Does silicon valley style work in your place?

Does Silicon Valley Style Work in Your Place?

~ Seek a right style ~

Chikafuji, Ryu fromBayArea.com

Beta version

This slide shows my thoughts on how to launch and foster high-value start-ups outside the United States.

Chikafuji, Ryu(Taka Kondo) April, 2012

SILICON VALLEY Part I

The most significant ability for business is empathy, the ability to understand and share the feelings of the target customers.

Empathy is the source of both encouragements and inspiraJons which make your team innovaJve.

Empathy Inspira2on Encouragement

Imagina:on Mo:va:on

Crea:vity Passion

InnovaJon

Empathy works as a compass, map and sails. A start-‐up team without it can’t voyage to the new world.

There are two types of acquisiJon for a start-‐up team to acquire empathy,

A.  Be ardent fans of your products /service, and have “the right discipline to think through whether a lot of other people are going to want it(*)”.

(*) Steve Jobs, CNN Money, Aug/03/2008 Apple iPod’s adver2sement

B. Build a start-up team with seasoned professionals in your business area.

Social media start-‐ups, like Facebook, TwiPer, etc., took type A approach.

If we plot the entry points of these start-‐ups on the graph below, then

Needs/Market <unknown>

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they were here


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Facebook / TwiGer

There was liPle technology risk. Market risk was their real challenge. But nobody had markeJng experience in this area because there had been no such market.

The start-‐up teams had empathy because they were big fans of their service. Probably, they also had the right discipline to think through whether a lot of other people were going to want it.


Technical

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Let us think about this area.

Facebook / TwiGer

Type B approach can be available in the other area

The most significant feature of Silicon Valley is generous supplies of talents.

Crazy tech guys and flighty investors are not the only residents in Silicon Valley’s business community.

There are a plenty of seasoned professionals in markeJng, sales, finance, IP, logisJcs, etc., …

… from a variety of business areas, and from all over the world.

If an entrepreneur has a really great idea,

then he/she can build a team with seasoned professionals.

VP, Marke:ng. I have 20+ years experience in this business area.

13 years 10 years

VP, Sales 16 years

VP, Engineering 12 years

12 years

Such a team can quickly acquire empathy.

Successful Silicon Valley entrepreneurs have an average of 13 years professional experiences before they started.

* Research of UC Davis & New Hampshire Univ., 2006

The average age of founders in Silicon Valley exceeds 40 when they started, even this web business heyday.

* For instance, Vivek Wadhwa, goo.gl/pfBdV

M. Zuckerberg (Facebook)

J. Bezos (Amazon)

R. Hoffman (LinkedIn)

B. V. VonderschmiG (Xilinx)

N. C. Warren (eHarmony)

R. Shapiro (LegalZoom)

J. E. Warnock (Adobe Systems)

J. Dorsey (TwiGer)

F. H. Moll (Intui:ve Surgical)

M. Benioff (Salesforce)

I. M. Jacobs (Qualcomm)

W. A. Porter (E*Trade)

20 30 40 50 60 70

Age when they started

In general, experience maPers.

Entry points when they started

Facebook / TwiGer

Salesforce

Adobe Systems

Intui:ve Surgical

Qualcomm

Xilinx

eHarmony

LegalZoom/ E*Trade

Amazon

LinkedIn


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Let us classify them into zones of:


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Too risky to invest zone

Too compe11ve to invest zone

Professional Zone

Facebook / TwiGer

Salesforce

Adobe Systems

Intui:ve Surgical

Qualcomm

Xilinx

eHarmony

LegalZoom/ E*Trade

Amazon

LinkedIn

Gusto Zone

•  “Empathy” is the most important ability to start a new business. The way to acquire it is: – Gusto Zone’s start-‐up: • Build a start-‐up team with ardent fans of the service because no seasoned professionals exist.

– Professional Zone’s start-‐up: • Build a start-‐up team with seasoned professionals.

