According to a story from the NY Times this week, in the last quarter of 2007, cell phone subscribers sent text messages more than they used their cell phones to make a call. The story points to a couple of factors leading to the increased texting rate, including QWERTY-style keypads (which make it easier to send text messages), and cell phone packages that bundle texting or offer unlimited texting plans.

While I’m sure that those things are factors, there are two other considerations that I think are at least equally important.

First, there is a stat in the story that is unbelievable (emphasis mine):

Teenagers ages 13 to 17 are by far the most prolific texters, sending or receiving 1,742 messages a month, according to Nielsen Mobile. By contrast, 18-to-24-year-olds average 790 messages.

Call me crazy, but I would have to guess that the unbelievably high number of text messages sent by teenagers is bumping up the stats. Chris thinks that I send a lot of text messages, but when I got rid of my phone last night - which I had for two years - I had only sent 900 text messages EVER. Since the average number of text messages sent per month is 357, according to the study, there are plenty of people who are still sending no text messages, and who are calling a lot more than texting. It’s these young-folk that are bumping up the numbers. That doesn’t make the numbers less true, but it seems worth mentioning.

Secondly, I think cell phone styles are really contributing to the increase in texting. As I mentioned, I got a new cell phone last night. Previously, I had a RAZR, and was really happy with it. This is the new phone that I bought (it’s an LG enV2):

This phone is so easy - and fun - to text on, that I have sent way more text messages in the past two days than I did in the previous month. It’s not only the QWERTY keypad that’s contributing to ease-of-use; it’s also the flip phone keypads, which often are marketed to, and appeal to, young people.

As more and more text services like Cha Cha hit the market, and as the older generations join the texting fray, get ready to see these numbers climb even higher.

In my family, I manage the money. I pay the bills, I collect the receipts, and I balance the checkbook. I think it was my mom who taught me how to do all these things. I have this clear image of her at the dining room table about once a month, using her pencil (always) to balance the checkbook.

Things are different now. Instead of writing a few checks every month and paying cash or straight credit for everything else, Chris and I both use our ATM cards to pay for almost everything. From $4.14 at the Dunkin Donuts drive through to $56.77 at the gas station, we almost never pay for anything in cash. This means that balancing the checkbook has become a much more time-intensive exercise.

For the past two years, I’ve used Excel to manage the accounts. My financial management spreadsheet has multiple tabs for each account, and every receipt, check, and transaction gets entered into one or multiple tabs. This is a huge pain and a major time-sink. I’ve been talking to friends and family about their solutions, and none of them seem to have a better option that would work for me.

So I decided to examine the online personal finance options. The three solutions that I tested were Mint.com, Quicken Online and Geezeo.

MINT.COM
Going in I was most excited about Mint. They won the TechCrunch40 best of show, their online budgeting and money-saving tools look really awesome, and the service is free. I was able to sign up without any difficulty, but when I tried to enter my primary checking account information, the trouble began. I selected my bank from a list, entered my username and password, answered some questions and waited for the service to authenticate.

Error message: Wrong username or password?

After about two weeks of trying to get my account set up with Mint, after changing my username and password twice, I started searching the user forums for information about my bank (Citizens Bank, one of the major banks in the New England area, with more than 1,600 branches in the U.S.). I should have checked there sooner, because the forums revealed a number of threads about Citizens Bank, all with the same theme - it can’t be added. Here are some examples of threads related to this topic and the number of “views” of the threads:

Adding Citizens Bank a No-Go (11,204 views)

Problems adding accounts (27, 252 views)

Official Citizens Bank Support Petition! (10,337 views)

I also received confirmation of this fact from a Mint representative (about a week after I sent in a question via their Web form), that said basically the same thing: Citizens checking and savings accounts are not supported, and we can’t provide the eta for the addition of any bank.

Foiled.

QUICKEN ONLINE
Quicken Online, from Intuit, was the next solution that I tried. I had used the software version of Quicken in the past, and had a good experience. I was able to easily sign up for a Quicken Online account. There is a fee to use the service ($2.99 per month), which is certainly a reasonable amount in order to save myself some of the current money management pain that I am having, plus there is a 60-day free trial to make sure that I like the application before ever paying.

The test came when I tried to set up my checking accounts. Success! I spent some time using the tool, and thought it was easy to use and intuitive.

GEEZEO
Still, I thought I could go for a free solution, so I tried Geezeo. This solution was one that I hadn’t heard of, so when I got to the site I clicked the link to watch the tour. The link didn’t work, there was no tour. And that was the end of Geezeo.

THE WINNER
I have been using Quicken Online for two weeks now, and it’s been fantastic. Dare I say that it is changing my life? It is definitely making managing our family’s personal finances a great deal easier.

Money photo by jenn_jenn

I’m back from my vacation, and it was terrific. Basically, Chris and I spent an entire week having fun and relaxing - and not a bit of work was done by either of us. It was a real vacation!

Of course, I may not have officially been working, but I was on the lookout for business ideas and interesting perspectives on the Internet during my time in Ireland. Only two things stood out:

1) Most ads, billboards and marketing that I saw in the country included a URL, and most of those URLs ended in .ie. I really was surprised at the prevalence of the country-specific domain name usage in Ireland. I can’t be sure if it was just Ireland that uses it’s country code, or if that practice is common across the world, but I definitely expected .com to be more popular in Ireland than it appeared to be, at least in what I was looking at as I drove across the country. This trend (or non-trend) is something that I am going to be watching closely for globalization projects.

