I’ve said it before but I’ll repeat it. In my opinion, Silicon Valley is the most vibrant entrepreneurial ecosystem in the world. The sheer amount of venture capital available helps but there’s a lot more than money that you can’t quantify and makes it unique. It’s hard to replicate the dozens of tech meetups happening everyday where people discuss any startup-related subject you can imagine. It’s even harder to replicate the collaborative culture you can find here. Everyone openly discusses their future plans and you feel like anyone you stop on the street can give you extensive and valuable feedback for your business.

This is what I call the “insider bias”. Just by being here, you’re exposed to ideas and concepts that others don’t have access to, but you hear them so many times that at some point you think everyone knows it. Everyone knows about the lean startup cycle, the 90/9/1 ratio, or the freemium conversion funnel, right? Wrong! One of the things that impressed me the most about Silicon Valley is the level of tech-related discussions you can get. With anyone! They might not know the difference between income and revenue but they can give you a half hour talk about how UI is different than UX.

You can’t replicate that, but you can immerse yourself in this ecosystem even without being here. How? Connecting to the Silicon Valley information hubs, attending virtual events, reading, interacting with local people, even working for people in Silicon Valley. It’s an organic process and can take its time, but slowly you can start feeling as if you were here. Here is how I did it.

1. Twitter. First, I started following relevant people on Twitter. The particular list of names is personal and debatable (the list of people I follow is public and you can check it at twitter.com/hugobernardo), and it will depend on the type of business you’re running. If you’re into tech, then you might want to check Techcrunch, Business Insider, or the newest Pandodaily. If you’re going to be a founder, you should follow some VCs and angels. You can check “The Most Respected Venture Capitalists” to start with. If you’re in the wine business, like I am, follow the most relevant wine bloggers and reviewers. You don’t have to be checking every single tweet, and you should definitely curate your list, but Twitter has this strange effect that makes you feel like you’re best friends with the people you follow, which makes you a little more of an insider. Even if you and I know you’re not ;)
2. Hacker News. I find Hacker News, Y Combinator’s news and discussion forum, is an invaluable source of help and information, in a way I don’t find anywhere else (except maybe attending live events). The name says it all - most people hanging out there are hackers, a lot from outside Silicon Valley. Try to contribute whenever you can, but even if you don’t, you can read about the latest in technology, and learn from people who are the real deal.
3. eMeetings & classes. Meetups are an incredible way of learning and receiving feedback. The problem, of course, is that you need to be here to attend. However, a lot of events now stream live, and the number is increasing. Of course, you don’t get to network but you’ll learn a lot. Go to meetup.com and find the groups that interest you the most, then check which events stream live. Also, Stanford has a lot of online resources (classes, conferences, etc), and attendance is free. Here’s the link.

Do these 3 things and you’ll quickly feel as if you were here. That way, whenever you decide to come to Silicon Valley, you won’t sound as if you’re alien. Plus, you’ll likely establish useful connections in the process that will make the transition a lot easier.

 

When I first started writing this blog, the idea was to illustrate what it feels like to be an immigrant entrepreneur in the Silicon Valley, and in the process help others who, like me, wanted to make the jump. 

However, when I recently sat in a couple of panels with Portuguese entrepreneurs, I quickly realized my posts had an insider bias. Even if I’ve only been here for 2 years, there’s already a lot of knowledge I take for granted that people outside the US (or even Silicon Valley) don’t have access to.

So I decided to start a series of posts that hopefully will help the aspiring immigrant entrepreneur to better understand the (unquestionably?) world’s most vibrant entrepreneurial ecosystem. I feel most blogs I read assume that people have already a decent knowledge of how things work in the US and in Silicon Valley in particular. The idea of this series is to be basic, sort of an intro to Silicon Valley.

I’m planning to write 11 posts but feedback is very welcome and I might change the lineup. Leave your comments here or send me an email with your ideas.

