A phone store smashed in London during the riots. Taken from the Guardian's article - click to read.

(* a ridiculous idea btw, if it wasn’t BBM it would be something else)

Unlike many though, my view of RIM and moreover Blackberry, is not as negative.

If RIM had the right leadership (and perhaps embraced just x1 CEO rather than x2 ?!), it could take this opportunity in turbulent times to change, evolve and grow.

The problem is that, in the same way Microsoft missed the boat with the web and lost the search market (through Bill Gates uninformed leadership at the time) the same way Nokia has (still in my view) not changed radically enough as a business to yet flourish, RIM is not making the gut-wrenchingly tough and transformational decisions it needs to, to fight in this new game, on a new playing field, which has some new rules.

Blackberry/RIM could still recover. They just need a radical strategy and of course one which works.

In short they need to focus on their strengths and get someone capable to sort out their product roadmap and new O/S.

Blackberry's heritage is in efficient, keyboard driven long battery life devices many of which are often used abroad

Why did O2 do this? Why did they stop?

Aside from it sporting an excellent name @Nero is intending his new venture to raise the game in Europe amongst the blogs and online publications covering the digital entrepreneurship sector.

My first column is a self flagellation on being too-early-to-market. Titled “Timing Is Everything” it is a brief cronical of two fairly visionary ideas, ultimately neither of which I executed on successfully.

The responsibility of course remains entirely mine for these failures. While mitigating circumstances certainly apply (for example, building forward thinking free-to-use direct-to-consumer services in Europe is almost impossible) the one who steers the ship is still responsible for it sinking in a storm.

You can read more here or if you’ve had enough of me already I highly recommend the other contributors, all of whom have made excellent launch contributions.

My first internet company turned out to be a web development company (although it was never intended that way initially, we pivoted from being a localised business portal after I failed miserably to sell enough advertising for the site).

It was comparatively early days on the web, in 1998.

A few years later after selling the business, I looked back at our client roster and realised that the top 5 most loyal clients who had been with us longest, had all experienced a major problem during the first project we executed; but because we handled the problem well they had become more loyal than clients who had never had a problem.

Good service is so hard to come by these days, that when people receive truly good, honest service, it stands out disproportionately.

There's no escape from it.

Sebastian Coe in his book The Winning Mind notes that “Human error tends to be the norm”. It seems inevitably then that you or your team will make errors and most likely on a regular basis.

View these as an opportunity. Fixing a problem well for a customer will always result in more loyalty than they originally had.

Of course not all errors can be spun easily to a positive. With a slip-up which loses a position of strength in business negotiations, or with a pilot making an error causing a fatal aeroplane crash, it would be difficult to see any sort of lining – let alone a silver one.

Thankfully in the world of day to day customer care, most errors are not life threatening. They are usually more irritating and time consuming for your customer, than anything else.

Big companies almost always deliver such appalling service that responding promptly to a problem and then over delivering with a fix (preferably including a gesture of compensation or good will) is a huge pulsing exception in the darkness of unanswered complaints, blame and denial of culpability which brands and big business routinely dish out to us, their customers.

Don’t let your company fall to this fate.

Fixing a customer problem should be approached as an attempt to garner irrational brand loyalty. In other words, use it as a step toward becoming a lovemark in the eyes of your customer.

Johan Nordstrum. Customer service visionary.

You don’t even have to believe me. Read Delivering Happiness by Tony Heish, a book of his approach to customer service at Zappos, or read my article about Johan Nordstorm – who’s chain of stores in the US proved exceptional customer service and profitability are not mutually exclusive; or my older blog post on a similar topic – why do corporates make simple mistakes?

Easy to say of course, but let’s be clear that it’s entirely understandable entrepreneurs don’t ask this question enough.

To branch out on your own to go and build the worlds ‘next big thing’ whether for consumer users or a fantastic thingy-wotsit for enterprise customers, you need to not only dream but suspend your realism-gland to actually take the risk to invest your entire life into acheiving what often feels like the impossible.

However there ARE actually things you can do to de-risk your start-up and increase the likelihood of your decisions about the nature of your service and the functionality of your shiny new thing, being right, not wrong.

Getting Others To Eat Your Dogfood (before you invest $500,000 in dog cans, entrails, label design and advertising)

I’ve learned the hard way that building the wrong thing is virtually inevitable unless you actively embrace a process against doing so. Once we got lucky and got it right, another time we worked out what we should have been building but by that time when we realised the error we’d been at it a while.

