Fusion by Fresco Capital • Fresco Capital

The Emergence of Data Over Oil

By Fusion by Fresco Capital, 3rd January 2017

If oil dominated the last century, data is the leading candidate to dominate this one. An often repeated phrase is that “data is the new oil”. But beyond the simple similarity of being important, is it useful to use oil as an analogy for data? How are they different?

1. Scarce vs. Cumulative

Oil is a scarce resource. Technology innovations related to discovering and processing oil merely help to contain price increases. Data is not just abundant, it is a cumulative resource. Technology innovations lead to a collapse in the cost of collecting and manipulating data, and our new data builds on top of our existing data. Personalization is an obvious application of this idea. To date, companies have mostly used this for targeted content and commerce. Going forward, the bigger opportunity is in areas like personalised learning and medicine.

2. Rival vs. Non-rival

If oil is being used, then the same oil cannot be used somewhere else because it is a rival good. This results in a natural tension about who controls oil. If data is being used, the same data can be used elsewhere because it is a non-rival good. It is up to us to appreciate this difference and embrace the potential. An obvious example is the power of open source. Our Internet would not exist in its current form without the positive impact of open source. It’s also clear that our intellectual property laws have not fully understood the implications of data being a non-rival good.

3. Tangible vs. Intangible

As a tangible product, oil faces high friction, transportation and storage costs. These costs place limits on the applications of oil. As an intangible product, data has much lower friction, transportation and storage costs. The result is a much wider range of applications due to fewer physical restrictions. The exponential growth in content and media is an obvious result of the fact that data is intangible. Less obvious is the transformational opportunity for a globally distributed manufacturing supply chain which would be connected by data rather than the current system of shipping and flying physical goods everywhere.

4. Process vs. Relationships

The lifecycle of oil is defined by process: extraction, refining and distribution. This process is relatively stable and predictable. The lifecycle of data is defined by relationships: with other data, with context and with itself via feedback loops. These relationships are dynamic and uncertain, requiring an entirely different approach to building value. This highlights the difference between complicated and complex systems. Oil and industrial assets benefit from the use of ideas like six sigma to enhance efficiency. Data benefits from the use of technology like deep learning to learn from the data itself, a form of exploration.

5. Linear vs. Non-Linear

A fixed amount of oil results in a predictable amount of output. There is no possibility of non-linear upside surprise. A fixed amount of knowledge can create huge value in a non-linear way. The laws of physics really do limit the benefits we can derive from a given amount of oil. On the contrary, the concept of zero is a core building block supporting our entire digital technology infrastructure. A completely non-linear benefit from a deceptively simple idea.

The Implications

Each of the above differences is valid individually, but taken together they multiply in importance and reflect the emergent nature of systems based on data. While our current oil based system has some features of emergence, the new data based system has vastly more potential for new and unpredictable applications.

To be clear, the impact of these applications is not always going to be good for society, certainly at an individual level, and sometimes at the aggregate level. Even with a much smaller level of emergence, we’ve already seen the damage that our oil based system can leave to our planet.

We should not be blindly following data and need to appreciate that the emergent properties of data make it much more powerful than oil. As data becomes increasingly important, it’s critical to understand the differences between oil and data. To fully enjoy the benefits of data, we need to fundamentally update all of our global ecosystems as soon as possible across business, government, and society. This is not something that can be done by any single person, company, or country. For those interested to build a stronger global ecosystem together, let’s connect and make it happen.

How to Successfully Raise a Series A

By Fusion by Fresco Capital, 3rd January 2017

It’s no secret, the widespread idea is that there’s a Series A gap in startup funding. You can easily raise a $1 million seed round and $100 million Series D, but somewhere in the middle things get a little dicey.

But as I’ve said before, there’s really no such thing as a Series A gap. Some companies just try to swing for the fences a little too soon and don’t drum up a lot of interest. Rather, they don’t focus intently on what they need to prove to secure the Series A or they focus on things that they think investors want to see.

The key to understanding the supposed gap, is that if your startup is really ready for a Series A, you can most assuredly raise money. You just need to be able to prove that your company has a repeatable and validated business model that can be scaled before walking into those meetings.

And this doesn’t mean you need to have tons of customers and millions in revenue by any means — a common misconception in today’s startup world. To raise a successful Series A round, start by proving the pipeline — and making financial projections based on it.

The Difference Between Seed and Series A

Seed money is supposed to help your startup figure out its business model. Seed is where you tell the story of what you are going to do. Series A, on the other hand, is more about making sure your business model works. You’ll also want to execute your story, telling people what you’ve done and what you’ll do next.

Let’s say you want to sell new coffee cups. During your seed, you should first focus on landing one or two landmark customers; maybe a few Starbucks locations that are proving to be loyal and consistently fill orders. When you’re pitching the Series A, show the investors that you can scale your business to every other Starbucks in the Palo Alto region and beyond, as well as Peets and other coffee shops — and the investor’s money is what stands between you and accomplishing that growth.

The Wrong Approach to Series A

Today, because of the emphasis on hitting a revenue target to signal a new round of funding, a lot of startups are guilty of growing their revenue linearly.

Imagine Starbucks is buying your new cups and you’re generating $50,000 ARR from that account. Then you decide to do non-core business model activities that pad your overall revenue. Maybe you consult for Peet’s Coffee and help out other startups in exchange for quick cash to keep the runway looking a little better.

Sure, all those extra funds are lumped into your total revenue. But let’s face it, that’s not the organic, scalable growth VCs are looking for.

You’d be much better off getting that one customer that fits your model, making some revenue off that sale, and then trying to get one more customer to show the pipeline potential. Focus on your core business, and a Series A will become that much easier.

Startups Love Revenue

It’s no secret that startups will chase revenue wherever it’s coming from. When you’re chasing a Series A, you’ll try to make whatever money you can to prove you have a business that generates revenue.

But let’s face it, not all revenue is created equal. This doesn’t mean revenue is necessarily bad, but time spent chasing after any revenue in sight can be a dangerous game in the early days of a startup.

