Greece, the Grexit and Jam Tomorrow

Recent events in Greece have brought me back to the blogging state of mind with a whole range of new thoughts on how a nation ends up in this scenario, how it developed and what it means going forward. Some of my thoughts are in line with the great and the good of economics but I do think that there are a couple of nuggets of my own in here.

Once upon a time ...

Historically Greeks have had what can only be described as an avant garde relationship with personal taxation. During the 70's and 80's avoiding tax was the national sport and there were more Porsche owners than tax payers. This is really the bedrock of the problem - culturally it was ok to avoid tax and do it openly with no fear of any real danger. This gave rise to a nation where it was possible to retire at 50 and live comfortably from your ill-gotten gains.

The 80/20 Rule

When examining catastrophic failures of this type I often use the 80/20 rule of thumb. This generally means that 20% of Greek establishment is responsible for the problems of the remaining 80% of the Greek population. That same 20% is both the cause of the issues and not taking the necessary steps to redress the pain they have caused. It brings the question of who are the 20%, an important factor in the current Greek situation.

What if...?

What if a company ran on the same basis. What if the management of the company spent more than it generated in revenue. We wouldn't expect a company to survive in those circumstances so why do we expect Greece to? We would blame the management wouldn't we? Of course the current Greek government is not the one responsible for the stupidity and irresponsible actions of the previous governments over the past 30 years but it is now taken responsibility for getting Greece out of its debt black hole so needs to act quickly and with only Greece in the here and now in mind.

What on Earth!

At a point in time when Greece can ill-afford it, the current government has lost the plot. It might not like what the European Union is saying but it doesn't have a choice. It needs its 3rd bailout in 5 years or the abyss beckons - but it seems that the government will not accept the terms for the money it needs and will therefore bring Greece out of the Euro and into the financial wilderness.

It is absolutely the case that the Greek people have suffered, suffered terribly over the 2010-2015 period but the phrase that comes to mind is "self inflicted - no sympathy". This is clearly the point of view of many of the Euro nations and has been drilled into the Greek psyche buy many a German politician. 

What now?

Greeks in general need to see the situation they are in as last chance saloon and act accordingly. This is not a moment for any kind of defiance or heroic last stand. The country will take 3 generations to recover outside the Euro, it might do it in 2 if it remains in the EU. The political establishment in Greece has called the situation wrong and needs to see that the EU will protect itself from Greece's problems no matter what.

What next?

Portugal, Spain and Italy should all be worried. They are all in various stages of the decline that Greece suffered which probably explains why they are campaigning hard for Greece to stay in the Euro. Portugal has a very similar cultural problem to the one that saw Greece plummet. A small number of tax payers, an elderly retired group of a disproportionate size and a struggling economy in terms of jobs and growth. I suspect that there are a couple of Portuguese politicians shitting themselves.  A little further back are Spain and Italy, they still have time to act to stop themselves "doing a Greece" but Italy has a lot of problems in the post-Burlusconi era.

What would I do?

A hard question to answer in some respects but I think it would be largely what I needed to to keep the IMF on side. What I wouldn't do is promise deliverance and jam tomorrow by holding out, being proud and going down with the ship. Without the support of those organisations that can sling a couple of billion Euro's in my direction when I need it its impossible to see how the whole economy wont collapse. Banking is key and the Greek banks are out of cash and out of time. The Greek nation would continue to suffer under the austerity of the times but a nation finding it touch is better than a nation finding tough on its own. 

Surviving Consumer Electronics Show

Consumer Electronics Show or CES as its more commonly known is the worlds largest and most intense technology show. The event is held annually in Las Vegas in Nevada and has been in existence since 1967. This posting is really aimed at anyone attending for the first time and some words of wisdom having done the show several times.

The basics

The first thing to try and grasp is how vast the show is. There are 3000+ stands/exhibitors on around 2.6 million square feet of floor space. There will be 5000+ journalists covering the event and the show regularly attracts 150,000 attendees. Its just huge and often overwhelming for the first time visitor. Because of the size its hard to get the most out of it without research and planning. Its not the kind of show you can just roll up and wing it.

