Monday, December 28, 2009

What Michael Porter Has to Say About the VC Model

I'm not aware of Michael Porter having actually ever written anything about the criteria for a successful VC investment, but as I was reading the part of Competitive Advantage of Nations where Porter recaps his theory of how firms create competitive advantage in the general sense, I was struck by how applicable his words were to many issues in the VC and startup ecosystems:
  • On what innovation actually is: "Firms create competitive advantage by perceiving or discovering new and better ways to compete in an industry and bringing them to market, which is ultimately an act of innovation. ... [Innovation] often involves ideas that are not "new" but have never been vigorously pursued. ... Innovations shift competitive advantage when rivals either fail to perceive the new ways of competing or are unwilling or unable to respond. ... Many innovations do not involve complicated technology [but rather have been overlooked or ignored by larger firms because of their own internal barriers to using them]."
  • On why startups and VC-backed companies are able to beat large, established, and deep-pocketed incumbents in competitive industries: "It is hard for firms steeped in an old technological paradigm to perceive the significance of a new one.  It is often even harder for them to respond to it.


    To sustain its position, a firm may have to destroy old advantages to create new, higher-order ones. ... The apparent paradox involved in nullifying old advantages often deters firms from upgrading. ... Supplanting or superseding old advantages to create new ones is not considered until the old advantages are long gone. ... The behavior required to sustain advantage, then, is in many respects an unnatural act for established firms."
  • On sources of innovation: "Sometimes [innovation] results from sheer investment in market research or R&D.  It is striking, though, how often innovators are those firms that are simply looking in the right place, unencumbered by or unconcerned with conventional wisdom. ... Often, innovators are 'outsiders,' in some way, to the existing industry." 
  • On the commitment need to successfully commercialize innovation: "With few exceptions, innovation is the result of unusual effort. ... The strategy is the personal crusade of an individual or group."
  • On the role of the local environment (e.g. Silicon Valley, Israel) in creating startups: "The national environment plays an important role in ... [supporting] the emergence of 'outsiders' from within the nation"
  • On what it takes to sustain competitive advantage beyond an initial innovation: "The sustainability of competitive advantage depends on three conditions.  The first is the particular source of the advantage [based in cost, which Porter considers unsustainable, or higher-order, more sustainable sources such as product differentiation, brand reputation, and customer relationships]. ... The second ... is the number of distinct sources of advantages a firm possesses. ... The third ... is constant improvement and upgrading. ... Sustaining advantage requires change."

Wednesday, December 23, 2009

In Belated Memoriam

After meeting a guy who founded the Israeli frisbee organization, I went to the website of the Brown ultimate team so I could send him the link. There I found the happiest picture of a friend - who died almost exactly three years ago. Seeing him in such a life-loving pose really caught me emotionally unprepared.

Although three years passed between when I last saw Mike and when he had the aneurysm that ultimately took his life, and three more years since then, I was instantly transported back to that first moment during freshman orientation when we first met on the frisbee field.  I met a lot of people during that week, most of whom I probably never saw again, but Mike was clearly special.  No matter how intense the course load of his five-year dual-degree program or the competition on the field, I always remember him with a huge grin on his face, unlike some of the other type-A personalities at Brown.  

During that first orientation ultimate frisbee game, I remember there being some sort of absurd argument over who would get to play since the event was grossly oversubscribed and we overly eager freshman were already hoping to win a place on Brown's championship team by impressing the upperclassman who were running the event.  Mike, calm as usual, decided to leave the event to the mob and go take advantage of everything else freshman orientation had to offer.  Realizing that he was right I decided to join him, which made that moment one of the few indelible memory of precisely when a friendship began.

Three years later Mike and I took History and Theory of International Relations together, which was and remains my favorite Brown course.  Mike was one of the few IR majors with a double major in engineering, and we used to talk about the applications of engineering thought paradigms to questions of international affairs.  Although we took our own separate paths afterwards, I will never forget Mike for his social generosity and intellectual courage.

In Memoriam, Michael Franz, 1979-2007

TwitterFeed, the API, and the Perils of Poor Documentation

I have been trying to use TwitterFeed to post to my Facebook and Twitter statuses, setting my URL shortener to, which I like because of the analytics it provides.  However due to my own short attention span, I didn't bother to read how the third-party API works and fed it my password instead of the API key (below), thinking all the while how weird it was that TwitterFeed would store my password and display it in cleartext on the screen (at least they gave me a "hide this" option).

When I saw that my posts continued using TinyURL, I disabled the TwitterFeed service and did some research, where I found out that your API Key is not the same as your password.  As one of the more technically- and detailed-oriented people I know, I should have realized this, so shame on me for that.  However shame on TwitterFeed for not taking the two hours to create an inline explanation of what an API key is (or the two days to create robust inline linking to all of the URL shortener services API key pages so that the user could get their key without ever leaving the TwitterFeed site).  If I was this close to dropping their service with my top Computer Science program degree and career spent in IT, imagine how many ordinary users who encounter this puzzle must simply decide the service is not worth the effort.  Even worse, a simple search on their support forum shows that many others have complained about the same problem and even gotten replies from TwitterFeed employees, so what are they waiting for to fix the problem?

