Entries Tagged 'geography' ↓

There’s been an explosion of interest in new “startup accelerators,” incubation, coworking, startup funding, and new-manufacturing efforts in Baltimore in the last few months; unfortunately this appears to say less about Baltimore than it does about the growth in interest in these efforts worldwide.

Here’s a list of some efforts in this space:

• “Accelerate Baltimore” at ETC Baltimore
• Accelerator led by Cangialosi and Lane
• ETC Baltimore itself (Canton and 33rd street)
• Baltimore Node, Hackerspace on North Avenue
• Sizeable Spaces, coworking in South Baltimore
• Capital Studios, coworking on Central Avenue
• Beehive Baltimore, coworking at ETC Baltimore
• Accelerator effort being driven by Mike Brenner
• Accelerator/cyber/techspace in Harbor East, led by Karl Gumtow
• Innovation Alliance effort being led by Newt Fowler
• Theater/workspace being discussed by Chris Ashworth/Figure 53
• Shared warehouse workspace being discussed by Andy Mangold/Friends of the Web
• Baltimore Angels (Cangialosi et al)
• Invest Maryland fund (DBED)
• TEDCO’s Innovation fund
• Abell Foundation fund (tied to Accelerate Baltimore)
• Wasabi Ventures fund (investing in city, affiliated with Loyola)
• Fabrication Lab at Towson University
• Fabrication Lab at CCBC
• Fab-lab ideas discussed by John Cutonilli
• Highlandtown workspace development led by Ben Walsh
• Mike Galiazzo, pushing Local-Made, (head, Regional Manufacturing Institute)

Did you know about all of these things? Amazingly, many of the people leading these efforts don’t. Or if they do, they’ve not actually talked to the people involved. To me, this is a problem.

Why? Because folks attempting to gather support for these efforts don’t have all the facts. They either haven’t sat down and listened to people’s motivations, and they’re flying blind. Or it means that they have been unable to sell other like-minded entrepreneurs on their vision, which probably means their vision is not that compelling. And that’s even worse.

But this is not all that’s wrong.

Two Serious Problems

One: there’s a tremendous amount of duplication of effort represented in the list above. Why duplicate all of that administrative, accounting, legal, and governance overhead? By pooling more of these efforts together, that overhead can be minimized and shared.

Two: we don’t have enough human capital to support all of these different efforts. We simply DON’T. Many seem to think it will somehow materialize, but from where I sit, with possibly the widest-angle view of the landscape here of anyone, I don’t see that flow of new startups or even new individuals that can support all of this. It just doesn’t exist.

The Opportunity

Baltimore has an opportunity to become a regional and even international destination for people looking to start or join entrepreneurial enterprises. But for that to happen, we need to have stuff here that can actually become a destination.

And unfortunately, the efforts currently underway are not likely to become that destination because duplicated overhead will keep each effort small and parochial.

However, if more of these efforts pooled their resources and talent – and most importantly identified a BIGGER and more IMPORTANT vision for what it is they are trying to achieve, there would be many positive effects, such as ample governmental and foundation support. And that would be hugely helpful in funneling in the sorely lacking regional and international *human capital* that we so desperately need here!

One Possible Vision

Baltimore has an opportunity to become the hub for digital manufacturing and mass-customization technology on the east coast.

Cangialosi and Lane are already talking about supporting some basic fabrication capabilities at their proposed facility on Key Highway. Gumtow’s effort has placed fab-lab capabilities high on its priorities list. CCBC and Towson have fab-labs, though it’s my understanding they may be underutilized. If you’re going to spend money on fabrication equipment at all, it should be utilized 24×7 in order to maximize the asset.

Something bigger – like taking over the WalMart in Port Covington, or the Meyer Seed Warehouse in Harbor East – could support an accelerator, fab lab, and shared workspace. Thinking a little bit bigger would also have the effect of lowering per-square-foot costs dramatically, and even dramatically altering the real-estate ownership structure.

