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To the person who nominated me in “Best business category”, thank you, that was a very nice gesture. In the true spirit of elections and polling, please go here to vote early and vote often! And if elected…
Seriously, regardless of who wins, let’s support the country’s blogging community.
How to start a company with no money down
I had started this blog as sort of a joke/response to all the “we don’t need no stinkin VC” postings floating around.
But an interesting thing happened along the way which should actually make a whole lot of people stand up and take serious notice.
Got an Idea? Passionate and Cocky? No money? No Problem. Step right up.
First, we need a computer. Nothing to it. I found 4 offerings ranging from 3 months, no payment/no interest, all the way up to 12 months of no payments, no interest.
Next we need an Internet connection. Since the previous “free” computer was a laptop, a little open wireless in the bldg or hooking up in the office, covers that item. A free connection, no problemo.
Now we need a domain name. Free? Absolutely. Head on over to http://www.registerfly.com/ and sign up for a .be domain. It’s Belgium, beats me, but the Registerfly guys are doing them, free, for the first year. And before all you Robert Scobble haters/lovers jump on this, fuhgettaboutit, I already reserved scobblewanna.be. It’s a holiday gift for mini-microsoft. But, I digress.
How about some tools. Go with some great free tools from Microsoft or grab any of the zillion open source tools in AJAX, Ruby, C++, Cobol, or whatever floats your development boat.
And of course, a free blog to talk about the product, have sign ups for the RSS feeds, get beta announcements, etc.
To this point we’ve spent no dollars. That’s zero euros, zilich pounds, nothing.
Let’s say you are rusty in the coding department. Two words: Sweat Equity and one source: Interns/Co-Op Students.
I did quick calls with some contacts at York University, The University of Toronto, The University of Waterloo, and The University of Washington. All of them had programs and were eager to offer up bodies in exchange for real world opportunities. In particular, the University of Waterloo has an entire program dedicated to taking ideas and running them through the whole process of plans, code, prototypes, etc. It’s pretty good and, of course, is free.
Staff, infrastructure, tools, equipment and a domain name are all a pretty good start for zero capital.
Just add some passion and/or cocky desire to change the world -n- off you go.
Don’t nit pick, there are flaws/holes, etc, in all of this because there is the larger point of what it takes to get started and it is certainly not all that much.
Personally, I think the VC community might want to brush up on the customer relations stuff. Especially the parts about being nice, returning phone calls, email, etc.
On the other hand, maybe in addition to cash, we can throw in some steak knives at every closing.
“There is a comforting absence of all those hot Web 2.0 start-ups. When you see these guys start advertising in Wired, sell everything because the party is probably over.”
Mark Evans, Canada’s leading tech journalist, on the return of Wired Magazine’s Ad pages. The full post is here.
One of the more interesting aspects of the VC business is meeting with all kinds of folks that have ideas of all types. We see things like a business plan for communicating with the dead via wireless technology or putting RFID tags on gold fish for ease of inventory and health management.
Every idea gets a hearing in our office because, well, you never know and listening is what it is all about. My partners, associates, and Carla, the glue that keeps the place together, all know that ideas are about passion, looking at things from all kinds of angles and, well, you just never know about stuff.
It pays to be nice, listen, offer advice and show a little respect.
The other part of the job that is fun is when a JSI (Just Ship It) walks in the door. You see something that just begs to be out there collecting users yet lies waiting for the entrepreneur to complete the grand vision, the master plan, the complete transformation of all that he (or she) surveys, or putting it bluntly, completing the rather large task of attempting to boil the ocean.
Having a conversation with such a passionate lad can be quite the experience because you walk the fine line between coming off as some know it all suit and missing the big picture in the rush to get something out the door.
Meet Albert.
Albert is my kind of young, aggressive, (aka cocky) entrepreneur who is doing some interesting work on a software product he thinks will change the world. It is a true labor of love and, to his credit, he managed to get some angels to view the power point, drink the kool-aid, and toss some coin his way. Way to go, Albert.
Albert gives me a call and wants to essentially do the no harm, no foul meeting. As you might have read before, I make it a practice to give anybody a change to come by the office for a 30 minute, no harm, no foul meeting that basically doesn’t count toward anything formal when it comes to funding. It’s great fun and, I hope, is a more relaxing way for new start ups to get to know the world of Venture Capital.
After going through the first chunk -o– slides, we hit the demo of the product. Not bad. Not killer, but not bad. The business problem he is trying to solve is real but not sure if what he is showing me is going to nail it. As I’m about to launch into the feedback loop, Albert says “oh, lemmie show you one other thing” and proceeds to show me this little desktop gizmo that is, well, killer (in my opinion, which is free and worth every penny).
