Founders Space, a startup accelerator and incubator in San Francisco, sent Chairman Steven Hoffman to the Meet & AAMA Taipei conference 2016 in Taipei in June to describe trends in the Silicon Valley and give advice on identifying fast-growth startups.
Founders Space was named by Forbes magazine as one of the top accelerators for startups. It has connections in differenc countries, such as France, South Korea and the United States. Hoffman has started three venture capital-funded companies and advised over 100 startups at Founders Space.
Hoffman identified seven industry trends starting to take shape in the Silicon Valley, a cluster of cities south of San Francisco known for anchoring the U.S. high-tech industry.
1. Fewer unicorns, or startups valued at US $1 billion or more, in the future because many startups are now overvalued
2. Lower valuations for startups due to investors feeling skittish about the economy and unstable stock prices
3. More corporate investments: Corporations recognize that to ensure the long-term success of their company, they must innovate.
4. More incubators in Silicon Valley who see opportunities from the continuous influx of startups
5. More venture capital firms , especially micro-VC funds of several million dollars
6. More investor competition: good deals will get lots of competition because the number of investors is rising.
7. Larger rounds of angel capital: It is now common for angel rounds to be a couple of million dollars.
Hoffman is a serial entrepreneur, angel investor, computer engineer and filmmaker, among other careers, the Founders Space website. He was once chairman of the film Producers Guild SF, to name just one professional highlight. He also worked as chief product officer at the online video startup Playkast and as North American studio head of Infospace, where he ran the U.S. mobile games publishing and development group.
Hoffman earned a master’s degree in film & television from the University of Southern California.
In his remarks, Hoffman also anticipated the following seven growth trends in technology itself:
1. CRISPR (Clustered regularly interspaced short palindromic repeats): DNA editing, targeted removal of genes, is propelling massive innovation in biotechnology. CRISPR has wide applications in biomedicine and animal biology.
2. Cellular computing: Scientists are working to program cells to complete critical tasks, such as scanning the intestines for signs for cancer.
3. Brain chips: Scientists implanted a chip into a tetraplegic man’s brain and enabled him to control a robotic arm.
4. AI for everything: As devices become smarter, how to utilize the vast amount of data generated to improve quality of life is an important question.
5. Sensors everywhere: Sensors have become significantly cheaper, which creates opportunities to collect data.
6. Nano robotics: Tiny robots can be placed in human bodies to deliver drugs and perform other procedures.
7. The augmented body: The future of healthcare includes incorporating technology into human bodies, such as inserting implantable chips into people to control diabetes.
In his speech June 28 to more than 500 people, Hoffman also suggested these 11 guidelines to determine whether a startup is that rare beast:
1. Team: “Great teams build great startups,” Hoffman said. It is essential to vet the background of the CEO and close associates. Team members must have the skills to accomplish what they say they will achieve. Experience at top companies such as Google or Foxconn indicates a record of ability.
2. Market: The startup’s end market must be large; niche markets are not as appealing to venture capitalists who are looking for the next Uber or Airbnb. These investors want to see a big exit, meaning a sale or IPO, and fast growth of the startup is essential for high value exits. Startups that have great technology withoug strong business models have low-value exits.
3. Customers: The startup must have a clear sense of who its customers are as well as their preferences and habits.
4. Design thinking: The user interface is more important than the technology. Numerous successful companies, such as Twitter and Facebook, did not build new technology initially, but their interfaces were better than those of other companies, and that is why they succeeded.
5. Secret Sauce: What does a startup have that its competitor does not have and will have trouble replicating? For example, does the company have an exclusive distribution channel?
6. Business model: The business model must be simple. Business models can go two ways: either the customer pays the startup (large fee once or small amounts continuously) or the advertiser pays the startup. If the business model is the latter, then millions of users are necessary for the startup to succeed.
7. Catch the waves: Great companies are built on technological and societal trends; companies that catch the initial wave are usually the sole winners. Take the example of the Palo Alto-based Nest Labs, which develops automated devices for household use. Nest caught the IOT wave and was acquired by Google in 2014 for US$3.2 billion. Other IOT companies that came after it have not been able to replicate its success. Being the first company commands from investors, mass media and investors, making it easier to rule the market.
8. High risk and reward: The nature of venture capital is high risk and high reward.
9. Best of the breed: A startup must aim to be top in its market because the that company usually captures a 70% share. For example, taxi hailing service Uber is valued at $62.5 billion while Lyft, its peer in second place by market share, stands at $5.5 billion.
10. Patents: They can be valuable in certain industries, such as medical devices, but most software patents of Silicon Valley startups are “not worth it,” according to Hoffman. Patents are worth the time and money if they are for specific technology that the startup is innovating.
11. Fun: Are the team members passionate about the company? If employees are not excited about what they are doing, there is a low chance of success.