Refocusing on the customer to improve startup failure rates

Even when startups have a seemingly good idea, high-powered team, funding, and marketing, most fail. Instead of accepting this as normal (a badge of courage and a ‘fail early, fail fast’ mentality), many people have started to question this, and congruently with Silicon Valley’s problem-solving mindset, try to solve the high rate of startup failures.

It is not that startups fail to build products and services, it is that they fail to build products and services that anyone WANTS.

Focusing on the customer and their needs, first, last, and at every step of the way, is suggested as the answer for creating startups that are far less likely to fail. One advent in tools to help develop and stay in the customer-centric mindset is the ‘canvas’ concept. The canvas is a large paper with the quadrants of the business model set forth, and teams populate the quadrants with content written on post-its which can be dynamically updated as ideas change and assumptions are validated. Some examples are the Lean Startup Machine Canvas and Business Model Canvas.

Crowdsourced stock market trading

Stock market trading has become a dirty word, or if not that, at least uninteresting. Wall Street excesses and the 2008 crash have led to little recent opportunity for financial return (non-existent interest rates for saving, and flat stock markets for equities (the S&P 500 return in 2011 was 0% (S&P 1257 at 12/31/10, 1258 at 12/31/11). Gold has been one of the only asset classes to realize real return (142% five-year return, $632 as of 12/28/06, $1531 as of 12/29/11). The particular subjective day trader gave way to faceless high-frequency computer algorithms as one of the only means of squeezing profits out of the stock market.

One thing that could turn this around, and have the dual benefit of bringing more transparency to markets and market practices is crowdsourcing. The enormous amounts of clean, freely available, computable, straightforward-to-understand data without privacy issues are ideal for crowdsourced manipulation.

Earlier attempts at applying crowdsourcing to stock market trading (for example, Yahoo Prediction Markets with leaderboard-style tracking of traders’ mock portfolios) fell by the wayside with the 2008 crash, but the concept could be reincarnated. There are several obvious ways to deploy crowdsourcing in stock market trading startups:

1. First would be a direct implementation of crowdsourcing as from the Wikinomics, fold.it, eteRNA model: making usable web-based datasets available to the wisdom-of-crowds to apply diverse ideas from different disciplines, often resulting in better results than those produced by the ‘experts’ in any field. Leaderboards, competition, leveling-up, forums, badges, and other gamefication techniques would be expected.
2. Second would be a platform where real-life traders can open source their trades, either before or after execution. Interested traders would grant open access to their trade logs, inviting crowd review to find winning trades, strategies, and traders, and conduct meta-analyses like what strategies work well in a high-volatility environment, a down economy, etc.
3. Third would be prediction markets 2.0, a more social gamefication implementation of prediction markets for stock trading, sales forecasting, movie hit projections, elections, and flu outbreaks through platforms like Iowa Electronic Markets, Intrade, etc.

Design and the disruptive startup: dynamic pivoting

In the mashup world of life, business, and web 2.0, spurred on by the Apple-ification of the world (iLife - as a concept not a product), one new idea is applying design to business models, and really by extension, applying design to everything.

Unfortunately, this does not mean as one might think, applying aesthetic principles, conceptually and literally, to business, business models, or any life context, adding beauty to function, and thereby function to function, and questioning the right proportionality of form and function.

Rather, at present applying design to business models means more basically, using design tools and design thinking in a business context, specifically, in the conduct of an iterative prototyping process with users.

In business 1.0, an entrepreneur would dream up an idea and write a business plan. In business 2.0, the claim is that entrepreneurs should interview dozens of potential customers to pivot through value propositions for ideas that solve the biggest customer pain points. Customer acquisition is tantamount, in a 'get, keep, grow' cycle. Elliptical tools like the business model canvas are proposed as support for this iterative prototyping process.

Genomics: progress in exomes and structural variance

The fast rate of progress in many areas of genomics was the most salient dynamic of the Future of Genomic Medicine III conference at Scripps in San Diego CA, March 5-6, 2010. Cancer genomics and pharmacogenomics continue to blossom as wide-ranging fields of applied genomics. Aging and genomics, and the role of genetics in studying disease and the microbiome are nascent and growing. Importantly coming to the forefront for the first time is structural analysis and exome analysis.