Baltimore is already home to Under Armour, and at some point in the near future (similar to what happened with Ad.com) it will start throwing off new entrepreneurs with experience in consumer products and manufacturing. Where will they go? Will we keep them here in Baltimore?

Focusing on the intersection of manufacturing and technology is important because it represents the one shot we have at rebuilding even a little bit of a middle class here in Baltimore. Because of that, you’ll find abundant support for such efforts — support that can further reinforce Baltimore’s reputation as an international destination for digital and manufacturing.

The More the Merrier?

I am a fan of placing many, diverse bets rather than making a few large ones. But it’s also important to make strong bets. Unfortunately, Baltimore is right now setting itself up to have many weak positions instead of a smaller number of stronger ones.

I strongly urge the folks leading these efforts to get to know each other and coalesce around a bigger unifying vision that can turn Baltimore into an important regional and international destination for entrepreneurs.

Because without agreeing on a bigger vision, it’s likely that these efforts – each led by well-meaning individuals but with individual motivations – won’t ultimately amount to much, and it would be a shame to waste so much time, effort, and talent.

I’ve been vocal about the 2011 Mayoral Race in Baltimore. It’s an opportunity to break free of the machine and finally put the city first.

But there’s a sorry timidity in Baltimore politics. Everyone agrees we need change. But too many are resigned to the way things have been, and whose “turn” it is. Who owes who favors. But this is a democracy, you say. Every vote counts, right?

That’s not how things have been. In Baltimore, the fix has always been in. However, last year we started to see the machine creak. Upstart young candidate Bill Ferguson unseated 27-year incumbent George Della. Gregg Bernstein defeated long-time incumbent Pat Jessamy. Cynics would point out that Ferguson was adopted by a clique of developers, or that Jessamy ran a horrible, entitled campaign. But still, this wasn’t how it was supposed to be.

There is other evidence of the decline and fall of the system. Ridiculous and incompetent Belinda Conaway filed a $21M suit against a blogger – which backfired. Now her challenger Nick Mosby has a real shot at upending the ludicrous and long-time Conaway “three bears” platform. And her father Frank appears more ridiculous every day.

I want more for Baltimore. That’s why I’ve supported Otis Rolley in his campaign for mayor. I’m simply tired of business-as-usual in Baltimore.

Specifically, I’m tired of developers being offered tax breaks in exchange for campaign contributions. I’m tired of city contractors being given lucrative no-bid contracts in exchange for campaign contributions. I’m tired of the same old tribe of corrupt, cynical power brokers doing what they have always done.

A vote for Otis is a vote for new blood – and for entirely different people. Don’t kid yourself. When you vote, you’re not voting for policies or a platform. You’re voting for a power structure. You’re voting for a group of people.

• Stephanie’s people: out-of-state contractors, developers, city contractors, democratic party operatives, county-based people with interests in the city, friends of her father’s, the Governor, the Governor’s brother, attorneys, KAGRO (the trade group that represents the Korean corner-grocers profiting from Baltimore’s food deserts), casino operators, scrap metal dealers, city employees. These people have either “paid to play” or are actively benefiting from the decline, fall, and eventual ruin of Baltimore – or want to have a finger on exactly how Baltimore is run.
• Otis Rolley’s people: real citizens of Baltimore (rich and poor; more individual donations than any other candidate); tech people, urban farming people, entrepreneurs, designers, patrons of the arts, folks from ALL of Baltimore’s neighborhoods.
• Catherine Pugh’s people: contacts from her work in Annapolis, aerospace contractors (?), some decent and concerned folks throughout Baltimore, a computer repair shop on Fayette street, Scott Donahoo (used car dealer).
• Jody Landers’ people: folks primarily concerned with the property tax issue, strong base in NE Baltimore, realtors, and many individuals associated with real-estate issues and encouraging residency in the city. (Ed. note: this post previously made reference to Live Baltimore, on whose board of directors I serve. There was no intention to associate Live Baltimore with any candidate or agenda.) Not many others.

