How to Decrease the Odds That Your Startup Fails

Many startup businesses – tech or otherwise – fail. In our industry we applaud the efforts for entrepreneurs to have tried and we know that today’s failure can bring the experience for tomorrow’s success. We also know that even though many of us who are experienced in startup successes & failures look at businesses and say, “That will never work” (as many people said about Uber) or “You can’t make any money in that business” (as many said about WhatsApp or Dropbox) and of course some entrepreneurs pull off extraordinary things we never thought possible.

Trying outrageous new things or even trying mundane things but in new ways but with extreme quality & innovation is what fuels the tech startup industry.

Yet I can’t help thinking there are many predictable failures that come from a lack of basic planning. It turns out that to build a successful company you ultimately need this strange thing called “revenue” that people don’t just hand you: You need to earn it. And there’s this other thing called “gross margin,” which shows the quality of your revenue. It says that selling an airplane ticket for $500 and getting paid a $5 fees by the airlines (1% gross margin) is not the same thing as selling $500 of software that you built (>90% gross margin).

If you don’t understand the basics of this I’ve written this primer on Startup economics you might appreciate – mostly to get journalists to stop saying, “That company isn’t even profitable!” when often that’s a stupid comment. Lately I’ve been having to say things I thought I’d never have to remind people, like, “getting to positive gross margin in several territories is a very low bar to claim success” or “profitable excluding marketing costs” is not actually a real thing.

But today I want to give you advice on how to decrease your odds of failure in a startup. You may still fail but at least you’ll have less chance of failing for the wrong reasons. Most of this advice boils down to an argument in favor of basic planning before starting a company or raising money. In many ways the fact that it has become so cheap to start a company and relatively cheap to raise angel/seed money that we as an industry have gotten lazy on basic planning.

The questions that a VC mulls before writing a check are precisely the questions you should be asking yourself.

1. Market Size
It’s ok to target a small market and you can probably build a niche business that is extremely valuable to you as an individual. But this isn’t likely to be a VC-backable business (which to be clear is totally ok). So if you go after a niche market then you need to raise small amounts of money, keep your costs exceedingly low, and get to cashflow positive as quickly as is possible. Running up big losses or trying to grow extraordinarily fast through paid marketing initiatives that have long payback periods will be the kiss of death for you. Marketing with long payback is precisely what requires venture capital.

If your goal is to build a scalable startup then you need to focus on where large amounts of money are spent and/or where large amounts of money will be spent. I like to use the example of a company I backed called MakeSpace because it’s such an easy an obvious market to understand. MakeSpace provides physical storage. They pick up your stuff and drop it off at your house when you want it back. They photograph your stuff and provide a beautiful app where you can see what you have at any moment.  So, let’s start with the basics. The US market is worth more than $25 billion and Europe is the same. Asia is smaller but growing as wealth increases in large, urban environments.

So when Sam Rosen came to me with the idea of disrupting storage with a product that is priced cheaper than existing incumbents and he could build a product that is a better service I was intrigued.

There are a million ways to either research your industries market size and you’re likely to have to do some basic estimations to figure out much of that is addressable to you. In our industry we call that a TAM (total addressable market) and I’m sure you can even Google methods for calculating a TAM.

Let me be very direct. If you’re not even spending any time thinking about what your market could be you’re simply being lazy and unprepared. For example, if you’re going to build a travel planning website (as many, many startup entrepreneurs do) your basic research would be:

  • How much do people spend on travel books / guides today?
  • How much ad revenue does TripAdvisor make? And how much do others providers make?
  • What is the CPM of ads in this industry (should I even be ad supported?)
  • How much money will airlines companies, hotel companies or event companies pay me as a referral or for booking?
  • What would it take in investments to acquire and retain traffic to support these businesses?

Answering these questions and other basic planning will tell you where the value is accrued in the enormous travel category, who is serving this market today and  you can find whether your entry into the market is likely to create a big business. Many startups in stead launch “cool” products that their friends and peers love initially but don’t yield large amounts of revenue or profits and certainly can’t support the costs structure.

Alternatively you may have figured out a way to capture a disproportionate amount of money in an under-served part of the market (as Airbnb have) and build an enormous company. But not doing basic research makes no sense. Equally, hoping to unseat TripAdvisor without understand their SEO strengths and how much it would cost to knock them down would be naïve.

2. Market Structure
Size of market matters but so, too, does “market structure.” Are you going into an industry (say, music?) dominated by a few very large incumbents who control much of the distribution or are you going into a market that is “fragmented” where nobody controls the industry. You can enter either but your strategy must be very different and I can tell you that fragmented markets are easier to disrupt.

For all of the talk about controlling the CRM market I’m told they still have less than 20% market share. In a way, CRM is actually fairly fragmented but to enter that market you’d have to come up with a part of the value chain not dominated by Salesforce or Microsoft Dynamics today.

If you look at the structure of the travel industry above – of course we know that the hotel industry is fragmented while the airline industry is reasonable consolidated. So if you’re going to build a front-end booking structure for either it’s probably more lucrative to do so for hotels vs. airlines. In the airline industry if 2-3 majors won’t play ball with you then it’s hard to build a valuable user experience. And to be successful you’d have to figure out how to unseat the likes of Kayak with its existing brand and tech assets. No, thanks. Airbnb’s success is that it unleashed a totally new market of inventory for travelers tired of paying too much for hotels and an entire supply of people who want to make a little extra money to make ends meet.

If you look at the storage market I referenced above, the largest player – Public Storage – does about $2.4 billion in sales and thus controls less than 10% of the market. The top 5 players combined control less than 25% of the market. Storage is what’s known as “highly fragmented,” meaning easier for a new entrant to get traction if it could design a better product / service / experience.

This is precisely why MakeSpace is growing so rapidly in its core markets: New York, Chicago and Washington DC where they can literally come and pick up your furniture and move it away and you never had to visit a facility and they do this at a cheaper price than incumbents by centralizing the location and thus having cheaper infrastructure costs. Sam did all this analysis before even deciding to build V1 of his software and before we put serious money behind him launching. He took seed money to test whether consumers cared and he started by not taking furniture to test the market with the least complexity.

After a year in the market, MakeSpace was growing rapidly and our biggest issue was CAC (customer acquisition costs) relative to payback period (when we get our marketing investment back) and relative to LTV (lifetime value). The metrics were good but we wondered how much better they would be when we expanded our product. We first rolled out furniture in a newer market – Washington DC, and we increased ARPU (average revenue per month, per customer) by > 300%, we lowered our CAC (this is because the number of people who came to our site and converted went up) and thus we decreased our payback period.

Boom. That is how great businesses are built. We did the planning work up front. We tested a simpler version of our product in the market first to prove product/market fit before raising a ton of capital, we build software to handle the complexity of the “mundane things” like driver routing, logistics tracking, warehouse management, photo processing, etc and we expanded our offering to test whether we could convert at better rates with an expanded offering.

And our software allowed us to offer: tighter pick-up windows, better utilization of “uploader staff” and to launch new products & services that I won’t discuss because they’re in development now.

If you create a business and start building products and go into an incubator or raise angel/seed money and don’t think about Market Size and Market Structure I only have one question: Why?

3. Incumbent Strengths & Weaknesses
So by now you should know your industry’s market size & structure. You should know at each part of the value chain where the value is controlled. But you also need to understand the incumbents’ strengths and weaknesses and their likely responses to your successes.

In an industry where you’re reselling airplane tickets, for example, you need to think about the power they may or may not have over you. In the early days of every business the incumbents tend not to respond because you’re too small and insignificant. As they see you grow the become intrigued and probably analyze your business model and potential. If you start to hit your success stride they willrespond.

As an investor that’s precisely what goes through my mind. If you’re not successful then who cares. But I’m investing on the assumption you will be successful, of course. So if you are then I have to ask myself, “What are the incumbents going to do when you grow?”

In the airline industry they have the ability to withhold inventory unless you’re an 800-pound gorilla where they can’t afford not to have your traffic while their competitors have it. But that’s harder to build in 2016 than it was in say 2005. If you figure out how to scale a video product inside of Facebook really, really, quickly they’re likely to allow it to happen for a while so they can study the positive & negative impacts on user experiences. But then they’re likely going to “traffic shape” so that you’re not too dominant. No platform is naïve enough to allow an outsider to grow enormously large in their ecosystem without an appropriate tax or benefit to them.

The perfect competitors are the ones where they unable to respond due to The Innovator’s Dilemma. Let me come back to MakeSpace to show you this point. Once we launched of course incumbents could try to create a product in which they pick up your stuff. At their scale this would be hard but doable. They could try to figure out how to do logistics, warehouse tracking, photo-processing and route management. It would take 2 years to catch up but believe me they have the capital to do so. They might struggle to hire a-players because, well, would you go work at Public Storage to build their software capabilities? Or would you go to a disruptor in stead?

But assuming they were able to copy us. They literally can’t respond to our core differentiator. They can’t continually lower the costs of providing the storage because they’re hamstrung by these huge assets called “local storage facilities” that were their great differentiator as they pushed to be closer and closer to the customers for “convenience” although I’ve never heard that term from any storage customers.

Our centralization is their achilles heel. It is Blockbuster video in the dawn of Netflix. And when you have a market where the competitor response can be that they throw money and resources at a problem but truly competing would be undermining their core business model and assets … BOOOOOM. Choose that market.

