Archive for February, 2007

Rule # 8 -Do not NOT follow good advice.
February 28, 2007

One of the best resources you can have in getting your venture up and running is to talk to other people who are successful in business and get their advice on everything from office space to marketing techniques.  While it would be most helpful to talk to someone who is in the field you are entering, it isn’t necessary.   The two people who gave me the best advice in my internet based ventures owned a chain of oil change shops and a chain of gas stations, respectively.

Another excellent source of such input is in the never-ending stacks of startup geared magazines like Business 2.0 or Entrepreneur.   It seems like every other issue has an article such as “The Greatest Lesson learned by 25 top CEO’s” or “One Piece of Advice from 10 billionaires.”

The simple fact is that “good” business practices are good in most every case.  Conversely, “bad” business practices are bad in almost every case.  A quick example: having good accounting in place is a necessity and while that won’t make your company a success, it will serve a critical role in your success.  On the flip-side, a company with poor accounting will be out of business soon.  Period.  No exceptions.  Your “eyeball math” of your bank account and bills won’t work, even if you’ve convinced yourself it will.

If someone you know runs a business and is successful, you’d be doing yourself a favor to listen to what they say. If they say, “don’t buy television ads in the last week of the month because that’s when car dealers drive the prices up…” it’s probably worth making a note of.  If they say, “you know, we found that our cell phones were getting all the calls and our 800 number was just being used to gather messages, so we cancelled the land line” you might want to jot that down.

Don’t get me wrong; if you listened to every piece of advice and implement it, you’d be spending all of your time switching directions and trying to do too many things.  The point is to listen to advice, ask questions, and then think in depth about the reason those things worked or didn’t work for those people.  In that thinking, you’ll find some obvious lessons that never occurred to you before.

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My aunt, the aforementioned owner of quite a few gas stations, told me the biggest thing she would recommend someone starting a new business is to calculate a formula for the company’s immediate worth and implement buy-out/escape provisions for the founders from Day One.  Her point was that often projects take longer then expected and the end result doesn’t always resemble the original intent.  As such, it’s good to have a mechanism in place that if someone is wanting out or needs to be removed, the value of their work and contributions has already been determined.

Even if you haven’t generated a penny of revenue, it’s important to know your company’s value.   In one of my ventures, we raised $125,000 at 10% valuation, meaning our initial value of the company was 1.25 million.  As such, a founder owning 30% of the company who wants out would be entitled to a value proposition of roughly $400k pre-tax.

Unfortunately, we didn’t put buyout and exit provisions in our paperwork and one of the founders now wants to leave.  He has stated that his contribution so far is worth 1 million dollars, which we do not have nor would we pay if we did.  Since he is not open to a payment plan over time – which also could have been in the paperwork – he is well within his rights to hold out for the cool million.  In the meantime, the rest of the founders, in addition to running the business, have to make up for the fact that the founder wishing to leave is not interested in doing any more work on the company’s products.

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Chances are, if you are talking to a “successful businessperson” they didn’t simply fall in to that position.  Even if you think they happened upon a giant stroke of luck to initially become successful, that’s likely long gone and they are actually earning every penny coming in through hard work and excellent understanding of their business, products, and customers.

Listen to what they have to say.  If you do, the chances are great that you will outright avoid many of the things that sink good businesses and ventures.

Rule #7 – Sometimes, “That’s not my job…” is the right answer
February 20, 2007

This was addressed a bit in the post on partners, but it is worth it’s own mini-post. Sometimes, despite your best intentions and hard work, it is important to realize that not everything is your responsibility, nor should it be. For starters, you aren’t helping the other members of your team by shouldering the whole load. You also are likely to wear out and collapse if you take on everything on your own.

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A week or so ago, I had a partner in a venture tell me he wasn’t receiving emails from me to the account that was set up on our project URL. I suggested he contact our network admin to get it fixed and advised that I would be copying emails to his personal address in the meantime. Fast forward one week to this morning. He informs me that his email is still missing messages and writes that the problem absolutely MUST get fixed this week, to which I agree.

