Elizabeth Perry/White Bull:
So, what’s your take on the innovation scene here in Europe?
Jon Bradford/The Difference Engine:
My view is that the whole digital scene is in kind of a state of transition - where technology has to a degree out progressed venture capital and there is a kind of a state of catch up being played with specifically early stage digital technology investment. If you look at what’s happening in the world, Silicon Valley are kind of the people that are going to react quickest to the trends and innovations. You can see that through the rise of the super angel in the States … and they’ve kind of stepped in where, dare I say, VCs fear to tread. VCs struggle with the need for less capital in early stage businesses and I think I would put out to you that the East Coast is getting on to it but Europe is still some way back. That said, there are a number of individuals who are playing in that space … Stefan Glänzer clearly … and even Saul Klein. …You can see a number of investments happening recently where Sol and Stephan and a few others in Europe are actually playing the angel game with some US investors, both in the UK based companies and also in the US. But I think the US has a much more mature angel base than the US has, so I personally think we’re a couple of years behind. We’re coming along, but we’re a ways back.
WB:
Do you think that has anything to do with the sort of fragmentation of Europe … I mean as opposed to Silicon Valley where everything is in one place … one language etc.?
JB:
I think it doesn’t help. I think it makes it more difficult. I think that the size of the market in the US … like when 4Square opened up its doors in the US and said, “We’re open for business!” It starts with a 250 Million-person market. Clearly, if you have an Estonian company out there who comes up with the same creation, it’s always going to be more difficult, unless in some way it pretends to be American. In fact, there is a company in Edinburgh who pretend to be American … meaning that the first market they’re trying to tackle is American. I mean, no one knows you’re a dog online. No one knows you’ve got a Scottish accent online when you type … Anyway, there’s no one to say you can’t tackle it
I was in Estonia ten days ago. One of the interesting things I noticed was that in1.2 Million people, 80 percent are online. And it seems the entrepreneurs start with the idea that they have to be somewhere outside of their region. It’s the first thing they ever think about because the market is too small. I don’t necessarily think that is an advantage, but I do think it does kind of help to get people in the right space.
WB:
So how does it work? You find these companies, and then what do you hope to see happen?
JB:
So there are three basic stages in the program itself. I describe them as Refine, Build and Show. Refine has to do with challenging the underlying assumption of the business itself. More often than not, the teams come with a really good technology but they haven’t thought it through with a full business plan. And in that process of challenging those assumptions, you help to build a business around those ideas and techs. It may be that you end up in the exact same place at the end of three or four weeks, but the underlying premise is before you go forward you have to make sure you have the right thing, rather than run around screaming about everything you’re doing.
Then you move into a place of building a business around the application … using some of the mentoring skills that are available around you, to get contacts and guidance and try and move the business forward faster … and then toward the back end of the program, I call Show, but Show … some people get hung up about it being about demo day … but it’s about being able to stand up and articulate what your business is. Can you do it in 30 seconds, 3 minutes 10 minutes. Whether you’re doing it on a demo day, doing it between yourself and someone on the lift… catching
their attention for that period so you get something out of it.
So it’s challenging the assumptions of the business, creating the business model around it, moving forward, trying to get traction, and the team into place, and then being able to describe that to a third party, whether an investor or someone who’s going to help you in the process. And it is what it says: It’s an acceleration program. It’s not a creation program. It’s people who are entrepreneurial by nature and want to do something and have a passion to do something and we help them do it faster. Now interestingly enough, it may be that we help them to do it faster to a point of failure, but that’s not necessarily a bad thing. It means that that person can get on and do other stuff. My experience is that they don’t actually move onto failure. They talk about pivoting. Because you’re doing it over such a short period of time they get to change direction of the business very very quickly without it actually having a detrimental effect. I had one team, for instance, that actually pivoted over the best part of nine weeks before they decided what they were doing, which was a bit of a nightmare … but they eventually locked down exactly what they were doing and are now making real progress, because they know what it is they’re doing and the market they are trying to chase after.
WB:
So, why the Difference Engine? What are you in it for?
JB:
On the simplest level, it’s fun. I’m very fortunate … I live in the North of England in a lovely old barn with a lovely wife … and cloud computing allows me to do some very interesting things with some very exciting startups. I think there’s the other half of me … and I cringe when I say it … but there’s a model (or models) which clearly work in the States. But which are in very limited supply in the Europe. But I say if the US can make a program like this work, why can’t the UK? Tech Stars made it a success, why can’t we? For every ten places that are available in the States, there’s only one available in Europe at the moment. I think that’s changing, and there’s opportunity to try and get in there and do something interesting. … I believe that’s what we’re doing.
WB:
How do you go about finding these companies, how do you get the word out?
JB:
By trying to generate as much noise as possible. I would love to say I can find them, but I think they have to find me. I work on a VC model which is to say I have to get at least 100 in the system … and in a one in ten model you hopefully will get the right people coming in the door, so I think it’s not very sophisticated, but it’s an awareness thing. I also spend a lot of time on the road. I’ve been to Manchester and Edinborough, Estonia, Lithuania, Poland … and just kind of getting up close and personal with some teams. I think the only way to persuade people to do this thing is to convince them that I’m a good guy … as opposed to writing press releases. So next time around I’ll pick another three places and do the same thing.
WB:
Where are the hotspots? Are there places you find particularly entrepreneurial?