4. Microeconomics
Smart investors think a lot about what we call “unit economics” or what is the economics of service one customers. We need to market to that customer to make them aware of our product or service. That marketing can be PR or SEO or influencer distribution or other forms of “unpaid” marketing. But in the end these all have a cost – it’s just hidden. PR requires time and effort from your team that isn’t spent elsewhere and thus is a real cost. SEO doesn’t just happen – it requires a content strategy, inbound links, relevancy, keyword strategies, etc. And influencers may help once or twice but ultimately nothing is free.

You may have paid marketing: SEM, Social Media Ads, Banner Ads, email lists, etc. Any way you slice it acquiring users and/or customers isn’t free. Then you need to understand the economic benefit to the user. It it just more time that they save? Efficiency? Will they save hard dollars? How much? Why? How will you charge? Will the user pay? Will a third-party pay (advertisers, data companies)?  If a third-party ad: what CPMs do they pay today, what minimum volume of traffic will you need, will you sell direct or through an ad broker? Will you have premium ads or remnant ads?

Then you need to understand what these people are paying for similar products and services today. You can’t just make this up. If you want to do food delivery you need to know if the consumer pays or the restaurant pays and why. You need to understand what alternatives they have and how that will shape the amount of money they’ll spend. If you want to sell a “coffee in a box” subscription – is it premium to their buying Starbucks or Nespresso or cheaper? Will they supplement those purchases or replace it?

In any market you’re competing with one thing that all people must compete with, “share of wallet,” which in most markets is not unlimited (unless you’re selling extreme luxury goods).

If you’re selling to moms – what are they spending for comparable products today? What will they not spending on if they’re ramping up on your products?

What price will your customer ultimately accept? This is based on “price elasticity” and you can google that to understand it better. Essentially products that are “inelastic” means price increases don’t affect demand much (think cigarettes, drugs, alcohol) and if they’re “elastic” it means small price increases can massively drop demand but equally large price decreases can massively increase demand.

What are the customer’s alternatives? In economics this is known as a “substitute product.” If you launch a fizzy water product you may think your competitors are Badoit and San Pelligrino but a substitute product might be flat water like Propel or cold green tea. Most products have substitutes and it’s worth knowing.

Our portfolio company Ring had a new “security doorbell” which is truly a new market. But there are competitors (high end alarm systems like from ADT) and there are substitutes (like trying to use a less sophisticated product like DropCam, which is great as a camera but doesn’t have any of the security features built in and isn’t constructed to work well outside your house and in a secure way. That’s why Ring is amongst the fastest growing company in our portfolio. But to assume there are no substitutes would be wrong.

Of course the hardest competitor for most of us is simply customer inertia.

If you want to succeed you need to study the competitors. You won’t likely launch into a market with nobody else present. You need to ask yourself honestly how your product or service is going to be significantly better in some way than the competition that exists in the market. You need a wedge. You may be cheaper, you may have more features, you may be easier to use, you may target one under-served demographic (think Bevel by Walker & Co) or you may just be better at sales & marketing than the competition with an equivalent (or even inferior) product. But not to study what else is happening in a market is wrong.

Why would you consider the competitors in a market AFTER you’ve spent 18 months building product on somebody else’s money and with a team you’ve pried away from their existing jobs. You only have your limited time on this Earth and to find out some competitor disadvantage after years of work is crazy to me. But it is often what happens with first-time entrepreneurs who are spoiled for choice with angel investors willing to fund with little thought or with the plethora of incubators that now exists who need a steady flow of options to hope to have the next big winner so they may not ask all the tough questions. But you should. Why wouldn’t you?

Finally. Study your history. If you want to launch a company that competes with RottenTomatoes you need to study both why they are successful and what happened to the 20 other companies that tried to knock them off their stools. Do you think nobody has tried to better IMDB? I’ve seen 10 tries. Want to eradicate Evite? Why have so many before you failed? TripAdvisor? Yeah, we all know it’s imperfect. But it’s a fierce competitor that killed many a company before it.

Every market is littered with companies that came before you. That doesn’t mean you won’t succeed. But not to ask yourself the questions of “what went wrong there” and “what could we learn from it” is to give up your biggest advantage: the ability to stand on the shoulders of those who came before you.

Plan. Think. Study. Test. Validate data. Validate firmly held positions. Know your planned sources of differentiation and adjust as you learn. Read plenty of “what went wrong” eulogies by founders and see what you can learn. But also understand that the lens from which they tell you the answer is both imperfect and has a narrative bias. The right answer might be (as I read recently), “we should have hired more people and raised more money, more quickly and either succeeded quickly or found out we were wrong quickly and moved on to the next company.” But it might also be, “We chose the wrong market, we didn’t understand the value drivers, we didn’t do enough planning and we did what we thought was cool but the market didn’t validate that.”


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6 Business Focus Elements That Get More Out Of Less

Intuitively, many entrepreneurs and businesses believe that the key to faster growth and success is more products, features, and markets. Since we all have limited resources, and can’t add more hours to the day, the result is usually more things done poorly, rather than a few key things done better than anyone else. The message here is focus, reiterated by every advisor and investor.

Good examples of startup focus before success include Google with their search engine, Facebook with friends networking, and Apple with personal computers. Later, after that initial success builds resources, and your penetration of the target market approaches 30 percent, it’s time to expand your horizons and make anticipatory changes to your focus. Don’t wait for a crisis.

For larger and mature companies, the hard part seems to be giving up the familiar space that isn’t working so well anymore, so that you can focus on a new segment or opportunity. This was highlighted in a recent book “Do Less Better,” by John R. Bell, an experienced business expert, who highlights the power of strategic sacrifice in today’s complex business world.

Bell calls this change hesitation the failure to kill your darlings, or the fall from a specialist to a generalist. All entrepreneurs must succeed first as specialists, using pivots as required to zero in on the real and current market. It’s a tough world even for big-company generalists, who take on the complexities of product diversification. Just ask J.C. Penny, Radio Shack, and many others.

I particularly like Bell’s discussion of business culture characteristics that create the necessary focus and being the best in any business environment. This culture must be maintained by every company at every stage of maturity. I’ll paraphrase several of the key elements here in the context of entrepreneurs and startups:

  1. An overriding sense of urgency and passion. Nimbleness and urgency to get the job done will set you apart from your competitors in so many ways, particularly with customers. It comes naturally with a small highly motivated team, but it’s increasingly difficult to maintain in the face of size and success. Build it at the start and don’t ever lose it.
  2. Well-articulated goals and metrics. Your success or failure must be quantified by such key business indicators as market share, financial ratios, brand awareness, new product launches, and execution within the deadlines. Like the refrain of an old country song, if you don’t know where you’re going, you will probably end up somewhere else.
  3. Innovation-driven mindset and actions. Startups can’t hope to outspend a giant with a fat balance sheet. Rather you must outsmart the giant with innovative thinking, pivoting on a dime, and impeccable execution. Innovation initiatives of any appreciable scale require a formal, intentional resource commitment, and work best bottoms-up.
  4. Zero tolerance for complacency and status quo. Always strive to increase your lead, and while competitors scramble to catch you, unleash your next breakthrough product, service, or promotion. It’s easy for complacency to creep in unnoticed in the face of initial success. Continually move up the bar to re-test your personal limits and your team.
  5. Maintain an intimate knowledge of the competition. You must know what your competitors are planning, and how they think, corporately and individually. Study their moves and engage your team for an analysis of updates. Avoid egotistical price wars and emotional outbursts, but make competitors think you are prepared to win at all costs.
  6. Focus on the few things that really matter. No organization, large or small, can manage more than five goals and priorities without becoming unfocused and ineffective. Keep these balanced and aligned between people and process, and keep the scope realistic. Concentrate your actions on preemptive projects that are within your control.

In the long run, to have a long run, your company needs a narrow and memorable focus that is constantly being updated in innovative ways. It’s easy to think that doing less as a company means you’re slacking, but results and longevity are all that count. Every entrepreneur and executive must learn how to build and maintain a culture of doing fewer things better.

Marty Zwilling

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startup fund

Super hot Korea gets a new startup fund

Korea is sizzling, and the fact isn’t lost on Altos Ventures or its backers. The early-stage venture firm, with an office on Sand Hill Road and in Seoul, has just raised an oversubscribed $110 million fund to invest exclusively in the country, the second fund of its type for Altos, which raised its last Korea-focused fund with $60 million in 2013. (The firm has also raised four U.S.-focused funds over the last decade.)

It’s easy to understand LPs’ enthusiasm. Korea boasts the world’s 12th largest economy, with more than 50 million inhabitants and GDP per capita of roughly $25,000, according to the World Bank. Its inhabitants are entrepreneurial, with 28 percent of the population self-employed versus 10 percent in the U.S. Korea also has among the world’s fastest and mostly broadly deployed broadband.

Also very notably, Korea has produced more than a dozen internet companies worth more than a billion dollars over the last decade or so, including the web search giant Naver, a now publicly traded company valued at $17 billion; the web search company Daum Kakao, formed when Korean internet firm Daum merged with domestic messaging app company Kakao in a $2.9 billion deal in 2014 (it’s now valued at $5.5 billion); and Yello Mobile, whose mobile apps business was valued at $4 billion during its most recent funding round in December.

Yesterday, we talked with Altos Ventures managing director Anthony Lee to get a better picture of what’s going on, and how his firm is going to invest its new fund.

TC: When and why did you start investing in Korea?

