5 things you need to know about the startup scene in Silicon Valley

by Sergio Barbosa (CIO) Global Kinetic Software Engineers

After our recent trip to the Bay Area to attend TechCrunch Disrupt and connect with our customers and partners in the area, I got a fresh new perspective on the startup scene in Silicon Valley.  There are close parallels to Hollywood, except the aspiring actors and directors are nerdy programmers and co-founders chasing similar sized carrots and seeking out the chance to become overnight celebrities with their unique offering.  Instead of a blockbuster movie success, these wired, dialled-in and caffeine infused geeks from all over the world are gathering here in the valley chasing the billion dollar app that’s going to buy them the rooftop apartment in the meat packing district in NYC that they’ve always wanted.

I’ve always been a bit cynical about the startup scene having come from a background of building Global Kinetic with Martin and our core group of co-founders from the ground up with no funding.  We did it by creating value, revenues and profit from day dot and growing the business organically over the past 10 years.  On the surface, the startup scene in Silicon Valley (and as mimicked in our home town Cape Town and other copycat startup hubs around the world) seems to encourage a very different type of behaviour which is more focused on creating the illusion of success as opposed to actually creating success.  The vast majority of startups we’ve met are only a couple of months old with a great pitch deck and amazing invision prototype visuals, but little in the way of working software/hardware or paying customers.

When you peel back the layers though, you start uncovering a very different scene here in the Bay Area.  It’s a highly collaborative environment where people are not afraid to put themselves out there and are ready as anything to fail, get up and try again – determined to add value on a global scale.  In fact, this is instilled in entrepreneurs from college level where the natural progression of your average Stanford graduate is to have already built and failed at a couple of startups before leaving college – all part of the learning experience, preparing them much like their actual lectures did for the realities of running a multi-million dollar company should they be one of the lucky few that makes it through the gates.  Some get there with their first startup and end up dropping out before completing their education because they have to go run their company.  It’s not the illusion of success that we see on the surface – it’s the overwhelming belief in their eventual success that’s apparent.  And here’s why:

  1. The “Unicorn” is real and thriving

For those that don’t know, the “Unicorn” is the term used for the billion dollar startup.  The Ubers and Airbnbs of the world.  Just when you think it’s not possible for there to be another one and the bubble is over, pop, another flies out of the gates.  The “Unicorn” is so real and thriving that CVCs (Corporate Venture Capitalists) spend billions trying to get in early on the next one, providing seed, A, B and C round funding to a widespread net of potentials.  You only need to look at how automated CVC’s behaviour and processes are to realise how real the Unicorn is.  Companies like HP, IBM, Intel, Cisco, etc. setup their CVCs like HP Ventures and the like and pump millions of dollars into them annually because they know that they can’t move as fast or as nimble as a disruptive garage startup from the outskirts of San Jose and they know that at some point the startup is going to need the cash injection to take them global and survive the harsh months where their burn rate is killing their cash flow.  These CVCs see dozens of pitches a day and fund hundreds of companies a year and currently there is one Unicorn coming out of the valley every month.  Most of them unheard of because they are not in the public face like Uber or Airbnb, they are an IoT startup that gets acquired by Huwawei and pushed into the Chinese marketplace.  The Unicorn is real and the Silicon Valley carrot exists.

  1. Raising funding is a necessary evil and not a sign of success

I’ve spoken to so many startups or seen talks by founders at startup events who waltz on stage to a round of applause after the MC introduces them as the person who successfully raised $20 million dollars for their 3 startups.  I would much rather applaud the founder who is introduced as the person generated $20 million in revenues for their 3 startups.  Funding puts you in debt, and debt is not a good thing.  But what’s worse is the notion that funding is the end goal, and the reason this is a problem is because it creates the mind set in founders that their work is done and that their future ideas are worth the $20 million they have raised.  This idea is so perverse that I have to sometimes pause for a breath before continuing on the train of thought…breath… ok.  Better.  Where was I… Right, the $20 million you got in funding is NOT the money paid to you as the founder for your future ideas.  It is the debt you have incurred and need to repay with interest to the investor through execution of your ideas.  And until you have paid back every cent of that investment, that funding is not a sign of success in any way shape or form.  Most startups do not get this.  However, raising funding is a necessary evil that you have to explore because at some point your business will not stand a chance against the competition presented by big corporates and copycats once your idea is out and your cash flow will not survive the demands of global expansion for your product.  So it’s important to understand exactly what raising funds is all about and how to go about it.  The book Masters of Venture Capital by Andrew Romans is a great starting point.

  1. Startups are a commodity

A lot of founders think their ideas are unique and that they are the only ones on pitch day in front of a VC or angel investor which leads to unrealistic expectations.  Almost every engineering student in college in the Bay Area or other startup hub around the world is working on their startup, so if you do the numbers you’ll quickly realize that you are one of hundreds of startups coming out of the woodwork on a daily basis.  Startups are consumed on a daily basis by the startup machine like any other commodity out there.  Apples for example.  There are tons of farms producing varying grades of apples for export and consumption, and just like some farms produce triple A grade apples and others don’t, some universities produce triple A grade founders and startups while others, not so much.  There are bad apples in a good bunch, and sometimes there’s an apple tree just off the farm that’s not part of the herd producing the most deliciously sweet apples.  What are the things that make your startup unique and how does it stand above the rest – focus hard on those and your core values and make them central to your startup.  Once you have this place, no matter how difficult the situation and how commoditized the startup scene is, you can rely on your core values to help you rise above the rest and pull you through the most difficult situations.

