Pocket Watch

With Capital Efficiency, Entrepreneurs can focus on building what customers want, rather than what VCs want to fund.

In addition to Democratizing the Startup Process, Capital Efficiency drives another important improvement in the startup model: Entrepreneurs are largely freed from the tyranny of building what the VCs want to fund.

In the traditional startup model, step one is for the entrepreneur to raise venture money.  Pragmatic Entrepreneurs want to know what the VCs want to fund, because it is much easier to sell a VC on an idea/category/business model that they have already decided they like.   This is a significant contributing causal factor for all the reporting and cocktail party chatter around what VCs are interested in/funding now.  This echo chamber effect causes some big problems, systemically reducing the chances of startup success through two mechanisms:

(1)  The world ends up with multiple copycat companies pursuing essentially the same business idea.  These companies engage in infant fratricide, wasting money, time, and market opportunity, in the process.

(2)  In an effort to “anoint a winner”, some VC funds will put much more money into the number two or three player in a space on the hopes that they can leapfrog into the number one spot.  Most of this “extra” money is spent inefficiently at best; poured down the drain at worst.

But, Capital Efficiency changes this.  Since Entrepreneurs don’t need to seek VC money as step one in the process (step one is put product into the market, since it’s so cheap to do), they don’t need to try to read the VC groupthink tea leaves regarding what is hot today.  Instead, they can follow their own market knowledge/intuition to build something the world really wants.  I humbly submit that we’ll all be much better off with this approach.

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It makes sense for the next new iPhone to support NFC mobile payments.

I know we haven’t even held the fourth generation iPhone in our hot little hands yet, but I was thinking about what Apple should put in the next new iPhone, and it seemed obvious that adding NFC to enable mobile payments for real world purchases made perfect sense.  Then, when I saw today’s announcement regarding the acquisition of Innovision by Broadcom, that solidified my belief that this must be coming down the pike.

Mobile payments are a wonderful idea — pay for modestly priced items in the real world by just putting your phone up to a reader.  It’s gotten some traction in Japan, but it’s failed to see widespread adoption, because it is so darn hard to get the multiple players in disparate ecosystems to act in concert.  You need:

(1) The handset vendors to put the NFC chips, and supporting software, into a critical mass of phones.

(2) The mobile operators, who generally subsidize the phones, to enable the payment mechanism (or, in an unsubsidized ecosystem, you need a banking partner to enable the payment mechanism).

(3) A critical mass of merchants to install point of sale systems to use the same NFC system as the phones have.

(4) A critical mass of users to actually use the system to pay for things.  Making the use of mobile payments be “easier than cash” is a necessary, but not sufficient condition.

Getting all four of those to move in concert has proven to be an insurmountable barrier to date.  BUT, Apple is in the perfect position to pull it off!  Let’s take the each of the items above in turn.  Apple doesn’t have to convince anyone other than themselves that they should put the NFC chips, and supporting software, into the phones.  Apple already has iTunes as a payment mechanism for the majority of iPhone users.  If anyone can leverage their brand to convince merchants to do something, it has to be Apple.  And, with the rabid Apple enthusiast fan base, they will get a lot of early adopter end users to give the system a try.

Apple is likely the only company on the planet (outside of Japan) that has the ability to pull this off.

I can only think of one reason why Apple might choose NOT to do it.  The only way that Apple can recruit a critical mass of merchants to install the NFC point of sale systems is to go (quasi) public with the effort long before the launch, and Apple hates to go public with anything before a launch.  Of course, given the impressive pre-order rate for the fourth generation iPhone — despite the phone getting leaked a couple of months ago — maybe they should rethink that stance (heck, maybe they should be cutting some affiliate marketing checks to Gizmodo for creating so much demand).

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Denying Fragmentation is an issue for Android isn't going to help address that real and growing issue.

Dan Morrill, Open Source & Compatibility Program Manager at Google posted a couple of days ago On Android Compatibility saying, essentially that Fragmentation is a non-issue on Android, and it has been trumped up into being an issue by bloggers/pundits looking to drive traffic.

While I am a big fan of Android, I have to respectfully disagree with Dan.  ”Fragmentation” is a real issue if (1) it takes noticeably more development resources to support the multiple instantiations, and/or (2) end-users have to become hardware platform aware in knowing whether or not a particular piece of software will work on their device.

Re (1).  I don’t know which developers Dan is talking with, but the small (less than 10 developers) companies I talk with complain vociferously about the extra resources it takes to develop, test, and debug for the various Android handsets out there.  Often, it is a problem of simply getting access to the handsets before they go into the market.  Of course, one has to expect some overhead associated with supporting multiple devices, but the current level is legitimately concerning to developers–especially as they look at all the new Android devices coming to market in the foreseeable future.

Re (2).  If you want to know whether or not Fragmentation is an issue from the end-users perspective, just spend some time reading the user reviews of anything other than the top apps.  It has become fairly common practice for end users to list what handset they are using the app on, because it is widely recognized as being a key determinant as to whether or not a particular app will work.   (Dan uses the example of an app using the camera not working on a device without a camera, which is sort of a customer-intelligence-insulting example.)

I’m not saying that the Android team isn’t going to heroic lengths to attempt to avoid Fragmentation, but Denial is generally not a good approach to dealing with a real problem.  Let’s not have a repeat of the Java fragmentation tagline: “Run Once, Debug Everywhere.”

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