AL: About 10 years ago. We started seeing this opportunity that was very much overlooked in many ways. Everyone knows the country for LG and Samsung, but there are now a lot of very real, billion dollars companies, and there’s almost zero Western capital in those companies. Many bootstrapped themselves. They were almost entirely missed by VCs in Silicon Valley.

TC: That must be changing. What other investors are you starting to see who you didn’t see five years ago?

AL: There’s now a domestic VC market, investing $1.5 billion annually in all sorts of things, from internet stuff to hardware, movies, medical, and manufacturing. We’re seeing a lot more foreign attention now, too. At the later stages, you’re seeing Chinese hedge funds, Japanese corporates — Softbank invested $1 billion in [our portfolio company, the e-commerce startup] Coupang last year. Goldman Sachs is coming in. Blackrock also led an investment in Coupang in late 2014. At the earlier stage, you’re also starting to see, Japanese, Chinese, and more U.S. investors start to venture over there.

TC: There’s a much stronger focus on profitability in Korea than in the U.S., is that right?

AL: Yes. Korean venture has been more merchant banking and corporate in its nature, meaning it invests for very quick returns. The government is a large LP in many funds and they’ve [accordingly been] optimized for lower risk. We sometimes find ourselves pushing companies in the direction of growth and not profitability. At the same time, of the 30 companies we’ve invested in there, we’ve only had one loss. It’s a bit emblematic of the way Korean entrepreneurs work. They hate to fail.

TC: Who are your investors in this new Korea fund?

AL: Most are institutional investors from North America and Asia. Maybe a quarter comes from Korean entrepreneurs, foundations, and internet companies.

TC: A lot of tech is pioneered in that part of the world. 

AL: It is. Korea was home to the first social network, Cyworld; the first virtual goods, online games . . . I remember being there in 2000 and watching full-motion video on its subway cars. People have large phablet-style cells phones and often more than one phone as Korea is way ahead in 4G penetration, so what people do on their mobile devices is way ahead of us in the U.S. More than half of e-commerce happens on the phone. [Editor’s note: in the U.S., that percentage is 30 percent.]

There’s this other really interesting layer where Korea used to be perceived as a really backward kind of country, but it has gone from OECD debt recipient to donor. It’s industrialized so quickly that it’s actually now known for its cultural exports. Korean dramas are popular through Asia. Korean cosmetics are huge — there are more cosmetics companies in Korea than in the U.S. It’s really become a bit a trend setter.

TC: What are you tracking now?

Half of our investments are focused on companies that can become big category leaders within the country itself. The other half are global companies that happen to be run by Koreans. Retrica, for example [a photo application for Android that lets users add filters to their snapshots], is one of the top apps in Europe and Latin America and it’s based in Seoul.

As for different areas, we’re very interested in fintech in Korea. There aren’t efficient mobile payments platforms there yet. They don’t have peer-to-peer lending. So those are two places where we’ve met bets recently. We’re also very interested in healthcare IT. Korea has a very advanced healthcare system. And we’ve interested in mobile entertainment. One thing we’ve seen recently are far more sophisticated mobile games that we’re used to playing on the Xbox.

TC: Have valuations been impacted by some of the global turmoil we’ve seen of late?

AL: There hasn’t been a big rush of supply of capital, so valuations haven’t gone out of whack. Deals are on an order of three times less than in the U.S., and burn rates are also much lower. So it’s not only more reasonable to invest in a company, but the companies are more reasonable to run.

TC: Meaning no hot air balloon chairs in the office?

AL: Actually, the companies are starting to look more like Silicon Valley companies. All the entrepreneurs speak English. They all read TechCrunch and they know what SV companies look and act like, and so to compete for talent, they start to adopt those kinds of things. In fact, Google has these entrepreneurial campuses and opened its first Asia-based center in Seoul and [stepping inside it], you would think you were in Mountain View.

TC: How are deal terms different, if at all?

AL: Our term sheets are exactly the same here as there. We don’t want to be taking advantage of the fact that there’s less capital there. We compete on the basis of offering a plain, standard, Silicon Vally term sheet; we even published it publicly to educate the ecosystem there.

The entrepreneurs are very savvy. Many are Western educated and many have worked for large Western internet companies. On any day, hundreds of startups are flying between the two countries. We see them in our offices all the time.

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Study: Immigrants Founded 51% of U.S. Billion-Dollar Startups

A new non-partisan study on entrepreneurship gives some credence to the tech industry’s stance that American innovation benefits from robust immigration.

The study from the National Foundation for American Policy, a non-partisan think tank based in Arlington, Va., shows that immigrants started more than half of the current crop of U.S.-based startups valued at $1 billion or more.

These 44 companies, the study says, are collectively valued at $168 billion and create an average of roughly 760 jobs per company in the U.S. The study also estimates that immigrants make up over 70% of key management or product development positions at these companies.

The foundation examined 87 U.S. companies valued at $1 billion or more as of Jan. 1, as tracked by the Journal’s Billion Dollar Startup Club. The authors of the study used public data and information from the companies to create biographies of the founders.

The three highest valued U.S. companies with immigrant founders include car-hailing service Uber Technologies Inc., data-software company Palantir Technologies Inc. and rocket maker Space Exploration Technologies Inc.

Stuart Anderson, the study’s author and the foundation’s executive director, says the findings show that the U.S. economy could benefit from the talents of foreign-born entrepreneurs even more so if it were easier for them to obtain visas.

Tech leaders including Mark Zuckerberg and Bill Gateshave called for increasing the number of H-1B visas that let skilled foreign workers stay in the country. They argue that immigration greatly benefits the tech community, and that it is difficult for companies to hire foreign-born workers and for immigrant entrepreneurs to start businesses due to the visas’ constraints.

Critics argue that tech executives are simply looking for cheaper labor, and some politicians, as well as Republican presidential hopeful Donald Trump, aim to curb the work visa program. A bill introduced by Republican presidential candidate and Sen. Ted Cruz (R., Texas) and Sen. Jeff Sessions (R., Ala.) in December that the lawmakers say aims to reform the H-1B visa program would require petitioners to hold an advanced university degree, have worked at least 10 years overseas and not get paid materially less than U.S. workers.

Either way, the process to secure a visa is lengthy and cumbersome. The visas are capped at 85,000 per year — 65,000 are set aside for foreign workers applying for the first time and 20,000 are for foreign students graduating from American universities. In 2015, the lottery to obtain a visa hit capacity within one week, according to the U.S. Citizenship and Immigration Services. The USCIS said it received nearly 233,000 H-1B petitions during the filing period.

Mr. Anderson said the law makes it difficult for entrepreneurs to qualify because it is meant for employers to petition on behalf of their employees. And the decision to start a company while waiting for a H1-B visa to come through is risky. Mr. Anderson said in most instances, immigrant entrepreneurs are only able to get their businesses off the ground after first gaining permanent residence, then obtaining a green card.

“How would you ever raise money for it?” Mr. Anderson said. “Who is going to invest in a company if the founder of the company may not be able to stay in the U.S.?”

Jyoti Bansal said he had to wait seven years for his employment-based green card before he could start AppDynamics Inc., a software company that helps companies monitor the performance of their networked applications and that has been valued at $1.9 billion. According to the study, Mr. Bansal couldn’t leave his job to start a new company because it was unclear if he’d be able to keep his H-1B status.

While bills to address these issues have been introduced – most recently in the form of the EB-JOBS Act of 2015 which was introduced in July – they have failed to gain traction due to the overall standstill on immigration policy. The EB-JOBS Act of 2015 would provide entrepreneurs with a two-year green card that would be revoked if certain financial and job-creation requirements aren’t met.

The Ewing Marion Kauffman Foundation, which funded the study, estimated the EB-JOBS Act provision would create 1 million to 3.2 million jobs over 10 years.

According to the study, founders of billion-dollar startups most often hail from India (14), followed by Canada and the U.K., with eight each, then Israel (7) and Germany (4). Two originated from France and the Collison brothers, the co-founders of payments startup Stripe, make up the pair from Ireland.

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What Founders Need to Know: You Were Funded for a Liquidity Event – Start Looking

The Good News

To most founders a startup is not a job, but a calling.

But startups require money upfront for product development and later to scale. Traditional lenders (banks) think that startups are too risky for a traditional bank loan. Luckily in the last quarter of the 20th century a new source of money called risk capital emerged. Risk capital takes equity (stock ownership) in your company instead of debt (loans) in exchange for cash.

Founders can now access the largest pool of risk capital that ever existed –in the form of Private Equity (Angel Investors, family offices, Venture Capitalists (VC’s) and Hedge Funds.)

At its core Venture Capital is nothing more than a small portion of the Private Equity financial asset class. But for the last 40 years, it has provided the financial fuel for a revolution in Life Sciences and Information Technology and has helped to change the world.

The Bad News
While startups are driven by their founder’s passion for creating something new, startup investors have a much different agenda – a return on their investment.  And not just any returns, VC’s expect large returns. VC’s raise money from their investors (limited partners like pension funds) and then spread their risk by investing in a number of startups (called a portfolio). In exchange for the limited partners tying up capital for long periods by in investing in VCs (who are investing in risky startups,) the VCs promise the limited partners large returns that are unavailable from most every other form of investment.

