I was recently at a conference (which I shall not name) where some tech leaders – Founders,  CEOs, VCs, Angel investors  and other stakeholders, all specialists in their respective domains – were  sharing their vision and views on what the future of tech holds. The multi-billion dollar question, or potentially trillion dollar question (I do believe that in the next decade we will see the first trillion dollar startup)

I have vouched to stop going to such conferences and not just because of the bad coffee and boring chat. 

Listening to them talk, despite their obvious intellect, vast experience and success, it struck me that the more of these conferences one goes to, the less chance of predicting the future they have. Or creating blockbuster products and services which is what most of the chat in these conferences tends to obsess over. Or in the very least no better chances. Why? Mainly for 3 reasons I would argue.

1. Everyone presenting at these events has an agenda of their own. They’re selling you something so their views are biased, by definition 
2. The more they mingle with each other the more esoteric their views become. They develop tunnel vision. 
3. If they could predict the future they certainly wouldn’t be sharing it with you. 

It’s no coincidence that some of the world’s top leaders failed to predict  the future or even see and react to fundamental shifts in their market. IBM failed to understand the importance of Software in a market they owned, paving the way for Microsoft and Bill Gates becoming the richest man on the planet. IBM’s CEO  Thomas J. Watson Jr. famously said back in 1943 “I think there is a world market for about five computers.”

Nokia, Motorola and Ericsson  which collectively owned the mobile market failed to see the rise of the smartphone, or react to it, as did Blackberry. 

The list goes on. Similarly, as innovative as todays tech companies are, tomorrows unicorns will likely not come out of the Googles or Facebooks of this world. They will most likely come out of, quite literally, nowhere. 

In fact you will struggle to find very many highly insightful or predictive quotes from top leaders anywhere which in hindsight have been proven right. And I would contest anyone supporting that they ever went to a conference that in retrospect was highly predictive of what was to come, in any field. 

Specialists, who tend to talk at such events, are specialists of today and often their views are irrelevant in tomorrows world. 

The artistic world in fact has been much more visionary, imaginative and predictive of the future than any of the ‘specialists’ opinions. Consider how relevant Star Trek is still to this day. Or ground-breaking films like the Terminator or Asimov’s novels from decades ago. 

Consider how David Bowies’ interview in 1999 to Jeremy Paxman was and still is perhaps the most visionary encapsulation of what was to come , a good two decades ago.  It was by an artist and musician, not by a tech leader. 

Art, music, film production, literature, fashion – all forms of Art – are in fact better places to look at to understand what’s to come. Why? Because Artists do one thing far better than most business people: they think fresh. They imagine. They don’t operate or act on data which is the mantra of the modern business world. By definition if you’re acting on data you’re already too late. 

This is not to say data is unimportant in business – very few businesses in today’s world can operate with any success without it. But trying to predict the future using data is like trying to paint with data. You will get something very dull at best. 

There’s  other reasons I think turning to the Art world is more useful than listening to specialists. I think Artists in general – of any form, be it fashion, music, fine art, film etc. –  are far better at understanding human’s inner desires than scientists and specialists. Why? Because for any form of art to be successful it must appeal to one’s taste. You listen to music you like, watch films you like, wear clothes you like, buy art you like without, in very many cases being able to articulate why. It’s not an act of logic or rationality, it drive by emotion and impulse. It just appeals to your taste.

The business world is rather tasteless in comparison. When was the last time you attended a board meeting when anyone addressed this – in my opinion vastly important- subject: taste. 

It only takes a quick glimpse at most business people to understand that in fact they are tasteless. When was the last time you saw a well dressed venture capitalist? 

Taste is hugely important. If only the business world was more consumed by it, so would we, literally as consumers. If you can understand peoples taste in the commercial world you are far more likely to create blockbuster products, and certainly much more than going to industry conferences hosted and attended by, mainly, people who have none. 

So, I would argue that industry leaders would do far better in spending their limited time going to art exhibitions, music festivals, the theatre, watching movies and reading science fiction rather than business books written by some Harvard MBA who shares a taste but with a blind donkey (and that’s on a good day).