This afternoon, his email still isn’t working yet I have been emailed about it at least three times today. The individual with the email issue has not taken the time to learn about routing email addresses through the software he is using, nor has he contacted the network admin or service provider for assistance. In other words, the way he is trying to solve the problem is to declare that the problem exists to anyone who will listen with the hope that one of those folks will stop what they are doing to solve the problem on his behalf.

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Don’t ever be the person who says, “That’s not my job” with regard to your company and business. Anything you can do to help further the team towards it’s goals should be done. Since you are likely the leader of this venture (it was your idea), you will be called upon to do more then anyone else. You should embrace this role and dive in to it, making it your mission to out-work everyone around you and lead by example. Be the kind of person that gets things done.

However, also be perceptive enough to realize when you are “getting things done” and when you are doing the opposite: enabling other people to NOT get things done. By fixing my co-founders email for him, I would be enabling his behavior of having someone else step in when things get the least bit out of his realm of expertise. By refusing to help, his only option is to learn about the software and fix it himself, which means that future software problems of this kind can be resolved more quickly and without such distraction.

Rule #6 – The “Ninety / Ten” Rule
February 16, 2007

Take a piece of paper, right now, and write down in one sentence what your idea is and/or what it does.

Now, write down what it does in 5 words or fewer. Next, 3 words. Then 2. Grammar isn’t important. However, every idea should be able to be described with a single noun and a single verb. This is your core, and as you get started, it should be the ONLY thing that matters. Don’t believe it can be broken down that way? Look at the following examples…

Google – internet search

Dell – Make computers

Wal Mart – Sell everything

Flickr – share photos

MySpace – connect people

Digg – rank stories

del.icio.us – bookmark webpages

And so on and so forth. Every little bell and whistle and feature and tag and setting is meant to enhance the client, user, or customers interaction with the core. Always keep that in mind because one of the biggest mistakes startups make is spending too much time making different steak sauces and not enough time finding a great cut of meat. In other words, they neglect the core.

I learned this lesson the hard way in a sector-specific web portal that I helped create. We evaluated the competition and made note of every feature they had. We documented the existence of every link on every page of the competitor sites and wrote down what that particular link or button did. Then, we built a product with literally every one of those things built in. By combining them all, we had about 60 different features as where our nearest competitor had about 40. Considering ourselves geniuses, we were certain that our additional features would net us additional customers. However, the time spent on new features had taken away from developing the core so much so that our core didn’t really work. No core = no customers. The additional features were worthless without the core.

As such, it is important that we introduce a rule that should serve you well when trying to determine what is and isn’t important to your product or service in its early stages of development. I call it the “Ninety / Ten” rule.

The Ninety / Ten Rule : Ninety percent of your customers will use no more then ten percent of your product features. Conversely, no more then ten percent of your customers will explore and use the bulk – or ninety percent – of your product’s features.

Now refer back to the two words you wrote down earlier. Chances are, that’s your “ten percent that ninety percent will use.” That is your core. You should focus on that first and foremost and worry about the other ninety percent of your feature set once the most important part has been created and works wonderfully.

And just so you know that this rule applies all over the place, let’s look at the previous examples I gave, based on what seem to be reasonable assumptions.

Google – Most of the site’s visitors (the 90%) are using the main search box to find something. Only a small segment (the 10%) are using GMail or Reader or Writely, etc.

Dell – Despite selling services assett recovery, the vast majority of people who interact with Dell (the 90%) are looking for a computer to buy.

Wal Mart – Wal Mart operates produce farms and shipping lines and gas stations, but most folks who interact with Wal Mart (the 90%) walk in to the store to buy something.

And so on and so forth. It doesn’t matter the industry and it doesn’t matter whether you are selling a service or physical product or function or experience: most of your customers, users, and clients will care only about your core.

The surest way to stability and profitability is through that core: build it first, build it well. You’ll have plenty of time to work on the other 90% later on.