In summary, without testing ASSUMPTIONS you risk having already burned through a bunch of cash and being in a weaker position to a) get more cash and b) pivot, even if you do finally work out what is wrong with your product.

Don’t feel bad, even experienced entrepreneurs make the mistake of just accepting their own ASSUMPTIONS. Just look at Color (although at least they don’t have much chance of burning through all their cash – yet – as they’re sitting on $40m). Most start-ups -especially in Europe- don’t have that luxury.

Natural Delusion

The temptation to assume a product is not getting 100,000′s of active users is to say because “it needs X functionality”. This is almost always wrong.

It analogous to when Sales people come back and say “The problem is, if it just did X we could sell it.” In my experience it is usually the sales person selling the product in the wrong way or to the wrong people.

The simplest solution to avoid this problem is that BEFORE you start building your shiny new thing is to sit down and right out all the ASSUMPTIONS you are making about your product.

Then find the quickest, dirtiest way – ANY way – to test these ASSUMPTIONS and prove them right, or not. That means even if you do it all by hand, or fake your website automation and do it manually: in other words, whatever it takes.

Imagine building a time machine. Your assumptions are:

• People want to travel in time
• People will pay for travelling in time
• People won’t be so shit-scared they will never take the leap of faith to trust your technology

Three basic assumptions. The answer is to all three “yes”, right? well, perhaps; but until you have PROVEN it you really don’t know.

So you've worked out how to build a Time Machine, but will any one actually agree to try it?

The capital expenditure of building a time machine is high, the technology significant. Be much better to find a way to test if people really want to travel in time first.

Furthermore, what other features would people expect? 100% guarantee of not re-appearing with limbs in the wrong place? What risks and worries do users want removed before they will risk using the service? What should the price point be?

How could you test these assumptions?

Maybe set up a room at CERN, advertise in person at a suitable event where people have lots of money and ask them if they will book a trial visit to come and see the Time Machine.

Clearly, I’ve chosen an absurd example – but you get the idea.

Back On Earth

What did Dropbox do to test if it had demand for it’s product? While simple it is a big technological challenge to build something across as many platforms and as seemlessly as they have.

The answer is that investors were unconvinced of the size of the pain being experienced by users doing file transfer before Dropbox existed, despite the Founder having a list of 4000 people wanting a trial (i.e. existing services were NOT easy or slick, but was this a big enough pain that users in their 100,000′s would pay for a service like Dropbox? This was an assumption and there was no proof of an answer, no even quantitative evidence).

Not being able to build the service properly without lots of time and money, the Founder created a slick video, targetted at geeks, full of in jokes, to fake a demo of what his product did. 75,000 beta sign up requests later, he had a significantly larger weight with which to argue his ASSUMPTION was correct.

We’re No Longer A Start-Up (or we have a product!)

This also applies to to new functionality, a product or division from a larger company. Indeed, any enterprise large small funded or not which is trying to build something which involves unknowns.

With a healthy step back toward reality, one wonders if Richard Branson was testing ASSUMPTIONS when he started taking pre-orders at $125,000, years before Spaceship One even took off, to fly into the earths orbit. Would he have continued if no-one signed up and paid the money?

Unconvinced?

The Dropbox example comes straight from a new book called “Lean Start-up” which was launched last month at Techcrunch Disrupt. If you’ve not read it, I would recommend it 100%. Rarely does a book appear which could literally make the difference between your start-up succeeding or failing.

Eric Ries has done a brilliant job and although the initial blurb regarding the ‘nature’ of a start-up at first seems hypothetical, he soon gets down to examples of why proving ASSUMPTIONS is all important; and finally thanks to him, I have a far easier way to explain to first-time start-ups what they should be doing, before they launch into building a time machine.

Excerpt of his book here on Techcrunch; or better, just click below and order it now.

The Lean Startup: How Constant Innovation Creates Radically Successful Businesses

As predicted this morning I was cutting it fine for time and tried to check-in online again; a similar problem, I couldn’t check-in. An online error.

Undeterred I ran on to the Heathrow Express, through Terminal 3 up to a Virgin Atlantic check-in terminal, to arrive right on the one-hour before departure deadline.

All the terminals were out of order.

The Human Touch

Five minutes later I was speaking to a service agent who was trying to be helpful.