Summary of Part I

Due to recent mass-media reports, people may embrace the illusion that most venture investment go to “Gusto Zone”. But the reality is:

Appendix

0%

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80%

90%

100% Other Business Products and Services Healthcare Services Retailing/Distribu:on Computers and Peripherals Networking and Equipment Financial Services Telecommunica:ons Electronics/Instrumenta:on Semiconductors Consumer Products and Services Media and Entertainment IT Services Medical Devices and Equipment Industrial/Energy Biotechnology Sokware

US Investments by Industry 2011(Money)

(* based on PwC's "Shaking the MoneyTreeTM Q4/Full-‐Year 2011 Update")

0%

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100% Other Business Products and Services Healthcare Services Retailing/Distribu:on Computers and Peripherals Networking and Equipment Financial Services Telecommunica:ons Electronics/Instrumenta:on Semiconductors Consumer Products and Services Media and Entertainment IT Services Medical Devices and Equipment Industrial/Energy Biotechnology Sokware

US Investments by Industry 2011(Money)


Gusto Zone is just part of this area

Professional Zone

0%

10%

20%

30%

40%

50%

60%

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80%

90%

100%

Other Healthcare Services Computers and Peripherals Retailing/Distribu:on Networking and Equipment Financial Services Electronics/Instrumenta:on Business Products and Services Semiconductors Consumer Products and Services Telecommunica:ons Industrial/Energy Medical Devices and Equipment IT Services Media and Entertainment Biotechnology Sokware

US Investments by Industry 2011(# of deals)


0%

10%

20%

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Other Healthcare Services Computers and Peripherals Retailing/Distribu:on Networking and Equipment Financial Services Electronics/Instrumenta:on Business Products and Services Semiconductors Consumer Products and Services Telecommunica:ons Industrial/Energy Medical Devices and Equipment IT Services Media and Entertainment Biotechnology Sokware


Gusto Zone is just part of this area

Professional Zone

US Investments by Industry 2011(# of deals)

Top 10 deals in Silicon Valley: Q4/2011 Company name $million Area of business

Dropbox 250 Sokware, file storage and sharing service

BeGer Place 200 Cleantech, electric vehicle transporta:on

S:on 100 Cleantech, thin-‐film solar module

Portola Pharmaceu:cals 89 Biotech, biopharmaceu:cal

Soraa 89 Cleantech, LED bulb

Workday 85 Sokware, enterprise business sokware

Fulcrum BioEnergy 69 Cleantech, bio energy

Hearslow 65 Medical device & equipment, Guiding system

Box 62 Sokware, file storage and sharing service

Lithium Technologies 53 Sokware, social CRM solu:on


You may forget it, but the Professional Zone is still a really Cool Zone.

THE REST OF THE WORLD Part II


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StarJng in this zone is OK because no seasoned professional is required.

Professional Zone

Gusto Zone

Actually, China’s Gusto Zone is crazy hot as well as Silicon Valley because of its domesJc market growth.

0 100 200 300 400 500 600 700 800

China’s internet popula:on will be almost double US and Japan combined by 2015(*).

(*) Data from The Boston Consul:ng Group

(Million)

* Examples of Vietnamese start-‐ups

Not only in China and Japan but also other naJons’ Gusto Zone are also hot even if their domesJc markets are sJll small.

The Gusto Zone is hot but it’s too hot for me, so my interest here is


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this “Cool” zone

Professional Zone

Gusto Zone

A successful story in the Professional Zone in Silicon Valley.

InnovaJon Empathy Start-‐up Team

idea!

Professional Experiences

A founder had experience in the field related to the target market – as a tech guy, marketer, researcher, or as a user.


idea!

Seasoned professionals were hired not only from Silicon Valley but also globally.

Experienced Professionals


idea!

They made full use of their empathy from day one, and got lots of inspiraJon and encouragement through their acJviJes.

