StartupBritain and the Startup Ingenuity Gap…

The big UK startup news of the last 24 hours was the launch of StartupBritain, a work-in-progress portal offering limited promotional discounts on various services (typically 10% or 1 month), a fairly sub-par startup link farm and (at some unspecified point in the future) some kind of unspecified startup mentoring facility. As conceptual (as opposed to financial) backers, its organizers amassed a whole raft of corporates and government Ministers, including one of the Prime variety. Cue lots of inspiring talk about inspiring young people to become inspired entrepreneurs (and to lose their inspired shirts in inspiring new ways).

Ummm… you may have guessed that I’m not sold on the whole thing.

For a start, by far the best skill startups can have is to avoid buying products and (especially!) services entirely, instead getting by on a briskly Spartan diet of thin air and ingenuity where possible. For example, if you don’t happen to be running a high-bandwidth Internet startup, why not pay a neighbour a few pounds for wireless access to their broadband?

And even so, if you really have to spend money, then I would have thought that you would (without trying too hard) be able to find ~£1400 of the alleged £1500 on offer here purely in the kind of sales promotions companies typically make to acquire new customers. For logo design, I’d point entrepreneurs not at 99designs but instead at  ultra-cheap online logo specialists such as gotlogos.com

So… there may possibly be some genuine residual value here for startups, but not that much; and you’d be pretty hard pressed to winkle what there is out of the far corners of StartupBritain’s shell. Bless the organizers for trying, their hearts are plainly in the right place, but personally I would have preferred they had focused on executing one genuinely supportive thing extraordinarily well rather then stuff lots of half-initiatives together into a single grab-bag.

From where I’m sitting, the big question going forward is: how best to salvage StartupBritain? Given that its organizers have created an interesting platform (even if it is, for the moment, fairly content-free), I suspect they really need to “pivot”, i.e. to change emphasis or direction more in line with what it turns out their ‘customers’ (UK startups) actually need, rather than what they thought they needed.

I think it’s already abundantly clear that their customers don’t need the whole “£1500” value angle: the presumption that it was a thing that needed corporate backing at all was also a mistake. Really, was anyone going to be fooled for even a minute by this? I don’t think so.

But I have a suggestion. Back in 2000, Canadian academic Thomas Homer-Dixon wrote an excellent book called The Ingenuity Gap (which I highly recommend to you all). This is essentially a sustained riff on what its back cover succinctly describes as “the critical gap between our need for practical and innovative ideas to solve complex problems and our actual supply of those ideas“.

Kickstarting the UK startup industry is in many ways the kind of complex social problem Homer-Dixon was describing. Yet I would say that StartupBritain is as yet simply not engaging with this key social problem, because we have no obvious shortage of startups, ingenuity, or ambition. It’s other stuff that’s missing.

In fact, arguably the #1 UK startup “ingenuity gap” is the lack of any obvious spirit of collaboration between angels and entrepreneurs. There are literally thousands of ‘latent’ (i.e. non-investing) angels out there, but angel groups have – thanks to such foolish aberrations as “pay-to-prepare“, “pay-to-pitch“, and “pay-to-invest“ – placed such significant and (I think) antagonistic barriers between startups and angels that practically nobody is writing cheques. Where, then, do angels fit into StartupBritain’s view of the world? (I somehow suspect Peter Jones may well form an unrepresentative sample).

Perhaps if StartupBritain thought instead about supporting and shaping practical initiatives concerned with the collaborational area between angels and startups – e.g. open pitching, open scouting, peer startup evaluation, etc – then it would stand some chance of making a real difference here.

In context, all of this comes in a Budget week when EIS has been extended (which is simply fantastic): but it remains to be seen whether UK angels’ ongoing cheque-writing paralysis will ease as a result. The government hopes it will: so perhaps StartupBritain’s organizers might ponder about how their initiative can help make a useful contribution there. No corporate sponsors / wobbly discounts needed!