“Ship that” are the words I uttered. Well even tho it could be ready, it’s really only a small part of this massive, change the world, yadda yadda yadda, says Albert.
Right. Albert, buddy, Just Ship The Damn Thing (JSTDT) and let the user community tell you what’s really needed. And of course, it was here that Albert and I launch into this massive debate over what the ‘right’ thing to do is. Does he ‘knee jerk’ and ship what I suggest because it might/probably get him funded. Does he play nice with me because he wants to get funded? Does he stick to his guns and make me understand that his strategy is not one that amounts to a boil the ocean plan rather a smart way to grow a long term business. It goes on well past the 30 minutes and spills into some of the better “flame mail” I’ve had since the days gone by at Microsoft. I wonder if they still have flame mail at Microsoft or have the corporate types taken over. I digress..
Albert was great in his passion, got the advice of a ton of other people and, in the end, will pull it all together and make the right call, of that I’m sure.
What this exercise reminded me of was the trap of ‘just one more thing’ or boil the ocean vs. shipping stuff and getting into the game.
So, I came up with my short JSTDT list as I see it. This list is designed to give you some guidance in deciding when is it good enuff to ship. Your mileage may vary, it’s just some thoughts.
– User Feedback
Rarely is anything totally killer version 1.0. Skype 1.0 had issues, Google out of the gate wasn’t a home run and Windows? Yeah, my point exactly. In fact, people on both sides of the aisle will tell you that most Microsoft products hit their stride around version 3. Some take a few versions more but, in general, version 3 is about it for the positive reviews to out number the bad ones. What this means to you is finding the sweet spot where the user won’t barf on install and/or first usage and find it ‘good enough’ to get use out of the product thus give you some useful feedback. The new thing is ‘beta’ or ‘preview’ labels on everything so, getting something out that won’t get labeled not ready from prime time is the tough but important balance point.
– Feature Creep
One thing I’ve noticed in beta cycles of software releases is this notion that the beta is the time for feature request. The danger is that you and your team get sucked up into never releasing anything because you chase features which are not bugs. When you put out that pre-release, make sure, double sure, you have a forum for feedback and make sure you have sections clearly labeled as bugs and ‘if only it would’ so that people will leave messages in the right place. The if only will help you with some road map issues, for sure, but make sure you can get a stable piece of code out the door which will get you in the game.
– Free vs. Premium (or the good enough problem)
Free is spooky. I’m a VC so, yeah, you’d expect me to say that. I have no issue with freeware, labor of love types who code up things, send em out with no strings attached. I really don’t. I just worry that a person wanting to craft some great piece of software to make a living, is driving into a world with everybody thinks everything is free. As I said, I’m a VC, consider the wallet, err, source of these comments.
Anyway, the challenge for you is finding the balance between offering services that are ‘good enough’ but get you enough people where a reasonable percentage of them will cough up something for your service/software. The good enough problem can be a tough one.
If, for example, you read the download squad, you will find lots of great products mentioned. Probably, call it, 75% of the time, the folks over there push free even tho they point out when something has a pricing structure.
In this entry for a product called AWASU (an RSS Reader), you will find a nice write up ending with these words on pricing:
“A $29 Advanced Edition and $59 Professional Edition add more features, but chances are the Personal Edition will cover most of your feed-reading needs.”
The point for you is the balance between the free version and upgrade. I could throw all kinds of stats at you but every product/service is different so getting something into the hands of the users is critical to the feedback loop and feature call.
– Happy users = Opportunities
If you can get that V1 product or that first service out the door and start to build a bunch of very happy customers, then you begin the relationships that can lead to people being receptive to other offers, services, and opportunities you can deliver.
All of this is tricky business. Trying to balance getting it completely right vs. beginning the trek toward a successful business depends on many things.
Ultimately, it will be the hardest call you make.
JSTDT, Albert! 
Raise your hand if you don’t have some type of pop up blocker running on your machine. Right. So, given that virtually nobody is seeing pop ups, it is mildly amusing that cnn.com still uses them. I use the Google toolbar so I see the little indicator when I hit the site. You’d think they’d give up or do something different.
It’s what happens when you are sitting on the plane, waiting, and you got a Verizon data card in your laptop. You notice these things. Weird. Okay, yeah, I’ll shut it down.
See you back at the ranch.
I rarely post stuff on politics because there are a ton of other people way smarter then me who do a superior job with observations, suggestions, etc.