Here are the planned posts:

1. Immerse yourself in the Silicon Valley community without being here
2. Forget your local market. Think global, think big, and act accordingly
3. Understand the startup cycle - team, prototype, traction, funding
4. Look for help, be connected, but don't take help for granted
5. Don't blow intros, respect everyone, manage your email
6. It’s never been easier to stay connected - use all resources available
7. Leverage your local market but don't over-invest in its uniqueness
8. The necessary bureaucracy - visas, lawyers, banks, accountants
9. What to localize and what to outsource
10. Basic rules for fundraising
11. Crossing the pond - commitment and timeline

 

Image: gaebler.com

This post was originally published on fnBlog.

A few weeks ago we had our annual share of tech predictions and a common trend was the inclusion of companies such as Airbnb, Zipcar, and Getaround. What I love about these companies (I should include Netflix here) is that they took on industries that failed to innovate for decades. For me, those companies have been a tremendous inspiration.

I grew up in the wine country, where my family has been trying to succeed in one of the most conservative and slow-moving industries you can imagine. The wine industry hasn’t change its modus operandi for decades, despite being dysfunctional for those who operate in it, and extremely opaque for the consumer. Casual wine drinkers dread the supermarket wine aisle, where 500+ brands with prices all over the place make the buying process a nightmare. I believe buying wine shouldn’t be harder than buying any other consumer product, and that is the main reason why I created Easy Vino.

The Wine Industry is Changing

Wine was born an exclusive product, made for connoisseurs and collectors. The industry has hardly changed until the Baby Boomers created a whole new segment of casual wine drinkers – people who just wanted to drink wine with no interest in having a deep understanding about the product. However, the industry organized itself around the wine expert, and that is why wine reviews include terms such as “pencil shavings” or “fresh cut grass”, and why wine ratings make little sense for the normal consumer.

Recently I have been sensing a change in consumer behavior. The new consumers are anti-establishment and reject all the snobbery surrounding wine. They don’t want to learn about wine, they just want to drink a good wine at all times. The market is not prepared for them though.

Technology and Slow-Moving Industries

Easy Vino was created to address this new trend. But how can you disrupt an industry that refuses to innovate? The end user is your best friend. If you can create an outstanding user experience, the industry will follow. For the wine consumer, that means being able to pick the best wine without thinking about it. We are building a wine recommendation app, combining taste preference, social graph, and location-based information, to help consumers pick wine at specific restaurants and retail stores.

Technology helps and timing is everything. What we are doing was not possible just a few years ago. The ability to cramp significant processing power in a mobile device, combined with the location-based information available today made our solution possible. The one advantage of working in a slow-moving industry is that the big players with a lot of money to spend are not even thinking about these problems. They’re focused on running business as usual, which gives a lot of room for fast-moving startups to become relevant in the space (just ask Blockbuster).

My point is, if you are frustrated about how certain businesses are run, look out for opportunities to disrupt them, assess the state of technology, and then see if there is a way to put the end user on your side. By the time you become relevant, it’s too late for them.

 

Image: Tom Curtis / FreeDigitalPhotos.net

The President of Portugal was in California last Sunday and Monday and that was big news. For most people it was big news because the last time a President visited California was 20 years ago. To me it was big news because a good part of the visit focused on entrepreneurship and Silicon Valley. Usually our politicians like to visit big companies and announce big investments that generate big headlines back home. But it’s hard to make big announcements theses days so it’s fitting that the focus turned to startups and entrepreneurs.

I spoke yesterday on a panel about entrepreneurship in Portugal vs Silicon Valley and one of thing I was very happy to hear was the enthusiasm around building strong ties among Portuguese entrepreneurs in Silicon Valley and between us and those in Portugal. A strong network means more opportunities for those in Portugal and there’s no other place in the world like Silicon Valley if you want to be a tech entrepreneur. A better network here means higher probability of success and we desperately need success stories.

One of the problems we historically had in Portugal is jealousy. Whereas in Silicon Valley we look at someone else’s success and think “how can I do the same?”, in Portugal we think “I wish she crashes and burns”. The first reaction means entrepreneurship, because we see success as a source of motivation. The second reaction generates inaction and a toxic environment where people are secretly hoping that you fail.

How do you change that? You do with repeated success and with a transparent path to success. When I say transparent I don’t mean formulaic. I mean giving people a chance to succeed the same way other did. I mean equal opportunities for real.

One of the reasons people in Portugal are suspicious about success stories is that they perceive it’s not transparent - maybe you need connections, maybe you need a rich parent, maybe you need to play dirty.