Some quick VC math: If a VC invests in ten early stage startups, on average, five will fail, three will return capital, and one or two will be “winners” and make most of the money for the VC fund. A minimum ‘respectable’ return for a VC fund is 20% per year, so a ten-year VC fund needs to return six times (6x) their investment. This means that those two winner investments have to make a 30x return to provide the venture capital fund a 20% compound return – and that’s just to generate a minimum respectable return.

(BTW, Angel investors do not have limited partners, and often invest for reasons other than just for financial gain (e.g., helping pioneers succeed) and so the returns they’re looking for may be lower.)

The Deal With the Devil
What does this mean for startup founders? If you’re a founder, you need to be able to go up to a whiteboard and diagram out how your investors will make money in your startup.

While you might be interested in building a company that changes the world, regardless of how long it takes, your investors are interested in funding a company that changes the world so they can have a liquidity event within the life of their fund ~7-10 years. (A liquidity event means that the equity (the stock) you sold your investor can now be converted into cash.) This happens when you either sell your company (M&A) or go public (an IPO.) Currently M&A is the most likely path for a startup to achieve liquidity.

Know the End from the Beginning
Here’s the thing most founders miss. You’ve been funded to get to a liquidity event. Period. Your VCs know this, and you need to know this too.

Why don’t VCs tell founders this fact?  For the first few years, your VCs want you to keep your head down, build the product, find product/market fit and ship to get to some inflection point (revenue, users, etc.). As the company goes from searching for a business model to growthonly then will they bring in a new “professional” management team to scale the company (along with a business development executive to search for an acquirer) or prepare for an IPO.

The problem is that this “don’t worry your little head” strategy may have made sense when founders were just technologists and the strategy and tactics of liquidity and exits were closely held, but this a pretty dumb approach in the 21st century. As a founder you are more than capable of adding value to the search for the liquidity event.

Therefore, founders, you need to be planning your exit the day you get funded. Not for some short-time “lets flip the company” strategy but an eye for who, how and when you can make an acquisition happen.

acquistion steps
Step 1: Figure out how your startup generates value
For example, in your industry do companies build value the old fashion way by generating revenue? (Square, Uber, Palantir, Fitbit, etc.) If so, how is the revenue measured? (Bookings, recurring revenue, lifetime value?) Is your value to an acquirer going to measured as a multiple of your revenues?  Or as with consumer deals, is the value is ascribed by the market?

Or do you build value by acquiring users and figuring out how to make money later (WhatsApp, Twitter, etc.) Is your value to an acquirer measured by the number of users? If so, how are the users measured (active users, month-on-month growth, churn)?

Or is your value going to be measured by some known inflection point?  First-in-human proof of efficacy? Successful Clinical trials? FDA approvals? CMS Reimbursement?

If you’re using the business model canvas, you’ve already figured this out when you articulated your revenue streams and noted where they are coming from.

Confirm that your view of how you’ll create value is shared by your investors and your board.

Step 2: Figure out who are the likely acquirers
If you are building autonomous driving aftermarket devices for cars, it’s not a surprise that you can make a short list of potential acquirers – auto companies and their tier 1 suppliers. If you’re building enterprise software, the list may be larger. If you’re building medical devices the list may be much smaller. But every startup can take a good first cut at a list. (It’s helpful to also diagram out the acquirers in a Petal Diagram.) Petal diagramWhen you do, start a spreadsheet and list the companies. (As you get to know your industry and ecosystem, the list will change.)

It’s likely that your investors also have insights and opinions. Check in with them as well.

Step 3: List the names of the business development, technology scouts and other people involved in acquisitions and note their names next to the name of the target company.

All large companies employ people whose job it is to spot and track new technology and innovation and follow its progress. The odds on day-one are that you can’t name anyone. How will you figure this out? Congratulations, welcome to Customer Discovery.

  • Treat potential acquirers like a customer segment. Talk to them. They’re happy to tell anyone who will listen what they are looking for and what they need to see by way of data or otherwise for something to rise to the level of seriousness on the scale of acquisition possibilities.
  • Understand who the Key Opinion Leaders in your industry are and specifically who acquirers assemble to advise them on technology and innovation in their areas of interest.
  • Get out of the building and talk to other startup CEOs who were acquired in your industry.  How did it happen? Who were the players?

It’s common for your investors to have personal contacts with business development and technology scouts from specific companies. Unfortunately, it’s the rare VC who has already built an acquisition roadmap. You’re going to build one for them.Network diagram
After awhile, you ought to be able to go to the whiteboard and diagram the acquisition decision process much like a sales process. Draw the canonical model and then draw the actual process (with names and titles) for the top three likely acquirers

Step 4: Generate the business case for the potential acquirer
Your job is to generate the business case for the potential acquirer, that is, to demonstrate with data produced from testing pivotal hypotheses why they need is what you have to improve their business model (filling a product void; extending an existing line; opening a new market; blocking a competitor’s ability to compete effectively, etc.)

Step 5: Show up a lot and get noticed
Figure out what conferences and shows these acquirers attend. Understand what is it they read. Show up and be visible – as speakers on panels, accidently running into them, getting introduced, etc.  Get your company talked about in the blogs and newsletters they read. How do you know any of this?  Again, this is basic Customer Discovery. Take a few out to lunch. Ask questions – what do they read? – how do they notice new startups? – who tells them the type of companies to look for? etc.

Step 6: Know the inflection points for an acquisition in your market
Timing is everything. Do you wait 7 years until you’ve built enough revenue for a billion-dollar sale?  Is the market for Machine Learning startups so hot that you can sell the company for hundreds of millions of dollars without shipping a product?

For example, in Medical Devices the likely outcome is an acquisition way before you ship a product. Med-tech entrepreneurship has evolved to the point where each VC funding round signals that the company has completed a milestone – and each of these milestones represents an opportunity for an acquisition. For example, after a VC Series B-Round, an opportunity for an acquisition occurs when you’ve created a working product and you have started clinical trials and are working on getting a European CE Mark to get approval.

When to sell or go public is a real balancing act with your board. Some investor board members may want liquidity early to make the numbers look good for their fund, especially if it is a smaller fund or if you are at a later point in their fund life. If you’re on the right trajectory, other investors, such as larger funds or where you are early in their fund life, may be are happy to wait years for the 30x or greater return. You need to have a finger on the pulse of your VCs and the market, and to align interests and expectations to the greatest extent possible.

You also need to know whether you have any control over when a liquidity event occurs and who has to agree on it. (Check to see what rights your investors have in their investment documents.)  Typically, a VC can force a sale, or even block one.  Make sure your interests are aligned with your investors.

As part of the deal you signed with your investors was a term specifying the Liquidation Preference. The liquidation preference determines how the pie is split between you and your investors when there is a liquidity event. You may just be along for the ride. 

Above all, don’t panic or demoralize your employees
The first rule of Fight Club is: you do not talk about Fight Club. The second rule of Fight Club is: you DO NOT talk about Fight Club! The same is true about liquidity. It’s detrimental to tell your employees who have bought into the vision, mission and excitement of a startup to know that it’s for sale the day you start it.  The party line is “We’re building a company for long-term success.”

Do not obsess over liquidity
As a founder there’s plenty on your plate – finding product/market fit, shipping product, getting customers… liquidity is not your top of the list. Treat this as a background process. But thinking about it strategically will effect how you plan marketing communications, conferences, blogs and your travel.

Remember, your goal is to create extraordinary products and services – and in exchange there’s a pot of gold at the end of the rainbow.

Lessons Learned

  • The minute you take money from someone their business model now becomes yours
  • Your investors funded you for a liquidity event
  • You need to know what “multiple” an investor will allow you to sell the company for
    • Great entrepreneurs shoot for 20X
    • You need at least a 5x return to generate rewards for investors and employee stock options
    • A 2X return may wipe out the value of the employee stock options and founder shares
  • You can plan for liquidity from day one
  • Don’t demoralize your employees
  • Don’t obsess over liquidity, treat it strategically
business, startup, gesture, people and teamwork concept - happy creative team making high five in office

7 Ways to Get the Most Out of an Accelerator Program

So you decided that an accelerator is appropriate and helpful to your company. You read 10 Reasons to Join (or not to join) an accelerator post and decided to go for it. Filled out the application, researched different kinds of accelerators, applied, and got in.

Congrats! Now the work begins. Here is how you can maximize what you get out of the program.

1. Work Backwards From Your Goal

Most companies join accelerators to catalyze the funding, grow and build their network. Whatever your goals are, work backwards from the goals. Set the goals (or even better just 1 goal) for the entire program, then for each month, each week and every day. See my post about GMT on how to do this effectively.

Recognize that unless you work backwards from the goals, you may not achieve them. Accelerator programs are known to be noisy, chaotic, serendipitous, competitive, and often distracting.

There is a lot going on and there can be a lot of noise. To stay the course and avoid being pulled into different directions and wasting time, decide on the goals and make them your true north.

2. Go Fast

The Techstars mantra coined by Brad Feld and David Cohen is Do more, faster. The idea is to accomplish in 3 months what typically would take years. During Techstars programs, we accelerate companies by pairing them with amazing mentors and letting them tap our network. The feedback from the mentors, their experience and advice, allows the companies to go faster. By tapping into the network the companies are able to shortcut biz dev, funding, sales intros — all the things that typically take weeks and months only take days during Techstars.

But in addition to the mentors and the network, it is the rhythm; the culture of doing things quickly that defines an accelerator. Realize that you are on the clock. This means you can’t afford to waste time. Don’t write extra code.