JB:
I don’t think any country has a monopoly on entrepreneurs. From a selfish point of view, my ability to persuade teams from Western Europe to move to the northeast of England is much more difficult because they’ve got a much more mature ecosystem around them … investors, venture capital … I think the reason you’ll hear me talking about Eastern Europe a lot is in an odd way the northeast of England can compete on a much more level par with the Eastern European countries, where their infrastructure or ecosystem is much less mature. So, others may complain about the NE of England not being like London, well clearly it’s not, but relative to other parts of Europe, it can challenge or have as mature if not a better ecosystem. And also we have the single largest advantage. We speak English, and when people choose to internationalize themselves, they want to do the English market rather than French or German … or whatever.
So, it’s less to do about me finding hotspots it’s more to do if I assume that there are ten good companies coming to me. And actually there’s one thing. There’s one statement I could make on that. They’re more ambitious … more willing to give up things to make a success of the business. … They’re there more likely to say, “If I need to move country, if I need to leave people behind and do things, I will!” … They’re more likely to do that then in more comfortable western nations. I think I’d upset a few Germans and French … they’ll say “oh no we’ll move” But, it’s that ambition. They’re likely to say, well if we want to do something, we’re going to move… and that’s kind of what entrepreneurs do from day zero!
WB:
Are there any tips that you give companies just starting out?
JB:
Build stuff! Build product. Build something! It’s not necessarily about a good pitch … or a business plan. It’s a Brad Feld expression: Entrepreneurs do stuff. There are too many people that stand around and talk about what they’re going to do in the future. One of my team members said it well. He said you’ve got nothing until you’ve got product. And only when you’ve got product is it worth going to some of these meetups. So, what can people do? Just get on with it and do stuff. It doesn’t necessarily have to be commercial, or something you sell. But just learning your trade and learning how to build stuff and putting it out in the market and seeing how people react to it, so that when you get to that point where you’re going to do that business that you’ve always planned on doing, you’ve got a lot of the skill sets already in place.
David Cohen who I worked with on Tech Stars said it well: He said, about Feld that his perfect investment is an entrepreneur who’s been successful, then subsequently failed on his second go-around, because then by the time he gets to his third, he’s so angry that he’s failed that he’s going to succeed at his third because he knows he can be successful because he’s done it before, and he’s so pissed off that chances are he’s going to be a success. It’s actually turning around that whole failure and making it a positive thing. You tend to be focused. The right people do. You tend to focus in on the things that are important. …
WB:
Are there any trends that come to mind?
JB:
I think there’s a broad trend happening and I think it’s looking out for things on the Internet that you wouldn’t expect to see happening. I haven’t seen the trend yet but I know it’s going to come. Up to this point the Internet has always existed on a device … a computer, a laptop, a phone. And I think it’s going to happen that every day devices are going to be more valuable because of Internet connectivity. A good example I’ve seen lately is a set of weighing scales where you stand on them and it tells the weight and bmi etc. But it had a wi fi chip in it. And it had the equivalent of itunes for Weight Watchers. So standing on those scales as a stand-alone device is sort of interesting, but when you connect it up to a SAAS or a cloud based solution, it suddenly creates a whole swathe of services and stuff, which could be incredibly valuable. It’s a bit like having a laptop but it wasn’t plugged into anything…
It could be any device. It think there’s a whole host of opportunities. The device plus the services could be incredibly valuable. With those scales, you could capture an incredible amount of information over an extended period of time
WB:
So, what makes this startup camp of yours work?
JB:
The answer is, from what we’ve seen so far, intense mentoring over a short period of time can actually make a huge difference in people’s businesses. Much as I was a little skeptical at first about how we would fare in the northeast of England, this actually suggests that if you do get the right people in the right room at te right time, it can make a huge difference.
WB:
How important do you think “face time” is in all of that? … Seeing the sparkle in someone’s eyes, shaking their hand?
JB:
I would suggest it’s absolute. Having said that there are certain personalities who can carry that through a camera.
But, 90 to 95 percent of the time you’ve got to get in front of the person and shake their hand. You may carry it on in a different way … but in a connected fashion, in a connected world, I think face time is incredibly valuable, if not the most valuable asset you can get.
I went to leWeb last year, subsequently the phone got picked up. It creates the glue across a very global spectrum. You may be able to carry on the relationship after that in a virtual way, over the internet, etc., but you’ll always remember the time you met fact to face.
WB:
Is there anything else you would like to add?
JB:
Well, yes. I think there should be more of these types of programs (like the Difference Engine.) I don’t think it should be an exclusive right, but a part of a wider ecosystem. It’s kind of a way that the American market has filled a gap. But there should be more opportunities like these in the European market. Entrepreneurs are a very rare breed. You do struggle to meet other entrepreneurial types. So, if you imagine you can actually get ten of those people in the same room for 10-13 weeks, it becomes an incredibly supportive environment. Where I thought there was going to be more conflict, it actually rarely happened. Instead, it was hugely supportive.
There’s just one last thing I think we can learn from the Americans.
It’s been my experience that every conversation ends with, “What can I do to help?”
I can’t remember the last time I ended a conversation like that in Europe. Instead it’s usually, “Come back to me when you’ve got something done.”
It was something I genuinely want to remember, because it’s not just about taking, it’s about giving something back. And it’s also about allowing the other person to ask themselves “What am I actually looking for?” What do I actually want?”
WB:
Thanks for the words of wisdom, Jon. We’ll look forward to a little face time in Barcelona!