Microsoft threw an invite-only gathering at its London offices: something about start-ups and Web 2.0. For some reason, I was asked along. Myself, Andy and Simon got on an early-morning train from Brighton to Victoria from whence we shuffled our way down the street to the glass lair of the Redmond giant. Once there, we were ushered into a room to listen to a series of talks.
For me, the whole day was like an anthropological exercise. I was getting a glimpse into a strange alien world of business plans and venture capital—the kind of stuff that I normally have no contact with. Here are the notes I took…
Lars Lindstedt, Microsoft
Here’s a bunch of Arial-filled slides.
Microsoft research labs, like the one in Cambridge, produce swathes of intellectual property that gets licensed to selected partners in the UK. Whoop-de-doo.
There’s a disparity between developed and developing worlds. Technology should be able to help (not if you’re demanding money for IP, it won’t).
Those crazy kids on Bebo who aren’t watching TV should be out kicking a ball around. Point is, it’s not just about a web browser on a PC: it’s about multiple channels.
And now, a graph. It slopes downwards from left to right therefore it must be showing something bad. It’s the UK labour productivity rate. Software increases labour productivity apparently.
All this Arial is making my eyes hurt.
Brent Hoberman, lastminute.com
What made lastminute.com successful? A great original idea. Outrageous ambition. ‘Cause this is meant to be fun and exciting.
Go after a huge market (so much for the long tail). The Web is a market where technology can really help.
When you get a good idea it seems so blindingly obvious that your first reaction is “surely somebody has done this already?” The second reaction you want is when you describe it to people and they say that they would want to use your service.
Then you’ve got to execute your idea. It’s really hard. Each individual slice of what you do is fairly easy to replicate but putting it all together is like a puzzle. You’ve got to balance supply and demand and marketing.
Speaking of marketing, how do you create buzz? Look at people like Facebook and Bebo (Bebo again?) who haven’t spent a penny on marketing. How do you distill that? Sure, luck is a big part of that but there are things you can do. For example, user interface is so important. The new marketing is just to make your product so good that you don’t have to shout about it. Cut the marketing budget in half and put that back into differentiating the product. Invest in tools that customers can use that are better and easier to use than anyone elses.
Brent’s new startup was born out of personal experience of frustration with interior decorating or something like that. Forget about market research. It’s just justification for somebody’s job. Your business should have a culture where failing is okay. Fail quick and fast so that you learn from your mistakes. Big companies have cultures of fear and consensus.
The hardest bit is the interface between business and technology, getting those people to talk to each other. You can’t just write down an idea and hand it over to the tech guys and get them to give you an estimate. Break it down and find out where the bottlenecks are and take them out. In small companies, you can have that dialogue. But big companies have so many layers that it’s hard to communicate.
Beware of data. As an ex-consultant, Brent knows how data is used to justify what the boss wants to hear. But do harvest as much data as you can about what your customers are doing. His biggest fear with his new project is that he’s sure he won’t get it right the first time. But the key thing is that his team is excited to react to what customers are doing so it will get better quickly.
There’s time for some questions.
Question: What are the differences between US and UK business attitudes?
The UK is actually a great place to do business even though there is something in the British psyche that is more cautious and less gung-ho. The media, who are quite important, are kind of schizophrenic—they promote stuff but at the same time, they love to see people fail.
Question: What are the problems associated with growth?
Innovation can go out the window. You get stuck in marketing (wasting money on TV) and fixing things rather than adding new features. Before launch, write down all those great ideas you’ve all got so that you can revisit them later because you won’t have time to think about this stuff after you launch.
Question: How did you survive the bust?
It made things less fun. Focus on the business even when everyone is telling you it won’t work. Stick to your guns. And don’t forget, outragous ambition will keep everyone on your team excited.
Question: What current trends to you see?
Customers are using better, quicker, more advanced tools; like uploading video to the Web, for example. Mobile was overestimated in the past but in the long term, it is very important. Social networks are powerful. You don’t want to launch a business that’s just a social network but it can be a prominent part of your service. Getting customers to do your work for you is exciting.
Question: Is content still king?
Building great tools so that customers can create content is great. Blending professional content with user-generated content is also great.
Question: Hire superstars or mold them?
Hire primadonnas. Put together a great team and then keep them. Molding them is very hard.
Question: How do you incubate innovation at a big company?
Stop obsessing about return on investment. Have some people who are allowed follow their instincts. The tricky thing is marrying that up with your market. Have a nutcase CEO like Jeff Bezos.