Realising I was hand-luggage only she said it would probably be OK and she spent five minutes trying to get through on the phone to someone. Finally getting through, before she could even explain I was hand-luggage only, she was told the flight was closed and I wasn’t allowed through.

This was strange as it was before 9:55am. This is significant because Upper Class check-in closes 40 minutes before departure although today (courteous of a client) I am travelling cattle class; the economy check-in closes 60 minutes before departure.

It was only 9:45am (50 minutes before wheels up) so the flight could not have been closed because if it were Upper Class passengers would not be able to check-in.

The helpful desk agent apologised, looking a little perplexed.

I always try hard not to take it out on staff at the coal-face. Often these days they don’t have the authority or decision making power to help you (that by the way is another business problem I discuss here.)

So, off I go to the ticket desk to get pushed on to the later flight at 2pm (which incidentally is a nightmare for me because with only five hours in New York before flying on to Dallas, my stop over and meetings are ruined).

Show Me The Money

Andrea a pleasant South American chap says the good news is that they can put me on the next flight VS045, but at a cost of £120. I protest politely but Andrea can’t do anything.

He asks his manager. Computer says no.

I ask at least if I could have my favourite seat in economy. No. I’ll need to pay for that too.

May be at least then, Virgin Atlantic will grant me as a Silver Flying Club member ( soon to be Gold) lounge access so I can have the New York meetings I will miss somewhere quiet on Skype? No.

Err, OK. Can I pay for lounge access? No.

I keep calm despite my frustration and seek out the Virgin Atlantic floor manager, who I’m told does have the power to grant lounge access.

After politely waiting for her to finish dealing with a staff issue (a quick gossip about another staff member) I start to explain, but she cuts me off mid-explanation:

“We don’t give lounge access unless you’re Upper Class?” …her intonation is as though I’m asking the location of the holy grail. She’s all out of empathy today then and it’s only 9:45am. I pity the afternoon customers.

Practicalities

By 10.05am (the flight takes off at 10.35am) I have:

• Queued to pay the extra charges to bump flights
• Complained to the delightfully unhelpful floor manager
• Gone through security
• Am sat in Chez Gerard (another brand I have a history with) and have just ordered breakfast.

The fact I’ve done all this and the gate is yet to even close irritates me further, but thankfully Chez Gerard deliver on my brand expectations this morning: A warm polite welcome, good coffee, warm perfectly crispy croissants and soothing music.

Has this every happened before?

Those who know me will know I try and pack a lot into my life. That means sometimes I’m late. On the whole it is of course my own fault if I’m late, in so far as we are all responsible for our own decisions and planning.

Similarly it is definitely a passenger’s own responsibility to check-in by the deadline set; but it is also a brands responsibility to deliver on the service which customers rely on and arguably especially your regular customers.

• I knew I would be short on time, so I tried to check in online. Twice. The web site was broken.
• Then I tried at terminal 3, within the 60 minute limit, but the kiosks were broken.
• The check-in clerk recognised the situation and asked to send me through, but was prevented by someone else.
• The flight couldn’t have been closed, I only had hand luggage and were I Upper Class I’d have sailed through.
• The ticket agent recognised the problem, but had to charge me anyway (he even left notes on my account to that affect)
• The Virgin Atlantic manager was abrupt and had a naive approach to customer relations (perhaps how she got to be a manager..!)

Good customer service is about recognising a customer’s problem and empathising. That should be true whatever level of customer the person is.  Today’s $1000 customer may be tomorrow’s $1b customer.

More importantly, monetary value is not the only consideration. Some customers affect more influence regarding your brand than others, as my post here about the new economy of influence explains.

I do not expect any brand to do the impossible.

I recognise a flight has to close at some point, no matter who wants to get on board, but when rules are adhered to via blind process (or in order to make a quick buck, like Ryan Air) rather than for logic or good reason, that pisses me off.

And I’m going to tell people. Lot’s of people.

Brands become lovemarks for me because they exercise effort, common sense and actively behave as though they genuinely care about me – even though I realise it is in order to make a profit from me.

Pret (the British chain of sandwich shops) are a superb example of this. From their always polite staff, to sending a customer £70 for payment of his “time using the Pret brand”, to letting me off £3.45 for my lunch when I realised I’d left my wallet in the office (I repaid the £3.45 the next day) they always make me feel cared about. I also feel that the employees are empowered to make their own decisions and understand what the Pret brand stands for.

