I visited 4 amazing cities and met a ton of startup founders and business leaders during my travels with GOAP and the wild and crazy 500 Startups crew the past 2 weeks.  Below are my notes.  And here are my notes from last year’s trip to South America.

Moscow, Russia

• lots of smart engineers, but most are afraid of the financial risk to work for a startup. Engineers for startups cost more than for big companies because of this risk and they won’t take equity
• cut throat competitive, not collaborative
• very few angel investors
• felt safe walking around the city, the environment did not feel weird like many americans would think… felt like NYC but with strange letters on signs
• expensive city
• Russians smoke like a chimney, like to cut in line, and don’t smile
• big language barrier; startup founders had enough english to do their pitch but having a conversation afterward was hard
• a few big Internet companies like Яндекс and Mail.ru are starting to crank out a new gen of entrepreneurs, however the biggest risk is keeping those people from leaving to start their company in the US
• Russia lacks sufficient logistics/delivery infrastructure to support ecommerce businesses. 2 weeks min to get a product delivered.
• the best startups are run by founders who have spent time in silicon valley
• fun flexible company cultures are rare and a competitive advantage for those that have it
• very cost conscious
• content is expected to be free. Even leaders at the big Internet companies say movies/music/books should be free or cost pennies, and publishers need to get comfortable w/ alt smaller revenue models in order to get any revenue from this market
• PCs, Android & feature phones dominate because of cost. Apple products are <1%.
• big opportunity for Russian entrepreneurs who have worked for or founded tech companies in the US to go back and build companies there “the silicon valley way”

Tallinn, Estonia

• clearly the most progressive tech startup community we visited in Eastern Europe, but also the smallest
• people are friendly and smile & everyone either speaks or understands English
• engineers tend to be more introverted compared to US engineers
• Skype is their darling tech company and extremely important to the startup community.
• similar to the US, lots of competition for engineering talent because of the number of startups
• slow immigration process getting engineers from the EU. Protectionist policies due to being occupied by Russia and before that Germany and others before that
• engineers are able to get their back after leaving Skype to do a startup and then failing. This low risk causes a lot of people to peruse it.
• they go global first starting with US market, because there is no local market
• no B2C, because there is no local market
• 1M people, but “only 1000s of programmers and ~10k IT people”
• Estonians are more like US and western Europe than like Russians. They do not focus on Russian market.
• Estonians hate Russia… at least on a political level
• lack biz dev, enterprise sales & middle management leader — an opportunity for US biz founder types to move to Estonia
• tight community, local mentors helping but they are not experts either. Founders are getting a lot of value going to 500 Startups & TechStars and coming back
• 250 startups, mostly unfunded
• single digit number of local investors
• startup founders club and Garage48 hackathons get founders together and has helped build the community
• opportunity to combine tech communities of Tallinn, Helsinki, Lithuania. Right now they are separate but similar, and many people think they will converge.
• free wifi everywhere and proud of it

Zagreb, Croatia

• nice people, safe country, great food & wine, reasonably good English speaking
• rolled out the red carpet for us
• met with Croatia’s president after he reach out to Dave McClure on facebook
• working really hard to build a startup scene from scratch
• no angels, no coworking spaces, no startup success stories… but starting to manufacture density through events and a coworkimg space coming soon
• like other emerging startup markets, good engineering talent but extreme lack of product, biz dev and enterprise sales talent. Again, and opportunity for the thousands of US biz founders who can’t find a technical cofounder for their startup idea
• hardware startups… a surveillance drone company, and Rimac – a Bugatti-caliber Tesla ($1M)
• local concern that US businesses will be less willing to buy products from Croatian businesses. Not a real concern; its an inferiority complex… this is similar to a college kid trying to build a business out of their dorm room — most US buyers won’t even know you’re not an established US business. A more real risk is that Croatian businesses’ won’t be able to effectively market their product to US buyers because they don’t know the market.
• not many Croatians have been to the US, but are trying to start businesses that sell into the US. They need to start sending entrepreneurs to the US. They just started a hacker house in silicon valley to rotate Croatians and other entrepreneurs in the region through.
• generally the questions asked by Croatian entrepreneurs related to fund raising and company building were very basic

Berlin, Germany

• can’t comment.  I skipped this part of the trip and went to Munich for Oktoberfest instead.

I was fortunate to be able to join a bunch of great people (too many to name) this week on the GeeksOnaPlane trip. We visited Brazil, Chile and Argentina. Our mission was to meet with entrepreneurs, investors and government officials to learn a little bit about their tech startup culture and to share a little of ours.

