Does silicon valley style work in your place?

1. Does Silicon Valley Style Work in Your Place? ~ Seek a right style ~ Chikafuji, Ryu fromBayArea.com Beta version

2. This slide shows my thoughts on how to launch and foster high-value start-ups outside the United States. Chikafuji, Ryu(Taka Kondo) April, 2012

3. SILICON VALLEY Part I

4. The most signiﬁcant ability for business is empathy, the ability to understand and share the feelings of the target customers.

5. Empathy is the source of both encouragements and inspiraJons which make your team innovaJve.

6. Empathy Inspira2on Encouragement Imagina:on Mo:va:on Crea:vity Passion InnovaJon

7. Empathy works as a compass, map and sails. A start-up team without it can’t voyage to the new world.

8. There are two types of acquisiJon for a start-up team to acquire empathy,

9. A.  Be ardent fans of your products / service, and have “the right discipline to think through whether a lot of other people are going to want it(*)”. (*) Steve Jobs, CNN Money, Aug/03/2008 Apple iPod’s adver2sement

10. B.  Build a start-up team with seasoned professionals in your business area.

11. Social media start-ups, like Facebook, TwiPer, etc., took type A approach.

12. If we plot the entry points of these start-ups on the graph below, then Needs/Market <unknown> Technical Challenge <exis:ng> <low> <high>

13. they were here Needs/Market <unknown> Technical Challenge <exis:ng> <low> <high> Facebook / TwiGer

14. There was liPle technology risk. Market risk was their real challenge. But nobody had markeJng experience in this area because there had been no such market.

15. The start-up teams had empathy because they were big fans of their service. Probably, they also had the right discipline to think through whether a lot of other people were going to want it.

16. Needs/Market <unknown> Technical Challenge <exis:ng> <low> <high> Let us think about this area. Facebook / TwiGer Type B approach can be available in the other area

17. The most signiﬁcant feature of Silicon Valley is generous supplies of talents.

18. Crazy tech guys and ﬂighty investors are not the only residents in Silicon Valley’s business community.

19. There are a plenty of seasoned professionals in markeJng, sales, ﬁnance, IP, logisJcs, etc., …

20. … from a variety of business areas, and from all over the world.

21. If an entrepreneur has a really great idea,

22. then he/she can build a team with seasoned professionals. VP, Marke:ng. I have 20+ years experience in this business area. 13 years 10 years VP, Sales 16 years VP, Engineering 12 years 12 years

23. Such a team can quickly acquire empathy.

24. Successful Silicon Valley entrepreneurs have an average of 13 years professional experiences before they started. * Research of UC Davis & New Hampshire Univ., 2006

25. The average age of founders in Silicon Valley exceeds 40 when they started, even this web business heyday. * For instance, Vivek Wadhwa, goo.gl/pfBdV

26. M. Zuckerberg (Facebook) J. Bezos (Amazon) R. Hoﬀman (LinkedIn) B. V. VonderschmiG (Xilinx) N. C. Warren (eHarmony) R. Shapiro (LegalZoom) J. E. Warnock (Adobe Systems) J. Dorsey (TwiGer) F. H. Moll (Intui:ve Surgical) M. Benioﬀ (Salesforce) I. M. Jacobs (Qualcomm) W. A. Porter (E*Trade) 20 30 40 50 60 70 Age when they started

27. In general, experience maPers.

28. Entry points when they started Facebook / TwiGer Salesforce Adobe Systems Intui:ve Surgical Qualcomm Xilinx eHarmony LegalZoom/ E*Trade Amazon LinkedIn Needs/Market <unknown> Technical Challenge <exis:ng> <low> <high>

29. Let us classify them into zones of:

30. Needs/Market <unknown> Technical Challenge <exis:ng> <low> <high> Too risky to invest zone Too compe11ve to invest zone Professional Zone Facebook / TwiGer Salesforce Adobe Systems Intui:ve Surgical Qualcomm Xilinx eHarmony LegalZoom/ E*Trade Amazon LinkedIn Gusto Zone

31. •  “Empathy” is the most important ability to start a new business. The way to acquire it is: – Gusto Zone’s start-up: • Build a start-up team with ardent fans of the service because no seasoned professionals exist. – Professional Zone’s start-up: • Build a start-up team with seasoned professionals. Summary of Part I