Rule #6 and 1/2 – Be the Rolling Stones
February 15, 2007

No doubt you’ve been dreaming about your idea for a long enough time to imagine exactly how you’d like to see it unfold. Maybe something like the YouTube guys would be good: build it, get popular quickly, sell to Google in a year and a half for a billion dollars, make the cover of Newsweek. Or, perhaps you’re more reasonable and taking the path of Flickr and getting purchased for a few million by Yahoo! is more your style. Or, better still, you could be like Facebook and hold out for more value while you build your business, vehemently denying that anyone is buying your business as the price tag goes up and up .

All of those scenarios are good ideas and would be a great path for you to follow. However, if you have your heart set on something like that, I would pose the following question:

What planet are you living on? Because here on planet Earth, there are thousands upon thousands upon thousands of fantastic companies that will never be acquired by Google or Yahoo! or Microsoft. Chances are extremely great that your company won’t be either. As such, you need to chart a more reasonable – and infinitely more manageable – path for your company to take. Enter the Rolling Stones.

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The Rolling Stones are arguably one of the most popular bands on earth. They are in-arguably one of the richest. Of course, that wasn’t always the case. The band played it’s first show in 1962 and soon after had an eight month residency at the Crawdaddy Club. During this residency, they finalized their lineup of members, tried out different songs, different arrangements, different set-lists, and different performances to get an idea of what appealed to their small but growing audience. Their first record was two cover songs and while it gained new fans, they were still existing in the darkest parts of the Beatles’s shadow. Their second record featured “I Want to Be Your Man” (ironically written by John Lennon and Paul McCartney) and quickly helped the Rolling Stones turn in to one of the hot up-and-coming bands of the time. They toured relentlessly, played 200 shows a year, and recorded albums at every free moment. As time passed, their fan-base had grown enough to help their records rise to the top of the charts and keep them there, producing hit after hit after hit and, some four decades later, they are still going strong.

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In a perfect world, your web-based venture would follow the exact same path. You’d form your band (development team), practice in your garage (build the app), play your first show (live launch), have a residency where you can try different things depending on how the audience reacts (Beta period), have a hit (“I Want to Be Your Man”) and build off of that for many years to come by working your rump off and understanding what about your application or service appeals to your customers.

Great musicians take chances and do things differently from one album to the next, but even at the height of the disco-period, the Rolling Stones were still a blues band at heart. Even when Madonna was busy introducing sitars and eastern influence in to her music, you could still dance to most of it. And even when The Beatles were doing completely off-the-wall things on their records, they still had a backbone of amazing harmonies and melodies, interesting lyrics, and the ability to explore new sounds without alienating their audience.

Your goal should be, in a condensed version, to do just that: work hard to have a small, yet meaningful “hit record.” Then build upon it by continuing to challenge yourself and your company without alienating your core users. If you follow this strategy from one success to the next, expanding your horizons without forgetting the customers and clients that helped get you there, you have an excellent chance of looking up in due time with a small army of loyal users behind you.

Aiming for something as lofty as “a million unique users!” or “get bought by Cisco!” is something you are going to have virtually no control over at this stage, if ever. That’s like the teenager who dreams of forming a band and selling out Madison Square Garden without realizing it takes a lot of nights on the little stage at Fred’s Bar and Grill to get there. Don’t confuse what I’m saying: It’s fantastic to dream big. Just remember that there are a lot of little things along the way that need your direct attention, and succeeding on those little things is the ONLY way you’re going to turn those big dreams in to reality.

Rule #5 – “Why” is more important then “What”
February 14, 2007

The reasons you are embarking on this new project, venture, idea, or business are infinitely more important then what the project is. The reason is simple: your ability to overcome adversity, how you respond to change, and ultimately, your execution are going to be guided almost exclusively by “why” you got yourself involved in this mess in the first place.

Do you want to build a company of long-term growth and profitability? Want to get bought out quickly by someone? Are you trying to launch a portfolio company and this is simply one offering of many you expect to have eventually? Want to change the way folks consume media on the internet? Interested in reducing greenhouse emissions from sea-going vessels? Seeking the affection of thousands of net surfers? Seriously, what’s the point?