I feel that I understand what’s going on in Brazil much better than I do Chile, so I am going to just cover Brazil in this post (I was tired after going non-stop for 4 days in Brazil and unfortunately I did not join the group in Argentina so that I could return to the US for a friend’s wedding. Hopefully someone else will write a similar post on Chile and Argentina.)

Here is what I observed:

Brazil
– the country recently overcame a period of hyper inflation and their currency is now stable
– taxes are high and complex, but also stable
– nobody thinks the govt will lower taxes any time soon to spur more business growth
– they have a rapidly growing middle class (consumers!) = opportunity
– Sao Paulo is the tech & business hub
– Rio de Janeiro wants to be the tech & business hub
– Rio is a beautiful city but businesses moved to Sao Paulo over the past 30 years due to drug related crime
– Rio is aggressively cleaning up it’s image by pushing the drug gangs out, closing and remediating their environmental catastrophe of a landfill (see film “Waste Land”), and building infrastructure to host the upcoming World Cup and 2016 Olympics

Brazil’s Startup Scene
– most startups I met are creating consumer internet businesses that copy successful US business models
– most are first time entrepreneurs, because until recently there wasn’t an appetite for engineers to take risk relative to getting a high paying govt job; this is changing because of the opportunity presented by the growing number of middle class consumers
– Brazilian VCs suck; they make investments to grow established businesses rather than investing in the riskier early stage companies that are innovating
– entrepreneurs are inexperienced and lack guidance when it comes to raising money. VCs rape entrepreneurs by taking huge equity stakes for a small investment (I heard one case of a guy giving up 80% of his company for a couple hundred thousand dollars!)
– entrepreneurs don’t collaborate with each other; again due to lack of experience they don’t understand the value of the feedback they would get from an open culture where ideas and data are shared, rather than being stealthy
– there are very few successful entrepreneurs advising and founding new startups; I think this is because there aren’t many exits and the entrepreneurs that get acquired are staying with their companies long  afterward
– big established companies don’t think they can be disrupted by startups. They believe that startups should and will just go after new opportunities rather than reinvent old industries using technology. I guess a big disruption has never happened there before. They’re in for a shocker.

Brazilian consumers have money to spend and their culture is similar to the US. There will be a land grab this decade to bring the types of products and services that we have in the US to Brazil. Local entrepreneurs are racing for it, but could really use our help. They need our experience and our money. I mentioned to the organization that hosted part of our trip,Brazil Innovators, that they need to get an entrepreneur exchange program going. I hope they do. They should recruit Silicon Valley entrepreneurs to come to Brazil for 6 months after they sell their company and before they start their next one, and send some Brazilians to work in Silicon Valley. The knowledge transfer that would occur from such a program would be tremendous and I bet some folks would stay. Startups cofounded by an experienced Silicon Valley entrepreneur plus a local Brazilian entrepreneur would crush it down there right now.

I just walked out of a fascinating panel at SXSW Interactive by the Meetup guys, about how their company's R&D culture evolved from fun/fast/startup-mode to, boring/slow/process-oriented, and then back to fun/fast/"self-organized".  They call what they have now "100% Time".

Here are my unedited, loosely organized notes…

Great entrepreneur/startup culture first few years. One day announced "we're no longer a startup and we need processes". Within a year, Product and R&D were at each other's throats and engagement had plummeted. The processes had made their business like every other business and crushed their company culture.  Leadership had 2 week offsite to figure out what to do. Could not decide. Decided to hold a 6 week Hackathon to more buy time to figure out what to do.

Held company meeting to tell everyone to put current projects on hold. Told them to pick a 6 week Hackathon project.  3 rules:
– Project must add value
– Must convince 3 people to work on project w you (1 product, 1 frontend dev, 1 backend dev, 1 support)
– Must impress your peers

First day, people pitched their ideas to the company, including leadership.  Leadership tossed out their feedback and then walked out and went to see a movie.

Teams then formed. Teams commandeered conference rooms and other spaces. Teams got to work.  They got more built in those 6 weeks than prev year. Staff's engagement level was all time high. It was a clear choice to keep this "self-organizing" team structure.

Every so often they have a deadline and slip structure back in, and it
always turns out to be a mistake. They learn this lesson frequently as
structure creeps in.

On usability:
The theory that Developers/Engineers can't understand humans and need product and design processes to drive usability is false. Typically developers/engineers just don't have access to the users. At Meetup Developers/Engineers routinely watch normal users use their product, and it us very humbling for them and the usability of the product improves because of this.

