Ray Hays

Entrepreneur Magazine April 2012 article, “They’re Coming to America” features interview of Ray Hays

A couple years ago, this blog featured the following articles on the trend of international franchises targeting the U.S. market:

Is Franchising the Last Bastion of American Business Leadership?

International Franchise Invasion: The Looming Battle for the U.S. Market

A new Entrepreneur Magazine article studies this new trend, some examples of foreign franchisors in the U.S. market, and the barriers to entry to for international franchises wishing to launch into the U.S. market. The article quotes Ray Hays, author of this blog, in addition to franchise owners involved in this trend.

Enterpreneur Magazine Apr 2013 article_Page_1
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Brics Nations Take Steps on Currency Trade, Bank

Brazil and China Set Currency Swap, but Bloc’s Idea for Development Bank Encounters Some Obstacles

By PATRICK MCGROARTY in Durban and DEVON MAYLIE in Pretoria, The Wall Street Journal
[image]ReutersSouth Africa’s first lady Bongi Ngema toasts China’s first lady Peng Liyuan as President Jacob Zuma looks on.

Members of the Brics group of emerging markets took steps to trade their currencies more freely and to establish a joint development bank, seeking to counter the influence that developed countries exert over the global economy.

Brazil and China agreed Tuesday at a summit of Brics leaders in Durban, South Africa, to use their central banks to swap up to $30 billion in Brazilian real and Chinese yuan over the next three years, allowing businesses to trade between the two countries without converting earnings and investments to U.S. dollars, the standard conduit of global trade.

Brazil’s finance minister, Guido Mantega, said the arrangement, which the countries have been working toward since this past June, would give them a means to exchange currencies “independent of the conditions of financial markets.” He also said the Brics countriesBrazil, Russia, India, China and South Africa—were close to an agreement to pool some foreign-currency reserves in case of a balance-of-payments crisis.

The bloc’s move to create a new development bank, however, was weighed down by disagreements over funding and management, said Russian Finance Minister Anton Siluanov. “On the whole, we agreed that we will continue to work on creating a Brics bank once the unresolved questions are answered,” the Interfax news agency quoted Mr. Siluanov as saying.

South Africa’s finance minister, Pravin Gordhan, added that he was pleased with the negotiations. “We’re on track,” he said.

South African officials want a new development bank to fund infrastructure projects that the International Monetary Fund and the World Bank have overlooked. Larger Brics members, such as China and India, are eager to establish an institution that could extend their influence deeper into Africa and other emerging markets where their economic interests are expanding.

The Brics’ slow march toward establishing their own bank illustrates their struggle to move past populist rhetoric to true cooperation between powerful and sometimes adversarial nations. Each is eager to reap the benefits of a larger trade group—and all are fearful of being flooded with products from the others, particularly China.

“What we now seek to address jointly is to find the means towards a more equitable balance of trade,” South Africa’s President Jacob Zuma told reporters in South Africa’s capital, Pretoria, after meeting with China’s President Xi Jinping. “Africa is counting on the People’s Republic of China for support in the continent’s development.”

Mr. Xi acknowledged China is pursuing its own commercial interests in Africa. “We each see the other side as an opportunity for our own development,” he said.

According to the proposals discussed Tuesday, each country would likely contribute up to $10 billion to the bank, an official said, speaking before plans were to be approved by the national leaders gathering Wednesday. The bank would focus on infrastructure development, he said, both in the five-nation group and in emerging markets where they want to do business.

But economists and business leaders said an initial pool of $50 billion wouldn’t be enough for the bank to make its mark in Africa or elsewhere.

“At this point it’s somewhat symbolic,” said Anthony Thunström, chief operating officer for accounting firm KPMG LLP‘s Africa investment program. “Its potential will only be realized when it’s better capitalized, and I think that’s going to be a longer-term project.”

More specific decisions—including which country will host the bank and where it will invest—will be postponed at least until the bloc’s next summit meeting in Brazil in 2014, he said.

“There is general agreement that there is a need for this,” said the official involved in the negotiations. “Creating a multilateral institution takes quite a long time from being an idea to being set up.”

 

U.S. Draws Greater Foreign Investments

Seal of the United States Department of Commerce

For U.S., Big Foreign Investment Is a Mixed Blessing

By NEIL SHAHThe Wall Street Journal

Foreign investment in the U.S. dwarfed American investment abroad by the biggest margin on record for much of last year, leaving the U.S. economy more vulnerable to external shocks but also suggesting the nation remains a magnet for foreign funds after the financial crisis.