It is entirely possible that you think you know the answer already, but I’d wager that you don’t. I expect that your reasons for trying to do something new are only skin deep at this point, and as such, those reasons will fail you when you need them most. Therefore, it’s important that you take a long look in the mirror, dig in, and figure out what’s driving you.

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For example, three years ago, I knew someone who built an amazing application for sending SMS messages (essentially text messages on a mobile phone, in case you didn’t know) to groups via a computer. The tools were pretty incredible. It took no time to organize contacts and send them a text message about an upcoming event or a newly launched feature. You could even program it to send the message at a later time. Frankly, if you needed to send SMS messages to a group all at once, this application would more then fit the bill. The marketing and mass-communication possibilities were near endless.

The whole time he was building and testing the application, his friends and customers of his business were excited and enthusiastic about the application. Everyone had dozens of ways they planned on using the service and couldn’t wait for him to “release” it for wide use. However, once the application was ready to go, a funny thing happened. I noticed that there was no business model involved. He hadn’t implemented credit card processing or prepayments or contacted cell-service providers or anything. He confessed a short time later that the whole reason he built the service was to try and get a friend who was a VP for a large telecom company interested in acquiring the application. My friend’s “why?” was “to get purchased quickly.”

Such a reason is being used all over the internet today with a slew of companies. The only problem with this strategy is simple: what happens if no one wants to buy you? My friend, and countless other folks, had built a product but not a business. As such, if no one is interested in purchasing the product outright, you may be left with no choice but to try and build a business. My friend, a developer by heart but not much of a businessman, is still waiting on a buyer. The more time passes, the more other companies launch similar products with a business model intact, making his chances of selling almost nil.

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I had another acquaintance that invested in a web portal in the real estate sector. The site’s technology and substance were hardly cutting-edge, but they had built a fair amount of unique traffic and for the most part, the site contained quality content. My acquaintance came in to the game late, providing money to help the site market itself for more traffic and scale up to handle that traffic. The stated goal of the founders was that they had received numerous inquiries asking if the company were for sale. They had decided to sell the company and wanted to build traffic up as much as possible in a 180 day period to build up the value of the company before cashing out.

Six months later, traffic had doubled and the buyout being offered was more then they had expected. They wouldn’t be retiring, per se, but the plan to increase the company’s value seemed to have worked and everyone was going to walk away with a fair amount of money in the bank.

But, as is the point here, it wasn’t meant to be. The original founder (who had conceived of the idea a year and a half prior) started talking about how they could monetize the traffic if they were to keep the company. They could enter into referral agreements with Realtors, contractors, and inspectors. They could have advertisements and paid home listings. When the investing acquaintance and the other 3 founders sat him down to discuss this new strategy, he confessed that he’d never imagined they would be able to grow traffic so quickly and his only reason for selling was that he didn’t see the site ever getting anywhere. However, now that there was real traffic coming online, he saw an opportunity to build what he’d envisioned some years ago. They decided to follow his lead.

3 months later, the traffic had subsided to the pre-investment level. 2 months after that, they removed the site from their servers as the new business strategies they had tried were not generating revenue and there was no capital left, even for bandwidth costs.

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In the first case, my friend had built a tremendous product for the purposes of selling it to someone. In the second, my acquaintance lost his investment because the real “why” for the real estate site’s founder was to built a site that could stand on it’s own and make money. Would being more honest about the “why?” involved have made a difference in the chance for each example to succeed? Maybe, maybe not. Perhaps my friend in the first example would have gauged buyer interest before he’d committed so much time to the building of the product. Perhaps he would have consulted with someone about the possibility of putting a business model behind the product so it could build some value on its own. In the second case, my acquaintance invested with the understanding that the founders of the company were intent on selling out. If the chance that they would keep the company had been in play, perhaps they would have tried to generate their own revenue sooner or raised money to sustain themselves longer or recruited contacts in the real estate field a bit earlier.  Perhaps he wouldn’t have invested at all.

