A group from We Are the Future, based in Scotland, came to visit us in Los Altos earlier in the summer. They asked 'what's it like to live in the Valley' ?
Answering that question requires pointing out some of the side effects of the stunning commercial success in the Valley - to buy a house, you are competing with people who have had successful exits from startups, to the extent that it's unlikely that you can fund the deposit for a house unless you have already done that.
Mountain View taken from Airship Eureka (2010)
Wealthfront went through a detailed analysis of a likely budget pointing out the requirement for equity just for living in a normal 3 bedroom house - this discussion isn't about buying a mansion in Palo Alto or Los Altos Hills. "If you were to join a mid sized company with momentum, it’s not out of the question you could receive a 0.1% stake that could be worth at least $1 million pre-tax to you if the company goes public. Joining a company that achieves great success will also put you into position to later earn a much larger equity position at a hot startup that could earn you well more than that.
Over 20 years you should have at least five shots at a big outcome. Managed well, one or more of your equity stakes should be able to address the shortfall required to retire comfortably. If you live in Silicon Valley, you have to play the equity game. Not doing so will leave you with a hole too deep to dig out."
When I moved to the Valley I was able to rent a 1 bedroom flat in Palo Alto on the salary a well funded startup was able to pay me. Since then startup salaries haven't gone up much, on average, but rents have, and availability of decent rental property is much tighter.
San Jose had an average asking rent of $2,066 during this year's January-March quarter. Oakland had an average rental rate of $2,187. San Francisco average - $3,057
What can work is renting a bigger property and sharing it with with house mates. Keen moved to San Francisco, rented a house for what was then the whole company, which they used as an office as well as their living space.
If you as CEO are considering moving an existing company to the US to accelerate your growth and obtain Valley VC investors, the founder of Waze (since acquired by Google) has some useful hints.
We walk regularly around Los Altos at the weekends. Usually for 3 or 4 miles, at a leisurely pace, so we are out for around and hour and a half. About three years ago, we started counting cars, to compare the frequency of Honda Fits with Ford Focuses. Teslas started to show up, so they were counted too. For comparison, Nissan Leafs were added. At this point, we've been doing this enough that anecdote starts to approach data. Yesterday we saw 6 Teslas, 3 Fits, 1 Leaf and 1 Focus. It has become routine to see more Teslas than Fits.
The new price for a Tesla Model S is approximately $65,000, with delivery in September. Honda Fit prices range between $14,500 and $17,500. Conclusions about the socio-economic profiles of Los Altos drivers are left to the reader. Having seen my first BMW i3 last week, it will be interesting to see whether they become as common as Teslas.
The Oatmeal has a particularly good explanation of what a Tesla is and why people like them.
The headline number is $16b, for WhatsApp being acquired by Facebook.
What it does
"WhatsApp Messenger is a cross-platform mobile messaging app which allows you to exchange messages without having to pay for SMS.
WhatsApp Messenger is available for iPhone, BlackBerry, Android and Nokia and yes, those phones can all message each other!
Because WhatsApp Messenger uses the same internet data plan that you use for email and web browsing, there is no cost to message and stay in touch with your friends."
Sequoia Capital invested $8m in WhatsApp (founded 2009) in April 2011.
Dan Primack, Fortune, says the total investment was $60m, and that Sequoia stand to make around $3.4b on the deal.
Infrastructure : 450m active users. 32 engineers " a reliable, low-latency service that processes 50 billion messages every day across seven platforms using Erlang" Lots more detail collected from a Rick Reed talk in the High Scaleability blog post.
"What's going on in the Valley ?" used to be a fairly regular question. Now that there are many high volume sources of "news" it doesn't get asked so often. As part of my ongoing attempt to filter the meaningful from the merely faddish, the plan for this year's blogging will be to collect pointers to useful indicators.
Three categories, each of which has systematic effects on the others
- technology trends
- investment and money trends
- actual physical goods and services trends
Today the big event was that it rained. This is the first time that there has been enough rain that it actually wets the ground under the big coast oaks in our garden since November. California is having drought - what http://www.weatherwest.com/ describes as the Ridiculously Resilient Ridge.
Angel List (which match makes between angel investors, potential investments they might make in startup companies, and jobs at startups) launched Syndicates at the end of September. There were a couple of weeks in October where the investment community in the Valley talked about nothing else.