I believe Silicon Valley is an equal opportunity land (I do, despite recent disputes) and the Portuguese entrepreneurs I’ve met here are generally very down to earth. A strong Portuguese network in Silicon Valley means more opportunities for those of us here and in Portugal, which means more chances to build success in a way we can replicate.

The other key step is collaboration. That’s what made Silicon Valley so special and historically Portugal hasn't been good at collaborating. That’s why I was so excited to see such level of enthusiasm about building a community here. This is a step in the right direction and one that can help entrepreneurs here and in Portugal. And Portugal desperately needs its entrepreneurs.

 

Image: jscreationzs / FreeDigitalPhotos.net

Every time I try to register a domain name I come across the same problem - dozens and dozens of domain names that are taken with no apparent purpose other than blocking other people from getting them and maybe make some money out of it. And every time I rationalize, “It’s a free market, anyone can do it, they got there first”. This time around I even measured the ratios (see below).

However, this is not a free market. It’s actually a regulated market, where an official entity grants you the rights to a piece of real estate that only you can use. In the case of .com domains, that contract has no strings attached, which means that anyone can buy whatever they want for whatever purpose they want. 

The result is uncountable domain names that have no real content attached. In my country we say “either you do it or you get out of the way”, which the Americans brilliantly summarized in one word - cockblock (in the rare case you haven’t heard about it, you can check the definition here http://brnd.ws/rpqZSH). The vast majority of these domain hogs have no intention of ever building anything on that real estate. They just got there first and don’t want to get out of the way.

This reminds me an episode that happened to me when I was a kid. It was summer time and I thought a good way to make some extra money was to sell lemonade at the intersection close to my house. This intersection had a lot of traffic going by and long lines during rush hour, and it was summer and hot. I sold 2 jars in just a few minutes so I went back home to make more and come back to business. To my surprise, when I got back I had 3 bigger kids waiting for me to “inform me” that that intersection was “theirs” and I did not hold “rights” to sell anything there. Were they selling anything? No. But apparently they got there first and thought that was good enough.

I don’t even care much about this issue. At the end of the day I always come up with a new stupid name that no one has remembered to register yet. But that doesn’t mean it’s not annoying or wrong. If you’re buying the rights to a piece of real estate and then just sit there preventing others from doing something productive with it, you’re just being a parasite. And if you think you did something productive by coming up with those domain names, I’ll tell you that if my job was to register “interesting” domain names I could be ICANN’s best customer. It’s just that I have better things to do.

PS. The stats for my latest search were the following. Out of 200 names I tried (excluding obvious ones that I knew would be taken), 80% (157) were taken. Of those, only 9% had content and another 7% had advertisement (parked domain with no real content). The remaining (131) had zero content. In this search process, I registered 5 domains that I have no intention to use (and as a result will let expire). If you ever come across one of these and want them to build something, I’m happy to give them away.

 

Image: renjith krishnan / FreeDigitalPhotos.net

A lot has been said recently about how you should go about finding a co-founder, and more specifically a technical co-founder. I think the idea of “earning a co-founder” is good as it is the very structured process of co-founder dating that Elizabeth Knopf explains. However, 2 questions remain unanswered after I read this: Should you have a co-founder? And once you find a co-founder, how do you know he/she is the one?

These questions are way more important than the whole co-founder dating problem because they’re more fundamental and have a long-term impact in your startup. The thing with co-foundership is that it’s such a personal decision that you can find a million different opinions and all of them can be right. In most cases, people are driven by their personal experience and think that what worked with them should work with you. I’m not sure that’s always the case but I’ll tell you what I learned from my personal experience and you decide whether that’s valuable or not.

