Comments (4)

By brantcooper, May 9, 2011 5:46 pm

Whether there’s a tech bubble or not is an interesting discussion going on in the blogosphere. (Reading guide is below.)

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)

Comments (3)

By brantcooper, February 23, 2011 6:58 pm

I haven’t weighed in on Customer Development thoughts for several hours, so it’s about time. Interesting series of tweets in the last several days got me thinking about the biases we bring to Lean Startup Customer Development practices. Unfortunately, but perhaps inevitable, the biases often result in finger pointing and not a little bit of self-congratulation. To an objective user, however, such instances seem to be rather obvious forest-tree issues, rather than the profound insights they hope to be.

Here’s a handy graphic illustrating source and bias:

If one looks closely, one can perhaps discern my bias. ; )

Let’s go through these.

1. Those with marketing backgrounds are comfortable speaking with customers in a manner determined by their specific role.  Product Managers talk about road map, collect feature requests and bounce ideas off customers, often in group settings (focus groups, advisory boards, etc.).  Product Marketers communicate features and benefits and elicit feedback, often through surveys.  Corporate marketers practice “branding” and spin.  Feedback goes to info@ email boxes, twitter tweets, and Facebook ‘Likes’ (or not).

2. UX Designers are quick to tell you they invented Customer Development only called it something different.  And frankly, they’re right to a degree.  When it comes to product design.  Or parts of product design.  Anyway, UX Designers are good at observing user behavior and interacting with them in a particular (not peculiar) way to determine if the product is “working.”  This is instrumental to today’s products.  (Not always the case, as I’ll argue in another post.)

3. Engineers, in their lifetime quest to never have to actually speak to a live animal of the “Customer” species, utilizes analytics tools and product instrumentation to produce reams of data on user behavior, i.e., actual user interaction with the product.  Instrumentation is instrumental, too.

4. Penultimately and leastly, are the investors, branders, Madison-Ave marketers, turn-key salespeople, high-tech gadflies and backseat pundits who declare that Vision is the only thing that matters.  All you have to do is be like Apple and Ikea, get it?  Do I have to spell it out for you?  All you have to do is be just like A-P-P-L-E.  There now, go to it.

5. Finally, what is the Customer Development bias?  Customer Development needs all the practices above, but none of them help you understand the problem, the pain, the passion. That’s the final leg or better yet, the first leg of Customer Development.  Empathy.  Whatever walk for mankind you need to do to walk a mile in your customers’ shoes; whatever interview technique, lunch buying, drink toting, teatotaling, karaoke yodeling you must participate in to gain an understanding such that you feel empathy.

Now, then, can’t we all just get along?

Please excuse the hyperbole and generalities and the tongue-in-cheek.  Recuse yourself as you see fit.  Feel free to post vitriol in comments. : )