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Your next job title: “Chief Revolutionary Officer”…

As I blogged here recently, a startup is in many ways a tiny social revolution: it tries to change how its customers act, how they think, and how their world is connected together. Furthermore, a key measure of a startup’s influence and, well, ‘success‘ is the degree to which it changes how social agents in their industry or segment value products or services. In most important senses, then, a startup’s technology is a means to a social revolution within its marketplace.

All of which does beg the question of why it is that even though tech startups almost always have a Chief Technology Officer, they almost never have a “Chief Revolutionary Officer”. OK, it’s true that, according to the omniscient eye of Google, well-known writer Douglas Rushkoff is CRO of superfluid (which promotes the “Quid”, a p2p social collaboration currency thing), while Mary Beth Campbell is CRO of Boom Boom! Revolution (which promotes an “uprising of guerilla goodness” across the world); but to be frank that’s not exactly a great deal of conceptual coverage for the idea.

Superficially, according to this online comment from Dick Webster, it might seem that CRO is not an entirely new notion, as the title was (effectively) proposed in 1960:-

The idea comes from Murray D. Lincoln’s “Vice President In Charge Of Revolution” (with David Karp, 1960. Pres. of Ohio Farm Bureau, Founder of Nationwide Insurance Companies, 1892–1966). Companies wise enough to take MDL’s advice will have a C-level officer as champion for making good sense, continual improvement and constructive change, for “pursuing excellence” in all its aspects.

However, this 1960-vintage CRO seems to be closer to a ‘quality champion‘ (i.e. inward-facing, promoting kaizen, etc) than the 2011-vintage CRO ‘fomenter of external revolution amongst customers‘ role that I think is now emerging from the primordial soup of contemporary startup thinking.

All the same, “revolution” (and its hip incremental cousin “next generation”) have long been used & abused as buzzy progressivist e-marketing jargonese, and it would be easy to fall into the trap of appropriating the concept as feel-good semantics just for the sake of it. But why not instead look at how Tsarist Russia fell, see if there are any lessons from history for this new generation of CROs? Really, how did the Bolsheviks roll out their social(ist) revolution?

Well… I think the #1 lesson is to choose a regime to revolt against that is already (a) bloated, (b) unsustainable, and (c) just about to fall over all by itself. The Wikipedia article makes it reasonably clear how the Tsarist government had (by October 1917) already lost control (insanely large national debt, mass protests, rapid increases in the cost of living, many enterprises shutting down, etc). In the end, the final battle was over with barely a shot being fired:-

“In actual fact the effectively unoccupied Winter Palace also was taken bloodlessly by a small group which broke in, got lost in the cavernous interior, and accidentally happened upon the remnants of Kerensky’s provisional government in the imperial family’s breakfast room. The illiterate revolutionaries then compelled those arrested to write up their own arrest papers.”

The Bolsheviks, it would seem, barely won a war: the Tsarists had pretty much lost it all by themselves. So for all the romance of exile – think of Lenin in the British Museum’s Reading Room – and the quasi-romantic “agitprop train” that toured the country after the October Revolution of 1917…

“[…] with artists and actors performing simple plays and broadcasting propaganda. It had a printing press onboard the train to allow posters to be reproduced and thrown out of the windows if it passed through villages.”

…the real secret of the Russian revolutionaries’ success was nothing more complicated than readiness: that is, being ready to step in when the self-destructing Tsarist juggernaut finally hit the wall. As far as I can see, it wasn’t so much the quality of their ideas that endeared the Bolsheviks to the people as their perfect timing – in many ways, simply arriving at the moment of greatest need was enough.

By way of comparison, then, how bloated, unsustainable & self-destructive are your competitors – and how good is your sense of timing, hmmm?

The stars are our friends…

What kind of startup is your company?

A bad startup is an exercise in applied greed, where its principals construct a series of sophisticated simulacra of market excitement all the while grooming foolhardy buyers to misvalue it at each stage (seed, Series A/B, exit). In fact, many startups set out on this path, though a fair few subsequently redeem themselves by accidentally connecting with a real market somwhere along the way.