Microsoft and Apple do not attend the event (they have done in the past), these days they have their own bespoke events to evangelise their tech - but every other tech company on the planet seems to be there so its a very good barometer of the whole tech space and what is hot/not.

Survival Advice

You need to be comfortable with crowds. The sheer number of people means that you wont be able to find or protect much in the way of personal space.

Learn to love queues. You're going to be queuing for everything! Cabs, coffee, food - nothing is going to come quick.

Organise rendevouz points with colleagues so you can coordinate meeting up in the crowds.

Choose your shoes carefully. You're going to be standing and walking a lot. Avoid new shoes. Go for worn in shoes ideally with thick rubber soles. Typically you can end up walking 5-6 miles a day.

Think about what you really need and try and travel light. My normally heavy backpack gets stripped right back so I'm carrying bare minimum.

If you're hoping to attend some of the parties, they're mainly invite only but if you're interested check out this list.

Any internet connection available will be running completely at max so don't be surprised if you can't connect to what's provided. If you have a MiFi then take it. SMS is going to be the best way of getting hold of anyone at short notice or in the event of an emergency.

There is a lot of "free stuff" so leave some space in your case so you can lug it home. Alternatively shipping it in the post can make sense (you don't have to carry it) but check the costs as it could be expensive.

Las Vegas is in the middle of the desert and therefore dry, take lip balm if your prone to dry skin. Likewise make sure you have bottled water in your bag.

My CES Week

Sunday: Arrive and try and manage the jet-lag

Monday: Collect badge and do a test run of walking between various locations to see how long it takes and to make sure I can get between appointments in plenty of time.

Tuesday: Show floor opens - walk the show floor to make notes on things to come back to, where they are and how to get to them - ready for Friday.

Wednesday: Back to back meetings

Thursday: Back to back meetings

Friday: Take the notes from Tuesday and go and look in more detail at the things I'm specifically interested in. The crowd is significantly less on the Friday which makes it easier.

That Pesky Penguin!

Introduction

Google has one again shook up the SEO market with another update to the way that the search engine finds and references content. The previous update (called the Panda Update) broke the connection between search engine rankings and the over use of keyword strategies to fool the algorithm. The Penguin update is now maturing - on release #5 - and was designed to yet again overcome some SEO techniques that were proliferating and making the search results skew in a particular direction.

What is Penguin?

Google is in a constant battle against spam. That has led to the creation of yet another animal-named update, known to the world as the Google Penguin. This update is specifically to reduce cyber traffic and give low ranks to link-schemed websites, the update has been a success in raising the bar for the standard of SEO in websites; though many sites have fallen foul of the update accidentally and as a consequence not everyone is singing Google's praises.

What's the #5 update for?

For businesses with websites, or public content, the things to look out for are elements such as:

• link relevance
• low quality back-links
• automated queries being sent to Google
• content duplication
• hidden links or texts

Any other kind of black-hat techniques which are the algorithm’s target will also have alarm bells ringing at Google's end and should be avoided. If your web presence includes any of these things then you might have noticed a sudden drop in the traffic on your site. This will be a case of needing to make some small adjustments.

What are the best tips following on from the #5 update?

What you're striving for now is the most natural looking website you can. While there’s a lot to be taken into account while refining your web presence, here’s a general list of the things you should do, to minimise the “Penguin Effect”:

• Optimise the content sent to search engines, and help make your pages relevant to the keywords you submit.
• Look out for malicious content being promoted on your site.
• Avoid any kind of black-hat technique such as keyword stuffing and cloaking.
• Avoid automatic-query sending products.
• Work on loading time with the help of Page Speed or YSlow.
• Keep check of broken links, and maintain the quality of content.
• Under no conditions should one go for plagiarism or duplicated work!
• Divert your links and keep different anchor texts.
• Though guest posting is nice, it’s important for bloggers to know that Google takes these as back-links, and are a negative point to your site.
• Integrate your site with as many social sites possible, especially Google Plus!