Don’t waste time chasing customers that take too long to close. Instead, quickly decide what is important, prioritize and go fast.

Read my post on Action and Idea lists for how to prioritize and execute effectively.

3. Look for Shortcuts

This is a simple tactic for going quickly – try to always ask how can something be done faster. Look for a shortcut. Do you really need to build the app to test the market or could you test it using a text message? Do you really need to have the full database in place or can you just enter a few rows. Do you really need to build the product before you get your first customers? Why not sign them up in advance, sell them on the concept?

Shortcut mentality can help you go faster during the program. Always ask — is what I am doing simple? Can I do this faster? Am I making it too complicated and grandiose? Am I doing more than I need to do? More often than not, you find a simpler, better and faster solution to test a hypothesis, to get to a customer, and to validate the market.

Since you are on the clock during the program, doing the least amount possible for maximum results is what makes sense. Note that in no way am I advocating that you compromise the long term quality of your product. Quality is absolutely important, but if your MVP is successful and sticky, you will get funding and the chance to refine and make your product better.

4. Focus on Growth & Revenue

The most important thing you can do help financing is to find a product that resonates with the customers/users and generates revenue/growth. The whole point of acceleration during the program is not to accelerate your financing, that’s not really possible. What gets accelerated is your business, which in turn leads to acceleration of financing.

If you already have some initial product market fit, then your goal is to grow as much as you possibly can during the program. You set up KPIs (key performance indicators or metrics) and work hard to drive them up and to the right.

Ideally, your number one metric is monthly recurring revenue (MRR). That would make your company the most attractive to prospective investors. If that’s not possible, then growth in beta customers and/or users is another good metric. Basically, if you are not growing during the program, it means that there is no demand for your product, and in turn it means there is no product market fit (PMF), and that in turn signals to investors that you don’t have proof that your business will work.

On the flip side, it is hard to argue with revenue and customer growth. Techstars companies are known to make a lot of progress and grow a lot during the program, and that typically results in successful fundraising around Demo Day.

5. Iterate & Pivot

Next, let’s talk about Pivots. To me, fail fast has become a cliche that some people take too far. The point is that, yes, you do want to pivot if your business isn’t working. But you need to also give it a fair shot. The thing to do during the program is to iterate weekly, where each week you are trying to grow. Initially, you are iterating and refining your original concept. And then you measure, does it work or not? If you feel that week after week you can’t generate growth, then it may be time to pivot.

Once you decide to change direction, apply the same idea of iteration. Before you write a lot of code, or any code really, go and validate that the market is there.

Do customer discovery, make sure you test and and learn as much as possible using all kinds of unscalable tactics and prove that the new idea will work before rushing to write a lot of new code.

6. Maximize the Mentor Whiplash

Most accelerator programs are known for their Mentor Whiplash. This happens when founders get conflicting advice and feedback from different people. It is a really frustrating and mind twisting experience (as many founders told me). The key thing is to turn this into a positive, an increasing returns and acceleration experience for your company.

To do that — open your mind, listen, take notes and say thank you. Remember, you don’t have to do anything that other people tell you. This is your company, and you will not be measured or judged based on how much advice you did or didn’t take. You will be judged and measured based on your KPIs, revenues and growth of your business.

So take all the feedback that comes your way – the good, the bad and the ugly. Synthesize and process it. Combine it, distill it. Hear mentors out and then decide for yourself and execute. Don’t be neither too rigid and stubborn, nor too twistable and flexible.

The point is to realize when a lot of people are telling you the same thing — pay attention, don’t ignore. At the same time, have the gut to follow your vision when you really believe it and have data to back up your belief.

7. Network, Network, Network

Regardless of whether you take someone’s advice or not – be super thankful, respectful, always shake hands and connect. Become a networking machine. Other founders, mentors, investors, customers — all of them should become nodes in your network. Obsessively collect people and connections. The network will help accelerate your company after the program. It will help you with this business and all your next businesses. It is your resource and your set of shortcuts around the business world.

If you don’t obsessively connect, you are missing out. You will literally be at a disadvantage compared to other founders who are doing this correctly.

Networking is the basics of the business since the first business was conducted, and an accelerator program creates a very fruitful soil for you to rapidly build out this amazing professional asset.

Follow these 7 things and you are likely going to get the most out of the program. Remember that funding is not guaranteed and doesn’t just happen. An accelerator is not the end but the beginning. Other people have good ideas and experiences. Be thoughtful, make the most out of the program and win.

Originally posted on Alex’s blog.

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실리콘밸리 스타트업계 한국계 대모 크리스틴 차이, 클레어 장 “인종·성별·국적 상관없이 가능성에 투자”

크리스틴 차이 500스타트업 설립.. 컨설팅·네트워킹·투자 지원 2000명 이상 창업자 배출
클레어 장 이그나이트XL 설립.. 한국 토종 스타트업 지원 “실리콘밸리 거쳐 중국에 가라”

크리스틴 차이
클레어 장

【 샌프란시스코(미국)=조은효 기자】 “가능성을 가진 젊은 창업가라면 성별, 인종, 국적을 가리지 않고 지원할 겁니다.”

그는 실리콘밸리 진출을 꿈꾸는 스타트업(창업초기기업)의 기업가라면 가장 만나고 싶어하는 사람 중 하나다. “투자를 하면 회수하는 게 첫번째 목표”라고 말하는 그에겐 한 가지 원칙이 있다. 투자할 기업 대표가 젊은 백인이어야 한다는 실리콘밸리의 불문율을 과감히 깨서 다양한 배경을 가진 유능한 창업가들에게 실리콘밸리가 가진 기회를 주는 것이다. 일종의 ‘편견에 대한 도전’이다.

세계적인 스타트업 액셀러레이터(컨설팅·투자사)인 500스타트업의 공동설립자이자 파운딩파트너인 크리스틴 차이. “전 세계 젊은 창업가들을 만나 가능성을 보고 지원해주고 있는 데 성과를 보이고 있죠. 그들이 어디에 있든 실리콘밸리에서 얻을 수 있는 기회를 주고 싶어요.”

구글 출신의 그는 페이팔 마케팅디렉터 출신 데이브 매클루어와 지금의 500스타트업을 설립했다. 이곳에선 스타트업이 필요로 하는 컨설팅, 네트워킹, 멘토링, 투자까지 진행한다. 전 세계 50개국 1000개 이상의 스타트업이 500스타트업 프로그램에 참여했으며 이를 통해 2000명 이상의 창업자가 배출됐다. 또 이곳 출신으로 120여명의 성공한 스타트업 멘토를 보유하고 있다. 미국에서 500스타트업에 뽑혀 프로그램을 이수했다는 건 일종의 투자 보증서다.

그는 편견에 도전하라고 말한다. “한두 번 도전해서 안된다고 포기하지 말고 과감하게 지속적으로 뚫고 나가세요” “우리가 투자한 곳의 30% 이상이 여성이고 앞으로 탄생할 거대기업들은 인종이나 성별, 국적에 상관없이 자기 노력과 아이디어로 성장한 기업들이길 바라기 때문입니다.”

500스타트업은 미국과 글로벌 투자를 진행하는 펀드 이외에 동남아시아 지역의 ‘두리안 펀드’, 태국의 ‘툭툭 펀드’, 한국의 ‘김치 펀드’ 등 다양한 지역 기반 투자펀드를 조성해 운영하고 있다. 한국에서는 지난 2월 중소기업청·한국벤처투자와 165억원 규모의 펀드를 조성해 유망한 한국 스타트업에 1억원 내외의 초기투자금을 지원하고 있다.

실리콘밸리 액셀러레이터 업계의 또 다른 여걸은 이그나이트XL의 클레어 장이다. 그는 실리콘밸리 진출을 꿈꾸는 한국 토종 스타트업 지원을 타깃으로 삼았다. 이민 1.5세인 그는 초등학교 때 가족과 함께 미국으로 이주했다. 현재는 액셀러레이터 설립자로 활동하지만 그 자신 과거 수년간 소셜네트워크 분야에서 스타트업을 세워 치열하게 뛰어본 경험이 있다. “실리콘밸리 액셀러레이터 업계에서 2000년부터 15년 이상 한국 기업들이랑 이렇게 오래 일해온 사람은 별로 없겠죠. 다양한 경험과 현지 투자 네트워크가 제가 가진 강점이에요.”

그는 과거 2000년대 초반 한국이 정보통신(IT) 분야에서 앞서갔던 경험을 똑똑히 기억하고 있었다. 클레어 장은 당시 첫 직장인 비자카드를 그만두고 아시아계 친구들과 회사를 설립하기도 하고, 그 경험을 살려 정보통신부 산하 중소·벤처기업의 미국 진출 지원업무를 담당했던 아이파크(iPark)에서 컨설팅 경력을 쌓았다. 지금으로 따지면 액셀러레이터의 전신 격이다. “과거 한국은 정말 혁신적이었죠. 2000년대 초반에 아이파크 같은 인큐베이터를 해외 주요도시에 세운 건 정말 앞서간 것이었어요. 미래를 내다본 거죠.”

“미국은 굉장히 다양한 곳이에요. 한국은 사과 한 개가 시장을 장악하는 곳이라면, 미국은 그야말로 다양한 사과들이 있는 곳이에요. 미국 시장에서 어떤 타깃을 잡고 뚫을지 한국인들이 가장 어려워하는 부분이에요.”