In the past I’ve found Virgin Atlantic to be more pragmatic than I have today. On top of this, I must have flown 15+ times with Virgin Atlantic in the last 3 years from London to San Francisco. I have a Founders Card which gives a discount (although I’ve yet to claim it) and I’ve met Richard a couple of times.

As a brand the important thing to realise is these things make my experience today all the worse not better.

Why? Because if you are dating someone for a month and they do something unpleasant, it hardly touches the sides. You can laugh about it in the pub with friends.

If you are dating someone for 10 years and you love them, then they do a similarly unpleasant thing, you can’t laugh about it. It hurts. It goes against your expectation and trust.

Loyal customers with your brand, which may be a Lovemark to them, are no different.

It’s ALL about me.

These brand ambassadors will sing your praises, but they’ll also be the first to call you out.

• They’ll get very pissed off, very quickly.
• They feel they should be treated differently.
• They feel they should be treated with extra care.

“Should” is the key word here.

Actually ALL customers should be treated with extra care; but what matters here is how these people feel, not the reality.

Your job with your brand is to manage your customer’s perception of a situation without pouring petrol on the fire.

Preferably, you want to be the guy wielding the fire extinguisher and without spraying it in your customers face.

The psychology of loyal customers

I buy in to the “poor little Virgin Atlantic” versus nasty British Airways myth because I choose to, not because I necessarily believe it.

It feeds my potential pleasure of a brand I generally enjoy.

It adds to my personal identity to associate myself with e.g. Virgin Atlantic, instead of British Airways. Therefore:

When you as a brand behave poorly I feel you’re attacking not just me as a customer but me as your brand.

Your bad performance means subconsciously I feel like I’ve performed badly, because a little bit of your brand has become me.

What is this lovemark stuff again?

The simplest definition of when a brand becomes a lovemark to a customer is when they make irrational decisions to choose that brand over another.

I’ve often in true Lovemark tradition gone against logic when booking my flights. Virgin Altantic are usually more expensive and I had an unlucky run in the mid 2000’s where seemingly every flight I went on had no entertainment system working. Until my last flight, I recently had a run of crappy seat locations, whatever class I was in.

Despite this I stayed with Virgin Atlantic; but now I feel like our relationship is on the rocks; but hey, as they say, better to have loved and lost than never loved at all.

The moral of the story is that a Lovemark is a double edged sword, both for the company and customer.

Handle with care Mr Branson, and now I’m off to get my VS045 flight.

Some businesses have only just started to remember that their customers might actually be right, others have only just got their heads around CRM and being “online”. Others continue blindy on trying to save money by passing the leg work on to their customers and annoying us all in the process.

Entering your mobile number at a call centre in a cue, only to be asked it three more times once you get through, is just one great example.

Rude retail staff, telephone operatives and n employees who can’t speak basic English or empathise with customers are others.

The Enlightenment: 2011

The more progressive companies are waking up to the new economy of influence – better known as social media.

Klout and PeerIndex as businesses both exist for a reason. They purport to measure “influence”.

The passionate and vocal devotees (or detractors) of your brand online are fast becoming the kingpins of the next 10 years of successful brand building.

Ratings scores like Klout and Peerindex will become a new currency in a world of social networking, online endorsement, virality and brand reputation. Even some credit score companies are already experimenting these scores in to account and providing third parties this data alongside traditional scoring methods.

Brands need to wake up fast to the fact that the price of a ticket is no longer necessarily the most reliable indicator of the “spending power” of a customer.

Klout and Peerindex scores are fast becoming the standards of "reputation" online; but how do they compare and what do they really mean? It's early days...

What is the on-going endorsement worth of a customer with an influence score of 59 but who travels economy, worth over an Upper Class passenger who keeps quiet and never endorses your brand?

I don’t have the right answer, but it’s certainly the right question.

Who do you think you are?

I’ve flown with Virgin Atlantic since my first ever transatlantic flight age 22, to sunny Los Angeles. Since then I’ve been a devotee; but as this article attests, last time I flew I was very disappointed.

I’m was left wondering if my friend Milo had been with me, whether I’d have had the same experience.

That time around a train had broken down or something, but despite my arriving very late we sailed through check-in just 30 minutes before departure and were upgraded, although at least he had got there on time. I however, had not, nor was I checked in. The difference is, at the time he was working for The Telegraph.