Or maybe – even better- try to create some art.  Painting is and has always been my deepest passion and has contributed far more to anything I’ve ever achieved in business than anything else. For anyone who has never tried it, I highly recommend it: staring at a blank canvass before starting to paint is far more daunting as any exercise I have ever come across in my 15 years of running businesses. You need to create something from nothing. Logic, data or any analysis – tools you readily deploy in solving business problems – cannot come to your assistance. Empirical evidence is irrelevant as is ‘a priori’ knowledge or past experience. The things that most businesses entirely run on. 

In other words to create art you need to do something that unfortunately we do too little of in business: you need to IMAGINE. If only we did more of it. 

This week I completed an investment in Rebagg – a company based out of New York that buys and resells luxury handbags.

 

I see increasingly more investment opportunities and consistently I find the way that sits with me the best in terms of evaluating them is along three very simple heuristics.  I truly believe that in consumer internet today (other tech sectors like Enterprise or Bio, Cleantech etc are a different  game altogether)  you can only compete in one of three ways fundamentally. That’s it – by the process of elimination almost.

You can compete on

1. Inventory
2. Fulfilment, or
3. Customer Acquisition

Most startup founders knee-jerk reaction is to say ‘we are good at all 3’ but the reality – and the evidence out there – is that you can onloy really win in one, at least at the start,

Put simpler, you either

 

1. have a way to produce or  curate products that others don’t have access to or at least as readily as you do (Airbnb, Warby Parker, Uber and eBay at its start fell in this category)…. OR
2. you get them delivered faster or cheaper than others (Amazon being the master at this of course) or with better customer experience service  (e.g. Zappos, which is now Amazon too not surprisingly)…OR
3. you have homogenous inventory (just the same SKUs as the others in other words like Amazon), you are NO better than the rest on fulfilment (you may be using Amazon’s fulfilment in fact or another third party) BUT  you somehow are (for a window of time at least) better at customer acquisition. I would put gaming in this category as they live and die over their ability to generate powerful viral loops that become their acquisition channels, although as we’ve seen, rarely sustainable or predictable for that matter.

 

Of these the third is my least favourable or investable. People who believe they have a sustainable advantage in acquiring traffic over others are like fund managers who delusion themselves that they can bid the index in the long term. They can’t. Trading – be it in stocks or keywords – is an arbitrage play, and like any  arbitrage  play, the margin trends to zero in the long term.

 

Of course if you’re Oprah or Kim Kardashian maybe you have a scalable unique customer acquisition channel. But otherwise you’re just kidding yourself that you can buy keywords or Instagram/ Facebook likes better – consistently – than anyone else. You can’t.  One could argue that SEO is more defensible if you just happened to be one of those brands that got in early and got indexed well by Google with a stronghold that’s harder to break, but even then you run the risk of  your business being shattered one day because of a change in Googles algorithm as we’ve seen happen many a time.

 

To the second heuristic, i believe that fulfilment i.e. speedy, reliable delivery of whatever it is your buying (be it a tangible product or a service), with great customer support at your fingertips, is important. However, with e-commerce at least, its now near impossible to compete with Amazon on that front. If you’re selling a non-differentiated homogenous SKU and think you can deliver better fulfilment than Amazon you’re deluding yourself. Amazon has been investing billions in building the most sophisticated logistics distribution infrastructure in the world for over two decades. The best you can do is be on it.

Of course not all consumer internet businesses are e-commerce businesses; arguably Uber transitioned from being a prime ‘Inventory fit’   in the above to now being both an Inventory AND Fulfilment play … but only after amassing unique inventory that no one else did (at least as efficiently as them) and put it a click away from the consumer. Now, of course, it also boasts a huge distribution network that its smartly using to go into other inventory categories like food  with UberEats (although there the inventory is homogeneous.. the food you get on Uber Eats is not differentiated, it’s the same stuff you can get yourself in the high street or by calling the restaurant themselves so clearly it’s a fulfilment play)

 

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Yesterday I completed my first startup investment of the year in a company called VillageLuxe.

 

Founded in New York City by a dear friend of mine Julia Gudish Krieger, VillageLuxe operates in the sharing economy and aims to be ‘the Airbnb for high-end fashion’, as Forbes magazine put it in a recent article.  Very simply VillageLuxe allows you to rent out your closet to utilise ‘spare capacity’ much like Airbnb does with your apartment; and conversely as a renter to open you up to a whole new world of possibilities without having to fork out the full purchase price.