You will find that the “why” will not only determine much of your company’s long term prospects of success, but it will also be a guiding light when you have to make tough decisions. For example, if you are interested in selling out or building a company of stable worth, then “creating and sustaining value” is your “why.” Every tough decision can likely be determined by simply asking, “is this going to help create and sustain value here?” If you are interested in creating a company in a field in which you enjoy working, then your “why” is “participating and making a living in the xyz industry.” Every tough decision can likely be determined by answering, “is this going to help me remain a viable member of this sector’s working community?”

It is imperative, however, that you figure out your “why” early on. When you do, be proud of it. Shout it from the rooftops for all to hear. Focus on it and work hard to achieve it, sustain it, and become it. But be forewarned: if you begin working with no idea “why” you are doing so, or worse yet, a dishonest version of “why” you are doing so, you will invariably face problems down the line. And when that happens, you aren’t likely to have a true sense of why you are doing what you are doing to guide you out of harm’s way.

Rule #4 – Solving the problem of Co-Founders
February 13, 2007

There is no shortage of talent out there willing to join up in your venture. There is no shortage of talent out there willing to work for free, work long hours, follow your lead, and generally behave exactly as you envision in your minds eye. These talented people will gladly listen to what you have to say and at just the right time, they will bring new and constructive ideas to the table that will make you thankful that you have them on your team.

The unfortunate problem in all of this is there is an even greater number of “dead weight” types that will hinder progress more then if you were entombed in concrete on Mars. These people will resist every suggestion, insist they can complete the task at hand in a better/faster/cheaper way, and generally make you want to jump off a bridge. Even worse, they will suck the life out of your project and thus they will suck the life out of you. And when all is said and done (if it ever gets done), you will not be hoping to enjoy your work or build upon your business, you’ll only be hoping to make enough money that you can either buy them out or they’ll buy you out.

So, how do we distinguish between the flotsam and the jetsam? It isn’t easy, but it can be done. While finding trustworthy, hard-working, team players willing to commit to the company’s greater good is not a science, you can increase your chances of success by following a few simply steps.