2) In Ireland, a widget is related to Guinness, not the Web. In fairness, many people in Ireland probably think of the Web when they hear the word widget. But for us, during this trip, the widget was all about the Guinness.

According to this interesting post by Fred Wilson that I read when I got back from my trip (Why Widgets is the Wrong Word for What We’re Doing), widgets as they relate to the Web may soon be an outdated term (or concept) anyway. But for posterity, a widget is “an object on the computer screen that the user interacts with,” according to Wikipedia. It’s basically a piece of code that can be used on a Web page (or blog) to deliver specific content or functionality to a Web page. (I am not convinced that the widget is going away, although Wilson makes an interesting point.)

In terms of Guinness, the widget is a little plastic ball that is in the canned version of the beer that releases gases to help make the head that Guinness is so famous for. This link provides some very helpful information (and a picture) about the Guinness widget.

I told you I was on vacation and not working, right?

I am getting ready to leave tomorrow for a week-long vacation in Ireland with Chris. We’re really looking forward to it. If there is anything that we MUST SEE when in Ireland, please leave me a comment. I’ve been twice, so I have some ideas, but Chris has never been. The best thing is that after the first two nights in Dublin, we’re free to do pretty much anything the rest of the trip. Once we figure out how to drive, that is…!

I’ll be back in a week, hopefully rested, filled up and ready to write some really creative and interesting posts. Here’s hoping.

In the meantime, I’ll leave you with some relevant posts if you’re interested:

10 Reasons Entrepreneurs Should Take More Vacations
(Today I figured out another item to add to this list. When I go on vacation, it makes me tidy up all my loose ends and finish projects that I have been putting off for weeks - or months.)

Becoming an Entrepreneur & the Things that Inspire Us
(Can’t wait to find all the next adventures and places and people who will inspire!)

Some interesting facts about globalization
(Thinking about the state of Internet business in Ireland - and wondering if I’ll run into any or anyone that’s a part of one.)

Have a great week!

Photo by atomicpuppy68

I have been working more than ever lately, but my blog posts have been scarce. This is no accident. But it is a mistake.

A couple of weeks back I wrote this post about productivity on Tuesdays. That realy got me thinking about my own productivity and what days of the week I am able to get work done. The initial inspiration for the post was this one by Penelope Trunk, which suggested, among other things, that if Tuesdays are the most productive day of the week, we should focus more on Wednesdays and Thursdays to try to make those days equally productive.

So I’ve been trying to consciously think about my productivity. And I have hit upon a great way to make myself productive. The past two weeks I have been picking one major (or difficult) item on my to-do list, and working on it the entire day until it’s done. That way, at the end of the week I will be able to cross five major items off my list. Any time that I have left in a given day, I work on the odds-and-ends that are left. Including my blog.

This strategy has worked great for getting those major projects done. (I finished four last week, one was so big that it took two days.) But the problem is, the other stuff - the everyday work - isn’t getting done. As evidenced by the sparse posts to this blog.

So this week I am going to try a new tactic. I’m going to schedule only 3 major things to get done this week and see if I can get caught up on the rest of my stuff. Because sacrificing my blog in the name of productivity is a bad idea.

This blog may be fairly insignificant in the scheme of things, but as far as my business goes, it has been essential in ways that I couldn’t imagine.

1. I have gotten consulting jobs because of my blog. Multiple jobs. When I hand out my business card, it has my company Website and my blog URL. People usually go to both. When they read the Pure Incubation site, the first question is usually “What do you do?” Followed by the statement “I don’t get it.” This is understandable because what I’m trying to do is uncommon and unusual, and I am trying to be vague on my site until I launch some products. But people get my blog. And my blog gets me jobs.

2. I am more engaged with the business community because of my blog. I don’t live in Silicon Valley, arguably the heart of the Internet Web 2.0 world that I’m trying to play in. But by blogging, and commenting on other people’s blogs (and have them commenting on mine), I am able to get involved in the conversation in a way that I wouldn’t be able to be involved if I wasn’t saying something. This recent post about women technology start-up founders sparked conversation from lots of interesting folks, including two who I really admire: Sarah Lacy, who released her first book last week: Once You’re Lucky, Twice You’re Good: The Rebirth of Silicon Valley and the Rise of Web 2.0; and Penelope Trunk, who I mention all the time in this blog and who is really my blogging idol, if there is such a thing.

3. My family and friends read my blog. Not everyone I know reads my blog, but the people who do have a better understanding of what I’m doing. I talked to my dad last night, and he told me that he follows what I’m up to with my business through the blog. And my Aunt Mary told me that she feels like she is more connected to me because she reads what I’m up to and thinking about at work. I’m glad that my dad and aunt are reading. When I go home to visit this weekend, they won’t look at me with blank stares when I talk about my business and how things are going. I like that.

4. Blogging helps me be more creative. I love writing, I always have, so the process of coming up with a topic and writing about it helps to get all of my creativity churning. I find that the process of writing a blog post often helps me think of new things to work on for my business, and often helps me discover new business models and stuff that’s out there that I wouldn’t otherwise have found - like Gary Vaynerchuk and Wine Library TV. If you’re not watching, you should be.

5. When I write a blog post, things happen. I’ve noticed this past week that my email from random people has slowed down, my traffic stats are a bit stagnant and I feel generally down about my business. This is a normal feeling for entrepreneurs to have on occassion, but I realize now that posting to my blog helps to lessen this. Because when I blog, I reconnect with my community, get support from the other entrepreneurs out there, and things happen. And it’s that thrill of activity that keeps me going when things get hard with the business, which happens all the time.

