When I was a kid, I worked hard and played hard. I wasn't more than 8 years old when I started my first entrepreneurial venture: selling beverages to golfers as they crossed the street from one hole to the next. When I wasn't hustling to make my own money, I was active doing things like skateboarding or riding my bike miles and miles on any given day.
It seems things are different for kids these days. I say that because of two very different, but eye-opening things I have noticed lately.
The first example comes from the fact that I am so incredibly busy these days, the last thing I want to do during one of my few weekend hours at home is mow the lawn. So I figured I'd hire a neighborhood kid to do it. Certainly, in my neighborhood full of kids, one of them has started a lawn mowing business. Right? Nope, I can't find a single kid doing anything to make money by working for themselves.
The second thing I noticed is the proliferation of motorized scooters. Kids of all ages are zipping around the sidewalks and streets on electric motor powered scooters. I no longer see them riding bikes, skateboarding, or even pushing an original Razer scooter. Nope, these lazy slackers are letting a motor do all the work while they stand on the board, with a spoiled grin on their face.
I know I sound like an incredibly old, grumpy man, but what has happened to the youth of our nation?
**WARNING: I am about to sound like an elitist, entitled asshole.**
When people ask me what I do for a living, I frequently say that I am the founder of a software startup. Sometimes, people respond by telling me that they are also into startups. They have a food truck, a house cleaning service, etc, etc. With all due respect, those are not startups!
Eric Ries wrote the best definition of a startup that I've ever seen, in his book The Lean Startup:
A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.
Awesome, right? I love it because it is so simple and short, yet it covers the key areas. Human. New. Uncertainty. So why isn't a cupcake shop or a bar a startup?
For starters, these are not new services. There is no question that most markets demand a bar. People have been buying and eating cupcakes for years. For the most part, nothing new has been created here. Sure, there may be a new way of delivering these products or a slightly different value prop, but in the end the product is essentially the same.
Which brings us to the next point: there is not extreme uncertainty. Sure, there may be some uncertainty but proper research and planning around starting your cupcake shop or neighborhood bar can reduce the uncertainty to minimal levels. It's relatively easy to figure out how many bars or cupcake shops a community can support, based on population. There are known, best practices that can be followed. Heck, with all the information available to use via technology and the web, it's probably never been less risky to start a small business!
I'd like to add one additional piece of analysis to Eric's definition. Based on the two points I make above, I'd also so that a startup is a business unable to attract bank loans or other sources of traditional debt financing. If a Starbucks executive left to start their own neighborhood coffee shop, there is little doubt that with a proper business plan, he or she would be able to obtain a small business loan from a local bank. There is little uncertainty in this venture. Little risk.
So what are these businesses called, if not startups? Small businesses. They are wonderful and critical to most economies. I take nothing away from the founders of small businesses. The successful ones are smart, adventurous people. Their businesses just aren't startups, and that is okay.
So much to blog about these days but it took a $1 billion acquisition of a no-revenue company to get me writing this evening. Yes, I am talking about Instagram and the sale to Facebook. One billion dollars. Wow...and congrats to them! The most amazing thing to me is that they are just a 10 person company with a product used by around 30 million people. That, my friends, is a lean startup!
So here is something to think about. Facebook paid approximately $33 for every Instagram user. That got me thinking, will this number be cited in the valuation of other web/mobile companies as they raise funding or negotiate a buyout? This means if your web/mobile app has 1 million users, you could reasonably argue that your company is worth $33 million......or more if you have revenue!
That is a little far fetched but it is a great way to remind yourself how much more work you have ahead of you. Say you have 25,000 users. That is wonderful, but you have a long way to go if you want to be purchased for millions of dollars! Twenty five thousand makes you worth about $825,000 based on Facebook/Instagram math. One hundred thousand users puts you at $3.3 million. Personally, I don't want to sell my current company for less than $100 million so I better get more than 3 million users running my software. Yikes, I have a lot of work to do!
Of course, I am over-simplifying things. Revenue changes the picture drastically. I also believe that each new Instagram user was worth more than the last (a network affect, so to speak). Not to mention all the other tangible and intangibles.
I'll leave you with this final thought. Maybe $1 billion was a bargain for Facebook? They are approaching an IPO that is rumored to value the company at around $100 billion. With around 900 million users, that is $111 per user. Makes $33 per user look like chump change, doesn't it?
