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Cunning Systems in 2013 - work in progress

It's Twelfth Night, the last day of Christmas - all the decorations are packed, cards taken down, tree outside and chopped in pieces. Time for observations on the new year.

Cunning Systems and its portfolio companies are working on some of the big themes in Rackspace CTO John Engates' list :

Big Data
Keen offers an analytics backend as a service to apps builders, to make it easier for them to analyse the data generated by the apps users.

Internet of Things
We've been working on a large scale systems architecture for embedded ARM based communications systems, using the cloud for back end data collection, processing, storage and presentation.

Disaster Recovery
Hybrid Logic has a cloud platform for hosting service providers which is self-healing, auto scaling, and supports point-in-time restoration for disaster recovery across clouds.

SSD comes to the cloud
Expect to see new components in the storage hierarchy, in addition to SSD, in 2013.

Software as a service
Musemantik's Musicflow is improving online music creation tools.

References

http://www.lightreading.com/cloud-computing/2013-predictions-rackspace/2...

http://keen.io/
http://www.hybrid-cluster.com/
http://www.musemantik.com/

Cunning Systems evaluates product and service ideas in computing and communications. If you would like to discuss an idea, contact us at info@cunningsystems.com

Moving to Silicon Valley - EIS consequences - calling Sir Humphrey

Continuing on the theme of how to obtain funding and expertise from Silicon Valley investors (see earlier post on comparative advantage) from outside the Valley ...

My thesis, for which I get violent agreement from, for example, US Venture Partners, is that it ought to be much easier for UK companies to raise money from Silicon Valley angels and VCs. In particular, the whole process of building up an entrepreneurial mindset both in UK startups and investors would be accelerated if more UK companies followed in the well trodden path of Israeli startups, by re-incorporating in Delaware with an HQ in California once they have passed the initial proofs of traction. If they do this, they have the opportunity to be competitive in the world market, of growing at a rate which makes them an investable business, and growing their UK development teams faster.

One of the British companies with which I'm working asked "If we re-incorporate in the US, so that our headquarters are there, and we have a UK subsidiary, what does that do to EIS tax relief for our investors?" which turns out to be one of those questions which is much easier to ask than answer.

HMRClogo

HMRC's Enterprise Investment Scheme tax relief (on both income and capital gains) rules are complex (much too complex, according to the UK Treasury Office of Tax Simplification (OTS)- calling Sir Humphrey Appleby). They are designed to help small companies raise equity finance by making it attractive for individuals to to buy their shares.

Finding an answer to the question took some digging and several exchanges with helpful lawyers. There isn't a set of standard terms, although the OTS has suggested that an electronic online clearance procedure would be useful.

It is possible to retain EIS status, and at least one company has done so. There are likely several more, but there's a general reluctance to talk about it, for fear of an ignorant backlash. (See, for example, Huddle Inc, featured in the 31 October 2012 Financial Times, which is a California corporation with a London office)

The basic requirement is that the UK company must be organized, or re-organized, so that the UK share holdings translate to their equivalent in the new US corporation, according to EIS "disposal relief:share exchanges" guidelines. The UK company (now a subsidiary of the US parent) should continue operations in the UK, from a "UK permanent establishment" as, again, defined by HMRC. HMRC will review in each case, in advance, if a company and a share issue qualifies.

References

Helpful lawyers included Dug Campbell, at MBMCommercial in Edinburgh. http://www.mbmcommercial.co.uk/

http://angelacade.me/2012/08/30/10-reasons-to-be-an-angel-investor-reaso...

http://www2.accaglobal.com/uk/members/technical/advice_support/tax/capit...
The Enterprise Investment Scheme (EIS) is administered in HM Revenue & Customs (HMRC) by the Small Company Enterprise Centre (SCEC).

Huddle moved to SF
http://www.ft.com/intl/cms/s/0/a98892c0-1838-11e2-80e9-00144feabdc0.html

Huddle’s national identity is an issue they must navigate carefully: they want to benefit from their status among London’s tech start-ups; but they also need to reassure security officials in Washington and to stay in touch with experienced investors in San Francisco. For a moment, the two fall silent. Then the squawkbox crackles: “If you cut us open, we’re British all through the middle,” Mr McLoughlin says. “But, given the type of businesses who may eventually acquire us or, given the type of customers we want to be working with, and given the money that we aim to raise that has always meant we have to have a strong US-based operation out here on the west coast.”
At the same time, Mr Mitchell says software developers are now easier to find and cheaper to hire in London than in San Francisco. “We get some of the best guys out of the banks.”