It turns out that I learned a bigger lesson this week than just the one on productivity - I realized just how important my blog is to my business. So if you have a blog, keep writing! If you don’t have a blog, go get one today. And then check back in three months to let me know how it changed your business (or life). I know it will.

Photo by Editor B

As I write this post, I’m getting ready to go away for a long weekend with Chris (my husband) to visit friends and family in Philadelphia. Anyone who has read this blog for any length of time knows that both of us are entrepreneurs - Chris helped start Spine Frontier a couple of years ago and I started Pure Incubation back in September. It may be obvious from that statement alone, but let me just come right out and say it - we are both insanely busy with our jobs. It is hard to get away for a vacation - even for a weekend - and to take a day off (gasp!) is practically impossible. But we are doing it this weekend.

As I was thinking about leaving, though, all the reasons why we shouldn’t go away kept swirling through my head. And they almost kept us from going (we didn’t book our flights until 5 days ago, for example). So I thought it might be useful to give my fellow entrepreneurs a list of 10 reasons that they should take more vacations. Refer back to this post anytime you are considering going away, but almost back out. Be strong! Take that vacation!

1) You work too much. I have no problem with working hard - or long - but if you are an entrepreneur, it’s likely that you work too much. Like to the point where you aren’t getting enough sleep, exercising regularly or eating well. Working a lot isn’t necessarily the best way to be productive and it’s hard to stop once you’re in the habit. So stop everything for a couple of days, get some sanity back, and you’ll be able to return to the job with a more realistic outlook on work duration - and you’ll likely be more productive during the hours that you are working.

2) New environments spark creativity. Right before I quit my last job, I took a vacation to Arizona. On the trip, we went to visit Taliesin West, the Frank Lloyd Wright school of architecture. I know very little about architecture, but seeing the amazing creative environment that was built at that school was so inspiring to me that I know that I had to leave my job. It opened my heart up again to the creativity that was just dying to come out - and that I could bury in the sameness of my everyday life.

3) You are getting boring to be around. This is happening to me. I meet with friends for a drink or dinner, and they ask me what’s going on, and pretty much the only thing that I have to tell them about is my business. And to me, it’s really exciting and fun and interesting to talk about my work. But I can tell that their eyes are starting to glaze over at times. Going on a vacation will give me something else to talk about - outside of my work.

4) It’s been a long time since you’ve been on a vacation. Admit it - when’s the last time that you took a vacation? A real one. A work trip doesn’t count. If it’s been longer than 6 months, it’s time.

5) You need to reconnect. For me, the trip will be great because I’ll be able to reconnect with Chris. We see each other during the worst part of our days - in the mornings (when I can barely function) and after work (when all Chris wants to do is veg out and recover from the insanity of his day). A vacation is going to give us the opportunity to spend the good parts of our days together - and this is important. Maybe you need to reconnect with your spouse, or your friend, or your kids or your parents - or maybe you just need to reconnect with yourself (solo vacations are highly underrated in my opinion). Invite whoever it is that you’re missing to go away with you and spend the time reconnecting.

6) You need to get out of the house. OK, this one might just be for me. But my office is IN my house, and I can never escape work (or the house). I love where I live, I look at the ocean from my office window, but I need to get outside of these walls. If you work from home, which many entrepreneurs do for a season, you know what I mean.

7) It’s helpful to remind yourself why you’re working so hard. Most of us aren’t working our butts off for nothing. There is usually a dream, a goal, a vision to come at the end of it. For me, I want to be able to travel. So taking periodic vacations reminds me why I’m doing all of this.

8) You need some fresh air. You’re probably working so hard and so much that you spend most of the daylight hours in your office, wherever it may be. You need to get outside, to breathe the air, to have the sun shine on your face. Typically people spend time outside on their vacations, whether it’s strolling through a neighborhood or doing something active.

9) Talking to people in other places will help your business. No matter what your company is doing or building, you have customers that you need to serve. And getting out of your familiar bubble will allow you to talk to people about what you’re doing - and will help you refine your ideas to make sure that you’re serving them better.

10) Vacations are fun. At least, they should be. And if a vacation isn’t fun to you, do something that is. The point is, you need to lighten up sometimes, have a little fun, laugh, joke around, remember that everything isn’t serious and at the point of imminent collapse (which is how entrepreneurs usually feel).

Bonus #11) Your employees want you to go away. (This is for those of you who have employees.) If you ever worked for someone else, you know how it is when the boss is away - there’s a feeling of freedom, of lightness, of relief. As the boss, you may not want your employees to feel this freedom. But it’s important not only for you to get a break, but for your employees to get a break from you. When you get back from vacation, you’ll find that they are refreshed, as well.

Happy travels!

(the pictures here are all from Philly - “Love” by vic15, Dance Philadelphia by my aim is true, Joan of Arc by pwbaker)

Really, I’m sure that Twitter has more than a single problem - most companies/concepts/new technologies do. But I think that the main issue with Twitter is that it will never gain mainstream adoption until there is an easier way to get new people understanding and using the technology - a quick and easy way.

