Nic Brisbourne's view from London on technology and startups

The average musician gets $23 for every $1,000 of music sold

By | Startup general interest | 4 Comments

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I used to write a lot about the music industry but it because less interesting once Spotify became dominant and everyone accepted that streaming is the future. This chart got me excited again though. Pop stars regularly complain about how little they get when their music is streamed, but they are mistaken in blaming the streaming services. It’s the labels that have the biggest take.

The $1,000 we are talking about here comes from music sales – e.g. CDs. As you can see the label takes $630 from that $1,000 and the band gets $230 which is then shared with their advisors leaving band members in a typical four person band with $23 each.

I saw the chart on Techdirt, a site dedicated to exposing old media rip-offs and BS. It’s great to see them still going. After the chart they go on to explain how even $23 is recoupable against any advance the band might have had, so the true situation is even worse.

Remarkable.

Good middlemen in most modern industries have a 10-20% stake. AriBnB, eBay, Booking.com, TripAdvisor and many others are in this range. Companies that take a 63% cut are open to disruption and it’s hard to see how the labels have held onto their position, much less how they will sustain it.

Spending money is like getting fat

By | Startup general interest | No Comments

“Spending money is like getting fat” is a sub-title from a great Techcrunch post about the dangers of raising big rounds. I love the analogy. As with weight, burn rates are very easy to increase but take large amounts of discipline and suffering to decrease. Moreover, just as food is hard to resist when it’s on the table in front of you, it’s hard not to spend money once it’s been raised. Not least because investors and employees will expect you to spend it.

Big rounds have their place of course, and at the margin we nearly always advise companies to raise more money than less, but radical over-capitalisation or accepting large a investment just because it’s easy and the terms are good is generally a mistake.

It sounds trite to say ‘don’t get fat, stay lean’ but it’s harder for companies to stay lean than you might think. The metaphor is with our bodies, but we can pretty quickly see fat on our bodies. That’s not always so in startups where progress is hard to measure and larger burn rates increase the sense of momentum.

The first sign that teenage social media use will stop scaring parents

By | Startup general interest | 3 Comments

I’ve long held the opinion that scaremongering about teenagers’ use of social media is more a reflection of parents unease with a new medium than anything else. There is, of course, good and bad in everything and teenagers do make mistakes and hurt themselves on social media but that’s true in the offline world too and not a reason to throw the baby out with the bathwater. To my mind it’s very clear that social media is net positive for society in a big way. And, the genie is out of the bottle now anyway.

A historical perspective is useful here. The advent of every new form of media has been met with widespread fears about the damage it would do to society before being adopted into the mainstream and ultimately regarded as normal. That was true for books, cinema, TV, and mobile phones and in time I sure it will be true for social media.

Reading an NYT write up of recent Pew Foundation research into teens social media use I’m seeing the first signs that we may be approaching that point now.

Amanda Lenhart, associate director of research at the Pew Research Center and the lead author of the report is quoted as saying:

Adults have tended to see time online for teenagers as this frivolous, time-wasting thing that’s just entertainment. But what we found is that it’s crucial for teenagers in forming and maintaining these really important relationships in their lives.

Also interesting is the thought that hanging out online is replacing hanging out offline because parents are less willing to let their children go and meet their friends in public spaces, usually due to safety concerns. This line of thought suggests that social media use by teens is good for them. Well over half of teenagers say they have made new friends online and that social media use brings them closer to their existing friends. Hence they are very happy with their social media use. Otherwise I guess they would do something else…

All this mirrors what I see in the real world. My daughter starts a new school in September and when we went to meet her new classmates the first thing they all did was jump on a Whatsapp group together. Since then they’ve been bonding virtually in a way I think will make her first day much less scary.

I think that’s great, but other parents we know aren’t so sure. With more surveys like this and the mainstream press adopting a more positive tone I think that will change.

On a side note I think that virtual reality may be the next technology to scare society. What happens when people start disappearing inside virtual environments for hours at a time? Whilst their muscles waste? That can’t be good, surely…. :ironicwink:

Three common mistakes founders make when analysing other companies

By | Startup general interest, Uncategorized | 3 Comments

Drawing inspiration from other companies is an important part of every entrepreneurs toolkit. To misquote Isaac Newton, we all stand on the shoulders of giants. It’s easy to get it wrong though, and there are three common mistakes that founders make.

