The computing industry progresses in two mostly independent cycles: financial and product cycles. Financial markets get a lot of attention. They tend to fluctuate unpredictably and sometimes wildly. The product cycle by comparison gets relatively little attention, even though it is what actually drives the computing industry forward.

What’s Next in Computing?

In the mainframe era, only large organizations could afford a computer. Now processors and sensors are getting so small and cheap that there will be many more computers than there are people.

Hardware: small, cheap, and ubiquitous

A lot of the excitement in AI has focused on deep learning, a machine learning technique that was popularized by a now famous 2012 Google project that used a giant cluster of computers to learn to identify cats in YouTube videos. Deep learning is a descendent of neural networks, a technology that dates back to the 1940s. It was brought back to life by a combination of factors, including new algorithms, cheap parallel computation, and the widespread availability of large data sets.

Software: the golden age of AI

There are a variety of new computing platforms currently in the gestation phase that will soon get much better — and possibly enter the growth phase — as they incorporate recent advances in hardware and software. Although they are designed and packaged very differently, they share a common theme: they give us new and augmented abilities by embedding a smart virtualization layer on top of the world. Here is a brief overview of some of the new platforms: cars, drones, the internet of things, wearables, VR and AR.

Software + hardware: the new computers

The computing industry progresses in two mostly independent cycles: financial and product cycles. There has been a lot of handwringing lately about where we are in the financial cycle. Financial…

Stashed ideas

In his 1997 shareholder letter, Jeff Bezos issued a manifesto “It’s all about the long-term” where he laid out his approach to business and to running Amazon. He pledged that decisions would be made with a long-term lens and with a focus on market leadership. This manifesto has been included in every single shareholder letter for the last 20 years! After reading these letters, it is clear that the fundamentals of how Amazon does business remain the same. Talk about commitment and consistency.

It’s all about the long-term…

<ul><li>A focus on the long-term is important for several reasons. First, for a company that drives growth through innovation, a long-term approach allows for experimentation and an acceptance of short-term failures.</li><li>Second, having a long-term orientation reduces the impact of stock price fluctuations on decision-making.</li><li>Third, when you are long-term oriented it aligns customer and shareholder interests. In the short term, this is not always the case.</li></ul>

Why long-term matters

Bezos offers a set of guidelines for how to make decisions at high-velocity:<ul><li>Understand that decisions can be reversed: </li><li>Bias towards action: Most decisions should be made with close to 70% of the information needed. Waiting for 90%+ information will slow you down.</li><li>“Disagree and commit”: When consensus is not possible but you have conviction in a particular direction, “disagree and commit”. </li><li>Recognize when an agreement isn’t achievable: Sometimes different teams have different objectives and see the world differently. No discussion will change these views.</li></ul>

High-quality, high-velocity decision-making

From the outset, Amazon’s goal was to build the world’s most customer-centric company. Bezos would constantly remind employees to wake up every morning terrified… not of the competition, but of Amazon’s own customers. Customers are fickle; they are loyal to a company until a competitor offers a better service. Amazon designed its core value proposition around keeping customers happy by constantly offering more selection, better convenience, and lower prices.

Customer centricity as a north star

While Amazon takes financial outputs seriously, 100% of the company’s time is focused on inputs. This is because these inputs are controllable and are the most effective way to maximize financial outputs.

Put effort into inputs, not financial outputs


Many large companies fail to launch new businesses from scratch because of the patience and nurturing required. One of Amazon’s competitive advantages is its culture which is supportive of small businesses with large potential.While Amazon’s culture demands that these businesses be high potential and differentiated, it does not require them to be large the day they are born.