Here are the issues that I think make Twitter so difficult to start using:

1) It’s hard to explain. I have been in a number of business meetings in the past month where the topic of Twitter came up. In one meeting (about social media) the person doing the presentation hadn’t heard of Twitter and everyone in the room looked at me like I had two heads when I brought it up. In another meeting, the president of a content creation company told me that his company “Looked into Twitter, didn’t get it, and figured that it would never have mainstream adoption.” I tried to tell these people why they should care about Twitter, why people telling each other “what they’re doing” in 140 characters or less was important, but they just didn’t get it. And I’m sure that was my fault because I did a terrible job explaining. There MUST be a better way to explain. I think this video was awesome and helpful, but what about when I don’t have a video handy?

2) There is no “key selling proposition.” Lovers of Twitter will tell me that I am crazy, that Twitter is so great because it does so many things for so many people. But I would tell you that to get mainstream adoption, it needs a key selling proposition. How do I get people to use Facebook? I tell them that it’s a low-key way to connect with friends I’ve lost touch with (and I give examples). How do I get people to use Tumblr? I explain how I can link to things and pictures and stories and all the stuff that I find interesting on the Web and that I can set it up in about 1 minute.

I don’t have ONE good way to get people to start using Twitter. Some people say that they get immediate and great input on restaurants when they are traveling. Others say that they use it when they’re lost or to get answers to questions. But I haven’t effectively used Twitter in any of those ways (although I’ve tried). I am not sure if that is because you have to have a certain number of people following you, a certain level of celebrity within the group that is following you, or if you actually need to know the people in your Twitter network, but those uses clearly don’t work for everyone. I am left without a great way to convince everyone that I know that they should use Twitter (and people I know using Twitter would be the one way that the service would actually begin to be extremely useful to me).

3) People sign up and then leave. This almost happened to me. I started using Twitter, had a bad experience, left, came back and managed to stick with it (although I’m hardly a Twitter power-user.) Here’s my embarrassing story:

I started using Twitter on October 18, 2007, with this Tweet: “Joining twitter, trying to figure out how it works” 

My fourth Tweet was this: “There’s never been a better time to do a startup http://www.scribemedia.org/…” Followed quickly by my fifth Tweet: “I should get a tatoo”

Of course, I meant for my fifth post to be connected to the fourth post, but I got tripped up by the 140 character limit. So I quickly went in to try to delete the fifth post and couldn’t - there’s no delete. So then I was horrified because I was trying to establish my professional Internet presence and not only did my Tweet say “I should get a tatoo” but I didn’t even spell tattoo correctly. I quickly made a couple of other posts in hopes of covering up the embarrassing post, and then bailed.

I came back again on January 4, 2008, with this message: “Trying Twitter again. I wish I could get into it.”

My next Tweet: “about to throw twitter out the window. just tried to send a direct message, dont think it worked. grrrr ”

Thank God for @tylerwillis who quickly replied “it worked if it was the one to me.” He might have saved my Twitter life. I kept going.

Everyone was writing about Twitter. I knew that I had to figure out how to use it, but I was struggling. I personally knew only one person who used Twitter. My friends (mostly non-techies) and business colleagues (behind in Web 2.0) weren’t using it. So I started “following” people, just in an attempt to see how Twitter worked. I currently follow 585 people, most of whom I started following on January 4th or 5th.

Then I started getting input from people about how I shouldn’t follow so many people and how I was incorrectly using Twitter. This is a gem that I received that day (via email):

“Saw you follow me on twitter, and you seem really interesting but.. can I respectfully refer you to this document http://www.caroline-middlebrook.com/blog/twitter-guide/ . ( i.e #3). Sorry just telling it like it is :-(

I had no idea what this guy (who I didn’t know) was talking about. I went to the link and this is what the link said:

Twitter Guide Part #3: Using Twitter Properly

So I figured that I made a mistake, that I broke some “Twitetiquette” but I had no idea what. So I wrote my new email buddy back to ask what my issue was. This is what he told me in reply:

“I know from your blogs that you are a top person. intelligent and info source. When I looked at your twitter follow I checked it out and simply you were not someone I would want to follow. … Bottom line, would you want to read and follow your own twitter posts? Maybe you would? …

With twitter you get flooded with feeds and if feeds are pointless crap, then people don’t have the time to follow them, unless they already know and are interested in the pointless crap of that person….

I can only tell you that when I looked at your twitters, you offered me “nothing” of interest.”

OUCH. I was a brand-new Twitter user being shown the door for writing “pointless crap” on Twitter.

I clearly am someone of outstanding stubbornness (or stupidity) because I stuck with Twitter. And I still use it, although not as much as some people. But I have a feeling that this experience that I had, this barrier to entry that was almost impossible to overcome, is probably holding people back from adoption.

When I went through the phase (lasting 2 days) of trying to add a lot of people at once, I had some strategies. One of those was to add all the people named “Melissa.” I typed the name into the search box and found that most people named Melissa have quit on Twitter after joining. Here’s the “Recently” timeframes of the first 19 Melissa’s that show up:

2 days ago
about 1 year ago
7 months ago
11 months ago
about 1 year ago
about 1 year ago
protected
3 months ago
15 hours ago
11 months ago
protected
9 months ago
10 months ago
protected
21 days ago
9 months ago
9 months ago
4 months ago
13 hours ago

If I consider “current” Twitter users as anyone who has sent a message in the past month, and I eliminate the Melissa’s who have protected updates, only 3 out of 16 (19%) are still current users of Twitter. I thought this might be an issue between female/male users of Twitter, so I did the same thing with my husband’s name (Christopher). I found this:

about 1 year ago
5 months ago
3 days ago
8 months ago
10 months ago
19 days ago
protected
2 days ago
20 days ago
about 1 year ago
7 months ago
2 hours ago
about 1 year ago
protected
about 1 year ago
11 months ago
10 months ago
10 months ago
protected

The results were a little better - 5 out of 16 (31%) were recent Twitter users. But in my unscientific study, there is clearly a huge drop off from the number of people who sign up to Twitter compared to the number of people who continue to use the service.

