Not yet President Obama made a speech yesterday on getting out of Iraq. Now this isn’t a foreign policy blog so I’ll skip straight to the part which interests tech enthusiasts. His long term plan is, sensibly enough, to reduce dependence on oil and to do so he is creating a $150bn clean tech fund.

This money is to be spent in the next ten years which should spark a bull run in cleantech investments. This is long overdue. It always struck me absurd that states like Arizona and Nevada baked under the sun all day yet had hardly any solar provision. These technologies will have the added benefit of helping the developing world. I think the aim for developing nations should be to skip older polluting stages altogether and go straight to cleantech.

It happened in telecoms when African countries skipped fixed line telephony and went straight to mobile. And the really encouraging thing is that Africans can build these networks for themselves. My dad was from Somalia which is a country with many problems, in spite of that the people have built for themselves a mobile phone network, high speed Internet and a money transfer service faster and more reliable than any of its western competitors (Dahabshiil). These developments often go unreported as media outlets like to focus on the doom and gloom. What it does show is that Africans are perfectly capable of utilising the best technology and standing on their own two feet.

Lateral thinking

Investors should look beyond the obvious cleantech investments at companies like TerraNet. This is a Swedish company which has developed technology which creates a peer to peer network using mobile phones which means base stations are no longer required. Many people in developing counties are reliant on their mobile phones for far more than just calling. The credits loaded onto them can be used as a proxy for cash and being able to get in touch easily makes their markets work better. Networks without base stations are a far better solution as they use much less power.

Hopefully some lateral thinking VC will see all the opportunities, not just the obvious ones. And it would be fitting if Obama was the President to get the ball rolling.

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On cleantech

Pic: BikePortland.org

I attended TechCrunch (UK) Pitch last night. It was a well organised event so props to Butcher for putting it on. We were not pitching so we could relax and take it all in. It was interesting for me because I got an insight into how VCs see startups.

I think at some level all VCs think all startup founders are crazy or potentially crazy. The successful ones they put up with but I think there is a basic tension between the two. And it doesn’t go away even if you hit the big time. The John Sculley/Steve Jobs debacle is a classic example.

The basic difference between the two groups is startup founders don’t really operate in a world of rational calculation whereas investors do. Starting a startup is in itself irrational and to go through with it you have to be absolutely convinced that your ideas are earth shattering, otherwise you just would not put in the effort required. So even when you see someone pitching an idea you think is absolutely terrible, what you have to understand is that to the founder it is amazing. You know – all babies are beautiful to their parents.

I’m lucky in that my two co-founders are more natural sceptics than I am. They took persuading that we had a good idea but doing so was good practise. I think the main thing I have learnt is that 90% of investors you pitch your startup to will not be interested. And of the 10% who show any interest they won’t give you any money until you have actually achieved something. In the end business plans and pitches count for naught. Actually building a product is what counts. A good pitch will get across two basic points – what the idea is and how far you have got. Good investors understand that technical guys are often bad presenters and do make an effort to drag those two things out of a bad pitch.

Business models and honesty

A lot of the pitches yesterday were bad in that they struggled to get their ideas across clearly and tried to pack in too much extraneous information. That said there were a couple of promising ideas and potentially good businesses. None of them will be the next Google but the combination of great product/great business model does not come around very often. It would be refreshing to see a few more startups just be honest and say ‘we want to get a lot of users then flip it to a bigger company who can work out what to do with it’. A lot of the big European successes have done this – Skype, MySQL, Last.fm, Bebo  – so I don’t see the shame in admitting it openly. Even Google didn’t come up with their own business model – Bill Gross did.

Good business models are even rarer than good products, what last night taught me is that if you don’t have one don’t tie yourself in knots with nonsense like ‘freemium’ pretending you have.

Pic: Bowbrick

I was watching a video of Mike Butcher, he said something along the lines of he likes recessions because they clear away the people who are out for easy money and leaves those who want to build something worthwhile. Thus while the clickmango’s and boo’s perish the Betfair’s carry on.

I’m not too sure about whether we are going into a recession, if so it seems quite mild to me (especially when the sun is shining like on Monday). Maybe its because I’m a startup founder and thus an incorrigible optimist but things don’t seem to bad. I was a little concerned the last time I rang my bank for a new loan, but, lo, they stumped up the cash without much sweat. Credit crunch indeed, it sounds like a new Arrington blog on finance.

Underpants gnomes

Nevertheless even the appearance of a recession does have its effects. Editechial wrote a good post about VCs starting to focus on business models and are being a little harder on the 1. Get users 2. ??? 3. Profit! approach much beloved of South Park’s Underpants Gnomes and web 2.0 startups. The NY Times also reports that VCs are finding both the public market and acquisition route drying up leading to some soul searching on Wall Street. Even the mighty facebook is getting the jitters as unnamed investors and employees rush around looking for a cut price exit.

I agree with Butcher. Slowdowns are a better time for good ideas as they reduce the background noise. Alongside our music product our developers are about to break ground on a new advertising product. Now I don’t want to get into specifics at this stage because it won’t be ready for launch until the end of the summer at the earliest. We are very excited about it as we think we have found the equivalent of AdWords for social networks. A big claim but stick around and you’ll get to judge for yourself in a couple of months when we release the app.

Pic: Archi3d