Steve Balmer, Microsoft CEO
Let’s talk about the evolution of software.
The first question that’s often asked is “What do you mean?”
Oh, the sentence continues, “…when you say software plus services.”
Well, here are some more Arial-rich slides.
There’s desktop, servers, online and devices. Each of these models has its advantages:
- The desktop PC allows most control for the user.
- Server (or “enterprise”) computing is good for security.
- People love the internet; just click and run with no intallations.
- Devices… um.
Ooh, Brent’s phone is ringing now, as if on cue. Glare, Steve, glare.
There’s a bunch of different user interfaces from the richness of the desktop to the reach of web apps, and there’s handwriting and voice recognition on devices. Not everything needs to be a web app or a Silverlight app. Office has some new online capabilities but that doesn’t make it a web app.
Then there’s enterprise stuff (I’m going to have to take a break from note-taking to tick off a bunch of squares on the Buzzword Bingo I’ve got open in my browser window).It’s all about cloud services apparently. It sounds like the stuff that Amazon are already doing. Ooh, he just said that! It’s like he knows what I’m thinking.
Mashups live at this REST level which is simple and easy and great. But we want sophistication and security apparently so forget that stuff—Microsoft have got a great model for talking to Windows-based clients, browsers and Silverlight. Let’s have a product demo from Mark.
Mark (didn’t catch his last name)
Let’s look at some tools with cool-sounding names. Here’s a Sliverlight flight-planning app. Having a plane whizz around a page is more compelling than text it seems.
Steve interrupts to say something about richness.
Back to Mark. This has reach; Windows, Mac, DRM (he snuck that last one in there quite cleverly).
Popfly is a mashup for consumers with a Silverlight UI. Here’s a Flickr component (of course! what mashup demo would be complete without an example that uses the Flickr API?). Mash it up with Virtual Earth. Page-turning animations are also an option. Ahem. Anyway, it’s about lowering the barriers to entry for people to make mashups.
Now what’s this? Looks like a barcode. Zoom in and it’s actually the complete works of Charles Dickens. Zooooom right in on one word. Applause! It’s a monstrous amount of data. This is Seadragon. No matter how big your data and objects are, you should be able to seamlessly flow into it.
There’s another zooming tool: Photosynth. Here’s the Venice example; a 3D model created from people’s photos. Zoom right in. Look, it’s Stephen Hawking on holiday.
Back to Balmer
The emphaisis is on seamlessness.
Uh-oh. Slide problems. Lars comes to the rescue and starts closing a bunch of windows ‘till we’re back to Powerpoint plus Arial.
Here’s a list of “services” and “partner opportunities.” The titles are so unsnappy I’ve forgotten them already. Most of them end with the word “Live” (like advertising a good seedy strip club). I think he’s starting to bore himself now.
There’s a bunch of partner programs. The startup accelerator program begins in the UK as of today. Talk to Lars for more.
Here’s the key point before questions from the audience: there’s been an incredible evolution in software. The model of what we do in creating software is morphing in incredible ways. We have to keep pace with that.
Question: What’s the future of consumer software? Ads?
A lot of things will be ad-funded. People don’t like paying for things. But some things are too expensive to be delivered through advertising and others where advertising is too invasive and painful. For example, basic internet connectivity won’t be ad-funded. Online publications, on the other hand, probably will. There’ll be a mix of things.
Question: want to talk about open source?
Microsoft believes in a commerical model; that’s how they can rent out this space we’re sitting in. But there’s room for different models. Microsoft’s strategy is to compete when they have open-source competitors. It would be great to see open-source innovations happening on top of Windows. The battle isn’t business model to business model: it’s product to product. Microsoft also pays a bunch of lawyers to buy IP and sue the ass off people. Open source people should play along and pay Microsoft money. That would be an IP framework (man, that’s some flavour of bullshit he’s spinning).
Simon Willison: This event is about startups but these days you can’t build anything without patents but you can’t buy patents unless you’re one of the big boys. Should there be a reform?
The patent system is pretty good but it needs overhauling. It’s unclear who benefits more from the current patent regime; the small company or the big company. Probably the small company (huh?). The bigger issue is how unpredictable the current system is. Who qualifies? How do you know about this stuff? The system was designed for mechanical things but now it needs to be reformed for software in the same way it was for the pharma industry (yikes! that’s some precedent to mention).
Question: Does Microsoft have any plans to support startups with revenue-linked licensing plans?