However in my own way to my own audience – and certainly in my industry – I have some influence:

• I write for WIRED and do guest blog posts
• My Klout score is reasonable as is my PeerIndex score.
• I’ve invited friends to join Virgin Miles.
• I can identify specifically at least 25 people who I’ve directly influenced to fly VA over other airlines in the last 24 months, because Virgin Atlantic has been a lovemark of mine.

As with most things we love, we naturally endorse them and want them to prosper. They represent part of me. As I said in this post about brand relationships and lovemarks:

.. when you as a brand [a lovemark] behave poorly I feel you’re attacking not just me as a customer but me as your brand.  Your bad performance means subconsciously I feel like I’ve performed badly, because a little bit of your brand has become me.

It is true that influence scores have their problems and on these the two specific companies mentioned (here’s another bloggers overview of PeerIndex and Klout) although they are the current market leaders, the jury is still out.

The Context of Influence Matters

Who are they the influencers of? If I have 10,000 followers on twitter who are all unemployed, or worse all spambot fake accounts, how influential is that? ..the answer is of course not very.

Both services (PeerIndex top radar image, Klout bottom list) try to work out WHAT I'm influential about. Klout lists me as influential about "Germany" ... clearly there is still some work to be done!

These things are changing though. They are becoming more sophisticated. This is inevitability; they will become more accurate.

Smell the coffee anyway

Consider where we are today in reputation scores as the AM radio of the early 20th Century; rough, low fidelity, all a bit hit and miss. We’re not going to have to wait 100 years for it to improve before we get to DAB digital Stereo radio. Try 5 years.

So listen up Virgin Atlantic when next time you give me crappy service, or maybe I’ll respond to that Executive Club email from British Airways, or maybe I’ll send tweets, or write a blog post. The inherent viral nature of social media means these outbursts can have disproportionate impact.

Not significant perhaps you might think, given that I’m just one passenger and I’ve probably only taken nudging thirty transatlantic flights in my life; and they weren’t even all Upper Class?

However, you must also consider the influence of the people I influence

To fully measure influence you need not just context but to understand the TRUE reach of an influencer. That becomes both computationally challenging and inherently hard.

What is my endorsement for the next 15 year’s worth to your brand?

What is it worth to your competition?

If your company’s brand does not get its head around the new economy of influence now, you’re at best missing an opportunity and at worst inviting persistent damage to your reputation; and therefore your profits.

On the horizon are even more advanced interpretations of brand popularity which take the influence of individuals and brands, combine it with a sentiment for popularity, public opinion or value within a virtual currency and publish it for all to see. Empire Avenue is just one of these new indexes, entirely virtual in nature based upon 1000′s of peoples social networks, virtual investments and reputation.

Microsoft is using Empire Avenue to profile the popularity of it's Xbox brand in Empire Avenues Social Stock Market

Brand ambassadors are the future of your business and will disproportionality impact your bottom line – that fact is here to stay.

While everyone else was choosing easyjet-orange or shortly after Facebook blue, Purple seemed to have majesty and was little used, in 2007

At the time it seemed a bold choice. There were no other purple sites out there.

At the beginning of it’s bid for stardom, Facebook blue had just begun it’s assault. Over the years this colour has been very hard to avoid with everyone seeming to fall for the charms of this reliable and newly reborn colour – blue having been stuck for so many years saddled by it’s heritage with Microsoft.

What other technology flirts of fancy have we seen with colours?

Somehow, it just doesn't look right.

For some years Dell championed the dark grey. There there was Apple with its White iMacs and Powerbooks. Later this gave way to Silver and aluminium.

Prior to this orange had been the order of the day, with easyJet leading the way, Orange the telco in full fledged brand glory and I knew of at least three start-ups which had chosen this punchy colour.

I have seen over the last two years or so, a new love of the solid, dependable regency of Purple though. Rummble’s colour scheme –although largely dropped by the January 2011 business to business incarnation of the company – looks as recent as it could, not 5 years old.

The most recent screen shots of Windows 8 were swathed in this royal, almost religious colour.

Windows Phone 7 metro UI in purple glory

Speaking of which, my favourite cassock of my late Grandfather, a traditional – I dare say cliché looking – Church of England priest, for his Purple one. It looked fabulously opulent and offset his longish white hair.

Perhaps that’s why I’m still fond of this, until recently, entirely ignored stalwart of the main set of solid common colours. I think we’ll continue to see a lot more of it in the next couple of years.