An OK startup moves directly to customers, fitting products and services around their (generally quite limited) aspirations, trying to fit nicely into their world without obviously rocking any boats. This is generally an exercise in satisfaction optimization, working within a very constrained conceptual and financial business environment. Even so, this is arguably how most real-world startups play out.

A good startup is an exercise in incremental social ambition, building shared dreams as astonishing and satisfying as your capabilities and finances allow. However, most failure-to-even-begin “beermat startups” follow this path: their flashes of dotcom-style brilliance appear unstoppable after a pint of beer, yet make no sense at all once sober. The paradox is that this is how business schools appear to think that startups operate.

You might pragmatically characterize these three as investor-facing, customer-facing, and production-facing respectively; or usefully satirize them as the virtual IP strategy, the we-do-what-you-want strategy, and the if-we-build-it-they-will-come strategy. Even so, which one should entrepreneurs choose? The Path of Needles or the Path of Pins?

You know, I think this is one of those false choices where attempting to answer doesn’t really help you much. Basically, the three parts all relate to different activities / roles / thinking hats that entepreneurs have to do / perform / wear at different times. Sometimes you need to be a bit greedy (in order not to roll over in negotiations); sometimes you need to be a bit responsive (in order to put your company’s social revolution into practice); while sometimes you need to have some kind of vision of where you’re going (in order to lead your market, rather than being perpetually led by it).

Probably a more useful way of looking at this is that companies inevitably have a production aspect (what do they create?), a service aspect (how do their relationships with their customers work?), and a financier aspect (who is exposed to the company’s success or failure?) Only someone hugely idealistic – such as, say, a person writing a course text for an entrepreneurship module at a business school, or possibly a person who believes that customer development kills all known germs, etc – would think that you could get away with focusing on any one rather than (if at all possible) all three.

What I find a bit sad is that a lot of startups I’ve seen over the last few years have such a dominant service angle (probably because London has made so much money out of financial services over recent decades) that it is almost as if many entrepreneurs have no notion of what it means to dream up a social revolution.

Yet ‘production’ in this context doesn’t mean anything so tangible as ‘manufacturing’ so much as simply “taking a view on what’s wrong or missing in your particular market and trying to plug the gap”.

What many entrepreneurs seem to have forgotten is that the innate marginality of service is usually only a worthwhile business proposition at large scale: in fact, in a competitive service marketplace, reducing service margins is arguably a ‘value-subtract’ rather than a ‘value-add’. By way of comparison, building towards a vision (rather than constraining activity to customer survey results) is what gives winning companies a real value-add. The issue is simply whether what you’re doing will lead to any kind of win.

Aiming at the stars is, then, not some risky and hallucinatory aberration to avoid, but a necessary production step: the stars are our friends, for though we never reach them, the process of shooting in their direction helps us develop and shape the dreams of our customers. And that is the place where social revolutions really take hold.

Angels, myths, hopes, fears, and social revolutions…

Even though so much self-serving, retrospective nonsense has been written about the tricky relationship between investors and entrepreneurs, almost all of it is supported only by itself rather than by anything so useful as evidence or even (Lord help us all!) genuine insight into investment psychology. What is more, atop these wobbly foundations is perched a massive secondary industry of advisors, strategists, consultants, books, courses, lectures, business school modules (and even alleged courses in entrepreneurship, for crying out loud), all promoting the supposedly mythological archetypes of angel investment.

This congealed toxic mass of self-supporting tosh is what gets passed off as business ‘collective wisdom’, and – tragically – is all that many entrepreneurs have to work with. Once you get the hang of reading that kind of stuff, it practically writes itself: which is presumably why the brain-damaged business shelves of bookshops groan under the weight of me-too inspirational business writing – let’s face it, anyone with a word processor can knock their own out, it’s not exactly hard, right?

Underlying this whole sorry mess sits a single core investment myth – that of the positive, win-win, genuinely strategic investment. You’ve surely read the same ur-story a hundred or more times: go-getting garage entrepreneurs and experienced cashed-out investors joining forces to create high-growth economic entities with both brains and brawn, the best of both worlds…

…ummm, don’t make me laugh too much, I’ll choke.