Tips and Tricks

• Make unique and genuine content – User experience is important
• Its better to take a new domain and shift the content to it. 
• Never use blogroll links in your website/blog
• Go social – promote your site via Facebook, Twitter, Digg, and Google Plus
• Check your site internal linking and the anchor text associated with that.
• Get more quality back links.
• Identify the poor links and try to remove them by requesting the site owners and then go for the Google Reconsideration Request

The name is Bond ... Completion Bond

Introduction

There are a number of ways a small company can fund a new project. Some of the well tried and tested routes can be slow or come with caveats that make them less than attractive in terms of time and effort it might take to secure a deal. This post is aimed at highlighting one of the less well known ones - completion bonds.

What is a Completion Bond?

A Completion Bond is a financial contract that insures a specified project will be completed even if the production company runs out of money or any other incident occurs during the production of the project. Completion bonds are used in many industries but have been particularly popular with major films and construction projects.

A common use of a completion bond is as part of a mortgage financing deal, and serves to protect both the mortgagor and mortgagee. A third party financier, a completion guarantor company, is typically brought in to provide the financial backstop in the event that original financing is insufficient to complete the project. This is also known as a completion guarantee.

Completion bonds are standard pre-project approach for any large project or complex projects involving large sums of money or multiple investors. They are a long-standing tradition in the entertainment business, where many variables can affect the completion of a large movie/game/TV project.

A third party guarantor will assess the risk to the projects completion and collect a premium for insuring the particular risks to a given project being completed on time, and on budget. Investors become much more likely to get involved, knowing that the project will be completed enough to be sold so they can recover their investment(s).

Completion Bond funding for Games [by Dan Marchant]

This is a funding model that is used in the film industry, which a number of publishers investigated as a possible method of funding entertainment software development. To date it hasn't really taken off in the main because the game development process is very different from the film production process.

Completion Bonds allows the publisher to defer their financial risk, the developer to secure funding for a project and the CB company to make a profit via a return on investment plus an agreed amount when the game is completed.

A publisher interested in an entertainment software title will sign a deal stating that they will publish or distribute the product on completion. With this guarantee that the product will get to market the developer secures a completion bond which will allow them to fund the development to completion. In some cases the deal give the CB finance company the rights (or obligation) to take over the project if it does not meet required deadlines in order to ensure it is completed. On completion the publisher pays the CB company back their investment, plus an agreed profit.

The pros are that the publisher has no financial exposure until the project is completed, the developer has a secure source of funding and the CB company gets a guaranteed return on their investment. Of course all of this is subject to the projects being successfully completed. The cons are that it is very difficult and time consuming to secure CB funding. The funding model is also rather inflexible, which can have a serious (negative) impact on development if design or technology changes become necessary during development. Unlike the film industry the entertainment software industry is still in a state of rapid technology development. This makes even the best planned project subject to alteration, which in turn requires a very flexible and quick reacting funding model.

Completion Bond Funding for Films [By BMS]

A film completion bond is a written contract that guarantees a motion picture will be finished and delivered on schedule, within budget and according to an agreed script, it does not, however, guarantee the quality or success of the film.

Most independently financed films, including many that are released and distributed by the major studios, require a completion bond to satisfy the lending bank. They are needed because a completion bond company’s balance sheet is usually quite small, so they need to go out to the market for the capital and then the insurance required to collaterise the guarantee is issued by the completion bond company. 

The technical structure of a film completion bond is an X/L treaty structure, with facilitative cover for big budget films this is achieved through markets in Bermuda and Europe, as well as London. Film Finances retain the first $500,000 but this is fronted to satisfy the banks and the X/L treaty structure is made up of six layers.

One of the largest limits completed to date, $120m is in respect of each of the final two Twilight films. Other examples of interesting films bonded by Film Finances include; Four Weddings & a Funeral (1994), Pulp Fiction (1994), Phantom of the Opera (2004), Borat (2006) and Oscar winning The King’s Speech (2010).

Opinion

Finding funding is hard. Creative projects often start with a negative against them as many investors see them as nearly pure risk. With that in mind those companies seeking funding need to work every option until it doesn't work. Completion Bonding is not a simple or straight forward solution to funding a creative project but clearly some projects do get off the ground on the basis of a completion bond so in the right circumstances it is the right solution.

