote their fastest times to you, on the assumption that the company and market will be hot and they will have to move as quickly as they can – be aware that they are talking the fastest likely time rather than the average (note there is no dishonesty here – in the early stages of discussions excitement is typically high on both sides and everyone is operating on the assumption that the deal is hot).  Remember that for VCs a quick decision is almost always a less thorough one. Clickmango didn’t turn out well.

If you are lucky enough to have a super-hot company then you might manage to raise money in 2-3 months.  My recent record is 83 days from first meeting to cash in the bank and I think other VCs in London have done the odd deal a little more quickly than that.

The deal process has two parts, pre-termsheet and post-termsheet.  The post termsheet part should largely be for legals and confirmatory due diligence which shouldn’t take more than 1-2 months.  The process of getting to termsheet can be much longer, as it involves writing an investor presentation, contacting VCs, getting them interested in a meeting, scheduling the meeting, and then scheduling follow ups, and building excitement and momentum within the VC fund.  Each of these stages can take weeks.

Next time I will answer the question ‘What can I do to control the timetable/reduce the time it takes to raise venture capital?’.

Q&A sites – multiple niche sites or one big one?

By | Startup general interest | 4 Comments

Q&A sites are hot right now! Yesterday I wrote about Quora’s challenges and then today I find a great piece on Techmeme from Joel Spolsky, CEO of Stack Overflow.  Stack Overflow is one of 33 Q&A sites operated by StackExchange, and the interesting thing about that is that their model is to create multiple niche sites instead of housing all the niches under one roof (the Quora model).

Overall, Stack Overflow had a very successful 2010, with uniques up 131% to 16m per month, high answer rates and a host of new niche sites launched.  They have even set up a site/process called Area51 which governs the launch of new sites.  The original Stack Overflow site for programmers is still the grand daddy of them all, and at 1.3m questions and 1.3m visits per day it is 10x the next biggest site.

Everyone (including me) is wondering how (and whether) Quora will maintain its allure as it scales.  The nice thing about the Stack Overflow model of multiple niche sites is that the same level of scale isn’t necessary.  New sites can be launched instead of growing traffic on existing sites, which is a clever way of not getting caught up in the tension between volume and quality.

Multiple niche sites matches more naturally onto the way we organise our lives as well.  Our different offline interest communities happen in different places rather than being housed under one roof, which makes it easier to dip in and out as our interest level varies over time.

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Quora’s challenges

By | Startup general interest | 11 Comments

Over the weekend Vivek Wadhwa put a post up on Techcrunch titled Why I don’t believe the Quora hype which has kicked off a bit of a storm in the blogo/Twittersphere (perhaps predictably given the number of self professed Quora devotees, and Vivek isn’t shy of courting controversy/publicity).

A couple of weeks back I wrote about Quora for the first time, noting its recent rise in popularity and also that as its popularity grows the management will need to evolve the way the site operates to keep the signal to noise ratio in balance and (related) to keep it an interesting place for techie A listers to keep sharing content.

Vivek hits on the same points, arguing that the signal to noise ratio will inevitably get out of balance which will drive the celebs away.  By extension he argues that the site will fail to adapt:

I believe that the excess hype is destined to make Quora a victim of its own press.  The quality of answers will decline.  The people whose opinion I value, such as Quora’s #1 respondent, Robert Scoble, will simply stop posting on the site when they get drowned out by the noise from the masses.  They will turn away after having their posts voted down (so that they look less important than their peers) and being personally subjected to the types of mindless, anonymous attacks that you see in the comments section of TechCrunch.

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Quora says it will educate users on its policies, guidelines, and conventions and that it will moderate answers more effectively….. but ……. You can talk about your own products and services, and disparage others’; in other words, it is a spammers’ paradise.  How is Quora going to manage hundreds of thousands—or millions—of unruly users, when even the mighty Google seems to be losing the battle for spam?

For me these two challenges remain significant, particularly in light of Vivek’s point that to succeed Quora will not only have to deal with an influx of people and answers, but also of spam. 

Most of the commentry on Vivek’s post takes issue with minor arguments he makes and ignores this key one.  An exception is in the (inevitable) response from Robert Scoble, which he appropriately enough put on Quora.  You will have to scroll down to find his answer, but if you get there you will see that he makes the great point that the larger the audience the more he wants to write for them, thus as Quora grows it becomes more attractive for people like him.  Where that might be less true is for people like Ev Williams and Denis Crowley, founders of Twitter and Foursquare who responses to a question about SXSW launches on Quora I wrote about a couple of weeks back.  For guys like Denis and Ev spending time on Quora when it is cool and exclusive is most likely very different to when it is mainstream, by which time it will be just another media/PR outlet.

