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Rural tech startups see success across the US

By Alice Williams as written on techcrunch.com

While tech startups have become synonymous with urban areas that offer improved access to talent, resources and infrastructure, the reality is that rural areas are also home to startups.

This may come as a surprise to those who have moved away from rural areas specifically to find a job in the tech industry, which accounts for more than 6.7 million jobs in the United States alone. Population loss is a real issue for much of rural America; some states, such as Nebraska and Kansas, have introduced tax incentives to fight back against this trend. Others are turning to technology to counter the trend.

States are starting to recognize the importance of supporting and developing opportunities for rural counties. In the state of Washington, the Department of Commerce has been encouraging business plan competitions in rural areas with “at least 10 competitions in rural areas that we have promoted and supported,” stated Maury Forman, senior manager of the rural initiatives and innovations at Washington State Department of Commerce.

This foresight is necessary to support tech startups and the entrepreneurs behind them — tech startups tend to grow quickly in their early years, which offsets “job destruction from early-stage business failures,” which in turn leads to a more robust job market.

Live. Give. Save. Inc., is a financial tech startup based in the city of Red Wing, Minnesota, home to a little over 16,000 people. “Red Wing has a history of pioneers … and inventors. There’s a rich, rich beautiful history of arts, culture and innovation,” said Susan Sorensen Langer, CEO, Live. Give. Save., Inc., a financial tech startup that is creating a mobile platform to boost retirement savings through charitable giving.

Langer moved out to Red Wing after her contract ended with her last employer and was introduced to Neela Mollgaard, Executive Director of Red Wing Ignite, a nonprofit organization that develops and promotes next-generation technology services and applications. “I was blown away by what they were doing in Red Wing,” Langer said, and spoke to the desire to change Red Wing’s image into a place that would become known for startups much like Austin, Texas.

Access to internet hasn’t really been an issue actually.

— C. Skyler Young

Support from the community to provide the necessary resources and infrastructure has been invaluable to the success of tech startups such as Live. Give. Save., Inc. In 2012, the city of Red Wing and Hiawatha Broadband Communications (HBC) formed a public-private partnership to bring gigabit broadband to Red Wing. For entrepreneurs such as Langer, who have virtual teams, having access to fast internet is crucial.

While other rural areas may not have the same support Red Wing has, technological updates and developments have been on the rise. Certain companies have specifically focused on bringing broadband internet to rural America. “I am often asked if the difficulty of running a company in a rural area is high-speed internet. It’s not,” said Ken Levy, CEO and co-founder of 4-Tell, which helps increase sales for online retailers by 17.1 percent with big data.

C. Skyler Young, owner of Site Savvy, a tech startup that provides managed websites and online marketing for small to mid-sized businesses based in Yakima, Washington, has a similar experience to Levy. “Access to internet hasn’t really been an issue actually,” said Young. “There are a few dead zones in town; some of the communication infrastructure dates back to the 20s,” Young said. “However, it’s been updated a great deal in recent years. It’s not at all hard to find good connections these days.”

While Yakima has a larger population that what is typically considered to be rural, the land is undeveloped and used mostly for agricultural purposes. Known to locals as the little sister of Seattle, Yakima offers plenty of opportunities to enjoy the outdoors, with mountains and bodies of water surrounding the area.

In terms of access to talent, Levy has credited the Columbia River Gorge area with attracting “a personality type that is perfect for startups, and employees want to move here.” Levy stated that “the Gorge has created a high-tech hub with over a thousand technical employees centered around Insitu (a division of Boeing) and related software and hardware companies.”

The assumption that rural areas cannot support tech startups is coming under fire.

While both Young and Langer spoke about the difficulties they’ve faced in getting talent to move to rural areas, they credit remote employees and having a virtual team as filling this gap. “After this [product] kickoff, what I plan is to get a couple of developers to move to Red Wing,” Langer said. Young noted that although finding talent was still a struggle, “it’s becoming easier as time goes on … as people work remotely and choose to live more comfortable and sustainable lifestyles in the countryside.”