The other thing to note that even if a completion bond is an option for your project, it doesn't come in as cheap money. If the terms of the bond are not negotiated carefully and expert opinion sort then it might be impossible for the bonded project to make money regardless of the delivery.

Lastly, the bonding community is closer to banking than it is to the creative sector so be prepared for a good lack of understanding if your project is cutting edge or a little wacky!

The Story So Far ...

The Story So Far ...

I thought I'd write a more reflective piece. I thought I'd put down some of my current thoughts on the whole start-up thing. I know some of my opinions on start-ups make me a heretic in some peoples eyes but I've never been big on what other people think. Here are my reflections on some of the more common points raised by entrepreneurs and investors:

Team

Whilst investors will often say its all about the team, entrepreneurs running start-up's often that comment to be everything. The recruitment game is difficult and mistakes are expensive. If they can avoid the cardinal sins of employing friends or family, they often fail the next test and hire people because of the way they look.  You just need people that can do the job. 15 years of experience in a hire looks nice, but it could be some time since they actually worked at the coal face. The focus has to be productivity, nothing else.

I meet lots of start-up's around the world, often superstars that get overlooked or don't quite make it because they're "quirky" or otherwise don't fit preconceived idea of what a person in a given role should look and feel like. None of that ever matters. When recruiting coders, find brilliant people that write code that solves the problem simply, effectively and can be maintained without causing a brain haemorrhage. Find sales people that have high emotional IQ and care about truly understanding customer problems and selling them a solution. Decide what success looks like for a job role, and ignore the irrelevant details. (Note: Culture fit is not an irrelevant detail. Things that are irrelevant are age, nationality, gender, etc. things that have no bearing on the outcome).

Problems

All the best business solve a problem. Challenge number 1 is to understand the problem that exists within your target market and customers. I don't care much for the established wisdom - the guy that comes along and tries to 'educate' me on why things are they way they are. He probably has a vested interest in maintaining the status quo and has an emotional attachment to the current state of things. I need to figure both the problem and solution for myself - its the route through to developing a product or service.

Approach

I'm not an Apple fan and didn't really care for Steve Jobs's business rhetoric but I am a fan of the idea of thinking differently - "think different" for those Apple fans. You can't beat bigger, well funded competitors if you try and play the game their way. You need to change the paradigm to suit your own circumstances. I get fed up with sentences that start with "Apple do it like this .." or "What Microsoft did was ...". That train of thought is pointless.

Experience

Experience is hugely over-rated. The most successful start-up teams consisted of people that lacked much experience at the time they joined. But, what they lacked in experience, they more than made up for in sheer talent and hunger. In the early days, hire athletes. People with raw talent and a propensity to get things done. Don't be resistant to recruiting people that are early in their careers. You're looking for arbitrage opportunities. You're looking for the future stars - because you likely can't afford or convince the current stars.

Product

Just release a product. You actually need to write code and release a product. You need to be able to respond to customer issues. You need to iterate fast so you can learn quickly. You don't need a head of anything or a lead of something, you need a doer of stuff that needs to get done. I'm really not interested in job titles, I'm just interested in outcomes. Start-ups need to plug gaping holes in the companies skills matrix. Are you signing up customers so fast that you can't respond to all the support emails? Don't hire a head of support, hire someone that helps you tackle the support issue. Someone that's maniacally committed to customer happiness. They can become your head of support some time further down the line.

Decisions

The only thing worse than a bad decision is no decision. Entrepreneurs can often see making decisions as a potential point of no return - if they make the wrong choice then it could be all over. Well life just isn't like that - nothing is a 100% sure bet. But whatever you do, don't sit on the fence. Commit to something. Don't hedge your bets. Give it all you have. Make it your life's first occupation. If you can't get excited about it then you need to find something else. I've made lots of stupid mistakes in my professional career - I still make them on a daily basis, I just know a bit more now about dealing with mistakes.

Patience

In a world where someone can become an instant success (X-Factor etc.) its easy to think that a start-up should be running like a freight train at the end of the first week. Be patient. Often, your best people will take a little time to really shine. Don't judge too early. Determine the context. If someone's not cranking yet, is it because getting up to speed at your company is hard? Everyone's too busy to show them the ropes? Their lack of early performance could be the context, so be patient.  But don't tolerate this too much, don't be too patient. If someone isn't at least moderately productive in the first month or two, it's unlikely they're going to be super-productive in the following year. The really great people tend to deliver some value almost immediately.