HMRC links
http://www.hmrc.gov.uk/manuals/vcmmanual/vcm32300.htm
http://www.hmrc.gov.uk/cap/s247.htm

Other recent commenters

Paul Singh at 500 startups
http://resultsjunkies.com/blog/why-immigration-policy-matters-for-startups/

"One of the big opportunities in early stage investing is to be the API to venture capital and functional expertise for companies that aren’t already in the US. In other words, let’s use our experience with things like data, design and distribution to help foreign companies climb the learning curve faster than their peers — regardless of whether they’re targeting the US or foreign markets."

Stefano Barni, moved from EU VC to SF office of Betable
http://venturebeat.com/2012/10/30/why-eu-startups-are-an-incredible-oppo...

Taking Comparative Advantage http://www.cunningsystems.com/2012/09/comparative-advantage-and-companie...

Seedcamp workshop on the Seed Enterprise Investment Scheme (SEIS) http://www.seedcamp.com/2013/01/the-seis-workshop-led-by-seedcamp-10-dow...

If you have questions or comments, email info@cunningsystems.com

Edinburgh needs an accelerator

Edinburgh is, arguably, a better place to live than Boulder, Colorado. More moderate climate, much better art galleries, better transit times to more interesting cities, just as good outdoor exercise and sports activities .. etc. Yes, I'm biased. The mountains aren't so spectacular, but the castle and the fringe festivals compensate.

streetart

Edinburgh skyline - the Castle on the distant left

To make it still better, Edinburgh needs an accelerator.

There was a short burst of activity on the Global Scot LinkedIn group a couple of weeks ago, sparked by a talk from the Turing Festival in Edinburgh. Per my comment on the GlobalScot group, Edinburgh has a lot of the ingredients required to upgrade its capabilities to support startups, so as to be competitive with Boulder.
There are two things most conspicuously missing - a leader with international standing and local knowledge like David Cohen, who can apply the TechStars principles (which TechStars make available) to Edinburgh companies; and a VC firm with a public image, long term perspective, and portfolio approach like Foundry Group. The most important ingredient is the leader, and the team which builds around that person - if need be the funds can (and will) come from outside the city.

Having an entrepreneurial team running an annual startup accelerator program, and pulling together the experienced mentors who support it, with help from world class support companies, would improve the potential outcomes for Scottish technology startups.

Ian Stevenson wrote up a longer post from the perspective of someone who is an active participant in existing Edinburgh startups. http://blog.salientpoint.co.uk/2012/09/21/opinion-is-lean-scotland-a-fir...

Brad Feld recently published 'Startup Communities: Building an Entrepreneurial Ecosystem in Your City' which is well worth reading. Chapter 4, describing the different roles necessary to establish and maintain a startup community, is particularly relevant - Edinburgh has several different groups who want to think of themselves as leaders, but are really feeders. "Leaders of a startup community must be the entrepreneurs". They must be inclusive, actively involved, put the long term health of the community ahead of their own short term interests .. with "give before you get" as a guiding principal.

I'd be happy to help establish such an accelerator - part of my motivation for mentoring for the last TechStars Cloud program and for the Alchemist accelerator was to learn from experience what does and does not work.

18 October 2012 - edited to add - http://www.skmurphy.com/blog/2012/10/16/subsidizing-startups-does-not-pr...

"There is a role for grants from both government and private agencies but there is a real risk is that the startup team loses focus on revenue from paying customers and instead invests in getting better at competing for grants." Having seen this happening in Scotland, Sean Murphy is right. Not the effect intended by the government agency - they aren't even feeding, at this point, they are inhibiting failure (or pivots) which should happen.

If you have comments, email info@cunningsystems.com.

On comparative advantage, and companies taking Silicon Valley funding

Was setting out to write a post about how startups outside Silicon Valley could model the process of moving to the Valley as an outcome of comparative advantage, and was thoroughly sidetracked into reading Paul Krugman on how non economists don't, and usually don't want to, understand what economists mean by comparative advantage.