(the TwitterFeed URL shortener settings)

Tuesday, December 22, 2009

Always Stay Recent

One of the recognized characteristics of a successful networker is that they consistently make occasional low-touch contact with their network, in the form of a holiday card, a personal life update, an interesting article to an affinity-targeted subset of their network, etc.  I had two interesting observations about this during recent conversations with my classmates who are still looking for jobs:

  1. Electronic and social media are tremendous levers (in the sense of force multipliers) to facilitate this.  Twitter, Facebook status updates, LinkedIn profile updates, even "old-fashioned" email have the potential to take minimal, quick messages or actions and bring them to our entire network.
  2. A lot of people pooh-pooh the efforts that go into these little touch points, saying that holiday card emails are cheesy, no one cares about my personal update, etc.  However the reality is that while these tactics may not make anyone suddenly send you their business or even think any differently of you, they do make them think of you more.  In fact this effect is so well-researched and documented that is has a name - the recency effect.  Therefore I've decided I call these little low-touch moments "staying recent."
To paraphrase the liquor ad then that exhorted would-be partiers to "Always Stay Interesting," if you need a network for anything from job hunting to deal sourcing, Always Stay Recent.

Chrome vs Firefox, w/ Surprising Results

Chrome claims to be the better memory manager, and from the feedback I got to my last post about Firefox's poor hygiene this is substantiated by others.  However I wanted to do my own, [un-]scientific test after installing Chrome on my work laptop today.

I started with the following 14 Firefox tabs in two windows:

Astute readers may note that I'm still reading some of the same articles that I was yesterday :-)

I then transfered all of the tabs in the first Firefox window to Chrome, so that I had five Firefox tabs in one window, nine Chrome tabs in one window, and the situation looked like this:

I had to re-sort the processes by name since there were so many chrome processes to keep track of.

Surprisingly memory usage went up.  If you add the chrome processes together (and for some reason there are 12 of them for nine tabs) they come to 282MB - more than Firefox had with 14 tabs.

When I moved the remaining Firefox tabs to a new window of Chrome, I got this:

What was previously 280MB in 14 Firefox processes was now 374MB in Chrome, or a 1/3 increase.

Firefox 1, Chrome 0.

The Marketing Value of the Laptop Fingerprint Reader

I love that my laptop has a fingerprint reader.  It doesn't make my computer any more secure (there is still the option to use a password, and I have to keep it something that I can remember because I use it for other enterprise-wide systems like email), nor does it save me time (the password login option loads before the fingerprint option), or even help me remember additional passwords (the current software only supports login to Windows; it doesn't not allow login to websites or third-party applications).  But it is cool, and swiping my finger makes me feel a lot more high-tech than entering a password.  Heck, even just having the fingerprint reader there is cool.  Even if I never use it it's already bumped up my perception of the laptop a notch.  Which I suspect is real reason laptop makers include fingerprint readers in the first place.

Oh Firefox, Why Can't You Take Out the Garbage?

I am very disappointed in Firefox's memory management.  It's not that Firefox is big and bloated; it actually loads new windows and tabs much fast than Internet Explorer.  However it does a terrible job at garbage collection, which is computer speak for freeing up the memory used by a program or window after it closes.*

I'm a pretty big power user of web browsers and general PC productivity tools (that's right, I did just web browsers a productivity tool).  At any given moment I might have a dozen or more browser tabs open at once, for web applications and sites for communicating, researching, cross-referencing, making plans, etc. 

At the moment my two Firefox windows have 19 tabs:

Therefore I'm not entirely surprised that Firefox is taking up almost half a GB:

or that my general memory utilization looks like this:

I also realize that I'm using a bunch of web applications like Gmail, Google Calendar, Google Reader, Scribd, and of course Blogger, which are probably big memory hogs as compared to static pages.  So, you would think that once I start closing all of these tabs that memory usage would drop dramatically, right?

Wrong.  I've closed everything but Blogger, but my memory usage is still through the roof:


Seriously?  I close 18 of 19 tabs and Firefox is still taking up more than 300MB?  I love you with your stability and plug-ins and all, but why can't you be neater like your little brother Chrome?  I'm far enough removed from my programming days that I won't go so far as to say that you have to treat every web page as a separate application, but surely you can do better than this.

* As opposed to waste removal, which is something else entirely.
** I realize that this is not a very precise definition of garbage collection, but it is good enough for present purposes.