America’s “international investment position” in 2012—how much the value of foreign investments in the U.S. exceeded U.S. investments abroad—jumped to $4.7 trillion in the second and third quarters of last year before falling to $4.4 trillion by year’s end, up from $4.0 trillion at the end of 2011, the Commerce Department said in a report Tuesday that provided quarterly data for the first time. READ MORE

BRICS Nations Plan New Bank to Bypass World Bank, IMF

By Mike Cohen & Ilya Arkhipov –  Bloomberg.com

Tomohiro Ohsumi/Bloomberg
The leaders of the so-called BRICS nations — Brazil, Russia, India, China and South Africa — are set to approve the establishment of a new development bank during an annual summit that starts today in the eastern South African city of Durban.

The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.

BRICS Nations Plan New Bank to Encroach on World Bank Turf

The leaders of the so-called BRICS nations — Brazil, Russia,IndiaChina and South Africa — are set to approve the establishment of a new development bank during an annual summit that began today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.“The deepest rationale for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world,” Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets, said in a phone interview. “There’s a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the western world.”

The BRICS nations, which have combined foreign-currency reserves of $4.4 trillion and account for 43 percent of the world’s population, are seeking greater sway in global finance to match their rising economic power. They have called for an overhaul of management of the World Bank and IMF, which were created in Bretton Woods, New Hampshire, in 1944, and oppose the practice of their respective presidents being drawn from the U.S. and Europe.

Reform Needed

“We need to change the way business is conducted in the international financial institutions,” South African International Relations Minister Maite Nkoana-Mashabane said in a March 15 speech in Johannesburg. “They need to be reformed.”

The U.S. has failed to ratify a 2010 agreement to give more sway to emerging markets at the IMF, while it secured Jim Yong Kim, an American, as head of the World Bank last year over candidates from Nigeria and Colombia.

Finance ministers and central bank governors from the BRICS nations, who met in Durban today, agreed to set up currency crisis fund of about $100 billion, Brazilian Finance Minister Guido Mantega told reporters today. He didn’t give details of proposed funding for the new bank, which Brazil wants established by 2014. The nation’s leaders are due to sign a final accord tomorrow.

FDI Inflows

Goldman Sachs Asset Management Chairman Jim O’Neillcoined the BRIC term in 2001 to describe the four emerging powers he estimated would equal the U.S. in joint economic output by 2020. Brazil, Russia, India and China held their first summit four years ago and invited South Africa to join their ranks in December 2010.

Trade within the group surged to $282 billion last year from $27 billion in 2002 and may reach $500 billion by 2015, according to data from Brazil’s government. Foreign direct investment into BRICS nations reached $263 billion last year, accounting for 20 percent of global FDI flows, up from 6 percent in 2000, the United Nations Conference on Trade and Development said on its website yesterday.

“If they announce a BRICS bank it will be quite something,” O’Neill said in an e-mailed reply to questions on March 15. “At a minimum it symbolizes they can achieve something as political group and means lots of other things could follow in the future. It also means that they will have their own kind of special World Bank, which may aid infrastructure and trade projects.”

Currency Pool

While BRICS leaders may approve the creation of a development bank in principle at the summit, details on funding and operations may take longer to finalize.

Russia favors capping each side’s initial contribution at $10 billion, Mikhail Margelov, PresidentVladimir Putin’s envoy to Africa he said in a March 15 interview in Moscow.

“It will be some time before it will be feasible for this bank to start financing say, a railway project,” Simon Freemantle, an analyst at Standard Bank Group Ltd., Africa’s biggest lender, told reporters in Durban yesterday. “That is some way out.”

Interest rates near zero in the U.S., Japan and Europe have fueled foreign investors’ appetite for higher-yielding assets, driving up currencies from Brazil to Turkey. Brazil has warned of a global currency war as nations take reciprocal action to weaken their currencies and protect export industries.

African Leaders

Brazil’s real has gained 1.9 percent against the dollar since the beginning of the year, while South Africa’s rand has dropped 8.7 percent in the period.

For South Africa, which makes up just 2.5 percent of total gross domestic product in BRICS, the summit is a way to showcase its role as an investment gateway to Africa. President Jacob Zuma has invited 15 African heads of state, including Egypt’s Mohamed Mursi and Ethiopia’s Hailemariam Desalegn, for talks with the BRICS leaders at the summit. For most of the BRICS leaders, it’s also the first opportunity to meet Chinese President Xi Jinping after his appointment on March 17.