  1. Your idea is only as good as your execution

Following on from point 2 above, no idea is worth $20 million – only the execution of that idea can be worth that.  Of all the startups we’ve seen over the past couple of weeks, the ones that are doing the best are the ones that have worked hard and smart, but more importantly focused on execution through collaboration.  Every co-founder will tell you how hard it is to run a startup.  The stresses of cash flow while dealing with operations and then at the same time holding up your chin and being positive in front of a new customer or potential investor.  There is no getting around the hard part or the smart part.  But the difference in the Bay Area (and something I wish would see more of in other startup hubs around the world like Cape Town where we are from) is that there is an incredibly high level of collaboration between co-founders where everyone is more than willing to assist another without any expectation of reciprocity – everyone is focused on the execution, which is why there is such a high startup success rate here.  Time spent hiding from the startup around the corner is time lost working on your own startup or collaboratively with the startup around the corner.

  1. Believe in your product

This one seems obvious, but sometimes enthusiasm or the allure of a billion dollars can be mistaken for belief in your product.  Really believing in your product means that your product is solving something that is actually personal to you or directly related to something in your life’s experience.  The Unicorns we see out there like FaceBook, Airbnb and so on were born out of their founders’ total belief in their product and that it is going to make the world a better place.  They themselves would be the number one user of their product, and by this very fact, be the best product owners a product could possibly hope to have and ultimately ensure the product’s success.  No one is a better example of this to me over the past couple of weeks than Dea Wilson of LifoGraph – watch this space!

In short, the startup scene in Silicon Valley is actually more than it's hyped up to be.  There is a real economy around it with real processes, good practice and most of all a ton of energy.  I’m hoping to bring some of this back to our burgeoning startup scene in Cape Town and create some good connections between startups in Cape Town and some of the great people we have met in the Bay Area over the past couple of weeks.

Written by Sergio Barbosa (CIO) Global Kinetic Software Engineers

Global Kinetic - Contact us via our corporate website and let us bring your application to life: https://www.globalkinetic.com

Global Kinetic

TechCrunch SF – Unveiling FutureBank

After many years of building mobile and web based banking solutions from the ground up, our core development team realized that 80% of the time they were building the same common functionality over and over again.

Most of the companies with a FinTech product strategy and with which we have worked in the past have a core banking system that they have either purchased or developed themselves to manage the internal workings of their FinTech product. But there are usually two key missing pieces. The first is a custom user experience (via mobile or other digital channels) that uniquely differentiates the product to the consumer, and the second is the ability to aggregate and orchestrate functionality between their core banking system and other complimentary systems or services.

In the case of the first missing piece, the custom user experience, this can be abstracted from the underlying Models, Controllers and APIs that provide the core functionality of the FinTech product. In the case of the second missing piece, disparate yet complimentary system and services can be abstracted by common interfaces and patterns using SOLID principles, and then orchestrated accordingly based on the business processes required.

By following the above approach and providing integration out-the-box to the most popular core banking systems on the market, the FutureBank Platform can provide our customers with a jump start to building their FinTech solution quickly.

Right now we are unveiling the Beta program to the world – an opportunity for companies looking to build a Mobile Banking/Payments App or similar FinTech Solution to sign up and join our Beta program, get access to the FutureBank Platform and work with us in perfecting it. Once we go out of Beta in March 2017, companies involved with the Beta get access to the full version at a discounted rate.

If you are in the SF Bay Area between the 12th and 14th of September 2016, please come past Startup Alley at the TechCrunch event to get a closer look at what the FutureBank platform can do for you.

WE’VE BUILT 80% OF YOUR FUNCTIONALITY SO YOU CAN FOCUS ON THE 20% THAT MAKES YOUR FINTECH PRODUCT UNIQUE

Get in touch via our corporate website at www.globalkinetic.com or find us at TechCrunch DISRUPT in Startup Alley, San Francisco.

FutureBank Fintech Accellerator

We're at FINOVATE NY & TechCrunch SF

We'll be at Finovate New York on the 8th & 9th of September, and then at TechCrunch Disrupt from the 12th - 14th September this be to unveil the new FinTech Accelerator Platform FutureBank.

The FutureBank Platform is an architectural blueprint and code framework that provides the perfect software accelerator for any new FinTech product.

If you happen to be at either event's please take the time to come chat with us, we would love to hear from you!

FINOVATE?

Finovate conferences showcase cutting-edge banking and financial technology in a unique, short-form, demo-only format - 700+ fintech companies have taken the stage in NYC, London & San Francisco.

What attendees saying…

Finovate felt like stepping into the future of finance with genuinely innovative companies challenging conventional wisdom - Aman Narain (Standard Chartered Bank)

Finovate is the premier financial technology conference for a reason. You’ll see the best examples of leading innovators from around the globe, every single time. Finovate delivers - Bradley Leimer (Head of Fintech Strategy, Santander Innovation)

Startups start here...

TechCrunch Disrupt is the world’s leading authority in debuting revolutionary startups, introducing game-changing technologies and discussing what’s top of mind for the tech industry’s key innovators. Disrupt gathers the best and brightest entrepreneurs, investors, hackers, and tech fans for on-stage interviews, the Startup Battlefield competition, a 24-hour Hackathon, Startup Alley, Hardware Alley, and After Parties.

Global Kinetic are FinTech Software Specialists that provide Accurate Project Estimations with Affordable Team Augmentation.

Get in touch via our corporate website at www.globalkinetic.com or find us at FINOVATE or in Startup Alley, New York.

FutureBank Fintech Accellerator