1. Should you have a co-founder?

There are 4 reasons why you might be considering finding a co-founder

1.  In the short term, it’s cheaper to have a co-founder than to hire someone to do the job. I hear way too many times people saying they’re looking for a co-founder because they don’t have the money to pay someone to do the job, the job being whatever: coding, designing, selling. If this is the only reason why you want a co-founder, it’s a wrong one. I would advise you to read the remaining 3 and think again. It can’t just be about the money.
2. The startup emotional roller-coaster is easier to get through when you have someone by your side that can reassure you about the soundness of your business and the possibilities of success. Let’s be honest, it’s great having someone telling you “this is going to work out” when you start questioning the assumptions, and family and friends don’t do the trick. But a mentor can, or someone else who you respect and know will always be honest with you.
3. You want a balanced team with people equally incentivized to see the company succeed. Most likely you don’t have all the skills needed to build a successful startup. Dave McClure says the perfect team needs a hacker, a hustler and a designer. I think people can combine some of those skills or even all three of them, in which case the problem will probably be time. Will you be able to be all three of them efficiently? And if not, do you want a co-founder or do you want to hire someone to fill in? That will depend on how crucial you think that role is. If it’s key and you want someone as incentivized as you, then you need a co-founder. If not or you think it’s easily replaceable, then maybe you don’t need one.
4. You want someone at your level that can challenge you and help you take the company to a whole new level. To me this is the most compelling argument to have a co-founder. When you hire a person, it doesn’t matter what your style is and what you tell her, she’ll always be an employee. A co-founder will challenge your premises and that will help you shape your idea and build a more solid business. Of course, you have to make sure your co-founder is able to do that. You can find advisors and mentors that can help you with this process but it’s not going to be the same. Advisors and mentors don’t have the time to think about your business in detail and won’t be there for all the important decisions you’ll have to make. You might be able to do it by yourself, there are plenty of examples of successful solo entrepreneurs, but please do think about this aspect before making a final decision.

2. How do you know the person you just found is the one?

So you went through the whole co-founder dating process and you think you found the right person. But how can you be sure? The right answer is you can never be sure but there are a few questions you can talk about to dramatically increase the probability of success.

Some people will tell you one way to solve this is to give a minority share to your co-founder. That way you can always pull the plug and go by yourself or with someone else. You can read Mark Suster’s opinion as he argues in favor of that solution. I’m not dogmatic about this but I do think that when you “hire” a co-founder you might create an unleveled partnership where it’s harder to challenge your assumptions because it’s “your” business. Again, to me this is the most important aspect of having a co-founder so I’d be very careful to make sure you have a true partnership.

Other than that, here are a set of questions you HAVE to make sure you talk about with your potential co-founder before you seal your agreement:

• Equity split. This is an obvious one but for some reason a lot of people postpone this conversation. As I said, I’m not dogmatic about the split but make sure you discuss this early in the process and everyone is comfortable with the final number.
• Vesting – things change, shit happens, and sometimes people decide to move on. It doesn’t matter why it happens as long as you make sure that you have a vesting calendar in place. The last thing you want is to have people leaving the company after 6 months with a huge chunk of equity, which will leave you looking for a co-founder with no equity in hand. Make sure everyone is on the same page.
• Expectations, goals, exit, pull the plug. If you read a lot of Mashable and Tech Crunch you’ll hear about companies being sold for dozens of millions or even hundreds of millions. It’s easy to be dragged into the perception that you should never accept any less than that but the truth is that most companies fail, and a lot of the successful ones either survive with meager revenues or get acquired for a small sum. So it’s important to manage expectations and set personal goals. When are you going to pull the plug? What is an acceptable exit, how long are you willing to stick around? These are awkward discussions to have early on but you better have them before you start than having to face those issues later.
• Salary. Are you going to have a salary? If so how much and when? What triggers a salary bump? This is usually an easier question to have but an important one.
• Pivot or not to pivot. This is another awkward conversation but you should talk about how willing you are to pivot and what could trigger that.

I’m sure you should be talking of other issues but from my experience these are the ones that can cause serious trouble if you don’t talk about it early on. With all this in mind, you’re ready for co-founder dating.

 

Image: Michal Marcol / FreeDigitalPhotos.net

I’m going to take a break from being a bitter motherfu**er who criticizes everything to actually complement an idea I recently heard about. Disclaimer: I was not asked to promote this nor do I have any sort of participation on this idea.

Talking to a friend sometime ago, I heard of this program that was sponsoring Portuguese early stage ventures to come to Silicon Valley for 3 months and learn something new. I thought the idea was smart but I lacked more detail and finally a few days ago I managed to talk to Torben Rankine, who runs the show here in the Bay Area.

