50 years ago, engineer Gordon Moore wrote an article that has become the bedrock of computing. Moore’s Law, as first described in the article, states that the number of elements that could be fitted onto the same size piece of silicon doubles every year. It was then revised to every two years, and elements changed to transistors, but has basically held true for five decades. Essentially it means that computing power doubles every two years – and consequently gets considerably cheaper over time.
What is interesting is to look back over the last 50 years and see how completely different the IT landscape is today. Pretty much all companies that were active in the market when Moore’s Law was penned have disappeared (with IBM being a notable exception and HP staggering on). Even Intel, the company Moore co-founded, didn’t get started until after he’d written the original article. At the same time IT has moved from a centralised mainframe world, with users interacting through dumb terminals to a more distributed model of a powerful PC on every desk. Arguably, it is now is heading back to an environment where the Cloud provides the processing power and we use PCs, tablets or phones that, while powerful, cannot come close to the speed of Cloud-based servers. This centralised model works well when you have fast connectivity but doesn’t function at all when your internet connection is down, leaving you twiddling your thumbs.
Looking around and comparing a 1960’s mainframe and today’s smartphone you can see Moore’s Law in action, but how long will it continue to work for? The law’s demise has been predicted for some time, and as chips become ever smaller the processes and fabs needed to make them become more complex and therefore more expensive. This means that the costs have to be passed on somehow – at the moment high end smartphone users are happy to pay a premium for the latest, fastest model, but it is difficult to see this lasting for ever, particularly as the whizzier the processor the quicker batteries drain. The Internet of Things (IoT) will require chips with everything, but size and power constraints, and the fact that the majority of IoT sensors will not need huge processing power means that Moore’s Law isn’t necessary to build the smart environments of the future.
Desktop and laptop PCs used to be the biggest users of chips, and the largest beneficiaries of Moore’s Law, becoming increasingly powerful without the form factor having to be changed. But sales are slowing, as people turn to a combination of tablets/phones and the processing power of the Cloud. Devices such as Google Chromebooks can use lower spec chips as it uses the Cloud for the heavy lifting, thus making it cheaper. At the same time, the servers within the datacentres that are running these Cloud services aren’t as space constrained, so miniaturisation is less of a priority.
Taken together these factors probably mean that while Moore’s Law could theoretically carry on for a long time, the economics of a changing IT landscape could finish it off within the next 10 years. However, its death has been predicted many times before, so it would take a brave person to write its epitaph just yet.
Intel must have thought it was onto a winner. Invest in building a new system to help Professor Stephen Hawking to speak, and not only does it get lots of media coverage (to help a good cause of course), but it also put one over on arch rival ARM by linking itself with Cambridge’s most famous living scientist.
Unfortunately, it hasn’t quite turned out like that. Headlines are dominated by Professor Hawking airing his worries that mankind will be threatened by the rise of artificial intelligence, with the machines (which Intel obviously makes the chips for) posing a threat to our very existence.
It isn’t the first time a big brand has been caught out by its chosen celebrity undermining its carefully thought out plans. Here’s another five that a quick Google search turned up:
nfare. All was going well until he tweeted to his 12 million followers that his phone had just erased all his data and rebooted itself – hardly the message of reliability that Samsung was looking for.
2. Motorola and David Beckham
Another classic issue is a celebrity being caught using a competitor’s product. Sticking with sports stars, footballer Ronaldinho signed a lucrative deal with Coke – and was then caught on camera sipping from a can of Pepsi at a press conference. Not to be outdone, David Beckham lent his celebrity status to Motorola’s £14,000 Aura mobile phone, only to be snapped by paparazzi with an iPhone in his hand. He later claimed he’d been ‘holding it for a friend’.
3. Microsoft and Oprah Winfrey
At least Becks had an attempt at an excuse, unlike Oprah Winfrey. Paid to endorse Microsoft’s Surface tablet, she sent out a tweet extolling its virtues. Trouble was every tweet has the program and platform it was sent from automatically added on the bottom. So “Gotta say love that SURFACE!” was appended by the unfortunate words “sent via Twitter for iPad.”
4. Bacardi and Vinnie Jones
Ex-footballer and professional hardman Vinnie Jones was always a risky choice for an alcohol brand, as Bacardi found out to its cost. After using him as the face of the rum, he had to be hastily removed after he was convicted of a drunken assault on a flight from Heathrow to Tokyo. On a similar, but less dramatic note, car insurer Churchill dropped actor Martin Clunes after he lost his driving licence for speeding. Clunes may have complained, but he should have done his homework – previous star of the ads Vic Reeves was sacked after losing his licence for drink driving.