There’s a common misunderstanding in the VC/startup world that a $1 million run rate means you’re ready for a Series A. In reality, there isn’t a benchmark that indicates the exact time you’re supposed to start raising money. Your run rate doesn’t matter as long as you can talk to investors about projected metrics.

How does that work? Start with your pipeline and your pipeline’s future. Show repeatability and show scalability. Show investors your funnel and the pipeline that goes into that funnel and tell them how you’re going to get there. That way, when you ask for lots of money to hire a certain number of salespeople and marketing folks, your request will be validated by the data up on the screen.

Whether you’re in a SaaS, B2B, or B2C business model, the same rules will still apply. So if it’s projecting growth in sales, the viral coefficient, or whatever else to show future scale, investors need to see the pipeline view of that story as validation before taking part in the round.

Key Takeaway

If you’re still trying to tell your company’s story, rather than actually using sales data to project growth, you’re likely better off waiting and raising a seed extension round.

How do you do that exactly? First, go back and see if your original investors are willing to go further in with you to bridge the company through to the next round; this may require you to give up more equity, but it will also be crucial to keeping the proverbial lights on. Also take time to look for firms that aren’t necessarily specializing in “Series A and above” funding — there is an abundance of seed stage investors out there looking to fill that gap.

Once you have an idea of how your business model will become scalable, use the extra time and cash to refine that story, validate the numbers, and make it real before pitching to Series A investors. This allows teams to focus less on generating non-core business model revenue, and more on securing a few necessary customers to project a data-backed pipeline. Once that happens, and you’re getting great feedback that shows the product or service is truly valued, it’ll finally be time to show later stage firms a clear vision of what you plan to do next.

Unique Insights from Silicon Valley Bank for Successfully Entering China

By Fusion by Fresco Capital, 3rd January 2017

Can you list the names of Silicon Valley companies that have succeeded in China? Can you list the names of foreign banks that have succeeded in China? There is only one name on both lists: Silicon Valley Bank (SVB).

SVB operates in China through a joint venture with Shanghai Pudong Development Bank (SPDB), and one of the senior leaders is Oscar Jazdowski, formally with the title of Deputy Head of Corporate Banking. I first met Oscar in 2013 while we were speaking on VC and startup ecosystem panel together and quickly realized that he wasn’t your typical banking executive. Seeing the success of the JV over the years, I recently had a chance to speak with Oscar and ask him to share some of the unique insights from the SVB experience in China.

Can you tell us some of the things that Silicon Valley Bank did before entering China as part of the preparation and how that preparation made an an impact on what happened after entering the market?

In 2005 we brought a delegation of about 10 top VCs from Sand Hill Road to China (Shanghai and Beijing). Folks like John Doerr from Kleiner Perkins, Don Valentine from Sequoia Capital, Dick Kramlich of NEA and other leaders of the VC community. For most of them, this was their first time in China. They all knew that China was growing and the likely future of technology. SVB set up a week of meetings with entrepreneurs and government officials and other related parties. Our goal was to get these US VCs to set up shop in China so that they would start investing in China and thereby build the ecosystem for us, into which we could lend to startups. It worked.

SVB also rented impressive office space in Xintandi, right in the center of Shanghai. We rented more space than we needed and built out a number of ‘guest’ offices which we offered to our US VC friends to use. That made their exploration and ultimate transition to China much, much easier because they did not have to go and look for office space in a foreign non-English (more so then) city. We made it easy for them to work out of our office, and that allowed us to stay close to them and see what they were beginning to do and explore in China. It helped us develop even closer relationships with them.

Silicon Valley Bank has been using a JV structure in China. What are the key factors that can make or break the results of a JV in China based on your direct experience and what you’ve observed in the market?

Always staff your JV with the most senior person you can from the parent company. In our case the first President of the JV Bank was SVB’s retiring CEO and Chairman, Ken Wilcox. By sending such a high level executive to China, you demonstrate (by action) to your joint venture partner, the regulators and to the government that you are 100% serious about China and that you are prepared to devote your absolute highest, most senior talent to make this JV successful. You also want those senior sponsors to stick around. This is very often the un-doing of JVs because the executive sponsors either get promoted to another part of the company or leave, thereby leaving the new JV bereft of a loving parent. The two key executives who brought our JV together are still around and even sit on our Board.

You need to have senior level backing, but that’s a given. The success of a JV is not determined at the executive suite, but in the trenches. You have to have a strong determined working group that gets things done. But the real success of a JV is defined at the working level. At the beginning of our JV, we would have monthly working committee meetings with our counterparts at SPDB in order to work on specific deals and issues.

Be aware that the two parties in a JV will have very different motivations. Understand what each party wants and then work to achieve that for them and have them do the same for you…even though each parties motivations might be polar opposites. As example, China and the JV bank is extremely important to Silicon Valley Bank from a long term perspective. If we are to remain the main bank globally to the technology/innovation/life science/ clean tech/ VC and PE industries, then we have to be in China. What is important to SPDB is that they can show the government that they formed a JV with this quirky bank from California and were able to stimulate and invigorate lending and financial backing of the Chinese innovation ecosystem. Two very different goals but both achievable so long as both parties understand what is important to the other and work towards these goals.

How did you find your JV partner in the first place, and what sort of due diligence process should foreign companies use when evaluating potential JV partners in China?

I wasn’t involved in the search for the JV partner myself but I spoke to many of my colleagues about the process at length. The story there is that we spoke to a number of Chinese banks, and we were looking for a partner who would be responsive, creative, risk taking, innovative, etc., and we found those qualities in SPDB. It was also chemistry, which is key in any JV. Our CFO connected very well with their CFO, who is now the President of SPDB, so that was very helpful in terms of building the relationship.

We also realized that when we entered a JV with a Chinese bank, we’re really entering it with the government because the government has to approve it and support it. So it was understanding that we needed to work with both the government and SPDB.

What about you personally? You didn’t live in China before and many foreigners who come to China don’t stay very long. What helped you make the transition?

When I first came to China, I was flattered, excited, and also a little bit apprehensive. I came over in late 2012 to meet the JV bank in Shanghai. When I went around the bank and met these individuals who were now all my colleagues, I asked them all the same question, “what brought you to SPD Silicon Valley Bank and why do you like working here?”