“We will discuss ways to revive global growth and ensure macroeconomic stability, as well as mechanisms and measures to promote investment in infrastructure and sustainable development,” Indian Prime Minister Manmohan Singh said in a statement yesterday.

To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

Is Africa’s business opportunity over-hyped?

Stories about Africa’s astonishing economic growth, a rapidly advancing
middle-class and a unique business opportunity
not to be missed, have been told time and time again at conferences
and in the media over the past years.

Kennedy Bungane, CEO of Barclays Africa, says investors should focus on the hard data concerning Africa's economic growth.

Kennedy Bungane, CEO of Barclays Africa,
Over the past 18 months both Time magazine andThe Economist came out with covers that read ‘Africa rising’.
The Economist’s cover caused quite a stir because 11 years earlier the publication called Africa “the hopeless continent”.

READ MORE

Global Startup Financing Is Booming! Time For Entrepreneurs (and Investors) To Become Fluent In Foreign Business

As articles below illustrate, there has been a noticeable surge in global startup financing. From established professional U.S. and European investors, to newly formed Russian venture funds, to crowdfunding platforms in Africa, there is a lot of money seeking to fund technology, alternative energy, robotics and healthcare startups around the world.  It is a fantastic and exciting time to be an entrepreneur.  Yet, it is a well-known fact that only a fairly small percentage of entrepreneurs seeking funding gets funded. The odds worsen considerably, when companies seeking financing and potential financiers are in different countries. In addition to the normal challenges that businesses need to address when seeking financing, international business carries with it a whole new set of barriers.  After looking at countless business opportunities, it has become increasingly clear that a substantial portion of the unrealized opportunities results from several repeating and recognizable factors:Lack of cross-cultural communications and relationship building skills among counterparties involved in transaction

Lack of brand or product adaptability to the target markets’ tastes, cultural or social norms

Lack of  international business experience and commitment to the desired markets

Lack of a mechanism to properly package transactions, evaluate markets and structure opportunities both entrepreneurs and potential investors.

Lack of an effective platform to develop in-depth relationships between QUALIFIED counterparties in multiple emerging markets

Thus the following challenge emerges – If someone could cost-effectively help entrepreneurs increase their international business IQ and help them become Fluent In Foreign Business,  billions of dollars of additional economic value would be created for those involved. Thus it is time for both investors and entrepreneurs worldwide to add a strong set of international business tools to their arsenal. 

Old World startups peddle their products to New World investors

Old World startups peddle their products to New World investors
March 20, 2013 4:42 PM

SAN FRANCISCO, Calif.-  Never separate an Italian entrepreneur from his coffee. That was one of the key takeaways, among others, at Mind the Bridge’s first ever demo day.

Mind the Bridge is a seed fund and accelerator that supports Southern European entrepreneurs from distressed economies, with a focus on Spain, Italy, Greece, Israel. The program helps entrepreneurs set up headquarters, establish a network, and gain exposure for their product in the U.S.

“It used to be there wasn’t good communication and no good way of breaking down international barriers to get all the ideas coming from different parts of the world,” said storied venture capitalist Tim Draper, in an interview with VentureBeat. “Now, I see things from Italy and Southern Europe and they look just like things in Silicon Valley. With the spread of viral marketing and information, and the connection we’ve all got with each other, the ideas are generally based on the same information. These startups are competing head-to-head.”

Draper kicked off the demo event, which featured presentations from six startups. Each of the companies participated in Mind the Bridge’s three-month accelerator program and received coworking space and guidance from mentors who understand the unique position of foreign entrepreneurs. Founder Marco Marinucci advocates a “dual-company model,” whereby development stays in the home country, but headquarters are in Silicon Valley, where the market and the money is.

“These entrepreneurs have a strong sense of creativity that is generally more pronounced than locals and easier and cheaper access to talent,” he said in an interview after the pitches. “Our startups all have a product launched and proved in different geographies, but the bigger challenge is to make it in biggest costumer market in the world- the U.S.. The market here is incomparable. This way you can play the big game of the mass market and find funding here, while maintaining all the development abroad. This is the model that I see working.”

Each of the presenting startup have built consumer-facing startups that span a range of sectors. Italian Atooma is a smartphone app that lets you set up conditional events that automatically trigger simple actions based on things like time of day, location, and favorite apps. Myze is a Spanish-based service that helps consumers collect and maximize their credit card rewards to access discounts, promotions and deals. Bad Seed is a gaming company from Italy developing mobile games that achieve ‘the quality of console games.’ Weendy is a social ‘sports mate’ application where surfers, skiers, kite boarders etc… can share information on weather conditions. The founders are from Greece. Also hailing from Italy, Map2App is a web-based platform that lets travelers create custom mobile travel guides to access on-the-go, and in3Dgallery’s technology turns 2-dimensional content into dynamic 3D presentations.