Build a disciplined, patient, and nurturing culture

Setting the bar high on hiring has been the single most important element of Amazon’s success. During the interview process, Amazon asks each interviewer to consider three questions before making a hiring decision:<ul><li>Will you admire this person?</li><li>Will this person raise the average level of effectiveness of the group they’re entering?</li><li>Along what dimension will this person be a superstar?</li></ul>

Raise the bar on hiring… again and again

In every Amazon annual report, Jeff Bezos publishes a shareholder letter where he provides a broad overview of the company’s operations throughout the year. His letters are incredibly…

What I learned from Jeff Bezos after reading every Amazon shareholder letter

The Berkus Method is a simple and convenient rule of thumb to estimate the value of your box. It was designed by Dave Berkus, a renowned author and business angel investor. It is meant for pre-revenue startups. The starting point is: do you believe that the box can reach $20M in revenue by the fifth year of business? If the answer is yes, then you can assess your box against the 5 key criteria for building boxes.

Value your startup with the Berkus Method

The Risk Factor Summation Method or RFS Method is a slightly more evolved version of the Berkus Method. First, you determine an initial value for your box. Then you adjust said value for 12 risk factors inherent to box-building.The initial value is determined as the average value for a similar box in your area, and risk factors are modeled as multiples of $250k, ranging from $500k for a very low risk, to -$500k for a very high risk. It is meant for pre-revenue startups.

Value your startup with the Risk Factor Summation Method

The Scorecard Valuation Method is a more elaborate approach to the box valuation problem. It starts the same way as the RFS method i.e. you determine a base valuation for your box, then you adjust the value for a certain set of criteria. Nothing new, except that those criteria are themselves weighed up based on their impact on the overall success of the project.It is meant for pre-revenue startups.

Value your startup with the Scorecard Valuation Method

The Comparable Transactions Method is really just a rule of three.Depending on the type of box you are building, you want to find an indicator that will be a good proxy for the value of your box. This indicator can be specific to your industry: Monthly Recurring Revenue (Saas), HR headcount (Interim), Number of outlets (Retail), Patent filed (Medtech/Biotech), Weekly Active Users or WAU (Messengers). Most of the time, you can just take lines from the P&L: sales, gross margin, EBITDA, etc.It is meant for pre- and post-revenue startups.

Value your startup with the Comparable Transactions Method

The book value refers to the net worth of the company i.e. the tangible assets of the box i.e. the “hard parts” of the box.The Book Value Method is particularly irrelevant for startups as it is focused on the “tangible” value of the company, while most startups focus on intangible assets: RD (for a biotech startup), user base and software development (for a Web startup), etc.

Value your startups with the Book Value Method

Rarely good from a seller perspective, the liquidation value is, as implied by its name, the valuation you apply to a company when it is going out of business.Practically, the liquidation value is the sum of the scrap value of all the tangible assets of the company.

Value your startup with the Liquidation Value Method

If your box works well, it brings in a certain amount of cash every year. Consequently, you could say that the current value of the box is the sum of all the future cash flows over the next years. And that is exactly the reasoning behind the DCF method.

Value your startup with the Discounted Cash Flow method

The First Chicago Method answers to a specific situation: what if your box has a small chance of becoming huge? How to assess this potential?The First Chicago Method (named after the late First Chicago Bank — if you ask) deals with this issue by making three valuations: a worst-case scenario (tiny box), a normal case scenario (normal box), a best-case scenario (big box).The First Chicago Method is meant for post-revenue startups.

Value your startup with the First Chicago Method

As its name indicate, the Venture Capital Method stands from the viewpoint of the investor.An investor is always looking for a specific return on investment, let’s say 20x. Besides, according to industry standards, the investor thinks that your box could be sold for $100M in 8 years. Based on those two elements, the investor can easily determine the maximum price he or she is willing to pay for investing in your box, after adjusting for dilution.

Value your startup with the Venture Capital Method

The best valuation method is the one described by Pierre Entremont. He says you should start by defining your needs and then negotiate dilution. The optimal amount raised is the maximal amount which, in a given period, allows the last dollar raised to be more useful to the company than harmful to the entrepreneur.