They basically all answered the same way, “we like the culture of the bank”. Culture in SVB is very important, and they answered in a way that an employee in our Seattle or Israel or Denver or San Francisco office would have answered. So as soon as they answered that way, I said to myself ‘wow, I know who you are’ because they answered exactly the same way that my other colleagues would from anywhere else in the world. That made me much more comfortable that I was coming into a culture that was very familiar to me because it was an SVB culture.

The other thing to succeed in any overseas environment, especially one as unique as China, is as an individual you have to be curious, like to get out of your comfort zone, like to take risk and that is my individual personal profile. Having said that, I knew by the answers from colleagues that I knew who I would be working with, so that reduced the risk factor dramatically.

On the topic of culture, one of the challenges that foreign companies have in China is finding, recruiting and retaining top talent. Can you talk about these issues?

On the corporate banking side, it’s relationship management and analysts, with an average age of late 20s to early 30s, bi-lingual, with many who finished universities in the US or UK, and then have worked with other international companies. We’ve got a big advantage with them because we are an innovation bank. That is clearly the drum beat in China today. We also have the words ‘Silicon Valley’ in our name, and those two words are very powerful and attract a lot of people.

We actually find that we attract a high calibre of talent because they’re intrigued by our bank. Our retention rate has been very good. In the case of losing people, we’ve lost people to people starting their own business or to join a VC firm. So we don’t lose people to other banks because they like the culture and the sector, but we can lose them to the lure of entrepreneurship or venture capital.

On the operation side, we are about to open our Beijing branch very soon subject to the final regulatory approval, and we had to hire more operations staff. We’ve hired more mature people who have been successful in their careers and see our bank as very intriguing and different. So there’s an appeal there for these more mature people who have worked in traditional banks for 15 years or more, and they’re saying that this is an interesting bank.

One of the things we’re criticized for is we put people through too many interviews. We also have written tests as well. We don’t do psycho-metrics type testing, it’s really based on understanding each individual as a person.

How do you think about the balance between the global culture of a company and the unique specifics of the local China market?

We put a lot of focus on culture. We focus on people who are creative and can enjoy an environment where everyone has a voice. So it’s a very similar culture to what is seen in our other locations. A lot of our employees in China like working for us and so our unique culture helps to differentiate. Of course, we’re very careful not to be arrogant about this and we recognize that we have to localize. We know many foreign companies have failed because they brought in their culture and they haven’t adapted and localized enough. It’s a balance, and that’s why the joint venture works well, because each side brings its DNA together. One thing I look back at now — had we had a local co-head, that may have been helpful to deal with local specifics. So even for us, it’s certainly possible we could have listened more to our local colleagues to understand the local marketplace.

Looking at localization in China, slogans are very popular. You have a new product, you give it a catchy name. You start a new year, and you have a slogan, like the ‘Golden Year’. Those sorts of slogans are important to employees for inspiration. It’s a very simple example but it’s important. We try and do things like sports days, hairy crab dinners, the regular Chinese New Year parties, and all the obvious things. We have social committees made up of Chinese employees who come up with ideas for building the culture.

In our early days, we would also ask the employees to put together skits, mini-plays, to our employees regarding things like ethics and customer relations. These would be funny skits but the underlying theme would be serious. The employees very much liked it. As we’ve scaled, there’s unfortunately not enough time to do it anymore, but it worked well.

Looking at the macro trends, are there specific themes that are particularly exciting?

The hot themes today are artificial intelligence, big data and virtual reality — those are hot everywhere, including China and Silicon Valley. People are noticing that China may be adopting virtual reality faster than other markets. Not just for entertainment and gaming, but also for enterprise applications.

The demographic shift in China is also driving a lot of themes as well. One venture firm is investing in amusement parks in shopping malls. Something we wouldn’t normally see but these are top tier VCs because families are going to shopping malls for entertainment.

In terms of business model, it’s now less about scale and more showing profitability over time. Not necessarily now, but at least the path to a profitable business model.

For the joint venture bank, what kind of company is interesting for you?

The same things that VC investors look for — a great team focusing on a large market with a defensible business, whether through intellectual property or some other unique edge, that can scale quickly. It doesn’t have to be deep technology.

For us, it’s also the quality of the investors and most importantly it’s management, management, management. You can have a great company and it can still fail with poor management. Our old CEO used to say to us that “cashflow doesn’t pay back the loan, people do”.

Most traditional banks are still focused on collateral, not people. What do you do differently?

It’s our focus on building relationships. We spend our time and energy deepening personal relationships.

Building a successful China JV starts with getting the people right. Oscar’s answers highlight that it is possible to have a strong and unique global company culture that also respectfully adapts to the local China market. While the specifics of each company are different, the lessons about finding the right partner and managing local talent are very relevant to all companies entering the China market.

Photo credit: Li Yang

An Expat VC on the US Election: Why, How, and What Now?

By Fusion by Fresco Capital, 3rd January 2017

As an American living abroad, I have been shielded from a lot of the insanity of this year’s election, but even sitting here in Tokyo, halfway across the world, the vitriol and frustration is palpable. Sure, the Presidential Election in the United States is always charged with emotion, but as almost anyone who has voted in multiple election cycles would agree, this year is particularly heated.

People have said harsh goodbyes to friends, unable to empathise with their choices. Families have lost touch, fearful of the difficult conversations that would ensue if the topic of politics were to be broached (I’m sad to say I speak from personal experience on that one). The very foundation of the Two Party System has been irrevocably damaged. The question of what it really means to be an American remains up for debate.

One thing is clear: Shit is broken. The world we lived in previously has changed. The American Dream used to be: work hard in school, get good grades, go to college, get a good job, find a wife who will take care of your house, buy a house, work hard, rise in the ranks, save your money, provide your children with a better life than you had, rinse, repeat. Sorry guys (yes, I mean guys), no can do.