4) The people who don’t use Twitter don’t understand the language of it. Anyone who reads this post who doesn’t use Twitter will not know the following terms and what they mean to Twitter or how to use them:

@mchang16 (the @ symbol is the biggest because it’s all over Twitter, and not intuitive)
Follow
Tweet
Twitetiquette
Recently

Something needs to be done to make it easier to get people to use Twitter, and to get them to stick around to learn how to use (and keep using) it after signing up. If that doesn’t happen, there will be no widespread future for the service.

Follow me on Twitter (if you dare!) @mchang16.

(As a footnote to this story, my email buddy and I became Facebook friends, although he still doesn’t follow me on Twitter.)

There are a lot of things that go into starting a business - fearlessness, dedication, risk-taking, money and perhaps a bit of stupidity. But the number one characteristic that seems to be common in all entrepreneurs is their adaptability - their willingness to change plans and go in a different direction when needed.

In her blog today, Penelope Trunk wrote that it really isn’t possible to know if your idea for a start-up is any good. I agree with her. And I believe that this is the reason that founders need to be so adaptable. If you don’t know if an idea is any good before you start, it’s highly possible that along the way you might find out that it isn’t that good. Or that there is a better idea. If that happens (and it often does), you need to be willing to make a change, and quickly. “Founders need to be adaptable,” says Jessica Livingston, author of the book Founders at Work. “Not only because it takes a certain level of mental flexibility to understand what users want, but because the plan will probably change. People think that startups grow out of some brilliant initial idea like a plant from a seed. But almost all the founders I interviewed changed their ideas as they developed them.”

Yesterday, Chris came home from work and told me that his company received their third FDA approval. This is a big deal in the medical device industry because it’s the point when a company can start marketing and selling its products (i.e. making money). I started to congratulate him but he told me not to bother. It turns out that after they had sent the application for approval, the designers discovered a flaw, so they are already working on version 2 of this device. Although they got the approval, the product is essentially going to be tossed out. He didn’t seem too phased. “Things change,” he said.

This flexibility is something that I’m working on as a key component of my start-up. I have to be flexible since a core part of my business model is starting a lot of businesses at the same time, some of which will not go as planned. At my first board meeting, one of the board members suggested that I start a software company as one of my launches for Pure Incubation. This wasn’t one of the original plans, but it seems like a good idea - possibly even a great idea (no one knows for sure yet!) - so I’m going to be flexible and incorporate that business idea.

Here are some other stories from the people profiled in the book Founders at Work:

“Over the years, I’ve learned that the first idea that you have is irrelevant. It’s just a catalyst for you to get started. Then you figure out what’s wrong with it and you go through phases of denial, panic, regret. And then you finally have a better idea and the second idea is always the important one.” - Arthur von Hoff, cofounder, Marimba

“We built this app for the Palm Pilot, which was getting pretty good growth. We were getting 300 users a day. Then we built a demo for the website, which was functional, so you could do everything on the website that you could do on a Palm Pilot, except the website was unsexy and we really didn’t care. It was like, ‘Go to the website and download the Palm Pilot version. It’s really cool.’…Sometime by early 2000, we realized that all these people were trying to use the website for transactions, and the growth of that was actually more impressive than the growth of the handheld device, which was inexplicable because the handheld device one was cool and the website was just a demo…We had the moment of epiphany, and for the next 12 months just iterated like crazy on the website version of the product, which is today’s PayPal.” - Max Levchin, cofounder, PayPal

“I came up with the idea to do a simple-to-install database at the back end. Then you’d use the browser as the front end. It could store any piece of information at the back, but the browser would be used to display it…So I wrote a business plan and didn’t know what to do with it…I knew Jack and knew that he was a great software and hardware engineer. So I shared this idea with him…While we were putting the business plan…together and were working at FirePower Systems, they installed a firewall around our corporate intranet that prevented us from dialing out to our personal email accounts. I had an account at Stanford and Jack had one at AOL, so we would dial out and email each other. but we couldn’t do that anymore because the firewall prevented us from accessing our personal accounts. So we ended up exchanging information on floppy disks and on physical pieces of paper. That’s when it occurred to us, ‘Wait a minute, we can access any website in the world through a web browser. If we made email available through the web browser, that would solve our problem.’ ” - Sabeer Bhatia, cofounder, Hotmail

“Entrepreneurs have to keep adjusting to…everything’s changing, everything’s dynamic, and you get this idea and you get another idea and this doesn’t work out and you have to replace it with something else. Time is always critical because somebody might beat you to the punch.” - Steve Wozniak, cofounder, Apple Computer

“[Our original idea was not just a DVR.] It was this flamboyant, home server network thing. And we actually got funded based on that. When we got into the technology, we realized, ‘Hey, network technology isn’t quite there yet. The idea of a server is fine, but how do you explain it to the average consumer?’ We learned very quickly that this was going to be a hard sell and a hard thing technologically…We went back to the VCs and said, ‘Thank you very much for the money. We’ve changed our minds. Here’s what we’re going to do and here’s why we think it’s a good idea.’ ” - Mike Ramsay, cofounder, TiVo

“Flickr was kind of a lark. It was a side project that we built while we were in the process of building Game Neverending. The back-end development of the game fell really far behind the front-end development, and so while we were waiting for the back end to catch up - being restless hacker types - we built this sort of instant messenger application in which you could form little communities and share objects. And we just added the ability to share photographs. So Flickr started off as a feature…Eventually, we had to put the game on hold and stop development on it because Flickr was really taking off.” -Caterina Fake, cofounder, Flickr

What do you think? What’s the most important personality trait of an entrepreneur?