Microsoft have looked at that like the big guys have done (like Sun) but Microsoft’s stuff tends to be a lot cheaper.
The questioner interrupts to talk about SQL quad processing stuff, yadda yadda.
Any other questions, write to firstname.lastname@example.org.
And with that, he exits stage right and out the door.
Panel discussion with Saul Klein , Ben Way and Cary Marsh , moderated by Ryan Carson
Ryan: Cary, you’re in a crowded market—online video—how do you compete?
Cary: We made a lot of mistakes. We should have provided a free trial and subscription services. We burned through a lot but we learned from that.
Ryan: Saul, you also run Seedcamp. How do the companies that get €50K use that money?
Saul: We ended up funding six business. The first six months are critical. You probably won’t be paying people, you’ll be motivating them through stock (Bwah-ha-ha!… Oh. He’s serious). You can use Amazon’s services to save money. It’s all about conserving capital and managing cost. You’ll always need more money than you’ve got. Do you need an office? Can you work in your living room?
Ryan: Ben, what tips can you give Web startups?
Ben: Don’t be afraid of making mistakes. Here in the UK, we are quite risk-averse. I failed when I was younger and I was scared of telling people but now I use it to my advantage. The other important factor is people, the people you choose to work with. Key people in key roles is… key.
Question: An article in The Guardian says that startups should act like mega-corporations. Is that at odds with what you guys are saying?
Ben: There’s a balance to be had. You’ve got to be innovative and fast on your feet but you’ve also got to keep an eye on your cashflow.
Saul: There’s nothing wrong with thinking big. You should think that you can be as big as Google or Microsoft. But that doesn’t mean you should spend money like them. That article sounds crazy to me.
Ryan: Anything good that’s happened to our business is because of relationships with people, not how big or small we are or appear.
Ryan: Saul, how are Seedcamp companies generating publicity?
Saul: Publicity is the beginning of a wider conversation you can have with your customers. Start blogging. Reach out to other people in your community like influental bloggers. The blogosphere is your first PR tool. There are blogs like Techcrunch and Read/Write Web that cover startups. But the most important thing is to start having conversations with the people who are relevant to your community.
Ryan: Ben, what’s been your biggest mistake in spending money on marketing?
Ben: The biggest mistakes come when you get a lot of money in the bank and you feel you must spend it. You get so used to not having money that when you get some, you go crazy. That can be an issue with VC funding. A cashflow situation would be better.
Ryan: Cary, can you share with us how much you spend on marketing?
Cary: Nothing apart from some ad words. Getting rid of the “business development” person and just getting a PA for myself, so that I can talk about this stuff passionately, was a great move.
Question: Cary, how do partnerships work out?
Cary: We’ve got a big partnership with Microsoft Windows Movie Maker. That made us global. Microsoft can introduce you to a lot of people. It’s difficult as a startup to knock on doors but if you have a big partner, they can help you.
Question: Saul, when is the right time for a company to raise finance?
Saul: People focus on the money aspect of financing but the people side of things is also important. You’ve got to get along with the investors. Early on, you can identify those people. They can give you advice and credibility when it comes to raising venture money. Raising venture is an important watershed moment for every company and it’s not necessarily right for every company. Try to find the right people first and they will find the right kind of money for you.
Ryan: I see a lot of people starting Web apps that aren’t skyrocketing but they’re doing okay. How do you know when you’ve failed or when you’re succeeding?
Ben: For me, I’m so passionate about an idea that I’d have to hit rock-bottom to give up on it. Honestly, a true entrepeneur keeps going until they can’t go on any more.
Cary: I agree. The one thing that all sucessful companies have is that they never gave up. You’ve got to be so focused but also flexible—be prepared to change and adapt.
Question: How do you maximize your shares when you go and get VC money?
Much mumbling from the audience; this is clearly a contraversial point. But I don’t understand any of it.
Saul: If you want ownership, you’re going to want the best people working with you and the best people investing in you. There’s no magic answer but I’d prefer to have a small share in Google than a very large share in a small company. I think the first fifty people in companies are co-founders, whether they’re called co-founders or not. Be generous with them.
And with that, the event wraps up and we all shuffle out for some sandwiches, sushi, coffee and water (from Microsoft branded bottles). There are a lot of people in suits but like water finding its own level, I end up chatting with Mike Stenhouse and Matt Webb.
Apropos of Mike’s pale skin, Matt looks out at the miserable London weather and comes up with a great idea: umbrellas that have UV lamps built in so that every time it rains, you get a tan.
Now that’s a startup worth funding.