Penny wise - pound foolish!

It is good to be money conscious in a new company, it instils the discipline that will help long-term. Don't be penny-wise and a pound foolish though, something's just cost money but the benefits are huge. There are little things that don't cost that much, that makes people happier. It's not about the money (they can all afford a coke), it's about the inconvenience and the principle. Not having them leave their desks for an hour by providing them with a £1 of something makes total sense.

Change

Change for most people is hard. Really Hard. But that doesn't mean its not for the best and that it can be avoided. Start-ups need to see this for what it is - a fact of life. They should know that most people will not see what they see or agree with change in the first instance. Its more important to be right than obvious. The change can come over time and people are convinced by evidence not rhetoric.

The glorious past

There is a tendency with start-ups to look back in time to make a decision, especially with recruitment. They always know a guy who was a genius in his own time or the best guy at college - but that might not be who he is now. They would be better to hire based on existing performance levels only - it avoids hiring the best guy in college which was where he peaked and is now average and middle of the road.

Change the game or fuck off home

Start-ups face a tremendous number of challenges but the most difficult one is themselves. They need to see that there is always room at the top and regardless of what else is in the market there is a way for them to win. The competitors may have written the rule book - but they will have written it to favour themselves. So don't play them at a game where they start with an advantage - change the game. Fear of failure for most of them stops them from acting on this - its just another fear to overcome. Ultimately if you're not changing the game then your a "me too" company and you won't be exiting anything with millions of dollars any time soon.

The Intellectual Property Act 2014

The Intellectual Property Act 2014

The act, which came into force on the 1st of October 2014, simplifies the process for protecting 3D designs and puts design rights on an even footing with copyright and trademark laws in the UK.

Overview

The objective of the act is to make the design rights process far more user-friendly. The most important changes in the act deal with design right protection. Design rights protect original 3D designs, which are not covered by copyright, trademarks or patents. This rights protection is particularly effective for creative industries in sectors such as furniture, home wares, packaging, footwear, architectural features and other 3D objects.

Design rights proceedings are costly, with many small companies keen to avoid spending money on litigation, which is likely to be pointless. A new service will be introduced giving parties a right to obtain a non-binding opinion from the Intellectual Property Office (IPO). If a business has a registered design that is challenged as being unoriginal, then the business with the registered design can ask the IPO for its view before going to court.

The most important change for most small businesses, and one that might cause the most problems for some businesses, is that when a business commissions a design from a third party, the designer will own the design right intellectual property (IP) rather than the business that has commissioned the work. A business that pays a designer (who is not an employee) to develop a product will not actually own the design unless this is specifically agreed. The commissioning company must take the right legal advice as to what contractual clauses retain the design rights for them.

The act now means that infringement of a registered design is a criminal offence. This brings design rights into line with copyright and trade mark laws. A small business that has a registered design will be able to report those who are producing or selling “knock-off” designs to the police, as well as pursuing its own  legal action.

Further Amendments

There are some things that are still in the pipeline for UK designs:

• The UK will join the Hague international designs registration system in its own right. Currently applicants wanting to use the Hague system and wanting to cover the UK need to go for EU-wide cover. The UK will not join the Hague system before late 2015 however.

• The IPO is planning to allow electronic inspection of certain design documents. Again this is not likely to happen before the end of 2015

• The appeal system for designs is to be changed along similar lines to the trade mark system with a choice between the courts and and a more informal process, to an ‘Appointed Person’, an expert in intellectual property law appointed by the Lord Chancellor. This may come in Spring 2015 but we should expect a consultation first.

• The Design Opinions Service, which should be introduced next year, will issue non-binding opinions from the IPO on matters relating to designs.

Links

Intellectual Property Act 2014 - Government Site

Intellectual Property Act 2014 - IPO Site

Taylor Wessing Overview

 

Hype!