Photo by Redvers

One of the biggest issues with starting a company - and keeping it running - is finding the cash to stay in business. Even if you work hard at saving money, only spending on the things that are necessary, it is fairly likely that there will be a time when you need more capital.

I am still in the early stages of my start-up, and only have first-hand experience with angel investments, but the following is a rundown of the common ways to raise money for your start-up. Once again, I’m drawing heavily on the stories of the entrepreneurs from Founders at Work by Jessica Livingston for the quotes included here.

The good news for anyone who has limited resources when starting a company is that entrepreneurs seem to agree that this can be a good thing. The need to conserve resources often leads to creativity, hard-work, and a drive to succeed that can be missing when money is available and things are easier and more comfortable. So the first piece of advice when you’re thinking about raising money is to make sure that you really need it before going after cash.

“One of the things we’re seeing that we really don’t care too much for is that way too many companies are taking money when they don’t need it. And the whole idea we had was that having too little money is a great way of getting great product because it’s a way to get focused.” - David Heinemeier Hansson, partner, 37signals

“The money was scarce, but I’m a big believer that constraints inspire creativity. The less money you have, the fewer people and resources you have, the more creative you have to become. I think that had a lot to do with why we were able to iterate and innovate so fast.” - Caterina Fake, cofounder, Flickr

“I really liked the discipline that came from a bootstrapped startup. I think that everybody that goes and does a startup - even if they don’t do a major startup that way - should start a business that is having to make people happy with them day one, through contracts, through small scale sales, whatever it is. How low can you go? How can you build something really inexpensively? How can you not spend money on furniture and matching carpet and those sorts of things?” - Brewster Kahle, founder, Internet Archive/Alexa Internet

“The advice I would give is to avoid [raising money]. I would say spend as little as you can, because every dollar of the investors’ money you get will be taken out of your ass - literally in the sense that it will take stock away from you, but also the process of raising money is so horrible compared to the other aspects of business. You can’t work your way out of it like you can with other problems. You’re at other people’s mercy.” - Paul Graham, cofounder Viaweb

“I think in general being overcapitalized is a path to failure. The VCs want you to spend. There are general ills with being overfunded.” - Joshua Schacter, founder, del.icio.us

1) Use your own money
In my opinion, this is the best way to fund a start-up if you have the capital to invest. Not only will this ensure that your decisions are not controlled by outsiders, it will also guarantee the highest percentage of profit if you sell. It’s also incredibly motivating if your own money is on the line every day. Of course, if you don’t have extra capital and you’re trying to self-fund, that can be a painful process of skimping and saving every dime - as well as living day-to-day with poverty and uncertainty. So this is probably only a viable option if you have significant personal wealth, or have put money aside in savings.

“There are pros and cons to taking money. The best kind of company is one where you don’t have to take any money…I funded the first few years myself. But eventually, I took some money from Mitch Kapor and then others. Not so much because I needed it at that point, but because I knew that, ultimately, you cannot accomplish something completely on your own. You really need to develop a network of people who win when you win.” - Ray Ozzie, founder, Groove Networks

2) Get a loan
There seems to be a general sentiment that small businesses and start-ups are not able to get bank loans. The truth is, there are loans that are earmarked for small businesses. Bank loans can require collateral to secure them, however, and the terms make all the difference in the world, so be sure to read the agreement closely.

“We lucked out and got an interest-free loan from the Canadian government. We’d applied for it, and gotten rejected, and then just sent the same application in again when it was open again, and much to our surprise, we got it.” - Caterina Fake, cofounder, Flickr

3) Apply for grants
From the research I’ve done, it appears that the United States government does not have any grants for small businesses owners, but there are state-based grants available. This list from About.com includes links to the state-based programs. If you’re based in Canada or elsewhere outside the U.S., you may have more luck finding government grants.

“We heard about these government programs, and we started applying for them. It was a lot of work to actually apply for these things, and then it was a lot of paperwork to maintain them. In the early days, they weren’t really big grants. They were rather small, and sometimes you wondered if it was worth all the trouble. But it was very helpful when we needed it. As you become experienced, and as the government agencies that we were working with became comfortable with what we were doing and recognized that we were onto something, the grants became more interesting.” - Mike Lazaridis, cofounder, Research In Motion

4)Put it on your credit card
While it can be difficult to get a bank loan or a government grant, most small business owners (depending on their personal credit histories) are able to obtain some kind of business credit card. The typical issues related to spending on credit apply, with the biggest concern being that the business will fail leaving the entrepreneur with a huge credit card bill to pay off. According to Joe Knight, co-author of the book Financial Intelligence, in a BusinessWeek article, “the worst thing in the world is to have your business fail and be stuck personally with $50,000 in debt at 21% interest.”