5. Yardley and Helena Bonham Carter
Perhaps the best example of a brand not doing its homework (and for sheer star insouciance) comes from actress Helena Bonham Carter. Chosen as the face of Yardley cosmetics she admitted in an interview that she rarely wore makeup and couldn’t understand why the brand had chosen her. The deal ended soon after.
All of this puts Professor Hawking (and Intel) in rather exalted company – demonstrating the perils of the celebrity endorsement, no matter how highbrow the name involved actually is.
Rumours are currently rife that Apple is about to open an office, albeit a small one, in Cambridge. The research and development centre would initially employ 20 people, so while it is a coup for the city, it is obviously a drop in the ocean compared to the estimated 54,000 tech employees in Silicon Fen. I’d imagine more people currently work in the electronics department of the city’s John Lewis selling iPads and iPods.
The move comes on the back of Qualcomm buying CSR, HP acquiring Autonomy and the opening of research and development centres by Microsoft and AstraZeneca in the area. Taken together these investments can be seen as a real demonstration of the importance of the ideas and skills within Cambridge – and, the potential benefits (business and PR) of associating with the Cambridge Phenomenon.
However, I think there are positive and negative sides to the interest from tech giants in Cambridge. On the plus side, it reaffirms the city’s strengths as a hub, attracts more skilled staff to the area and, in turn, spawns new startups as employees with ideas leave corporate life to launch out on their own.
But there are also two downsides that potentially impact the good news stories. Firstly, there is a risk that with big investment the tech culture can become too corporate. After all, a lot of Cambridge innovation has come from finding solutions to problems in quirky, very different ways. For example, Intel wouldn’t sell Acorn chips for its new range of computers. The company couldn’t afford to build a billion dollar factory to make its own chips, so came up with the first fabless design. Acorn spun off this knowledge as ARM, now Intel’s biggest competitor.
Before that Clive Sinclair built a scientific calculator that used clever algorithms to run calculations on a single, relatively standard chip. Rivals such as HP used five chips and consequently built machines that were much more expensive. The SureFlap microchip controlled cat flap was created by a physicist who didn’t want neighbourhood moggies invading his house. All of these are examples of the lateral thinking that Cambridge is famous for – but could potentially be stifled by corporate politics (and, ironically too much money).
However I think that while the Cambridge culture may change, it won’t unduly impact its DNA. After all, in Silicon Valley enormous behemoths and nimble startups co-exist with people moving between the two. What is more serious is the second threat of a lack of infrastructure, particularly affordable housing within the city and its locality. It is currently as expensive to live in Cambridge as in London, but with less in the way of facilities. There are plans to build 33,000 more houses by 2031, but the majority are outside the city. And if people live further out and commute by car, rather than bike, it will add to congestion and put further strain on key roads.
Obviously Apple’s 20 researchers aren’t going to add too greatly to current housing woes, but as Silicon Fen grows, now is the time to address infrastructure concerns – or risk losing the city’s status as a tech hub to better equipped rivals.
The tech market across Europe is on a roll. According to Dow Jones VentureSource European startups raised €2.1 billion (over $2.8 billion) in Q2 2014 from VCs, the highest amount since 2010. The average size of the 365 deals was €2.2 million, up from €1.5 million in Q3 2013. Essentially that means every day of the quarter four startups got funding from VCs.
At the other end of the company journey, Tech.eu counted 92 tech exits in Q2 2014, up 70% from Q1 2014. 10 of these were IPOs, showing a healthy move back to the stock market for tech companies. And while deal size was undisclosed in 72% of cases, 15 were for over €100 million.
So, does this mean that everything is rosy in the tech market and your startup will receive its deserved funding in a heartbeat? Unfortunately not, and there are three worrying points behind the figures:
1 What is a tech company?
I’ve always been suspicious/puritanical on what makes a startup ‘tech’ rather than part of any other sector. Taking a look through both the Tech.eu list of exits and its corresponding index of EU tech funding rounds so far in 2014, I don’t see that many companies I’d class as technology. IPOs and exits included:
- Takeaway platform Just-Eat (food)
- Zoopla (property)
- Markit (financial information)
- Oldford Group (gambling)
- M and M Direct and Game Digital (retail)
- eDreams Odigeo (travel)
- Jobsite (recruitment)
Companies that received the largest amounts of funding mirrored this list – Delivery Hero, which has raised $285 million to date, is an online food ordering platform, while Ozon ($150 million) is an online Russian retailer.
There are what I’d consider genuine tech companies receiving funding (Klarna is a payments provider, Tradeshift is B2B software and Elasticsearch is a search and analytics engine). And looking at the IPOs, Zendesk (customer service software) also fits into my narrow definition of proper tech.