In true European form, the presentations were punctuated with breaks for h’or dourves, pasta, coffee, and cookies, and the entrepreneurs all seemed remarkably at ease. The event did not have the same level of tension or anxiety that often pervades the room at demo days, and the founders seemed just as eager to chat with each other as with potential investors. Marinucci said European entrepreneurs often have a different attitude than locals, and the Mind the Bridge community is a supportive, rather than a competitive one. “

“There is a more social attitude, he said. “It takes an immigrant to understand an immigrant and the nitty-gritty of the challenges you face. Everyone has different nationalities, but they all have similar issues, and that makes them a tighter community.”

Mind the Bridge was founded in 2007 as a side project while Marinucci worked at Google. It was first conceived as a non-profit accelerator program dedicated to developing Italy’s startup ecosystem, but has grown to encompass a wider geographical scope and includes a seed fund and startup school. Today’s startups were the first to graduate from the accelerator program, but they won’t be the last. Marinucci plans to make between 12 to 15 seed investments a year of between $40,000 and $100, 000 and is raising a second fund.

Accel’s massive new $475M fund is all about startups in Europe & Israel

Accel’s massive new $475M fund is all about startups in Europe & Israel

It’s a good day for European and Israeli startups seeking funding, as Accel Partners announced a new $475 million fund today for early-stage tech companies.

The new fund, Accel London IV, was raised in just eight weeks and makes Accel London one of the largest venture capital firms in the region, with $2 billion raised to date across its previous funds. The new fund’s total is more than what was initially rumored back in February, as VentureBeat previously reported.

“Europe has a strong talent base, including a growing community of repeat entrepreneurs, whose success, experience, and ambition continue to fuel our ecosystem,” said Accel London partner Harry Nelis in a statement. “Innovation and entrepreneurship are thriving in Europe, and with technology hubs developing across the region, the next billion-dollar company could emerge from anywhere.”

Accel, which has offices all around the world, said the newly announced fund will focus on investing mostly in companies in Europe and Israel that deal with consumer Internet, big data, cloud, SaaS, and mobile.

Accel is well known for its long list of early investments in wildly popular companies, most notably Facebook. It has also previously invested in Spotify, Rovio, Dropbox, Cloudera, Etsy, Trulia, and Groupon. More specifically, Accel’s London team has invested in QlikTech, Playfish, and Kayak, which sold to Priceline for $1.8 billion after going public last year.

New Russian high-tech fund to invest up to $20M in startups across the globe

New Russian high-tech fund to invest up to $20M in startups across the globe
March 22, 2013 1:38 PM
Adrien Henni, East-West Digital News

In a new illustration of the vibrant activity of the Moscow venture scene, Maxim Shekhovtsov and Alexander Zhurba – founders of TexDrive, one of the city’s largest startup accelerators – announced last week the creation of a fund dedicated primarily to IT projects in Russia and around the world.

Christened Genezis Capital, the fund actually launched and made its first investment in late 2012 – but the official announcement was delayed to take advantage of the most suitable moment for it, Zhurba said in an exchange with East-West Digital News.

Genezis was put together by a group of more than 30 limited partners, representing investment banking, PE funds, large-scale multinationals and just “wealthy people.”

The amount of the fund – which is still open to new LPs – has not been disclosed. But Genezis sources have stated that it has raised enough money to invest in three to five seed or early-stage companies every year, with each receiving from $25,000 to $1 million, and in two more mature startups for as much $20 million apiece – and this for at least two years running.

IT projects are expected to account for up to 70% of the fund’s investments, with the rest allotted to beefing up players in biotech, clean tech, energy saving, alternative energy and robotics.

A global focus

In Russia, Genezis works as an extension of TexDrive, managing the accelerator’s assets. Its playing field has been rather narrow, with no more than 70 investment-grade startups in the country, the fund has estimated.

But Genezis – which was registered in an as-yet unspecified foreign country – seeks investment opportunities across markets as diverse as the U.S., Europe, Russia and Asia. “We consider Russian and foreign startups under identical criteria,” Zhurba told EWDN.