그는 한국 창업가에게 실리콘밸리를 거쳐 중국으로 가라고 조언했다. “미국의 투자가들은 중국 진출을 생각하는데 엄두를 못내는 부분이 있어요. 한국은 지리적으로나 문화적으로 중국과 가깝기 때문에 중국시장을 내다보고 투자전략을 짜라고 말하고 싶어요.”

※ 저작권자 ⓒ 파이낸셜뉴스. 무단 전재-재배포 금지


Korea Rising ( Part I: Series Chronicling the Rise of Korean Startups ) #KoreaRising

There is no greater time to be in Korea than now.

Yes, that’s coming from a Korean American that has lived his entire life in the Bay Area and landed in Seoul 10 months ago. Hard to digest right? ( I can feel the collective eye roll of native Koreans )

이사람, 진짜 미쳤다…

My grasp of the language is mediocre at best, and baristas still cringe when I trickle in my order. Taxi drivers inquire, “where you visiting from?” when I request my destination, and I’m fully aware that I’m years from understanding the detailed nuance of current Korean culture. But I will tell you, there’s something incredibly special happening in Seoul. Something is stirring…

The traditional conveyor belt that harbored young professionals from college graduation to traditional large corporations is cracking, and a new generation is gravitating towards risk and massive reward. The dormant but innate entrepreneurial blood of Korea is awakening once again.

My time in Silicon Valley, what some refer to as the mecca of startups, taught me much. One of the most significant being, the early telltale signs of what will be life altering companies and technology. Today in Korea, I see those signs sprouting. A new generation is beginning to rupture the hardened fault lines of tradition to make way for a new time. A new way of life. The pieces have been accumulated for what will be another historic chapter for Korea.

I moved to Korea to join a rapidly growing startup called Baedal Minjok; Korea’s largest food ordering app (consider it the GrubHub of Korea ). This company and it’s CEO, Bongjin Kim, are revolutionary in many ways (another post), but what truly drove me across the Pacific was the larger opportunity to get in on the ground floor of building the next generation of Korea.

This country is currently in one of the most unique periods of it’s history and it will be this decade that will define it’s next century.

Korea’s meteoric rise can be largely attributed to the Chaebols ( family owned conglomerates such as Samsung and Hyundai ). While many host differing views on them, for the purposes of this post they set the context of why I so strongly believe startups will be critical for the future of Korea.

It’s crucial to understand just how intertwined the fate of Korea’s future success or failure rests with these Chaebols. Samsung alone owns nearly 23% of the nation’s GDP. While much of the success of modern day Korea can be attributed to these companies, one has to recognize the precarious predicament Korea has now been slotted into. Every egg is in the basket. If one falls, so goes the nation.

Take for instance this scenario, if by chance Facebook or Apple were to suddenly file bankruptcy and collapse tomorrow, while a major loss to the US economy, America as a whole would be able to continue on. Korea doesn’t have that luxury.

If one conglomerate topples, the domino effect of this fall would leave a catastrophic path of economic turmoil. Purchasing power would be all but obsolete, restaurants and small businesses would shut down, nightlife would come to a halt, taxi drivers would remain idle, and the heart of the country would come to a murmur. This bustling 24–7 metropolis would simply go dark.

And yet it is here, right now, where others see risk and instability, that I see a once in a lifetime opportunity be a part of a revolutionary moment for a proven winner. Korea has no other choice. It must build.

For the pioneers, the global craftsman, innovative daredevils and cultural poets; Seoul is your next playground.

It is here that Korea will do what it has always done best. Prove the world wrong.

There is no greater time to be in Seoul than now.


To make sense of my initial claim, it’s critical to first understand Korea. This futuristic cyber world is pulsing in a domain years ahead of many modern cities around the world. Yet, it was not long ago, 1965, that South Korea’s per capita GDP was less than that of Ghana. Even more surprising, North and South Korea’s GDP were nearly identical as recent as 1970.

So how did this country pull off this global miracle?

The answer can be found within the heart and soul of it’s people. Every success story is driven by it’s people. It’s talent.

While other countries have entrepreneurs, Korea is an entrepreneur.

Seoul, I’d argue, is the greatest global product the world has ever seen, and what it has managed to accomplish in just one generation is nothing short of spectacular.

If Google started in a garage, Korea started in the ashes of war. Hope was a commodity even the wealthy had a hard time possessing, and yet it was from this ground that the Korean people would begin a trajectory so profound, it’s likeness is unprecedented.

The country launched ( it’s current iteration ) after the Korean War ( 1950–1953 ) with humble beginnings. Infrastructure was a paved dirt path worn in by foot traffic, and neighborhoods were constructed with weather as it’s greatest adversary. South Korea has no natural resources and very little arable land. A country not even half the size of California; a featherweight in the global ring.

What it had though was talent. Incredible, indestructible talent. An inner fire and gut wrenching grit that can only be forged through generations of pure survival. For 5,000 years Korea has withstood over 400 invasions. Korea shouldn’t even exist, but it does. The country’s history has produced a people that are intensely sharp, deeply passionate and wholly unrelenting.

Korea “IPO’ed” on the global markets with it’s people, and in just two generations built the likes of global behemoths such as Samsung, LG, Hyundai, Kia, and Posco. These “product divisions” have dived into the mainstream arena as if it’s been ruling the yard for ages. Little do people know just how far these companies have come in such a short time.

It is this history that has me in awe, and also championing that the next generation of world changing companies will come from this small peninsula. You can not bet against the Korean people. Up and to the right; the economic forecast. Challenges? Plenty. But let me ask you, does it look like Korea has ever had a problem with overcoming challenges?

Every great startup from Facebook to Uber, Airbnb to Kakao, starts with one fundamental variable: talent.

Korea is loaded with pure home grown talent. 98% of Koreans graduate from college; highest rate in OECD. The greatest hurdle this young generation of Koreans face has little do with external forces, but whether they will look inside and dare themselves to be great.


Silicon Valley isn’t a geographic location, it’s a movement.

30 years ago Uber was not zipping around San Francisco, and Airbnb wasn’t the go-to option for your vacation stays. These companies formed due to the entrepreneurial habitat formed by the migration of thought leaders, dreamers and risk takers. Year after year, the infrastructure of capital and imagination melded to take the current form of Silicon Valley.

The beauty of a movement; it can happen anywhere and at anytime.

Civil rights and marriage equality are not movements confined to the US, they are universal. At any moment, a single voice, an uncaged thought, can spark a national firestorm of change. Entrepreneurial firestorms spread by consuming fuel; cultural, political, and technical architects.

What makes The Bay Area so special is the collective energy, wisdom and infrastructure that cultivated one of the most unique environments of our generation. However, this movement is not relegated to a small piece of land in California. Movements are a belief system; a rebellious religion that proclaims: “ I will change tomorrow.”

That religion is now taking root in Seoul.

The entrepreneurial fuel is here; incredible talent, ultra modern infrastructure, and a government that is ‘all-in’ for the growth of Korea’s next generation of companies.

If Seoul’s startup ecosystem is successful, it will not look like Silicon Valley, it will simply look like… Seoul.

There is an energy here that is unbridled. A new generation of dream seekers are marching. An entrepreneurial uprising has arrived, cultivated by native hope; the ground is swelling. The movement has begun.

You want a once in a lifetime opportunity to not only build a world changing company but shape a nation’s future?

Welcome to Korea. Welcome, to The Rise.


In my next piece I’ll go in-depth on the 3 fundamental pieces I believe will be key to Korea’s rise and development of it’s startup ecosystem.

Elite Talent. Dynamic Infrastructure. Entrepreneurial Soul.


The Most Powerful Korean Corporation (Chaebol) You’ve Never Heard Of ( Part III: Series Chronicling the Rise of Korean Startups ) #KoreaRising


There is a Chaebol in Korea that is nameless.

No HQ, no CEO, not even an email.

It has massive worldwide influence; setting trends in Asia within a matter of hours. The nation’s economy fluctuates with the slightest movement of this corporation.

The organization’s dominant power and reach far surpass the ranks of Samsung, LG, and Hyundai. Combined.

There is not a single institution it’s members have not penetrated; controlling the country like a stringed puppet. They dictate the rules. They command the future. What they want, they will.

The employee base is globally educated and meticulously trained in a diverse range of professions. New ventures are attacked with military precision; bred from a deep ancestry of native warriors.

A syndicate that will control the foreseeable future of Korea; political, financial, even armed forces are at the mercy of this group. Their grip on the destiny of this country is undeniable and their rule can not be avoided.

Korea has never seen the likes of this. Ever.

The Nation’s Preeminent Empire.

Yet, despite this. Despite this gripping reign of power, this Chaebol has been rendered powerless in the past decade. The armor of this Goliath has been pierced. In the greatest of ironies, this country with a history of being invaded from the outside, has been attacked from within.

Korea’s mightiest corporation has fallen ill from a self inflicted disease. The virus?

A lack of genuine self belief. The loss of unrelenting hope.

You haven’t heard of this Chaebol have you?

Let me introduce you to them: Korea’s Young Professionals. The Tiger Chaebol.


The Question

The air was frigid. A glacier gloss glistened along the tree lined footpath as I anxiously walked to my first day of work in Seoul. Ice crunched beneath me; hands paralyzed in a deep cocoon of wool. This Bay Area native was getting his first sense of true winter.

I was smiling though. Ear to ear; grinning. A childlike giddiness fueled me as I stepped towards my new office. As I rode the elevator up, my heart began to thump; a soft scent of Krispy Kremes shadowed me. I’ve never enjoyed going into a first day empty handed.