  1. Someone has to be in charge. Chances are it’s going to be you since this whole thing was your idea. Fine. That doesn’t mean you’re the big cheese or get to take the executive suite while everyone else bunks together at the Motel 6. Quite the contrary, being “in charge” means you will need to work harder and longer then everyone else. You will have to find ways to motivate and organize your team. You will have to know how to take the good ideas and leave the bad. You will have to manage things when someone gets sick or goes on vacation or decides they don’t feel like working all that hard right now.
  2. Do not bring in anyone as a partner if they have a problem with there being someone else in charge. Yes, group-think is likely going to produce better results and a better product, and everyone should feel that their input matters a great deal. But somewhere along the way, SOMETHING will come up where one person has to make a decision and everyone else will simply have to live with it. Make sure this is clear before you get started.
  3. Do not, under any condition, create a partnership with anyone whose role is to do something you can do yourself. This can not be overstated. Even if you think, “I’ll bring Fred along because I know he’s a hard worker and he can help with activity x and activity y”, you are better off not including Fred if you yourself are adept at performing activity x and activity y. Even if you think that the time and energy saved so you can focus on doing something else is worth the trouble of bringing someone else in, then wait until you have some sort of capital and hire someone to do these tasks. Under no condition should you cannibalize your company unnecessarily by redundently filling positions with co-founders or co-owners.
  4. If you are considering someone to bring in as a co-founder or principal, research their work history like you are hiring them for a job. It does not matter how well you know someone or how excited they were about your idea when you talked about it over margaritas. You are doing yourself (and your company) a disservice if you do not ask for a resume and references. And if they resist providing a resume and references, then perhaps you don’t really want them involved anyway. Far too often we hear what we want to hear with potential partners and our lack of due-dilligence puts us in a bad spot. For example, I have been involved in a partnership with a ridiculously talented software engineer, designer, and site-builder. There would appear to be nothing he can’t do on a computer. However, the three projects he was involved in before I began working with him are unfinished web-services sitting on the internet collecting e-dust. If I had researched his work history a little, I would have known that while bringing his talent on board was still well-advised, it should have been done with a few conditions, including completion timelines. Which leads me to my next point…
  5. Do not simply “give” any part or parcel of your company for nothing. Without question, far too many startups take two or three or four people, divide up company ownership, and get started taking over the world. This is a mistake of the highest degree. All people, regardless of their field or industry, work better when there is a reward directly attached to their efforts and input. Unfortunately, “We’ll launch the site, make lots of money, and everyone will be happy!” isn’t a directly attached reward. Even though you trust your co-founders and know they’ll do their part, you are best off building in provisions that guard against someone not holding up their end of the deal. Any benchmark is worth including, from fundraising obligations to completion timelines to revenue generation milestones and everything in between. The person in charge takes ownership of the provisions, and every one else should be given a fair and reasonable way to earn their part. Invariably, someone will end up working harder then someone else, which will lead to trouble in paradise that could have been solved ahead of time. It is important to explain to your co-founders that this isn’t about them doing work and then being shut out, it’s about them fulfilling an obligation that they are willingly agreeing to. Times will get tough, tensions will mount, frustrations will boil over. These are the moments when having provisions about vested interest built in to your paperwork will allow you to sleep easy at night.
  6. Define EXACTLY what each founders role is to be before you start any work. Think of everything and assign it to someone. Accounting, taxes, development, marketing, sales, public relations and buzz, fundraising, networking, travel, interface design, quality assurance, infrastructure, decorating the office, picking the domain name, choosing how to configure your email addresses. EVERYTHING should be accounted for. Now, that isn’t to mean only one person can do each thing. It does mean that one person is responsible for stewarding that aspect of the business and getting it done. Everyone’s input should be welcomed by that person, but ultimately, that part of the business is up to them.
  7. Give everyone an out. The unfortunate thing is that as time passes, the exact direction of your company is likely to change, even if only a little. However, there is a good chance that while some of the folks involved will love the new developments, some of the folks involved might not. And it’s also possible that the enthusiasm and ingenuity that made the latter group so valuable might disappear. It’s better to build in provisions for people to leave of their own accord as amicably as possible. If a person doesn’t want to work on your project anymore and lacks the drive and motivation to do their best work, you’re company is likely going to be better off without them. Having a “friendly” provision that allows them to leave with no hard feelings will likely make the difference between that person walking out angry and that person spending some time transitioning their work to someone new so nothing is lost.
  8. Give your company an out. While you certainly hope that following the rest of these steps and your natural intuition will keep you from getting involved with the wrong partner, sometimes it happens anyway. As such, you are best off building a buyouy/dissolution piece in to any agreement you make. You can have the buyout be a lump payment. You can have it be the cash equivalent of a variable (i.e. monthly revenues) multiplied by a duration of time. And while the temptation will be strong to “get the best deal” possible out of getting rid of the wrong partner, you’re much better off playing it the exact opposite way; your reward is removing that person from your company structure. Make their payout sufficient enough so they are disappointed that you let them go, not angry that you let them go.  Once again, this will help make any transitions of assets and information much smoother and will keep you from dealing with an angry ex-employee as you move forward with your company.

Finding co-founders is tricky business. Sometimes, people come up with an idea together and it just works for them to work together on that idea. Sometimes, people come up with an idea and the only way it will work is if they call all the shots, right or wrong. Frankly, I would advise against partnerships outright unless you absolutely can not go forward alone. More often then not, they end up messy with friendships, money, or both lost forever. That said, if you are like me and your appetite for technology is greater then your ability to create that technology, you may find yourself with very little recourse but to bring in other people. If so, I advise you be thorough in your deliberations and thoughtful in your decision making.

It is very easy for the wrong people to end up bound to you as partners. It is significantly more difficult to remedy such a situation.