32. Due to recent mass-media reports, people may embrace the illusion that most venture investment go to “Gusto Zone”. But the reality is: Appendix

33. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other Business Products and Services Healthcare Services Retailing/Distribu:on Computers and Peripherals Networking and Equipment Financial Services Telecommunica:ons Electronics/Instrumenta:on Semiconductors Consumer Products and Services Media and Entertainment IT Services Medical Devices and Equipment Industrial/Energy Biotechnology Sokware US Investments by Industry 2011(Money) (* based on PwC's "Shaking the MoneyTreeTM Q4/Full-Year 2011 Update")

34. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other Business Products and Services Healthcare Services Retailing/Distribu:on Computers and Peripherals Networking and Equipment Financial Services Telecommunica:ons Electronics/Instrumenta:on Semiconductors Consumer Products and Services Media and Entertainment IT Services Medical Devices and Equipment Industrial/Energy Biotechnology Sokware US Investments by Industry 2011(Money) (* based on PwC's "Shaking the MoneyTreeTM Q4/Full-Year 2011 Update") Gusto Zone is just part of this area Professional Zone

35. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other Healthcare Services Computers and Peripherals Retailing/Distribu:on Networking and Equipment Financial Services Electronics/Instrumenta:on Business Products and Services Semiconductors Consumer Products and Services Telecommunica:ons Industrial/Energy Medical Devices and Equipment IT Services Media and Entertainment Biotechnology Sokware US Investments by Industry 2011(# of deals) (* based on PwC's "Shaking the MoneyTreeTM Q4/Full-Year 2011 Update")

36. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other Healthcare Services Computers and Peripherals Retailing/Distribu:on Networking and Equipment Financial Services Electronics/Instrumenta:on Business Products and Services Semiconductors Consumer Products and Services Telecommunica:ons Industrial/Energy Medical Devices and Equipment IT Services Media and Entertainment Biotechnology Sokware US Investments by Industry 2011(# of deals) (* based on PwC's "Shaking the MoneyTreeTM Q4/Full-Year 2011 Update") Gusto Zone is just part of this area Professional Zone

37. Top 10 deals in Silicon Valley: Q4/2011 Company name $million Area of business Dropbox 250 Sokware, file storage and sharing service BeGer Place 200 Cleantech, electric vehicle transporta:on S:on 100 Cleantech, thin-film solar module Portola Pharmaceu:cals 89 Biotech, biopharmaceu:cal Soraa 89 Cleantech, LED bulb Workday 85 Sokware, enterprise business sokware Fulcrum BioEnergy 69 Cleantech, bio energy Hearslow 65 Medical device & equipment, Guiding system Box 62 Sokware, file storage and sharing service Lithium Technologies 53 Sokware, social CRM solu:on (* based on PwC's "Shaking the MoneyTreeTM Q4/Full-Year 2011 Update")

38. You may forget it, but the Professional Zone is still a really Cool Zone.

39. THE REST OF THE WORLD Part II

40. Needs/Market <unknown> Technical Challenge <exis:ng> <low> <high> StarJng in this zone is OK because no seasoned professional is required. Professional Zone Gusto Zone

41. Actually, China’s Gusto Zone is crazy hot as well as Silicon Valley because of its domesJc market growth. 0 100 200 300 400 500 600 700 800 China’s internet popula:on will be almost double US and Japan combined by 2015(*). (*) Data from The Boston Consul:ng Group (Million)

42. * Examples of Vietnamese start-ups Not only in China and Japan but also other naJons’ Gusto Zone are also hot even if their domesJc markets are sJll small.

43. The Gusto Zone is hot but it’s too hot for me, so my interest here is

44. Needs/Market <unknown> Technical Challenge <exis:ng> <low> <high> this “Cool” zone Professional Zone Gusto Zone

45. A successful story in the Professional Zone in Silicon Valley.

46. InnovaJon Empathy Start-up Team idea! Professional Experiences A founder had experience in the ﬁeld related to the target market – as a tech guy, marketer, researcher, or as a user.