The thing nobody tells you is that (outside of the US startup bubble, and I’m guessing at a figure here, though it is based on what angels have told me) I believe roughly 75% of angel investments are opportunistic – decent little companies typically stuttering over liquidity issues, dropping large amounts of equity into angels’ laps to stay in the game.

Hence any time you see aggregate figures for angel investments into companies, I suspect you should divide them by at least four: strategic, ‘business school’-type positive investments are the sub-25% minority. I’ve previously called this approach towards investment “TK Maxx” mode (i.e. “if it ain’t a bargain, I ain’t gonna buy it“), but I now suspect it’s actually part of a wider trend: investing not to grow a trend (companies on the way up), but to stop the rot (companies on the way down).

Part of this is probably to do with inadequate valuation skills, for an inconvenient truth about angels is that most lack sufficient financial accounting or management accounting skills to properly value startups with any confidence (which is also why ~75% never lead). Part is marital – think of the frosty stares over the breakfast table each time another of your £25K investment goes belly-up, even if your overall portfolio is still (theoretically) in the black. But part is undoubtedly to do with investment psychology – for, as I’ll explain below, I’m sure most win-win angel investments are done not out of hopefulness but out of fearfulness.

Even though there’s a lot of rational calculation going on in investments (i.e. poring over optimistic cashflow forecasts and unbelievable hockeystick graphs), more or less all of this is post-rationalization. In the end, angels either like & trust the person pitching to them within 30 seconds or not at all. It’s rare (I believe) that they talk themselves into a deal with someone they don’t immediately ‘get’: as a rule, it’s 100x easier to talk yourself out of something than to talk yourself into it.

Timing is also a key issue here: companies on the way down normally have a timetable of impending doom – they have bills they can’t pay, orders they can’t fulfil, export markets they can’t service, etc. Their dynamic is often that of a succession of short-term ‘wolves at the door’, no matter what their abilities and customer relationships are: they need equity investment by a certain date or the door shuts (on wolves and customers alike). These are relatively easy to value, and easy to negotiate a good deal with: the gun to the head helps a lot.

Compare this with investing in companies on the way up: what makes this such a hard sell is that it relies on positive market sentiment, trust, credibility, positive social capital, financial optimism… in short, all the things that society is in such short supply of these days. At the same time, most business books you’ll see treat the challenges young companies face as if they were purely technical engineering puzzles: yet for the most part these are actually social challenges masquerading as high tech problems, e.g. ‘route to market’ is about social collaboration, ‘product/market fit’ is about social negotiation, ‘pitch optimization’ is about credibility and excitement, etc. In the end, the entire startup issue reduces to this: have you got what it takes to start a social revolution?

I think this explains a great deal of why UK entrepreneurs with win-win pitches have such a hard time: angels (and indeed most entrepreneurs, truth be told) have been conditioned to believe that the startup world is all about technical challenges, when it’s much more about social challenges. Both groups are ill-equipped for tackling such mountains, and the tools they have for communicating with each other – pitch decks, business plans, cashflow forecasts – fixate on arguably the wrong aspects entirely.

I firmly believe that very few angel investors have sufficient faith in hopefulness to put money behind it: what actually drives the hand to write the cheque is fear of missing out on a big opportunity. People often talk about ‘first to scale’, but the real deal is not so much ramping up the scale of production, but ramping up the scale of opportunity. That is, at a certain point in a proper startup’s growth curve, its scale of social opportunity leaps off the graph, way ahead of the J-curve of its financial execution. It’s hard to define precisely when that is: but that’s the point when angels have only a few months (or indeed weeks) to get in before it’s too late, before the boat sails without them.

So, it’s fear of missing that boat that drives angels to invest, not hope of catching some mythical future curve.

Compare the two types of investment: whereas stabilizing a failing company is largely a technical finance challenge, building and growing a new company is a social challenge – angels look at the two side-by-side, and routinely put their money into the former category because (frankly) it’s easier to quantify. Yet basically all the presentational tools that win-win startups use are aimed at solving technical finance challenges, not social challenges: it’s no wonder they so often bite on stone, achieving nothing, going nowhere slowly.

