Elements of a Tech/Startup City

closer_to_fineHere’s my thesis, which won’t make me popular in some parts: My city’s no tech startup hub. Not even close. So the question is: What’s the missing thing that would make a city a tech hub?

I asked a bunch of experts. Do you remember that Indigo Girls song “Closer to Fine?” I was an Indigo Girl last month, asking everybody my question. Maybe I can put that earworm inside your brain for the rest of the day. “I went to the doctor, I went to the mountains…” You’re welcome.

I collected six answers from as many experts, which I’ll summarize and let them expand upon: Proximity, Practice, Leadership, Unique Advantages, Real Problems, and Patience.

Those were the answers, and clearly are some of the ingredients. Combining them to make a tech city probably takes a dash of luck and a bit of magic as well.

The UT San Antonio Dean of Engineering Dr. JoAnne Browning proudly showed me the architectural plans for her department’s key ingredient to building a tech startup city: Proximity. Outside of her office window, trucks moved earth in preparation for constructing a 17,000 square foot “Maker’s Space,” intended to bring together under one roof engineers, entrepreneurs and industry experts – a tech lab to launch the next generation of startups, and startup founders.

Meanwhile, on another part of the university campus, Diego Capeletti, Coordinator at the Center for Innovation, Technology and Entrepreneurship (CITE) runs an annual startup competition to give undergraduates startup practice even before leaving university. Twenty teams typically enter the annual CITE competition, teams made up of both engineers and business students, paired with industry mentors. They are winnowed down to 10 teams that receive funds for building prototypes, and then a final group of 5 teams make a pitch to a Tech Symposium. Winners receive a $5,000 cash prize plus generous in-kind services such as legal, public relations, office space, and patent help. The big idea here is that a startup city needs to produce young people with practice in startups.

I asked Michael Girdley, who wears many hats as the founder of a software coding school CodeUp, co-founder of investment firm Geekdom Fund and startup incubator Real Co about the city’s key missing ingredient. He added the third element beyond the UTSA’s folks’ proximity and practice.

When I pushed for the tech startup city’s most important single missing piece, Girdley settled not on training undergraduates but rather on the dearth of business leadership.

“There are not enough startup founders. We need the experienced professionals, in particular, who can start companies and swing for the fences.“

cyber_securityCongressman Will Hurd (R – 23rd District) brought an intelligence agency and cybersecurity professional background to serving the district which stretches from northwest San Antonio all the way nearly to El Paso. When I asked about San Antonio’s key missing ingredient, he immediately pointed to one of the city’s natural, unique strengths – cyber security.

“It requires us to understand why San Antonio is Cyber Security City USA. Very simply, the 24th [LINK: http://www.24af.af.mil/] and 25th [LINK: http://www.25af.af.mil/] Air Force in SA, TX. This is what’s driving the talent,”

he commented, naming the two cyber warfare groups stationed at Lackland Air Force Base. The first key to building a tech startup city would be building on that unique strength, to retain people leaving those jobs who want to remain in the city, but also to build private companies to serve the Air Force groups’ needs.

And that, according to Hurd, requires the second ingredient: the need to solve specific, real problems.

“To create an ecosystem…you‘ve got to have problems to solve, and you’ve got to have people that can solve them.“

If the Air Force cyber units can identify and make specific problems available to the private sector through something called the Cyber Proving Grounds [LINK: http://www.24af.af.mil/CPG/] Hurd argues,

“then we get everybody like all these smart private sector entrepreneurs in a room, and tell them ‘Here’s our problem, give us a 30-day, 60-day, 90-day solution.’”

The big idea here is that local startups shouldn’t focus on solving Silicon Valley problems, but rather San Antonio-specific problems, as posed by the city’s unique cyber security strength.

I called Dr. Ben Jones, Professor of Entrepreneurship at Kellogg School of Management at Northwestern University in Chicago, who independently echoed Congressman Hurd’s key messages, and amplified them. It sounded to me like they’d been reading the same books on startups.

“We think in innovation that it’s easier to work back from real problems. By being close to a real problem you can pivot and innovate toward real solutions.

You might have a company that has a real problem they are trying to improve on, and you need to bring those problems to people who can work on that.