I like and respect Jody Landers and Catherine Pugh. However, I had hoped that Jody would weigh his chances, drop out of the race, and back Otis. I, and others, asked him to do just that. And I think Catherine Pugh can do more for Baltimore by continuing to serve as a State Senator in Annapolis. She had nothing to lose by running for Mayor.

The conventional wisdom (The Sun, with its one poll and its feeble, lackluster endorsement of Rawlings-Blake) says that the fix is in, and we should just accept our fate.

There is one way that this race can end differently, and that is to turn out votes for Otis Rolley tomorrow.

The same set of jaded old political pundits (Barry Rascovar, Frasier Smith, Matthew Crenson – I’m looking at you) who will tell you that the “race is in the bag” for Stephanie are the same ones who also predict that turnout will be atrociously low on Tuesday.

Wonder why that would be? Maybe folks are tired of being told how to vote, and that races are over before they start.

It’s true. The internet and social media are not the drivers of voting behavior in Baltimore yet. But the Ferguson, Bernstein, Mosby, Ramos, and Rolley candidacies have received a boost from discussion by “networked citizens” that is unprecedented in Baltimore. And that’s something that the Sun’s lone pollster and our 1980′s era political pundits seem incapable of understanding. And the sentiment on Twitter has been overwhelmingly in favor of Otis Rolley (with almost no mention of Sen. Pugh, and few positive comments for the Mayor.)

It’s impossible to predict the outcome of tomorrow’s race. But know this: YOU can change it. You have a voice. Go vote. Get others to vote. Baltimore deserves that.

And beyond tomorrow, there’s another truth: 5th most violent, the 6th dirtiest and the 7th most murderous is no longer good enough for Baltimore.

To all those who say “stay the course,” please get out of the way. Baltimore deserves the best. We’re done waiting.

Check out Tom Loveland’s insider view of this election (and accompanying post). The reality will surprise you.

Otis Rolley delivers this powerful “closing argument” on why you should choose him as your next Mayor.

Otis shows his deep love for Baltimore, and understanding of cities, at TEDxMidAtlantic 2010.

Newly-elected Maryland State Senator Bill Ferguson was recently named to the Baltimore Business Journal‘s Power 20. This week they asked me, as a friend of Bill’s and member of a previous Power 20 cohort, to comment on Bill’s relationship with and use of power.

“Bill is a curious, humble, and earnest young man, and he represents a true shift in how power is conferred in this town,” I said. “He didn’t work his way up through the ranks and spend a few years as a city council person, or wait his turn. Bill was able to win because of a shift in political power that’s taking place right now. He derives his power from the people, not from the system.”

Political power is now being conferred through the accumulation of weak and strong ties with citizens, and no longer by top-down power structures, power-brokers, and kingmakers. Don’t get me wrong; those folks still have an impact (they did in Bill Ferguson’s race – they got behind him when it was clear he was onto something), but that impact is waning. And things that were previously unthinkable are now possible.

It may seem like hyperbole to compare the situation in Baltimore to what took place over the last three weeks in Egypt. But it’s an apt comparison.

For decades in both places, people have felt marginalized by a top-down, tone-deaf government that was more interested in its own well-being than that of its citizens. In both places, decades of neglect and mismanagement have led to a serious crisis of confidence.

People are fed up. They’re tired of feeling marginalized, the failed programs, the broken promises, the lack of accountability and the inability to implement imaginative solutions. For 60 years, Baltimore’s population has been in decline, and places in decline have not had the benefit of oversight, dollars, or creative leaders. Instead, corruption (explicit or implicit) festers.

