Metrics for Startups – Speedinvest Insights

When we started Speedinvest we had one ambition that we are trying to fulfill every day: be as entrepreneurial as an investor as possible. This is easier said then done, because the day to day business is truly different than that of the average entrepreneur. We have looked at over 200 companies in the past 6 months, made over 100 personal meetings and invested in less than a hand full of companies, meaning that we are more driven by our calendars and email inboxes, than by product development. What is the “product” of a successful investment fund anyways? We think that it is the value and the specific services we can offer to the companies we invest in. That is what we need to work on, because after all the startups are our clients.

Thus being entrepreneurial means not only to understand the trials and tribuluations of a startup, but also to provide meaningful help to portfolio companies and others in our region along the way. That is why last Friday we hosted our first Speedinvest insights, a get together planned to be hosted regularly, focusing on a different topic (like “Performance & Metrics” this time) where startups and experts would exchange their views and experiences in a friendly surrounding, helping everyone to get better.

We were exited how well it went, here are some impressions.

I am looking forward to future events in this series that is definitely going to be an important part of our “product” in the future.

The Internet is still a Series of Tubes

… or How Ageing US Lawmakers get it Wrong Again with SOPA.

Those of you who aren’t familiar with the ‘Stop Online Piracy Act’ (SOPA) now facing the US Congress, or the earlier ‘Protect IP Act’ (PIPA), and haven’t noticed the flurry of urgent discussion following the Wikipedia Blackout or the many online protests and petitions in the last week, please take the following steps:

  1. Locate your computer’s C: drive in Windows
  2. Right-click on the drive icon, then click on the ‘Format…’ option in the drop-down menu
  3. Follow the steps, and ignore any warnings
  4. Sell your computer on eBay
  5. (Macbook users – simply set your machine on fire because this is about to destroy its resale value)

For those of you who have been paying attention, please read on (and those who have actually read the text of the SOPA bill and can summarize the heinous section 105 – IMMUNITY FOR TAKING VOLUNTARY ACTION AGAINST SITES THAT ENDANGER PUBLIC HEALTH with a short essay on the broadly poisonous implications of subsection ‘a’ can claim a cash prize from Oliver Holle)

I wanted to highlight pertinent discussions on the Web that reveal the implications of the bill, and its many dangers, and also to add a few points of my own that reveal two things that haven’t been widely discussed: 1) bad actors involved in the bill’s genesis, and the irrelevance of its ‘bi-partisan’ support; 2) the misrepresentation of the dangers of two factors driving the bill’s creation – illegal online pharmaceutical sales, and the online sale of illegal military equipment.

There has already been quite a lot of explanation of the bills’ dangers. Trevor Timm, at the Electronic Frontier Foundation, does a great job of summarizing some of the bill’s more harmful provisions and likely consequences. The National Venture Capital Association already strongly oppose the bill (as of the writing of this post, their Web site was still black); SpeedInvest also oppose SOPA (our Web site remains unchanged because of our unwavering, primary commitment to our limited partners; we have real work to do, etc.). Even many Hollywood artists, ostensibly one of the groups the bill is designed to protect, have offered a cautiously worded opposition statement.

Everything seems stacked against this “poorly thought out” law. Could the necessity of opposing SOPA be any clearer? Well, yes.

The bill’s title explains its purpose ‘To promote prosperity, creativity, entrepreneurship, and innovation by combating the theft of U.S. property, and for other purposes.’ Those other purposes are the elimination of online trafficking in counterfeit drugs, and the illegal, online sale of military items. It appears that the bill was written in such a way as to assure support from patriots and pharmaceutical manufacturers, distributors and resellers. The bill counters piracy, terrorism, and drug trafficking all at once. Who would oppose it?

One statistic used in discussion of the bill is that the global market for counterfeit pharmaceuticals was 75 billion USD in 2010. This statistic, which is quoted widely, comes exclusively from the ‘non-partisan’, ‘non-profit’ research institute – The Center for Medicine in the Public Interest. ‘The Center’ is funded by pharmaceutical companies, and ‘was originally a project of the Pacific Research Institute, an older corporate front established in conjunction with Philip Morris to fabricate academic support for the tobacco industry.‘ The real statistic is this – USA Today estimates that in any reasonably regulated pharmaceutical market, the percentage of counterfeit drugs hovers at about 1%. Actual law enforcement statistics bring that number much lower – there were 433 seizures in the US of counterfeit pharmaceuticals in 2010, with a stunning street value of 5.6 million USD.