Why do clusters of innovation happen? Because it’s a thick market on both sides. There’s a large variety of needs and a large group that can meet those needs.”

 

Jones’ theory echoed Hurd’s focus on San Antonio’s unique advantage – cyber security – and the identification of real problems that need solving, as the basis for startups and innovation.

For one more element, I turned to one of the original three Rackspace founders, Dirk Elmendorf, for his unique perspective as an entrepreneur who helped build the city’s only recognizably large tech company.

His pitch for the one missing piece for everyone eager for a tech and startup city: patience.

“The real challenge of being a tech city is that unlike technology itself, cities don’t change overnight. So the challenge is sustaining the ambition, to be willing to stick it out even if you’re not sure the plant is going to grow.”

He also urged a two-track approach to encourage patience.

“Our idea is to continue to build small things that may survive, because small achievable things sustain excitement, but also aim for large ambitious things that make a bigger impact.”

So proximity, practice, leadership, unique skills, real problems, and finally, patience.

There’s more than one answer to these questions, pointing us in a crooked line.

 

A version of this post ran in the San Antonio Express News and Houston Chronicle.

 

Please see related posts:

 

Getting started – Entrepreneurship

Entrepreneurs – Pack twice the luggage, half the money

Entrepreneurship and its Discontents

 

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Book Review: The Lean Startup

What’s the most important thing to do when starting a company?

How about this: Don’t try to build the company. Instead, try an experiment.

A confluence of events and conversations have me re-asking that question, and landing on that answer.

The first event is that my city celebrated “Startup Week” in the beginning of March. I attended gather ideas on the central mystery of startups. The mystery is – how do you manage that initial transfiguration from a mere idea stuck inside a lunatic entrepreneur’s head to a real-live business providing a service, satisfying customers, collecting revenue, and employing people?

The second event is that a few weeks ago I started asking people in my own network for advice about a financial technology startup idea of mine. It’s a genius idea, obviously. Just ask me. A few minor stumbling blocks exist for me, however, like for example I’m not a technology guy and I don’t have direct experience in the relevant financial industry. That is not going to stop me. With a small dash of humility, however, I reached out to friends for advice.

One of my best friends works in the Bay Area as a software development manager. “You should read The Lean Startup,” by Eric Ries, he mentioned casually in the course of our phone call.

Next I called my cousin in Boston, currently in year five of his tech startup, for advice. “BTW, have you read The Lean Startup?” he texted after our call ended.

The next day I asked advice from a friend in my neighborhood who had successfully launched a technology company while still in college. As he laid out some suggestions, he added, “of course, you know the ideas from The Lean Startup?”

Ok, ok, guys, fine! I’ll read it. One does not simply start a company anymore. Apparently, one does a lean startup first.

Lean_startupBut what does that even mean?

The point, as I’ve now learned by reading Ries’ book, is not to build a finished product or company and then deliver that to a customer. The point is to design a series of business experiments to learn what customers want most.

Do customers respond to certain type of marketing pitch? Do they even use a proposed product in the way you expect? Or maybe they have a different preference for features than you expected?

Ries argues that cheap testing – followed by fast innovation in response to customer data – will succeed more often than a fully-built solution.

Ries makes the interesting point that big companies too can employ lean startup techniques. Instead of investing huge dollars and months or years in research and development, he argues, small teams within a larger organization should be encouraged to attempt small-scale experiments, all the more easily trashed, or expanded, as they gain feedback from customers.

So that’s what Ries means by “Lean Startup.” Seemingly every entrepreneur in my acquaintance has bought into this idea.

Ries goes on to redefine, for entrepreneurs, what their “burn rate” is.

In a typical startup, we might think the burn rate is determined by comparing the money in the bank and the speed at which the startup incurs costs. With $700,000 in the bank, and $100,000 costs per month, we can say that the company has roughly seven months before it runs out of money. A seven-month opportunity to achieve sustainability is an important measure of survivability

Ries seeks to re-define a different kind of survivability-pace for startups. Specifically, how much time and money does it take to test a business hypothesis? If a startup can legitimately prove or disprove a business idea in four months, that’s fine. If, however, the next startup experiment only takes two months to disprove or prove an important idea, then the startup is in effect improving its chances of survival. The shorter the time the company takes to test innovations, the better its chances of survival. The more ideas it can test, before it runs out of money, the greater the chance of sustainability. Ries says this is a better measurement of survivability.