Inspira:on Encouragement


idea!

InspiraJon fostered creaJvity and encouragement led passion. Finally, the original idea became an innovaJon.

Crea:vity Passion

Another story in the Professional Zone, happened somewhere.

A founder got a great idea and decided to start a new business.

Because it was difficult for a start-‐up to hire seasoned professionals, the founder had to hire junior and amateur guys locally.

Start-‐up Team

The start-‐up team couldn’t understand and share the feeling of the target customers, and wasted too much Jme.

Start-‐up Team Chaos

Far from Empathy…

The window of opportunity was closing. The idea failed to become an innovaJon.

Start-‐up Team Chaos

The idea failed to become innova:on

Give up

In many areas in the world, it is fairly difficult to organize a start-‐up team with experienced professionals(*).

(*) Israel may be an excep:on, the na:on has great talent pool for high-‐tech start-‐ups; furthermore, many Israeli start-‐ups easily move to Silicon Valley.

PracJcally, a start-‐up team needs a kind of preparaJon period to culJvate the team’s Empathy.

Case Study

Tokyo Electron Limited, a world leading manufacturer of LSI and FPD produc:on equipment, the company name became synonymous with “High-‐Tech company” in Japan.

Case-‐1

Revenue $8.04 Billion(2011) Net income $865 Million(2011) Market Cap $9.83 Billion (April, 25, 2012)

Tokyo Electron Laboratories, Inc.(*) was founded in 1963, as a trading company. The company imported cuzng-‐edge technology products such as IC testers, electronic components and semiconductor produc:on equipment into Japan.

(*) Today’s Tokyo Electron Limited.

In 1969, the company entered the market to design and develop a semiconductor produc:on equipment. About five years experience in sales and customer support enabled the company to acquire the ability to understand and share the feeling of the target customers.

Case-‐2

Acer(Mil:tech) was established in Taiwan in 1976 as a trader of electronic parts and a consultant in the use of microprocessor technologies.

(*) Ref: Acer’s web site and Wikipedia

Acer released “Micro-‐Professor MPF-‐I” in 1981, the company’s first computer product. The company obtained interna:onal reputa:on through the success of “Micro-‐Professor” series, especially, in European market during 1980s.

Micro-‐Professor MPF-‐I Photo by “Toytoy on en.wikipedia”

I would say that several years of experiences in sales and consul:ng fostered the ability to understand and share the feeling of their target customers. Acer group became one of the biggest PC maker in the world; the company owns Gateway, Packard Bell, BenQ, AUO, AOpen, etc.

Crea:ve Technology, a Singapore-‐based company established in 1981 as a computer repair shop. The company ini:ally treated the Apple II computer, then IBM PCs.

Case-‐3

Apple II, Photo by Marcin Wichary

In 1987, the company released their own product, a sound generator card for IBM PC architecture, widely known as “Sound Blaster”.

* Ref: “Wikipedia – Crea:ve Technology”

About six years experience might enable the company to understand and share the feeling of target users. As you may know, “Sound Blaster” dominated the PC audio market during 1990s.

Case-‐4

Huawei Technologies is a networking and telecommunica:ons equipment and services company headquartered in Shenzhen, China.

Revenue $29.3Bilion Net Profit $3.8Bilion Employee-‐owned corpora:on

(2010) *1CNY=0.16 USD

The company was established in 1987 as sales agent for Hong Kong’s PBX-‐switch company. In 1990, the company embarked on research and commercializa:on of their own PBX technologies targe:ng hotels and small enterprises. Experience in sales and support must advance their empathy to develop their own products.

In 1992, Huawei launched digital switching solu:on and generated sales RMB 1.5Billion in 1995. Huawei has con:nued to invest in technologies, and 46% of the 110,000 employees are engaged in R&D.