For most people, that is no longer an option. College doesn’t guarantee you a job anymore (trust me, even a Harvard degree is worth less than it used to be). And even if it does get you a job, your job has probably started to be replaced by technology. Entire companies are being dismantled, so the idea of a long-term career at one company is rare. Most women don’t want to be just wives anymore, nor do they have to be. As the Great Financial Crisis taught us so painfully, houses don’t always go up in value, so they are not a safe investment anymore. Interest rates are zero, so saving doesn’t do you much good either. So… yeah, shit is broken. The promises we were sold have turned out to be empty, and it’s not really anyone’s fault, either. It just is.

Sure, we can try to put it all back together again. Go ahead and try. Even if that were possible, it still wouldn’t work again. Why, you ask? But why, can’t we just go back to the glory days? One word: technology. Technology has not only changed the world, but it has changed how fast the world changes. As our most recent Nobel Prize winner, Bob Dylan, so eloquently pointed out… “The times they are a’changing.” And they’re changing faster than ever before.

Nassim Nicholas Taleb, author of the Black Swan, wrote a fantastic book called Antifragile. I have a short attention span, so I’m not going to lie to you, I only read half of it. But the takeaway is this; Fragility is when you break something, and you cannot repair it. Resilience is when you break something, and it can return to its previous state. Antifragility (the best way to be), is when you break something, and it returns to an even better state, more powerful and strong than before it was broken.

I can only hope that part of what makes America great is that we are the definition of antifragile. We need to have faith in our ability to heal these rifts that emerged from the US election, to face the difficult conversations that must take place, and to emerge a stronger, more informed, more creative, and more antifragile nation than we were before.

Doing that, however, requires us to take a step back, to set aside our emotions, and to take a deep look at the incredibly valuable and previously unseen information revealed by this election. So let’s remove the emotion, take a quick look at the facts brought to light by this year’s Presidential Saga, and dedicate ourselves to building something better in its wake.

What have we learned?

Technology has forever changed how we, as individuals, make decisions.

We used to live in a world where information was difficult to access, and we relied on key institutions like the political parties, the media (newspapers, TV personalities), academic and religious institutions to tell us what we needed to know to make an informed decision.

Now, we get our information from the internet. Anyone can read about the candidates online, anyone can publish their opinion, anyone can state a “fact”, or share their emotional reactions. We have become infinite information consumers and producers.

As a result, it has been shown that our grip on the truth is loosening. Our willingness to hear arguments counter to our own beliefs is weakening. Our strength to overcome our own biases is diminishing.

The systems that have kept our world stable have not gotten the memo.

The key systems and infrastructure which shape our lives were all created in a time before technology existed. The idea that we would be meeting our mates on Tinder, sharing our momentary thoughts and emotions on Facebook, carpooling to work in a stranger’s car, or tracking our daily food intake and steps on an app were completely unfathomable at the time of their creation.

So, where does it all break down? Jobs. The systems that support the world as we know it can be broken down as follows: corporations that provide us with jobs, education which prepares us for those jobs, the government which protects those jobs and protects us if we don’t have jobs. (Ben Thompson writes brilliantly on this system here, if you’re interested in learning more how this system was created and why.)

As technology accelerates, companies are being forced to adapt to increase margins, productivity, and profits for investors. As a result, jobs are being automated. Because technology evolves faster than we can learn, or the education system can provide us with relevant skills, we are losing our jobs. People without jobs are angry, disappointed, disenchanted, and scared. Not a good equation for an election, or for anything for that matter.

It is up to us to rebuild those systems in a way that will last.

Technology is not a trend. It is not a sector. It is an inevitable force redefining the world in every way. This will not change, it will only accelerate. As outlined by the concept of singularity, the rate of change of technology will only get faster and faster. This unleashes unfathomable potential, but can also be disastrous if we don’t create a system that can keep up.

This brings us back to the concept of antifragility. We can’t simply repair our broken systems. We can’t simply aim for resilience. The only option is to imagine and re-build the world on a foundation that gains from change, and as a result, actually gets stronger over time.

Okay, fine. But what can we do about it now?

First, we have to stop wishing for “the way things were” and start taking a deep look at how we can start rebuilding a world that fits today’s reality. Because of technology, we are living in a world where we have unprecedented power as individuals. Yes, that is terrifying. But it’s also fucking awesome, because it means we all matter and we all have a role to play.

I continue to believe the only way for each of us to start making a difference is through education. Whether this is in K-12, universities, corporate training, online platforms, whatever. A few ideas:

Educate individuals on how to find, assess, and synthesize what is valid information and what is not.
Encourage empathy so that we have the discipline and intellectual strength to accommodate the views of others.
Raise awareness around our inherent biases so we know how to truly listen and learn.
Create ways that professionals can continually learn new skills, quickly and efficiently, so we can always find jobs.
Provide access to information about what jobs are available, and what we need to be get them.

The list goes on and on. Everyone needs to play their part, but first they need the tools that empower them to do so.

I am personally dedicated to doing whatever I can to help rebuild the systems that shape our world (not just America). That’s why we created Fresco Capital, where we are investing in the technology transforming these very sectors that need serious upgrades: education technology, work technology, digital healthcare. But that’s just one small part of a much bigger, more important picture of creating a new future.

So… let’s stop whining about this fucking disaster of an election and get started.

Why Everything Will Be Disrupted — And What Your Startup Can Do to Win

By Fusion by Fresco Capital, 3rd January 2017

Taken together, the evolution of technology, macroeconomic trends, and political shifts all point to the same conclusion: We’re nearing the end of a cycle. It’s only a matter of time before the industrial age disappears altogether, giving rise to the information age.

As we become even more submerged in this new fast-paced digital age, it’s becoming increasingly clear that everything will be disrupted sooner or later — even doctors and lawyers.

In the past, the old rules of economies centered on the concept of “choice under scarcity” — which is how “supply and demand” became a phrase everyone knows. But things are changing in the new economy. Now, it’s about “choice under abundance.”

Customers — in every sense of the word — have more choices than ever before. Consumers can compare a ton of brands in a few minutes, and companies have their pick of freelancers and contractors on a project-by-project basis.

For this reason, the job market is shaping up to be dramatically different in the coming years. In many ways, the gig economy is already here. But by 2020, experts predict as many as half of U.S. workers will be freelancers.