Sunday, December 20, 2009

Amazon Arbitrage

It turns out the same item might have a completely different price at and (or presumably any one of Amazon's other five country sites).  I'm not talking about a few dollar or percentage points either: I recently purchased Hops and Glory: One Man's Search for the Beer That Built the British Empire, as a chanukah present for one of my beer-loving friends.  The page that suggested it provided a link to, which I thought was odd because it is a US-based site.  Searching for the same book on I found the following amazing result:  The price was more than twice as expensive, even after shipping was factored in.  See pictures below (note that the UK price includes shipping and gift-wrapping:

In this global era, when accessing international catalogs (websites) requires only the conscious effort to do so, it makes you wonder what else you could save money on by ordering from abroad (and whether there isn't a business idea here).

Friday, December 18, 2009

We've Already Created an Israeli Nokia

A couple of years ago Daniel Cohen at Gemini wrote a great piece in VentureBeat called "The quest to create an Israeli Nokia" in which he argued that the black-eye to Israel's high tech scene was that "there are no examples of great Israeli break out companies – no Israeli equivalent of Google, Microsoft or Nokia."  He went on to give a very insightful commentary into the reasons behind this, all of which are based on what I would call "micro" factors - impatience of investors, impatience of entrepreneurs, a think-small mentality, and lack of $1bn experience - which could be overcome by the right people.

In doing some research for a piece that I am planning on writing about what I believe are the structural reasons that Israel has not created a Nokia or a Microsoft, I discovered something very interesting: we have already created a Nokia.  Teva Pharceuticals, despite having sales of around 20% of Nokia, actually has a slightly higher  market cap as of the time of this writing.  Nokia has a slightly higher EV, but even being close is an accomplishment.

Sure, you could say that Teva is not high-tech in the sense of IT, but life sciences/biotech is a pretty big VC sector, and pretty high-tech in its own way.  You could also say that Teva is "Old" (as Danny puts it in his piece), tracing its history all the way back to 1901, but let's not forget that Nokia was founded in 1865!

I am still planning on writing my post about the structural challenges to Israeli entrepreneurs, but first I've got to brush up on my Michael Porter ...

Wednesday, December 2, 2009

The iPhone and the Dark Side of Korea's Mobile Leadership

Much has been made of second-place Korean mobile carrier KT picking up the iPhone, as the world waits to see whether the smartphone prodigy can cut it in a famously competitive wireless market.  However the really interesting question is not whether Koreans will take to the iPhone, but what they will do with it.  Korea's dark technology secret is that for most Koreans this will be their first time on the mobile internet.

The world knows South Korea, rightly, as leaders in wireless and internet technology.  South Korea was the first country to have mobile 3G, mobile TV, and pretty much everything else mobile, and is first in the world in broadband rankings.  But the country remains woefully behind in mobile content, due to shockingly high walled gardens and byzantine data plans.

In a sort of quid-pro-quo for the massive capital investments the carriers made to build the world's first 3G data networks, the South Korean government and public have not pressed for an open mobile ecosystem as they have in the West.  The leading South Korean mobile operators - KT and SK Telecom - have complete control over Korean mobile content, and almost everything has to go through the carrier deck.

As a result, only 1% of Korean cell phone users have smartphones according to Korean paper the Joon Ang Daily, compared to the US where smartphones made up of 31% of new phones in Q3.  These are not old phones either - half of all Koreans replace their phones every two years.

Korean phones may have super high-end features, but they are still feature phones.  For the uninitiated, feature phones are basically everything that is not a smartphone, which is to say everything without its own operating system and the ability to install third-party applications like a computer.  Feature phones tend to have limited web browsing abilities.   They have lots of cool features - or what could be called "apps" - but these features are pre-installed by the operator and can not be expanded or modified.

Thus we find that in 2009 the South Korean mobile internet is one of the most backward and underdeveloped in the world, despite their world-leading infrastructure and handsets.  Korean carriers have been deathly afraid of a mobile internet that they could not control.  In 2008, when LG Telecom offered OZ, its unrestricted mobile internet service, this was considered a revolution in the South Korean market, while SK Telecom first announced unlimited data service plans in April (2009!!!).

The true impact of the iPhone on the South Korean market will be to introduce the real mobile internet to South Koreans, much like the iPhone did in the US (where mobile internet was available for years before the iPhone but never caught on).  As in the US, the ripple effect on competitors has come quickly.  While market leader SK Telecom declined to pick up the iPhone, it made a preemptive strike at KT by opening up its own app store, T-Store (I don't speak Korean so I hope this is the right link ;-).  Perhaps because of the harsh criticism the T-Store received, SKT has just announced plans to introduce the Motorola Droid and HTC phones to continue the fight.

The clear winner in all this is the Korean consumer, who will have access to unlimited mobile applications for the first time.  Based on what the Koreans have already come up with for mobile phones and broadband Internet, I can't wait to see what they come up with once they put the two together.