SA Startup Week

At Startup Week, I arrived ready to test whether that’s indeed what successful entrepreneurs do in my city.

By happenstance, I picked a particularly “lean startup-ey” event venue, organized by entrepreneur George Haskell, founder of cheap-airfare service Whiskr.

Haskell had organized this meet-and-greet for startups and interested people in what he described as “science fair for startups.” At the event, entrepreneurs set up a quick and easy booth to show off and describe their wares or services. It was an experimental venue with a knowing nod to high school-level experimentation.

whiskrDid Haskell endorse the lean startup model for his own business?

Oh yes. Haskell described to me an extremely cheap form of experimentation, on his way to business creation.

“My company started in 2012 as a simple mailing list. We pitched it at travel conventions, with just a t-shirt and stickers, simply talking to people. I got their feedback, what they wanted, what they didn’t want.”

With a mailing list of interested customers, Haskell would personally spend hours online searching for what he called “mistake listings,” of cheap fares – like flights cross-country for less than $175, or to Europe for less than $300, or to Asia under $400. Having first built his customer base experimentally, and a manual process for finding what they wanted, he launched this past week an automated process of delivering deals fast to his customers. It all sounded quite lean startup-ey to me.

wildway_granolaAfter chatting with Haskell, I wandered over to a different booth at the science fair for startups. Probably because I’m a coffee addict, I grabbed the Vanilla Bean Espresso granola sampler on my way past the Wildway Granola table.

As it turns out, Kelli Koehler and her husband Kyle began Wildway with a series of experiments as well.
“We started at farmer’s markets. We tested a lot of different flavors,” says Koehler.

In the beginning they would make just 20 to 40 bags of granola for one farmer’s market.

“We would get feedback right then and there from consumers, over and over again, from hundreds of people in one four-hour farmer’s market. We tested a lot of flavors that we don’t have today because they didn’t hit a wide enough audience or they fell flat.”

I asked about their packaging.

“We started with ‘the sad brown bag’ as we like to call it. Just a brown bag with a sticker, and the sticker evolved every single week. We would add stuff to it, take it off, change the shape. We were still trying to figure out our voice, our branding, what we stood for, what we wanted that to feel like. We went through lots of iterations.”

“Our motto has always been to get it out there to market, and to see what happens. You can always improve and make changes along the way, but nothing is going to happen if you don’t at least put it out there.”

mark_twain
19th Century Lean Startup Guy

Koehler proudly reported to me that Wildway Granola is sold in over 700 stores nationwide, including Whole Foods and HEB. Koehler totally endorses the lean startup approach.

“This is a quote that I have on my whiteboard above my desk, and it’s from Mark Twain, and he says ‘Continuous improvement is better than delayed perfection.’

So I learned that Mark Twain, nineteenth century wit, was also a lean startup guy.

Entrepreneurs: Don’t build the whole company. Build an experiment and improve from there.

 

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related posts on entrepreneurship:

Entrepreneurs – The difficulty of funding

Entrepreneurs – The difficulty of getting started

Entrepreneurs – Bring half the luggage, twice the money

Entrepreneurship – The air, the taxes, the retirement

Please see other book reviews – especially All Bankers Anonymous Book Reviews In One Place!

 

 

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Entrepreneurs: Pack Half the Luggage, Bring Twice The Money

A version of this post ran in the San Antonio Express News.

In late high school and college I travelled to Mexico as often as I could. Some trips I went for ten days, later trips for a semester of school, then a whole summer. Finally, after graduating from college, I lived and studied in Mexico for a year.

I always carried the student travel bible at the time, Let’s Go Mexico, whenever I crossed the border.

I memorized two pieces of advice in the Introduction to my Let’s Go Mexico book.

“First, lay out all of your clothes and other luggage you intend to take in one pile on your bed. Next to that pile, place all of the money you think you will need to spend.

Now, pack half the stuff and take twice the money.”

The second piece of advice from Let’s Go Mexico was of a similar vein, something along the lines of “Take no more luggage than you could – if necessary – carry at a dead run in the middle of the night for a mile.”

