How to Handle VC Rejection

"I see an opportunity here, but it wouldn't be an opportunity if everybody saw it."

Google Beats Spell-Check for Figuring Out How a Word is Spelled

I was writing an email to my friend and entrepreneurial colleague Mike Horn over at CraftCoffee trying to help him articulate his company's vision in a way that will help potential investors see the opportunity as clearly as he does.  Somewhere along the line it became clear that the word connoisseur was going to have be used.  In writing.  Except that I had no idea how to spell it.  


Not only did I not know how to spell it, I couldn't even get close enough for the spell-checker to figure out what I was talking about.  I tried out "conneseiur" and "connesiour", but MS Word (and ironically Chrome as well, which must be using the same spell-check engine), just wanted to suggest words that started with the word "connect" (connections, Connecticut, connectible, etc.).  Quickly calculating that the ratio of vowel combinations to my knowledge of French approached infinity, I realized that this was not going to get anywhere.  So, I turned to that modern oracle of all knowledge, Google.


In the address bar of my Chrome browser (not even on the Google site!), I started typing: c-o-n-n-e-s.  The first suggestion Google gave me was "connestee falls."  But the second?  You guessed it.  Google 1, spell-check 0.  And as Google Instant likes to point out, I didn't even have to press enter.

Amazon Arbitrage: Part 2

A couple of weeks ago I wrote a post called "Amazon Arbitrage" about how I found an item that was $70 pre-shipping on Amazon.com for $32 post-shipping on Amazon.co.uk.  Turns out the joke's on me.

I got an email this morning informing me that Amazon was "unable" to obtain the book, which was just published in June.

Apparently sales they must have not done a lot of sales because it is ranked #1,005,832 on Amazon.com and #137,153 on Amazon.co.uk.  By comparison, Man Walks into a Pub: A Sociable History of Beer, also by Pete Brown ranked #395,371 in the US and #11,254 in the UK.  (It is also #6 under the category of Books > Food & Drink > Drinks & Beverages > Beer, which we don't even have in the US).

Full text is below:
---------------------

Dear Customer,

Greetings from Amazon.co.uk.

We regret to inform you that we have been unable to obtain the following item:

 Pete Brown "Hops and Glory: One Man's Search for the Beer That Built the British Empire"

This item has now been cancelled from your order #203-2653883-6631506 and we can confirm that you have not been charged for it.

We are no longer able to offer this item for sale. Our supplier has informed us that this item has been discontinued and is no longer available.

Please accept our apologies for any disappointment or inconvenience caused.

If you took advantage of a promotional offer when placing this order, this cancellation may affect your order's eligibility for that offer.  If you discover this to be the case, please contact customer service so that we may investigate.  You can send an e-mail to customer service from the following URL:

http://www.amazon.co.uk/contact-us

This item may be available from an Amazon.co.uk Marketplace seller. The availability of the item will be indicated in a blue box that says "More Buying Choices" on the top right-hand side of the product's information page. The links in this box lead to lists of new, used, refurbished and collectable copies of that particular item. To buy the item click the yellow "Buy from Seller" button and fill in the requested information to complete your purchase.

To view the current status and the costs associated with your order, please visit Your Account (http://www.amazon.co.uk/your-account).

Thank you for shopping at Amazon.co.uk, we hope to see you again.

Please note: This e-mail was sent from a notification-only address that
cannot accept incoming e-mail. Please do not reply to this message.

Sincerely,

Customer Service Department
Amazon.co.uk
http://www.amazon.co.uk

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."
  

Amazon Arbitrage

It turns out the same item might have a completely different price at Amazon.com and Amazon.co.uk (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 Amazon.co.uk, which I thought was odd because it is a US-based site.  Searching for the same book on Amazon.com I found the following amazing result:  The Amazon.com 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).

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 ...