The program is called Global Strategic Innovation Accelerators (I’m out of breath!) and the URL is longer than my Firefox address bar. Otherwise the idea is fairly simple. Every quarter, 3 companies are picked to come to Silicon Valley to spend 3 months at the Plug & Play Tech Center and interact with the Bay Area’s entrepreneurial community and ecosystem. The companies can have different goals but they do have a goal they’re trying to accomplish during the 3 months. The program sponsors part of the expenses although companies have to pay a small fee and living expenses.

The application form is short and to the point and the whole process is fairly transparent. As you can guess, I would change a bunch of the program’s details but overall this is a great idea for a number of reasons:

1. Companies have to pay. Everything free is deemed worthless so the fact that companies actually have to pay, even a small amount, ensures that whoever is applying is serious about it.

2.  Immersion in the Silicon Valley community. If you want to learn entrepreneurship, you have to live it, talk to founders and investors, see it with your own eyes, and the SF Bay Area is arguably the best place to learn entrepreneurship.

3. No bullshit. This is not an academic program – it’s not about listening to a bunch of people telling you how to do stuff. There’s a small training component but this is you, your idea and your goal, and it’s up to you to take the most out of it.

In brief, what I like about this idea is that it’s simple yet powerful and can produce long-term impact. It’s not the typical government-run ultra-bureaucratic free program that treats you like you’re 5 years old and makes you fill 100-page application forms and in the end requires a 50-page report. As I said, I would still change a few things and make it leaner, less formal and find a shorter name and URL. But that’s me.

Putting it together and running it is a great achievement and I hope this gets some deserved publicity back home. And of course, it’s always good to meet interesting countrymen and discuss ideas in Portuguese. If you’re around, there are enough buttons around this website that will allow you to reach me.

 

If you work at a startup in Silicon Valley it’s impossible to go around without hearing about THE bubble. Everyone has an opinion – it’s not a bubble, it’s a bubble but only for early stage, it’s a bubble just like the one in the 90s, it’s a bubble but not for facebook, and I could go on.

Bubbles explained like you’re a four-year-old

Let’s first go to Bubble Economics 101. A bubble, which is a process, happens when assets are valued at an unreasonably higher price when compared to their intrinsic value. In other words, you’re selling chicken liver for the price of foie gras (I love food analogies!). A bubble is the result of an abundance of cash, scarcity of assets, or a combination of the two. A bubble is also a vicious circle since every time you buy something for an unreasonable price you’re taking one asset out of the market and injecting cash into that same market. In brief, a bubble is a legal-ish Ponzi scheme and you don't want to be the one without a chair when the music stops.

The big problem of calling something a bubble is that you need to know what the intrinsic value of an asset is and that is a very tricky question because we like to rationalize. For example, you know what the price of bread is so it should be easy to spot a bread bubble if tomorrow you go to the bakery and they’re charging $50 for a baguette. But if this process occurs in the course of 4 years in the context of a shortage of wheat, we’ll rationalize it. If you don’t believe me, just look at gas prices. There are bubbles happening around us all the time but only a very small number of those actually get big enough to become relevant. And yes! The dating scene is very prone to bubbles. 

False positives

Back to THE Bubble, you can see how evaluating the intrinsic value of startup assets is really hard – companies are private, we know very little about their business and we mostly know the good news (or you're facebook's PR department). But say we had access to all the numbers, would that help? The intrinsic value of a company is a function of future earnings and we’re not exactly talking about large stable businesses. You can imagine that anyone who claimed Google was overvalued at IPO is right now hitting her head against the closest wall. Hit it hard, but who could tell? Would you have predicted MySpace implosion 5 years ago? Hell no!

Or would you? That's when we get to the problem of type I errors or false positives. There is always someone predicting bubbles, economic crisis and the end of the world (BTW, it’s tomorrow so if those guys are right someone should give them a prize in the after life). You know the story, every time there’s a bubble or crisis, a few stories come out of “the guy” who saw it coming. What nobody asks is how many times that guy saw it coming and it never came. If you’re not a false positive kind of person (usually that comes with high doses of pessimism), trying to predict a bubble is like buying the winning lottery ticket. And if someone starts arguing with “the fundamentals”, please say out and loud “Bullshit!”

