Founders, this isn’t Silicon Valley

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Most start-ups will fail, whether you’re following the Silicon Valley model where you work to get traction and venture financing or you’re bootstrapping your business. Many fail because they run out of resources (including cash). In both cases, you’re expected to work your ass off for the first few years.

As a graduate of the Founder Institute program, I’ve been taught the Silicon Valley way of going for huge markets and easy to scale ideas while the window of opportunity to gain huge market share is still open. We’ve also been taught a structured approach of raising venture capital to grow our business and ideas. Many of the lessons shared by experienced mentors in the program are applicable to any business, even non-technology businesses. You may read more on my thoughts about the program here.

I’ve spoken to a number of local Small Medium Business owners who have an annual revenue of $1million onwards. None have built a sustainable business based on venture financing. Most relied on their own savings or capital from family and friends. In short, they bootstrapped their business to profitability. One could argue that many of these businesses are service-based and thus by definition, hard to scale globally. True. Classic examples are your advertising agencies and consulting firms which took decades to scale globally.

When Instagram, a photo-sharing mobile application, was sold to Facebook for US$1 Billion, I cringed. You will shudder too if you hear words along the lines of, “If I built an app and sold it for a million dollars, I would be rich.”

Picplz, Dailybooth, Hipsmatic, Steply. These were the listed competitors of Instagram on Quora, a question-and-answer website with thousands of active users from the tech start-up community. PicPlz has shut down. Dailybooth last received US$6 million in venture funding and has no revenue model. Hipsmatic is a paid app with millions of downloads which generates revenue. Steply has in-app purchase which generates some revenue, similar to Instagram. There are definitely a handful of other similar apps that have sunk to oblivion since the acquisition or several others trying to carve a niche. e.g. Instagram for pets, Instagram for food, Instagram in your mother tongue language

There are many articles and books written about the subject of building a successful technology venture, what’s paling in comparison are the stories of failure. In which the following article from NPR briefly addresses (Failure: The F-Word Silicon Valley Loves and Hates) In which, I surmise, the fear of failure and the mastery of it is as good a a healthy dose of scepticism.

There’s a saying that goes, “Most entrepreneurs in Silicon Valley are working on ideas that only 1% of the world’s population care about.” So are these tech startups bound to fail?

You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.
~Paul Graham, Venture Capitalist and Co-Founder of Y Combinator

If local startups are to compete with smart teams in the Valley and solve similar problems that only 1% of the world’s population care about, will they fail? Likely, because the playing field is not levelled to begin with. This is partially an issue with market size, access to international press, experienced mentors and ease of capital. In short, a less robust eco-system.

There are 2 articles written by Jeffrey Paine, partner at Golden Gate Ventures which explains in detail why the playing field is not levelled for startups outside the U.S. particularly Singapore.

  1. Starting up in Singapore Part 1 (Product/Market Fit)
  2. Open Letter to Government Round Table

Despite the odds, the stories of how local entrepreneurs built a profitable businesses continue to inspire me. Local businesses that have been profitable and grown global include, Charles & Keith (fuelling its global expansion with strategic investment from LVMH), Razer (going IPO soon) and X-mini (recently expanded to the U.S.)

So here’s a challenge to all startup founders in Asia: Look back home, think about local role models and learn to build your business brick by brick and dollar by dollar.

This isn’t Silicon Valley.

Additional Reading:

  • http://bosslee.co/ Bryan Lee

    hahaha. such a small world. I did a post ytd on Peck Ying’s poster and I also wrote this statement.

    This is Singapore not Silicon Valley.

    Totally agreed :D

  • http://www.facebook.com/evelyn.samuel Evelyn Samuel

    Great to see some basic marketing sense — the world is not just one market.

  • http://twitter.com/darkchyld88 Brandon Leong

    Great article! This is clearly very relevant to the Asia market. Understanding markets is clearly a big part of marketing (which has been associated more with advertising and promotions). I’ve seen many Tech start ups both from Asia and ones that are expanding from Silicon Valley fail to grasp and overcome the challenges in Asia. They should definitely look deeper into the issues.

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