Bearing all this in mind, I’d say that the ‘2011’ way to pitch win-win propositions to angels isn’t with a sharp suit and a carefully rehearsed slide deck, however much of a presentation buzz you can build up. Rather, you need to sit down in front of them with one or two customers and field questions about what you’re doing, open up a dialogue. Simply put, you’re trying to start a social revolution: so why not show angels how you’re going to achieve it?

Generic business plan, 2011-style…

Announcing InsertNameHere, a high-growth, highly capital-intensive, solid-gold once-in-a-recession investment opportunity.

InsertNameHere builds on its founders’ deep experience in heavily-leveraged compressive carbon transformation [*], yet takes that to a whole new level – fully virtualized service services.

Its dramatic new core technology is a 24/7 100% online meta-toolkit for startups and SMEs looking to exploit new service markets, under the catchy service mark “We Service Services“.

Our “SliverMeddle” package provides our customers silent marginal billing & accounting, invoicing, tax landing in optimal Swiss canton du jour, minimally auditable Bahamian banking, multi-territory soft legal, and even a dull-but-undeniably-usable-website auto-generator (with colour options fully selectable all the way from #444488 to #4444FF). Entering their service model into our database gives access to our full spectrum of service services, enabling our clients to start creaming their important transaction slice off within mere minutes of sign-up.

This is because, according to our extensive market research [**], the biggest market growth in the startup segment in 2009-2010 has been in pure services for services – in fact, InsertNameHere calculates that by aggressively virtualizing nearly all services for services, we can (for example) help companies get rid of ~85% of jobs around Old Street. [***]

Despite having soft-launched only two days ago, InsertNameHere’s technology is already powering 786 greedy service plays around London. It is now looking for £880K at a post-money £2.5m valuation to roll its package out to ‘419’ fraudsters, spyware, scamware, pyramid & Ponzi schemes, poker sites, local authorities, and Business Link replacement services. Invest now before we reverse takeover the UK government!

[*] ‘turning shit into diamonds‘.
[**] i.e. reading TechCrunch most days. Except when it’s particularly vacuous, of course.
[***] Actually, our computer model says ‘95%’ but we didn’t want to exaggerate.

Stealth mode (not) RIP…

The more I think about it, there’s something funny going on in StartupLand, and it seems to centre on declarational information asymmetry – the notion that knowing more (but not telling anyone) helps make Startup A worth more than a similar (but overtly open) Startup B, better known as “stealth mode”.

Having just endured 20 years being told by VCs and their media lapdogs how wonderful stealth mode is, we’re now encouraged to be completely open, even to the point that we should disclose what we don’t know, i.e. push our business development learning curve out into the light. We are all (the argument du jour goes) running ‘learning enterprises’, engaged not so much in driving technological development as in rolling with customer engagement – i.e. the logical linearity of engineering has been supplanted by a kind of spiralling helix of user feedback.

According to this worldview, the you-are-what-you-know of development experience has been replaced by the you-are-who-you-know of customer development. ‘Intellectual capital’ is out, ‘social capital’ is in. So, building customer relationships is now deemed to be startups’ primary business focus, while building things is just a secondary issue. In this brave new world, business only makes sense as a ‘pure service play’: others way of constructing value are just quaintly nostalgic virtual reality-esque diversions. You’re actually building stuff? Get outta here, lame-brain, and come back when you get the Internet and viral social media, haw haw!

…yeah, right.

To me, this kind of shallow nonsense comes across as the legacy of two toxic decades where financial services have been in near-perpetual ascendancy: to many modern ‘experts’, product, experience, credibility, imagination, and creativity have become mere marginalia compared to the financial service angle of any given business. How can a service business ever be in stealth mode, they ask, when your customers need to see you from Day One?

As with most stuff, this is hardly news to most switched-on startup people: and for quite a while I’ve been taking this services-vs-products non-war in a bit of a negative spirit. But… if practically nobody is going to invest in anything tangible for quite some time, this is – in a weirdly twisted way – great news looking forward. Why? Because it means that the kind of busy & large global marketplaces that get me particularly excited will gradually empty, if only from attrition.