Anyway, "take Ricardo’s original comparative-advantage example, in which unit labor requirements look like this:

-----------Cloth Wine
Britain 100 110
Portugal 90 80

Ricardo famously argued that in this case there can be mutual gains from trade. Suppose, for example, that cloth and wine exchange at a relative price of 1. Then Britain can get its wine more cheaply — 100 units of labor rather than 110 by producing cloth and trading, while Portugal can similarly get its cloth more cheaply by producing wine."

The same model can be applied to businesses - one shouldn't do for oneself what one can buy in, if the price at which one can buy it is less than the cost of doing it internally (including opportunity cost). Silicon Valley has a very clear comparative advantage in funding and developing businesses to sell into a global market. It makes sense for a business which has to compete globally (and almost every business does, once it gets beyond a certain size) to take advantage of the money and the skills associated with that money available in the Valley. This does not mean that you have to move the whole company here; it does mean that some of the people making up the company have to move, for a while. Some of the people who move will want to stay, but some of them will want to move back - when they do that, they bring with them a knowledge base and network of contacts which can be applied to another startup.

References
Kurgman describing Ricardo's original example http://krugman.blogs.nytimes.com/2010/02/21/a-globalization-puzzle/
'Ricardo's difficult idea' http://web.mit.edu/krugman/www/ricardo.htm
Comparative funding statistics http://www.nvca.org/
Flybridge Capital on 2Q2012 funding trends http://ontheflyingbridge.wordpress.com/2012/09/02/funky-times/
http://www.cunningsystems.com/2012/06/getting-started-silicon-valley

I'm currently mentoring for the Alchemist accelerator. If you'd like to discuss an idea, contact me at info@cunningsystems.com

500 Startups Demo Day 17 July 2012

Worthwhile afternoon at the Microsoft Mountain View campus

Notable startups -
Chalkable, a platform for apps for schools
ToshL, worldwide financial management (from Estonia)
Monogram - personalized shopping platform for iPad
StoryPanda - kids stories on iPad

The most interesting people in terms of velocity and traction were Tokyo Otaku Mode - 6 million people like its anime content. Will be interesting to see them monetize. There were a surprising number of startups focused on clothing and helping people to dress better.

Dave McLure was neither so manic nor so rude as he's been reported. Anyone considering emulating his schtick (he's known for what Americans call, quaintly, "f-bombs") shouldn't - it doesn't scale up well.

Links
All the companies, logos and links to press coverage http://500.co/2012/07/25/recap-500-demo-days/
Techcrunch has a short description for what each company does - the accelerators should do this for their companies http://techcrunch.com/2012/07/17/500-startups-demo-day-fourth-summer-2012/

I'm currently mentoring for the Alchemist accelerator. If you'd like to discuss an idea, contact me at info@cunningsystems.com

Mentoring TechStars Cloud

Led by Jason Seats, with lots of help from Nicole Glaros, TechStars Cloud ran from January - April in San Antonio, Texas. Here's a first time mentor viewpoint.

The point of the Cloud variation on TechStars' usual model was to focus on infrastructure - companies building the underpinings of the ecosystem which supports consumer oriented apps, and companies building functionality for enterprises. It has the usual 13 week format. There was also an intent to bring startup companies at least temporarily to San Antonio to see if any of them wanted to stay put afterwards.

streetart

On the Riverwalk, where it meets E Pecan St. Techstars had office space in the Weston Centre opposite.

The sucessful applicants were companies building a mixture of tools for creating and manipulating APIs, for data analytics, for video editing, and for understanding your cloud spending. Cloudablity was the most advanced, having taken a seed round after its launch in June 2011 - some of the other groups had just formed companies in order to take initial $118,000 investment which is offerred to each succesful applicants.

In the second week of the accelerator, there's a sort of speed dating day, where mentors go through 30 - 45 minutes session with each of the companies whom they think are interesting and which have asked to see them. At the end of the 4th week companies pick which of the mentors they want to work with - mentors are expected to pick one company and focus on it. Cloudability picked me. I'd expected a team to form among the mentors, but mostly the companies dealt with one mentor at a time - they learned to pick and choose advice. Towards the end of the 13 weeks, more of the companies I'd met contacted me, so I ended up advising four of the eleven, mostly by email, with occasional conference calls. During the run up to and on the day of the final review I was in England, so missed going back to San Antonio to attend Demo Day in person. I did review the videos of the pitches: there was a huge improvement over the three months in both content and presentation style from all the companies.
At this point (July 2012) almost every company has additional finance in place, and a much better idea about their target market and prospective customers than they had in January. I learned a lot about how a good accelerator is run (this was the first TechStars Cloud, but it benefitted hugely from the about 15 programs which preceded it).