 

Aside of  the obvious reason of operating in the sharing economy for which I feel very passionately about having ran PeoplePerHour  for a good decade now, I invested in VillageLuxe for the following reasons:

 

1. I believe in Julia, the founder, blindly. She’s a Harvard grad who started off in Venture Capital and so she’s clearly of high intellect and has seen many businesses succeed and fail. Although she’s young and has a lot to learn, her energy, drive, passion and magnetism will definitely be assets that help her plough through inevitable roadblocks.
2. Julia has managed to attract some great people early on in building her team. Especially in a place like New York with so many startups fighting over talent, a founder’s ability to both identify and woo them in is a key ingredient of success. If shows good judge of talent to start off, but equally important, persuasion, grit, tenacity and charisma.
3. Great PR: in its relatively short existence VillageLuxe has managed to generate some impressive PR coverage and get the brand out there amongst influencers. Putting money behind organic marketing is always a safer bet than paying to generate traction – and the latter can be very dangerous as could make the founders bask in the sunlight of fake growth that never sticks. This was also our story at PeoplePerHour – PR was our key jump-starter of growth in the early days.
4. Downside limitation: even if it doesn’t become the Airbnb of high-end fashion, as a platform businesses it can be  very capital efficient (if VCs don’t push you to do stupid things) and so can reach profitability relatively easily and high Return On Capital ratios. The challenge is to resist over-expanding beyond a point of no return in pursuit of the big dream.
5. It’s a business i can help and contribute with my experience of building a successful marketplace, so that makes the investment all the more meaningful to me. What’s more i would greatly enjoy working with Julia: she’s smart but not a ‘know-it-all’; she’s thoughtful, has humility and listens; attributes which i rate higher than raw intelligence in the path to success.
6. The market cannot NOT grow: again the key question (much like a VC would ask on Day1) is how big the market for sharing one’s closet will become. Maybe it will be a huge phenomenon like Airbnb or Uber, but, lets face it: it doesn’t have to be be at that level to make a successful business.  The way i see it it’s highly unlikely that it won’t grow from where it is today: it just makes sense in every way that matters to the consumer: price, diversity, ease of use. And that will only increase as more people get online and get more web savvy which again cannot NOT happen over time.

 

Last but not least – maybe i can rent some stuff myself and become a little more fashionable 🙂

 

Julia – wishing you every success, I know you’ll do great and look forward to the journey ahead!

 

We’ve all heard this phrase before: ‘life is a marathon not a race’. Yet how many of us put it in practice?

 

Ironically we’ve been nurtured to worship and admire  endurance. From the preachings of Jesus Christ who endured so much in his life for the good of Mankind, culminating in  enduring the weight of the very cross he was crucified on; to persecuted mythical heroes we grew up in awe of, from Hercules to Tarzan, to more modern characters like Rocky Balboa who beat the odds by never giving up. We revere not their success but their endurance… we envy not the result but the courage they show  in  ‘going the distance’ as the soundtrack of Rocky – by that very name and not coincidentally – reminds us, climaxing our emotions seeing a guy refusing to give up despite the beating he was taking, enduring till the end even if he lost. Or did he? As the expression goes ‘he may have lost the battle but won the war’.

 

Tenacity, grit, persistence are the things that make one endure through tough situations. Time and time again we see those being more instrumental to the long term success in any given situation that the mighty powers of whatever one deploys in the short term: talent, wit, intelligence… I call those ‘situational masteries’. You can master a situation with traits like charm… the ability to outwit someone, talk the talk; you may even hit some home runs with situational mastery. People do after all become overnight hits- sometimes. They do in casinos too! But that’s neither a strategy for success not a safe haven for ones’ hopes or ambitions. It’s dependent as much on luck as on anything else; or in there being just the right mix and fit between the ‘situation’ and the tricks possessed to master it in this notion of ‘situational mastery’.

 

Building endurance is, on the other hand, a strategy. It’s a sustainable, dependable and more predictable – or a more backable – route to success. I’d much rather train for a marathon than the 100m sprint (although admittedly I have done neither). By the nature of having a longer path from the start point to the end you have just much better odds of finding a way to win; to muster the energy and stamina needed to keep going. I’d much rather bet on a team committed to building something – anything – for the longer term. Be it a business, climbing a mountain, building a family.