1. Assuming mistakes made by competitors are because they are dumb. This is from Aaron Harris’s Presumption of Stupidity

I’ve noticed a common bias that shows up in some founders: they believe that their competitors are stupid or uncreative. They’ll look at other businesses and identify inefficiencies or bad systems, and decide that those conditions exist because of dumb decisions on the part of founders or employees.

This is a bad belief to hold. In truth, competitors in the market are usually founded and run by intelligent people making smart and logical decisions. That doesn’t mean that all the decisions they make are necessarily the right ones, but they’re rarely a function of outright stupidity.

Where companies do things that diverge from what seems smart from the outside, it’s a much better idea to ask why those companies are doing things from the presumption of intelligence and logic rather than the presumption of stupidity.

2. Assuming everything that successful companies do can be copied. Every successful company makes mistakes, and some successful companies have habits they hold out as drivers of their success which it doesn’t make sense to copy. Apple is the best example here, great as he was, Steve Jobs’ management style and his insistence on relying on his vision and not talking to customers aren’t things that will port well to many other companies.

As Paul Graham wrote in a recent article advising startups that can’t secure the .com domain for their name:

There are of course examples of startups that have succeeded without having the .com of their name. There are startups that have succeeded despite any number of different mistakes.

The most common version of this mistake is to cite a habit of another successful company as justification for bad or lazy behaviour – e.g. Steve Jobs had the courage to rely on his own vision of what’s best for customers and so do I.

Another, more insidious, version of this mistake is to copy startups that have had some early success but haven’t definitively succeeded yet. Often this is European startups copying American startups that have reached the Series B or Series C stage. The problem here is that you might be copying something that fundamentally doesn’t work (as with many of the GroupOn clones) or where the reasons for the success they are enjoying aren’t apparent.

3. Success can come from copying others rather than being different (which takes more courage). In The Possibility for Outrageous Failure Max Wessel wrote:

Warren Buffet has famously stressed for folks to be greedy when others are fearful. Clay Christensen has cautioned that profitable markets face the greatest pressure towards commoditization. Even inside today’s tech landscape, we have Peter Thiel appropriately pointing out that there is only likely to be one Google, one Salesforce, one Facebook, one Uber, and so on. The next conquerors of industry are likely to arise in surprising spaces where there isn’t a clear opportunity.

Summing up, the overall message is that getting to know your competitors and what drives success at other companies is a great thing to do, but use that as the basis for your own critical and ‘from first principles’ thinking. Then don’t rely on your ability to out execute the competition, but be bold and above all seek a source of competitive advantage. Often a piece of information you have or something you believe that others don’t can be that source of competitive advantage.

Hat tip to Mattermark’s daily newsletter today which had links to the three articles I quote here. It’s a great source for content.

Three success criteria for ‘Assistant-as-app’ companies

By | Startup general interest, Uncategorized | 2 Comments

Nir Eyal recently wrote a great post speculating that ‘Assistant-as-app’ companies might be the next big tech trend. I think he’s right – it’s a trend that has legs, but it’s also a trend that has been going for a couple of years already but hasn’t yet been given a good label. Magic and Operator are the companies in this space that have made the biggest splash recently but companies like Thread.com and Big Health from our portfolio and like Native and Vida Health that Nir mentions have been pursuing variations on this theme for a while.

In another post Nir proposes the following definition:

I’ve proposed “assistant-as-app” to mean: an interface designed to enable users to accomplish complex tasks through a natural dialogue with an assistant.

He emphasises ‘natural dialogue’ because the first success criteria is that users don’t have to learn a complicated interface. Few people can be bothered to do that for anything, let alone when there’s a simple option available which will probably get you to a result faster on the first couple of times through. Complicated interfaces are in effect asking people to make an investment of learning time against a highly uncertain outcome – not an attractive proposition.

However, the key point is that there is no learning curve, so rather than ‘natural dialogue’ I would use the more inclusive term ‘easy to use interface’.

The second success criteria is that the service delivers something more than the fully human equivalent. That doesn’t mean it’s better on all dimensions, but that it is demonstrably better on at least one important dimension. For example Big Health is a therapy service for insomniacs that offers 24-7 access to an AI therapist called The Prof. Human therapists typically see their clients for an hour per week, whist The Prof checks in multiple times per day and if you wake up in the middle of the night he’s there (in his dressing gown) to help you get back to sleep.