In reading one of the smarter ones, Jeff Jarvis, I noticed a story about Hossein Derakhshan being refused entry into the United States. I flipped over to Hossein’s entry as well which is also an interesting read.
A couple of comments.
First, its a tough job working that border. I can’t imagine what it would feel like if it could be traced back to me that I was responsible for something or someone rolling over the border and causing a problem. It’s a tough job and I’m not sure knocking those guys, in any fashion, it particularly fair. Jeff didn’t nor did Hossein, just to be clear.
Second, given the Mr. Derakhshan is linked to the Harvard Law folks, is it such a leap to assume that he could cross all the Ts and simply come in. I recognize the irony that Jeff points about with respect to a guy going in/out of Iran while talking up political reform and being denied entry into the US, however, it appears people were polite, professional, etc. In my best new york jewish accent: could a little paperwork have hurt?
Third, a guy with a wireless laptop and an Internet connection makes for an interesting tool. As we saw with Sam the dog, all it takes is a little link love and presto, you are right on up there. I wonder if there should be more worry about people getting caught up in that somewhat random type of a net. Maybe it is a good thing, maybe not, probably worth some debate by smart people.
This was particularly interesting to me because I’m on the road from Toronto, via Vancouver, down to LA, back to Vancouver and now headed home on the Redeye. I’ve been up close -n– personal with the border folks on both side. Canada, they pretty much always smile and say welcome home.
So, to Mr. Derakhshan, I say, stick around Toronto a bit. I know an amazing NY Deli, excellent pizza place and a small place in Richmond Hill that makes bagels like the Big Apple. It’s a great town and a nice country; try the Tim-Bits.
Off to the plane, hope you had a great Thanksgiving down south.
I haven’t posted anything on the Sony disaster because there isn’t much to need to point out the obvious, i.e., putting secret software on customer’s machines that make security holes = lawsuits, duh.
But one place that has surprised me and offers a key lesson for your start up is the treatment of the single most important group of people Sony has; their people.
I’m one of those types that believes if you treat your team like gold, your customers will feel that treatment at every interaction they have with your company. I mean, really like gold as in the customer doesn’t come first, your people do. And it starts from the top
For example, I don’t like companies where there are reserved parking spaces for VPs, the CEO, and one “employee of the month” slot. What crap. Amazingly enough, this kind of aloof silliness still exists and even more amazingly, start ups from time to time have the sent me invites from the exec assistant pointing out I can park in the space marked reserved for the CEO. Shezz, don’t pass go, don’t collect a check.
Anyway, in all of this Sony mess, I’ve spoken to a number of friends who work inside the company, both in the US, Europe, and Japan. The management was not only ‘tone deaf’ to the customers but pretty much is leaving the thousands of employees, worldwide, to suffer piles of Sony bashing without at least an attempt to make it right internally.
I would have guessed the Japanese culture wold have caused somebody to bow in front of the entire company, issue an apology to all; with a final act of.. well, you get the point. But it doesn’t appear that new fangled imported western management is falling on swords of any kind.
The lesson for you? Apologize, cough up the fur ball, whatever, to your team first. Say what you will about Microsoft and the DOJ stuff or Intel and it’s fun with chip math. Both of those companies, tried hard, to keep the teams informed and tried hard to spell out the company position on the issues of the day. I can attest to the painful entertainment at Microsoft but the company was good about internal communications.
And personally, I think Microsoft should have shipped a ham sandwhich. You’d have gotten something to eat while rebooting your machine. But I digress.
I spoke to somebody who was there when the Tylenol bottle tampering scandal happened years ago. The company received lots of good marks about how they handled the public part but what wasn’t widely reported was the massive effort to get the whole company informed and told first about what was happening.
Remember that in the end, it’s all about the people that are doing the work and when that starts to fail, no amount of public whoo hoo will save the company.
It’s always a good thing when big companies spend millions of dollars on marketing campaigns that are, well, major “huh?” so that you, kind start up, get a free lesson in: don’t do this.
Toshiba has a new “end the stealing” campaign. You can skip the ‘how’d you hear about us’ thing and press the arrow. Oh, and for fun, you can click on the big END THE STEALING Logo which, as of this writing, will give you a quick lesson in RFC 2068. Shezzz..
Not up to the call your customer’s old and dinosaurs, true, but this is pretty poor. Go with some marketing interns; they are really eager, smart, and won’t do weird stuff like this.
If you are looking for a way to managing your QA Test Plans, you might want to check out Test Run.
It is a pretty powerful, hosted application that gives QA folks, managers, and the code jockeys an great platform for the management of the test process.
