I fall into the “boom before bubble” pack. Having lived through the 90s’ bubble, there’s no way we’re there yet.  That doesn’t mean there won’t be one, but my feeling is we’re skating a razor’s edge off one side of which looms another wave of  housing foreclosures and a doom & gloom Sequoia presentation. Investors herding like sheep around darling Silicon Valley startup memes is not in itself bubblicious, it’s SOP.  Sheep investing affects supply and demand conditions that result in higher valuations.  Good or bad, that doesn’t in itself represent a bubble.

The Internet bubble was about more that overvalued startups. Horowitz and Graham argue other dynamics way better than I can (see links below), but I think it’s important to point out that bubbles dramatically affect the entire economic climate. The bubble was “our” version of 70s inflation.  The bubble caused a huge migration of people to the SF Bay Area. Salaries went through the roof (not just for engineering talent.) So did cost of living.  In the 90s, the housing bubble was inseparable from the Internet bubble. The buying of lots of different goods became irrational.

And there’s the final point.  Frankly, as long as the voices saying we are in a bubble remain as strong as those who say we aren’t, it’s hard to say we are.  There’s was very little dissent in the 90s or perhaps more accurately, that dissent was easily drown out by the ignorance of the mainstream media. But that isn’t the case today, either.

The Best Way To Avoid a Bubble

Think globally, act locally.  Successful startup ecosystems in Boston, New York, Boulder and a few other cities eases pressure on Silicon Valley prices for EVERYTHING, including startup valuations.  Yes there are advantages to investing in startups in large ecosystem like Silicon Valley, including access to partnerships, vast amount of resources and M&A opportunities, but there are pitfalls, too.  Strong entrepreneurship exists outside Silicon Valley, as many of the past “big wins” show.  Local non-SV ecosystems frequently have strong, yet  underemployed resources, lower engineering costs, employees less likely to jump ship, and local environments arguably more attractive that Silicon Valley.

But where’s the money? San Diego’s Avalon Ventures is the only VC with an active fund. Tech Coast Angels, who laughingly claim “lean startup” as a tag, is infamous among entrepreneurs for their six month plan for not investing, rather for any risk-taking activity.  Local support organizations like CONNECT server clean tech and life sciences well, but their vanity metrics fail to reveal their inability to attract and help Internet and software entrepreneurs.  There are about a dozen San Diego angels on Angel List, most of whom have no San Diego investments.

I have heard similar stories from other startup cities, even the bigger cities that seem to be thriving.  There are several problems:

• Many local investors are “old school,” believing they sit in the catbird’s seat and can wait for for entrepreneurs to knock on their doors.  (Not going to happen.)
• Many local investors follow the lead of Silicon Valley investors, rather than striking out on their own.  (Angel List helps solve this, plus lower $ amounts should increase risk tolerance.)
• Investors don’t know how to connect to local entrepreneurs. (Entrepreneur groups are thriving and investors need not fear being swarmed.)
• Many entrepreneurs don’t know how to connect to local investors. (Entrepreneur groups help with this, too.)
• Some entrepreneurs either ask for money based on ideas or are not building “real” startups. (Why do you think I evangelize the Lean Startup framework?)

The crazy result is local startups going up to Silicon Valley to find funding and then experiencing a tremendous amount of trouble to move there AND local investors investing in Silicon Valley companies.  This circumstance not only represents a failure to support San Diego’s economy, but also serves to increase the pressure on the Silicon Valley bubble, er boom.

Please let me know your thoughts on the bubble and local investments in comments.

_____________________________

Here’s a short guide on bubble opinions:

Yes, there’s a bubble

Steve Blank (post)

Paul Kedrosky (post)

Mike Maples (TechCrunch)

No, there’s no bubble.  (Yet.)

Henry Blodget (slides)

Paul Graham (article)

Ben Horowitz (post)

Howard Lindzon (post)

Steve Blank speaks to San Diego Tech Founders from Brant Cooper on Vimeo.