The Perfect Storm

Several factors are emerging all at once:

• Young people want to live near their work and are tired of commuting (and they’ll accept a pay cut to do it)
• Our roads are full and can no longer be meaningfully expanded due to lack of space and funds
• Fuel costs are projected to rise as China’s demand grows exponentially
• Online networks are having a meaningful impact on real-world relationships and politics

These factors, combined, have made Baltimore the most important jurisdiction in Maryland – practically overnight. Yet our leadership has not caught up with this reality.

Baltimore’s recent rise to relevance combined with the power of communications networks will create stark shifts in the power structure.

Two Kinds of Leaders

Today we have a choice between two kinds of leaders. We can choose between the leaders that the system hands us, or we can choose to put our faith in new, emerging leaders with whom citizens have a legitimate connection and a voice.

It is sadly telling that Mayor Stephanie Rawlings-Blake’s much-promoted (Orwellian, broadcast-oriented) Safer City social media campaign follows just one person on Twitter: the Mayor herself. And it has just 78 followers. Why? Because it’s all for show, and no one legitimately cares about a program to mitigate a problem – people actually want to solve it at the root. To hell with a Safer City: give me a city where everyone can earn a living, and I can bet you it’ll be safer.

But our politicians don’t know that, because they have not taken the time to benchmark ourselves against other cities or learn from best practices elsewhere. Baltimore has more cops per capita than any other city. Why is that?

Because we need them. Why do we need them? Because we have a lot of crime. Why do we have a lot of crime? Because we have no middle class. Why do we have no middle class? Because we have not seriously focused on enabling small business formation, which is the number one driver of jobs. Instead we have given tax handouts to fatcat developers so they can build big projects and enrich their cronies.

Yes, clearly the cure is more cops. As the Mayor told the Baltimore Sun’s Justin Fenton, “Maybe we could do without as many officers, but that’s not what the public wants. They want more patrolmen on the street. They want more police in the neighborhood.”

No, Madam Mayor. What the public really wants is for these root cause issues to be addressed. It takes true leadership and understanding to go beyond just treating the symptoms.

Accelerating Change

Some have called the recent events in Egypt “the Twitter and Facebook revolution.” A few have scoffed at the idea that these tools could spark a revolution and cite eons of revolutionary precedent as proof. But it’s a mistake to dismiss their role.

Online networks are accelerants. They create connections passively where none might otherwise exist. Critical mass for change comes when the density of connections between people reaches a threshold level. Ideas spread between networks instantly. What might have taken 10 years before now takes 1 year.

The Soviet regime could never have survived in the age of networks. Iraq would have collapsed under its own weight if given time and these tools.

And the same repressive structures will fall in Baltimore, for the same reasons.

To quote Gandhi: “First they ignore you. Then they laugh at you. Then they fight you. Then you win.”

50% Off Loaves and Fishes…

Every few years a company emerges that grows so swiftly that it manages to define the zeitgeist and often helps to inflate a bubble that defies any rational explanation. Often these businesses are driven by new, disruptive ideas that take the market by storm and create a real shift in how people do things. Amazon (and online shopping), Google (and the search business), and Apple (music, smartphones, and touch computing) fall into this category. They created real, thick value.

For every one of these, there are others that grow, get tremendous buzz, and then seem to dissipate as quickly as they emerged. Or they settle into a kind of staid middle-age, their torrid teen years long forgotten. Think about 90′s darlings like IOmega, Boston Chicken, eBay, and Home Depot. It can be difficult to predict which businesses will stick around and which will fall away (or become low-growth, boring enterprises).

Groupon has emerged as the “Jesus Startup” of 2010-2011. The industry always needs one, and they tend to conform to an archetype and have a mythical story: the visionary CEO (Marc Andreesen, Evan Williams, Mark Zuckerberg) who experiences a remarkable rise to greatness. For this story and for these 15 minutes, we have Andrew Mason, the humorous and self-deprecating everyman who declares of the fledgling Groupon, “We could still fuck this up.”