Obviously consumer facing companies need large amounts of funding – they have to market themselves and launch into competitive marketing which takes cash. But my complaint is that technology is part of every business, so just because you sell via the web, that doesn’t make you a tech company. After all, in the early days of the telephone, no-one created a new category for businesses built on the communications power of the phone. By lumping these companies into ‘tech’, investors and commentators overlook the genuine technology companies making software and hardware in favour of more glamourous consumer businesses. It was exactly the same issue in the dotcom boom, with anything that had a website being lauded to the skies as a tech pioneer.
2 Europe lagging the US
The European figures for funding look strong, but in the US private tech companies raised $13.8 billion in the same period. We’re talking about a similar size market in terms of people, yet nearly five times the investment. No wonder that many EU tech firms are crossing the pond to tap into US funding. Zendesk is a good case in point. While founded in Denmark, its successful IPO was on NASDAQ, where it has seen its share price nearly double from $9 to around $17.97 currently.
Clearly, there are structural and funding issues that need to be addressed to convince European companies that this is where they need to build their startups if we are to build a vibrant tech sector across the EU.
3 Selling out too soon?
Some companies are never going to have the scale to survive on their own and fit better as part of a larger entity. So, trade sales are a vital part of the tech ecosystem – investors get their money back (hopefully), enabling them to invest elsewhere, while founders and management teams are able to move on to the next big idea.
But looking through the crop of acquisitions the largest amount (37%) were by US companies. Facebook and TripAdvisor made two European acquisitions, and the likes of Cisco and Intel bought one business each. The risk is that too many smart European tech businesses don’t turn into long term, billion dollar companies with their own ecosystems around them, as they don’t get the chance to grow before being snapped up for their technology or market position. That holds back the wider European tech economy and reinforces US dominance. It would be good to see longer term backing for European tech, with more IPOs and acquisitions by local companies, rather than selling out to US giants.
I don’t want to come across solely as a whingeing naysayer, as it is great news that funding is up for tech businesses across Europe. But I think there needs to be a narrower focus on what tech actually is amongst the media and investors, and a longer term attitude if Europe is ever to come close to building a sustainable tech economy across the continent.
It used to be that failing in business was a potentially catastrophic black mark in the UK – essentially the end of your career. But over the last decade attitudes have changed, driven by a more American view that it is better to have tried and not succeeded than to not to have bothered at all. There are a thousand and one reasons that a venture might fail, many outside your control, and as long as you learn lessons you can bounce back stronger.
This more relaxed attitude to failure is reflected in the growth of startups in the UK. Rather than leave university and go and work in corporate Britain, setting up on your own is a viable choice – if it doesn’t work you can always try the 9 to 5 in a few years time. And as the Seth Godin quote goes, “If failure isn’t an option, neither is success.”
But if the stigma of failure has been removed it brings another big question – when do you give up on your idea/business? Do you shut up shop at the first signs of trouble or soldier on when all chances of success are gone? That was the topic of an entertaining discussion at last week’s Pitch and Mix in Cambridge, which got me thinking about the whole topic.
It is easy to look at businesses or individuals where it would have been easy to give up when they hit the first roadblock. Harvard made Mark Zuckerberg take down the first version of Facebook and nearly expelled him – but he learnt from the experience and moved on. In Cambridge, ARM was essentially created within Acorn as Intel wouldn’t sell the computer manufacturer the chips they needed. The business pivoted and is now a multi-billion dollar world leader.
What came out from the discussion were two main ways of helping you to know when you’ve really failed and it is time to give up.
Firstly, set realistic objectives and goals for your company/project, with a timeframe attached. It shouldn’t be a hundred page business plan that controls your life but an idea of what success looks like and the time it should take to get there. Whether as simple as “we need to have made our first sale in 18 months” or more complex, use it as a guide to when to stop. If you get to 18 months and there’s no sign of a customer then you should probably give up, but if you’re negotiating with a couple, then extend your timeframe. Build a plan to get to your objectives – what needs to happen for you to make that sale/launch the project within your timeframe.
Secondly, get independent advice. Everyone involved in startups must have passion – if you aren’t enthusiastic about the idea you won’t put in the hours to make it work. However perspective is more difficult – you are simply too close to the coalface to provide an objective view of reality. So find yourself an independent mentor, who understands your business and what you are trying to do and give you advice and perspective on the way forward.
More businesses fail than succeed, but don’t take it personally, learn and move on. And marry passion with perspective to work out when to throw in the towel and start again.