Search Results for: ecosystem

Pitfalls of entrepreneurship, ecosystems of innovation

Two new books recently landed on our desks, on two different subjects:  the pitfalls of entrepreneurship and the ecosystem of innovation.  We’ll consider them for The Library in St.Pete, but in the meantime the reviews were interesting enough to merit spilling some ink here.

The Founder’s Dilemmas, by Harvard Business School professor Noam Wasserman, compiles 10 years’ worth of studies of 3,600 start-ups (and nearly 10,000 founders) to examine the pitfalls of entrepreneurship:

People are motivated by high-profile stories of hugely successful entrepreneurs, but the truth is that it’s very hard to become one.  The “ultimate” entrepreneur combines someone who’s passionate and has a strong vision that they pursue single-mindedly with someone who is analytical and looks down the road and wants to understand the pitfalls along the way before they make early decisions that will get them in trouble.  [It’s a hard combination to strike.]  My mission is to inform entrepreneurs about key lessons based on data, rather than merely what’s anecdotally “known,” so they don’t have to learn the hard way and they don’t get burned by anecdotes that capture the wrong lessons.

In one review, Professor Wasserman is asked, in light of this analysis – the rare combination of skills required to succeed – whether or not co-founders make sense:

You have to judge founder by founder, and idea by idea. Some ideas lend themselves to one person being able to tackle it. Others that are more complex require disparate skills, and to maximize success you need things that you don’t have. Some founders who’ve accumulated work experience in the industry and are able to manage multiple functions, and whose goals and personalities fit with being solo, might be better off alone than a founder with big holes [in his experience] who will open himself up to much bigger risks if he doesn’t fill them.

Irrespective of how many founders are involved in the idea’s germination, growing the acorn into a mighty oak is a long-term project that will eventually include adding partners who share the vision and can bring additional resources – financial, expert, and network – to bear.  Choosing partners who best fit requires as much rigor and thoughtfulness as any decision an entrepreneur makes.

***

The Wide Lens, by Tuck School of Business professor Ron Adner, explores the “business ecosystem” – distributors, retailers, and salespeople – critical to the launch of any successful innovation.  Adner recounts successes (Apple’s path to market dominance), monumental failures (Michelin’s run-flat tires or Pfizer’s inhalable insulin), and works-in-progress (electric cars or electronic health records).

Companies understood how their success depends on meeting the needs of their end customers, delivering great innovation, and beating the competition; but [they fell] victim to the innovator’s blind spot: failing to see how their success also depended on partners who themselves would need to innovate and agree to adapt in order for their efforts to succeed…  To be sure, great customer insight and execution remain vital, [but] two distinct risks now take center stage:

  • Co-Innovation Risk: The extent to which the success of your innovation depends on the successful commercialization of other innovations.
  • Adoption Chain Risk: The extent to which partners will need to adopt your innovation before end consumers have a chance to assess the full value proposition.

When you try to break out of the mold of incremental innovation, ecosystem challenges are likely to arise… a strategy that does not properly account for the external dependencies on which its success hinges does not make those dependencies disappear.  It just means that you will not see them until it is too late. … Dependence is not becoming more visible, but it is becoming more pervasive. What you don’t see can kill you.

Adner provides an easy-to-grasp example in an excerpt printed in The Atlantic:  the first portable digital audio player (1998), cleverly (?) named “MPMan”:

It sold 50,000 players globally in its first year. But [it was very different than the Walkman] 20 years earlier.  You couldn’t purchase them in traditional retail settings.  Downloading an album – legally or not – could be a multi-hour affair. It didn’t matter that MPMan was first – it wouldn’t have mattered if they were 6th, 23rd, or 42nd. Without the widespread availability of mp3s and broadband, the value proposition could not come together.

As we reported in The 10 rules of entrepreneurship, the best products don’t always win.  Compelling innovations can and do fail after launch – as did this precursor to Facebook.  It’s a long and difficult journey from idea to successful business, involving many inter-related factors.

The migration of talent and capital to the high-tech corridors of the Southeast

Good article from Technet about how the startup economy has spread across the country:

The American startup ecosystem — the envy of the world — has spread outside of the coasts and high-profile tech hubs, such as San Francisco, Boston, and New York City, to other parts of the country.  Startup activity is happening everywhere in cities and towns across America.

More than that, the startup culture of entrepreneurship, fueled by scalable technology, is spreading as well.  Around the country, an increasing number of companies are describing themselves as “startups” when they advertise for workers.