I’d encourage you to take the tour on the home page as it is a pretty good lesson for any start up on how to pitch the product and ask for the order.
Well done.
You may recall Doc Searl’s web test about Sam, the ugly dog. Sad to report that Sam has died at the age of 14. Full story on CNN.
One of the things I like about air travel is a block of time to catch up on blog postings that otherwise would get a quick scan and that would be that.
Fred Wilson, a VC in NY has a post up which he calls Online Music Musings. It’s always risky to take quotes from somebody else’s entries because I don’t want to make my point via an out of context shot at somebody else. So, if there is any doubt on what I’m saying here, please read Fred’s entire post.
One other disclaimer is that I have an investment in a music technology company called Predixis, so keep that in mind as well.
Hookay..
In his post Fred talks about Snocap, the technology company that basically goes out, finds/indexes music on the P2P network so that an content owner can tell Snocap, this is my stuff and Snocap can register it in her database. Then, a participating P2P will not allow a music file to get transfered without first checking with Snocap to see what the rights are. If the track is registered to an artist and the artist says, yeah fine, the transfer takes place, if the artist says, no or play a sample, or 3 times then pay, or whatever, that’s what happens.
Fred likes the basic P2P model. In his words:
“They include most, if not all, of the music that is available online because the users are the ones creating the network (peer production). Peer to peer networks include bootlegs, mashups, and most anything you'd ever want to find. So the peer to peer networks are comprehensive whereas iTunes is not.”
He is right. P2P networks are good things that scale, are easy to use and make efficient use of all that computing/network power out there.
Fred makes this comment about P2P networks:
“I use peer to peer networks all the time to get music that isn't available on iTunes or some other legit online music store. I'd be happy to pay for the privledge, but have never been asked to do so. I suppose that makes me a thief, but I suggest that it makes me a lost customer instead.
So when Mashboxx launches, I will gladly use it and pay for the music I am finding on peer to peer networks that is not on iTunes.”
My first point of contention with Fred is this rationalization that if he isn’t given an opportunity to buy it, getting it doesn’t make him a thief rather a lost customer. I think this notion of “I’d pay if you’d let me” is just hypocrisy at it’s best.
The clerk went in the back room, I couldn’t wait so I took the candy bar but if the guy had been at the counter I would have gladly paid for it. Extreme example? Yes, but it is to make the point. Let’s just call it what it is. People like Fred, will continue to steal music if there isn’t a brain dead easy way for people to consume it. I doubt Fred actually steals software, HBO, or his groceries, and fairly certain if the kiddos showed up one day after school with a bag full of unpaid for goodies, Fred would not be a happy dad.
To me it is simple. Let’s say you hear a new artist on the radio called, say FreddieW. Cool new song, you think. I’ll even extend the example to make the point. The radio station says the CD is exclusively available for a limited time at Barnes and Noble. You remember the artist and fire up iTunes. No such artist. Hmm. You crank up your P2P client and sure enough, there is the track because somebody ripped the CD and put the tracks up. Presto, you have the track.
Using Fred’s logic and assuming he would pay if asked, he’s fine with claiming lost customer status.
But what if the artist produced that CD and, on purpose, for whatever reason, doesn’t have his music available in digital format. Suppose, for that artist, the whole CD, liner notes, lyrics, etc, tell an entire story, give an entire experience that he, the artist wants to produce. He chooses to limit his customer base to those that want the CD in its entirety. That is the artist’s choice, not Fred’s and not the choice of the person that ripped the CD and put that music into the digital world. And once it gets into the digital world, that is not clearance for Fred’s dubious “lost customer logic” to kick in.
The artist didn’t ask Fred to pay for one track or the CD in digital format and that is the artist’s choice Hiding behind not being asked to pay as an excuse for supporting the notion of stealing is just not creditable.
Then Fred takes aim at the content owners with this part. I’ve quoted a large chunk because I am trying not to take it out of context.
“First, and most important, are the intentions of the content owners. We have learned that we cannot trust them to understand the value of online distribution. The last line in this paragraph in Saul Hansell's article is what concerns me:
Then they will enter into the registry the terms on which those files can be traded. It could be just like iTunes - pay 99 cents, and you own it - or it could be trickier: listen to it five times free, then buy it if you like it. Or it could be beneficent: listen to it free forever and (hopefully) buy tickets to the artist's next concert. Of course, the rights holders could also play tough: this is not for sale or for trading, and you can't have it.
