There were some great responses to my post last week as to the poor returns experienced by venture capital fund investors.
Some suggested that the blame for this lied more with the very difficult market and deal conditions of the past decade than with the VC investment model itself.
Typical was this comment submitted by a San Diego VC: "I agree that the VC fund industry is guilty as charged when it comes to being opaque as to real returns data, but I challenge you to revisit your analysis in 24 to 36 months, when we all will have had time to benefit from today’s strong M&A and IPO markets."
One reader reference Gust Founder David Rose’s new book - “Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups” and to Rose’s main contention that to access the 25% IRR potential of the asset class one must hold positions in not less than 20 companies.
He asked, “Is this practical advice? I mean - who really has the time to find, diligence, and invest in dozens of companies? And for those that don’t, are there really any “Warren Buffet-types” to back in this asset class?”
This is the billion dollar question, is it not?
And while of course anyone will be very hard-pressed to even approach Warren Buffett’s other-worldly track record, there are some powerful forces right now driving the timeliness of venture investing via the “Berkshire Model.”
These forces fall into three main categories – Improved Liquidity, Investment Flexibility, and what let’s call “Labor Arbitrage.”
Improved Liquidity. Illiquidity is a huge elephant in the room when it comes to startup and emerging company investing. Most startups and early stage companies that seek outside investors are years away from investor liquidity – either via sale to a strategic or financial acquirer, or far more rarely via a Public Offering of the Company’s stock.
Now Berkshire Model companies, as entities with fundamentally investment vs. operating mindsets more naturally position, language, and network their businesses in finance contexts.
While doing so by no means assures successful outcomes, it does create the far more likely possibility of secondary market liquidity alternatives for investors that “want out” in the interim before the final exit.
Investment Flexibility. Investment companies in the Berkshire mold have great flexibility to structure investments of various types: traditional straight cash-for-equity, warrants, contingent warrants, revenue certificates, convertibles, in exchange for professional services, on project-by project bases, and more.
This flexibility is a game changer, as when done right it can provide managed, diversified exposure to a portfolio of deals and opportunities inaccessible via more “traditional” means.
Labor Arbitrage. A wise man once said that all businesses fundamentally do is “bridge the gap” between markets for labor and those for products and services.
Relatedly, one of the best advantages of the Berkshire model is the ability it affords to "Mark Up" the labor involved in effecting deals and transactions.
Let’s explain this by example.
Say a finance or advisory services professional is paid a salary of $80,000 per year, plus bonuses and incentives based on deals, transaction closings, and successful exits (not atypical terms).
Let’s then utilize a 20% load factor and assume that this worker’s fully loaded cost is $100,000 per year. Let’s then assume a 2,000 hour work year (we hope they work harder than this, as this is such an opportunity filled industry!).
Then, on a hourly basis, this professional’s fixed cost is approximately $50 per hour.
Now it is neither unusual nor unreasonable for even midlevel management consultants and investment bankers to bill out at $250 an hour and more on a cash basis, and much more than this on a cash equivalent basis when services are performed in exchange for contingent and / or equity compensation pay structures.
The critical point here is that when services are performed in exchange for equity compensation , even with average deal “picking” there is a natural Deal Arbitrage Effect that can easily create positive expected value on each and every deal.
A massive advantage.
Like everything associated with startup and emerging company investing, a lot of hard and smart work is needed to do it right.
But when done so, the payoffs can be enormous.
Just ask any Early Berkshire investor for confirmation.
To Your Success,
P.S. Like to learn how to apply these principles to your portfolio? Then attend my webinar this Thursday, “What the Super Angels Know about Investing and What You Should Too.”
Click Here to learn more.
A joy of my work is that I get to connect often with smart, “out-of-the box” businesspeople that can be best described as "Investor – Entrepreneurs.”
The most talented of these fine folks evaluate opportunities through the complementary perspectives of the two mindsets.
As investors, they do so dispassionately - with the lenses of risk and reward, and of expected value.