Contents:
00:00 My Intro
03:17 Why Accountants Don’t Run Startups
- Old constraints on startups
- Entrepreneurial explosion
- Startups vs Small Businesses vs Large Businesses
- IBM example of big company disruptive innovation
- What did my income statement say in month 1?
- “You’ve just washed ashore on an a deserted island with a knife in your mouth and a loincloth.”
- Searching for a business model, not a business plan
- Customer Development
58:26 Atoms or Bits (New Material)
- Physical vs Online products
- History of Lean
1:03:26 Sloan vs Durant
1:08:41 Q&A
1:29:50 My Conclusion

Be sure to come check out entrepreneur turned investor Mark Suster talk to San Diego Tech Founders March 31.

=> Startups RSVP here.

=> Investors, Service Providers, Professionals RSVP here.

My book was (is) trite and sophomoric. After all, what insights do most 20-somethings have worth sharing? A lack of experience — a lack of failure — makes pontification shallow. One of my younger brothers, who was trying to make a living as a painter at the time, had a great comment. He said that he felt my book, like his art, was merely trying to say too much. That it wasn’t that we didn’t have good things to say, but that there was lack of discipline in focusing and examining in greater depth a few ideas, rather than “letting it all hang out.”

I think young entrepreneurs suffer from a similar malady. But I’m going to leave it to you to ponder the connection between this and customer development and lean startups.

I actually bring this up because I recently did my first customer development presentation and I think I tried to say too much! I’m no Eric Ries, but really, I’m not a bad presenter. This was my first attempt at a new presentation and admittedly, I did not dedicate the proper time to building the deck up front.

So now the presentation has been made available on video.  I forced myself to watch it, which frankly, was rather painful. You know what I mean if you’ve ever watched yourself “perform.” FWIW, I’m going to share it with you. Maybe you’ll find something of value!

BTW, it cuts short not because I was removed with a hook, but rather due to technical glitches. (Yeah, right.)

Insights on how to improve or which parts you’d like me to concentrate on would be of great help!

In a nutshell, Marketing=PR=Ads=Marcom=Branding.

This is far from the truth.  Understanding the basics of marketing and whom to hire for marketing help, is critical for CEOs and technologists to understand.

The key thing to understand is that the type of marketing is highly dependent on Who you are, Who your customers are, and What stage your business is in.  Here’s a quick and dirty primer:

PR

PR is about managing media and analyst relations.   A good PR company helps manage messaging and positioning targeted at the media.  PR should generate interest from relevant trade magazines, blogs,  editors, award bodies, analysts, etc.  The goal is  increase knowledge of your company and products among customers, industry experts, investors, etc.  Specific PR campaigns should have more concrete objectives.

PR is most effective as part of a broader marketing campaign.  Good PR is  dependent upon many factors, not the least of which is timing.  In other words, PR for PRs sake is extremely expensive with little return.    The need for PR is highly dependent upon what stage your business is in and what your current corporate objectives are.

During boom times, PR companies can be very expensive, demanding a high monthly retainer and requiring careful management to ensure you’re getting the attention you’re paying for.  In tough times, prices drop significantly and retainers can be negotiated way.   Additionally, since the 2001 bust, there’s been a steady increase of highly competent independent PR contractors, who work by the hour or by project.  For start-ups requiring help with press releases and initial exposure to trade magazines and industry analysts, I recommend going this route.

Branding

Many of written about the misconception of the term “brand.”  (I recommend reading Tom Asaker.)  Without getting into it too much, branding is more than a logo and a slogan.  Much more.   Branding is about everything your company does that is perceptible to the public, including things such things as customer support and your  sales team’s sales style.

Logo, web site images, color palette help create the visual aspect of your brand.  Brand image is important.   Bad name, ugly logo, awful colors, poor web layout, etc., all adversely affect your credibility.  But again, the relative level of its importance is tied directly to where you are as a company.  There’s also a common misconception that you are stuck with whatever you choose now.  That’s simply not true.