If that's the approach they take, I'll just keep using Limewire. Content I can't have isn't an acceptable answer in my book. I understand that there are rights issues. But I don't really care about them. If its available online, I'll get it one way or another and you can't sue all of america just because you've made some stupid deals on the rights to your content”
Let’s start with this notion of trust. I’ve read that line at least 50 times and as I’m siting here at 32,000 feet, I’m still hoping that this isn’t what Fred really meant but it’s out there. To quote it stand alone:
“We have learned that we cannot trust them to understand the value of online distribution.”
Maybe Fred meant that content owners have not yet been convinced of online distribution or maybe he was taking aim at some big record label or some such, I really don’t know but content owners should be offended by this comment as it stands. It’s up to the ‘we’ to sell the idea of online distribution not up to the artist to take ‘trust me’ as comfort for protecting her work.
If a content owner and I mean the original artist wants to get paid, that is their choice and if the content owner doesn’t want it traded that is also their choice. Choice, free enterprise, capitalism, all the really good stuff that let’s me enjoy this job are the same tenants that give artist the complete and unfettered right to starve and get zero sales. If they sell the CD for a million dollars and nobody buys it, that is the choice of the artist.
It is not for the mysterious “we” to impose this notion of trust on an artist that in effect says do it my way or I’ll simply steal it. How smug and arrogant is that. But, clearly Fred didn’t mean that so I’m left with trying to understand what this line really meant.
I’m not going to attempt to even try to understand the phrase “content I can’t have isn’t an acceptable answer in my book” because it smacks so bad of a Conrad Black entitlement speech that it clearly was part of another thought that got edited wrong.
Unfortunately, Fred continues on with this notion of my way or I’ll just steal it. Fred makes it plain he doesn’t care about rights issues. And, as you can read, it is in the context of either let me have it my way or I’ll just steal it or in his words, “get it one way or another.”
There is the key “If its available online” piece that is particularly bothersome. If the artist didn’t intend to put it online and somebody rips the CD which then gets it online, does that give Fred’s argument weight to say, too bad, it’s online, didn’t trust you anyway, so too bad it’s now on my Ipod. I hope not.
That paragraph then attempts to shift the issue right back to the owner of the content. Too bad, Mr. Artist, cut a dumb deal that doesn’t allow you to put your music up where I can get it, bite me; I’ll just get it. Again, this has to be a bad editing job on the part of Fred because this is just ridiculous on its face.
The indie musician that puts his or her CD up on CD Baby for sale has NO deal cut with anybody and, according to Fred’s logic if that person doesn’t want his tracks up, too bad, you can’t be trusted and if you can’t be trusted and I’m not quickly and easily asked by you to pay for the song my way, I’ll steal it or, again “get it one way or another.” I encourage you to read the arrangement people have with CD Baby. It’s simple. Send us 3 copies of your CD and we will list it. Let us know if you want to have samples online, etc, etc. All choices of the artist and totally under the artist’s control.
Fred complains about having to pay for music more then once and on that point he is right. He wants a simple service that he pays one fee and he gets whatever he wants whenever he wants. And he is ready to pay. All of this is fine but it doesn’t justify all the preceding noise about lost customers, not caring about rights issues and basically saying put your music where I can get it or I’ll steal it nonsense.
Fred tries to end on a reasonable up note:
“I hope this works out at least well enough to encourage the content creators and the content owners to continue to move in the direction of peer to peer networks, open and comprehensive catalogs, and easy payment mechanisms.”
As well, I give the man credit for being refreshingly honest even if the logic is, in my opinion, flawed.
And for the record, DRM today sucks beyond belief. I had to write this in silence because my 80 gigs of music is dead in the water. Why? I haven’t phoned home to Napster recently. They have my money but I, right now, don’t have my music because Napster hasn’t seen my PC. Clearly, DRM of today is not encouraging people to play fair either.
I got some link love from the Scoble blogging machine (thank you, Robert) with respect to my VC Handbook posting. At the risk of getting yelled at (again) over excessive Scoble linking, I’d like to review/respond to a couple of points Robert made in his note.
Robert has this snip:
“I’ll be honest. If I were starting a company I would try to do it without much VC, if any. Why? Cause I know some folks who’ve worked for VC-run startups. Ones where the investors made billions. Where the founders got maybe a hundred million. And where everyone else got literally bubkiss.”
and this snippet:
“How the investors just don’t care about the developer. The folks who actually make the product work and make it pretty. Er useful.”
A couple of reminders: I know Robert personally and I used to work for Microsoft so filter everything through those disclaimers.