After months of deep thought and finally making the decision to move my life to Korea; this was it. I was stepping foot into a whole new world. As far as I knew, this elevator was my own personal spaceship to a foreign galaxy.

The first day was a blur. Navigating a new land awash with a trove of meaningful moments; I struggled to absorb it all. In my broken Korean I managed to get through the day with a deep sense of gratitude to my new teammates and plenty of laughter.

And it was here, on day 1, that I first received the question.

The following days, weeks, and months would be a consistent cycle of encountering the question. Coffees, dinner parties and general city exploration always led the conversation to one, reoccurring question.

The Question, perpetually delivered with a puzzled look: “Mike.. why would you leave San Francisco/Silicon Valley( America ) for Korea? You left the Bay Area voluntarily!?”

It was the question…

And always, my response, with a giant smile, a resounding:

“Why would I not?”

The future is here. You are here. And it will be You, Korea’s millennials, that become the next significant authors of Asia’s next chapter. I wasn’t joiningBaedal Minjok that day, I was joining the ranks of Your Chaebol.

There is no doubt in my mind, it will be this Tiger Chaebol that roars Korea into a century of majestic new milestones. Yet, it can not be fueled by my fervent belief alone, it will need to come from within. The largest factor for Korea to rise to it’s own potential greatness will be altering it’s youths outlook of their country and their own lives.

South Korea’s Ministry of Patriots and Veterans’ Affair conducted a poll among school children to garner the extent of their national pride which delivered particularly weak results. The index concluded that Korea scored 62.9, with China at 84.2 and the United States at 70.6. Further, the rate of suicide is devastatingly high; ranking first in the OECD. ( 11 years in a row.. )

Many young Koreans feel helpless and are disheartened by a tenacious work culture filled with long hours, hierarchical management, little room for professional growth, high youth unemployment, and the much dreaded nunchi ( 눈치 ). Students are hammered by an arduous education system with suffocating expectations. In addition, the constant comparison of one’s personal life and relative success has become a piercing bullet. I won’t disagree that these conditions may make life disheartening, but let me tell you an uncomfortable truth: You are lucky.

I’m sure you’re questioning my sanity, but here’s why I so deeply believe in you and our collective future in Korea:

You, we, possess the power of free will.



There’s an adoration of the West in Korea. Silicon Valley glory, Hollywood glam, an independent lifestyle, innovative culture and fashionable entertainment, but if there was ever something young Korean professionals should truly idolize about the U.S., it should be their absolute steadfast and unwavering resolve to consistently fight for the life they want. To consistently battle to reinvent their country to the dream they dare it to be. America became the place so many desire to go because Americans fought for it to be that way.

The current state of the U.S., which many Koreans admire today, stretches from a long shadow of uprising. America’s history was chiseled with turbulent and courageous movements that shaped it’s current rendition. From the civil rights movement to women’s suffrage, gay rights to equal pay; Americans stood up, braved malicious ignorance, and challenged the status quo with staunch conviction. They had hope for a better nation; The American Dream.

That’s the lesson young Korean professionals should take heed in.

The change you dream of has always been and will always be, within you. Not across the Pacific Ocean…

It is common for me to hear young Koreans desire leaving their country for what seems like greener pastures. However, very rarely did I ever hear my friends in the U.S. desire moving abroad to combat the cultural stresses of daily life. Young professionals in America rarely, if ever, thought the solution to their daily struggles was leaving the country.

Exceptionally high rent ($3,000/month in SF ), office politics, inequality for women in the workplace, racial discrimination, youth unemployment, strained parental relationships, nosy neighbors, etc. are not relegated to just Korea. These are universal issues young professionals face both in the U.S. and Korea. Yet, it’s simply not common to hear American friends suggest leaving the country as a manner of improving their lives. Instead, they face opposition and challenges with a furious vigor to change it.

Women in Silicon Valley are fighting a battle that should be observed by not only those in technology but globally. Similar to Korea, the number of women in executive positions and board seats is disgracefully low. Only 11% of executives in Silicon Valley are women and their male counterparts with the same credentials earn 73% more. These are atrocious statistics, and by no means where this hub of innovation should be. However, what gives me great hope is the spirit of the women in Silicon Valley who are rallying together to build the Valley they know it should be.

Despite the repercussions and societal nunchi (yes there is nunchi in America) these women are destroying an offensive cultural construct and rising. They are trailblazing. They are damn inspirational.

So I implore you, Korea’s young professionals, to look past the glitz of America and become a student of America’s greatest genius: Their aptitude to transform hope to reality.

Rosa Parks didn’t move to another country when African Americans were being lynched and relegated to immense racial segregation due to the color of their skin. She stayed home and fought for her People.

Harvey Milk didn’t move to another country when gay and lesbians were being brutally beaten due to their sexual orientation. He stayed home and fought for his Civic Rights.

Susan B. Anthony didn’t move to another country when women’s voices were muted and denied the right to vote. She stayed home and fought for herWomen’s Rights.

Rosa Parks refusing to give up her seat.

These leaders. Pioneers. Activists. Crusaders. These visionaries are no more human than you. They simply had the courage to rise above the blockades of their time to become agents of change. Self pity was a diagnosis they refused. Rather, they medicated themselves with an audacious sense of courage, no matter how hostile the environment, and began the work of rebuilding the culture they deemed necessary and right for their country.

The core strength of these revolutionary leaders: belief in themselves.

“To live is the rarest thing in the world. Most people exist, that is all.” — Oscar Wilde

My enduring wish for This Chaebol, The Tiger Chaebol, is to believe in yourselves and to KNOW YOUR VALUE.

You are, collectively, the most powerful Chaebol in Korea. Don’t ever forget that you hold the pen to your future. Parents, bosses, friends, professors; they may assert influence but in no way determine your future. That’s only up to you.

This month, in Berkeley, California, hundreds of high school students walked out of class in solidarity to protest the disgusting racist threat of a public lynching left on a library computer. Thousands joined their movement.

In Missouri, the entire college football team boycotted play until the University President resigned due to his inaction confronting racial incidents on campus. He stepped down in a matter of a week.

The power of common belief can move mountains. Just imagine if every woman in Samsung walked out until each and every single one of them was paid the same as their male counterparts and demanded that 50% of the board be women. There isn’t a thing the CEO could do to keep the company from toppling.

Imagine if every student walked out of Hagwons to demand a balanced lifestyle. No amount of parental force could stop the walkout. No one can force the mind to retain data other than you.

Together, collectively, you hold the power. You always have.

The Tiger Chaebol, not those on top, control the future of this nation. Never forget that.

I’m all in, not because of startup gold, but because I have the deepest of faith that this generation of young Koreans will not only change the country, but the world. Part I and Part II of this series highlights just how bullish I am on this nation and this generation. ( I moved my entire life to Seoul on this belief.. )

On an August day in 1963, Martin Luther King Jr., a civil rights activist, stood on the steps of the Lincoln Memorial and declared a dream. He did not preach for those being persecuted to leave the country. Alternatively, he inspired a nation to rise against the culture of hate and racism to build the nation he knew it could be.

I too, share a dream of building together with Korea’s Tiger Chaebol, the nation’s most significant startup:

The greatest startup Korea can develop will be a culture of audacious self belief; a legacy of hope for generations yet to come.

This; The Korean Dream.

“You can not live on hope alone, but without hope, life is not worth living.” — Harvey Milk


Take the Reigns

Korea has waited for this very moment for 5,000 years.

After centuries of being manipulated and pillaged by neighboring nations, this mighty peninsula has survived. It has overcome. It has prevailed.

End of The Korea War — 1953

During the Joseon era, Korea was subject to a dominant China that exercised political and cultural influence over Korea. Three to four times a year, Korean monarchs paid tribute to China as a part of a policy of sadae, or “submission to the stronger.” At the onset of the 20th century, Japan colonized the country leading to atrocious violence and despicable acts of horror to the Korean people, culture, and way of life.

Just over 60 years ago this country burned from the somber ashes of the Korean War. Poverty was a national condition. Moreover, the late 80s brought the hard fought and bloody battle for democracy. 400 invasions and Korea has stood. It has endured.

The eyes of Korea’s forefathers have yearned to settle on an unobstructed future that could only be paved by the Korean people. No outside influence. No submission to others. Beholden to no one. Just itself.

Now, for the first time in it’s history, Korea can do what it’s ancestors so desperately fought for: Write It’s Own Destiny.

This gift of free will, forged through 5,000 years of unimaginable adversity, now rests in the hands of Korea’s newest and mightiest Chaebol. It will now need to invest towards reforming the existing culture to one driven by great hope and self belief.

Culture, like a river, can erode at the banks of it’s past. Even the most hardened constructs can melt to the pressure of change and new direction. Over time, with enough force and most importantly, courage, the current that was deemed unforgiving can bend to the will of new hope.

In Part I of this series, I declared Korea is rising. Indeed it is, and in order to continue to rise it will not only need engineers, product managers, startups, and venture capitalists, it will need to recruit cultural architects.

Who will Rise to be the champion for women’s rights?

Who will Rise to fight for the voices of the disenfranchised and elderly?

Who will Rise to be the education activist that reforms Korean schools?

Who will Rise to represent the voices of our youth in parliament?

Who will Rise to stand up for healthy work/life balance in our corporations?