The ‘invest abroad’ trend among Russian funds started in 2009, when Yuri Milner’s Digital Sky Technologies invested in Facebook. Since then, a bevy of Moscow-based VCs, including Bright Capital, Phenomen Ventures, Runa Capital and Ru-Net, have been chasing opportunities around the world, while DST’s cash has fueled AirbnbAlibabaSpotifyTwitter and several other top Internet companies.

Genezis Capital’s first investment – more than $10 million – went to an undisclosed company operating in the U.S. and Western European markets. Its Russian portfolio includes B-152, an Internet service that helps businesses comply with the demanding requirements of Russia’s personal data legislation; Martmania, a Novosibirsk, Siberia-based online retailer; and Fleecs, a startup developing a payment solution for fuel stations.

Photo Credit: John Leach/Flickr

Crowdfunding In Africa

African tech startups raise $1 million in crowdfunding effort

Africa is the most exciting place in the world these days for tech entrepreneurship.

For proof, look no further than the the VC4Africa blog, which covers Africa’s exploding tech startup scene, and its parent organization,Venture Capital for Africa, which raises investment funds for some of the continent’s most promising early-stage startups.

VC4Africa’s mission is “crowdsourcing a startup movement across Africa.” The movement was there, capital both from within and without the continent was there, and coming now in greater and greater gouts, but the crowdsourcing was not. VC4Africa and a small handful of other groups, such as HumanIPO, are seeking to fill the gap, with increasing success.

The one-year-old organization has so far raised over $1 million in direct investment for early-stage startups on the continent, targeting the underserved sector of companies with less than a million-dollar valuation.

A matchmaking service, uniting African entrepreneurs and their companies with individuals interested in investing in them, today announced its 10,000th member. It has also reached 1,000 African enterprise members.

The service vets qualified investors and credible startups before admitting them to the community, adds a social element in profiles and interactivity, and provides “self-help tools, business modeling workshops, and member hosted networking opportunities,” in addition to structured mentoring programs.

There’s a lot of money at play, too. As Wired so crassly put it, “Want to become an Internet billionaire? Move to Africa.”

But if your goal is some good old-fashioned neo-colonial resource-extraction-style investment, think again. Africans by and large have learned from their previous relationships with non-Africans and, as a group—especially as a plugged-in group—its entrepreneurs seem unwilling to sell out their long-term interests for short-term gain. One relationship will stand in for many in this respect.

The South Korean corporation Samsung partnered with the iLab at Nairobi, Kenya’s Strathmore University, funding a wing of the tech research institute. But instead of “owning” the work of the students and faculty they are funding, they get first-look opportunities to license the tech. The ownership of the IP remains with the creators.

This is the new context for investment in Africa, and the sense of independence and control is not incidental to the burgeoning tech industry on the continent. When you are motivated by a sense of pride and ownership, you tend to give it your all. The resulting quality and market have inspired VC4Africa’s investors to risk minimum investments of $10,000 on the network’s entrepreneurs.

That boomtown, smash-and-grab attitude is one of the reasons the founders wanted to build face-to-face relationships between its members before diving into funding, co-founder Ben White told the Daily Dot.

“We don’t think people should be leaning back in their chairs and investing through a computer screen,” said White. “VC4Africa might be a virtual platform, but its a community that consists of real people who often meet in person.”

They have hosted meetups in 40 cities, in Africa and elsewhere.

But White believes that the investing climate in African tech has already matured to the point where the ability to sweep in and “invest” the crap out of a place like an early 20th century bauxite tycoon is starting to change.

“If you have the foresight to get on a plane and go to Bujumbura with the intention to invest today,” admits White, “you will be able to meet the country’s top entrepreneurs. Capital is limited and this means early investors might have an advantage setting the terms. This can be seen as unfair advantage.”

However, as any market matures, the increased competition starts to level the playing field.

“I think many (African) markets are actually starting to move into this next stage of development and we see things starting to settle,” he said. “Local investors increase their participation over time and a healthy ecosystem starts to emerge as a result.”

In the final analysis, however, “the ecosystem and the agenda has to be driven by entrepreneurs” and they are thick on the ground in Africa.

As those who were in San Francisco in the mid-nineties know, there is no place so exciting as ground zero of an explosion in intellectual capital. Africa, with a population of 1 billion people, 50 percent of whom are under 30, connected as never before to the global community and with tools to build with that many more people can afford, is in the midst of a renaissance that could make the Bay Area’s last-century heyday seem like a footnote.