I loved that advice and it always – for me at least – put me in the right adventurous frame of mind for border crossing.

Advice for Entrepreneurs

I’ve written before that it helps entrepreneurs to be a bit ignorant and maybe a touch funny in the head in order to launch themselves into a new business venture.

Entrepreneurs are risk takers. They exhibit the kind of crazy that would enjoy situations involving a dead run for a mile at midnight on the streets of Juarez.

Lately I’ve thought about the Let’s Go Mexico advice, and how that’s exactly the advice I would give to first-time entrepreneurs.

Instead of luggage, of course, you have your business start-up costs.

First, in your business plan, lay out all of the costs of things you think you need to get started. Next to that, figure out how much money you already have available for your venture. Here’s the thing: To survive your first year in business, you’ll have to make do with half those things, and you’ll need twice the money.

Also, if luggage in my analogy equals costs, try to start your business with no more costs than you can carry at a dead run for a mile in the middle of the night. Ok, the metaphor doesn’t quite work. But I hope my point is clear(-ish.) Entrepreneurship is incredibly difficult, your business will encounter the unexpected, and you’ve got to be ready to pivot in a totally unanticipated direction.

Writing a Business Plan

I work on educational videos for a regional non-profit microlender LiftFund that offers training for new (and experienced) entrepreneurs. Writing a business plan is one of those things which every business owner does.

A couple of my videos walk folks through the different component parts of a business plan. What I want to say at the end of the videos, however, is that – no matter what your plan says – you’ll need to cut your planned costs in half and figure out a way to put your hands on twice the cash.

Mike_Tyson_Strategy
Business Guru Mike Tyson

Everybody’s Got a Plan

I guess the following is a true story, since I found it on the interwebs.

Boxing great Mike Tyson was peppered, pre-fight, with journalists’ questions, asking how he would respond to his opponent’s plan for delivering a devastating left uppercut.

Mike responded sagely “Everybody has a plan ‘til they get punched in the mouth.”

(In my mind’s ear, I always hear that quote in a high-pitched voice, the final word pronounced ‘mouf.’)

Anyway, the point is, an entrepreneur’s written business plan only gets you so far. Because, at some point, everything goes into complete disarray.

Metaphorically speaking, you’ll be bleeding from the mouth, running your business at top speed for a mile in the middle of the night, just praying you make it to safety.

So remember, you entrepreneurs: carry half the luggage, and bring twice the money.

 

Please see related posts:

Videos Playlist for Entrepreneurs – Learn Excel

Video for Entrepreneurs – Personal Financial Statement

Entrepreneurship Part I – Fixed Income v. Equity

Entrepreneurship Part II – Lessons From Finance

Entrepreneurship Part III – The Air, Taxes, Retirement

Entrepreneurship and Its Discontents

 

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Video for Entrepreneurs – Personal Financial Statement

A regional microlender named Accion Texas helps entrepreneurs get started on the process of builing small businesses.

In this video I walk you through the process of collecting your personal financial data all in one place, using an Accion template available on their website.

The personal financial statement would be used to talk to any bank or lender about getting a loan. Even prior to that, it could be used by you to determine whether your startup idea makes financial sense at this time.

See related post Accion Texas video on using a startup capital template

personal_financial_statement

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Video For Entrepreneurs: Tracking Startup Capital in a Spreadsheet

Startup-resources-videoI periodically produce instructional videos for a local micro lender named Accion Texas. They support and lend to young and startup companies that might otherwise get overlooked by the traditional banking industry. In fact one of the key conditions of being an Accion Texas customer is a prior rejection for a bank loan application.

The point of this video I made is to introduce Accion’s customers and potential customers to the value of tracking your startup costs in a spreadsheet. Since I am a huge proponent of entrepreneurship for building wealth, and since many entrepreneurs are not necessarily spreadsheet whizzes, I figured this may have appeal beyond just Accion Texas customers. I hope it will be useful to you.

 

Please see related posts:

Entrepreneurship I – Salary vs Ownership

Entrepreneurship II – Ownership vs. Working for Others

Entrepreneurship III – The Air, The Taxes, and Retirement

Excel Video Training – The Autofill Function

 

 

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