All in all, I’d say that, in a purely contrarian sense, right now is arguably the best time ever to be building IP in stealth mode… as long as you’re talking with loads of lead customers at the same time. Nanodome operated in stealth mode for about 18 months while all the patent and IP stuff got really locked down, but I still talked with plenty of customers and buyers during that time (and I have a box-file full of NDAs to prove it). Basically, why ever would you not want to have the best of these two worlds? There’s no business law that says you can’t, right?

Nanodome status update…

I thought, given the bold implicit claim on this blog’s mast-head, I ought to at least mention in passing how far towards its mythical future $1bn valuation Nanodome has progressed over the last few months. The honest (i.e. startup theatre-free) answer is: it’s hard to tell – as always, there’s good news and bad news…

The short-term good news is that Nanodome’s electronics all work fine (all that I’ve tested, anyway; thanks Bob!), insofar as the two bootloaders, the firmware, Linux, the video display & basic image processing are all functioning fine. Today, I’m plumbing the image sensor into Linux’s V4L2 layer (but wondering why the keyboard handler is so stubbornly silent). Of course, every startup worth its salt has a near-endless supply of Walls to get past, so none of this is really huge news, but all the same it’s always nice to have new stuff working.

The short-term bad news is that I’ve been engaged in a bit of bootstrappery, i.e. doing basically the same kind of insanely high pressure getting-the-hardware-and-software-all-working-together for another UK security camera startup (albeit only for a few days a week). The reason I think bootstrapping is a problem is that  – though it does pay the bills, which is great – it almost always slows your main development down to a snail-like crawl (or do I mean ‘ooze’?): it can also be a hard habit to kick once you’ve started. Still, what can you do?

The long-term good news is that I’ve recently had a bit of a conceptual pivot, in that I’ve worked out how to apply a fair-sized part of Nanodome’s core tech development to the gigantic fixed camera market: and now have a distinctly contrarian view on what cameras in that segment should be aiming for over the next five years.

The longer-term bad news is that this means my level of ambition for Nanodome is now approaching VC grandeur levels, at a time when – despite sky-high government pro-startup rhetoric – new companies find it hard to borrow even £25K from a bank, all the while UK angels’ wallets continue to accumulate more dust than new investments. Still, with IFSEC coming up in mid-May, the best business development play will probably be to put together some kind of deal there – with a bit of luck, Nanodome will have plenty to show by then. 🙂

Bananarama, startups, and success…

OK, the following probably won’t mean much to (the overwhelming majority of?) startup people under 30, but it is what it is.

When I was a kid, I never really got Bananarama. If you managed to miss that particular treat, it was a three-girl pop band singing not brilliantly in slightly jokey videos wearing way too much foundation. As I saw it back then, they had a bit of music, a bit of style, and a bit of sexiness, but not really enough of any of the three to electrify me. Yet they enjoyed (and sustained) a fair bit of chart success.

What, then, was the secret of their success? Was it electrifying people or just ticking the quality boxes? Were Bananarama subtle musical geniuses, or an ISO 9001 certified factory cranking out music-related products?

Personally, I’m pretty sure that success has almost nothing to do with ‘secrets’ (which are, for the most part,  just props for retrospective “success theatre” presentations), but everything to do with working hard & engaging with your audience. And that’s as true for startups as it was for Bananarama.

Business angels claim to be looking to back edgy, exciting, rule-breaking companies, with an explosively dramatic story to tell on a big (world) stage – kind of “the Sex Pistols of startups”. Yet this is basically missing my point, which is that business success rarely comes from surfing some mad adrenaline-fueled development high, but usually comes instead from developing and growing a long-term relationship with an audience.

If Bananarama were a startup, how many angels would have invested in it?

And what kind of band would your startup be?

Death to startup theatre!

I try to keep up with startup-related forums & newsfeeds, I really do: but I have to say it’s a challenge that’s getting harder and harder. It’s not simply the continued absence of any genuinely good news that makes it painful, but the overwhelming preponderance of ‘startup theatre’ – the pouty cheeks and defiant jaw of the face nearly every startup seems to want to present to the world.