Structural analysis of genomes concerns copy number variation (multiple copies of genes), inserted genes, deleted genes, inverted genes and other structural changes, and is found in all classes of traits and disease. There is thought to be 12% structural variation between humans as opposed to 0.1% SNP variation between humans. SNP variation is the 'typos' at specific genetic locations where the normal nucleotide combination is 'AA' and some people have the risk alleles 'AT' or 'TT.”

Using exomes (the 1-2% of the genome that contains protein coding regions) as a cheaper alternative to whole human genome sequencing, and conducting basic SNP analysis together with more complex structural variation analysis, and possibly methylation analysis (which genes are blocked from expression), and RNA transcriptome analysis (levels of DNA expression), could bring more sophistication to DNA analysis for myriad purposes including pharmacogenomics and disease analysis.

Some interesting startup companies are starting to realize these new aspects of genomic medicine:

• Cellular Dynamics, Madison WI (human cells derived from induced pluripotent stem (iPS) cells)
• Integrated Diagnostics, Seattle WA (predictive blood assays of organ-proteins; UCLA melanoma clinical trial)
• Population Diagnostics, Melville NY (copy number variation analysis for pharmacogenomics)

VC guide to anti-aging biotechnology investing

Several promising startup companies focused on the nascent but obviously significant and growing anti-aging biotechnology space were present or discussed with interest at the recent SENS4 (Strategies for Engineered Negligible Senescence) conference in Cambridge, U.K., September 3rd – 7th, 2009 (program) (full conference report).

1. Epeius Biotechnologies, San Marino, CA, USA: Rexin-G, a tumor-targeted injectable gene delivery system
2. FoldRx, Cambridge, MA, USA: small molecule therapeutics to treat protein misfolding diseases, and bind and clear undesired molecules
3. Gencia Corporation, Charlottesville, VA, USA: mitochondrial DNA rejuvenation using the rhTFAM (recombinant-human mitochondrial transcription factor A) protein
4. Genscient, Fountain Valley, CA, USA: novel chronic disease therapeutics by combining genomics and selective screening (a large Alzheimer’s Disease genetic study is in progress with Kronos and TGen)
5. Knome, Cambridge, MA, USA: whole human genome sequencing (consumer offering)
6. Neotropix, Malvern, PA, USA: oncolytic viruses for the treatment of solid tumors
7. Pentraxin Therapeutics Ltd, London, UK: small molecule drug CPHPC specifically targeting SAP (serum form of amyloid P) and removing it from the blood and brains of patients with Alzheimer’s Disease
8. Repeat Diagnostics, Vancouver, BC, Canada: telomere length measurement for total lymphocyte and granulocyte populations (consumer offering)
9. Retrotope, Los Altos Hills, CA, USA: using isotope effect to slow down damage pathways and control metabolic processes associated with oxidative stress
10. StemCor Systems, Inc., Menlo Park, CA, USA: bone marrow harvesting system
11. T.A. Sciences, New York, NY, USA: telomerase activation via the single molecule TA-65, licensed from Geron Corporation (consumer offering)
12. TriStem Corporation, London, UK: retrodifferentiation technology to create stem cells from mature adult cells

Angel investors drive innovation

The Center for Venture Research at the University of New Hampshire reported that in 2007, angels invested almost as much as venture capitalists in startup companies, $26.0 billion vs. $29.4 billion. Focused on seed and startup stage financings, angels invested in far more firms, 57,120 vs. 3,813 for venture capitalists. Angel investment growth was flat in 2007 vs. 2006 while venture capital investment grew 11%. San Francisco Bay Area angel investors comprised 10% of total angel investment activity. As with venture capital, the top four categories of angel investment in order were software, healthcare, biotech and energy.

Angel investing was once a solitary activity driven by personal networks, the practice has been formalizing in the last several years and there are now over 150 angel investor groups in the U.S. and Canada. The groups typically meet monthly where 3-6 pre-screened companies present to members. Angel investors are not disengaged retirees, 80% continue to be actively involved in the business world. Cleantech and even social venture capital are starting to be interest areas for angel investors.

Angel investors are a critical component of the entrepreneurial ecosystem and should be encouraged and sponsored by communities trying to establish a more innovative environment. For startups, angels can be an important resource for funding, feedback, contacts and exposure. The contribution and impact of angel investors can be expected to grow.