Rule #3 – Good news! Your great idea probably stinks
February 12, 2007

Face it, your idea is probably not that amazing. I’m being serious. Chances are that no matter what idea you have for a product or website or business, it’s not all that amazing in the grand scheme of things and is likely to be equally un-amazing to the huddled masses upon which you will stake your idea’s future. Even worse, there are likely no fewer then 1,000 other people on earth who’ve had the same idea and at least 3 of them are working hard to get it built/deployed/sold right now. Furthermore, the world has gotten along just fine for hundreds of years without you entering the fray with your idea, and it’s likely to get along just fine if you decide to continue sitting on the sidelines.

Don’t despair. This is good news. Heck, it’s GREAT news! Why is it a good thing that your idea isn’t all that great? Because your idea will have very little to do with the eventual success or failure of your venture. In fact, it will have so little to do with the eventual outcome that I’d be willing to bet when it all shakes out, you’ll find that your venture’s biggest assett has nothing to do with the great idea currently residing in your head.

If you haven’t read 37 Signals book “Get Real,” you should do so without delay. They’ve even been nice enough to provide a free version Here. One of the most interesting points comes as they quote Derek Sivers, president and programmer of CDBaby and HostBaby. Sivers breaks down the value of an idea by multiplying it by what I think is a much more important piece of the equation: execution.

Sivers equation:

  • Awful idea = -1
  • Weak idea = 1
  • So-so idea = 5
  • Good idea = 10
  • Great idea = 15
  • Brilliant idea = 20
  • _____________________
  • No execution = $1
  • Weak execution = $1000
  • So-so execution = $10,000
  • Good execution = $100,000
  • Great execution = $1,000,000
  • Brilliant execution = $10,000,000

Multiply one with the other and you can figure out how someone (including you) could calculate the value of your venture. It’s no accident that the values tied to Execution are significantly higher then the values tied to the idea. Execution is that much more important.

For example, Michael Dell didn’t invent the PC (the idea). He simply streamlined the production of PCs exactly like everyone else was making by tightening up logistics and his supply chain (the execution). Result: one of the top computer manufacturers on earth, oodles of money in the bank. Google didn’t create search nor did they create pay-per-click advertising (the ideas). They simply found a way to make the concept of looking for and finding information on the internet easier and found a way to target advertising so it would better catch the attention of customers (the execution).

The examples are near endless. Why do you think there are so many car dealerships on earth? How are there so many auto-parts stores and liquor stores and coffee shops? Looking at it in mere numbers, countless businesses and industries out there have saturated the market….yet they still stay in business and prosper. How can so many companies prosper from the same idea? Execution.

The difference between success or failure (no matter how you define it) is going to come down to how well you execute your idea. That will include constructing it, protecting it via patents and copyrights and whatnot, marketing it to potential customers or clients, utilizing your resources in the right places, seeking out competitive advantages, remaining unphased when competition comes to the market, responsibly controlling your cashflow, and on and on and on.

Proper execution could create a market for ice-machines in Alaska. Proper execution is why 2 out of 3 Microsoft employees use Google instead of their own company’s MSN Live Search. Proper execution is why the Jets “upset” the Colts in the 1969 AFL/NFL Championship game. So take out a big fat magic marker and write it in huge block letters somewhere nearby so you can be reminded every day: “It’s all about EXECUTION.”

As I said earlier, your great idea probably stinks. But the good news is, that isn’t going to matter in the slightest.

Rule #2 – No, you don’t need to raise money right now
February 9, 2007

There is a tendency, especially in tech startups, to believe that adding someone else’s money in to the equation early on will help solve a number of the problems you’re bound to face. Better to be safe then sorry, they say. Angels, VCs, Banks, SBAs, etc. Someone, somewhere is bound to have some cash that can help move your baby from infant to All-Star.

Nothing could be further from the truth. Raising money rarely solves ANY problems, including the ones created by having money in the bank. More specifically, when money is introduced in to things, the temptation to spend money follows shortly thereafter. At this point it’s easy to say, “that would never happen. I’m way too responsible for that!” No doubt you are. Unfortunately, you’re far too naive at this early stage of the game to see the potholes on the road ahead.