I meet a lot of company founders and directors who have some notional idea that the tech they are developing (or developing with) is red hot and the next big thing. There are a number of ways this ends up being the case, previous experience or background, specific opportunities or in some odd cases just a gut feeling. The one that is probably most common is hype. The media has a fantastic way of making us feel that there is a fabulous technology world just in front of us and that we should all ride that wave. The difficulty for business owners is to what extent these visions are real or unlikely. In the 80's we were told we would be riding around in a Sinclair C5, more recently we're promised the utopia of same day Amazon deliveries via drones. So what is really driving all this and how can business owners make more informed decisions on future tech?

I blame Gartner!

There is some established wisdom on this subject. Gartner Inc is a technology research and and advisory firm that is widely regarded. They have long been associated with something called the "Gartner Hype Cycle". This describes the path that most new technologies take through the eco-system of development and then usage over a period of time. That hype cycle is essentially a five stage process:

What this diagram shows is the common path followed by new technologies in the digital era. So what do these stages relate to?

Technology Trigger: A potential technology breakthrough kicks things off. Early proof-of-concept stories and media interest trigger significant publicity. Often no usable products exist and commercial viability is unproven.

Peak of Inflated Expectations: Early publicity produces a number of success stories—often accompanied by scores of failures. Some companies take action; many do not.

Trough of Disillusionment: Interest wanes as experiments and implementations fail to deliver. Producers of the technology shake out or fail. Investments continue only if the surviving providers improve their products to the satisfaction of early adopters.

Slope of Enlightenment: More instances of how the technology can benefit the enterprise start to crystallize and become more widely understood. Second- and third-generation products appear from technology providers. More enterprises fund pilots; conservative companies remain cautious.

Plateau of Productivity: Mainstream adoption starts to take off. Criteria for assessing provider viability are more clearly defined. The technology’s broad market applicability and relevance are clearly paying off.

Looking back over the last 20 years this is a pretty consistent assessment of the journey most new tech takes.  

So the challenge for most businesses becomes at what point do you use a new tech to make the most of it? Its not easy to call. If you're an early adopter you can spend a lot of money waiting for the market to develop and appear under you. If you call it too late then the market is dominated by an 800lb gorilla that is soaking up all the customers and revenue. It then just becomes about marketing spend to generate market share - also expensive.

Personally I lean towards early rather than late. Its more rational to have products and services building momentum as the market develops than having to free up huge amounts of cash to make a marketing splash. Being seen to be in the market first/early also has other business benefits for companies creating tech, patents etc.

So how do we prove that the Gartner Hype Curve is valid as a way of understanding the tech market?  Here is the Gartner Curve for 2013:

As you can see from this there are several technologies that are in all the press, autonomous vehicles, 3D Printing, Drones etc. that are all reaching the peak of inflated expectation. Amazon are not going to be doing deliveries by drone and a Google Car is not going to drive you anywhere any time soon. If you study the diagram carefully I think its an accurate representation of where all these technologies were 1 year ago.

So what is the way to assess this? Its really just the age old question of risk versus reward:

Innovators are creators of technology not users of technology. It costs a lot to develop new tech and can take years. The rewards however are huge, particularly with patents.

Early Adopters are inclined to take something that's a little under developed and help shape it. Early adopters tend to become join venture partners or form some other commercial relationship which means they use the product for less than the market rate further down the line.

Early Majority companies are the first real customers for new tech. They realise the benefits early in the technology life cycle and form early client-supplier partner relationships with tech companies.

Late Adopters generally come in when the technology is maturing, has established markets and customers. They are not innovating and tend to be using well embedded tech on low commercial margins. Often they're described as resellers.

Laggards are companies that come to the party just about as its over and everyone's gone home. They are slow to adopt and are seen as technologically backward.

Dependant on what part of this scale your company adopts the risk and reward goes up and down. The earlier your company appears the higher the risk and the higher the reward. No company wants to be seen as a Laggard and this should be avoided at all costs.

The only thing worse than a bad decision is no decision. Every company in the tech space should understand where it fits in the scale above and then match that to technologies on the Gartner Curve. If you think your an innovator then your currently working with drones, 3D Printing and Crypto-Currencies. If you're a late adopter then you're integrating speech and analytics into your products.  Either way make a choice and develop your strategy accordingly.