Syndicates make it much easier for an individual investor to gather a coterie of like minded investors who want to follow his lead, and for that individual to earn 10-20% of the profit on the fund that he generates as 'carry'.
There have been a respectable number of syndicates established since - it's too early to tell what the outcomes are likely to be - angel investing is a long game, since the average time to exit is 7 years or so.
Tim Ferris and Jason Calcanis were the launch candidates for syndicates, raising about $300K each in the first week. Think of it as professional grade Kickstarter, for accredited investors.
Adding reference to Hunter Walk's post - he'd like to see syndicates to fund: international deals; bundling expertise; alternative liquidity outcomes. In other words, using Angel List to organize the mechanics of putting a fund together, increasing the leverage an individual investor can have.
from Dan Primack's newsletter...
** I've been in the Bay Area for less than 24 hours, and already I've had four different conversations with VCs about AngelList. In short, it's a combination of shock and awe.
Now comes word that Foundry Group has become the first traditional VC firm to launch an AngelList syndicate. It's $2.5 million in total ($50k into 50 companies), with Foundry's cornerstone commitment coming out of its general fund.
This will be seed deals, but I do have to wonder if AngelList syndicates ultimately are going to be used for the types of Series A deals that firms like Foundry focus on. And, if so, AngelList could be disruptive to much more than just the historical angel group and the more recent spate of micro-VC funds. I think that's why so many VCs seem nervous.
I asked the Foundry guys a bit about this, and here was partner Jason Mendelson's reply:
"I think that it's possible they go into Series A fundings. I think the verdict is still "out" on how much help" syndicates will be to entrepreneurs versus VCs. I think most VCs, despite their marketing efforts, don't help out entrepreneurs very much, so for these firms I do think it will disrupt the market. For VCs that have real reputations for helping entrepreneurs, I think there will be much less change.
As for fund structure, technically LPs could do better with a structure like this is all goes well. AngelList is not only no fee / no carry to the syndicate leader, but gives back carry giving our investors a potential larger return. It's all very early. We'll see what happens, but we definitely wanted to be involved here."
As a Global Scot, I get occasional requests from Scottish Enterprise to help with their mission to help grow companies in Scotland. As part of a 'learning journey' this week there was a Connect event, where several of us worked with the Scottish visitors. it was held in DLA Piper's SF offices, which happen to have an excellent view of the construction project for the new Transbay Transit Center.
Managing Customers was the content request to me. The time limit was 5 minutes, so I didn't talk about even half of the material.
Two big areas of necessary focus are Lean Startup (think small data around validating experiments, moving quickly to improve the offer to prospects based on the measured data); and Big Data, as applied to analyzing customer sentiment, to retail trends, to genetic assay and to anything else where there is a large volume of data and for which the business may be able to identify patterns.
My earlier post 'Moving to Silicon Valley' has more useful background.
Last Friday was Demo Day for the first batch of companies to go through TechStars London.
As a previous mentor for TechStars, located in California, having UK investments in other small companies, I volunteered to mentor for the London batch. This led to useful interaction with OP3NVoice, who aced the demo - they took lessons from Keen.io, who graduated from TechStars Cloud in 2012.
Editing (September 2014) - op3nvoice changed their name to clarify.io , and moved to Austin, TX.
IBM arranged a nicely balanced afternoon and early evening event for the 'demo day' for the US finalists in their Smartcamp competition. This is a worldwide event, held in many locations over a year, for small companies interested in partnering with IBM - it's one way in which IBM gets visibility into the universe of new technologies and ideas which would otherwise be beneath the radar for their business groups.
Coriell Life Sciences was judged the best of the batch; they had much the best blend of technology and business case for how the genomics data processing ecosystem they are building is going to make money. " .. healthcare providers, patients and payors can take advantage of the available sequencing technology while carving out and interpreting only that data needed for immediate use and securely storing the data in the GeneVault for future interpretation."
The Computer History Museum is a fine venue for this kind of event - the auditorium upstairs had plenty of space for the investors and invited members of the public attending in the afternoon; after the museum closed the downstairs foyer makes a fine space for drinks, hors d'oeuvres and conversation.
Brenda Magid from IBM (who had put together the judging panel) and I may have been the only two people attending who had also been at the previously blogged event, EIE13 in Edinburgh.
Daima Energy Solutions
Global Surface Intelligence
Swift TG Energy (Scotland)