Guns Germs and Steel for Startups

The FATES of DIGITAL SOCIETIES

BENJAMIN JOFFE

GUNS, GERMS, AND

STEEL

BENJAMIN JOFFE

•  13y in CJK+SEA+SV"•  Digital Naturalist, +8*"•  Startup Guy, Cmune"•  Angel investor"•  Mentor, 500 Startups,

Chinaccelerator, etc."•  Speaker, Columnist"

HAVE YOU HEARD OF THIS BOOK?

THE QUESTION IT ASKS IS

WHY IS THE WEST DOMINANT?

AND THE ANSWER IS UNUSUAL

SUITABLE ANIMALS & CROPS

SUITABLE LATITUDE & CLIMATE

NOT “SMARTS”

CONCLUSION #1

YOU’RE (POTENTIALLY) JUST AS SMART

(AND MORE ATTRACTIVE)

THERE ARE TWO WIDESPREAD BIASES

BIAS #1

EVERYTHING FROM THE U.S.

IS GREAT (AND GLOBAL)

“A  billion  dollar  so-ware  company  is  founded  every  3  months  in  the  USA”  

–  Ron  Conway  

BIAS #2

EVERYTHING FROM ASIA

IS WEIRD (AND LOCAL)

YET…

$1B COMPANIES OUTSIDE THE US •  Europe " "Skype, Spotify, Rovio, SuperCell, Unity!

•  Japan " "Softbank, Rakuten, DeNA, GREE, CyberAgent, Kakaku,"" " " "Gungho, LINE"

•  Korea " "NHN, Nexon, KakaoTalk!

•  China " "Tencent, Baidu, Alibaba, Qihoo, Sina, Sohu, VIPShop, YY,"" " " "Shanda, Giant Interactive, 360Buy, Youku Tudou, Netease,"" " " "NetDragon, KingSoft, Ctrip, Xiaomi, Lightinthebox…"! ! ! !(Sogou, Qunar, Vancl, UCWeb, Cloudary, Dianping, Xunlei,)!

•  Russia " "Yandex, Mail.ru"

•  Brazil " "MercadoLivre, Peixe Urbano"

•  India" " "MakeMyTrip, FlipKart!

Note:  Not  all  are  strictly  $1B  or  public,  but  in  the  ballpark  

CONCLUSION #2

INNOVATION IS EVERYWHERE!

TABLE OF CONTENT

"

CONCLUSION: GUNS, GERMS AND STEEL FOR STARTUPS!

"1.  ON ECOSYSTEMS"2.  BEING GLOBAL"3.  FINDING USERS"4.  RAISING MONEY"5.  ON ACCELERATORS"6.  THE CULTURAL OS"

1. ON ECOSYSTEMS

DEFINING ECOSYSTEMS

ECOSYSTEM MODEL

Market"Infrastructures""Capital"Talent""Regulations"Entrepreneurial Culture"

USA  

CHINA  SINGAPORE  

ANNA KARENINA PRINCIPLE

•  “Happy families are all alike; every unhappy family is unhappy in its own way.”"

Anna Karenina, Tolstoi""

Also true for Startups?

•  Deficiency in any one of a number of factors dooms it to failure."– Check your ecosystem!"

CONCLUSION #3

DIFFERENT ECOSYSTEMS GIVE BIRTH TO DIFFERENT SPECIES

CONCLUSION #4

SIMILAR ECOSYSTEMS CAN HAVE SIMILAR SUCCESSES

EBAY IN CHINA?

!“eBay was trying to land advanced jets in muddy rice paddies.”!

– Jack Ma, Alibaba"

Yoda can help you out!

(MORE DETAILS IN OTHER TALKS)

ECOSYSTEMS 101

DIGITAL NATURALISM

AND IN MY TC COLUMN

hCp://techcrunch.com/2012/09/01/ecosystem-­‐101-­‐the-­‐six-­‐necessary-­‐categories-­‐to-­‐build-­‐the-­‐next-­‐silicon-­‐valley/    

MYTH

“INNOVATION” & “ENTREPRENEUR” ARE AMERICAN THINGS

(LET’S REMIND EVERYONE THAT “ENTREPRENEUR” IS A FRENCH WORD)

AND INNOVATION IS GENERALLY DISMISSED WHEN NOT

(1) FIRST WORLD (2) TECHNICAL

AND SIMPLY “INCREMENTAL”

WHERE DO YOU DRAW THE LINE? WHO DECIDES?

MYTH

“TWO GUYS IN A GARAGE”

THAT WORKS BETTER IF YOU’RE A STANFORD CS GRAD AND YOUR

GARAGE IS IN PALO ALTO

(LIKE THE HP GUYS ON THE PHOTO)

CONCLUSION #5

ECOSYSTEM MATTERS…

COROLLARY #1

…EVEN FOR HANDSOME TAIWANESE…

Like Jerry Yang @ Yahoo

COROLLARY #2

…BUT NATIONALITY DOES NOT.