Now I'm mentoring at Alchemist, much closer to home in Menlo Park, and planning to mentor another Cloud next January.

References
Gigaom review of demo day http://gigaom.com/cloud/apis-and-data-dominate-techstars-cloud-demo-day/
TechStars for a Day introduction http://www.cunningsystems.com/2011/11/techstars-day-ts4ad
Outcomes and statistics http://www.techstars.com/companies/stats/
Alchemist accelerator http://www.alchemistaccelerator.com/
TechStars background and future trends http://gigaom.com/2012/06/30/techstars-david-cohen-on-transparency-growt...

Cunning Systems evaluates product and service ideas in computing and communications. If you would like to discuss an idea, contact us at info@cunningsystems.com

Modelling public relations

Having been involved with assorted PR for small and large companies, here's a model I use for thinking about how and when to do what.

First, there is a lot of background noise, and if you go to the trouble of crafting a story about something you'd like strangers as well as your friends to read, then you need enough signal to stick out of the noise.

Expand this a little to a 3D surface metaphor, over which you and your audience is travelling in time. Events are hills - some of these are predictable, like trade shows and holidays, some are not, like weather events and acquisitions. Looking back, they perturb the landscape, with the size of the hill and the slope of its sides representing the volume and trend rate of the commentary about and around the event.

bigdata

image from Matlab

Each of your audiences is starting from a different place on the surface, whether existing customers, prospects, existing employees, future candidates, existing and potential investors, or politicians. Tailoring your content, the distribution of that content, and the release timing is an effort to get your story to form a noticeable hill in the path of that audience. Each of those audiences will also look back in time (will search for relevant material); including the right terms improves your visibility from some future time looking back.

While planning for a release, remember to account for internal review time - to improve the quality, to check for legal issues, to include other parties mentioned or likely to be influenced by the release.

Lastly, proof read! People won't notice correct spelling and good grammar, but they will mark you down heavily for uncorrected mistakes.

References
Getting attention for a blog post http://socialmouths.com/blog/2011/05/12/how-to-plan-and-write-a-blog-pos...
Recipe for a blog post http://diythemes.com/thesis/perfect-blog-post/
Contact lists for tech reporters http://www.feld.com/wp/archives/2012/07/tech-reporter-contact-list.html

How your data gets used
https://www.recordedfuture.com/how-people-use-recorded-future/competitiv...
https://www.recordedfuture.com/assets/Detecting-Emergent-Conflicts-throu...

Cunning Systems evaluates product and service ideas in computing and communications. If you would like to discuss an idea, contact us at info@cunningsystems.com

Getting started in Silicon Valley

Several weeks back, I talked to a friend of a friend about getting started in the Valley. He has a software development company in Northen Italy, and was able to take a couple of months to stay in San Francisco to find out what it would take for him to move his company there. Here are some of the suggestions, generalized a little.

Valley
Mountain View taken from Airship Eureka (2010)

At least a couple of months before you arrive, find one or more contacts who are themselves well connected to startups and developers already in the Valley. In this case, the mutual contact was a family friend who moved from Italy 20 years ago. Ask them to make introductions for you so that you can exchange email ahead of time and set up meetings with some of them.

Look up the list of trade shows going on in Moscone Center - you don't have to sign up, but many thousands of people do, and they hang out in bars and restaurants in that area of town, so you can get a sense for what's going on in that business. If you are developing for Apple users, for example, there's WWDC; and a few days later there's a meetup for iOS developers.

If you can get into one of the accelerator programs, you get some money, but more importantly you get access to shared resources for most of the things that are essential, time consuming to understand, and not really your focus when building a company - accountancy, legal, sometimes office space,and mutual support from peers. See below for lists of accelerators - each of them describe their schedules (most often 13 weeks, several times a year) and competitive criteria for acceptance.