It seems to me that the main ways that ‘Assistant-as-app’ services can be better than humans are:

  • 24/7 presence and immediate response
  • Price – high levels of automation bring some services to a price point that works for consumers (although note the third success criteria below)
  • Access more information about the user and use better analytics to deliver the service – e.g. data from wearables, activity diaries, transaction history
  • Access more components to build a customised solution – human services are limited to what the human operator knows, Assistant-as-apps can access all the inventory on the web

If you can think of more ways ‘Assistant-as-app’ services can be better I’d love to hear them.

The third success criteria for ‘Assistant-as-apps’ is that the economics work. To get to a price point that’s attractive to consumers typically requires some heavy duty automation on the back end, often leveraging AI. Most companies in this space start out delivering the service manually and initially lose money on every transaction. Predicting the extent to which those manual activities can be automated and can be difficult at the outset, but it’s critical to the business model and should be addressed early on. It’s easy to build an amazing service that will never make money and I suspect we will see some high profile companies make this mistake.

 

Software doing the work of cameramen

By | Startup general interest | One Comment

“Software is eating the world” and “robots are taking all the jobs” are much used phrases these days. That’s because they are regularly proven to be true in new and surprising ways.

I was surprised earlier today when I read this excerpt from a Fast Company interview with Chris Anderson, founder of 3D Robotics:

“The first phase of our little adventure was getting robots to fly. That was super hard, but we got there,” he says. “The next phase was putting cameras on them, and stabilizing with a gimbal. That was pretty hard, but we got there, too.” What we’re missing, he says, is “the aesthetics of a good shot.”

Solo, in concert with GoPro, is designed to deliver that perfect shot, with very little technical skill on the part of the pilot. “There are these well-established Hollywood conventions about what makes a great shot; they have this combination of classic framing and paths, which are typically done by teams of professionals,” he says. “We turned all that into software.”

The first paragraph is a cool description of the challenges in getting drone mounted cameras to work well. The second paragraph is the best though. 3D Robotics have captured the art and craft of Hollywood camera professionals in software. If it works as well as Anderson implies then it could be the sort of highly visible development that helps people to viscerally understand that change in employment patterns is coming fast and that we should start preparing.

Government and startups: It’s not them vs us

By | Startup general interest | One Comment

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There’s a widespread notion in the tech world that governments get in the way of innovation. The idea that slow moving, self-interested bureaucracies make it harder for nimble entrepreneurs to change the world by raising taxes and creating regulations is an easy narrative – but it’s wrongheaded.

The problem starts with a mistaken view that the public and private sector are separate entities in conflict with one another. There is no point where one stops and other starts. Rather they bleed into one another. Society needs a range of services to function and some are best provided by government, some by the private sector and many by a blend of the two. Transport infrastructure and defence are examples of ‘public goods’ that are best provided by government. The prison service and the health service are amongst those best provided by a blend of government and the private sector. Finally, food and clothing are on the long list of things best provided by the public sector.

In different times and in different countries there have been a multitude of experiments where services have been moved between the public and private sector, but these three categories have always been present, from black market economies in communist Russia to transport infrastructure in the USA.

The chart above shows how theory translates into practice. It’s from a Techcrunch article urging startups to partner with government rather than fight it. I couldn’t agree more. It’s what society needs, and as we can see from the frequency and size of the green bars above, it’s a good way to make money.

Choosing people over algorithms

By | Startup general interest | 4 Comments

It seems to me there might be an emerging trend back towards human curation. LinkedIn’s new Pulse App features human curation, the same is true for Apple’s forthcoming news app, and Apple’s new music service similarly makes a big deal about it’s human editors, including former BBC Radio 1 favourite Zane Lowe.

Two of these examples are from Apple, making it early to generalise, but there’s definitely a strong meme that humans are better than algorithms when it comes to recommending content.