 

Warren Buffet put it perfectly when asked how is it possible that he beat every other investor with the least sophisticated of strategies, purely by sticking to fundamentals. He said:  “because no one wants to get rich slowly”

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I started PeoplePerHour.com in a basement in London back in 2007. I had no idea – even in our wildest dreams – that a few years later we would be serving 1.5 million people across 150 countries and be the source of inspiration, financial freedom and independence for so many people the world over. To date we’ve matched close to a million freelance projects with Small & Medium sized companies all over the world, across disciplines such as design, software development, web building, but also translations, data entry and administrative services. Freelancers on our platform, or ‘GiGsters’ as some call them today, have earned over 100 Million Euros to date from us, and growing

 

It’s been a journey blessed by good fortune, a roller-coaster of emotion, a tonne of mistakes from which we learnt from, a lot of laughter, some tears, intense pain at times and great fun at others; all mixed in with a good pinch of faith and luck. Somehow, nine years on, we are still here!

Least of all we never expected to have – by 2016 – the vast majority of our team based out of Athens, Greece. Without that admittedly the company could not have survived. So how did we end up in that situation?

 

It all started in 2010. Just after we raised our Series A funding round and the first amount from Venture Capitalists (Index Venture) to a tune of c.a. 8m Euros, we needed to expand rapidly. Which in our line of business means hiring more engineers to develop and improve the PeoplePerHour platform. UK at the time was deep in recession, as was Europe, and the startup culture hadn’t yet caught up to the levels it is today. We simply struggled to convince risk-averse people to leave secure jobs to come work for a startup of 4-5 people in a basement.

 

One cold yet sunny Saturday morning in early December, just after we closed the funding round, I was having my usual Sumatran roast coffee pot walking around my flat pondering how to buck this trend when I got on the phone to a good old friend of mine, Spyros in Athens. Spyros at the time was running a small web shop in Athens and coincidentally was also my first outside investor in my previous company (which pivoted into PPH in 2007). Within minutes he told me he could find me 10 -15 engineers by March. Incredulous as I may have been back then, he delivered on the promise.

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Unfortunately, entrepreneurs get bad advice all the time. There are many misperceptions around success and the journey of building a company, such as ‘entrepreneurs take big bold risks’ (they, in fact, take very calculated risks) or ‘failure is good’ (there’s nothing good about failure, but sure you can learn something from any experience). I can’t address all of them here but the one I’d like to focus on is ‘never give up’ (we’ve all heard it before).

True, in theory, if you never give up, you technically can’t fail. But you can end up spending a lifetime pursuing the wrong dream or being blinded from the stark reality of what it is you are doing.

 

Entrepreneurs – or worse yet, people giving advice to entrepreneurs, like investors – often like to present themselves as heroes or villains. The ‘macho’ daring people who had the guts to do what others couldn’t. Hence, they like to keep hammering this ‘we never give up’ mantra while drinking their  own cool-aid. It boosts their ego.

 

 

The reality is that knowing when to quit is super important and quitting sometimes just makes absolute sense. ‘Quit while you’re still ahead’ is much better advice, in my opinion. And here’s why: everyone is capable of having bad ideas. Even the best entrepreneurs, like Richard Branson, did and still do. Virgin Cola was not a success, so he shut it down as one should. Would it be smarter to spend the rest of his life and valuable dollars trying to beat Coca-Cola just so that he could save his own ego?

Equally, even the best ideas may simply be attempted at the wrong time, or with the wrong group of people. There are so many ingredients that are needed to make a start-up work that no one (however smart) can predict or be in control of them all.

So the question then is when does one throw in the towel? For me, the acid test is these two questions:

1. Do your micro-fundamentals stack up?
2. Are the macro-fundamentals there?

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In a previous post of mine I write about Why Culture Matters. This was back in 2011. My company PeoplePerHour was in a totally different stage back then, and so was I. As we’ve progressed and grown up I’ve reflected back on this post to compare the then and now.

In short, the more we grow, the more we mature, the more I’m convinced of the main thesis of that post: that if you get culture right, almost nothing else matters.