And the best valuation method is…

Learn how to value a startup - 9 methods explained

Valuation For Startups — 9 Methods Explained

The easiest way to build a useful product is to automate some part of your daily workflow which ensures you’ve got proven demand for your product and a pre-existing funding source.Successful examples:<ul><li>MailChimp: built a tool that would streamline the process of email newsletters created.</li><li>Lynda: produced training films for her students. She spent the next two decades building a content library and tech assets.</li><li>PluralSight: Like Lynda.com, PluralSight offers remote software training. </li></ul>

Automate Your Workflow

Instead of trying to compete with a company like Apple, these scrappy startups filled the gap left by RadioShack and built multi-million dollar businesses worthy of emulation.<ul><li>AdaFruit Industries: Limor Fried started her DIY electronics eCommerce empire as a student at MIT by assembling DIY kits comprised of off-the-shelf parts. </li><li>SparkFun: Nathan Seidle started Sparkfun from his dorm room by selling electronics kits and oddball components to engineers who wanted to explore exotic new sensors and systems. </li></ul>

Start With a Capital Efficient Product

Solving an old problem with a new technology or UX layer can be enough to build a multi-billion dollar business.<ul><li>Shopify: Shopify’s founders were searching for a shopping cart solution when they were setting up an eCommerce site for snowboarders. Unable to find one, they decided to scratch their own itch and built a bespoke solution on the then red-hot Ruby on Rails framework. </li><li>Braintree Payments: Exchanging money online, without being fleeced by fraudsters, is one of the oldest problems on the web. </li></ul>

Old Problem + Existing Business Model + New Tech = $$$

<ul><li>Ipsy: Youtuber Michelle Phan leveraged her online celebrity — 8M+ YouTube subscribers — to turn it into a phenomenon. </li><li>ShutterStock: Jon Oringer combined his set of skills and used 30,000 photos from his personal photo library to start a stock photo service.</li><li>Quizlet: it was founded by a precocious 15-year-old who wanted to ace his French final.</li><li>Skyscanner: The company started as a bespoke spreadsheet to help its founder find the best flight prices.</li></ul>

Scratch Your Own Itch

Funding doesn’t always come millions of dollars at a time. Founders can scrape together money from grants, incubators, and angels, or even pre-sales.<ul><li>CoolMiniOrNot: it started out as a website where geeks could show off their ability to paint Dungeons & Dragons figurines. </li><li>The Wirecutter: Who says blogging doesn’t pay? Founded by a former Gizmodo editor, the Wirecutter promised more thorough and fair-minded reviews, and paired that with Amazon affiliate feed.</li></ul>

Everyone’s Money is Green

<ul><li>RXBar: When one of the entrepreneurs behind RXBar shared his ambitious business plan with his father, he told his founder son “You need to shut up and sell 1,000 bars.”</li><li>Scentsy: They sold candles at swap meets when they couldn’t afford to buy ads.</li><li>Spanx: Shark Tank judge Sara Blakely turned a $5,000 investment into an Oprah-approved approved garment that generates $400M in revenue annually. </li><li>Grammarly: Spell checkers around for decades, but Grammarly made enough improvements that they could charge over 800 universities and hundreds of thousands of writers.</li></ul>

Sell! Sell! Sell!

<ul><li>ButcherBox has thrived, earning as much as a million dollars a week by skipping expensive ad channels and developing ongoing, capital-efficient relationships with influencers.</li><li>Cards Against Humanity: They’ve sustained their brand with a series of canny marketing stunts, selling cow poop, cutting up a Picasso, etc.</li><li>GoFundMe: Viral marketing is dismissed, rightfully, when it is tacked on to a business model, but it can be a powerful driver when properly integrated into a product. Paired with hyper-efficient Conversion Rate Optimization, it can be unbeatable. </li></ul>

Be Miserly with Marketing

<ul><li>PaintNite: While their competitors relied on a slow, expensive franchise sales model, PaintNite paired art teachers with existing bars that wanted to sell wine on weekdays and created a business that did $30 million in revenue the year before it raised venture capital.</li><li>Tough Mudder: Track & field entrepreneur Will Dean turned $7,000 in savings into a company with over $100 million dollars in annual revenue. </li></ul>