I’m not surprised that smart people are taking a hard look at this whole notion of VCs as we head into this thing everybody but moi is calling Web 2.0 and other such new and improved stuff. For the record, if I left my firm and were to do a start up, I would do it with as little outside money as possible as well. That’s just the nature of slicing up the pie and creating value. And, as I’ve said, today you can go really far on that credit card so my outside money would come from my trusted partners but only after I had started the process of creating value.
The VC community clearly is getting a wake up call about the changing nature of the business we are collectively in. We need smart people with smart ideas or we are simply finished.
Robert is off base, however, on what we (the VCs) care about and who drives much of the wealth sharing in a start up.
A start up, by the way, is different from late stage, 200 employee, expansion capital type situation.
Let’s first hit the ‘don’t care’ part. This just wrong on a number of fronts. We care a ton about the people building the product or service.
In almost all start up cases, it is the founders who were/are the core people who think up/code up the very thing I want to invest in. So, ‘the developer’ is the founder and those first few folks that the founder hires. In a start up situation, it is usually less then 10 people so, in general, we care about everybody, talk to everybody, and take care of everybody when we first go into the company.
All good VCs speak the “its about the people” thing so it’s unfair to make that type of ‘don’t care’ sweeping statement.
The “VC-run” start up comment concerns me from a different perspective.
A “VC-run start up” is a company in trouble because that is not what VCs do. VCs invest in smart people with good ideas, providing capital and (I hope) other value add to improve the odds of success.
In most first round cases, VCs are not the majority or don’t have board control, etc, so it isn’t the VC who ‘runs’ the company. When a company goes through multiple rounds of financing, you will always have cases where the majority shareholders are the investors but they don’t run the company. Yes, when a company gets into trouble or there is a case where the management team doesn’t perform, the investors will bring in a team, change the board, etc. But that is not the normal process, rather the result of some kind of trouble.
Finally, there is the issue of who got/gets what. In Robert’s note he mentions founder getting a pile and everyone else getting zip. That, Robert, is the fault of the founder(s), not the VC.
As part of almost every term sheet, we have a requirement for employees to be taken care of. In most cases, it’s the obvious, stock options, but there are other ways, like restricted stock grants, etc. I have companies where the employees, all of them, got a chance to invest along side us, in effect, getting the same price/value we did and making all of us owners. In one case, all the employees took a reduced first year salary in exchange for some clear, vested, stock. In a couple of cases, I have companies with a plan in place where a piece of the gross sale of the company is reserved for the team. And that piece is on top of option/restricted shares that are given out.
Good VC firms know the value of motivated people. Good VCs will layout the basics and then work with the founders in making sure the team is taken care of.
Founders who don’t want to have option plans, scare me. Founders who don’t want to share the wealth with the team, scare me and they should scare you.
Flickr and Skype? I’d ask the founders how many other people in the company got a good reward. Say what you will about Microsoft, Google, Netscape, Ebay, Amazon, Yahoo, Real Audio and many others. Those big time companies made a lot of people a lot of money, including many of the people on who’s back (or keyboards) the products were made. In fact, Robert’s current employer (my former employer) made a ton of developers rich.
Robert is right, tho, on making sure win-win drives businesses of all sizes because, in the end, that’s the only way anybody or any company can be successful.
Sorry for the all quiet on the western front thing going on here; it has been a busy couple of weeks.
Recently, I had an opportunity to listen to a couple of VCs who are, by all accounts, rock stars. These are the 100 million dollar to each partner type rock stars. They were with a group of VC rock star wanna-be types. Given my rookie status, I’m not at wanna-be status yet, so I was somewhat on the outside looking in.
What struck me is how many people in my world simply don’t see what’s coming. I guess when you sit in a room and worry about where your pilot is while trying to help your yacht mechanic Google a part for the ice machine, well, what’s a little change in the industry. What’s a bit more surprising is the whole group of folks who don’t have the planes and other toys, yet seem to want to cling to a rather old view of how to play the game.
So, I’ve been working on a bit of a VC playbook. In my view, it’s the way VCs today are going to have to think and act if they want to play with the really smart kids. I’m sharing because I think you, as a start up, need to evaluate us with the same rigor we are supposed to be evaluating you and these ‘rules’ from the playbook might give you some points to think about.
And I could be wrong, your mileage may very, don’t read why operating heavy machinery.
Customer service and being nice
Isn’t is amazing how VCs pound portfolio companies to love the customers, be responsive, etc, etc, yet feel perfectly okay with ignoring potential customers (you), being unresponsive, and generally dragging one’s butt in getting discussions to a conclusion that helps everybody move on. I believe people who call, send an email, or otherwise contact me, deserves a response in a timely manner. It really is that simple. If you contact me about your biotech idea, you should get an immediate no because we don’t do biotech in my firm, at all, under any circumstances. Lots of us, me included, tell you to read web sites, etc, and figure out what we do before you contact us, but sometimes you don’t and sometimes, for whatever reason, you contact me.