I wonder three things though:

  • whether large companies prefer human curation because it leverages one of their strengths vis a vis startups – capital
  • if this is more about positioning than substance – human curation sounds better to most consumers than recommendations from a machine
  • whether the real answer is a combination – human curation augmented via AI – we’ve made one investment on that basis and are considering another one now

Let’s design the future of capitalism

By | Startup general interest | 7 Comments

As regular readers will know I’m optimistic about the future. I think there’s a strong chance that advances in technology will bring us cheap and abundant energy, machines that can do most of our work for us and medicine that delivers longer, happier and healthier lives. But, as I’ve also written before, the path between here and there will most likely be very rocky. Automation will replace jobs at an increasing pace over the next decade or two and without radical change wealth inequality will skyrocket to dangerous levels and existing welfare structures will collapse.

My kids will enter the workforce in 10-15 years and I’m worried by what they will find.

There’s a counter argument to this, most vocally espoused by Marc Andreessen, which says that every time technology replaces jobs the capitalist system finds new work for people to do. We’ve seen that movie play out multiple times over the 200 years since capitalism rose to prominence in the UK’s industrial revolution and we should expect to see it again.

The only thing I know for sure is that there are no certainties, and Andreessen might be right, but I think it’s more likely that this time it will be different. If I’m right it will either be because the destruction of jobs will happen much faster this time and the job creation won’t come close to keeping pace, or because automation will take the new jobs too and there will be a permanently lower requirement for human labour going forward.

In both these ‘it’s different’ scenarios we will need more income redistribution to fund bigger and better safety nets and radically better retraining and back-to-work programmes. Otherwise we will end up with a large permanently unemployed underclass and riots on the streets. A universal basic income is one solution that’s being increasingly widely touted.

Right now it’s still hard for most people to believe that we are headed to a post-scarcity world and think it’s a waste of time thinking seriously about how we navigate from here to there. The common reaction to pending automation is to fear job losses and robot overlords, think briefly about restricting technology development, decide that’s futile and then put off change for a few years because the problems aren’t imminent and the solutions are hard. The point they’re missing is that most of the pertinent technologies are developing on exponential curves – change will come slowly and then it will come FAST.

Capitalism is a system designed to optimise the distribution of scarce resources. That’s what money does. If we are entering a post-scarcity world then almost by definition we will need a new system. If we are entering a period of difficult adjustment then keeping equality of wealth and opportunity within reasonable bounds will be a difficult global challenge. Either way, we should take the opportunity to design our future system rather than simply let it happen to us.

Designing our future system requires thinking through where we collectively stand on acceptable levels of wealth inequality and how much we support the right to work. That’s worth doing even if I’m wrong and Andreessen turns out to be right.

For further reading see Vivek Wadhwa’s recent post on Venturebeat.

Retail’s future is to solve the paradox of choice

By | Startup general interest | No Comments

The primary function of retail used to be access/distribution. In the vast majority of cases consumers had to visit high street shops to get products and manufacturers went through physical retail to reach customers.

One of the big promises of the web is that brands/manufacturers will form direct relationships with consumers. They can build their own showrooms and take orders direct over the web capturing the retail margin for themselves. So far it’s mainly startup manufacturers that have gone this route – Bonobos and Warby Parker are famous examples from the US and LostMy.Name and Spoke from our portfolio are blazing a similar trail over here. Established brands are now moving slowly in this direction – but they need new capabilities and have to worry about conflict with the retail partners that drive the vast majority of their sales. Most established brands that now sell direct still only have a fraction of their product range available on their own sites and pricing is often above what can be found in retail.

So retail’s raison d’etre is losing relevance.

But consumers are faced with a new problem – too much choice. The web makes all the products in the world available, and a wealth of research has shown that whilst we say we want choice, too much of it makes us less happy and results in fewer purchases. This is the Paradox of Choice.

The new opportunity for retail, therefore, is to solve the paradox of choice. Give consumers access to all the inventory there is and then help them to a decision. At it’s heart new retail will be about personalisation and recommendation, making smart use of data and artificial intelligence to guide people to purchase decisions. Conversational interfaces will be an important secondary part of the mix as each of us will effectively have to programme the services we use and very few of us have the patience to learn syntax and commands for new apps.

These new retailers will sit between brands/manufacturers and consumers. They will handle less stock, have fewer staff and take less margin than traditional retail, but they could/should be much more profitable. Thread, Stylect and Top10 are good examples of these ‘new retailers’ that we’ve invested in.

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