Efficiency > Capital

<ul><li>Mojang: The masons behind Minecraft never raised any venture capital, employed just 50 people, and earned nearly a billion dollars in profit before selling to Microsoft. Minecraft grew by charging users a flat fee, resulting in a $2.5 billion dollar acquisition.</li><li>Craigslist: Craigslist parlayed an early launch in the first dot-com boom into a durable long-term advantage. Craigslist is the #17 most visited site in the US.</li></ul>

Build a Community

<ul><li>SurveyMonkey was founded in the dot-com bubble of the 90s; it survived the dot-com crash and steadily grew into a nine-figure run rate, only raising $100 million 11 years after getting started.</li><li>Grasshopper is a phone networking company that had 150,000 customers, over $30 million in annual revenue, but no VC on the books, and was eventually acquired by Citrix.</li><li>GitHub took the pain out of version control and became a critical part of the tech ecosystem before raising capital.</li></ul>

Fortune Favors the “Boring”

Wayfair was profitable from its first month of operation and grew profitably for a decade until they ultimately raised a series A. the company is currently worth $6 billion dollars and because they suffered little dilution, the founders are worth a billion dollars each. Zip recruiter: “we started out with humble ambitions, to Bootstrap a lifestyle business,” said Co-Founder/Ceo Ian Siegel.

You Can Always Raise Capital Later

<ul><li>Wayfair: The company is currently worth $6 billion dollars and because they suffered little dilution, the founders are worth a billion dollars each!</li><li>Zip Recruiter: “We started out with humble ambitions, to bootstrap a lifestyle business,” said Co-founder/CEO Ian Siegel in an interview with Alex Konrad from Forbes. Those ambitions were met and superseded.</li><li>Nerdwallet: The personal finance service that promises to help young people save money lived on a tight budget from the time it was founded in 2009 until it a raised $64M series A in 2015.</li></ul>

Blessed are the Unfundable

Venture capital has powered nearly every major tech company from Apple to Zappos. Just remember that you don’t need a penny to get started. You don’t need permission from funders to found and scale a startup. So the next time a VC tells you they “pass,” remember these three principles:<ul><li>It’s possible to get a tech-enabled business off the ground with no capital.</li><li>It’s feasible to scale a tech business rapidly with very little capital.</li><li>It’s often in the founder’s best interest to limit the amount of capital they take.</li></ul>

Don’t Design Your Business Around VC

There’s a widespread belief among founders that venture capital is a precursor to success. It is true that VC is a common denominator of the most successful tech startups, but it isn’t a…

50 Big Companies that Started with Little or No Money

Google’s corporate mission is to: “Organize the world’s information and make it universally accessible and useful.”What was originally a humble search engine is now also a business SaaS provider, a maps purveyor and a pioneer of Artificial Intelligence. Obviously, Google deserves a huge amount of praise, appreciation and gratitude for its many contributions to the world.

Examining Google Mission

Google would have nothing if no one ever published anything online. YouTube utilizes a profit-share model that inspires everyone from celebrities to stay-at-home moms to produce quality content. In lieu of shared ad revenue, professionally produced channels like this, simply wouldn’t exist.Being venture-backed, Google’s success is measured in terms of growth — not fairness. Sharing ad revenue with content creators would massively dilute the company’s valuation. Google continually releases new features that make them richer at the expense of content creators.

How content creators made Google rich

The Internet is a global effort to preserve knowledge, free speech and equal opportunity for humankind. Fundamentally, no one should “own” something meant for the good of all.Those who wish to protect the Internet from unfavorable economic forces must begin taking small steps to challenge the status quo.

Content creators must unite

Google engineers Paul Buchheit and Amit Patel coined the phrase during a 2002 company meeting. Buchheit, who also happens to be the creator of Gmail, describes the brainstorm session to author…

What’s Next in Computing?

What I learned from Jeff Bezos after reading every Amazon shareholder letter

Valuation For Startups — 9 Methods Explained

50 Big Companies that Started with Little or No Money

Investor money vs. public interest: did Google fail to build a non-evil platform?

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