As entrepreneurs, they are more operational, more tactical.
They know that numbers on financial statements are byproducts of collective, human effort - of sales, marketing, and operational strategies and project plans, all underpinned by cultural commitments to excellence and to winning.
Now, when things get dicey is when these Investor - Entrepreneurs don't properly distinguish in their otherwise able minds where investing and entrepreneurship do NOT intersect.
The problem reveals itself in a number of ways.
For the entrepreneur, it is a Cognitive Dissonance, a denial of the simple fact that an incredibly large percentage of their net worth and earnings power is often concentrated in a single, and very high risk asset - i.e. their own business.
For the investor, it is the dark and dangerous side of that usually, admirable human quality of Commitment and Consistency.
This is the tendency we all have to stick to decisions that we have made in the past even if and when the original evidence that underpinned those decisions has changed dramatically.
The classic example of this is basing an investment decision on the original purchase price of an asset, its sunk cost, even though the faulty logic of doing so is almost self-evident.
Yet, following this truism, because of our emotional human wiring, is always far harder to do in practice than in theory.
So, how should - let’s call them “Entrepreneur Mind” and “Investor Mind” - properly work together?
Here are three ideas:
1. For Investors, view with an extremely jaundiced eye records and claims of past performance.
Let's be clear, doing so is extremely hard.
Both because of the aforementioned “human wiring” matter, and because the brokerage and insurance industries have a massive, vested interest in manipulating and exploiting this wiring to prevent us from doing so.
To best resist this manipulation, invest like an entrepreneur - pointed toward the future and leaving the past where it rightfully belongs, in the past.
2. For Entrepreneurs, just for a few moments, step in the space of not believing one’s own “propaganda.”
This too, is hard as of what makes entrepreneurs who they are is their unshakeable and often irrational self-belief, in spite of often much evidence to the contrary.
This self-belief serves them well as leaders and as creators, but as shareholders not so much.
And as shareholders, the irrefutable principles of diversification, of long-term and global planning, and of the overriding importance of small differences in return, multiplied over time, so fundamentally apply.
3. And finally, as Investors - Entrepreneurs, to recognize good professional guidance as a success requirement, for the simple reason that our most dynamic competitors are getting it.
And if you are not, then you are wanting.
And in both investing and entrepreneurship, this wanting, this disadvantage, even if small, multiplied over time is usually the difference between failure and success.
What does this look like in practice?
Well, for one, a best-functioning team of professional advisors should include a great strategy and exit planning advisor, a great accountability coach, and a great wealth manager.
And they should all work together, especially and effectively toward that most natural and glorious and appropriate goal of all entrepreneurs and of all investors.
Which, of course, is asset building and earning power.
Built both slowly and methodically over time as an investor and in sudden, large green and creative shoots as an entrepreneur.
One of the great joys of my work is the unique opportunity it affords to meet and to learn from talented, committed, and effective executives - working hard and long on their entrepreneurial journeys.
Men and women like Mike Kovaleski and Carrie Kessel of Mahar Tool, a Michigan-based, mid-sized automotive technology distributor that is reinventing how vendor partnerships are structured and maintained in the global, high-tech, and oh-so competitive modern car business.
And as they do, they are creating both good jobs and an inspiring culture that's reflected in both the great longevity of their company (68 years young and counting!) and in the average tenure of their executive team (12+ years and increasing daily!).
Leaders like Dr. Ezat Parnia - President of Pacific Oaks - a small and fast growing Pasadena-based college that under his leadership is merging traditional offline educational values with the promise and power of online learning.
And as he does so, everyday demonstrating his fierce commitment to his students, mostly adults going back to school mid-life to earn training and degrees in early childhood education…
…who armed with their Pacific Oaks’ educations go out into the world and effect the school’s mission of seeing every child - no matter race, gender, or economic circumstance - be treated as a unique, special, and able learner.