This is the most recent item in a long run of stories describing a geographic analog to the process of creative destruction.  Those states who spray “startupicide” on the economy –  suffocating regulations, inflated business taxes and fees, lawsuit-friendly legal environments, and political classes uninterested in business concerns, if not downright hostile to them – lose economic clout as people and capital migrate to other states with more favorable environments in which to work and live.

Local evidence of this trend can be found in this story, in which the U.S. Census Bureau reports

Three metro areas in Florida were among the nation’s 10 biggest gainers in the number of people moving there last year, and another three Florida metro areas were in the top 10 for overall growth rates.

Our hometown Tampa was #5 in the nation in 2016 population growth.

This migration of economic clout within the US has been more subtle than the California Gold Rush or Irish Potato Famine but is just as significant.  Some states are chasing away their earners, workers, and entrepreneurs; this is their tax base.

The growth corridors of the high-tech South would have a mercantile-like advantage but for the fact that employers can (and do!) simply move in order to thrive under our growth-oriented tax policieslower public sector debt burdensstronger job creation, excellent climate for entrepreneurs, and a superior overall business climate.  (The actual climate happens to be conducive to a great quality of life as well.)

The NVCA’s letter to the President-elect

The National Venture Capital Association (NVCA) has sent a letter to President-elect Donald Trump outlining how the entrepreneurial ecosystem is the key to creating new jobs and economic opportunity for Americans who feel left behind by the modern economy.

startup_trendsThe letter outlines an agenda crucial for supporting entrepreneurship and building a strong economy in all areas of the country, including: a tax policy that encourages new company formation; making capital markets work for small-cap companies; encouraging talented immigrants to build or work at American startups; making life-saving medical innovation a reality; increasing basic research investment; and other key policies that would bolster the entrepreneurial ecosystem and foster new company creation.

The NVCA’s letter opens with a brief paean to entrepreneurship:

Entrepreneurship is the key to expanded economic opportunity in the United States.  From FedEx to Genentech, entrepreneurs have fueled growth and expanded opportunity across the American economy.  America’s venture capitalists have been hard at work supporting these startups with tremendous growth potential in areas like personalized medicine, next-generation computing, 3D printing, and synthetic biology.

Young companies, many of them venture-backed, create an average of 3 million new jobs a year and have been responsible for almost all net new job creation in the United States in the last forty years.  In addition, venture capital has backed nearly half of all companies that have gone public since 1974, which have collectively been responsible for 85 percent of R&D investment during this period.  In short, while a small industry by relative standards, venture capital is mighty in its outsized role in supporting economic activity and creating growth and economic opportunity.

27,000 U.S. venture-backed startups have received $290 billion in funding—and 11,000 of those received funding for the first time—since 2012.  To put this into perspective, that calculates to about $170 million invested into 15 startups each day.  An underappreciated truth is that startup activity has proliferated in the middle of the country in recent years.  Since 2012, nearly half of all startups receiving venture capital backing have been based outside of California, Massachusetts and New York.  Specifically, about 12,900 venture-backed companies in the other 47 states have raised $83 billion in funding since 2012.  What’s more, the collective annual growth rate of companies receiving funding in these states (10.1%) has exceeded that of the top three states.

We highlight/excerpt three of their recommendations below, but we also encourage all our readers to check out the NVCA’s letter in its entirety.  (We also provide a few links to some of the relevant Greatest Hits here at Navigating Venture.)

1. Support tax policy that encourages new company formation.  Since the Reagan Administration, our tax code has been relatively effective at encouraging patient, long-term investment, but on net has been hostile to entrepreneurial companies.  For example, punitive loss limitation rules punish startups for hiring or investing in innovation, while benefits such as the R&D credit are inaccessible to startups.  Unfortunately, tax reform conversations in Washington have ignored these challenges while at the same time proposing to raise taxes on long-term startup investment to pay for unrelated priorities.For instance, carried interest has been an important feature of the tax code that has properly aligned the interests of entrepreneurs and venture investors since the creation of the modern venture capital industry.  Increasing the tax rate on carried interest capital gains will have an outsized impact on entrepreneurship due to the venture industry’s longer holding periods, higher risk, smaller size, and less reliance on fees for compensation.  These factors will magnify the negative impact of the tax increase for venture capital fund formation outside of the traditional venture regions on the coasts.

