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@krestenbuch-blog
As Stephan Kinsella argues, if you are pro free market, you shouldn't support the idea of state given privilege. (IP right) There exist only rights in physical object and contract. So if you want to profit from your invention or product you made then it's up to your creativity to do so, don't relay on the state to do so.
Public education is a #fail.
A hundred and fifty years ago, adults were incensed about child labor. Low-wage kids were taking jobs away from hard-working adults.
Sure, there was some moral outrage at seven-year olds losing fingers and being abused at work, but the economic rationale was paramount. Factory owners insisted that losing child workers would be catastrophic to their industries and fought hard to keep the kids at work--they said they couldn't afford to hire adults. It wasn't until 1918 that nationwide compulsory education was in place.
Read post here
As less money is needed for investing in a startup the less time you can spend on making the decision to invest. Check out 500 startups, with is an hybrid between an incubator and a seed fund. IPO48 Investment 48h bootcamp take this concept to the extreme by limiting the investment decision to 48 Hours. Be part of the show sign op as a mentor on IPO48.com.
This lecture by Israel Kirzner on entrepreneurship and competition gives more insight into economics and entrepreneurship then a 5 year study of main stream economics from a state university. The entrepreneur is the driving force in the economy and a central figure in the Austrian School of economics. In the mainstream books used in most universities on he dosn't excist ? Here the books focus on how the state can manipulate the economy using monetary and fiscal policy. The student of economics today are being thought how to be an 'economic priest' believing that they can control and guide the economy with fancy mathematical models. But you can't model the innovation and creative destruction that entrepreneurs creates, and this is where real progress comes from.
The entrepreneur is as Kirzner put it, an analytical pest for all the economic priest mathematical models.
The Internet will blow up the educational space and new educational brands will emerge and compete with the universities. It's a really interesting space to invest in and I'm keen to hear from companies that want to smash public education.
The up coming spice girls of tech. Stil wondering why Nokia have not called to sign these girls on for promoting Nokia products - but eventually they will :-). This is from their interview with Kenyan television last saturday.
A must see for people who are into lean startups
The road to sustainability is paved with profit
Most people would find the claim that government officials, priests, journalists and people working in aid organizations are only motivated by their will to serve the public good rather naive and simplifying. Cultural prestige, financial gain a personal passion for finding solutions to problems also have a role to play. Unfortunately, there are no pure angels walking the earth. But when it comes to market entrepreneurs it is often assumed that they work only for the profit motive. The “devil figure” is more accepted. But this too is simplifying and naive.
Market entrepreneurs are also motivated by a desire to solve a problem, and works out this desire with passion and energy. This “entrepreneurial energy” is an important resource of society to be nurtured and allocated efficiently just as all other important resources.
When talking about “sustainability”, entrepreneurs are often forgotten or even scolded. But the entrepreneur’s quest for market profit is actually a key to sustainability.
How do we know we have a sustainable solution to a problem?
If you have solved a problem and at the same time makes market profit, this implies that you have designed a process where people voluntarily pay for something that solves the problem.
Market profit is not only good as a financial reward to the entrepreneur, but also as a signal that here we have a solution that rests in itself without forcing or bribing anyone to participate and without help from the outside (such as foreign aid or industry subsidies).
If you are passionate about finding a sustainable solution to a problem, use market profit as your guideline. Find out how to make the relevant parties pay for your service/solution out of their free will (this excludes tax money). This focus will help you mature and develop your concept and ideas in the right direction and possibly lead to a solution where people voluntarily pay for it. This will not only make it sustainable, but also make it possible to scale it up so that it creates a massive impact. An example of such solutions is the extensive use of mobile phones in developing countries.
This notion of sustainability is different from the one used by ecologists. But “market sustainability” is not irreconcilable with ecological sustainability as long as ecological sustainability is pursued by making equal rules for everyone, setting the frame within which market entrepreneurs can work on equal ground.
Too often social entrepreneurs and politicians with the best intentions fail to understand the power of this guiding star of the capitalist system, the market profit. The result is that the search for sustainability is pursued by strategies such as “pick the winner” where the bureaucratic elite chooses a few industries that are deemed “sustainable” and lavish them with subsidies. The windmill industry in Europe or primitive handicraft in India are examples. Or by giving money to specific NGO’s, government programs etc that work to create solutions dictated by the political or bureaucratic process.
The influential economist William J. Baumol has suggested that entrepreneurial energy/activities can take more forms than just the quest for market profit *. That rent seeking or warfare are also sorts of entrepreneurial effort, just unproductive ones. It’s the incentive pattern that determines what activities the entrepreneurial forces of society are directed at.
If we want to exploit the entrepreneurial forces of society in a productive way, if we want to use the entrepreneurs to find sustainable solutions to our problems, it is crucial that we recognize the fundamental, long term importance of market profit.
So don’t feel guilty over making profits and congratulate others when they do – you just made the world a better place to live. Profit is not only the signal that people are willing to trade their money for something they value higher, your product, but also a signal you haven’t wasted another important resource of society, your time and energy.
*William J. Baumol, The Journal of Political Economy Vol. 98, No. 5, Part 1. (Oct., 1990), pp. 893-921.
IPO48 - Investing in a Kenyan startup in 48 hours!