And leaders like Good Samaritan Hospital’s CEO Andy Leeka, with his so articulate commitment to seeing his 1,400 employee strong, inner city Los Angeles Hospital become both a leader in care giving and a place that shows that even budget and regulatory-strained hospitals can be places of high staff camaraderie, great patient care, and dare we say, even a little fun, too.
What do these executives all have in common?
Well, first of all, in spite of them all leading very different organizations, with different reasons for being, competing in very different marketplaces, with very different sets of challenges and opportunities, they all think and act fundamentally the same.
Recognizing that even though they lead organizations that are on average more than 80 years old, that their fundamental business reality today is constant, unrelenting, everlasting, and fundamental change.
And that their job as leaders is to respond, pivot, profit, and win in the midst of all of it.
Second, they all "get" strategy.
Not as some academic or consultant’s exercise, but strategy as at the core of why their organizations exist and what their mandates are to lead them.
Strategies that are big, as in where do they want their organizations to be 5, 10, 20 years hence? (And how to best utilize data and Business Intelligence to get there).
And strategies that are “small,” as in grappling with what is the best CRM, the best eCommerce platform, the best project management software for their organizations.
And yes, they are all definitely contenders.
They just don't talk about reaching for the brass ring, they sacrifice every day to actually do so.
They plan their work.
And then they work their plans.
They (and everyone around them) know that it is not about them. Their glory, their rewards.
They’re in it for the mission.
Because they are blessed to be given the opportunity, and now by golly they are going to strive and strain with every fiber of their being to make the most of it.
To contenders like them, I have only one thing to say: Thank You.
For making all of our lives healthier, smarter, richer, and all in all just better.
Oh, and maybe a quick word of advice for these business and organizational heroes: Every now and again do come up for air and give yourself a pat on the back.
Because you've earned it and more.
Over the past few weeks, I have written about the amazing growth and financial progress of Business Intelligence (BI) companies like Domo, Birst, and Looker and how their rise to prominence and value signifies a shift in how we think about the best way to manage and value an enterprise.
I described this shift as "changing the world of business from one done by gut and hand to one done by statistics and evidence," and how this next generation of software companies can "finish the job" of the IT revolution and enable a level of predictability and automation to business and investment processes like never before.
There is one big problem, however.
A problem that threatens the ability of these companies to deliver on the promise of their amazing technologies…
…and along with it any meaningful ROI for their customers.
That problem is people.
You see, the vast majority of us are a combination of unable and unexcited to actually use business intelligence tools and technologies on a regular and consistent basis.
Because doing so is hard.
And harder still when one does not have a rigorous quantitative background in things like statistics, cost accounting, behavioral economics, and managerial finance.
As tough, managing by data requires a lot of “pig-headedness”- not getting distracted by the "noise in the numbers" and a deep humility that when the inevitable conflicts between and our gut and the numbers arise to consistently choose the latter.
None of this sounds like much fun. So we avoid it.
However…let's juxtapose this difficult reality against why so many very smart people and investors are so excited about BI.
Because when Business Intelligence is done right, everyone makes a LOT more money.
A good analogy is eating better and exercising more – we all know it is really good for us but doing it requires education, habits re-training, and consistent, diligent work.
And those most successful at eating great and being in awesome shape usually have coaches – personal trainers, chefs, nutritionists - to help them define goals, put action plans together, and provide ongoing measurements, accountability, and course corrections to achieve success.
And enabling Business Intelligence tools and technologies within organizations is no different.
Luckily, a whole generation of companies have arisen to help companies implement and integrate BI into their management practices and work processes, and to train, teach and coach managers how to use and profit from them.
For sure, some day using BI to drive our daily work and business decision making will become, for most of us, as simple and natural as using a word processor or a spreadsheet.
But that day is a long way off.
And between now and then, the best managers looking to get BI working in their organizations quickly and correctly will hire coaches and consultants to help them.
And the values of the firms that do this work right and truly help managers and companies unlock the huge profit potential of Business Intelligence could someday approach that of the companies that build the software empowering it all.