2. Reform the regulatory state to bolster startup activity.  When Washington piles on new regulations it is startups who are most adversely affected because these young, high-growth companies do not have the resources to navigate the regulatory state like large companies.  At the same time, government red tape is inhibiting government entities from tapping into venture-backed innovation in fields such as cybersecurity due to challenges with the government acquisition process.

3. Make life-saving medical innovation a reality.  The future has never been brighter in terms of scientific and health care discoveries that are on the horizon.  Venture capital is investing in revolutionary medical innovation and groundbreaking treatments and cures that are aimed at diagnosing, treating, and curing the deadliest and costly diseases.

Unfortunately, medical innovation is at risk unless policymakers adopt modern approaches to development, regulation, and reimbursement for medicine and medical devices.  Progress has been made to streamline the regulatory approval process at the Food and Drug Administration, particularly for novel technologies, but more improvements are needed.  In addition, we need to establish pro-innovation approaches to reimbursement at the Centers for Medicare and Medicaid.

TicketBiscuit Looks Towards Its Next Phase of Growth

What’s next for TicketBiscuit after its $5M funding win?

Posted October 20th, 2016 by Birmingham Business Journal

Birmingham software company TicketBiscuit is looking to a new phase of growth, thanks to a $5 million investment from a Tampa-based venture capital and growth equity firm.

Ballast Point Ventures recently confirmed its investment in the Birmingham ticketing software company, which TicketBiscuit CEO Jeff Gale called an “endorsement.”

“Investors are smart, especially institutional investors like Ballast Point Ventures,” Gale said. “They don’t invest in companies that won’t be good stewards of their money. I take it as an honor to receive that money and go out to put it to good use.”

The deal comes on the heels of funding wins for several other Birmingham companies, a trend local business leaders hope will create a snowball effect and lead to more investor money flowing into the Magic City.

Founded 15 years ago, TicketBiscuit has recorded steady growth and often ranked as one of Birmingham’s fastest growing companies. The company processes more than $100 million in ticket sales annually for customers like music venues, festivals and event centers.

Largely bootstrapped since its inception, TicketBiscuit needed the backing of a good capital partner to push it to the next level.

Echoing a familiar refrain of Birmingham tech experts and executives like Innovation Depot’s Devon Laney and health care startup Pack Health’s Will Wright, Gale said Birmingham companies like TicketBiscuit are hungry for outside capital access like BPV’s investment.

“We’ve got a really great, budding technology ecosystem here,” Gale said. “For the longest time, it’s been about health care and biotech, thanks to UAB and similar companies, but now we’ve got a true high-tech startup community in Birmingham.”

Tech investment appears to be gaining momentum in Birmingham: Shipt recently raised $20.5 million and GI Partners purchased a majority stake in Daxko.

Ballast Point Ventures recently invested another $5 million in Prepaid Technologies, a Birmingham company with major partners like Visa and MasterCard exploring the emerging wearable tech market.

“I’m really proud to have TicketBiscuit following in the footsteps of Shipt and similar companies in Birmingham to help grow this startup community and outside capital,” Gale said. “My hope is that it will get the attention of inside capital.”

TicketBiscuit’s $5 million investment will fund sales force expansion, marketing efforts and new tech development while the company continues to grow its StateChamps app. The company last year rolled out the software suite targeted for high school and amateur athletics.

TicketBiscuit is eyeing a massive opportunity in this market: Gale says high schools represent the largest ticketing market in the country, with some 500 million tickets sold each year.

“By and large, those tickets are paid for in cash, bought by people standing in line 10 minutes before the event,” Gale said.

Gale said high school and amateur athletics continue to use “old school” ticketing because existing modern technology can be too cumbersome and expensive.

Electronic ticketing solutions like Ticketmaster, where you print out your ticket at home and have a bar code scanned at the venue by a door attendant, require back-end support in addition to technology like scanners and employee training.

“It’s difficult to let everyone print their tickets at home if they don’t have this technology at the gate,” Gale said. “Scanners are expensive, flaky, require training and a robust internet connection – high schools don’t have these things.”

TicketBiscuit hopes to disrupt this market with Share and Tear, new technology that puts digital tickets on consumers’ phones. The tickets are authenticated through the StateChamps app: Gate attendants don’t have to validate the ticket any further than “tearing” it in the app with a swipe of the finger. People can also purchase tickets in bulk and distribute them digitally to their kids; no more wrangling families to hand out individual tickets at the gate.

