The Cost Of Living In the Valley
The cost of living and working in the Valley is obscene. Take a look at this…
A software developer might earn $99,250 in San Jose – the highest paying market in the US. But adjusted to $51,693 in real terms – #7 in the bottom 10.
I wonder how this compares to NZ?
NZ Start-ups & The Valley Of Death
Rod as an interesting post on “The Valley of Death”.
I view this principally as a mental rather and physical issue. Contextually NZ businesses sit far from the rest of the world and therefore they frame everything in terms of distance. Distance begets an attitude of scarcity -“I don’t have enough because I am a long way from everything…” … “I can’t raise capital because I am so far from it…”
Because I sit in San Jose, CA, I frame everything in terms of proximity. I am close to capital and markets. I have lots because I am close to everything. It takes me a night or day to get to New York. It takes a Kiwi a night or day to get to San Francisco. Arguably, my trip is the more exhausting of the two… really.
How do you change the mindset? First, act like you work and live in Silicon Valley. Switch to the timezone. Work the hours. Network via Skype, Twitter and other tools. Plan a week a month there. You don’t have to drink the crap coffee though.
Second, dream your enterprise as it was going to scale like a US business.
Third, if you think there is a Valley of Death it is likely you will fall into it. Imagine there is a highway instead and go ride it. This is critical. Most NZ businesses plan very conservatively in the hope of mitigating risk and failure. They do so so severely that they constrain growth and expansion, choking the company to death.
Fourth, you focus on what is closest to you. Closest to you mentally. The UK is closer mentally to NZ than the USA. So, Kiwi entrepreneurs, despite the distance, focus on the UK. Or, they focus on local customers first. I know some great NZ start-ups that did the opposite and are thriving in the US. To avoid the trap of focusing on what was closest to them they deliberately chose instead to only focus on the West Coast of the US.
And then, you need to turn-up. Some say that a great part of success is in turning-up. Most NZ businesses never break-in to the US market because they don’t turn-up.
I’m not going to make light of the many issues a Kiwi business faces in breaking into the US market. Two biggies for me are lack of capital and a scarcity of experienced talent. In the Valley we have an incredible investment ecosystem – from VCs and Angels through Venture debt. And there is a very deep bench to draw on. For other start-ups issues like Government procurement rules come into play.
These are all issues faced by – and overcome – by Israeli companies. I wish more NZ companies would look at Israeli companies as a model rather than nations like Singapore or Ireland. Go on, give me more than two superstar, NASDAQ listed companies from either…
It is amazing how quickly all the physical and market issues start to vaporize when you shift your context, aspirations, focus and frame of reference. Lets look to a new set of role models and move the mind-set.
The IPO Market
I was asked on my recent trip to New Zealand about the US IPO market. Somewhat fortuitously I received an email from America’s Growth Capital with a good summary. Here is the rub:
The U.S. IPO market thrived in the 1990s, averaging more than 500 IPOs per year over the entire decade. However, as we entered the new millennium, the once vibrant IPO market drastically shrank, not only because of the implosion of the Internet bubble, but also due to the following reasons: i) the market cap threshold of targeted investments for mutual funds increased as these funds ballooned; ii) the most active IPO underwriters either disappeared or moved up-market; and, iii) overzealous regulation and costly litigation significantly deterred both executives and private equity players.
These factors led to the dip in IPO volume that we saw from 2001 – 2003; however, the U.S. market has clearly rebounded with a strong finish in 2006. In Q406, 89 IPOs were priced- the highest quarterly total the market has seen in recent years. 228 IPOs were priced in 2006 on U.S. exchanges, compared to 202 in 2005, an overall increase of 13%. So far in 2007, 48 IPOs have priced, compared to 40 IPOs at the same time in 2006 (as of March 16). The tech IPO market saw 41 deals priced in 2006, the same number as in 2005. Tech IPO filings increased by 35% from 2005 (51) to 2006 (69). Expect substantially more tech IPOs in 2007-2008 compared to the post-bubble doldrums of 30-40 IPOs a year.
We believe that this increase can in part be attributed to an influx of private companies that sat on the sidelines during unfavorable market conditions and are now considering going public. Most are successful later-stage companies with $30-100 million in revenues. While many of these companies need capital for growth or liquidity, they may be unwilling to raise another round of private equity due to unattractive private valuations and often onerous liquidation preferences. In other cases, these companies do not yet want to sell to a strategic acquiror or have not generated a compelling offer. In early 2007, there is now an abundance of private companies that are proven with strong market penetration, established customer bases, and demonstrable growth and profitability (or near-profitability). However, these private companies do not meet the minimum IPO criteria as determined by the bulge bracket banks and traditional large fund IPO investors.
An Economist’s Courtroom Bonanza
Great profile on Kiwi David Teece. The one thing it doesn’t mention is the incredible job he did with Stephen Tindall in creating KEA.
Meet David Teece, renowned expert on lots of things and pioneer of a lucrative consulting niche that has transformed business litigation. The University of California, Berkeley, business-school professor is one of America’s busiest expert witnesses, billing corporate clients as much as $850 an hour for his insights. He has built a publicly traded 1,300-person research shop, LECG Inc., that does much of the legwork for him and other economists, so they can zoom through more assignments.
And this made me smile… “And his New Zealand accent worked nicely on the witness stand; it made him sound erudite without being pompous.”
Move over SV, here comes NZ….
It’s time we heard this said of NZ’s start-ups!
Several organizers noted that Silicon Valley’s original success as an innovation center was largely because of business and social networks developed over several decades in a community of venture capitalists and technologists.
The Net’s level playing field
Now, they said, with the Internet supplementing and replacing traditional face-to-face social networks, Silicon Valley might be losing its competitive advantage.“The epicenter was Silicon Valley, but that has created a wave of innovation that has now reached the entire world,” said Yossi Vardi, an Israeli entrepreneur and investor who financed his son’s development of ICQ, an early Internet chat program later sold to America Online.
Also, some interesting stats on Skype:
Like many participants here, Zennstrom voiced the opinion that Internet-based commerce would accelerate in its disruptive effect on traditional businesses. Skype, for example, now says that it carries 4.4 percent of all worldwide long-distance calling.