Beyond the change in the job market, we can also expect international barriers to break down further thanks to new technologies. Syrian refugees, for example, were able to get across Europe and find their neighbors and families thanks to smartphones, Facebook, and WhatsApp.

How can companies survive this changing business, technological, and economic landscape?

How Startups Can Win

Succeeding in this new age requires an immersion in the technologies and understanding of the economic implications inherent in the information age. Quite simply, companies need to prepare for disruption because it’ll happen sooner or later. Don’t hide behind regulation (e.g., San Francisco). You’ll eventually get burned.

If you’re a startup, go attack the areas where regulation meets technologies. While venture capitalists used to not invest in these battleground areas, that’s precisely where the opportunity lies these days.

Case in point? Uber, which is now valued at $80 billion.

The company lives in gray areas. In the early days, there was an argument as to whether the ridesharing company should be able to pick up and drop off customers at New York City-area airports. After the New York City Taxi Commission said that Uber shouldn’t be able to serve airports because drivers were uninsured, Uber ponied up money to get their drivers insured and cover costs associated with legal representation.

What’s more, when Mayor Bill de Blasio was threatening to cap the number of drivers Uber could have in New York City, the company released a feature on its app that showed how long it would take to hail an Uber if the proposal succeeded. De Blasio eventually capitulated. Uber had too much support to fight.

It seems quite plausible that the successful companies of tomorrow will all have an Uber-like policy that toes the line and tests regulations — giving customers what they want before politicians can take it away from them for the sake of the status quo.

Change Is Everywhere

Ten years ago, who would have thought that the restaurant industry could be drastically changed by technology? But here we are. There are manytablet-driven restaurants. As any restaurant owner knows, margins are tight. The use of tablets lessens operating expenses and reduces the frequency of errors.

Technology has also disrupted the coffee shop (well, at least Starbucks). Though in my opinion the Starbucks app leaves a lot to be desired, I still use it because it beats waiting in line.

Thanks to outsourcing software and platforms, higher-end jobs — like design specification managers and systems architects — are becoming increasingly available. This is great news for workers and companies alike. Engaged on-demand talent is closer than you think.

The economy has changed; this is your new way of looking at it. The more prepared you are for disruption — and certainly the more aggressively you pursue the opportunity to be the disruptor — the more likely your company will live to see brighter days.

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Photo by flickr user Tsahi Levent-Levi

Inspiration from Leading 8 Million Active Parents & Volunteers

By Fusion by Fresco Capital, 3rd January 2017

The most inspirational founders are able to find a mission bigger than themselves and I was fortunate to have a recent Q&A with one of these founders, Karen Bantuveris. Not only is she a savvy entrepreneur and mother herself, her company empowers a community of 8 million parents and volunteers. Karen was recently at the White House as part of the Computer Science for All initiative and this was a great topic to start the discussion.

You recently spoke at the White House about SignUp.com’s role as an official partner to the Computer Science for All initiative (#CSforAll). What was that like?

Speaking at the White House was of course an unforgettable experience for me. I felt honored, inspired, empowered — and excited to see SignUp.comjoining other tech leaders like Google and Facebook as an official partner in such an important initiative in education. It’s a movement anyone can contribute to — you can learn more about it on the White House’s website.

How will SignUp.com be contributing to this initiative?

We’re here to help engage parents. They’re a powerful, untapped audience capable of making a huge impact in our nation’s goal to bring computer science to ALL kids, and SignUp.com is connected to 8 million of them. We’re doing a variety of things to help parents and families drive this movement at a local level, but the one we’re most proud of is “Family Code Night.”

During a memorable and fun Family Code Night event, families learn to code together. Thanks to a program produced by our partner, MV Gate, hosting a school-wide Family Code Night is easy for any parent to coordinate. Kids and parents get an exciting introduction to computer science — they get to do something fun and empowering with their family and with their friends and school community. Families leave the event eager for more and ready to support computer science learning at school and at home. The Family Code Night event kit is available free at SignUp.com/FamilyCodeNight, and we’ll be encouraging our users to download this and other free computer science ideas and resources from our new CSforAll Idea Center in partnership with the CSforAll Consortium.

Tell us why you chose to get involved with CSforAll?

There are so many things we each want to do with our day, with our lives, for our children — but it’s overwhelming if you try to do it on your own. As a business leader and mom, I get that. We’ve spent seven years building SignUp.com around the belief that we are all stronger in numbers. Every day, our solutions help people unite groups of 10, 50, 1,000 people around common goals and interests. With CSforAll, SignUp.com gets to do that for a nationwide movement. Given the powerful role parents play in influencing school priorities and our unique connection with them, it makes perfect sense that we would contribute to this movement.

Until recently, your brand used the name VolunteerSpot. Why the change to SignUp.com?

Our solutions were originally designed for moms like myself who were looking for a better way to coordinate school activities that depended on parent volunteers. Over time, parents began to expand how they used our solutions — with friends, at work,… Today, people use our solutions for every type of activity that relies on people to sign up and participate.

We recognized it was time to adopt a name that more accurately reflected our solutions and enabled our company to reach new audiences such as universities and small businesses. So this summer, we rebranded as SignUp.com. Our new name more accurately reflects what we do and who we serve (everyone!), and therefore generates better outcomes for the people using our solutions to organize activities that depend on group participation.

Based on your experience, what advice would you share to other companies who are thinking about a change in brand?

Consult an outside brand strategist early and often.
Build a comprehensive project plan and assign a skilled project manager, just as you would a website launch or product launch.
As you design your transition plan, carefully consider all of the people and components of your business that will be affected — each group of stakeholders and audience segments may need targeted communication plans but deploying a change is much more than marketing and communications. For example, site infrastructure, SEO, help desk, partner contracts, human resources and banking are all touched with a brand change.

Your community of users is extremely active and engaged. What kind of brand partners are the best fit for your community?

We wouldn’t be here without our brand partners. Brands like Lands’ End, Penguin Random House, Uncle Ben’s, and Chuck E. Cheese advertise with us to reach the millions of highly influential moms that use our site.