Several hundred schools are currently using the technology across the country, in addition to eight state high school athletics association.

Gale said tens of thousands of people have downloaded the app for use, and TicketBiscuit only plans to grow from here.

“It’s 2016, and it boggles my mind that the largest ticketing market in the country still operates that way,” Gale said. “It’s our mission to change that with StateChamps.”

BPV Invests in Birmingham-based TicketBiscuit

Birmingham tech company lands $5M investment

Posted October 17th, 2016 by Birmingham Business Journal

One of Birmingham’s fastest growing companies has landed a $5 million investment from Ballast Point Ventures.

TicketBiscuit, an online ticketing and event management software company, announced the investment Monday. The company plans to use the funds to “grow its sales force, bolster marketing efforts and develop additional technology products.”

“This investment opens up serious growth opportunities for us,” CEO Jeff Gale said in a release. “Our team has worked relentlessly to build and support cutting edge technology and provide the best ticketing experiences on the planet. With this funding, we will be able to double down on our investments in talented people and bold strategies.

Founded by Gale in 2001, TicketBiscuit company processes more than $100 million in ticket sales annually for customers like music venues, festivals and event centers. In 2015, TicketBiscuit launched StateChamps, a software suite targeted for high school and amateur athletics.

Ballast Point Ventures, a Tampa-based venture capital and growth equity firm, previously invested in Birmingham-based Prepaid Technologies.

Ballast’s Robert Faber will join TicketBiscuit’s board of directors. Faber also serves as board observer at Prepaid Technologies.

“TicketBiscuit’s industry-leading position in online ticketing is a testament to the vision and platform developed by a great team over several years,” Faber said in a release. “Under Jeff Gale’s leadership, the TicketBiscuit team has had great success to date, and this investment dovetails well with our strategy of partnering with talented entrepreneurs who are building high-growth companies across the Southeast and Texas. We are excited to partner with Jeff and his passionate team at TicketBiscuit to continue building a leading technology company in Birmingham. TicketBiscuit represents our second investment in Birmingham in 2016, and we are excited to continue building our network in this market where a vibrant ecosystem of technology and health care companies has developed.”

TicketBiscuit employees around 50 people in Birmingham and Portland, Oregon. The company announced earlier this year it would be relocating from Riverchase Parkway to a new facility off Valleydale Road.

FVF’s “state of the industry” panel with Robert Faber

faber fvf

Robert Faber (L) discussing our state’s entrepreneurial ecosystem.

This past Friday BPV principal Robert Faber helped cap off the 24th annual Florida Venture Capital Conference as part of the “State of the Industry” panel discussion.

The panel covered several topics, including: new non-traditional sources of capital attracted to our state’s (and region’s) attractive business climate, start-up valuations, and how critical it is for an entrepreneur to do his or her homework on potential venture partners.

The Miami Herald reports that all of the panelists were “optimistic about opportunities in 2015” and foresee “a strong year ahead.”  We look forward to seeing many of you next year at the Vinoy in St. Petersburg for the 2016 Florida Venture Forum conference.

 

The innovator’s blind spot

Pets.com sock puppet spokesdog.  (PhotoTurns Out the Dot-Com Bust’s Worst Flops Were Actually Fantastic Ideas – or so argues Wired magazine.  There remain “many deliciously ideal symbols” of the epic failures during the bust, but “the irony is that nowadays, they’re all very good ideas.”

Now that the internet has become a much bigger part of our lives, now that we have mobile phones that make using the net so much easier, now that the Googles and the Amazons have built the digital infrastructure needed to support online services on a massive scale, now that a new breed of coding tools has made it easier for people to turn their business plans into reality, now that Amazon and others have streamlined the shipping infrastructure needed to inexpensively get stuff to your door, now that we’ve shed at least some of that irrational exuberance, the world is ready to cash in on the worst ideas of the ’90s…  (Emphasis added – ed)

The lesson here is that innovation is built on the shoulders of failure, and sometimes, the line between the world’s biggest success and the world’s biggest flop is a matter of timing or logistics or tools or infrastructure or luck, or—and here’s the lesson that today’s high flying startups should take to heart—scope of ambition.

Maybe if Pets.com had kept its head down and worked harder on getting the dog food to our doors than assaulting U.S. airwaves with ads like the one below, they would have made it.