I was astonished.

Admittedly, it is a small sample size and focused on very early-stage start-ups; but it I still find the fact baffling.

When you’re running a start-up, there is lot’s to do – I know I’ve done a few – but one key ingredient is to make yourself accessible:

• to investors (who you may need later even if not today)
• to future team members (who you want to begin enticing from day one)
• to press
• to potential partners
• and to customers or users!

Having no website at all looks even worse (and yes even if you are in “stealth mode”). Have a holding page simply giving a project name and team; or be sensible and use something like LaunchRock or a simple google form to start collecting emails of your future users.

If you don’t want anyone to know you’re doing a new start-up, then perhaps don’t enter a competition!

Stealth mode for a start-up is all very well, but don't be entirely aloof from contact, nor ignore business basics such as being easily contactable. By the way, I didn't make this poster, otherwise it would say "you're".

All these factors such as ease of contacting them, the website, the apps, contributed to our choice of the five finalists (and would no doubt contribute to the choice of a journalist to write about you or an investor to take an interest or reach out).

It simply doesn’t bode well for your attention to detail, your ability to design good product or your understanding of user psychology.

(Incidentally, the reason I needed to contact them all was I myself had made an error and neglected to add an email field to the application form…but at least this was a temporary competition!)

Even Some Launched Start-ups Don’t Have One

There was even a service (I’ll leave unnamed) I tried this week which was live and trying to garner users but which had no team page, no contact us page and not even a terms and conditions of use. This is just sloppy, lazy or naive. I’m not sure which of those is worse.

In summary then…

If you have a start-up and have no holding page or contact us form or page with email address that I can find in under 8 seconds or preferably faster, then ADD ONE RIGHT NOW TODAY!

This is certainly one of those blog posts I never, ever expected to be writing.

Incidentally, the winners of the MLOVE11 Start-up competition were Booklet Mobile; congratulations!

More Reading:

While the average London start-up’s dilemna* is should I go to Silicon Valley or stay in Silicon Roundabout? (which I touched upon last week) and takes the mind share of the European tech-elite, I don’t think the Americans give two hoots. Why would they? Silicon Valley is where it’s at, right?

What did catch their attention was Hermione Way’s post “The Problem With Silicon Valley Is Itself“ on The Next Web, which prompted a response from Robert Scoble on Google+, both worth reading by the way.

Has Silicon Valley Lost It’s Way?

Loosely, Hermione complains that The Valley no longer truly innovates and it is full of fluff. Robert says it is still the only place really changing the world and no-one else does in the same way or to the same extent.

Naturally as I’m writing a retort, I must have a different view: I think they’re both wrong; but there is an element of truth in both claims.

With a long history of game changing technologies and innovation, has Silicon Valley had it's day?

With Silicon Valley, it’s the iceberg problem. You only see the tip of what’s going on underneath. Even I have grown tired at times of the sometime obsessions (and many say poor journalism) of platforms like Techcrunch; but you have to be realistic about what they represent. They are not trying to be the BBC or a broadsheet. They are for mass market consumption by the geeks, the early adopters, the DiggNation kids and Appleheads. At this they excel.

As a tabloid Techcrunch will write what sells impressions – they are not representative of the depth of Silicon Valley.

The problem is surely that inevitably, like the general news on TV and in most tabloids, it skews to easily consumed, often banal, content. The lowest common denominator.

The masses are selfish; they don’t care about new window material technology for the Empire State Building, they care about Big Mac $1 Burgers, Foursquare checkins, saving 50% via Groupon on their next t-bone steak. They care about themselves (see: Facebook, Google+, Flickr ..they are all about your ego, about your life).

This is why Techcrunch.com doesn’t shout about the other low level technologies (or indeed publish much about things outside of the USA) and instead you get 3 posts a week for 9 months straight about a company like Foursquare. Well, good for Foursquare. Gaming location, the system and MG all in one go!

Of course, I’m simplifying the argument, but one has to, to make a salient point.

These publishers publish that stuff because people consume it. They don’t care about a new silicon chip design, even if it does save lives or save money. It’s too abstract for most people. 

The Myth Of Silicon Valley

So let’s look back for a moment. Why is Silicon Valley (and it’s venture capital ecosystem) Silicon Valley?  Actually, it has a far longer history of entrepreneurship than most other centres of technology.