On hiring:
– To get things done, their developers have to be able to work with others. People who just want to sit alone and hack will not get anything done, since a rule is you must work on your project w 3 others. Makes hiring really difficult. But finding the right people that fits this mold pays off.
– interview process: written test, then meet w 4-5 people from all sorts of groups, then meets w leadership. Takes Joel Spolsky approach where one maybe = No

On management:
– Tried peer-to-peer reviews. Created too much work. Now peers are asked to voluntarily give feedback to an employee's manager 
– everyone has a manager. Managers are essentially the top technical guys. Managers are also on dev teams themselves. People on the same team do not have to have the same manager.
– everyone works at their office. Not remote.

They encourage lots of communication channels. Small company. 60 people.  Their office is mostly one big open space. Lots of overhearing.

Interesting comment… "Leadership can't create a company culture. It
rises out of who you hire. Hire entrepreneur startupy people and you'll
have and entrepreneur startupy culture. Your job as leaders is to not
squash the culture."

Q&A:

How do you resolve product vision conflicts?
– we're extremely transparent, so everyone understands the vision, sales/finance, product adoption, etc

Do you have a product roadmap?
– no. This made it really hard to raise money. When people ask, they make shit up. Normally it doesn't matter.

Do you have a company wide development methodology?
– no. Teams pick their own methodology.

Do you have any dev metrics or goals?
– nothing company wide. Each team tells us how we should measure their success. And I spend a lot of time asking the teams questions and offering suggestions as they design, develop and set milestones.

Release Cycles?
– week releases every Tuesday
– QA person signs off

Do you think this model would work if you guys had Customers, not Users?
– I don't know.

Do you think this model would work for a much larger organization?
– we don't know yet.

Have you written about this?
– no. But here are 2 books we read after we started doing this:
Maverick
Seven Day Weekend

Why don't we take the $25 billion, $50 billion, $100 billion, or whatever it is that automakers are begging congress for, and instead of helping them keep their dying business models alive, invest the money in building a kick-ass US rail system like Europe and China have?  This would be better for US workers because it would create new sustainable jobs to replace their inefficient union jobs that still may vanish even after a bailout.

If a company is “too big to let fail”, such as Citi, AIG, GM, shouldn’t we not let them get that big in the first place? I’m not sure they actually are too big to let them fail… But if the government thinks they are, then isn’t the government negligent for putting us at risk by allowing these companies to get this big? Do we need anti-monopoly style laws to break up these giants early so that some can fail without government bailouts? If not, then these companies aren’t too big to let fail.

What a F*%ked up system…

How the Patent System Really Works
posted by David Hitz @ NetApp

When David refers to "BigCo" in his post, I’m sure he really means Big Blue.  According to IBM’s own website, they earn $1 billion each year directly from licensing their intellectual property.  They are the biggest contributor/benefactor in the mess that is our patent system.

Call me naive, but I’m one of those guys who David mentions wants nothing to do with the U.S. patent system.  When I visit a small company’s website and I see the words "patent pending", my first thought is that this company is investing the limited resources that they have into the wrong things.  Usually my second thought is "Wow, you can patent that?"

If it were up to me, I’d add a complexity requirement to new patents.  Don’t just grant a patent to somebody who happened to be the first person to document a very simple process.  Require that the process or invention be complicated; not something so simple and non-revolutionary that nobody has bothered to write it down yet.

My view all comes down to this…

People should be rewarded with a patent when they invest a lot of
resources into their invention, not when they invest a lot of resources
solely into their patent application.  Basic ideas that are invented via the natural evolution of other ideas, need to be owned by the community, not by one company or one individual.  Adding a complexity requirement to the invention would solve this.

Ironically, IBM claims to be working on initiatives to modernize the patent system.  They are pushing for positive changes such as a community review system with social networking components and patent quality and complexity indexes.  But these indexes are intended to be a means of rating a patent or patent app, not a requirement as I think we need.  And just because IBM’s PR spin shows them attempting to correct the problem, don’t expect them to stop exploiting the current system until there is nothing left to exploit.

Some folks are also trying to get the USPTO to recognize open source software as "prior art", so that companies like IBM can’t steal somebody else’s work when people release their work to the open source community rather than investing in a patent.  Open source work is the most obvious form of the natural evolution of ideas, and those ideas should be community owned.  Or at least owned by the copyright holder of the specific piece of code that was committed to the project’s version control system.

I apologize for not properly swearing in my opening sentence 🙂.  I was told by a friend that when I use curse words in my posts, it takes away from the message that I am trying to convey.  He is probably right, so I will take his advice and censor future posts, with a few exceptions when I feel there is no other way to appropriately express what I am trying to say.