SignUp.com best fits brands that want to connect with active people (which includes pretty much every mom with school age kids!). They use SignUp.com because they’re always looking for ways to do more with less time — for some that means personal interests like church or book clubs, for others that means career achievements, and for the majority of SignUp.com users, that means contributing to their child’s education and success.

You’re based in Austin and have an insider’s perspective of SXSW. Any tips for visitors, especially those who are thinking of going for the first time?

Treat it like any travel adventure: wear smart shoes, try new things, embrace the unexpected, and sleep when you get home! SXSW is immersive and you may not see a lot of Austin, but don’t leave without eating a breakfast taco (or three). Everyone has their favorite taco shop, but personally, I’m Team Torchy’s all the way!

Thank you for reading!

Our portfolio companies including SignUp.com are always on the lookout for top talent and also partnership opportunities. To learn more, get in touch.

Image Source: White House

The Most Effective Way Governments Should Support Startup Ecosystems

By Fusion by Fresco Capital, 3rd January 2017

I once met an active angel investor from Europe who was convinced that government subsidies of investors were the most effective way to build startup ecosystems. Of course I asked the obvious question, “what about Silicon Valley?”

“Except Silicon Valley” was his reply.

Huh. Lightbulbs going on everywhere (at least in my mind).

The Best Intentions

Small scale grants to get startups off the ground in place of friends, family and fools money certainly makes sense. After all, most people actually don’t have friends, family and fools with enough money to support them.

What about when governments start subsidising rich angel investors with tax breaks? While this may be the result of genuine intentions to encourage risk taking, if investors are ultimately viewing startup investments as tax deductions, then this is a fundamentally flawed strategy. Instead of being investments, startups are transformed into tax loopholes.

Moving up the investment value chain, it’s certainly admirable for governments to actively support local venture capital because there is a positive knock-on effect of helping the real economy. This leads to a natural question:

How should governments support local venture capital funds in order to scale and build a local ecosystem?

One approach to building a local venture capital ecosystem is to provide rebates and other complex incentives where the government takes on more risk and leaves the private sector with extra return benefits. No matter what the fancy official name of this kind of program, it is effectively a subsidy.

As a venture capital investor, I’m supposed to jump at the chance of getting subsidised returns. Call me old fashioned, but I don’t want to receive subsidies to juice returns because it’s wrong for society (my altruistic side) and I don’t want my returns to be artificially boosted by subsidies (pure ego).

Fortunately, there’s a simpler idea.

Instead of tilting the risk / return in favour of funds via subsidies, government related capital should simply be open to investing in new venture capital funds on market terms. The boring reality is that most government capital is allocated through various intermediaries and by the time it gets to venture capital funds, many decision makers take the view of something like this:

New venture capital funds are too risky, so we prefer teams that have worked together for at least 10 years and are raising fund 5.

If you want to attract venture capital investors to your local ecosystem, it’s a lot easier to do so before fund 5. Rather than throwing around subsidies to attract funds, governments should take a hard look at how their existing capital is being allocated through various intermediaries to make sure that there is an allocation for emerging venture capital funds.

If done correctly, this market driven approach will actually increase returns, as there’s plenty of data to show that new funds are generating outsized returns. Instead of spending money to subsidize venture capital funds, governments can get more money through higher returns.

The Unintended Consequences

Beyond the obvious concern that governments should not be subsidising investors directly, there is also the problem of unintended consequences.

At the company level, since small scale grants for startups to get off the ground usually do make a positive impact, it’s very tempting for governments to scale that up.

Unfortunately, when companies raise institutional capital which was only possible because of subsidies tied to the investment either directly or indirectly, the incentive mechanisms tend to train grantpreneurs.

The reality is that all startup subsidies come attached with complicated forms because governments need to protect themselves from criticism. So there is no such thing as “simple startup subsidies”.

Grantpreneurs are extremely efficient and skilled at filling out the complicated forms and ticking all the right boxes for subsidies but unfortunately are a lot less skilled in building successful businesses.

People improve their skill through repetition. The worst case scenario is creating serial grantpreneurs, who are able to jump from subsidy to subsidy.

One of the goals usually cited by governments to subsidise investors is that this will then lead to more jobs. Of course, there are usually many restrictions on the people who may be hired.

This prescriptive approach to hiring can actually lead to increased inequality because it increases demand for a fixed pool of talent rather than increasing the overall pool of talent. Wages go up for those already with skills. Everyone else, not so much.

Throwing money at jobs is not the same as increasing the overall pool of talent.

A Better Way

Should we just throw our hands up in the air with the view that governments are always wrong and it’s foolish to mess with markets?

Not quite.

Markets are far from perfect and as the impact of technology continues to accelerate, cities and countries that do nothing to build thriving startup ecosystems are at risk of being left behind.

So what should governments focus on when it comes to extra support for startup ecosystems?

Ultimately, every government has limited resources and a key starting question should be “what is the best use of our resources for maximum impact?”

If the goal is to encourage innovation across society and the improvement of overall welfare, better to focus on talent.

What would a program to support talent look like? Rather than giving money to startups, which would empower grantpreneurs to fill out forms more successfully, governments should be subsidising individuals to learn new job skills. To be clear, this does not mean training everyone to become an entrepreneur.

Empowering individuals to make their own job skill education choices at least creates a pathway for them to find new job opportunities. It won’t work for everyone but it has the potential to enhance the overall pool of talent at scale. So rather than funnelling more money to the same number of people, there will be a broader base of talent.

Will there be inefficiency? Of course yes.

Will there be fraud? Probably.

But at least by focusing on individuals, the magnitude of any individual fraud case should be smaller.

Even with inefficiency and fraud, as long as the overall talent pool is improved, then this approach could create massive value for society.

The Unexpected Benefits

Beyond the direct impact of enhancing the talent pool, there is an important secondary benefit: increasing the quality of overall talent should attract more institutional capital.

Why does increasing the pool of talent attract more capital? Because capital follows talent.

Just take a look at the history of Silicon Valley. The talent moved first, led by pioneers like the Traitorous Eight, and the capital followed.