Who will Rise up for those marginalized due to their sexual orientation?

Who will Rise to support those struggling with depression and destroy the stigma surrounding psychotherapy?

Who will Rise to bring together a torn nation into one?

Somewhere in Busan, Daegu, Seoul, Daejeon, there is a child looking for a hero. Searching for hope.

It will be, it Must be, this Tiger Chaebol, that rises, much like our ancestors did, to provide a future better than that we inherited. This generation may face hardships, but consider the hardships our ancestors endured for it’s current youth to enjoy a slice of ‘Happy Cake’ on Garosugil ( Dore Dore ).

The seismic cultural shift has begun though. It has been the startup community in Seoul that have been the pioneers engineering a new norm. Young Korean entrepreneurs are shattering conformity and ripping apart the fabricated life others wish them to have and instead, living their dreams.

I can’t tell you how much this inspires me.

And let me declare, there is absolutely nothing Silicon Valley has that Korea does not. Nothing. Korea has it all: Investment capital, globally recognized universities, a wealth of talent, incubators, accelerators, a historical backbone of entrepreneurship, a democratic governing body, modern infrastructure, and plenty of coffee.

The only missing piece, which arguably is the most important, is the steely belief that my future is mine to determine. It is not a tangible variable, but it truly is this belief that when altered will catapult not only Korea’s startup scene, but Korea as a whole, to it’s next chapter.

It’s time for Korea’s most powerful Chaebol to no longer remain silent. Future generations are watching, waiting. Navigate your heart to your dream life, ignore the burdensome cultural demands, and pursue the gift you are. Pave the path for those yet to inherit this beautiful nation. Whether you aspire to be an artist, political leader, entrepreneur, musician, restaurateur; go live. You are far too talented to succumb to a lifestyle that is not of your choosing.

“The privilege of a lifetime is being who you are.” — Joseph Campbell

An often discussed topic among the Korean startups scene is ‘how to go global.’ I don’t believe it has anything to do with strategy, capital or mobile infrastructure. Earlier I recalled the question: ‘Why did you leave the U.S. for Korea? If Korea truly holds aspirations of going global, it needs to alter the question instead to:

“How do you plan on changing the world?”

It’s a mindset, and it will mean everything for Korea’s success. Every generation develops a new voice. A new art. A new language of life. Today, this responsibility rests upon the Tiger Chaebol. While the debt this generation owes it’s forefathers can never be repaid, it can be honored by a single act: Live. Live with Hope Beyond Reason.

The cure to the virus.

I wholeheartedly recognize that I am not a native son. But I am a son nonetheless. You may discard the weight of my words due to this technicality, but I hold true, that together, we will forge a light that will echo in the chamber of Korea’s heart for eternity.

Korea will Triumph. Korea, will Korea.

DE. HAN. MIN. GUK. 대한민국!

THIS – is our Minjok. THIS – is Korea’s Time. THIS – is Your Time.

Witness, The Rise.


Part I [ ] Part II [ ] #KoreaRising


Women Entrepreneurs: The missing piece in Seoul’s burgeoning startup ecosystem

Anyone with an eye on the Seoul start-up scene will tell you that the city is buzzing with exciting and innovative new ventures.

In May of this year, TechCrunch hosted their first meetup in Seoul, while Google launched its first Korean Google Campus with the aim of nurturing entrepreneurs in the big city. In 2014 alone, KVIC reported $1.4 billion was invested in Korean startups, most notably Coupang, a Seoul-based e-commerce online platform securing more than $300M, and BaeDal Minjok, a food delivery service attracting $36M. According to Korean state-run industry tracker VentureIn, January 2015 saw a total of 30,052 new ‘venture firms’ registered across the nation, up from just 15,409 in 2009.

An increasing number of young Koreans are set on creating the next start-up success story. However, there is one thing largely missing in the mass of exciting new business on the peninsula: women entrepreneurs.

Gender Inequality in New Business: A Global Issue

It’s not only Korea’s new tech industry that suffers from a lack of gender diversity.

Silicon Valley has come under scrutiny for its handling of women in the workplace, most recently during the now-infamous Pao vs. KP trial. The valley’s reputation for being a progressive safe-house for innovative startups to flourish has been somewhat tainted, as tales of workplace harassment, unequal pay, and gender discrimination were hauled into the spotlight.

According to a recent study by Babson College, the percentage of female venture capitalists (VCs) in the US dropped from 10 percent in 1999 to just 6 percent in 2014. Meanwhile, despite the fact that, for the first time in history, graduate and post-graduate degrees acquired by women are outnumbering those acquired by men, the percentage of women starting technology companies is still hovering dismally low, at around 3 percent. According to the study, only 6.5 percent of privately held businesses have a female CEO, while those with a female founder stand at 1.3 percent. The study also states that 77 percent of VC firms have never hired a female investor.

And yet there is a significant amount of research highlighting the positive effects of diversity in the workplace. Companies with women on their board of directors consistently outperform those with all-male teams — in equity, return on sales, and return on invested capital. Recent data has also shown that women-led technology companies are more capital-efficient — achieving a 35 percent higher return on investment than their male-run counterparts.

We also know that women bring different approaches to problem-solving, helping provide more diverse and creative solutions to the challenges of running a business. Perhaps Joseph Keefe and Sallie Krawcheck of Pax Ellevate Management LLC put it best when they said:

It’s not that women or men are “better” but that diverse groups — where both men and women are at the table — make better decisions than non-diverse groups. Women bring diverse perspectives to the table, their leadership style can drive more innovation and collaboration, they are more likely to ask tough questions, and they often take a different approach to risk.

It’s not all doom-and-gloom — female-led businesses are slowly but surely on the rise. Over the past 10 years, the growth in the number of women-owned firms with $10 million or more in revenues has increased by 56.6 percent, a rate 47 percent faster than the average rate of growth of $10 million-plus firms.

Companies founded by women also represented a record 13 percent of venture capital deals through the first half of 2013, up from only 4 percent in 2004. These companies are also growing at higher rate than their traditional, male-led counterparts.

The fact remains, however, that women are still sorely underrepresented in this new generation of start-ups.

Why Korea’s lack of female entrepreneurs?

Korea is a deeply patriarchal society, where traditional societal values still place a woman’s main responsibilities in the home. Many Korean female graduates say they attended college not because it would open doors in the pursuit of a professional career, but because a college degree represented a valuable qualification on the resume of a bride-to-be, and campus life provided ample opportunity to meet a potential husband.

During the job application process, it is not uncommon for women to be asked questions about their future marriage and family plans. Unlike in America, Korean labor law does not prevent a potential employer from asking about your personal or family life during interviews.

The system also sometimes stacks the deck against the favor of women entrepreneurs.

When Ji Young Park founded her first company in 1998, her bank not only required her to personally guarantee the company’s loans — a typical request for a male founder — but also demanded guarantees from her husband, her parents, and her parents in-law. Despite these obstructions, Park led her company, Com2uS, a mobile game publisher, to a successful IPO in 2007, and then sold to Gamevil in 2013.

What can Korea do to accelerate the development of a more diverse generation of young entrepreneurs?

In a June 2014 conference entitled, ‘‘Taking action: achieving gender equality and tapping the talent of women’’, the Korean Chamber of Commerce and Industry and the Ministry of Gender Equality and Family launched a dedicated Task Force, committed to evening out gender imbalance in the workplace and nurturing female CEOs. The conference was attended by high-profile government figures, as well as executives from some of the country’s largest conglomerates, who together pledged to shatter the nation’s thick glass ceiling, and make business in Korea more accessible for women.

With such a long way to go before achieving balance between the number of male and female executives, however, it is going to take a large and communal effort before progress is made, especially when it comes to fostering female start-up CEOs.

So what can Korea do?

First, Korea can start by identifying and highlighting female success stories. Positive role models can have a powerful impact in changing perception among and instilling confidence in aspiring female entrepreneurs, and women in business in Seoul are certainly not without their success. JiYoung Park, Co-Founder and CEO of Com2us, Ji Yun Moon, former Co-Founder and CEO of Viki, acquired by Rukuten in 2013, and current CEO ofVingle, and SooInn Lee, Co-Founder of Locomotive Labs, have all battled the odds to establish booming new businesses.

Second, Korea can foster the progress of women entrepreneurs by creating further networking platforms for aspiring, current, and experienced female entrepreneurs to share knowledge and experience, and build a mutual mentoring and support system. The Women Entrepreneur (WE) Network atStartup Alliance, founded by Hyo-Eun Moon, Professor of Ehwa University and former executive at Daum Communications, has gone some way toward providing such a platform, by hosting monthly meetups specifically for women entrepreneurs.

Last but not least, woman entrepreneurs and professionals alike need to come together to address current needs — most pressing being the shortage of dependable public childcare, arguably to blame for the derailing of the careers of thousands of women in South Korea. Perhaps there’s even a win-win startup opportunity there: a woman entrepreneur-founded collaborative economy marketplace for working mothers requiring childcare.

As President Park Gun-Hye said in a video message broadcast at the launch of the workplace gender equality Task Force last year: “We are living in an age where the power of women determines a nation’s competitiveness. Establishing an environment where women can realize their full potential is not only in their best interest, but also beneficial for national development.”

Korean start-ups have shown huge promise in their potential to be global game changers. It is up to female entrepreneurs to bring further diversity — and thus competitiveness — to the industry, and it is up to the nation to dismantle the hurdles currently standing in their way.


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