As far as I can see, there is basically zero genuine startup journalism going on out there, nothing that manages to stop itself from tumbling into the self-pleasing techno-vacuity of Wired, whose love affair with technology shows no signs of abating – still gadget PR-crazy after these years, still delighted to “go gonzo” by fetishizing some ultra-obscure MIT-style spin-out in a cool-sounding field. At some point, Wired became practically a paean to the putrid pagan altar of VC – and as such has everything to do with the vanity of hyper-money, and nothing to do with the real 99.9% of startups actually building the future.

All the while Wired-style startup journalism continues to suffer from narcissistic personality disorder and budding companies continue to feed journalists willfully optimistic semi-spinned bilkage, there probably is no answer. As a result, we appear to be stuck in a situation where

• all available information on starting companies is largely outdated and irrelevant
• startups operate within a financing segment that is barely alive
• startups have no effective information channel to/from their financing markets
• ultimately, nobody believes anything any startup has to say about anything

Though I’m mainly talking about UK print media here (when was the last time The Economist genuinely looked at startups? Or the Financial Times?), I think the same is – perhaps surprisingly – no less true online. Despite occasionally hosting dissenting guest columnists (such as me here), TechCrunch Europe as a rule rarely reaches the level of what anyone else would term ‘journalism’. And for all Sara Rizk’s hard work at Startups.co.uk to get interviews with UK  ministers, nobody right now is (for example) currently flagging the 100x disparity between the government’s notion that startups’ growth will revitalize the economy (as long as they can start up without needing any money or support, presumably) and the actual size of the macroeconomic hole we’re all stuck in.

Startups themselves do bear some of the blame here, because – as I mentioned – most seem trapped in a spin-heavy broadcast-only PR loop, unable to open any kind of realistic two-way dialogue with the financing community. So, I say, DEATH TO STARTUP THEATRE! – if it reads like a piece in Wired, you’re doing it wrong.

In some ways, this blog functions as a kind of “startup anti-theatre” – saying the kind of things hardly anybody else wants to say, particularly about financing – but that’s not really proving a terrifically helpful exercise either, as it doesn’t seem to be provoking any middle ground into existence… it’s all antithesis and no synthesis, if you’ll forgive me this Hegelianisticism.

So here’s today’s startup challenge for you. The specific innovation that I think is missing here is an effective and credible information channel between startups and financiers, a place out in the open where funding-related dialogue can take place. The question is: what could achieve this? Should startups (for example) press B.I.S. to sponsor the FT to include a weekly / daily startup column, containing a mix of interviews (with startups, angels, Prisk/Cable, etc) and op-ed-style pieces? Alternatively, might The Guardian, The Telegraph, or perhaps even City AM be an effective host?

Business models and lickspittle leeches…

Why are so many people in the startup community so obsessed with business models?

Strip away all the McKinseyite high-concept clutter around them, and I think you’ll find that nearly all so-called “business models” reduce down to only two important aspects:-

1. How the company fits (or doesn’t fit) into a given industrial / cultural / social infrastructure
2. How / when / how often the company persuades its customers to pay it for what it does for them.

But we can make this even more straightforward. You see, as far as #1 goes, if you accept your business environment, you’re a lickspittle: while if you seek to change it, you’re a revolutionary who’s probably too bolshy for his/her own good.

Similarly… as far as #2 goes, if your transactions happen one at a time, you’re essentially an egotist, who would prefer to avoid forming any kind of longterm relationship with his/her customers: while if you sell a stream of smaller transactions, you’re far too attached to your customers to be healthy, hence are at heart a leech.

Happily, you’ll be delighted to hear that these form a neat little 2×2 grid, exactly the kind of thing business schools love so much.

Of course, with this matrix in place it become painfully obvious what has gone so very badly wrong with the UK startup sector: it’s full of lickspittle leeches (specifically financial services), at a time when it needs more bolshy egotists.

Where on the grid do your companies sit?