In Pitfalls of entrepreneurship, ecosystems of innovation, we discussed the book The Wide Lens and what author Ron Adner termed “the innovator’s blind spot: failing to see how success also depends on partners who themselves need to innovate and agree to adapt.”  Here’s Adner:

Companies understood how their success depends on meeting the needs of their end customers, delivering great innovation, and beating the competition…  To be sure, great customer insight and execution remain vital, [but] two distinct risks now take center stage:

  • Co-Innovation Risk: The extent to which the success of your innovation depends on the successful commercialization of other innovations.
  • Adoption Chain Risk: The extent to which partners will need to adopt your innovation before end consumers have a chance to assess the full value proposition.

…When you try to break out of the mold of incremental innovation, ecosystem challenges are likely to arise… a strategy that does not properly account for the external dependencies on which its success hinges does not make those dependencies disappear.  It just means that you will not see them until it is too late. … Dependence is not becoming more visible, but it is becoming more pervasive. What you don’t see can kill you.

Adner serves up an easy-to-grasp example, a 1998 precusor to iPods called “MPMan:”

It sold 50,000 players globally in its first year. But [it was very different than the Walkman] 20 years earlier.  You couldn’t purchase them in traditional retail settings.  Downloading an album – legally or not – could be a multi-hour affair. It didn’t matter that MPMan was first – it wouldn’t have mattered if they were 6th, 23rd, or 42nd. Without the widespread availability of mp3s and broadband, the value proposition could not come together.

For more examples, check out our Vintage Future series – a tongue-in-cheek-yet-barbed reminder that predicting technology trends is not for the weak at heart.  (And that’s before one tries to protect the IP and find a way to profit from it.  There are reasons we affectionately call the really early stage of investing adventure capital.)

It’s a long and difficult journey from idea to successful business, involving many inter-related factors.  The best products don’t always win.  Compelling innovations can and do fail after launch – as did this 1997 precursor to Facebook.

Where are the start-ups?

The entrepreneurship rate, defined as the number of new firms in a given year as a share of all firms, has been in persistent decline for decades (15% in the late 1970’s, 8% in 2012).  It has been punctuated by tech surges – but those decline after a time lag (e.g., the dotcom boom/bust).  However one defines high-growth firms, their share of the economy is declining.  So argues this excellent AEI podcast about job creation, innovation, productivity, and national wealth.

High profile firms such as Google and Facebook (hardly start-ups, anymore) enjoy outsized awareness because they’re personal and omnipresent, and belie the fact that the data show declining business dynamism overall and for start-ups specifically.  No one knows at the outset which high growth firms will explode and disrupt – so we need “more shots on goal.”

As we once wrote:

There’s a heroic assumption propping up that line of thinking:  that there will always be a nicely growing economy, with plenty of opportunity, and no shortage of entrepreneurs.  We believe it is not safe to assume that entrepreneurs will continue to risk their wealth and careers, expend the energy, and make the enormous sacrifices required to build a business no matter how big a bite the taxman takes out of their eventual reward.  It’s fine to say investors will look for the best opportunity regardless, but if there are fewer entrepreneurs there will be fewer opportunities, and the economic pie will start to shrink…

“Terrific” ideas will still find willing investors, but what about all the not-obviously-terrific-but-still-really-good ideas?  For every Facebook there are hundreds of other early-stage companies who receive financial backing and grow nicely…  The economy is not built on a series of towering home runs that clear the fence no matter how strong the wind is blowing into the park.  Winning takes singles, doubles, walks, anything that advances runners and scores runs.  Over-regulating (or over-taxing) early-stage investment activity is like building a pitcher-friendly park and keeping the infield grass long:  you better plan on low-scoring games.

Hathaway believes over-regulation is a significant problem; particularly, how specific regulations impede firm entry and protect incumbents.  What we said in our response to a WSJ editorial about tax rates and early-stage investing is equally true of regulations:

[Large companies like] Costco may grow more slowly but will weather whatever tax regime is in place. However, small private companies (who create virtually all the new jobs in the country) lack a large company’s ability to shift income and lobby Washington, and they won’t fare so well.

(UPDATE:  As if on cue… today’s WSJ reports that Google has just become the country’s biggest political donor, knocking off heavily-regulated Goldman Sachs. – ed)

He also spends some time on the importance of the entrepreneurial ecosystem, the “networks and community, the dark matter, the softer things.”

The bottom line, whether it’s taxes, regulation, or institution-building:  some forms of activity promote economic growth and ought to be encouraged.