Read about Lean Startups - the google group for discussion is https://groups.google.com/forum/?fromgroups#!forum/lean-startup-circle
Look for blogs from Eric Ries, Steve Blank, and Sean Murphy

Ask for a frank opinion about the quality of your English. It doesn't need to be perfect, but Americans are bad, in general, at listening to non-native speakers - the better your English is, the more effective you can be. One thing which will help is if you can write a blog; aim to post every day, even if it's only a few sentences at a time. Your audience is people like you, who wish they could spend a summer in San Francisco learning how to get a company started here.

Your blog, your Twitter presence, and your LinkedIn page are important - get them organized ahead of time, so that the people to whom your contacts are introducing you will get a positive sense that you are doing interesting stuff from which they might learn (and so whether they will take time to drink coffee and share experiences).

Twitter people - here's a selection from the people I follow, with a little bit of explanation. Look at whom they follow, too, and pick some of them (use what they post and their profiles to guide your choices). Reply to posts if you have anything constructive to say - this builds your own publicly available profile.

@Venturehacks - Angel List founder
@dorkitude founder Keen.io They just completed Techstars Cloud and raised a seed round.
@stormental co-founder @cloudability Techstars Cloud
@rodolfor founder at @Storybricks
@kotikan - mobile app development agency in Edinburgh
@500 500 Startups (Dave McClure)
@springboardnews - accelerator program in London and Cambridge, England
@techstars - @davetisch, @nglaros
@timburks - runs iOS developers meetup in the Valley
@scobleizer - high volume, interviews interesting new startups (works for Rackspace)
@bfeld - founder Techstars, VC at Foundry
@avc - Fred Wilson, VC at Union Square
@skmurphy - see Lean Startups, above
@ycombinator - accelerator
@gezbrady - supports startups for Silicon Valley Bank
@borthwick - CEO Betaworks. Very interesting business investing in media properties including bit.ly
@sgblank - Steve Blank
@martenmickos - Finn moved to Silicon Valley
@msuster - blog Both sides of the table - VC at GRP Partners - read the blog too

References
iOS developers meetup http://www.meetup.com/sviphone/
Incubator locator page http://www.t3advisors.com/launch-space/map.php
Accelerators and Incubators - my posts with lists, EU as well as US
http://www.cunningsystems.com/2011/09/effectiveness-incubators
http://www.cunningsystems.com/2011/06/incubators-accelerating-innovation...
http://www.cunningsystems.com/2011/02/y-combinator-makes-news

If you have additional suggestions, let me know at info@cunningsystems.com

Big Data - 21 companies selected by SVB

Silicon Valley Bank put together an event reviewing companies with less than $5m in revenue, in the big data and analytics space. In-Q-Tel were the sponsor; the audience included senior people from Siemens, Intuit, HP, Autonomy (an HP company), Northrop Grumman, GE, Standard Chartered Bank, IBM, Splunk, Google, NEA, Hummer Winblad, USVP and Jafco Ventures.

After the introductions, the format was 3 sets of 7 companies, presenting for 7 minutes each. After each set there was a break, at which the audience was encouraged to find the presenters to ask questions. The quality of the presentations wasn't uniform, but it was at least as good as the IBM global smartcamp event I mentored earlier in the year - which says volumes about the pre event coaching which must have been applied by Gerald Brady (SVB) and his team.

Most worth attention: NuoDB for the 'elastic' promise; Kaggle for the game approach; Full Contact for people background; Cloudant for database virtualization.

Dave Feinleib's graphic sorts topics; most of these people could actually do most of the other things, but this does reflect their current postitioning.

bigdata

Notes on the companies

Sumo Logic Log management - think syslog for everything that emits status, in private or public cloud, with reporting and analytics front end.
$15M in Series B funding in Jan 2012 Mountain View, CA

Platfora Hadoop for non specialists in large enterprises - making big data useable without Map Reduce.
$7.2m Series A Oct 2011 San Mateo, CA

Placed Location analytics anchored on lat/long positions. Reminded me of Palmap (Shanghai).
$3.4m seed round April 2012 Seattle, WA
NuoDB Grand claims for a new database architecture - scalable,geo-distributed, elastic, SQL/ACID -compliant, shared nothing, asynchronous, peer-to-peer .. this is Jim Starkey's (Datatrieve, InterBase) latest vehicle for improving relational databases.
$10m venture round, April 2012 Cambridge, MA