Huawei began interna:onal expansion in 1997, and 75% of the sales is generated from overseas markets in 2010. Huawei was ranked 5th most innova:ve company in the world by Fast Company in 2010.

Case-‐5

DeNA is the world’s largest mobile social gaming plasorm provider, headquarters in Tokyo.

Revenue $1.4Bilion Opera:ng margin 50% Market cap $4.7Bilion

DeNA was founded in 1999 as an eBay clone service provider. At that :me eBay hadn’t entered the Japanese market, but Yahoo! Auc:on was launched at the same :me.

(*) NTT Docomo started i-‐mode, the world first mobile internet service, in 1999.

DeNA struggled and decided to shik their emphasis from PC to mobile in 2002. In 2005, when the mobile auc:on service was just star:ng to take off, the company got an idea called “mobile social gaming plasorm”.

Six years had passed since establishment, the company became an experienced professional team. The mobile social gaming plasorm, “mobage” was launched very smoothly, and the business has been growing extremely quick.

All of these companies took a similar route regardless of the founder’s intenJon.

InnovaJon Empathy

idea!

in Emerging market Prepara1on Period

Start Acquire Empathy

Vision!

Every company entered emerging business area

Business Area Business when they entered

Tokyo Electron Semiconductor (1963) Trader

Acer Microprocessor (1976)

Trader and Consultant

Crea:ve Technologies

Personal Computer (1981) Repair Shop

Huawei Telecommunica:on (1987) Sales Agent

DeNA E-‐Commerce (1999) eBay Clone

Every company entered emerging business area as a non-‐technology company.



Acer Microprocessor (1976)






Every company entered emerging business area as a non-‐technology company.



Acer Microprocessor






Prepara1on Period

Acquire Empathy

Prepara1on Period

Acquire Empathy

These companies took preparaJon period regardless of the founder’s intenJon.

Trader Consultant Sales agent Repair shop Clone Service …

Empathy is the most important ability for business. And this kind of preparaJon period develops start-‐up team’s empathy:

communicate with target customers,

True marketing says, “These are the satisfactions the customer looks for, values, and needs.”

– Peter F. Drucker

enhance a human network,

Today knowledge has power. It controls access to opportunity and advancement.

– Peter F. Drucker

and build a team.

Alone we can do so little; together we can do so much.

– Helen Keller

PreparaJon period is a key process.

More haste, less speed

Four Steps for preparaJon period

I.   Define target market II.   Seek a business opportunity in

the preparaJon period III.   Start small, grow smart IV.  “Keep looking, don’t sePle”

I. Define target market

•  First of all, make sure that you have a passion to do business in the target market.

•  Emerging business area is good, but not limited to so long as you and your folks have a passion for the business area(*).

(*) For example, a UK manufacturer, “Dyson” successfully entered the vacuum cleaner market, a saturated market, with cuVng-‐edge technologies. He had worked as a licenser for 14 years a[er designing prototype, then established Dyson Ltd.

II. Seek a business opportunity in the preparaJon period

•  The purpose is to develop your team’s ability to understand and share the feeling of the target customers. The following are examples of businesses which enable you to develop:

Ø  Importer/sales agent Ø  Technology consultant Ø Repair service firm Ø Clone service provider / Clone product maker etc.

III. Start small, grow smart

•  Start small(of course) •  Enhance a human network and uJlize

(open) innovaJon system Ø Universi:es / Na:onal Ins:tutes Ø  Professionals in other industrial fields Ø  Foreign high-‐tech companies etc.

•  Organize internal R&D team as early as possible.

IV. “Keep looking, don’t sePle”

idea!

•  Look for new business idea which makes your hearts sing.

•  “Keep looking, don’t sePle”

Summary of Part II

•  In many places in the world, a start-‐up team needs a kind of preparaJon period to start business in the professional zone. •  This slide showed some case studies and provided a direcJon for the preparaJon period.

THANK YOU

fromBayArea.com

Does silicon valley style work in your place?

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