On the 29th of October a group of (mainly) Estonians will go to Kenya to create a 48 hour boot-camp event for web and mobile services. The idea for the teams participating is to create a working demo, from an idea to operating service in just 48 hours. First let me just give you some facts about Kenya that surprise most people I speak to. Kenya has 22 mln mobile subscribers, but even more significantly they have the most successful mobile payment service, a joint venture between local mobile company Safaricom and international gigant Vodafone. Over 10 mln use this service and as a merchant, when accepting payment from your customers, you only need to pay a fee of about 5% and you have no credit risk. To make IPO48 more fascinating compared to Garage48 and startup weekend, we will invest a minimum of €10'000 EUR in the best team right after the event. Normally it takes quite a long time to get funding for a startup, 6-9 month is not unusual. The investors would like to follow the startup to see how it develops and also to have time to check out the team. IPO48.com has a 14-day pre-stage, where ideas will be posted to humanipo.com. A crowdsourcing process from a number of advisors will challenge the entrepreneur and push him to look into business models and other aspects of turning the idea into a business. This transparent approach will quickly show whether the entrepreneur has the ability to sell his idea, debate it, and pick out relevant information from the process. My theory is that this gives some insight to his ability to execute the business plan. As a next step the idea holder gathers a team. This can be done online or at the event. Again, the entrepreneur who is good at selling his idea and evaluating people will end up with the best team - stars attract stars. This is all about social skills, selling yourself and the idea, an absolute key competence for the vast majority of successful entrepreneurs. During the event the teams are under pressure and need to make very quick decisions about the specifications of the software. This requires strong teamwork and someone who can cut through and quickly get things moving. Real leaders with the ability to perform and energize the team will stand out in this process and this should be a good indication of their capability to lead and execute. You will be able to follow, engage and help the African teams on humanipo.com before and during the event. If you have ideas or would somehow like to participate as a online advisor or in any other capacity, then feel free to send me an email or leave a comment on the blog.
Try trouble-making instead of pitching.
I have now spent a fair bit of my time looking at the Estonian start-up scheme by attending various startup events, especially these pitching events. As I understand this is the traditional VC way. When you have become good at pitching you go to the U.S., pitch about 200 times and you might get 2 mln USD, a 250-page long shareholders' agreement and an invoice for 100 000 USD from your lawyer. You will now start burning cash as if there is no tomorrow, hence the next thing you start to think about, is pitching for the next round. You will become a pitching junkie who's looking for the next fix.
This approach to starting a business doesn't seem healthy to me and if your are under 25 years old, as a fair bit of these people are whom I've seen pitching, then you are quite unlikely to get any money. A recent report from CB Insights showed, that only 4% of the U.S. VC money in 2010 went to people under 25 years old.
So what do you have going for yourself as a young entrepreneur? You don't actually need much money to survive, as you are used to living for almost nothing. This is quite a big advantage as you will see from my next point.
What I focus on when starting a business, is that I want to hit break even as quickly as possible. You should scramble for cash and try to come up with all kinds of ideas to quickly make some money. This will force you to quickly to find out how to make money out of your idea and you will come to realize that were most likely not there where you expected it to be. Finding upside and great potential you can do later.
Just to give you a small illustration: a Danish company called Vigilante, which eventually ended up in New York stock exchange, started up by providing consulting services in security sphere. Obviously you can't get financing for that as it doesn't scale, but because they got to know the clients needs well enough, they made a security software product which scaled really well. So my point is, that when you have a running business that breaks even, it is very likely that you can come up with new exciting ideas that have great potential. Breaking even means that you have the time, knowledge and network, which gives you much better chances for executing your ideas.
I have a couple of ideas how you could scrabble for cash. These will mainly work in web service sector, as that’s the area I’ve most been involved with.
1) Give your upside away in a certain geographical area for a fixed fee. You might have a great web service that needs traffic, so you can go to a big portal and say that you will give them all upsides of your product for a fixed fee per month or a combination of a fixed fee and a bit of upside.
2) You might go to a big website and say you would like to build this application for them, including giving them source code for a low fixed fee per month. That way you can use the code for other markets.
3) You might want to give some of your company away for a sales deal with a big website. Remember to get some fixed cash as it shows commitment from their side. I have seen too many deals, where the website just promises but never delivers.
4) Find some business people and offer them a percentage of your business if they can close some sales. Remember, sales people with good connections can sell software before it's build. They just need some slide-ware.
Be creative and a bit nuts, think of deals that are impossible for bigger companies to make. Be aggressive and annoying, it will just show people that you are willing to run through a wall to make your ideas happen. Remember, 'Entrepreneurship is the last refuge of the troublemaker'.
If you want some ideas on what kind of trouble you can make with our product, then go to www.HumanIPO.com and create a short business plan. Invite me to comment on it and I will try to help you the best as I can.
Entrepreneurs on government welfare
I was attending a summer start-up camp last week and on the last day of the event I came to sit beside a consultant. Ooohh shit. He asked me about the start-up I'm doing and his first comment after I told him, was that he thought I could get EU funding for it. Great news! But then I explained to him that I left Denmark, because I wanted to get away from the Danish welfare state with its 63% marginal income tax, 25% company tax and 45% withholding tax and therefore found it difficult to on the one hand argue for low taxes and then on the other hand go for EU handout. He totally agreed, and explained how entrepreneurs came asking his consultancy company 'What should I write in the business plan to get some EU money?'. So instead of an entrepreneur setting out with a vision to change the world or fix a problem for consumers, their motivation is just to get some money. But as he continued, these are the current rules and therefore he might as well utilize them.
What do you think, if there are governmental welfare programs in place, would you take the money or would you be a free market idealist and say 'no thanks'?