Silicon Valley started growing toward it’s present day nearly 100 years ago. During the war, the government funded innovation for large military and cold-war driven contracts with radio related technology, radar and later, other electronic warfare.

This graph is NOT true. Silicon Valley grew gradually since the war, it's taken decades. Click for more information and Steve Blanks excellent -and accurate- history.

Frederick Terman from Stanford played a pivotal role in the 40′s and 50′s pushing students out of education encouraging them (instead of doing PhD’s or masters) to start-up innovative technology firms to serve the country and defend against the Nazis and then the perceived Communist threat.

The 60′s brought transistors, the 70′s microchips, then Microsoft, Apple and the other leviathons we all know today. At the end of the 70′s deregulation in the investment markets enabled Venture Capital to begin in earnest.

London, Berlin, Amsterdam nor Tel Aviv has had any of this history. A few cycles of Silicon Valley computer and internet boom later and there are:

• 100′s and 100′s of VC’s thus a huge pot of money
• A tech ecosystem which is bigger than anywhere
• There is a bubble cycle of hype driving investment and belief in the next big thing
• and a lack of understanding of the outside world (actually sometimes useful when building a company which every normal person says nobody will ever use: see Twitter).

Add to this a huge early adopter crowd which can test-bake the next crazy Twitteresque idea to see if it’s real – all 2 years in advance of the rest of the western world being ready to use it – and you have a compelling place to create some seriously game changing products and services.

These advantages are why we in Europe are behind with consumer internet, why we don’t have a Google, a Cisco and now with mobile phone software it is the valley where innovation is getting funded in way which will give the start-ups longevity to get their new services right. It’s why Facebook and Google grew in the Valley.

I feel innovation in Silicon Valley – both whether hardcore tech or social media – is alive and well. Hermione should have cause to be worried about her native land though, for the same reasons she moved to Silicon Valley rather than continue in Silicon Roundabout or move to Silicon Alle or Silicon Valley! (do keep up

European Unadventure Capital

The history and experience in the Valley, also contribute to why European Venture Capital is behind and why our ecosystem is behind. We simply don’t have it.

Had visionaries in Cambridge (and government people in charge of technical innovation) pushed harder during the first dot com boom to make Silicon Fen more than a running joke, then Cambridge England might have had a 10 years start on Silicon Roundabout.

Cambridge was and is about the right size to become a town all about tech. It remains an important centre for science and biotech, but it is no centre for internet start-ups and with the growth of Old Sreet never will be.

The rooftops of Cambridge, including Kings College Chapel. More Fen than Silicon.

I started a localized web portal in Cambridge (wanting to scale to 140 towns and cities) in 1998, but couldn’t get funding. Arguably a lack of vision from investors -rightly or wrongly- prevented access to capital. I pivoted to B2B and a web development company which I later exited.

It’s a hugely wasted opportunity; possibly contributed to by the all suffocating Cambridge University which essentially controls the city and most certainly because of a lack of available investment capital for start-ups.

There’s something going on though, as New York is hardly a small city yet seems to be catching up with it’s Boston neighbour, touting Silicon Alley.

Cities like London and New York are almost too diverse, with lots of other history and other industries, meaning “Tech” will never be elevated to the focus which San Francisco and Silicon Valley enjoys. 

Small means focused.

Where else would you be able to start Square and have tech-savvy iPad owning shop keepers and cafe owners clammer for the service with open arms? Once it’s proven, bug fixed and entrenched in Palo Alto and San Francisco, where everyone carries an iPhone, they’ll raise another 1/2 billions dollars and take over the world.

Old Street is more than a "hotspot", it's burgeoning; but without follow on finance and better skills in the VC community, start-ups are being left as start-ups.

So Silicon Valley Is The Centre Of World Innovation?

In essence I agree with Robert Scoble that the depth of innovation is SV is astounding; however he is wrong to say world changing technologies don’t come from elsewhere.

That ARM processor in nearly every mobile phone you’ve touched in the last 2 years? That’s from Cambridge, England (my home town in fact).

The computer? invented in England.

The jet engine? England (and if our government had funded it to the extent the US government funded innovation in Silicon Valley, WW2 would have been a lot shorter!) 

OK so you see where this is going… 

For me problem with the UK and Europe compared to America and Silicon Valley, is we’re not good at scaling.