The entire wide-ranging podcast is worth a listen.  A few other well-said points:

  • The economy needs more than a narrow rebound in tech entrepreneurship, especially since the current rebound has been accompanied by an uptick in “hardening” or consolidation as early firms are gobbled up before they boom.
  • Using job creation as a measure is problematic because fewer people work for Twitter or Facebook than their previous equivalents – by the nature of what they produce.  Michael Spence divides the US economy between the one that competes globally vs. the local market (tradeable vs. non-tradeable).  The former generates national wealth but will employ fewer and fewer people;  however, that’s what sprinkles money around the non-tradeable localities.  “Not everyone can work at Google or Apple.”
  • Innovation can be costly for individuals and firms in the short run, but is the key to wealth in the long run.  E.g., productivity enhancements in low-tech/low-wage firms, consolidation that drives out less efficient mom&pops, and innovation that pushes stale incumbents out.

 

Why do pioneers tend to fail?

c-columbus-1Gerard J. Tellisv, in The Columbus Effect in Business, writes that “Pioneering is glorious, but later entrants are often the ones who see the true potential of discoveries.”  We made a similar point on Columbus Day two years ago:  though conventionally thought of as an explorer, Columbus might more accurately be described as an enormously influential (and lucky, perhaps even failed) entrepreneur.  Not only did he fail to achieve a blow-out IPO, he couldn’t even get the results of his project named after himself.  Here’s how Tellisy puts it:

Christopher Columbus will be feted in many places on Monday as an intrepid explorer, reviled in others as the spearhead of European colonization. But the Genoese ship captain who in 1492 sailed west to parts unknown might be best considered today for what he can tell us about ourselves. The man who successfully pioneered direct cross-Atlantic navigation also died dispossessed and embittered. In this respect Columbus represents a type, not an exception: failing pioneers.

Many scholars believe that pioneers are highly successful, have a high market share, and are long-term leaders of the markets they pioneer. Yet historical analysis shows that pioneers mostly fail, have a lower market share and rarely lead their industries. Long-term market leaders seldom are pioneers. Rather, they are ones who appreciate the discoveries of pioneers, envision the mass market and exploit it profitably.

Columbus might have fared better had he worried less about the idea and more about the execution.  As John Greathouse once put it (in the May 2012 issue of Forbes):

The second time Christopher Columbus pitched Ferdinand and Isabella (two years after his initial presentation – raising money has always taken patience and persistence), he did not need to convince them that locating a shortcut to the spice routes of India was a good idea. Rather, he had to belie their primary concerns: was he honest, tenacious and competent enough to execute the journey?

The same is true of entrepreneurs and their backers:  we want to hear about the idea – the details in the pitch reveal important things about the entrepreneur  – but the intangibles in a good long-term partnership are primary:   integritytransparency, trustworthiness, enthusiasm and tenacity, self-awareness, and flexible persistence.

Tellisy makes another point that is a favorite of ours:  business history is full of surprises.

Today’s market leaders in many categories didn’t pioneer those categories. Microsoft didn’t pioneer personal-computer operating systems (QDOS came before) or word processing (WordStar and others came before). Amazon didn’t pioneer online books stores (Books.com came before). Apple didn’t pioneer mobile music, the smartphone, the tablet ( Sony , BlackBerry and others came before). Google didn’t pioneer Internet search (AltaVista, among others, came before). And Facebook didn’t pioneer online social networks (Myspace came before).

Here’s how we covered the topic in Outcomes that feel ordained only in retrospect:

A few of the stories of these companies’ origins may ring a bell (DuPont began as a manufacturer of gunpowder, Berkshire Hathaway of textiles) but more than a few will likely surprise you:  Avon started as a book seller, Nokia in wood pulp, Wrigley in soap and baking powder, McDonald’s as a drive-in BBQ, 7-Eleven as an ice house, and Coleco made shoe leather (Connecticut Leather Company) long before it did Cabbage Patch Kids and video games.

The common theme to all these Origin Stories?  Business conditions may ebb and flow, but good managers adapt.  Tellisy, again:

Why do pioneers tend to fail in the long run? For the same reason that Christopher Columbus didn’t flourish despite his initial success: Pioneers too often cling to their initial intuition, just as Columbus clung for too long to the notion he had reached India. Pioneers focus on the small initial market, failing to envision the vast mass market that they just opened up. Pioneers stick with the initial product even when the market demands relentless innovation. All the while, a surge of later entrants learns from mistakes of pioneers, envisions opportunities and rides on the explosion of new superior technologies.

