What I’ve learned in Silicon Valley

I recently spent a month in the US, travelling to Los Angeles, New York and Silicon Valley (as part of ICON program), and meeting with some of the world’s top investors, founders and companies. Being in Silicon Valley felt a bit like flying forward in time — seeing autonomous cars on the road, talking about VR experiences and how they will affect our reality (or what will be a true reality). Talking about the future of middle class employment once robots take over so many jobs, and in general discussing new technologies, whether they will happen and how we can be there first and help shape the future.
I absorbed much more than I can bring to words but I’d like to share some of the insights that I gained, firstly for others who are just starting out with their venture and secondly for myself to remember and to summarise some of my learnings. Nothing mentioned here is a quote, rather an interpretation of what I’ve heard and seen.

Aim high and dream big

Every good company starts with a big vision. As Israelis, we’re extremely cynical people. If I were to tell someone that my company is going to change the car industry for good then Israelis would probably laugh out loud. Israelis are mostly tech and ideas people. Americans are inherently salespeople; from the age of 10 they get taught how to present and articulate themselves, but Israelis don’t. We are much more doers than we are talkers. Hence, we should get out of our comfort zone and sell a big vision. Actually, no. We should believe, dream, and aspire toward a big vision, and then sell it. Also, with great visions come great people…

Here are some visions I like:

Disney — “To make people happy”

Ikea — “To create a better everyday life for the many people”

Amazon — “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online”

Talk about the why not the how

As technical, solution-oriented people, we often talk about how to do something rather than why we are doing it or whom it is for. Focusing on the why will make it a better sell for both investors and clients. The how can change a million times, so founders should be clear on who they’re building for and what the purpose is.

Fundraising

Seed rounds are extremely dependent on two main factors: the team and the size of the market. The likelihood of raising more funds before launching or even developing a project is much higher (than after launch and development), as you’re only measured on your team and the size of market. Whereas if you do it after you have a few lines of code, you’d be measured by traction or other KPIs. So, raise funds before you build but make sure to do proper research on the market (validate its size and future existence) and build a top-notch team. Obviously there are some caveats to this approach but it has its merits.

Commodities vs. new categories

Sure software is eating the world, but as startup founders we have to remember that software is quickly becoming a commodity, with hosting costs lower than ever and APIs becoming abundant. These days, in order to make a billion dollar company, you are more likely to do so by creating a new category in an existing market or a new market. A company with an unfair advantage, no or few competitors, and a very well defined vision can have a much bigger impact.

The foundations of an unfair advantage

In a world where new startups are built and shut every day, it seems that companies that are based on the foundations of the following are more prone to success than others. There are obviously many more factors affecting one startup’s potential to grow, such as timing, hiring, market potential etc., but the following ones are those I’d like to emphasise:

Network effect platforms where every node added has an impact on the entire network, and once it becomes big enough it has this unfair advantage that no new player can compete with as it’s just too late. Airbnb is a good example of such a company — it has no software or algorithm superiority but now that it has become such a huge network of renters and homeowners, no one can compete with it.

Data oriented companies can build up on analysing data and optimising behaviours based on this data. Obviously, these days, collecting data is no longer a challenge. It seems that startups that are only built on software are less likely to succeed than those who use the data they collect for a better experience, more conversions, and growth. Amazon is a great example of a company with a massive amount of data about its customers. They obviously use this data for more targeted advertising, but also for fraud detection, supply chain optimization and others. Netflix is another great example of a company that uses its viewing habits data to commission original programming content.

B2B services are more likely to make it if they address a very clear pain point that enterprises would be willing to pay for, and once they’re in they are locked and someone would need to be at least ten times better to make them change the service. Look at Salesforce, for example, which has locked in enterprises with great service, solving a real problem albeit their high costs.

Flexibility

Almost all the founders we’ve met had to go through several pivots in the lifetime of their startups. One company started off as a remote control for TV with hand gestures and ended up using the same technology for VR handsets, that led to them being sold to Facebook. Another startup started building autonomous trucks and pivoted to marketplace, and later on sold to Uber. As you start developing the product, and digging deeper into the industry, you find out that the problem might be much bigger or different than the one you had in mind, and your solution should change accordingly — for that founders’ flexibility is key.

All of the above is…

There are so many exceptions to the points I wrote above that they might be the actual exceptions. There is really no secret sauce. The bottom line is: if you surround yourself with great people, and have an amazing vision that you truly believe in and that pushes you forwards, all the rest is bullshit.