An endearing, but dangerous quality of entrepreneurs and small business owners is their propensity to go all-in -- not only pouring all of their lives, hearts and souls into their business, but all of their money too.
Of course, many entrepreneurs simply need every penny they have and more to fund their businesses and there just isn't any money left to invest in anything else.
But once an entrepreneur gets beyond the survival stage, they need to think about how and where money is working for them in their own business, and where it could do better.
Often times, a lot better.
The first challenge: Entrepreneurs live, breathe, and too often suffer their own businesses so much that when it comes to investing, they can’t think straight.
I encounter a lot of entrepreneurs who have this massive built-in bias toward ongoing, disproportionate investment in their own businesses and correspondingly are often just blasé, disinterested, and even, dare I say lazy when it comes to thinking about money and investments outside of their “baby.”
So they take one of two approaches. The first is the passive one -- outsourcing money and investment decisions outside of one’s business to a wealth “manager.” While there are compelling financial planning reasons to do this -- i.e. "we need to save and invest this much and earn this rate of return by this date to comfortably retire" -- the expectation for actual investment returns via this approach should be kept pretty low.
In fact, the S&P Indices Versus Active Funds Scorecard (SPIVA) shows that average "managed money" returns trail the index averages by almost the exact percentages of the fees charged for managing the money.
The second approach is more scatter shot - whereby investments in “one-off” real estate, startups, oil and gas, and collectables opportunities, among others, are presented to the entrepreneur by a varying lot of well-meaning and potentially pilfering parties.
And entrepreneurs, as they are wired fundamentally as optimists, find these opportunities naturally appealing.
So they invest – sometimes to good and lucky effect, but often disastrously so.
Is there a better way?
Can the hard-working entrepreneur have his or her money earn a good rate of return? While managing risk?
And dare we dream – adoing so in a way that is in alignment with their entrepreneurial values and leverages their entrepreneurial skill sets, experiences, and industry knowledge?
Of course there is!
An approach built on diversification and one that leverages traditional managed money vehicles like public market stocks, bonds, and mutual funds, but also offers the opportunity for above average, and with a little good fortune, potentially excellent investment returns.
It looks, quite simply, like this: Invest in what you know.
Or, in other words, a restaurateur could invest in other people’s restaurants and food service businesses.
Healthcare entrepreneurs could evaluate investment opportunities in healthcare.
Those owning distribution or light manufacturing businesses, look at other people’s distribution and light manufacturing businesses.
Now, of course there are caveats to this approach.
The first is to be cautious and conscious as to industry risk – factors such as an uncertain regulatory environment or perilously fast changing technological change that create risks beyond the control of any one or several companies in an industry.
Secondly, to undertake this form of investment, especially when owning minority positions in private companies, transactional and deal term sophistication is a must.
So if you don't understand aspects of private equity investing like valuation, capital structure, control and anti-dilution provisions, it is probably better to either avoid this form of investing, or do so through a managed or private equity fund vehicle approach.
You may be asking: Why go through all the trouble?
Well, when done right, a properly executed and diversified "angel" investment approach like this can earn a very high investment return.
Research from the Kauffman Foundation Angel Returns Study and the Nesta Angel Investing Study, compiled by Dr. Robert Wiltbank, have demonstrated that the "…average angel investor (across the U.S. and UK) produced a gross multiple of 2.5 times their investment, in a mean time of about four years."
Returns like this will not be found via traditional managed money approaches, and rarely -- especially when accounting for the huge opportunity costs of running a company -- in one’s own business.
So for those entrepreneurs with the stomach and the work ethic for it, an "Other People’s Business" investment strategy like this is one well-worth considering.
To Your Success,
P.S. To listen to a replay of my Friday Webinar, “Characteristics of SaaS Companies with Breakout Potential,”, click here.