You may ask: really? That sounds too simplistic and bold. What about people? What about the product ? What about the market, processes, etc etc. What about all the other stuff business schools and books rant about?

First, lets not forget that culture cannot exist without people. Culture is the fabric that brings people together to do great things. So of course you cannot have a culture without people. And for culture to work you need like-minded people who are simply ‘on the same page’. Bonded by chemistry more than by hierarchy, roles and definitions.

Similarly, without a product you can’t have people either. So yes, product is the starting point of any business. You build a product, you amass a team, and then its about growth and scaling. THAT’s when culture becomes the key ingredient.

Why? Because it renders a whole host of things that are just impossible or too painful, time consuming to get right, almost obsolete. Like rules and processes. Like lists of do’s and dont’s. As a young business you will not have time to compose a thorough ‘how to’ manual for everyone to follow, and even if you did you wouldn’t (and shouldn’t) have the time to train everyone on them, and even if you did you would not be attracting or retaining the right people in the first place! Smart people operate much better in a climate where they know the overarching goal, they see the destination, but they’re given freedom as to how to get there.

The role of the leader

Defining the role of a great CEO or leader has and will remain a subject of much debate. The more I mature as a CEO I see my key responsibilities narrow down and crystallise to these 3 and these 3 alone.

1. To hire the smartest people I can for each role
2. To provide a clear vision and very clear & tangible goals (vision and gaols are different)
3. To set the right culture for them to work together to get there.

If you do those 3 things right you almost don’t have to do anything else. Or in the very least you will have more leeway for all the other things you’ll get wrong. It’s very refreshing. You will find (as I did) transcending from managing to leading. From doing too many things yourself to just setting scene and the actors for them to get done without you. A great CEO as they say should make him/herself redundant just a little more every singe day. That’s a sign that you are doing those things listed above.

Often confused: vision is not the same as goals. Some CEOs think that a bold, magnetic vision is enough. Its enough only to get peoples appetite going. Its not enough to feed it. It’s enough to inspire people but inspiration is not enough. They need goals & targets that take you collectively closer to that vision. Vision is how you imagine the future to be and how you and your company are changing it. Many entrepreneurs make the mistake of thinking that everyone can see what they can — they cannot. And thats a good thing! A world full of visionaries would mean nothing gets done. Its your job as an entrepreneur to translate how that vision manifests itself into reality by setting milestones along the way.

So in short, if you do that, and hire the smartest people you can who are like minded, culture will take care of everything else.

What is culture?

Culture itself can be a vague idea. For me culture comes down to practical things like: what you as a leader expect of people; when should they ask and when should they get on with things; what sort of ‘reasons’ for things not happening do you tolerate… Think about they way you are with your friends, spouse, or kids if you have any… If a kid misbehaves and you tolerate it that sets the tone for future action. If a friend is always late and you tolerate it, they will carry on being late. If you answer every little question that comes your way, you can be sure that more will come.

Culture therefor is not this abstract idea that lives up in the either. Its the collective behaviour of your team and it’s defined 100% by the tone the leader sets.

I will illustrate by reflecting on our culture at PeoplePerHour so its not just a vague concept.