The implication is that they’ve done something to “ace” it so far. But the truth is that they are just regular guys that started out doing something else (some kind of social mission charity stuff – blech – don’t talk about that, it’s not compatible with the visionary myth). And after executing on their original idea and experimenting a bit, they found themselves in the middle of a new exploding business model. Kudos for that. But as is the case with most “Jesus Startups,” there’s been a notable lack of critical thinking about what happens next.

Here’s where I think Groupon is weak.

1. Over-reliance on hypergrowth.

Groupon has posted some crazy huge numbers as they push through massive expansion into new markets. When you are turning up a new major metropolitan area every few days, gross revenue numbers are going to grow very quickly as businesses rush to be part of something that’s got so much buzz. As their geographic footprint stabilizes, top-line revenue will start to level out. When that happens, the business becomes much less interesting and has a lower upside (see Home Depot, Gap, Boston Chicken, Microsoft). This is why a push to IPO while this hypergrowth is happening seems to be a priority for the company.

2. Customer fatigue.

If you have been using Groupon, Living Social, GILT, HauteLook, or any of the countless other sites that rely on daily emails to get their message out, I’ll bet your experience has been something like this: at first you reviewed the emails every day; you bought a few things; you are now buying almost nothing; now, you may not look at the emails at all; you still have unused Groupons. Time is money, and people have too much crap. Eventually, people are not going to take the time with this. And when Groupon has exhausted all the “easy hits” that drive people to buy, then what? Besides, I thought email was “dead” and for “old people.” Right? Or did I miss something? (Sure, the deals spread through Facebook or whatever social channels, but email is a huge part of the business model.) As younger folks steer away from email, it’s an open question whether the current “daily deal” model can be sustained.

3. Business fatigue.

Businesses are tripping over themselves to be part of the latest new thing and expose themselves to thousands of customers at a shot. And sure, a Groupon deal can be a great opportunity for some businesses. But many businesses (some say up to 40%) have found that doing a Groupon deal can be a costly mistake that actually damages their business. The economics of the deals deliver a fraction (typically 25%) of the face value, which often does not cover their costs. While there is some breakage (unused deal revenue that can offset losses), this still may not cover the cost and hassle the promotion entails. Additionally, businesses that undertake in smart advertising can promote themselves all year round. A business can do a Groupon deal at most once every few months – otherwise the deal just doesn’t seem “special” enough. Groupon is a great novelty that can help some businesses become better established, but I really wonder if many businesses would participate more than once or twice, when compared to ongoing targeted marketing initiatives.

4. Scale as the only barrier to competition.

There are now thousands of competitors to Groupon (Living Social is the largest). There will be thousands more. The reason why both companies have received such massive investments to date is that they need to get big to create a local sales force in every market in the world, which is obviously an expensive proposition. If they can get sufficiently big, they can build a sustainable business that will dissuade new market entrants simply because any competitor would have to build a worldwide localized sales force. And if you’ve ever had to run a local sales force, you know that it’s a very expensive, messy, people-driven business. The business that Groupon will eventually most resemble structurally is the Yellow Pages. With sales teams in every city, the major directory publishers were able to exert a near monopoly control over the interface between local businesses and consumers, and Groupon is going after the same market. The difference is in Groupon’s use of technology and use of social. Otherwise, the two businesses are nearly indistinguishable. The assumption is that Groupon’s scale will prevent competitors from gaining a foothold, but I don’t see any real reason a focused local competitor couldn’t develop a sustainable business.