EVEN IN SILICON VALLEY, A VAST NUMBERS ARE FROM “OUTSIDE”

IT’S A MINDSET

CASE OF CMUNE AND UBERSTRIKE

•  3D Multiplayer Shooter on Facebook"•  High tech, first in the world"

CHECK IT OUT > WWW.FACEBOOK.COM/UBERSTRIKE

WHAT IS THE NATIONALITY OF CMUNE?

•  Team" " " "10 nationalities"•  Founders " "French + Australian"•  Investors " "Europe + US (and their LPs?)"•  Market " " "US is #1, but not "•  Company " "Based in Beijing and Berlin"

DOES NATIONALITY MATTER HERE?

CONCLUSION #6

NATIONALITY IS A BRAND

WHO CARES ANGRY BIRDS ARE FROM FINLAND? USE IT IF YOU CAN.

2. BEING GLOBAL

CAN YOU BE GLOBAL?

•  USA = English only"

•  China = Chinese only + Hyper-competitive"

•  Russia? Japan? Other?"

BEING GLOBAL IS NOT SO SIMPLE…

Western!

Latin American!African!Orthodox!

Indian!

Muslim!

Japanese!

Chinese!

YOU CAN LOOK AT THE WORLD AS “CIVILIZATIONS”

Buddhist!Source:  The  Clash  of  CivilizaRons,  Samuel  HunRngton  

WHEN TO EXPAND?

1.  Platforms give reach (FB, Apple, Google)"

2.  Users already there (best case, build on it)"

3.  No choice (small home market)"

OFTEN, EXPANDING EARLY IS NOT GOOD ROI ON MANAGEMENT BANDWIDTH (THE SCARCEST RESOURCE)

CONCLUSION #7

“GLOBAL” & “ASIA” MEAN NOTHING

PICK MARKETS & PLATFORMS

“ASIAN” COMPANIES ABROAD

Zheng He, Explorer

THE WESTERN FRONT

•  Recent"– Japan: DeNA, GREE, Rakuten"

•  Casualties"– Japan: Index, For-Side"– Korea: Daum"

•  Same mistakes as Western firms in Asia"

TYPICAL MISTAKES

•  “Landing jet fighters in rice paddies”"•  Assuming ecosytems are similar enough"– Payment, internet speed, devices, logisitics…"

•  Ignorance of local competitors"•  Ignorance of must haves of local users"•  No autonomy to local team"

ENTERING A LARGE MARKET IS OFTEN MORE LIKE CREATING A NEW STARTUP

SOME ARE GOING “UNDERCOVER”

•  Tencent + Riot Games (LoL)"– Most players probably don’t know the “new

World of Warcraft” is now a Chinese property"

•  AppAnnie!– HQ in Beijing, French CEO!"

•  Dolphin Browser!– Entire team is Chinese"

ALTERNATIVE: LICENSING OR LONG-TERM

•  Especially suitable for Asian firms entering Non-Western markets"– Ecosystems closer to China’s (India, Brazil,

Indonesia, Russia)"

•  Gaming companies"– Nexon in China via licensing"– NHN in Japan took many years"– Chinese companies & emerging markets"

CONCLUSION #8

ECOSYSTEM DIFFERENCES MAKE THINGS HARD

CONCLUSION #9

THERE IS MORE THAN ONE STRATEGY TO EXPAND

YOUR  AMAZING  APP  GOES  HERE  

3. FINDING USERS

MYTH

GREAT PRODUCTS ALWAYS FIND THEIR AUDIENCE

REALITY

1.  Most great products die in oblivion"

2.  Great = 10 bad then 1 good-to-great"

3.  Distribution, Monetization, Funding"

WITH PLATFORMS

•  Apple, Google, Facebook, Amazon"•  eBay, Taobao, WeChat, LINE, Kakao…"

•  Ideally"– Have IP"– Use new features"– Have connections with platforms"

BY YOURSELF?

•  Figure out what is left of “Viral”"

•  Retention = Do Proper Cohort Analysis"– Week-on-week growth"– 1d, 7d, 30d retention"– Lifetime value"– This is VERY OFTEN DONE WRONG"

CONCLUSION #10

MAGIC BULLETS DON’T LAST LONG

4. RAISING MONEY

GOOD  IDEAS  

BAD  IDEAS  

GOOD  IDEAS  THAT  LOOK  BAD  BAD  IDEAS  THAT  LOOK  GOOD  

STARTUPS  ARE  HERE  

DEFAULT ANSWER IS NO!