My Post last week on the fast funding and growth success of Domo (over $450 million in capital raised at a $2 billion valuation), generated a lot of great responses - some whimsical, some skeptical, but with the most interesting being variants of:
"How can the lessons of Domo (and those of the other Tech Unicorn's profiled), be best applied to my business and investment plans?
This is such an important and in so many ways misunderstood topic that I decided to share, via live Webinar, key insights from the business models and investment strategies of Unicorns like Domo, Uber, Airbnb, Dropbox, and Slack and why some of the smartest business and investment minds in the world today consider what these companies do so important and valuable.
What Will Be Covered
On the webinar, I will reveal:
• Why the valuations for SaaS companies have grown so exponentially
• What aspects of their business models can be ported to virtually any business in any industry
• Why emulating what Tech Unicorns do and how they do it can be so high ROI for virtually any business
• Where companies with Unicorn Potential can be found in today's markets
• And much, much more!
Who Should Attend
I have designed the webinar with two main audiences in mind:
1. Entrepreneurs and Business Owners seeking transformational ideas to quickly increase the growth and value of their companies.
2. Investors interested in aggregating positions in Disruptive Technology Companies at their most opportune moments: after the highly unpredictable Startup stage, but before they become widely known and priced to market.
To preserve the intimacy of the presentation, we are limiting attendees to the first 35 registrants, so Reserve Your Seat today!
Sign up here:
I regularly engage with entrepreneurs and executives to help them determine the right long-term strategic plans and goals to pursue, toward the end of maximizing their businesses’ valuations and their likelihoods of selling their companies down the road.
This, as I have discussed before, is the highest ROI work that a business manager can do, yet most of us invest way too little time in it, and even more vexingly the results we get from the time we do spend are middling at best.
Now, in addition to just not knowing how to strategic plan (and for those interested in a quick primer, I recommend Dave Lavinsky’s excellent book Start at the End), an under-rated reason why otherwise talented businesspeople are poor strategists is because of what I would describe as Business Dissonance - the sad feeling that even if we do manage to arrive at the right plan, it won't make any difference.
Why not? Well, at least partly because for too many of us and the organizations we lead feel incapable of implementing and maintaining the big changes that are almost always required to attain the long-term plan.
Yes, to paraphrase a famous scene from The Godfather, it can often feel like every time we think we have freed ourselves from Business as Usual, we are pulled back in and nothing changes.
As a result, we sabotage our grand plans by frittering away our precious time and energy on the mundane, the petty, and on the "urgent" but not really important stuff that can so easily consume our day.
Like round and piles and endless streams of email.
Meetings with weak agendas and even weaker follow-up.
The daily "just getting through” client and customer “crises” (versus finding and fixing their root causes).
On chatter, and on frenetic activity that feels like hard work, but doesn’t progress us toward important goals.
Paradoxically, this state of affairs does point us to the strategic breakthrough: by gaining control of our day to day schedules and to dos, we will free up time and space to focus on the important projects as dictated by our strategic plan.
And how can we empower ourselves in such a glorious way?
Well, for those that can describe themselves as Knowledge Workers (almost all of us these days), here’s an extremely simple daily “hack”: For the first hour of our day, shut off the technology.
No email. No text. No tweets. No posts.
And if an hour feels too much, then start with 15 minutes.
Sound simple? Well, it is, but not easy. (Try it, and if you can keep it up for just a month write me back, and I'll send you a card for a free cup of coffee on me).
When we clear our minds and spirits like this to start our day, almost magically will our capacity grow to make steady progress toward our most important (and almost always extremely proactive) projects and goals.
And the deep peace of mind of knowing that today’s work is in sync feels really, really good, too.
This is clearly one of the great boom times in the history of Venture Capital, with more than $29 billion in fresh capital being raised by more than 250 funds over the past year. This represents a 70% jump from the comparable, previous year’s period, and more than a 225% jump from the “nadir” numbers of 2009-2010 (all stats here from the NVCA).
And VCs have seen a lot of successful exits, too (hooray!), with in 2014 more than 115 venture backed companies going public and more than 455 exits via M&A.
