Software is eating the world

Software is eating the world. This is the title of the last chapter of The Launch Pad by Randall Stross, which is a book about how Silicon Valley invests in start-ups run by small teams of brilliant software engineers and salesmen, which then go on to change business as we know it.

This book is one of the most gripping business books you could read. It is about the realities of modern entrepreneurship where 20 year old college drop outs create ideas that can disrupt any industry.

I was reading Peter Blakemore’s remarks on turning 70, reflecting on his very successful career in wholesaling built on a very simple business model: buying well, knowing your staff giving great customer service and competitive prices. A simple strategy executed well.

The scary thing about the Launch Pad is how Y Combinator, the school for start-ups launched by Paul Graham, is enabling digital businesses to find simple strategies that can change how your world works.

Stross followed 64 teams (out of 2,027 who applied) who were funded through the 2011 Y Combinator summer school. As well as cheap cash, these businesses get access to mentors and angel investors. After three months they get to pitch for investors to support their business ideas.

Consider this pitch from Chris Steiner of Aisle50. He was pitching to a room full of billionaires and celebrity investors (Demi Moore and Ashton Kutcher to name two).

“We will be the premier way for food manufacturers to market their products. The consumer packaged goods industry in the United States is a $2 trillion business.” It will spend $35 billion a year on marketing. “More than half of that money ends up in these things.” He holds up a sheaf  of newspaper coupons.

“Freestanding inserts. FSIs. More than 250 million of these go out to newspapers every single week. The problem, of course, is that most people don’t look at these. So there’s this giant pot of money that’s trying to migrate…to digital.”

Steiner says his competitors have had to “jam” all the coupons into a couple of web pages. But Kraft don’t “really want a thumbnail image of their products next to competitors. What they want is a pedestal with the product by itself. That is why they’re still willing to spend $500,000 for a single page ad in an FSI that goes out across only half the country.”

Aisle 50 provides an alternative. “We take these products and put it on a big stage. All alone. With custom copy and great photography. We e-mail the deal out every morning. They buy from us and we load it to their grocery store loyalty card.”

This will mean an end to consumers being forced to flip thorugh the newspaper in search of a good deal.

Aisle50 has launched only the week before, with a grocery chain in North Carolina. Other changes have been added swiftly, including a deal signed the previous Friday with SuperValu, the nation’s third-largest grocery conglomerate, with 2,500 retail stores like Albertsons and another 2,500 independent grocers that it supplies.

Since launching Steiner says Aisle50 has been fielding unsolicited enquires from consumer product companies rather than chasing partners itself.

Stross observes that it took Aisle50 one week to be on the verge of attaining a retail partnership extending from coast to coast.

[Check out the Aisle50 web site to see the brands that are supporting it today!]

But the Launch Pad provides readers with much more than just stories of 25 year olds backed with lots of cash. Business readers will learn from the way Stross records with care how US entrepreneurs structure their business propositions and how they create opportunities.

Reading this book will help you to put together business presentations, to win support for your ideas, to challenge your team to think about the big picture and will fuel the fire in any entrepreneur.

For more see www.betterretailing.com.