Sure, the financial industry seems to do it just fine – raping and pilleging it’s way literally to the top of the global finance world; but taking good technologies and funding them, patiently nurturing them, growing them, having faith in them and their young founders, to become truly global players seems to be something in the UK and Europe we’re not very good at.

THAT is the big question.

The question is not why can’t we innovate, for we don’t lack of innovation. The question is why are we unable to scale our innovations rapidly to become the global market leader?

Back in Europe, where the history comes from… 

One problem  in London and Europe for technology innovation to scale (aside from these), is certainly finance.

This is grossly ironic, given London’s pre-eminence London is the world’s global financial capital, with New York in second place and Hong Kong in third.

The discussion of the problems with European VC’s, the lack of Googlesque companies and whether a start-up should start, or move, to The Valley, is a persistent topic in the London tech scene. The UK versus US funding debate is always threatening to popup on tech conference panels; to some extent for good reason but it also becomes boring and negative, though I entirely understand why the conversation needs to be had.

The ecosystem in London is less developed and the VC’s (with a few exceptions) are guilty of much of what Nic Halstead (and many more behind closed doors) will tell you: tech venture capital in London is run by financiers. This, is a problem; may be our biggest problem in Europe.

It perhaps underlies other knock-on effects, which is a lack of understanding of early stage capital requirements, what it really takes, to run and scale an internet business and being risk averse.

Read it and weep. I don't agree with the crazy $1 billion invested in the likes of Groupon, but you can't make butter with a toothpick. My own last start-up was expected to compete with our US counterparts of one fifth of the funding. The numbers seem pretty clear.

With little hands on experience, many European VC’s treat a start-up like an investment on the stock-market. Short termist, they undervalue Founders, don’t understand -or invest in- bold long term visions and they often under-capitalise (largely for all the reasons I’ve just listed). Facts seem to back this up (see graph above).

It is also claimed that European venture capitalists more commonly have a background in finance, while US venture capitalists tend to be scientists and ex-entrepreneurs. The implication is that the lack of scientific expertise among European VCs means they are less able to identify investments with high potential, than their counterparts in the US.

Bottazzi, Da Rin and Hellman (2004) undertook a survey of European VC and noted:

‘What may come as a surprise is that less than a third (of VC partners) actually has a science or engineering education.’

Half of all partners in their survey have some professional experience in the financial sector with ~40% having corporate sector experience. The recent European Investment Fund report by Roger Kelly, says that:

“Hege, Palomino and Schweinbacher (2009) observe that US VCs are often more specialized, and note that there is evidence that US venture capitalists are more sophisticated than their European counterparts, which contributes to the explanation for the difference in performance”

So Everything Is European VC’s Fault? Obviously not. I just personally feel it is the biggest single issue.

Entrepreneurs also have to up their game; pitches from many European founders are frankly terrible. Poorly delivered, unfocused product and ill-thought out business case. Both entrepreneur’s and employees need a more “can-do” attitude, to network better and think bigger.  I’m not saying it’s easy, it’s not. I’ve been there many times and made many mistakes myself.

Some people say local culture doesn’t always help, that it’s not fashionable in many countries to be an entrepreneur or want to make millions. I’m not so sure this is an issue – doens’t seem to phase the stockbrokers.

The size issue probably doesn’t help; tax systems, incentives and finance rules are not consistent for VC across Europe – but then again the Finance industry has managed certainly in London (to disastrous results in 2008!) so why not tech VC?

European early stage VC is laughably low compared to the US, in European VC's efforts to invest in later stage supposedly "safer" companies. All capital, little venture.

What to be done?

As an ecosystem, as a government and as a Venture Capital community, we should then now focus more on how to scale our businesses and fund the existing innovation from the many good entrepreneurs, encouraging a drive for global domination and find a way to teach European venture capitalists how to be more entrepreneurial and visionary, rather than only get more people to start a tech-business, without the proper mid and late stage finance, skills and infrastructure in place.

* Seems to be a world or argument raging about dilemna or dilemma. OED says Dilemma, but then why does the Times write dilemna? I’m sure I was taught dilemna, but the odds seem to be on the side of dilemma.

More reading on European VC’s:

• http://techcrunch.com/2011/02/14/can-you-really-build-a-great-tech-firm-outside-silicon-valley/
• Some people believe European VC is doing just fine http://thenextweb.com/eu/2011/07/27/european-venture-capital-outperforming-the-us-report-claims/