Probably most importantly, long term (3, 5, 10, and 20 year) VC returns continue to significantly out-perform the major public equity indices (DJIA, NASDAQ, S&P 500).
All very, very good and exciting stuff, but for the individual investor, is investing in a VC fund a good idea?
It can be, as the return examples above attest, but because of regulatory and technology changes, there are now far better ways to deploy capital into high potential, privately held companies (i.e. the VC investment sweet spot). Here’s why and how:
Market Efficiency. With now over twelve hundred active U.S. venture funds - and in general with them pursuing mostly the same deal sourcing strategies and approaches - it has become extremely difficult for VCs to consistently find and secure high potential, well priced deals.
The result has been a “regression to the mean” - with alpha performance by fund managers being driven as much by randomness and luck (as it has been with public market mutual funds for decades) as by coherent design.
Fees. The world of low and no load management fees that so transformed mutual fund investing for in the 80's and 90's is far from being on the VC radar.
In fact, as opposed going down, venture fund fees have been going in the other direction, with a number of higher profile funds upping their annual fees to 3% (along with asking for a greater share of the returns) versus the standard 2-2.5%.
These high fees obviously eat away at return, and more profoundly are in contrast to the “disintermediation spirit” so at the heart of modern investing.
Friction. Little discussed in most venture fund models are the high costs of deal sourcing, diligence, and oversight.
It is not unusual for a venture fund to sort through thousands of possible investments, deeply diligence a few hundred, prepare and submit term sheets on a few dozen, and then do zero deals.
This all costs money.
And all this doesn’t even begin to measure the management and oversight costs on the deals that are done – which at their barest minimum range from quarterly board meeting attendance to monthly, weekly, and sometimes daily calls and meetings with portfolio companies.
All this work is necessary to do VC investing right, but is also expense and friction filled.
Now, funds do work to charge some of these costs back to their portfolio companies, but usually these offsets flow to the fund’s General and not its Limited Partners.
So what to do?
Well, for those that want access to the unique returns of the asset class, but are reluctant to either a) put all of their eggs in one basket via investing in one particular startup directly and / or b) get the problems with the current VC model per the above, here are two ideas:
1. Explore peer-to-peer lending sites like Prosper.com and LendingClub, all of which offer various forms of fractionalized and securitized investing into the asset class.
And, with the SEC greenlighting equity-based crowdfunding last week, keep a careful eye on crowdfunding sites like Crowdfunder.com that will now be able to directly process smaller-denomination private company investments over the Net.
2. Do Like Warren Does. The Berkshire Hathaway Model of an “operating company owning other operating companies” can be a great gateway to the asset class, combining both diversification along with the the “pop” and fast liquidity potential that a single company investments allows. Well-run companies like this that focus on the startup space are hard to find, but when one does they are definitely worth a closer look.
In short, when it comes to this asset class, the advice here is to avoid the VCs and explore investment models – some new and some old – that provide access to it in a lower cost, higher expected return, and all-around more modern way.
To Your Success,
The confluence of Big Data and high quality, low cost software-as- service (SaaS) programs and applications for virtually every business purpose has made the path clearer than ever as to what entrepreneurs and executives must do to build real equity value in their companies.
It looks like this:
First, utilizing great tools like John Warrilow’s Sellability Score or Dave Lavinsky's Start at the End we define exactly what we seek for our key stakeholders: Customers, Employees, Partners, Vendors, and Shareholders.
For customers, it might be the efficacy / benefits of our products and services.
For Employees, it might be their opportunities for contribution, professional growth, enjoyment and income.
For Partners and Vendors, it might be what we wish our reputation to be, our brand to represent.
And for our Shareholders, it is the equity value we seek to attain, through our stock price, our sale price (to a strategic or financial acquirer), and / or the future value of our cash flows.
With these end points clearly defined, we then score ourselves - i.e. measure the size and nature of the “gaps” between where we are and where we want to be.