There are two factors behind this dynamic. First, great talent is still scarcer than capital. Second, it’s easier to move capital than talent.

So by focusing on improving the talent base, governments will naturally be building the foundations of attracting capital for the right reasons.

The First Steps

It’s tempting for governments to go big with a fancy launch party and lots of hype around a new program.

But for a talent subsidy program to actually be effective, better to act like a startup and start with a small test. Make it small because then the mistakes will be small and there is only one guarantee with a talent subsidy program: there will be mistakes.

Then this is the most important part: get feedback, learn from the mistakes, and don’t scale up until it’s actually working on a small scale.

This means less publicity in the short-term but ultimately much larger positive impact in the long-term. It’s a marshmallow test for governments who want to support startup ecosystems.

Lightbulbs are a metaphor for new ideas and innovation. If governments truly want to support startup ecosystems, they should be focused on helping people find their unique lightbulb moments.

For anyone else interested in figuring out how governments can help support startup ecosystem talent, please get in touch.

Behind the Scenes at Nanosatellite Company Spire

By Fusion by Fresco Capital, 3rd January 2017

I first connected with Peter Platzer in 2012 during the early days of Spire, before any of the company’s nanosatellites were actually in space. We hit it off immediately, and very quickly this led to an investment by us at Fresco Capital. There are many teams with big dreams, but Peter and the Spire team are one of the few teams that consistently execute those big dreams. In addition to launching and managing a constellation of nanosatellites, the satellite-powered data company has built a truly global business with offices across Asia, Europe and North America.

Here’s a recent Q&A I had with Peter.

When most people think of satellites, they think of very large and expensive projects that only governments can afford. What has changed in the past 15 years and why?

Nanosatellites are about the size of a bottle of wine and since 2014, there have been more nanosatellites launches than traditional large ones. With nanosatellite being far more affordable, this has dramatically changed the number of space faring nations, companies, and even individuals!

The two biggest reasons for that is the integration of new technologies from other industries and the creation of the CubeSat standard. Components from smartphones, drones, and robotics have made it possible to build an incredibly powerful satellite in a fraction of the time at a fraction of the price — it is still quite a bit or rocket science, but simply by replacing the need for lots of money with the need for lots of ingenuity and brain, it opened access for innovation from the private sector to space. Secondly, when it comes time to launch, there are now opportunities to share a ride in almost every space-faring country because the standard form factor is now a well-known and accepted by over a dozen launch vehicles.

You are originally from Europe and have lived in both Asia and North America. How does that influence your perspective of which country or countries Spire considers home?

When I was a teenager I came to my father with my passport and said “I’d like it to say ‘Peter Platzer, citizen of earth”. This was the time before the fall of the wall, my home town being just 45’ away from the Iron Curtain. An avid reader of both science and science fiction this separation between me in wealthy Vienna and others just 45’ drive away made no sense. Since then I travelled to over 60 countries and worked extensively in 7 countries on 3 continents. Clearly this has deeply influenced my thinking, curiosity, and appreciation for different cultures, norms, perspectives. And while I don’t think that my background influenced my perspective on Spire’s ‘home country’ it has certainly influenced the type of problem I want to solve and the type of company I would want to start. So from the beginning it was very clear that Spire needed to be a global company, with global customers, global operations, a global talent pool, solving global problems. Its home country is Earth.

The transformation of the space industry is likely be a much needed catalyst for job creation in the future. What should governments, schools and parents be doing to make sure that their children are well prepared for these new job opportunities?

The best thing that schools can do is to keep kids engaged with technology. We need people who can code, build electronics, and understand complex systems. Thankfully there are great minds in ed-tech, like Ardusat.com, working on this problem. We put an educational payload into every satellite because investing in children’s passion for science and technology is an investment in our future.

Anything related to space has a huge amount of global and national regulations. Recently, startups in other industries have been hurt by not following regulations. How do you approach the challenge of innovating in a highly regulated industry?

It’s always going to be difficult to deal with a highly regulated industry like aerospace but it is worth reminding yourself that the regulations were created for a reason. When we run into a roadblock, we talk with people. It’s often the case that no one even imagined a world with nanosatellites when they wrote the rules. So far we have found regulators to be very keen on understanding and supporting New Space, even though they often have to work with regulations that are anachronistic to today’s rapid pace of space technology development.

Many technology companies struggle with having diversity in the team. Spire, as a space company, is obviously working on some very advanced technology, so how does the company approach the issue of talent diversity?

Our approach to talent is to hire the best people and to build a heterogeneous team. Research has showed that heterogeneous teams consistently outperform homogeneous teams. Our team now consists of people from 18 countries and counting. It is also worth noting that from our perspective, diversity comes far more in the form of different personalities, approaches to problems, situations, desires, and aspirations, that differences visible on the outside. We measure diversity far more by the “content of the book” rather than “the cover of the book”, something that we think is often forgotten in the diversity debate.

What benefits do you think this new technology will be bringing to companies, government, and people in the next 1–3 years?

Nanosatellites are bringing about a sea-change in how much data is available from space to benefit mankind. Its like switching from a 1950 black and white silent movie to a 2015 4k 3D IMAX movie. Many of those benefits are yet to be discovered, but simply imagine a world were no airplane is ever lost again, global shipping is running on half the emissions because of route optimisation, our oceans are replenished in fish stock thanks to eradicating illegal fishing, and weather forecasts are as accurate as swiss train schedules, allowing you to never be late for a date (or miss a shipping to a customer). And those are just the areas that one company, Spire, is working on. We are certain that many more areas will be positively impacted by the wide-spread use of nanosatellites, similarly as the widespread use of the PC instead of the mainframe brought about the internet.

Thank you for reading!

Our portfolio companies including Spire are always on the lookout for top talent and also partnership opportunities. To learn more, get in touch.

Image credit: Spire Global

Connect Pipedrive to a Slack Channel Using a Bot

By Fusion by Fresco Capital, 3rd January 2017

Here at Fresco Capital, we love to eat our own dogfood so we have been using Pipedrive for years. Pipedrive is a sales management tool that helps sales teams manage a sales pipeline in a visual way. At Fresco we enter everything into Pipedrive: our portfolio companies, startups that pitch us, our investors, potential investors, etc.