VC4Africa’s story is interesting. But it’s one story among millions whose first chapters are only now being written. VC4Africa is a keyhole through which, if you put your eye right up to it, you might be able to see the next century spread out across the continent’s savannas, forests and coasts.

Photos by Venture Capital for Africa

 

Double vision: Netflix changes its stripes for foreign markets

By: Sarah Treleaven
From: Business without Borders

A Q&A with the author of “Netflixed”

When Netflix introduced a DVD-by-mail program in 1998, it changed the way people consume entertainment. But now, in an increasingly digital world, Netflix faces a different landscape and increased competition. Gina Keating recently published Netflixed: The Epic Battle for America’s Eyeballs. In this interview with Business without Borders, Keating comments on the impact of leadership styles and why Netflix is finding it harder than expected to go abroad.

 

comments on the impact of leadership styles and why Netflix is finding it harder than expected to go abroad.

Reed Hastings
Netflix CEO, Reed Hastings
Photo: Getty Images

I understand that several people at Netflix refused to speak to you for this book. How does what you’ve written differ from the company’s preferred mythology?

It’s pretty different. The main thing is, when I started interviewing people about the history of the company, this name kept turning up: Mark Randolph. I had covered Netflix for eight years and this was very curious to me. It turns out that he was one of the main innovators of the consumer interface, of the idea of renting DVDs online. The idea that the concept behind Netflix was born when Reed Hastings got a late fee [from Blockbuster] is just wrong. Once I found out about that, it was not a happy thing for the company.

Why has Netflix, which once appeared so promising, been so volatile lately?

My thesis is that when Marc Randolph and Reed Hastings were both leading, the company had the perfect parents. Randolph was the big idea guy, the consumer-facing guy who loves people and wanted to put out a product people couldn’t resist. And in Hastings it had a guy who could take those ideas and optimize them for the Internet; he turned those ideas into code. That’s what made Netflix so powerful. When the company lost Randolph and his sensibility, the engineer took over and a lot of mistakes came from the lack of someone looking out for the customer.

Reed Hastings has been called America’s worst CEO, but you also call him a genius. What makes him such a polarizing leader?

First of all, Netflix is one of the most shorted stocks. Time after time, people have underestimated that model.  Hastings is a visionary, and he’s often three or four steps ahead of his peers, but there’s resistance to his ideas – not only in the media industry but also in the analyst community. The other part is that this guy just doesn’t care what anybody thinks about his leadership style or ideas for where the company should go. That’s threatening to people. He’s made mistakes, and one of those was pushing out a lot of the management team that held his hubris in check. That’s been a big problem since 2010.

What are Netflix’s key challenges now?

They have many. Carl Icahn buying so many shares is not, in my opinion, a positive thing. [Icahn is a billionaire and former corporate raider who in November purchased nearly 10% of Netflix’s shares] In my book, I talk about the effect Icahn had when he made a similar investment in Blockbuster and it completely took the company off track. I think he thinks that Netflix will be bought; if that doesn’t happen I’m a little concerned about how he plans to get out of that investment and still make money. It could be very harmful to Netflix. The second challenge is that the competitive landscape is much different than when they first started streaming. They have to compete for content against much bigger players. They’re going to have to be so nimble to stay afloat. I think that Icahn’s involvement in Blockbuster prevented them from responding in a quickly changing landscape.

Can you tell me a little about their international expansion? Have they had much luck moving into other markets?

They went into Canada first and that service grew incredibly quickly; they arrived just at the moment that Blockbuster was retreating there. Latin America has been a little more difficult because the consumption patterns, technology and markets are different. It’s a little more trouble than they were expecting. They just launched in Scandinavia and it’s been more costly than they anticipated. But they’re reaching a saturation point in the U.S. and they have no choice but to go overseas for growth.

How are the international markets different?

International markets have all been streaming-based and that’s part of what makes them so appealing to Reed Hastings. The international markets have become the paradigm for what Netflix will be — they’ll be able to go in and negotiate content based on streaming only. Hastings really envisioned that the television of the future would be a lot like an Internet application — and that’s really what Netflix is in every country but the U.S.

You’ve mentioned that one of Hastings’ biggest weaknesses is his difficulty understanding consumer response. Has that been an obstacle in trying to cater to other cultures?

I can’t really speak to that, but I can tell you how they make the decisions they make. They’re extremely data-driven and their data is excellent. The Netflix website collects behavioral data as people navigate it. So, for example, if you watch a whole bunch of TV episodes on a weekend, during a certain time of day, and you fast-forward through certain episodes or certain parts of the episode or stop and watch a certain actor a few times, the algorithms attached to that make assumptions about you that are so accurate that I don’t think the human brain can even process it. And that’s how they go about offering people certain movies. Hastings isn’t making these intuitive leaps about his international audience; he’s watching them. But he has 15 years worth of data on his U.S. customers and almost nothing on his international customers, so there will be a learning curve there.