The fear that stolen or misappropriated military gear might end up on eBay or clandestine auction sites, and fall into the hands of terrorists, adds another strong impetus to the bill. But the US Deputy Undersecretary for Defense, Alan Estevez, doesn’t seem to agree, arguing in 2008 US military internal equipment rules do the job quite well. The Army’s own criminal investigation department (DCIS) ran a sting operation in 2004 ‘Operation High Bidder‘, at a time when illicit trade in military body armour was supposed to be rife due to supply shortages in Iraq. The outcome appears to have been the uncovering of 150 online sellers of body armour (although the report doesn’t indicate how many were subject to criminal prosecution). In 2004 eBay had approximately 3.4 million sellers. And much of this body armour was purchased by families of US soliders in Iraq, hoping to supplement the inadequate provisions of their sons and husbands. One conclusion of the DCIS initiative was to instigate a joint program of keyword filtering with eBay, which seemed to do a good job. Almost too good. In 2008 eBay caught 4,000 suspected body armour purveyors, but only removed 1,000 listings. 75% of the alerts were false positive. For matters of scale, eBay carried over 13 million listings in 2008.

The inclusion of ‘anti-terrorism’ and anti-counterfeit-drug measures in the bill is pure distraction, and addresses problems that are hardly relevant on a national scale, and not even recognised as urgent issues by the DCIS and law enforcement agencies. What really motivates this bill are the media and publishing corporations who provide large financial backing to Howard Berman and John Conyers, two of the bill’s Democratic authors, and the two congressmen who provide the ‘bi-partisanship’ that would normally signal broad political acceptance. You would expect support from Lamar Smith, Republican, whose largest backers include TV/Movie/Music industry and healthcare industry professionals; and from Bob Goodlatte, who has been a crusader in enforcement and expansion of online copyright legislation, and is chair of anti-piracy and both bi-partisan and republican internet caucases.

Howard Berman is the congressional representative from Los Angeles districts, and has often been called the ‘representative from Hollywood‘. His political career is underwritten by media and entertainment companies. John Conyers has courted controversy by opposing public access to publicly funded research at the behest of large publishing companies (who profit massively from such research, sold back to the very institutions who provide the data for free, at the expense of the US taxpayer). Large publishing houses are among his strongest financial backers. I enjoin the reader to track the money trails (and the falling approval ratings) here –

If there weren’t already enough reasons to oppose SOPA, here are two more: it addresses problems that are hardly of an international or national scale, and shouldn’t require fundamental changes to the Web to address; and its ‘poorly thought out’ provisions, rather than being a bi-partisan and honest effort by US lawmakers, are simply products of a small group of congressman acting as mouthpieces for the publishing and entertainment industries.

Update January 23, 2012 – As of last Wednesday Rep. Lamar Smith has announced the postponement of SOPA consideration in the US Congress, and hinted at broad changes to the bill. This is likely the death of the bill in its current form, and reason to celebrate!

Can we stop talking about European clone startups now?

My fiancee, who is a violinist, and takes no interest in my work with startups, except to express the opinion that people who work in business (and particularly finance and hi-tech) are overpaid, and probably dishonest, came up with a second observation recently:

Fiancee: ‘I hear most European tech startups are just copycats of successful US companies.’

Me: ‘What?! Wait! Where did you hear this?’

Fiancee: ‘Mike Butcher wrote about it in TechCrunch.’

Me: ‘How do you know Mike Butcher? Why are you reading TechCrunch?’

Fiancee: ‘It’s great! It keeps me from thinking about Mozart all day, and has tons of good gossip. Did you know that Mike made Oliver Samwer cry?’

Me: ‘No. And you’re not allowed to read TechCrunch anymore!’

There followed a long argument, but I’ll summarize my winning position: ‘Who cares? Can we stop talking about this now?’

The fact that Europe has copycat or clone startups should be irrelevant. The real issue fueling this whole conversation is that people don’t like being made fun of. A natural reaction is to turn the ‘copycat’ accusation into a term of pride that you are not one (see, ‘The Pirate Summit’), to deny the accusation, or, in rare cases, to walk out of an interview in tears (or perhaps there was just a misunderstanding. These are all emotional reactions that don’t address the substance of the accusation.

Let me put it to you this way: who today complains about Japan’s copycat auto industry? No one. That is because Japan learned from the models of others, as everyone must do, and became an economic powerhouse in its own right. And anyone who dares repeat the old canard that the Japanese, as a whole, make good copycats, but are unable to innovate (…because of their stifling education system, their cultural homogeneity, their bland diet, blah, blah, blah…) needs to take a hard look at the recent 30-years’ history of consumer electronics, or Japanese world-leading innovation in robotics today. Any remaining doubters can spend some time investigating the glorious Kajimoto Lab!

Bill Gates himself spent his early teen years pulling printed source code out of rubbish bins so that he could copy other people and become a better programmer himself. A period of ‘copycatting’ characterizes almost any individual or collective route to success.

The recent Euro troubles pose a far greater, long-term threat to the EU tech ecosystem than any reliance on copycatting. The fundamentals remain strong for creating a European nexus of innovation, and a technical and economic engine to rival Silicon Valley: Things happen fast. Ten years from now, this entire little flurry of name-calling will be forgotten, Europe will likely have a couple of mega-successes under its belt, and the tears will have long since dried on Oliver Samwer’s cold, German cheeks.

This post also appeared on Techcrunch.