And the advantages to having your tech startup based in a rural area? Plenty. Young was full of praise, citing “low cost of living, no traffic, elbow room, and easy access to the outdoors.” In a similar vein, Langer talked about how Red Wing is a great place for those with a love of the outdoors, its close proximity to both Minneapolis and St. Paul, as well as only being 45 minutes away from the nearest airport. “Red Wing is the perfect mix of small town and big city,” Langer said. “It’s a wonderful place to raise children. It’s got everything.” An important factor Levy brought up was access to quality education. The Gorge has access to quality schools and “employees for a high-tech company want the best schools for their kids.”

Although challenges still exist for rural startups, the assumption that rural areas cannot support tech startups is coming under fire. Because of the initiatives of state organizations and private companies, as well as the opening of co-working spaces, rural areas are being given the attention they need and deserve to develop and invest in opportunities that will allow business as a whole to grow and succeed.

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The death of Instagram for brands

By Steve Feiner as written on techcrunch.com

Earlier this week Instagram updated its news feed algorithm. Posts will no longer appear in chronological order and instead be sorted “based on the likelihood you’ll be interested in the content, your relationship with the person posting, and the timeliness of the post.”

What this means is that Instagram will choose what to surface and when – essentially mirroring Facebook’s news feed.

This change is being spun as a way to optimize a user’s feed, when actually it grants Instagram the power to control ad content. “On average, people miss about 70 percent of the posts in their Instagram feed,” says Kevin Systrom, the co-founder and CEO of Instagram. “What this is about is making sure that the 30 percent you see is the best 30 percent possible.” While this certainly is true, make no mistake, Instagram is about to do this for monetization.

Why does Facebook care?

Facebook, which owns Instagram, just announced $5.8 billion in Revenue in Q4, a staggering 51 percent growth over the prior year. While Facebook’s growth rate has consistently been over 40 percent, maintaining that growth is not simple by any means.

By applying Facebook’s historical growth rate, it needs to produce an incremental $2 billion in growth next quarter and another $3 billion in growth in this quarter next year.

In the most recent earnings call, Facebook’s CFO mentioned “core Facebook is really driving the top line”. This growth is being driven by an increase in average revenue per user, not an increase in user growth. Can this growth continue to be driven by core Facebook?

Facebook needs to grow an incremental $3 billion more in this quarter next year. If we apply historical user growth numbers, of 13 percent that would mean average revenue per user would need to increase 33 percent. Can Facebook continue to do that given that Facebook has already increased Rest of World growth by 4x since and U.S. & Canada growth by nearly 5x since Q1 2012? How much further can Facebook average revenue per user growth grow before that too reaches a saturation point?

So this places an importance on monetization in new areas such as Instagram. According to eMarketer, Instagram revenues hit $600 million in 2015 and are forecasted to grow by 149 percent in 2016. Surely this will not be driven by user growth as a 149 percent growth in users would equate to nearly 600 million new users just in the next year.

Implications for brands

Here’s where Instagram comes in. Over the past few years, thousands of brands have joined Instagram after realizing that it is the social media platform brands and consumers engage in most. What happens when Instagram begins to monetize? The path of least resistance would be to follow a path similar to Facebook and limit organic reach — we have seen this story with Facebook before.

So what happens to brands that have heavily invested in creating wonderful content on Instagram? While larger brands have the marketing budget to pay for what was once free media, blogshops and other small businesses may not be so lucky.

Consider this your wake up call, because if your business relies heavily on Instagram as a channel, customer acquisition is about to come with a hefty price tag instead of a perfectly edited photo.

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As Silicon Valley chills, Europe’s tech gets hotter

By Mattias Ljungman as written on techcrunch.com

We are accustomed to hearing that European tech is perpetually in Silicon Valley’s shadow. Now there have been suggestions that the local tech scene is starting to feel Silicon Valley’s valuation woes.

If true, this should raise alarm bells, because if European technology startups struggle to raise money from wary investors, it could hit the brakes on Europe’s budding digital economy just as the EU begins ramping up its tech industry, preparing for a digital single market.