How can Netflix be used as a model for anyone who seeks to drive a service online?

The main lesson from Netflix is that the technology has to serve the consumer. There is a remove from the consumer when you sell something on the Internet because they can’t see it, smell it or touch it. You have to come up with a very compelling offering driven by an emotional attachment to the company and the experience they create. Randolph understood that, and that’s part of the reason Netflix grew so fast. They took us on a journey to places we didn’t think we would go. How many people had previously watched a lot of Bollywood or anime or Chinese martial arts before Netflix came along?

Survey Ranks ‘World’s Most Unfriendliest’ Countries

by Libby Zay gadling.com 

Have you ever been to a country that just seems to give tourists the cold shoulder? Now, there are some figures behind those unwelcome feelings; the World Economic Forum has put together a report that ranks countries based on how friendly they are to tourists.

The extensive analyses ranks 140 countries according to attractiveness and competitiveness in the travel and tourism industries. But one category, “attitude of population toward foreign visitors,” stands out.

According the data, Bolivia (pictured above) ranked as the most unfriendly country, scoring a 4.1 out of seven on a scale of “very unwelcome” (0) to “very welcome” (7).

Next on the list were Venezuela and the Russian Federation, followed by Kuwait, Latvia and Iran (perhaps when visiting one of these countries, you should try your best to not look like a tourist?).

On the opposite side of the scale were IcelandNew Zealand and Morocco, which were ranked the world’s most welcoming nations for visitors.

Tourism infrastructure, business travel appeal, sustainable development of natural resources and cultural resources were some of the key factors in the rankings. Data was compiled from an opinion survey, as well as hard data from private sources and national and international agencies and organizations such as the World Bank/International Finance Corporation and United Nations Educational, Scientific and Cultural Organization (UNESCO), among others.

The report also emphasized the need for continued development in the travel and tourism sector, pointing out that the industry currently accounts for one in 11 jobs worldwide.

All of the results of the survey can be found after the jump.

Attitude of population toward foreign visitors
(1 = very unwelcome; 7 = very welcome)

Friendliest

1. Iceland 6.8
2. New Zealand 6.8
3. Morocco 6.7
4. Macedonia, FYR 6.7
5. Austria 6.7
6. Senegal 6.7
7. Portugal 6.6
9. Ireland 6.6
10. Burkina Faso 6.6

Unfriendliest

1. Bolivia 4.1
2. Venezuela 4.5
3. Russian Federation 5.0
4. Kuwait 5.2
5. Latvia 5.2
6. Iran 5.2
7. Pakistan 5.3
8. Slovak Republic 5.5
9. Bulgaria 5.5
10. Mongolia 5.5

Have you ever visited somewhere where they didn’t exactly roll out the welcome mat? Alternatively, have you visited somewhere on the “unfriendly” list and had a great, welcoming experience? Let us know how your travel experiences compare with the survey’s ranking in the comments below.

[via CNN]

[Photo credit: Phil Whitehouse, Wikimedia Commons]

Google’s Schmidt to Visit Myanmar

By SHIBANI MAHTANI, The Wall Street Journal

Following a highly publicized visit to North Korea, Google Executive Chairman Eric Schmidt will travel to Myanmar. The WSJ’s Shibani Mahtani tells us why the U.S. technology giant hopes to gain access to this market of 60 million.

Google Inc. GOOG -0.75% Executive Chairman Eric Schmidt heads to Myanmar next week, a sign of the Southeast Asian country’s appeal to leading U.S. technology companies as it emerges from decades of secrecy and crippling western sanctions.

The visit on March 22 will be the first by a high-level executive from a U.S. technology giant, as many American companies have been held back by U.S. regulations that restrict their access to this market of 60 million people, giving international rivals an edge.

Mr. Schmidt’s visit follows a high-profile personal trip to North Korea, which has similarly low Internet penetration but remains far more isolated and closed off to U.S. companies than Myanmar, now widely seen as the region’s newest investment darling.

“Eric [Schmidt] is visiting several countries in Asia to connect with local partners… who are working to improve the lives of many millions of people across the region by helping them get online,” said Google spokesman Taj Meadows, confirming the visit. Mr. Meadows didn’t go into specifics of Mr. Schmidt’s agenda, but industry experts in Yangon said Mr. Schmidt plans to speak at a public event with local startups, entrepreneurs and students.