Since we embraced Slack at Fresco for our internal conversations, it is the one stop shop for all of our communications. (I joke with our partners, if it is not in Slack, it didn’t happen.) In Slack we created a #pipedrivebot channel where we would alert each other of a new update we just entered into Pipedrive. After doing that a few times, I wanted to automate this process; we needed to automatically wire up Pipedrive to a Slack channel. The easiest way to do this is with a bot.

Bots As a Service (BoTaaS)

Fortunately our friends over at Recime have created a bot to do just this. Recime is a cloud based bot infrastructure backend and hosting platform for developers (BoTaaS). Recime automates all the plumbing a bot developer runs into, similar to what parse.com did for mobile devs before Facebook acquired it. One of the free bots hosted on their platform is a Pipedrive to Slack Channel bot.

Connecting Pipedrive to a Slack Channel

Using the bot is easy, but you have to configure a few things in both Pipedrive and Slack. In order to configure the Recime pipedrive bot, you need to do the following:

Enable integration Webhooks in slack
Enable push notifications in Pipedrive to trigger the Recime pipedrive bot.

Enable Integration WebHook in Slack

In Slack, from account menu, go to menu->app & integration and then click manage in the navigation bar:

Click Manage -> Custom Integrations -> Add Configuration:

This will take you to a wizard where you can configure which Slack channel the bot will send messages to. Once completed you will be given a Webhook URL that you will need to configure the pipedrive notification. (Image and other metadata information are configured automatically by the bot therefore you can leave them as it is. ) Copy the URL to a safe place.

Enable Notifications in pipedrive

This task has three easy steps.

First you need to obtain an API Token from Pipedrive. Go to your Pipedrive Settings and click API. Copy the API token to a safe place.

Next up you have to create a URL out of the Slack WebHook and Pipedrive API token for Pipedrive’s push notification to enable the bot to connect the two together. You can do this by going to the Recime website and entering the WebHook URL and API Token into this form:

https://recime.ai/bot/pipedrive

The Recime website will return to you a URL, copy it to your clipboard and go back to Pipedrive for the past step.

In Pipedrive, go to Settings -> Push Notifications and create a new notification:

Enter in your Pipedrive user name, the URL that the Recime form gave you and the events in Pipedrive you want to enable the push notification bot for.

If you want to get notified about everything you enter in Pipedrive, put in *.*, or if you just want to be notified when a deal is updated you would put in updated.deal, or if you only want a new note notification put in added.note. If you are not sure use *.* and experiment.

Now your bot will now send a message to the #pipedrivebot channel in Slack every time you update your Pipedrive.

Enjoy. 😉

Why You Should Start Experimenting with AR and VR Today

By Fusion by Fresco Capital, 30th December 2016

Those of us paying attention all knew it was only a matter of time before augmented reality (AR) and virtual reality (VR) became mainstream. Now, thanks to the rise of Oculus Rift and Pokémon Go, we’re beginning to arrive at that point.

First, some brief definitions so we are on the same page:

Augmented reality is technology that integrates digital information into the actual environment surrounding a user in real time, usually via a smartphone or tablet. According to MarketsandMarkets, the AR market will grow at an annual clip of nearly 76% over the next six years,reaching $117.4 billion by 2022.

Virtual reality is technology that generates a three-dimensional digital environment, tricking users into “believing” they’re inside that environment when interacting with the technology. MarketsandMarkets says the VR market will grow 57.8% each year between now and 2022. The market realized $1.37 billion in 2015 and is projected to bring in$33.9 billion by 2022.

If you or your company is in any position to create AR and VR products, now’s the time to get started. Even if you fail during your first attempt, you’ll get a head start on claiming as big a chunk of the AR and VR pies as you can.

I Couldn’t Jump

I am advising a company in the space, so recently I was lucky enough to visit an AR/VR accelerator and interact with the exciting new technologies that many businesses are building. I started playing with the Oculus Rift and thought it was pretty cool. I also got to try an HTC Vive (which I liked much better). Even though I knew what I was seeing was a digitalized environment, I wouldn’t “jump off of a cliff” when presented with the opportunity. It all seemed too real. Psychologically, I couldn’t do it.

My experiences, coupled with the media frenzy over Pokémon Go — which provides the first mainstream AR experience — have led me to one conclusion: you need to simply get involved and start building products now, rather than later. Because there’s really no such thing as failure in this case.

If you fail, it’ll probably be because the market isn’t big enough and the tech isn’t as popular as it will be one day. But you can learn from those shortcomings. And in two or three years when the market is booming, you’ll succeed because you’ll have learned a ton of helpful lessons while failing.

An Enormous Opportunity

Pokémon Go represents a breakout moment for augmented reality. But we’re still in the super-early stages of seeing the true power of the technology. It’s where mobile was when Michael Douglas was blabbing on an enormous cell phone in Wall Street.

So before you get turned off on AR because of how annoying you perceive Pokémon Go to be, it’s worth your while to consider how the technology can transform your company. If you’re a startup founder, there’s a good chance your first stab at AR or VR will be unsuccessful. But three to five years from now, you’ll be in one of the best positions to build the technology.

Need more convincing? F1 recently signed a deal that will allow its races to be streamed via VR devices. Racing fans will be able to see the course as if they were sitting in the driver’s seat themselves (which might be a way for racing to attract new fans — folks who previously couldn’t understand the sport’s appeal).

Despite these breakthroughs, there are very few masters of AR and VR technologies right now. Developers are going to AR/VR hackathons to learn more skills. The industry isn’t yet full of geniuses who are building the surefire next big thing.

But it will be sometime in the near future.

If you’re a technical startup person interested in the space, go out and start turning your AR and VR ideas into reality. While it might not be monetarily successful for you right off the bat, your efforts will undoubtedly help AR and VR technologies move forward. As an added bonus, you’ll become more intimate with the space — which should put you in a great position to claim a big chunk of the market through your subsequent AR and VR efforts.

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First Photo by flickr user UTKnightCenter

Second Photo by Stephen Forte

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