47. InnovaJon Empathy Start-up Team idea! Seasoned professionals were hired not only from Silicon Valley but also globally. Experienced Professionals

48. InnovaJon Empathy Start-up Team idea! They made full use of their empathy from day one, and got lots of inspiraJon and encouragement through their acJviJes. Inspira:on Encouragement

49. InnovaJon Empathy Start-up Team idea! InspiraJon fostered creaJvity and encouragement led passion. Finally, the original idea became an innovaJon. Crea:vity Passion

50. Another story in the Professional Zone, happened somewhere.

51. A founder got a great idea and decided to start a new business.

52. Because it was diﬃcult for a start-up to hire seasoned professionals, the founder had to hire junior and amateur guys locally. Start-up Team

53. The start-up team couldn’t understand and share the feeling of the target customers, and wasted too much Jme. Start-up Team Chaos Far from Empathy…

54. The window of opportunity was closing. The idea failed to become an innovaJon. Start-up Team Chaos The idea failed to become innova:on Give up

55. In many areas in the world, it is fairly diﬃcult to organize a start-up team with experienced professionals(*). (*) Israel may be an excep:on, the na:on has great talent pool for high-tech start-ups; furthermore, many Israeli start-ups easily move to Silicon Valley.

56. PracJcally, a start-up team needs a kind of preparaJon period to culJvate the team’s Empathy.

57. Case Study

58. Tokyo Electron Limited, a world leading manufacturer of LSI and FPD produc:on equipment, the company name became synonymous with “High-Tech company” in Japan. Case-1 Revenue $8.04 Billion(2011) Net income $865 Million(2011) Market Cap $9.83 Billion (April, 25, 2012)

59. Tokyo Electron Laboratories, Inc.(*) was founded in 1963, as a trading company. The company imported cuzng-edge technology products such as IC testers, electronic components and semiconductor produc:on equipment into Japan. (*) Today’s Tokyo Electron Limited.

60. In 1969, the company entered the market to design and develop a semiconductor produc:on equipment. About ﬁve years experience in sales and customer support enabled the company to acquire the ability to understand and share the feeling of the target customers.

61. Case-2 Acer(Mil:tech) was established in Taiwan in 1976 as a trader of electronic parts and a consultant in the use of microprocessor technologies. (*) Ref: Acer’s web site and Wikipedia

62. Acer released “Micro-Professor MPF-I” in 1981, the company’s ﬁrst computer product. The company obtained interna:onal reputa:on through the success of “Micro-Professor” series, especially, in European market during 1980s. Micro-Professor MPF-I Photo by “Toytoy on en.wikipedia”

63. I would say that several years of experiences in sales and consul:ng fostered the ability to understand and share the feeling of their target customers. Acer group became one of the biggest PC maker in the world; the company owns Gateway, Packard Bell, BenQ, AUO, AOpen, etc.

64. Crea:ve Technology, a Singapore-based company established in 1981 as a computer repair shop. The company ini:ally treated the Apple II computer, then IBM PCs. Case-3 Apple II, Photo by Marcin Wichary

65. In 1987, the company released their own product, a sound generator card for IBM PC architecture, widely known as “Sound Blaster”. * Ref: “Wikipedia – Crea:ve Technology”

66. About six years experience might enable the company to understand and share the feeling of target users. As you may know, “Sound Blaster” dominated the PC audio market during 1990s.

67. Case-4 Huawei Technologies is a networking and telecommunica:ons equipment and services company headquartered in Shenzhen, China. Revenue $29.3Bilion Net Proﬁt $3.8Bilion Employee-owned corpora:on (2010) *1CNY=0.16 USD

68. The company was established in 1987 as sales agent for Hong Kong’s PBX-switch company. In 1990, the company embarked on research and commercializa:on of their own PBX technologies targe:ng hotels and small enterprises. Experience in sales and support must advance their empathy to develop their own products.

69. In 1992, Huawei launched digital switching solu:on and generated sales RMB 1.5Billion in 1995. Huawei has con:nued to invest in technologies, and 46% of the 110,000 employees are engaged in R&D.

70. Huawei began interna:onal expansion in 1997, and 75% of the sales is generated from overseas markets in 2010. Huawei was ranked 5th most innova:ve company in the world by Fast Company in 2010.