SO MANY REASONS TO SAY NO

1.  No traction"2.  Wrong sector"3.  Not Delaware C Corp"4.  Team can’t execute"5.  Limited exit options"

6.  Can’t understand you"7.  No money"8.  Don’t like or trust you"9.  Spouse against"10. Not cool enough"

And  one  is  enough!  

EXAMPLE: ELYSIUM SPACE (SPACE BURIALS)

•  Background"– Space Burials"– NASA founder"

•  Fundraising"– Pitched dozens of angels and early-stage VCs"– VCs want TRACTION"

•  Result of first round: Friends"

MY NASA FRIEND IS RAISING A ROUND FOR HIS STARTUP. IT’S NEVER EASY.

GETTING ATTENTION

•  ONE clear phrase about the PROBLEM"

•  Your BEST FOOD FORWARD"– TRACTION TRUMPS EVERYTHING"– Crazy high retention?"– Figured out viral?"–  Interviewed 100 clients?"– Ex-Google?"– Sold a startup?"– Users pay?"

STATISTICALLY AMONG INVESTORS:

CONCLUSION #11

FOCUS ON THOSE WHO “GET IT”

DON’T WASTE YOUR TIME CONVINCING THOSE WHO DON’T CARE OR HATE IT

CONCLUSION #12

PREPARE FOR SURVIVAL DOING THE WORK IS GOING TO

TAKE A WHILE

COROLLARY #3

BETTER PICK A MARKET & CUSTOMERS YOU LOVE

YOU’RE GOING TO SERVE THEM FOR A LONG TIME. YOU NEED EMPATHY WITH THEM TO DO IT WELL.

CONCLUSION #13

YOU WILL NEED ALL THE HELP! ALWAYS BE PITCHING

(I PITCHED BOTH CMUNE & ELYSIUM SPACE

IN THIS PRESENTATION ;-P)

5. ON ACCELERATORS

ACCELERATORS ARE STARTUPS

Source:  hCp://emergentbydesign.com/2013/02/28/62-­‐top-­‐startup-­‐accelerators-­‐us-­‐canada/  

3 TYPES OF STARTUPS?

STARS WILL SUCCEED

REGARDLESS

? MIGHT MAKE IT WITH HELP

BOMB NO AMOUNT

OF HELP WILL DO

IF YOU’RE AN INVESTOR, HOW DO YOU SPEND YOUR TIME? FINDING MORE STARS!

ADDED-VALUE OF ACCELERATORS

•  (Money is generally small)"

•  Connections " "Still your job to charm them"•  Environment " "Focus & Distraction"•  Demo Day " " "One opportunity on the road"

ACCELERATORS ARE SPRINTS WITHIN MARATHONS

•  Market access"•  Take a long-term view"•  Do the work"

6. THE CULTURAL OS

CULTURAL OS

Career/Money""Family"Society""Culture"Spirituality"Physical Appearance"

FRANCE’S DEFAULT SETTINGS

(MORE DETAILS IN OTHER TALK)

YOUR HAT LOOKS FUNNY

“THE SLIDESHARE SENSATION

WITH OVER 20,000 VIEWS”

RATE YOUR CULTURAL OS TOO!

FOUNDERS NEED TO SEDUCE!

CO-FOUNDERS, TEAM MEMBERS, INVESTORS, CUSTOMERS

PICK-UP ARTIST VS. STARTUP FOUNDER

•  Leader " " " "= Own Vision & Decisions"

•  Assertive " " "= Speak Up"

•  Adventurous" "= Risk-taking"

•  Easygoing" " "= Empathy & humor"

•  Sexual " " " "= Success-driven"

Source:  Aura  DaRng  Blog  

ARE “ASIAN VALUES” IN YOUR WAY?

•  Leader " " " "Follow the Crowd"

•  Assertive " " "Modesty, Respect, Hierarchy"

•  Adventurous" "Risk-Averse, Responsible"

•  Easygoing" " "Serious, Diligent"

•  Sexual " " " "Repressed, Dependent"

The FATES of DIGITAL SOCIETIES

BENJAMIN JOFFE

CONCLUSION GUNS,

GERMS, AND STEEL

GUNS? GERMS? STEEL?

GOOGLE    

FB  Y!  

GOOGLE, FB, Y! ENABLE ECOSYSTEMS BUT SUCK LIFE OUT OF THEM TOO!

GET YOUR OWN GUNS, GERMS AND STEEL!

•  Increase your skills (it’s a long-term investment)!

•  Understand distribution at scale (don’t let your product die alone)"

•  Figure your ecosystem strengths (and weaknesses- and adapt to it or move)!

PICK WISELY, THEN WORK

“A good team in a strong market will beatan excellent team in a bad market”!– Song Li (ChinaHR, Zhenai.com)"

•  So:"– Pick a good market"– Customers you love"– Learn fast"– Be patient"

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THANK YOU!