However, the data paints a more nuanced picture, one showing that, in the main, Europe is not as susceptible to the impact from a U.S. tech downturn, because it has now laid the foundations — talent, mentors, angel investors, local VCs, incubators, accelerators and communities — that are propelling Europe on its own, separate investment cycle.

The data about Series A funds raised, capital invested and $100+ million exits, gathered from Dow Jones VentureSource, CB Insights and S&P Capital IQ, shows that in relative terms, Europe is now starting to fire on all cylinders, much like Silicon Valley did in 2013.

Silicon Valley is indeed undergoing a chill, while tech in Europe is growing, purposefully, confidently and across a broad front of geographical hubs and industries. Currently, France is leading Europe in investments so far this year.

CB Insights shows that the absolute number of funding rounds for early-stage companies — what’s called Series A rounds — in the U.S. appear to have peaked in 2014 (2015 was down from 2014 by -4 percent).

We have the opportunity to both learn from the successes in the U.S. and pre-empt some of their issues.
Series A rounds are important because they are one of the best indicators of the health of an ecosystem in producing a solid pipeline of companies that have gained sufficient traction to raise an institutional round from venture capitalists.

In Europe, Series A investments only really started to ramp from 2014, and the number of local companies hitting this funding milestone continues to rise. 2015 was a record year for Europe — up 12 percent from the year before. In January and February so far this year, A rounds are up 38 percent year-over-year (versus 19 percent up in the U.S.).

Generally speaking, venture investing in tech companies in the U.S. has been volatile, with a large uptick in funds raised by venture capitalists since 2012, and big spikes in 2014 and 2015, according to Dow Jones VentureSource.

In Europe, we’ve yet to see any big jumps or dips in VC funding.

According to CB Insights, $100+ million exits — when startups are acquired by larger firms or IPO — started to ramp in the U.S. from 2011 onwards, reaching an eight-year high of 122 exits in 2014, but then declining again in 2015 to 83.

In Europe, the ramp in $100+ million exits only really kicked in from 2014 (18 exits), and reached a new high of 26 exits in 2015.

None of this is to say that the gung-ho spirit of Silicon Valley has dampened and that Europe has magically thrown off its yoke of conservatism. U.S. startups are still raising money, although, for some, the valuations are coming down to what some might say is a more realistic level.

European institutional investors — with some exceptions such as in the Nordics — could still step up their activity in late-stage funding, and a handful of activist EU data protection authorities are erecting barriers to the global free-flow of data. Investment pace in the Nordics is currently four times faster than just two years ago.

But tellingly, this year (so far), several fast-growing private tech firms in the U.S. have seen their valuations plummet. You can’t really argue with the numbers: For Silicon Valley, the hangover from heyday valuations has started. CB Insights has even created a Downround Tracker on companies that have raised money or exited at valuations lower than their earlier investment rounds. For now, it’s mostly populated by companies from the U.S. (83 percent of all companies on the list). This could, of course, spread to Europe, but so far the data does not show this to be the case.

Listed companies haven’t fared much better. The aggregate market cap of the 34 public Internet Software & Services companies that have IPO’d in the U.S. since January 1, 2013 was trading at 42 percent below their aggregate first-day market cap on March 16 this year, according to S&P Capital IQ. Here too, Europe has not seen the same impact. The 25 public Internet stocks that have listed in Europe in that same time period have been much more resilient, and are trading 9 percent above their initial first-day aggregate market cap.

Given all of the above, it seems that a more informed way to think about whether or not Europe will be caught in Silicon Valley’s downturn is to understand that the Valley has been on fire since 2008, and Europe has only really got going in the last three years.

So does Europe’s trajectory mean that we’re heading for the same kind of correction just a few years down the line? Not necessarily. Due to the relative scarcity of capital in Europe when compared with the glut in the Valley, Europe’s tech industry has also had less hype — and hopefully the conditions for more sustainable, long-term successes.