Myanmar’s information-technology sector is seen as a potential billion-dollar industry, soon to be boosted by planned advances in telecommunications. Two licenses will shortly be awarded to foreign operators, a step that is expected to improve Internet and mobile networks there.

President Thein Sein‘s nominally civilian government has pledged to open the once-sensitive sector, piquing the interest of companies world-wide. Under the previous military government, online communication was considered highly sensitive, and was heavily controlled. Even the word “Internet” was censored from all publications and cyber cafes were banned at the turn of the millennium, a time when Internet companies were booming in countries elsewhere.

The government hopes to increase mobile-phone ownership to 80% of the population by 2016, from 9% now, presenting huge opportunities for any company operating in the mobile-Internet space.

The change is getting attention by U.S. companies. The U.S. Agency for International Development (USAID) last month led a technology delegation with representatives from Google, Intel Corp., INTC -1.34% Hewlett-Packard Co., HPQ -0.68% MicrosoftCorp. MSFT -0.30% and Cisco Systems Inc. CSCO +0.51% to Myanmar to meet with government ministers and young entrepreneurs.

“Our companies are eager to partner with you and work with you,” said USAID Administrator Rajiv Shah, speaking in Yangon after the business mission.

Technology companies like Cisco have already started making small investments in the country, announcing earlier this month that they will be setting up training centers in Myanmar for locals to use their software.

But the sector is also one where American companies—though widely considered global leaders in the field—remain burdened by outstanding U.S. sanctions. Sites likeeBay EBAY -1.96% still bar users from signing onto their website from Myanmar, with pop-up notifications indicating that accounts cannot be accessed from a “sanctioned country.”

The U.S. and Europe had sanctions against Myanmar when it was run by the military. But they removed almost all economic sanctions over the past year, rewarding Mr. Thein Sein’s administration for its sweeping political reforms.

But U.S. Treasury Department regulations still prohibit American companies from dealing with a list of more than 100 individuals considered cronies of the former military regime, many of whom continue to hold powerful and influential business positions under Mr. Thein Sein’s administration.

American companies that can avoid working with these individuals wouldn’t face similar restrictions, but would still be required to comply with strict reporting regulations when making investments in the country, which they complain is unnecessary red tape.

“Some of the U.S. sanctions effectively shut out 60 million people from certain services to punish 100 people,” said Thaung Su Nyein, an entrepreneur who runs his own information-technology company and seven publications in Myanmar. “Our hope is that the U.S. will do their part [in lifting the remaining regulations], and we’ll do our part in improving this field, and everyone will be happy.”

American officials say that there are some “legacy issues” that frighten U.S. companies investing in Myanmar, admitting this is partly the fault of poor communication from the U.S. government.

“I’m not sure we’ve done a good-enough job communication to our companies that they are allowed to be working here freely,” said U.S. Ambassador to Myanmar Derek Mitchell, speaking to The Wall Street Journal at the sidelines of a USAID event. “We need to do a better job.”

U.S. officials have also promised to update the list, adding new names as their ties to the former regime become apparent and removing others who they believed have improved their behavior.

Still, U.S rivals continue to dominate the market there, having been the first movers to the country of 60 million people, many of whom are growing in affluence.

According to a report from the Open Technology Fund, a research division of Radio Free Asia, Chinese company Huawei Technology Co. 002502.SZ -1.20% leads the smartphone market. The report, which doesn’t break down smartphone makers’ market share in the country, says Huawei phones there cost between US$500 and US$600. Apple Inc.’s AAPL +1.89% iPhone 4, on the other hand, retails for US$1,120 in Yangon—far more than in the U.S. because of third-party restrictions. South Korea’s Samsung Electronics Co. 005930.SE -2.63% Galaxy smartphones retail between US$115 and US$500 in Myanmar, according to the report.

Many of the country’s tech entrepreneurs have been plugging away at the sector for decades despite the hurdles. They hope to modernize their country with new innovations. But partnerships with U.S. companies, they say, remain the bigger prize and could push their government to be more open and transparent.

“You will always have the risk takers, the entrepreneurs,” said Mr. Thaung Su Nyein, noting that these aren’t always long-term players—happy to cash in on millions and move on. “But without sanctions, the U.S. will let in a whole number of companies—like Google—which will hopefully come with e-government solutions, monitoring of Internet openness and other benefits.”

 

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