“There are more choices nowadays for people - angel money, for example. And many things are much less expensive to do now. You can go further on your credit card than you could before. I want entrepreneurs to make informed choices when it comes to financing. Understand what the impacts and implications are for different financing options.” - Mitchell Kapor, cofounder, Lotus Development 

5) Get consulting work or side jobs
This suggestion is something I covered in an earlier article about how to save money on your start-up. It’s a popular way for flexible start-ups to get some extra cash - money earned from side projects assigned to the company or one of the start-up founders can then be used as an infusion of cash for the business.

“The first year was entirely self-funded. It was just doing this work mostly for HP. HP basically funded Pyra for the first year, unbeknownst to them, because at the time you could charge a decent amount of money for doing pretty simple web application development. If one of us was working on that full-time, it would pay for three of us (not that we were paying ourselves much).” - Evan Williams, cofounder, Pyra Labs

6) Find angel investors
Angel investors are typically wealthy individuals who use their own money to fund a start-up in exchange for repayment of the investment (with interest), or a percentage of the company or both. Angel investors are often friends, family members or previous business partners or associates - or people who are in the start-up founders’ extended network. (This is a good reason to start networking now!)

Angel investments provided me with the initial funding for my business, and angel money has been an excellent way to make sure that I have the capital to fund my start-up, while at the same time having the flexibility to work on a variety of things in different markets without too much outside control. This is how Chris’ company is funded, as well, and it is an increasingly popular way to fund companies, especially in high-tech.

“We all tried to get $3,000 from each of our parents, and five of the six parents put up, so we had $15,000. After graduating, three of us lived in one house in Palo Alto, and three of us lived in another. We set up shop in the garage of the house that I was living in. It was the classic setup. My parents came up and they saw the garage and wound up buying us some nasty carpet. The tables were all Formica. I won a fax machine at Office Depot. We stole our chairs from Oracle Corp.” - Joe Kraus, cofounder, Excite

“We were very encouraged that the angel investors wanted to invest. We gave demos to two investors. We only wanted to raise $50,000, but both of the investors who saw the demos said yes. So we thought, ‘All right, we’ll raise $100,000 then, since they both said yes.’” - Paul Graham, cofounder, Viaweb

7) Take on venture capital
For me, and for most of the founders featured in the book, venture capital is the type of money that is surrounded in the most mystery. Typically, start-up founders don’t understand venture capital or how it works until they go through a funding round with the venture capitalists. There is also a great deal of fear surrounding the idea of working with venture capitalists, and often a great deal of resistance to taking money from them. However, for companies that need a lot of cash to see their idea come to life or to push them to the next stage of growth, venture capital can be a good option.

“Once you start down the treadmill of taking venture capital, it’s ‘How many rounds before people give up on your or you have a positive exit event?’ So you’re really setting yourself up. The best by far is to structure it so that you don’t have to take money.” - Ray Ozzie, founder, Groove Networks

“We took no investments because there were so many horror stories about what VCs would do to you. ArsDigita was the most public one, obviously, of kicking out the founders and then mismanaging the company and bringing in the so-called professional management.” - Joel Spolsky, cofounder, Fog Creek Software

“We didn’t have any desire to take money. We had heard all these horror stories about people receiving venture money, and even though we didn’t think we could have the aspirations to be something huge, we certainly didn’t want to crash and burn because we took money when we shouldn’t have. And we didn’t know anything about it. Are you supposed to pay them back? We didn’t understand that investors put money in and they own a part of your company. All we had heard were bad things that happened, and we didn’t know why.” - Mena Trott, cofounder, Six Apart (they eventually did take VC money)

“It’s one of those things where, if you look back now, when everyone walked away with a ton of money, everyone loves everyone. We had this great time, etc. It’s generally more complicated than that where, when the company is doing well, they’re happy and they think they’re great. The company’s not doing well; they’ve overpaid and they’ve been too nice. It’s half and half.” Max Levchin, cofounder, PayPal

“Then we found one venture capital firm, Brentwood Venture Capital. Jeff Brody, a VC there, saw it and he thought it was great. He said, ‘We want to invest.’ And they were prepared to put in $4.5 million…It was great, since we were plumb out of money. I would have lost everything; my house; I would have been deep in debt; the company would have folded; it would have been a bad scene.” - Steve Perlman, cofounder, Web TV

The next article in this series on start-ups will talk about one of the key attributes of an entrepreneur - the willingness and ability to change plans quickly, and to adapt to outside pressures and influences.

As a rule, most start-ups are short on cash and want to spend as little money as possible to give their business enough runway to take off. But there are some times that it doesn’t make sense to bootstrap because it may do more harm than good.

Here are the five places to spend money on your start-up to give you a better chance at success.

1) Get a good bookkeeper or accountant. This piece of advice doesn’t apply if you are a bookkeeper or accountant, but I am not. Having a good bookkeeper is worth every penny. I love - no, I adore - my bookkeeper. Not only is she helpful in getting my budgets together, paying all my bills and cutting checks to all my contractor’s, but because of her past experience, she also has been able to help me with a number of other start-up issues, such as opening a bank account, wiring money overseas, setting up an LLC, registering a DBA, and a number of other business issues that it would have taken me hours to figure out how to do without her. Some people are able to find this experience and expertise elsewhere - with a business partner or advisor, for example - but it’s incredibly valuable to have someone on your team that has done the paperwork before. It will save you hours of work and will keep you from making costly mistakes.