Metamarkets Data science as a service -trend analysis, spotting anomalies in big data volumes, at speed. Their blog gives a better idea of what they do than their CEO did. http://metamarkets.com/blog/
$15m Series B April 2012 San Francisco, CA

MemSQL Gigaom's description http://gigaom.com/cloud/ex-facebookers-launch-memsql-to-make-your-databa...
Converts SQL to C++ and re-use for subsequent queries, lock-free, in memory to get sub millisecond response times.
$5.1m seed, June 2012 San Francisco, CA

Lucid Imagination Private or public cloud search - 24x7 support for open source Apache
Lucene/Solr search, analytics, big data
$16m Venture, October 2010 Redwood City, CA

Tempo DB Techstars Cloud alumni. Customized time series database as a service for sensor data.
$750K seed May 2012 Chicago, IL

Kaggle Host competitions for data scientists - make existing data available in public to find and qualify scientist, then in private to specific scentists. Competition shows stages of improvement in application of algorithms.
$11m series A Nov 2011 San Francisco, CA

Integrate Advertizing support, ad spend optimization
$11m March 2011 Scotsdale, AZ

InsightsOne Predictive analytics. Real time multichannel user offer matching.
$4.3m venture March 2012 Santa Clara, CA

Huddle Enterprise and government content collaboration platform - big wins in UK, just launching into US.
$24m May 2012 London and San Francisco, CA

Hadapt Add RDBMS to Hadoop nodes so existing SQL tools work. Adaptive analytics platform.
$9.5m series A Oct 2011 Cambridge, MA

Full Contact Impressive, and scary if they can do what they claim. Take partial information about an individual, clean it up and correlate by collecting what they've put out on the net over time. Social profiles, too.
$1.5m series A Denver, CO

Delphix Support developers where lots of copies of the same DB get used. Database virtualization. This is a real problem, and they cite real numbers for money saved and productivity improved.
$25m series C Palo Alto, CA

DataStax Enterprise services and platform using Apache Cassandra open source database.
$11m series B San Mateo, CA

Cloudant Low latency on small low power devices, by getting big data on or close to its consumers. Has 18 data centres worldwide. Data replication and sync using NoSQL database monthly service.
$2m venture round Dec 11 Boston, MA

Bottlenose Low cost real time analytics - see what's trending - process 3000 messages/second - browser frontend.
seed investment (no numbers given) Raising round in 2012

Birst Automating supply chain for low volume high value data. Easy to use business anayltics.
$26m May 2011 series D San Francisco, CA

Apigee API technology and services, for making data available and understanding how it is used.
$14.1m Jan 2010 Palo Alto, CA

Agilone Predictive marketing intelligence. "maximize customer lifetime value at the optimal marketing spend"
Sequoia Capital invested, no numbers given. Mountain View, CA

10gen Commercial support and development for open source MongoDB. Used as an Oracle replacement, gain scability, agility, productivity for developers.
$42m series E May 2012 New York, NY and Palo Alto, CA

Several people were interested in Techstars; TempoDB just emerged from the Techstars Cloud program, which I mentored. Links below for more background - there's another blog post to come on that topic, too.

References
Investment numbers and dates from Cruchbase www.crunchbase.com
The book about the companies http://www.svb.com/pdfs/ibook/ESG_Big_Data_Event_62012_eBook.pdf
Techstars http://www.techstars.com - see Techstars Cloud, and http://globalacceleratornetwork.com/
IBM global smartcamp final http://www.cunningsystems.com/2012/02/ibm-smartcamp-global-final-mentori...
Forbes graphic - Dave Feinleib http://www.forbes.com/sites/davefeinleib/2012/06/19/the-big-data-landscape/
Another broader chart of the landscape http://mattturck.com/2012/06/29/a-chart-of-the-big-data-ecosystem/

Cunning Systems evaluates product and service ideas in computing and communications. If you would like to discuss an idea, contact us at info@cunningsystems.com

Technology for and in vehicles

Last week Silicon Valley Bank saw a lot of me - two afternoons in a row at events they sponsored.

The 'Technology on the move' event in their Tasman Drive offices was worth the time. Good reviews of the silicon systems in cars from Simon Segars, ARM; and Taner Ozcelik, NVIDIA. Their components are used not just for