You deserve a response even if that response is a fast no. Yes, I understand the issues of SPAM and stuff sent to the general mailbox that has been blasted to everybody, gets tossed. But, personal emails, phone calls, faxes, the occasional paper mail product all get read and acted upon.
If you take the time, I should take the time.
Many of my brethren just snicker and laugh. You just wait, they say, wait until you get 200 emails a day. My general view is that I should only be so lucky that everybody is pounding my door first. Bring em on.
How many times have you gone into a meeting with a VC and gotten a ‘thanks for coming by’ note usually before you are done for the day. Your time is as valuable as mine. Thanking you for thinking of my firm and my partners seems like a no brainer for me. Perhaps it is from the days where sending a thank you note was impressed upon me at an early age, but in general, I think the VC community has to be nicer to our customers and potential customers because the world is small and getting smaller. Bloggers talking about this putz or that goofy VC firm will start to have an impact if it hasn’t already.
We aren’t needed
I have a web service idea that automatically looks at your calendar, where you live, what you like to eat and creates a customized service that automatically arranges the delivery of lunch to your office, wherever you happen to be. If you indicate a lunch meeting, I’ll let you check the box on the invite to get lunch for everybody else. Now, to get this idea up and running (ignore the pesky details, it’s a make believe example), I need a whole lot of nothing.
You will want to code something. You can get free open source stuff but let’s say you want to be a high roller and impress Robert Scoble or any of the other Redmond commandos. Nothing to it, download the free express developer kits from Microsoft. Then down load the free 90 - 120 day evaluation licenses with respect to some back end software or go free if you need it. Then set up a free MSN blog, creating a lucid posting about how you are trying to solve a problem. Then there is that little service that sits on your “device” and “talks” to you back end system to deal with all this. Need an Internet account and a way to speak with all the potential delivery services that would deliver to your particular location; that be pretty much it.
To get that up and running, with some customers, hitting milestones and a little bit of revenue will not require acres of green. We live in an era where the cost to go from idea to a paying customer has dramatically dropped and with that drop comes the rise of credit card VC. Yes, that’s always been there; people putting up the house or maxing out the credit cards. The thing that has changed, however, is the dramatic lengths those credit lines can go.
Naturally, there is the notion of “smart money” where you get more then a check. We’d like to believe we are there to open doors, help with marketing, fill out roles in the company, help get the company ready for the big run, etc, etc. My observation in all of this is that with everybody continuing to be more and more connected to everybody else, your ability to get the word out gets cheaper and easier and that translates into less need for the so-called ‘professionals.’ Yes, there is always getting above the noise issues and fit -n– finish issues, but the larger point, in my opinion, is your start up can go far, really far, before you ‘need’ us. This ties into my first point about being nice because our firm wants to be the first phone call you make when the expansion capital or outsiders are needed.
Let the competition begin
We compete. You should know this and use this to your advantage. There are simple things you should know/do that have been said before but are worth repeating:
– Go early. I do the 30 minute ‘no harm no foul’ meetings to give any start up a chance to socialize an idea/business plan, get some free feedback and begin the process on getting to know each other as early as possible.
– Go often. Keep us informed. Assuming you came by and I didn’t say our firm doesn’t do investments in your space, work out a way to keep us informed. It’s the best thing you can possibly do. In the first meeting, you’ve said here’s the general plan (with some milestones), what do you think. In the updates, you are saying here is what I’ve been doing against what we talked about.
– Compare. Who returns phone calls, gives feedback, sends suggestions (unprompted) your way, tries the product/service, etc, etc.
– Call em all. Get the list of CEO/CTO/CFOs of all the portfolio companies and call them. All of them. Don’t ignore this step. Seems simple and sounds like a check references suggestion but it is a very important step that virtually nobody follows through with. Call them all and ask the hard/tough questions.
– Look around the office. I know a VC who put a term sheet into a email rules/hosting/spam type company. The VC principal didn’t answer his own email. Had them printed out, replies sent back, etc, etc. This person’s big pitch to the start up was, we can help you. We don’t read email, don’t struggle with spam or costs of maintain a server, etc, but we can help you. The entrepreneur went with a group that started off the meeting with a saved file of spam, then asking the start up to filter it so they could immediately see if the company was any good. On the spot, let’s get do to it. The terms were not as attractive but they had the chops to deal with the entrepreneur.