The Portland Business Journal on March 9th, 2012 published a list of the Top 25 Technology Companies in the Portland area. They ranked using number of global employees but also listed the number of Portland area employees. Effectively, this is a list of the largest tech companies with a presence in Portland.
Wow, did they miss the boat. Of course the likes of Xerox and Intel made the list (#1 and #3 respectively), but the omissions and selections get more and more odd as you read down. For example, at #25 they list Infinity Internet with 27 worldwide employees, 26 in the Portland area. You mean to tell me that the 25th largest tech company in Portland only has 27 employees?
So I did some research and quickly discovered that the Portland Business Journal blatantly ignored local companies that were obvious choices for the list. They even ignored multiple companies that they wrote about in the very same March 9th issue (Fisrv, Monsoon, Axium, Symantec)!
So out of respect for the great companies that were omitted for the list, here are some that should have been mentioned. The figures in parenthesis are my estimations of local employees based on data collected from LinkedIn plus a sprinkling of my personal knowledge.
Act-On Software (over 60)
Avnera (about 60)
Axium (about 80)
CD Baby (over 200)
Clearedge Power (more than 100)
Digimarc (over 100)
EasyStreet (at least 30)
Elemental (about 60)
Fiserv (as many as 300)
Galois (about 35)
iovation (over 75)
Janrain (110)
Jive Software (200+)
Monsoon (about 84)
Netflix (about 200)
Pixelworks (about 32)
Puppet Labs (about 40)
Rumblefish (about 30)
Urban Airship (about 60)
Shopigniter (about 30)
SolarWorld (hundreds)
Symantec (100, even after layoffs)
Synopsys (about 300)
Thetus (about 50)
ViaWest (at least 25)
This isn't even an expansive list, there are more but I had to stop researching! Even the big guys have a presence here. Microsoft has about 150 in the Portland area, and Apple has at least 175 (both retail AND engineering). Finally, I didn't even list companies with fewer than 20 employees which I stumbled upon in my research. There are easily a few dozen tech companies with 10-20 local employees.
So, Portland Business Journal, I find it hard to believe you when you say "every attempt is made to ensure the thoroughness and accuracy of the list." It is especially frustrating when the only avenue to communicate errors and omissions is to send "corrections and additions on company letterhead to..." followed by your mailing address. Company letterhead, really? Why can't I just email you a list?
Reading through the archives of this blog, you'll see that there are a few popular topics I like to write about. One of them is the downfall of the newspaper industry. I recently had an online conversation with the new Business section editor at The Oregonian which only strengthens my grim outlook for a dying industry.
As some of you know, I have been working hard to build my own startup company. Nearly 2 years now and we are finally getting some real traction. Big news is on the horizon. During this time, I have become aware of many other Portland startups. Unfortunately, it seems as if these companies don't get much attention from The Oregonian newspaper.
A recent example is when my company teamed up with another Portland startup, GadgetTrak, to produce an innovative project called "stolen camera finder." It was interesting enough for the New York Times, Economist magazine, Popular Photography magazine, TechCrunch, Gizmodo and others. We sent information to the Oregonian's tech business writer and I even spoke with him on the phone about the project during a call for a different story. Nothing, no story. Apparently the Oregonian is too good for a story that the New York Times and TechCrunch like.
However, the Oregonian did have space in their paper for a July story about an eccentric millionaire that has sunk nearly $1 million into the development of a shaving razor that sells for $100,000 each (yes, you read that correctly, one hundred thousand dollars). Then, in late August, the Oregonian did a follow up story with "news" that the company has now produced an $18,000 model of their high-end razor. According to the August 25th article, not a single unit had been sold at either price point.
In the meantime, realPortlandstartups are building world-changing products, earning revenues, hiring employees and otherwise succeeding. When was the last time you read about that?
So when the second razor article hit the Oregonian's web site, I took issue with both the author (who I respect greatly) and his boss, the Business Editor. Here is our Twitter exchange, archived thanks to a cool company called Storify (which isn't from Portland):
What is your take, Portland? Was I wrong to question the Oregonian's coverage of this gimmick razor business or do they in fact do enough coverage of Portland startups?
Update, 9/24/11: The Oregonian today published a story about Geoloqi, one of the companies I mentioned in the comments below because I felt they didn't get the attention they deserved. Here is the story.
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