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The first thing my partners and I did once we began raising money was establish an office (location), an 800# and 2 phone lines (communication), and purchase some business cards (marketing/more fundraising). We optimistically thought that not only would our product be up and running in no time, but we thought we needed every last one of these things to create a presence and validity to what we were doing with interested parties, customers, current investors and future investing prospects. The only other money we had spent was on registering 4 different versions of the URL we were going to go with. (2 .coms and 2. nets)

The Office: Our office is extremely well-priced for a metro area. We’re 1 block from one of Austin’s busiest intersections and all the utilities are paid. We have 24 hour access and a balcony. Our rent is $250 for 400 square feet, which is a steal of a deal. It’s also $250 a month for something that was not nearly as needed as we thought when we eagerly signed a two year lease.

In hindsight, we should have given greater consideration to the fact that most of the work building our site/product would be done at our programmer’s house since that’s where he was most comfortable and our resources were housed. We also were doing most of our work after 5pm since we all had day jobs. As a result, we usually wanted to meet somewhere to work where there was a reasonable expectation of food, i.e., someone’s house. Our wonderful, affordable, conveniently located office sat empty often for weeks at a time since we had other jobs that kept us away by day, and other comforts that kept us away at night.

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Rule #1 – Get Started. No, really. Get Started NOW
February 9, 2007

Newsflash: everyone has a great idea. EVERYONE. Your Aunt Grettle and the guy at the next desk and the 13 year old paperboy in the neighborhood. All of them have a world-changing idea about a business or product or invention just waiting to make them bajillionaires.

So, why aren’t there more bajillionaires? Aside from the fact that some ideas might not be all that good (more on this later), some wise people would tell you the reason is simple: humans are creatures of habit and comfort and striking out in a different direction then what is conventional is often more trouble then it’s worth. We’re happy – or at least happy enough – with how things are. Changing the direction of the train is too much work once the tracks have been laid.

That’s a bunch of horse-pucky. The real reason there aren’t more entreprenuers is the fear of failure combined with the fear that what we’ll lose along the way – the opportunity cost – won’t be easily redeemed.

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Why Techstbooks?
February 8, 2007

I used to have a cute little blog where I wrote all kinds of clever and quasi-interesting topics.  I ranted about sports, Google, politics, etc.  Then I found that no one was reading it, not even me.  There was no cohesion and no aim.  So I decided to narrow the focus and launch Techstbooks.

What’s the point?  Well, I have been trying to start an online business for the better part of 3 years.  We have found partners, raised capital, built the product, re-built it, been happy together, been angry at each other, had a launch party pre-maturely, run over time lines and burned past our budget time and again.  As a bonus, we still aren’t generating any real revenue because the core functionality of our product – a subscriber service built aroundsearching the databases of a specific sector – is still living in a shade of gray.  It would be easy to call the last three years “an exhaustive education in business and the new economy.”  In fact, that’s exactly what it has been.  I know the pitfalls so well that “if I knew then what I know now” we’d probably be able to go from idea to real launch in 1/10th the time.  But despite these challenges, the product also still has a very real and tangible chance to work,  enthrall users, and make money, which is why we continue to care so much and work so hard to get it right.

So, I decided that while I get to benefit eventually from the site/product paying off, maybe someone out there would care to “benefit” from me sharing the lessons I have learned in the last three years.  Everything you will read here is something with which I have personal experience.  The results I describe are real and happened to actual people (including me) trying their hardest to make something out of very little.

As I say in the little blurb on the right, I can’t code anything and know nothing about databases.  I still use Microsoft Paint to draw pictures and wouldn’t even have a blog without free, idiot-proof software.  If you’re in a similar boat, maybe something I write can help you get started, get moving in the right direction, and avoid the countless landmines that await you on your way to being acquired by Google.

Welcome to Techstbooks.