Monthly Archives: January 2008

Myths of Entrepreneurship

This is a guest post on Guy Kawasaki’s blog from Scott Shane, professor of enterpreneurship, author of The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live

Below are Scott Shane’s top ten myths and the realities behind:

  1. It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.
  2. Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.
  3. Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.
  4. Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.
  5. Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.
  6. Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are mostlikely to fail.
  7. The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.
  8. Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.
  9. Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.
  10. Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months

The article is so good that I had to paste it here to make sure I can read it in the future, just in case Guy would change his mind about his blog.

Steve Jobs Keynote 2008

2008 Apple’s keynote has introduced great products: MacBook Air, iTunes Movie Rentals, AppleTV Take 2, new applications for iPhone and iTouch, and Time Capsule.

Keynote highlights in nine minutes from YouTube:

If you only have 60 seconds to view the 90 minutes keynote, click here.

For the full keynote go to events.apple.com

iJam was not part of the 2008 keynote

logo Apple
If Apple was from Spain:

http://www.ijam.es/

iPhone and Google will transform Mobile phones

iPhone iGoogle
According to NYT technology article by Miguel Helf, iPhone accounts for only 2% of the worldwide smartphones. Nokia’s Symbian 63%, Windows Mobile 11% and RIM 10%. Yet, during Christmas, traffic to Google from iPhones surpassed any other smartphone.

This data clearly points out that iPhone is making mobile web access a reality, thanks to a web browser user interface superior to any other mobile device before.

Google acknowledges iPhone browser excellence and predicts it will be a boost to developers to create applications for the iPhone web layer, instead of the heavy task to do specific development for each mobile phone OS and handset model.

Google has just unveiled a new slicker interface for iPhone.

“With Google for the iPhone, users will get an improved UI optimized for the touch screen, customization of default tabs (easy access to favorite applications), faster Gmail (email automatically show up, no refreshing needed), a speedier Calendar (including a new month view), and iGoogle.”

The iGoogle gadget integration will enable developers to create widgets for the iPhone, without the need to develop on the iPhone proprietary platform.

An opportunity for Mobile Operators? or a threat to be bypassed?

Operators vs. Media companies


In GigaOM’s guest column, Mr Chetan Sharma writes an interesting article on the battle between operators and media companies to deliver mobile entertainment to the end-user.

Although Media companies are in better position to bring their content over agnostics IP networks – like the ones of mobile operators are becoming-, operators have still powerful arguments to leverage:

1) Billing relationship. Operators have a trusted billing relationship with operators, that puts them in good position to charge for premium content delivered over their networks

2) Customer ownership. Operators have access to plenty of information about their customers behavior. With proper Service Orchestrator software solutions, marketing campaigns can easily be tailored to match each user profile

3) Bundling services. A subscription fee for a mobile TV channel that also give access to a premium website, are easy options to add to the phone bill and give operator more room for promotions and cross-selling.

4) QoS : Quality of Service. With IMS deployed, only the mobile operators can control QoS. A guaranteed QoS enables carrier-grade VoIP and other real-time conversational services, like high definition video calls and video sharing, that Internet players can not deliver with best-effort Internet QoS.Once the operator controls the real-time services, then it is in a strong position to bundle presence, location, user profile and IM with conversational services. Without this bundling, Google, Microsoft and Yahoo are even in better position than operators to provide applications based on presence, location or user profile (including advertisement).

On the content delivery side, similarly the battle is not lost for operators if they show the determination and courage to play their cards. See KDDI example of a music service that competes head to head with iTunes in Japan.

Related articles in tech-talk.biz:
http://tech-talk.biz/2007/12/15/iphone-friend-or-foe-can-mobile-operators-avoid-turning-into-pipes/
http://tech-talk.biz/2008/01/02/will-2008-be-the-year-of-mobile-advertisement/
http://tech-talk.biz/2008/01/12/kddi-lismo-best-mobile-music-service-in-the-world/

KDDI LISMO: Best Mobile Music Service in the World

KDDI Neon KDDI au

Few people are aware about the huge success that KDDI, #2 mobile operator in Japan, has achieved in selling music to mobile phones. LISMO is the name of the music service available to KDDI au subscribers, that offers song downloads over the air.

In a press release back in February 2007, KDDI already announced that they have exceeded 100 Million song downloads, since the EZ “Chaku-Uta Full” full track download was launched in November 2004.

The following table shows the remarkable growth:

KDDI and Sony announced in October 2007 that LISMO will now enable ‘Chaku-uta Full’ files downloaded to au mobile phones to be transferred to Sony audio equipment via a new ‘LISMO Port’ PC software. It is to work with Sony Walkman and with Sony Net Juke, HDD Stereo System. The service is named ‘au x Sony MUSIC PROJECT’. The intention is to make the protected music available to other devices than the au phones, in response to international music labels embracing DRM-free downloads.

The move also highlights how Sony and KDDI defend from the imminent iPhone assault to Japan. KDDI has a portfolio of music phones quite impressive, that will give a tough battle to iPhone. Sony may have lost the worldwide battle for mp3 players to Apple but, in cooperation with KDDI, might still resist in its domestic market. 3G iPhone in Japan will also be required to download songs over the air, to compete with KDDI service and devices.

KDDI LISMO shows how an operator with determination and courage is able to provide mobile entertainment without giving away the Service and Customer ownership, as AT&T’s has done with the iPhone and Verizon Wireless with the MTV/RealNetworks Rhapsody music service. Even NTT DoCoMo, number one operator in Japan, has been unable to replicate KDDI success after seeking agreements with Napster and Microsoft.

Well done KDDI. Keep giving example to other mobile operators.

Blue-ray or HD DVD? The Hard Drive

Blue-ray is winning the battle for the next-gen DVD. Warner has announced that they will release high-definition movies only in Blue-ray format starting July. With Warner announcement, Sony has secured support for Blue-ray from most of the big film studios.

This is a big win for Sony, specially for the push it will generate in sales of PS3, which includes a Blue-ray reader. The cost optimization that Sony has engineered on the new models of PS3, plus Blue-ray, will make PS3 gain ground on the console battle. Since Xbox 360 supports the “losing” Toshiba HD DVD format, there will be a hit on Xbox 360 sales in the short term. Some Microsoft spokesman already mentioned that Microsoft could consider Blue-ray, if it finally becomes the de facto standard.

Nonetheless, with the predictable increase of bandwidth in our broadband connections, and with High Definition being offered by more and more IPTV service providers, the winning format of the next-gen DVD becomes less relevant than in previous standard wars. In the future, we will consume HD movies through video-on-demand or movie download services, as Amazon Unbox, instead of through a disc format. The CEO of Seagate, one of the biggest hard drive manufacturers, states it clearly: “Blu-ray won the battle but lost the war“. If on-line distribution triumphs over physical disc distribution as expected , the hard drives will be the storage for the movies distributed on-line. Not even backups are likely to be made on discs in the future, once we have Blue-ray writers. As network storage gets cheaper and cheaper, and broadband better and better the Net will be the right place to host your backups.

Nonetheless, congratulations to Sony for winning this battle.