5. Tone-deaf on China.

Groupon has undertaken a massive push to expand into China. That sounds great, and any US investor would likely salivate over such an aggressive, prescient-sounding move. Ah, that Mason guy, he really knows his stuff. But my friend, China-expert Christine Lu tells me that Groupon’s Berlin office has recruited 1,000 new hires for China in the last three months – many recent college graduates. But here’s the thing. I’m currently getting a daily deal from a site in Shanghai called Wufantuan that’s indistinguishable from Groupon. (50% off Mexican food in Shanghai was one recent deal.) If you know anything about the Chinese market, you know it favors locals and cloning is part of the culture. To expect Groupon to be able to achieve anything meaningful in China is wishful thinking. Google got run out of the country on a rail. You expect the powers that be there to allow a US firm to “split” revenues with Chinese businesses to provide its budding bourgeoisie with deals on burgers, skydiving, and cupcakes? Um, yeah. OK. If there’s a business there, it will be Chinese. The entire Groupon strategy with China is theater, designed to show investors that they’re “paying attention to that market” while they ready the IPO.

So, the real deal of the day is for Groupon itself. The question is whether there’s enough upside in the model – and enough “bigger suckers” out there for the average Joe to make any money on the offering before the business model settles out and becomes the next eBay, Home Depot, or Gap. These are fine, sustainable businesses, to be sure, but all are way less sexy than they once seemed. (Yes, for about 6 months in 1995, Gap was incredibly sexy.)

Before you decide that Groupon’s the next hot young thing, it’s worth asking whether you want to jump on this model right now. I believe there’s a really nice, long term, but ultimately very boring business in there that should pay a nice dividend. Meantime, the visions of hypergrowth are likely much exaggerated.

I certainly can’t criticize the trajectory that Andrew Mason and company have managed to carve out for themselves. It’s an incredible story and it’ll be fascinating to see how it unfolds. The expectations are so high, they really can’t be met.

My bet is that they will need to move on to more sustainable forms of year-round marketing for businesses and away from the aggressive 50% discount model. That’s a much less sexy place to be and it will require some real creativity to carve out a niche there. But I just don’t buy the idea that they can continue to build a business based solely on deals of the day at such aggressive discounts.

The Groupon model right now is based primarily on creating new relationships between businesses and customers. They’ll be on to something really interesting when they can help to nurture and sustain those same relationships profitably.

From my friend Christine Lu (@christinelu):
Thanks for the mention Dave. I think they’re hiring 1K in the next few months. As in currently in the process of. Things over there have just sounded a bit weird to be a sustainable market entry strategy so I think it’s all a nice way to have a China story to prop up the IPO. The elusive vision of 1.3 billion people using Groupon. Nevermind that clones are already saturating the market and they’ll have Alibaba’s Taobao to deal with. Anyways, we discussed it a bit on Quora.

From my friend Vivian Wang (@vivwang):
The JV is a positive differentiator for both companies and will accelerate market consolidation. There are 1686 other group shopping sites as of December, yet only 29 sites have CIECC licenses to legally operate. Some believe there are only 10 serious contenders that can attractively compete. The real threat is Alibaba and Taobao, so a more international footprint into China seems warranted. One of the smarter things Groupon did was buy Mob.ly back in May, which has been developing on all mobile platforms. For a sector that’s already doing about $79B in transactions, I think the risk seems worth taking.
…
Hope something truly uniquely innovative comes out of this that the world has yet to see. I’d personally love to see Tencent migrate from selling a $1B of games & virtual goods to some seriously tangible merchandise. The foolish side of me actually thinks they’ll have a fair shot at it. Should be fascinating.

And from my friend Francine Hardaway (@hardaway):
I believe all this bargain stuff, especially in the US, is part of the recession and will go away when it is over and we all relax. I agree with you 100% on Groupon’s model; I am done buying stuff I don’t need, even at half price. All the people I know who love coupons (I never have) are armed with sheaves of them, and all that happens is the merchants are in price wars with one another in a race to the bottom. Sites like Groupon and Haute Look might be marketing front ends, but they are also margin-shavers for the people in the businesses they market. This HAS to be unsustainable at the end of the day, whether China is successful or not (and I bet it won’t be, because of all the people who, when we were in China, got up and said they would clone our products in half an hour).

What do you think about Groupon?