1. Brutal Honesty: I tell my team: I do not tolerate anything BUT brutal honesty. I cant stand ‘wishy-washiness’ and beating about the bush. I can smell BS from a mile and it makes me want to puke. So we have a very direct and outspoken culture, without fluff and waffle. Everyone in my company knows that waffle and BS doesn’t fly with me. It’s not for everyone. But for those who do fit in it amplifies results and cuts back on time wasting. And no doubt it stems from intolerance of anything other than brutal honesty
2. Numbers, Numbers, Numbers: Similarly we have a culture around strong numeracy and measurement. We are all quite a numerical lot, and everything we do must be measured. I don’t tolerate people’s request for something unless its benefit can be quantified. I am allergic to pie in the sky kind of thinking thats not rooted in some form of ROI measurement. Hence that’s part of our culture. And again that’s probably my engineering background and obsession with knowing exactly what I get out of something I put in.
3. Ownership & Accountability: We have a culture of accountability and ‘can-do’ attitude. Again. The tone is set by my lack of tolerance for‘reasons why something isn’t done’. I’m astonished how common this is in other companies. They foster a culture of ‘effort matters’. It doesn’t! Life does not reward you for effort: not in sport, not in the arts and not in business. You dont make it to the Olympics juts because you tried! You make it because you achieved a good enough result. Anyone who’s worked with me will know that when they come to me with a laundry list of why something didn’t happen (even though they tried hard) they well get shot down. Brutally and openly . Often humiliatingly. Is it right? I don’t really care. It’s irrelevant. Its how I do things and it sets the tone and expectation for the whole team. Come to me with results, and why things DID happen or WILL happen (at worst). I hire smart people and so I expect more than excuses from them. Otherwise i may as well hire gibbons and pay less.
4. Less is more: We have a culture succinctness, snappiness getting to the point. I joke about the ‘3 lines rule’ : that if an email doesn’t get to the point within the first 3 lines i stop reading. It may be said half jokingly but its largely true. The result: people get to the point or get ignored. That avoids time wasting on long convoluted emails, memos, talks, presentation that have little substance in them
5. Openness: everyone can and is encouraged to voice their ideas or concerns about something. Often this results in long team email trails, chat groups, and lengthy debate but, again, as people know that we also have a no BS, no fluff culture almost always these debates are for good cause and lead to something. It may be a new practice, a product feature, a new / team event, a new process… Its shows that people care more than just getting their own job done. They care about the overall outcome
6. Humour: we tolerate and encourage people to laugh, say silly things and have fun while working. It wasn’t always like this, in the early days I think the company and team were too highly strung and intense. We weren’t having fun. Why ? Because I was too highly strung and intense. I probably still am compared to most people but compared to myself back then im now a Budhist monk on coolaid! Why ? Because the worst part is gone, the company is out of the red and whilst there are still many challenges a huge weight has been lifted off my chest knowing that come what may, unless we REALLY screw up, we will stay in business. And also because I’ve simply grown up! Again: the tone is set by you! If you are stressed, everyone else is stressd. If you crack a joke, and have fun others will too.

The list can go on and on. There is no definitive limit to what defines culture. It simply is the way you behave, its the way you do things, Its the things you do and you don’t do. If you have a tightly defined culture the litmus test is to ask yourself: would this (whatever ‘this’ may be) fly in the company? If the answer is a definitive ‘yes’ or ‘no’ then you have a tight culture. If it’s a ‘hmm not sure’ then you don’t.

Alas, with the right overarching vision and goals, with the right people culture is all that’s needed.

“If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea”. — Antoine de Saint-Exupery

 

There is no question that tech valuations are frothy (to say the least) at the moment. People however try to argue that ‘this time it’s different’, amongst other reasons a commonly cited one being that tech companies today deliver ‘real value’, have real revenues, scale etc etc.

 

Firstly : there’s never been a bubble in history during which a certain few were not convinced that ‘this time it’s different’. Unfortunately for the rest of the people those ‘certain few’ are often the influencers and not surprisingly the ones with the biggest vested interest in profiting from the inflated valuations that they so help drive. In the subprime mortgage bubble it was the same: a certain few convinced themselves that ‘this time it’s different’, fundamentals don’t matter, and that people could be handed mortgages way above their affordability , no matter if they couldn’t repay them, because ‘this time it’s different’.

 

It’s easy to cook up why this time is different. It’s harder to de-clutter the noise and figure out why the fundamentals still remain the same (as they always do).

 

Whilst I don’t disagree for one second that todays tech companies do actually deliver real value (after all I am a tech entrepreneur myself and I see that both in my products – PeoplePerHour.com & SuperTasker.com and the ones I use so avidly), whilst I don’t disagree that the way we live and do business is rapidly changing and being disrupted by tech, I think the ‘Valuation vs. Value’ argument is intrinsically flawed for a few reasons

 

1. Value is not enough

 

Its not enough to just deliver value. You need to do it in a way that’s sustainable in the longer term and builds on fundamentals. You can shoot for the moon overnight and fall to ashes just as fast if you’re building a business without fundamentals. Many examples come to mind, from Fab.com, Colour, Joost to more recent from our space – HomeJoy – who filed for bankruptcy a few months ago after raising ca. $100m. All of these were once amongst Silicon Valleys darlings, had multi billion valuations and some achieved hundreds of millions in revenues. Yet that wasn’t enough.

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