Design firms specialize in branding work.  While they also may wish to help define other aspects of marketing, such as vision, mission, messaging, etc., I don’t recommend this.  It’s not their specialty.  They need to understand these things and can perhaps help bring out your brand “personality,” but don’t get into actually developing messaging with a branding house.  Like with PR, there are a ton of great independent contractors you can use as well.

Marcom, marketing communications, messaging, positioning

The core messages of your company and product, which describe your distinct value in the market place, your differentiators, benefits, position relative to competiton, etc.  Messages must be targeted to your various audiences, but most importantly the customers in the market segment your targeting.

Who is the best to write the messages?   Well, actually your customers.  So you might want to look for marketing consultants who specialize in using your customers to draw out your core messages.

Lead Generation; Demand Generation

Specific marketing activities to generate customer prospects.  Search engine marketing, ad words, direct mail, email campaigns, webinars are all examples.    The price of these vary by activity.  The effectiveness is dependent upon how tightly coupled they are to the needs and buying process of the prospective customer.

There are a ton of marketing consultant firms and independent contractors, as well as potential full time hires.  My recommendation is to hire for what you need now, not what you hope you’ll need when you’re bigger.    Do you need Madison Ave or customer development?

In the Bay Area I was a small fish in a large pond.  In San Diego, at least I’m a small fish in a small pond.

bah-dump, bump.

The San Diego market for marketing professionals certainly is different and has, not surprisingly, both its ups and downs.  Clearly, fewer opportunities exist for software and Internet high-tech marketers.  There are just not as many companies as in the SF Bay Area, including Silicon Valley.  San Diego has a strong bio tech industry, but the cross-over is not simple (or at least that’s the perception).  Wireless technology is big here, led by, of course, Qualcomm which has resulted in a number of wireless/telecom start-ups.    There certainly is some crossover into this market.  It’s my view, however, that a mini-bubble exists in that there are serious business model issues with some wireless start-ups, and I’m guessing the current economic downturn will expose these.  (I talk more about this in a separate post.)

Generally, I’m not feeling a lot of marketing love in San Diego.  Perhaps it is simply the natural evolution of a technology ecosystem.   First a region must build a strong technology base and then a demand for marketing expertise will emerge.  Despite the fact that San Diego-based WebSideStory was instrumental in leading the marketing ROI trend through its web analytics products, and the fact that there are several marketing related start-ups here, e.g., JuiceMetriQs, Island Data (now Overtone, I see), and Certona, generally, the idea that Marketing doesn’t mean Madison Ave, appears to me to be poorly understood.

(BTW, I don’t know the motivation, but Overtone moved its marketing organization to the Bay Area.  Aside from founders, until recently the entire Ortiva Wireless management team was from outside San Diego.   The same goes for Paraccel. Trend or merely emblematic of the state of San Diego resources?)

There is upside:

The community is tight.  The atmosphere is collegial and in general, one gets the feeling that all are “in this together” — this being the flourishing of San Diego’s tech community.  As I made my networking rounds when I first arrived, I heard the same people that I needed to get to know, repeatedly.  Several individuals made an effort to introduce me around, for which I am grateful.  Some of these include Leo Spiegel, Ruprecht Von Buttlar, Jeff Belk, and Carlton O’Neal.  (Much thanks!)

There are a number of good groups and organizations in town, including CONNECT, Tech Coast Angels, San Diego Venture Group, MIT forum, CommNexus, and San Diego Software Industry Council, but not so many as to make one feel inundated or incapable of keeping up.  They offer a steady stream of networking opportunities, workshops, quality speakers, etc.

Finally and most importantly, if it is the case that many San Diego entrepreneurs, technologists, or investors lack knowledge of process-oriented, metrics-driven high-tech marketing, well then, that represents an opportunity for education and for new voices to be heard.

Hmm, a pain point, an opportunity, I better get to work!