We have the opportunity to both learn from the successes in the U.S. and pre-empt some of their issues. That’s a great position to be in.

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Real-Time Messaging: Data Unearths Surprising Findings on Usage, Distraction, and Organizational Impact

By Scott Solomon as written on blog.bettercloud.com

For more than four years, BetterCloud has bi-annually surveyed thousands of IT professionals, producing some of cloud IT’s richest data. Our goal is to help you make more intelligent business decisions and better understand the landscape of business technology.

Now, we’ve decided to bring our research efforts further into focus by launching an ambitious and ongoing data project. Last month, more than 800 IT professionals and end users participated in the first-ever Trends in Cloud IT Monthly Poll. The following data is a result of that poll and has helped us explore one of the hottest topics in tech: real-time messaging.

Everyone remembers the days of AOL Instant Messenger (affectionately called AIM). In 1997, the simple text-based chat service brought real-time messaging mainstream. Fast-forward nearly 20 years and real-time messaging stands as one of the most powerful tools in business.

Real-Time Messaging Application: A unified communication tool designed to enable high volume and rapid response text-based conversation, while also encouraging enterprise collaboration through file sharing and even video conferencing.

Key Takeaways

• The majority of organizations (57%) use two or more real-time messaging applications.
• Nearly a quarter of respondents (22%) admit they either don’t know or don’t care whether IT has approved their real-time messaging application.
• 80% of Skype for Business users, 84% of Google Hangouts users, and 95% of Slack users say communication has improved because of real-time messaging.
• 56% of respondents believe that real-time messaging will displace email as their organization’s primary workplace communication and collaboration tool.
• 27% of end users and 23% of IT professionals say some employees are less productive because of real-time messaging.
• 71% of small-to-medium sized businesses (1-1,000 employees) will not invest in another phone system at all or will not increase their investment.

Usage

In the modern workplace, real-time messaging has become an expectation. Just 13% of our surveyed audience are not using real-time messaging for work purposes.

Contrary to what you might expect, organizations aren’t just using one application. In fact, it’s quite the opposite. The majority of organizations we surveyed use two or more real-time messaging applications–regardless of employee count.

Why would an organization need to use multiple real-time messaging applications?

There are several likely reasons, the most obvious being that departments have different needs. Sales teams may need to easily chat and video conference their prospects, which makes Google Hangouts and Skype for Business quality candidates. Engineering teams may need to configure integrations and Slack bots to receive timely information in a group channel rather than clogging inboxes.

Shadow IT (where users use devices and software outside IT’s control) is another reason organizations may have multiple applications, despite each serving similar functions. End users may decide to use an unauthorized application, and over time, as more users begin adopting the application, IT may choose to embrace it instead of stomping out its organic growth.

As we uncovered in our research for our recent 2016 State of Cloud IT Report, organizations are building what we call “heterogeneous environments,” where best-in-breed cloud applications (sometimes with significant overlap) are stitched together regardless of vendor. Organizations may use Slack, Google Hangouts, and Skype for Business, all for unique and necessary purposes. It’s not uncommon (though perhaps not ideal) to pay for two similar services even if only a small minority of users (e.g., your marketing team) uses one of them.

More than 20% of large enterprises (5,001+ employees) use five or more real-time messaging applications.

As your company grows, expect the number of real-time messaging applications in your environment to grow too. This isn’t a phenomenon reserved only for real-time messaging either. We’re seeing this trend unfold in many cloud application categories, from storage and collaboration to project management.

Does an organization really need five real-time messaging applications? In some cases, yes. But no matter what, you need to find a balance between your employees’ productivity and your organization’s security–much easier said than done.

Shadow IT

IT professionals are essentially just as likely as end users to knowingly use unapproved real-time messaging applications. Roughly one in every six people we surveyed uses a real-time messaging application outside of IT’s control. And if you consider that people tend to be less forthcoming when it comes to breaking rules, shadow IT is likely more rampant than our data suggests. In fact, 7% of respondents aren’t even sure if they’re communicating outside of IT’s control. That shows a small, but apparent disconnect between IT and end users.