It is not a bubble until it bursts

When finally the bubble bursts, everyone saw it coming, and that is when the false positives and false negatives all gather around beers talking about how obvious it was and how “the fundamentals” just didn’t make sense. That is the moment when the bubble really happens! It’s when it bursts.

So you have three options. You can be the bitter let-me-hide-in-my-bunker-everytime-I-hear-armageddon false positive, the condescending it-was-so-obvious-that-I-never-told-anyone-about-it false negative, or you can tell those two to screw themselves, ride the wave, and raise money as early as you can. You know, once the bubble bursts it’s too late to say, “I saw it coming”.

 

Last night I had dinner with a friend from Portugal and eventually we talked about the economic situation in Portugal and why the country can’t be competitive in the global market. There are a ton of theories but at that point I looked at the bottle of wine we ordered and thought that was a great example of why Portugal is in deep shit. The bottle was a red Rioja from Spain that had ‘Tempranillo’ stamped on the label.

For those who have no idea what this means, most wines from Rioja are blends although Tempranillo is the most prominent variety. Outside Europe people don’t understand blends because it’s too hard to explain. It’s easier to say ‘I like Cab, Pinot and Merlot’, which can apply to several different countries, than ‘I like Rioja, Penedes, Umbria, Veneto and Alsace’ to speak of 5 wine regions in Europe (there are dozens). So if you’re not Bordeaux, the easier way to export is to promote a variety and then allow a bunch of wines from that country to jump in the varietal bandwagon.

Spanish producers have identified this trend and have been promoting Tempranillo as their variety of choice. Then regions like Rioja use that brand to produce varietals that are roughly the same as the blends but with a more consumer-friendly label.

What about Portugal? Not so much. Let’s jump into the facts. Portugal is the 7th-8th largest wine producer in the world. It should be a large exporter given the size of the domestic market (10 million people). In addition, it has the world’s top selling wine – Mateus – and an internationally recognized brand – Port. Despite this solid base, Portugal is usually no. 9-10 in the top wine exporters and mostly thanks to Port – you can hardly find regular Portuguese wine outside Portugal. Why? You can blame the lack of consumer focus. I keep hearing producers in Portugal complaining that the consumer needs to be educated, that you shouldn’t make wine easier to drink just because the consumer wants it, or name a wine after a variety just because it’s good for marketing. They sound like the guy who’s been running his business for 4 years with no success but keeps complaining that users don’t get it. If they don’t get it after 4 years, you should change your product.

As an entrepreneur, this is something that particularly pisses me off. When businesses don’t look at the consumer as the ultimate reason why they’re in business, they’re doomed to fail. As a company, I exist because of my consumers. Consumers could not care less if I exist or not.

P.S. If you want to know my opinion, I think Portugal should promote Touriga as the variety of choice – it’s Portuguese, it’s easy to identify, and most producers are using it anyway.

Fundraising is like dating, and when it comes to dating I have a theory – the theory of the stove burner. Imagine you have a stove with 6 burners and you’re using all 6 of them to cook. If you have all 6 in max something is going to get burned, or you’re the fucking master of the stove burner (aka the Casanova). If all 6 flames are low you’re not going anywhere and you can be there all day and do no actual cooking. If you want to master the stove burner you need to play with the flames and make sure you have 1 or 2 high, another 1 or 2 medium and the remaining low enough that they’re still cooking but not too fast. And of course, when you’re at the point you’re finishing something, put everything else in low and focus on that one because you’re going to need to turn it up. 

This is my stove burner theory and I hope the parallel with dating is obvious enough. Now that I’m back to the dating game (for investors, don’t get me wrong), I feel the need to get back to my stove. If this lead looks promising, turn that burner up and the other ones just a tad down so I don’t get burned. Just like with dating and cooking, it’s hard to articulate what’s too much and too little but I feel that after a while adjusting I’ll get the feel of it.

Just like with dating, every new encounter can be a hit or miss – but you’ll never figure that out if you don’t try. Just like with dating, you can be setup and that will likely improve your chances. And yes, just like with dating, you can be left with blue balls, it’s just part of the game.

And now I have go back to my stove, I smell something.