“One of the hassles of ONElist was that I was the one managing the books the first year, as well as answering the 200 support emails every night, as well as doing all this other stuff. I guess I’m torn with how cheap do you want to go with a startup. Having an accountant is kind of a nice frill.” - Mark Fletcher, founder, Bloglines

“One [of the biggest challenges starting a start-up] is, in general, not knowing what’s ‘normal.’ Investors hand us ‘normal’ term sheets, consultants ask for ‘normal’ fees. I’m 21 - I haven’t seen enough of the extremes to know what’s normal.” - Blake Ross, creator, Firefox

“We knew what we knew, which was the product. But there were all these little things that you just have no clue about. It was incredibly overwhelming.” - Mena Trott, cofounder, Six Apart

2) Hire a great lawyer. Do not try to save money on a lawyer. A great lawyer will keep you out of trouble and out of court (which kills a lot of start-ups before they can ever gain traction). A lawyer will also help you when it’s time to raise money or sell your business. Spend money here - it may seem like a waste or too big of an investment, but it’s well worth the cash.

“They’d put in a right of first refusal. Since I was a young entrepreneur at the time, I didn’t understand that this basically meant that you couldn’t go to any other VC…We didn’t have a very good lawyer back then.” - Sabeer Bhatia, cofounder, Hotmail

3) Hire employees with special skills and experience. Stick with contractors vs. full-time employees as long as possible, but when you are hiring, it’s worth a little extra money to get someone who has the special skills and experience that you need. For example, I need a series of reports written in SQL Reporting Services. This is a customized list of reports, I know someone who has written these types of reports in the past, and I am going to hire her to do it for me again, even though it might cost me a little more than a rookie SQL programmer. I am willing to pay her extra because I know that she is good, and she won’t have to spend a lot of time making mistakes and fixing them (because she’s already made her mistakes in the past). Chris hired someone to handle his company’s regulatory issues with the FDA - and he spent a little bit more to get someone who had previous experience working with that particular government agency, which just might help get their products through the FDA pipeline a little more quickly. Plus, the inside knowledge of how the organization works will save them hours of time in preparing documents and submissions.

“The difference in almost any position between someone who does a good job and someone who does a great job might be 20% more in salary, but it’s 100% or 200% more in throughput. If you can have enough people in the company that work twice as efficiently as the person sitting next to them, because they just know what to do, what not to spend time on…It’s just, hey, you give this engineer a task, and it’s just done right in half the time as the next person.” - Stephen Kaufer, cofounder TripAdvisor

4) Splurge on occasional perks that make a difference. Sometimes small splurges can make a huge difference in the company’s culture, and are worth every penny. For me, that means something as small as taking people out to dinner (with their families and significant others) to celebrate whenever we hit a big milestone, to thank them and to mark the occasion. Chris’ company, at a recent conference in Jamaica, instead of getting each employee an individual hotel room, rented a villa (for just a bit more money) that came with a private cook, housekeeper and butler. The experience that we had on that trip far exceeded what it would have been if we didn’t have authentic, home-cooked Jamaican breakfast every morning. The extra cost was worth every penny.

“We were very frugal and we didn’t spend money on frills, but after the IPO there was a really bad time for Marimba when it was very difficult to hire people, and all the early people that had been there 3 to 4 years were starting to leave. Morale was very low, and so I went to the CFO and said, ‘Look, I want to buy an espresso machine.’ And he said, ‘No, we can’t do that, it’s too expensive.’ A few weeks later when another senior engineer quit, I said, ‘Screw it, let’s buy an espresso machine.’ So Jonathan and I went online and bought this super-duper Italian, fully automatic, $15,000 espresso machine on his credit card and submitted the expense form. The CFO almost had a baby…They came and installed the espresso machine and it was the best money we ever spent. Every morning, people would meet and crowd around it…people loved it, they couldn’t stop talking about it. A month later, the CFO came and said ‘I’m sorry, we should have done this years ago.’ And it tells you something about where you spend your money and what you spend your money on. It’s not just business-related expenses. You also have to create an environment that you like so that people are happy and feel they are valued.” - Arthur van Hoff, cofounder, Marimba

5) Spend when it will accelerate the business. The first four months of my start-up, all my Web sites were running on a hosted server that cost about $40/month. Low-cost, low-bandwidth - and I didn’t need anything more than that. Shortly, I will be rolling out a Web application that will need a more robust server environment, so I splurged on getting my new servers set up well ahead of time. I started paying for the servers in January (I likely won’t be using them full-power until March), but having the extra time to set up and test and move all my existing sites will allow my business to hit the ground running when the application is finally delivered.

“I wouldn’t recommend [skimping on hardware sometimes]. We often had to replace stuff we bought because we had been so worried about costs.” - Mena Trott, cofounder, Six Apart

“As you’re growing…what I tried to foster here is an attitude of risk-taking, where all I want to know really is what’s my downside scenario in terms of time and opportunity cost?…If the amount of time spent making a mistake is small, don’t be afraid to make a lot of mistakes without a lot of time analyzing whether you should or shouldn’t do it. On the Web, it’s particularly easy to try something and get feedback. If it doesn’t work, drop it.” - Stephen Kaufer, cofounder, TripAdvisor

Eventually, even after a combination of saving and spending, start-ups often get low on money and need to look for additional funding. Next week, I’ll talk a bit about where start-ups can get cash, and the pros and cons of each option.

All of the quotes in this article are from the wonderful book Founders at Work: Stories of Startup’s Early Days, by Jessica Livingston.

Money photo by luismi1985
Victoria Arduino Venus Century Espresso Machine, $19,932.00.