It would be interesting to see some thoughts on how Quora are thinking about the problems of evolution and how they might adapt.  So far the only ideas I’ve seen have to been to educate the users, which, whilst important, will not be enough.

Finally – Quora will have to keep the site functioning, which is a real challenge because there are a lot of realtime elements.  My Facebook feed this morning was full of people moaning about Quora being slow.  In a funny kind of way I think that being slow might be more of a problem for them than being down was for Twitter – slow kills the user experience more than ‘come back later’.

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Twitter Weekly Updates for 2011-01-23

By | Weekly Twitter digest | One Comment

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Danish accelerator Startupbootcamp goes pan-European

By | Startup general interest | 7 Comments

image Accelerators are becoming an increasingly important part of the startup ecosystem all around the world.  Seedcamp here in Europe and TechStars and Y Combinator over in the US have set the standard for others to follow.  Most of them offer startups the chance to exchange 5-10% of their equity for a small investment (typically sub $50k), a three month intensive mentoring programme and increased visibility amongst the investment community.  Typically they have one or two programmes operating on an annual cycle.

Startupbootcamp (which is affiliated with TechStars) was new on the scene in 2010 and ran its first programme in Copenhagen in the autumn of 2010.  They had a bunch of good mentors there including my friends Tommy Ahlers, Richard Anson, Michael Jackson, Hazel Moore, Morten Wulff, and last but not least Alex Farcet, who is the driving force behind the whole shebang.  It is too early to know how successful the companies will be, but initial reports from the companies who participated and investors who have seen the companies are very positive.

I’m writing about all this today because this morning Startupbootcamp Techcrunch broke the news that they will be running a programme this summer in Madrid, to compliment the one in Copenhagen in the autumn.  Next year they are planning to add London and Berlin.  That is some expansion!  If they are half as successful as Techstars is being with a similar number of programmes in the US it will mean we have many more high quality startups in Europe a year or two from now, which would be great.

Some details on how it works:

Startupbootcamp is a highly selective mentorship driven 3-month program. Teams are given 4K EUR per team member, free office space, and access to over 75 mentors including serial entrepreneurs, investors and corporate managers. The program concludes on Investor Day where teams showcase their startups to over one hundred of Europe’s most active Business Angels and Venture Capitalists.

As Seedcamp, Y Combinator, and TechStars have shown many times now accelerator programmes like Startupbootcamp can add a lot of value to very early stage companies.  If that description fits your business and you are in Europe you should consider applying.

Lovefilm acquired by Amazon

By | Announcement, Startup general interest | One Comment

image As you might have seen Amazon announced the acquisition of Lovefilm yesterday for a rumoured £200m.  Exits of this magnitude haven’t been too common of late in the UK startup scene so we, along with the Lovefilm management team and the other shareholders were very happy to see this deal completed.  Particular congratulations go to Simon Calver, CEO, Jim Buckle, CFO and Simon Morris, CMO for building a fantastic business.  Kudos also to Will Reeve, one of the founders of Lovefilm and now a Venture Partner with us at DFJ Esprit.

There are a lot of different elements that contributed to Lovefilm’s success, but I’m going to pick out three that for me were the most important:

  • An iron grip on the metrics – an accurate understanding of customer acquisition costs, customer lifetime value, and cash flow can be hard to come by in a business like Lovefilm that acquires customers across multiple channels with different sign on deals, subscription pricing and churn rates, but it is key to cost effective scaling.
  • First class execution of marketing – Lovefilm did a great job of keeping the growth going by moving campaigns to new and more mainstream forms of media as the business grew.  The switch from online only to online and TV is a hairy one for any startup and its investors but Lovefilm kept the risk to a minimum with good creative and by staying on top of the numbers.
  • Use of M&A to become category leader – in the early days there were many competitors in the online DVD rental market and over the years a number of them came together to form Lovefilm, a process that created more value for management and shareholders than if they had all fought it out in the market place.  In web businesses scale brings value, and a clear category leader is usually worth disproportionately more than two companies who are neck and neck for first place.
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