71. Case-5 DeNA is the world’s largest mobile social gaming plasorm provider, headquarters in Tokyo. Revenue $1.4Bilion Opera:ng margin 50% Market cap $4.7Bilion

72. DeNA was founded in 1999 as an eBay clone service provider. At that :me eBay hadn’t entered the Japanese market, but Yahoo! Auc:on was launched at the same :me. (*) NTT Docomo started i-mode, the world ﬁrst mobile internet service, in 1999.

73. DeNA struggled and decided to shik their emphasis from PC to mobile in 2002. In 2005, when the mobile auc:on service was just star:ng to take oﬀ, the company got an idea called “mobile social gaming plasorm”.

74. Six years had passed since establishment, the company became an experienced professional team. The mobile social gaming plasorm, “mobage” was launched very smoothly, and the business has been growing extremely quick.

75. All of these companies took a similar route regardless of the founder’s intenJon.

76. InnovaJon Empathy idea! in Emerging market Prepara1on Period Start Acquire Empathy Vision!

77. Every company entered emerging business area Business Area Business when they entered Tokyo Electron Semiconductor (1963) Trader Acer Microprocessor (1976) Trader and Consultant Crea:ve Technologies Personal Computer (1981) Repair Shop Huawei Telecommunica:on (1987) Sales Agent DeNA E-Commerce (1999) eBay Clone

78. Every company entered emerging business area as a non-technology company. Business Area Business when they entered Tokyo Electron Semiconductor (1963) Trader Acer Microprocessor (1976) Trader and Consultant Crea:ve Technologies Personal Computer (1981) Repair Shop Huawei Telecommunica:on (1987) Sales Agent DeNA E-Commerce (1999) eBay Clone

79. Every company entered emerging business area as a non-technology company. Business Area Business when they entered Tokyo Electron Semiconductor (1963) Trader Acer Microprocessor Trader and Consultant Crea:ve Technologies Personal Computer (1981) Repair Shop Huawei Telecommunica:on (1987) Sales Agent DeNA E-Commerce (1999) eBay Clone Prepara1on Period Acquire Empathy

80. Prepara1on Period Acquire Empathy These companies took preparaJon period regardless of the founder’s intenJon. Trader Consultant Sales agent Repair shop Clone Service …

81. Empathy is the most important ability for business. And this kind of preparaJon period develops start-up team’s empathy:

82. communicate with target customers, True marketing says, “These are the satisfactions the customer looks for, values, and needs.” – Peter F. Drucker

83. enhance a human network, Today knowledge has power. It controls access to opportunity and advancement. – Peter F. Drucker

84. and build a team. Alone we can do so little; together we can do so much. – Helen Keller

85. PreparaJon period is a key process.

86. More haste, less speed

87. Four Steps for preparaJon period

88. I.  Deﬁne target market II.  Seek a business opportunity in the preparaJon period III.  Start small, grow smart IV.  “Keep looking, don’t sePle”

89. I. Deﬁne target market •  First of all, make sure that you have a passion to do business in the target market. •  Emerging business area is good, but not limited to so long as you and your folks have a passion for the business area(*). (*) For example, a UK manufacturer, “Dyson” successfully entered the vacuum cleaner market, a saturated market, with cuVng-edge technologies. He had worked as a licenser for 14 years a[er designing prototype, then established Dyson Ltd.

90. II. Seek a business opportunity in the preparaJon period •  The purpose is to develop your team’s ability to understand and share the feeling of the target customers. The following are examples of businesses which enable you to develop: Ø  Importer/sales agent Ø  Technology consultant Ø  Repair service ﬁrm Ø  Clone service provider / Clone product maker etc.

91. III. Start small, grow smart •  Start small(of course) •  Enhance a human network and uJlize (open) innovaJon system Ø  Universi:es / Na:onal Ins:tutes Ø  Professionals in other industrial ﬁelds Ø  Foreign high-tech companies etc. •  Organize internal R&D team as early as possible.

92. IV. “Keep looking, don’t sePle” idea! •  Look for new business idea which makes your hearts sing. •  “Keep looking, don’t sePle”

93. Summary of Part II •  In many places in the world, a start-up team needs a kind of preparaJon period to start business in the professional zone. •  This slide showed some case studies and provided a direcJon for the preparaJon period.

94. THANK YOU fromBayArea.com

Does silicon valley style work in your place?

TAKA KONDO

Does silicon valley style work in your place?