 

What color was Dorothy’s dress?

imagesCAT4D4FP

Oh my.

In honor of the 75th anniversary of the release of The Wizard of Oz, we offer three thoughts about a movie whose plot was once humorously summarized as:  “Transported to a surreal landscape, a young girl kills the first person she meets and then teams up with three strangers to kill again.”

1.  Predicting technological trends is not for the weak at heart – and that’s before one tries to protect the IP and find a way to profit from it.  The road to failure is paved with innovations that couldn’t quite achieve a sustainable business model.  The evolution of color film is an excellent example.

Emeralds, gold, poppies

Emeralds, gold, poppies

The Wizard of Oz is often erroneously thought to be the first color film.  Not so.  The first true color still image was produced in 1861 (based on the same RGB principle in use today), and the first instance of color recorded in film was in 1910.  Technicolor was invented in 1917 but it wasn’t until the introduction of their three-color camera in 1934 that the first viable full-color system came to the movies.

Instead of using a single piece of film, the three-color camera used bulky optics to split the image so that it could be recorded simultaneously on three strips of film.  This meant that Technicolor had to be shot with a special camera that weighed several hundred pounds.  It also required much more light than black and white cameras.

The lights on the set of Oz were so bright that Dorothy’s blue and pink (!) dress appears blue and white.

2.  Success often depends on external dependencies within the business ecosystem.  Despite good reviews and 6 Academy Award nominations, the film took roughly a decade to turn a profit due to the astronomical budget ($2.7million) and the low ticket price ($0.25).  It was re-released in 1949 & 1955, but it was a new technology – broadcast television – that took a marginally profitable film and turned it into an institution and source of countless pop culture references.  The initial broadcast in 1956 drew 45 million viewers.

Dude...

Dude…

3.  The Dark Side of the Rainbow (Aka The Dark Side of Oz or The Wizard of Floyd) might be the most entertaining example of chemically-enhanced BS confirmation bias we’ve come across.

At some point in the ’90s, word went around that Pink Floyd’s 1973 album “Dark Side of the Moon” synced up with the movie in eerie ways, producing moments where the film and the album appear to correspond with each other.  E.g.,

  • “The Great Gig in the Sky” meshes well with the tornado.
  • The scarecrow dances during the track “Brain Damage.”
  • The heartbeat at the album’s close coincides with Dorothy listening to the Tin Man’s torso.
  • The old Side 1 of the album ends just as the sepia-colored portion of the movie does.  Some also believe the iconic dispersive prism of the album’s cover purportedly reflects the movie’s transition from black-and-white Kansas to Technicolor Oz.

~ ~ ~

N.B. – Our research for this piece turned up a few additional charming bits of film history:

1910 silent film

1910 silent film

  • Although it lost the Best Picture Oscar to Gone With the Wind, it won for Best Original Score and Best Original Song (Over the Rainbow).  The studio had come within an eyelash of cutting that song from the movie because the scene “dragged.”
  • The 1939 film was the 4th time L. Frank Baum’s story was adapted to the screen:
    • The first was a 13-minute silent version entitled The Wonderful Wizard of Oz released in 1910.
    • In 1925, a young Andy Hardy – later of the Laurel & Hardy comedy duo – played the Tin Woodsman in another silent version.
    • A nine-minute animated version was released in 1933. Though produced in color, the short was released in black-and-white because the production did not have the proper license from Technicolor.
  • Casting notes:
    • 20th Century Fox had wanted Shirley Temple to play Dorothy, but her singing chops posed a problem.  Fox ended up losing the film rights to rival MGM and a young contract player at the studio named Judy Garland got the role.
    • Actor Buddy Ebsen was initially cast as the Tin Woodsman and completed some scenes, but had to bow out due to an allergic reaction to the silver makeup.
    • Margaret Hamilton, who portrayed the (old) Wicked Witch of the West, was only 36 at the time.
  • Trivia:
    • Burt Lahr’s Cowardly Lion costume was knitted from actual lion fur and weighed nearly 100 pounds.
    • Dorothy’s dog Toto was paid $125 per week while the actors playing the residents of Munchkinland only received a reported $50 a week.
    • The movie had two directors:  Victor Fleming handling the Technicolor scenes set in Oz, and King Vidor overseeing the bookend black-and-white sequences set in Kansas.
© 2017 Ballast Point Ventures. All rights reserved.