Just 11% of respondents who call Google Hangouts their organization’s primary real-time messaging application admit to using other unsanctioned real-time messaging applications. Slack and Skype for Business saw higher levels of shadow IT. 23% of Slack users and 24% of Skype for Business users use a secondary real-time messaging application that is unsanctioned by IT.

As an IT professional, you’re more of a target than the majority of end users–leading by example whenever possible is always a best practice.

Communication

Clearly, real-time messaging improves communication for the majority of companies that use it.

What’s most interesting here is how opinions differ between end users and IT professionals. IT professionals are nearly 12% more likely than end users to believe that real-time messaging has improved communication. This suggests that end users either lack training and are not using applications to their full potential, or IT professionals simply overestimate how effective real-time messaging is in their organization.

Surveying your end users will help you find out where they stand and how useful the tools you give them are. Do they need more training? Are they actually using real-time messaging? Is it distracting? With hard data, you can take meaningful actions to improve the end-user experience for your user population.

Behavior

The slight majority (56%) of respondents believe that at some point, real-time messaging will overtake email as their organization’s primary workplace communication and collaboration tool. Interestingly, 5% of respondents already say their real-time messaging application has displaced email.

Still, almost half (44%) of our poll respondents believe that real-time messaging will never displace email.

Email isn’t going anywhere anytime soon, regardless of whether or not it’s your organization’s primary means of communication and collaboration. At this point, real-time messaging is an enhancement to email, not a replacement.

Distraction

The benefits of real-time messaging are hard to overlook, but some not-so-positive areas need addressing–primarily distraction. Slack users most commonly spot decreased productivity, but only slightly. The advanced functionality of the Slack platform may be contributing to the loss of productivity. Users can do more like quickly send GIFs or create channels dedicated to non-work related topics, meaning there are more avenues for distraction.

But do the benefits outweigh the loss of productivity? Most likely–95% of Slack users say it has improved communication in their organization.

If real-time messaging has become a distraction, take action before things get out of hand. It may be necessary to roll out company-wide “dark” hours, meaning real-time internal communication is halted completely or restricted to only urgent messages. If the problem is less widespread, simply communicating with your users from time to time may do the trick.

Investment

The growing use of real-time messaging is one of the most significant factors contributing to the trend seen above. Companies are reigning in their phone system investments. If you plan on investing in a new phone system at some point in the future, you’re in the minority.

Real-time messaging, the rise of mobile devices, and the “bring your own device” explosion are all reducing the need for a traditional phone system. A significant portion of IT admins (68%) will either keep their phone system investment the same or will not invest in another phone system at all.

In many modern workplaces, the desk phone is dying. If you’re one of the 32% of respondents who will be rolling out another phone system at some point, don’t be surprised if it’s your company’s last.

Growth

Though we can’t say for sure which of the three real-time messaging applications is gaining the most customers and growing fastest, we can tell you the percentage of new customers for each application among our audience.

The majority of Slack users began using the application within the last year. However, of the three real-time messaging applications we studied, Slack had the smallest number of respondents in our audience.

The vast majority of Google Hangouts and Skype for Business users have been using the application for more than a year. Will Slack continue its apparent rapid growth in the enterprise? Will Google Hangouts and Skype for Business retain users who move to Google Apps and Office 365, or will customers look outside their cloud office system for their real-time messaging needs?

Customers

Hangouts and Skype for Business are nearly identical regarding their customer base distribution. The majority of their customers are small and medium-sized businesses (1-1,000 employees), with the rest split almost evenly between mid-market organizations (1,001-5,000 employees) and large enterprises (5,001+ employees).

The overwhelming majority of Slack’s customers are small and medium-sized businesses. That’s in line with the public perception of Slack. Many view Slack as the agile entrepreneur’s dream and the perfect communication tool for a young startup. However, according to our research, Slack is being used by some large enterprises.

Real-time messaging isn’t just for startups. Mid-market and large enterprises are actually more likely to use a real-time messaging application than small and medium-sized organizations.

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