I’m somewhat exaggerating but the point is clear, you should treat this just like any other important business decision; a little bit of planning and a whole lot of looking around to use the competition to your favor.
In my view, folks, we are going to see a ton of great new ideas, services, and companies in the coming months. It’s my hope that lots of the lessons learned during the previous insanity got learned by both sides, entrepreneurs and VCs alike. Let’s collectively be careful out there.
And, come to Canada, we’re open for business.
Well, now it starts. I expect to see a whole bunch of these purchases. Foldershare is a great app, which I use. Details on the purchase are here.
At one time or another, you've probably seen a movie or show where a fighter pilot takes off from the flight deck of an aircraft carrier.
Part of the ritual is that just before the pilot gets flung off the deck, he is given and returns a smart salute from the deck boss. It's the ultimate sign of respect.
I'm on the way to Vancouver (from Seattle) on a small puddle jumper. We go down the ramp to the plane and have to stop while another small plane is getting ready to leave.
As the plane was just rolling away, the young women marshalling the plane gave the little United Airlines plane a very smart salute. I looked up into the plane to see the pilot (co-pilot, actually) return it with the same snappy respect.
IAs I watched this exchange of less then 30 seconds, I wondered about what you would do if you 'saluted' your customer. A smart, snappy salute.
Would they return the gesture of the single finger type? Laugh? Roll thy eyes?
Or would they feel/sense the respect and return some respect your way?
Mutual respect, not a bad thing to think about.
I mentioned, in an earlier post, Watson reporting and the hope that all developers could get at the data in order to improve their respective products.
Via my friend and resident genius, Michael Winser:
“http://msdn.microsoft.com/isv/resources/wer/
There is a really interesting/good company called Healthunity located in Bellevue, Washington. They are doing some very interesting work with respect to health care collaboration. Check out the founders/management. These are not lightweights. Very smart, tons of experience.
Multi-year Microsoft Alumni types.
Now go to the contact us page and click on the map to the office.
Exactly.
That would be my point about taking care of your alumni so they use your products and services vs the other guy(s).
Assuming you grow and are successful, you will have some alumni/former employees. Take care of them as this stuff comes back.
If you use OneNote, it’s likely that you read Chris Prately’s blog. As he has been called by Robert Scoble: “one of the geeks that runs the OneNote team.”
Recently, he had a good (actually great) post about the SP2 update to OneNote. That post is here. You should read it and the comments that follow. Go, I’ll wait.
There are a couple of fairly valuable lessons in this post for you and your start up. Start up of any size, by the way. This isn’t a Microsoft love/hate/they’ve changed post, so stay with me.
First, the meat of the post is a point by point review of each of the major errors/bugs/crashes that were fixed in SP2. Nothing surprising here, right? Well, I dunno about you, but having one of the designers tell me what they fixed, what didn’t get added, etc, tends to make the relationship I have with the product and by extension the people who made it, personal.
Lesson: Make it personal. Back in the good ol ‘compiled fresh daily’ days of shareware, freeware, etc, this was totally normal. The open source community, from what I can tell, does a good job of fix history, etc. Don’t forget this when you launch your product or service. The blog entry by Chris is a good template.
Next, you will notice a number of references to the Watson bucket. For all those, sorry, can we phone home and tell them we puked messages you’ve send, feel good that they are used and products are getting improved based on real pain points. This, to me, is net good even if there is a sizable group of people that worry about privacy, etc.
You will note in the comments somebody made the observation to the effect, wow, somebody reads error reports.
A nice fellow named Peter Engrav of the development team responded with this comment:
“It's actually better than that mere humans read the error reports. Every (reported) failure gets tallied on a server somewhere and (this is the slightly tricky bit) "bucketed" with other instances of the same failure. The first few instances in a bucket come with a chunk of extra data describing what precisely was going on when things blew up - thereafter we just count how many times the bucket is "hit". So we can work on fixing them in order starting with those that occur most frequently. It turns out the frequency curve tends to start out quite steep - a relatively small number of unique bugs cause a surprisingly large number of failures.”
Lesson for MS: Value add, folks. Making that data available to developers who are working on Windows applications, helps everybody. Great way to help developers build better applications. I believe there was a movement within Microsoft to get this data out to third parties. In other words, if your app blew up and Watson caught it, shipped the problem to MS, you could get this data. I don’t know what the status is on that project. Last time I asked, June, it was in the works.
Remember, in the end, customers just want value. Value for the time they invest with you as well as the money spent. By getting out in front of issues, keeping customers informed and, keeping it personal, you will build a long term successful business.
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