Now, for almost all businesses, completing this scorecard requires accessing various SaaS programs, both paid and free, to “get the data.”
We then turn to “the Micro SaaS” – the various “Cloud” programs and applications on which our business partially, mostly, or completely runs.
Programs and applications like Google Analytics, PIWIK, Clicky, and KISSmetrics for our web marketing performance, Salesforce, SugarCRM, Infusionsoft, and Marketo for lead conversion and sales teams, ECI, Sage, Intacct, and Basecamp for operations and project management, and QuickBooks, NetSuite, and Xero for accounting and finance.
Now, here is where, in the last 18 months, the game has really changed.
For the first time ever, we can now automate both the measurement of where we stand against our goals and the Gap Analysis of what we need to do improve results.
This is because the long hoped for promise of business intelligence dashboards, tools and services has reached a tipping point, as best evidenced by the massive financing attained by companies like Cloudera and Domo, and by the incredible traction that smaller company-focused business intelligence dashboard tools like Geckoboard, Leftronic, and my company's product Guiding Metrics have gained.
Combining Exit Planning, SaaS, and Dashboards allows us to automate our strategy, defining what we want to achieve and understanding the industry, market, and competitive landscape we must prevail in…
…and our tactics, the day-to-day marketing, sales, operations, and financial nitty-gritty needing to be done to get there.
And as we attain this seamless integration and automation, we in turn get closer to realizing the ultimate business dream...
…sitting back and watching the dollars and the victories roll in while enjoying and not killing ourselves in the process!
Pretty cool, eh?
Yesterday, TechCrunch posted a neat slideshow on the nine largest venture capital and private equity financing rounds of the past 24 months.
It is an extremely cool piece - profiling seven (two companies on the list had multiple rounds) of the highest flying technology companies in the world.
Let's start with Uber, both because it tops the list, with over $4.6 billion in capital raised, and because most of us can easily understand and relate to the Simplicity, Power, and Promise of its business model.
First, the Simplicity. At its core, Uber utilizes pretty basic technology to better deliver a basic service - a hired ride from point A to point B - that has been in existence since the beginning of time.
It is simple in such an eye opening way that for many folks the first time they download the app, press “Request Uber X,” and magically then a few minutes later a ride appears they are taken with a giddy excitement.
This simplicity masks the Power unleashed by Uber's technology: the initiative of the now over 162,000 and growing Uber Drivers.
There are various reasons (many controversial) why these drivers see Uber as a good and worthwhile use of their time and work energy, and whether or not it is good for our economy and society as a whole.
However, what is clearly not in doubt, is how Uber is massively profiting by harnessing and channeling the entrepreneurial, Sharing Economy Power of these tens of thousands.
That Power in turn leads to the Promise of Uber: To transform our notion of what transportation is, including whether or not it even makes economic and quality of life sense to own an automobile anymore...
…and in an even grander vision how Uber could up-end the shipping industry (and even the mail, too!).
Simplicity, Power, Promise - better and more cinematically embodied in Uber than perhaps in the other six companies profiled, but as you dig into those you will find similar themes.
Didi Dache, which just raised $700 million, is the Uber of China. The core business of SpaceX, which just raised $1 billion from Google, is as Simple and Powerful as they get: shooting rockets into space.
Xiaomi, to bring the promise of high-end “Apple-like” smartphones, to China’s 1.2 billion mobile customers.
The vision of Cloudera, which has raised over $1 billion from investors (and is contemplating an IPO in the near future) is nothing less than to give “all businesses a…360-degree view of their customers, their products, and their business.”
The obvious suggestion is to work to bake these qualities into our business models and entrepreneurial endeavors.
Perhaps less obviously, in my experience these qualities do exist in most businesses, but to find them requires a boiling away of the Complex Excess to get to the essential core.
When you do, while you might not raise $4.6 billion at a $40 billion+ valuation like Uber, my gut is that you will find the path to meaningful growth and a High Value Exit more clearly and easily defined.