'We back surfers, not waves' - tech entrepreneur Saul Klein on a career cherry-picking 'practical sci-fi' startups
"It makes you realise you have been doing something for a very long time, I started in this industry in 1993, it has been more than half my life," says tech entrepreneur Saul Klein to The Drum after he was this week inducted into 2018 British Interactive Media Association (Bima) Hall of Fame in recognition of his 25 years cultivating startup innovation and helping to develop revolutionary companies like Skype and Lovefilm.
Saul Klein inducted into Bima Hall of Fame
Marking the occasion, Klein talked through how the scene has changed during his career. Speaking ahead of the event, Klein reflected on co-founding LoveFilm (now owned by Amazon), serving as an original Skype exec and backing more than 45 startups through his seed-stage venture capital firm LocalGlobe. Among Local Globe's partners are bit.ly, Erply, Moo, Songkick, Spot Runner, Citymapper, Improbable, Lovefilm, Transferwise and Zoopla.
On being inducted into the Hall of Fame, he reflects: "It makes you realise you have been doing something for a very long time, I started in this industry in 1993, it has been more than half my life."
Beyond the valley
Ever since the proliferation of the internet, and as a result, technology and ideas, startup culture has spread across the globe, in particular London. "In the last 10 years, I have really noticed that the London and European technology ecosystems have been on a different trajectory. The level of ambition that people now have when it comes to building enormous, groundbreaking businesses is beyond recognition," says Klein.
He notes that Skype, one of the early Swedish startups he was an executive on, was acquired by eBay in 2005 for $2.6bn and says that set in motion a change of mentality at the time. Six years later, Microsoft took ownership of Skype for $8.5bn. Klein's seminal video communications system has undoubtfully helped entrepreneurs branch out across the globe but there was another unintended consequence. He says: "People realised you could build those types of companies in London and European, not just in Silicon Valley."
While technology broadens the playing field for startups, it also makes it easier to start and run businesses. Klein notes: "The cost of starting a business, the ability to communicate with anyone at no cost, and all of the tools available from Trello to Slack, just make the whole process of getting going and scaling up, much, much easier."
He states his belief that this trend has meant that there are more startups than ever before. And this acceleration is likely to continue.
Picking the winners
The sector becoming more crowded and competitive results in making the team at LocalGlobe's job more difficult. Picking out future-gazing ideas from a slew of sales people injecting words like machine learning and blockchain into their pitches may cause headaches for investors.
"The more there is, the harder that becomes, but the things you look for don't change substantially, we back surfers, not waves." says Klein.
He has a very strict criteria for the companies in his sights. He seeks firms that envision "practical science fiction" ideas, products that may sound "crazy" to others just now, but in 10-to-15 years will become a reality. Few would have guessed that consumers would be able to stream TV and movies on handheld devices - even on the move - but here we are with Netflix, Amazon and the BBC iPlayer all adapting. This is Klein's example of a winning idea that may have once been written off.
With further disruption in AI, computer vision, robotics, mobility, and cloud computing on the horizon, there may be more variables or "waves" than ever to chose from.
No Brexit slowdown. Yet...
Klein regularly advises the UK government on digital and technological issues, leaning on 25 years of experience.
He's been keeping tabs on how Brexit uncertainty has been disrupting his space. With just two years since the European referendum, it could be premature to make long-term damage assessments, Klein offers a positive outlook in the here and now.
He cites the importance of the fact that growth in annual investment in the UK has doubled after the Brexit vote, sitting at €7.3bn in 2017, greater than the next two biggest EU players, Germany and Israel put together.
On boasting private, billion dollar companies, he also said: "We are country miles ahead of the rest of Europe and nothing has changed in the last two years."
Focus on product, not marketing
Finally, Klein offered some marketing advice, urging founders to focus less on talking about the next big thing and instead delivering a product that inspires consumers to do the talking.
"We advise people to spend all of their marketing time and dollars on product marketing, understanding the customer, what they want, getting it out there and and refining it."
Once that's out the way, startups can deliver their narrative through owned assets like websites or social media sites. Further along the cycle, PR, journalists, influencers and analyst can be drafted to get the message out there.
He urges: "Don't take up paid media or even earned media until you've got a product that people are going to respond well to because no analyst or journalist will take you seriously if you can't point to people who agree you are solving a problem."
Klein concludes: "This can only be done successfully if you have a great product. There's no shortcuts. There are companies that raise capital without having that, but that never ends up well. Your customer will always catch you out. If you don't have customers who love your product, ultimately no investor wants you."
This year, British computer scientist, Dr Sue Black joined Klein in being inducted into Bima's Hall of fame.
Content created with:
BIMA (the British Interactive Media Assoc)
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