Posts Tagged ‘Founders at Work’

Starting a company and being an entrepreneur

Tuesday, February 26th, 2008

Founders at Work book coverThe past couple of weeks I have been doing a series on starting companies and being an entrepreneur. These posts are all based on the book Founders at Work: Stories of Startups’ Early Days, by Jessica Livingston. If you haven’t read the book and you either have a startup or are planning on starting a company, I highly recommend it.

Here’s a summary of the posts:

Getting started

- How to get over the fear and start your own business
Four hurdles to jump after starting a business

Money issues

- 5 ways to save money on your start-up
5 places to spend money on your start-up

7 ways to raise money for your start-up

The successful entrepreneur

- The #1 most important personality trait of an entrepreneur
10 less-than-great personality traits of entrepreneurs

10 less-than-great personality traits of entrepreneurs

Monday, February 25th, 2008

Number 10While the most important trait of an entrepreneur must be his or her flexibility and adaptability, it’s also true that people who found start-ups often have some less-than-stellar qualities that help them be successful in their ventures.

Here’s a look at 10 qualities that some entrepreneurs share that may help them be great at starting a company, but not so great at existing in normal society. The quotes below are all taken from Jessica Livingston’s book, Founders at Work.

Entrepreneurs are…

1. Paranoid – “Distrust of others, sometimes reaching delusional proportions.” Sometimes founders have a good reason to be paranoid; other times, they are worried for nothing. But most founders are a little jumpy.

“[We were afraid] they would copy us, or what if they just shared this idea with Netscape? Or shared it with anyone else. You have to realize that in those days we had nothing – just the idea…There was not much to protect in terms of IP. Whoever built it first would win the market. So we were afraid and that’s why we kept that as the secret.” – Sabeer Bhatia, cofounder, Hotmail

“We worried about competitors, but it was an unreasonable fear. As a friend once pointed out, most gunshot wounds are self-inflicted.” – Philip Greenspun, cofounder, ArsDigita

2. Self-promoting – Since many founders are working alone or with small teams, they have to be their own biggest fans.

“After I sent out that first email, I went rollerblading around a big office park where Tellme was based. I went up to a random guy and said, “Hey man, have you checked out hotornot.com yet?” He said, “No, what’s that?” I said, “Dude, just go check it out!” Then I went home and watched our logs for Tellme and saw a hit come in 10 minutes later, and then more hits kept coming from different people within Tellme.” – James Hong, cofounder, HOT or NOT

3. Delusional – “Having an unshakable belief in something untrue.”

“I just remember the general feeling that there was very little to risk…Of course, all that is false; there’s a lot of risk and you are never fully equipped.” – Ann Winblad, cofounder, Open Systems

4. Insomniacs – Most founders will admit to a general lack of sleep and an overwhelming feeling of exhaustion at various stages of their company’s inception.

“We were just working around the clock, literally. What I would typically do is not sleep for 2 nights, then I would get 4 hours of sleep and go back to work for another 2 days in a row, and then get 4 hours, and so on. It was the hardest I’ve ever worked in my life. Sometimes I’d take 10-minute cat naps by just laying my head down on my shoulders – just so I’d get some REMs. As soon as the dreams would come, it resets your brain a little bit and you’re able to work again. We were sleeping at our desks.” – Steve Perlman, cofounder, WebTV

“As I was getting interviewed by the Wall Street Journal, or some big pub guy, all I remember was that he went off to the bathroom for a second, and they brought out my omelet. The next thing I remember, I woke up, and I was on the side of my own omelet, and there was no one at Buck’s. Everyone was gone. They just let me sleep.” – Max Levchin, cofounder, PayPal

5. Filled with visions of grandeur – Nearly all start-up founders think that they are going to have a huge impact, that they are going to change the world. Otherwise, why would they go through this hell?

“What held people together was the belief that you’re really going to change the world. I think that’s the nature of many startups. You believe that what you are doing is going to have a dramatic impact. You might not exactly know how, but you really have a belief. That keeps you going and going through many changes and a lot of uncertainty.” – Ray Ozzie, founder, Groove Networks

6. Stubborn – “The quality of being inflexible.” When you found a company, not everyone is going to agree with you along the way. Not only do you have to be too stubborn to go along with them, but you also have to be too stubborn to quit.

“I think one of the things that kills great things so often is compromise – letting people talk you out of what your gut is telling you. Not that I don’t value people’s input, but you have to have the strength to ignore it sometimes, too. If you feel really strongly, there might be something to that, and if you see something that other people don’t see, it could be because it’s that powerful and different. If everyone agrees, it’s probably because you’re not doing anything original.” – Evan Williams, cofounder, Blogger.com

7. Tall-tale tellers – Most founders wouldn’t call themselves liars, but most have, well, stretched the truth from time to time to make their companies seem more established.

“If anybody ever did want to come and visit us, we pulled all kinds of tricks to make ourselves seem more legit. When that first giant company wanted to buy us and sent people over to check us out, all we had in our so-called office was one computer…So we borrowed a few more computers and stuck them on desks, so it would look like there was more going on.” – Paul Graham, cofounder, Viaweb

“I met with 43 VCs…I remember saying to them, “Look, in 4 years, we’ll be doing $18 million in revenue with $4.5 million of profit. After that, the sky’s the limit I’m an ex-venture guy; I’m telling you the truth. We can get to $18 million in year 4, and 30 times $4 million is a $120 million valuation for the company at that time.” They all told me $18 million wasn’t interesting. And I’d say, “But most people will tell you $50 million, and you know they’re lying. I’m already discounting it because I’m a venture guy just like you are.” And they’d say, “Yeah, but $18 million just isn’t interesting.” So I changed my spreadsheet to say $50 million. And they said, “OK, that’s pretty interesting.” – James Currier, founder, Tickle

8. Obsessive – “Excessive in degree or nature; fixated.” This is the personality trait that leads entrepreneurs to spend hours and hours and hours and hours on the contemplation of one tiny problem. This is also the quality that can lead to incredible products.

“You have to be very diligent. You have to check every little detail. You have to be so careful that you haven’t left something out. You have to think harder and deeper than you normally would…It has all these kinds of things and not one bug ever found. Not one bug in the hardware, not one bug in the software. And you just can’t find a product like that nowadays. But, you see, I had it so intense in my head, and the reason for that was largely because it was part of me. Everything in there had to be so important to me. This computer was me.” – Steve Wozniak, cofounder, Apple Computer

9. Dirty – “Filthy.” This is often a result of sleeplessness, obsessiveness and stubbornness.

“My admin…tells stories about coming in in the morning and trying to clean up. She’d pick up a folded pizza box and get scared because she’d find a guy sleeping underneath it – it was covering his face. It was really bad. My dog, when my wife would bring him over, he would find burritos, because the place was just a pigsty.” – Steve Perlman, cofounder, WebTV

10. Moody – “Given to frequent changes in mood, sulky, temperamental.” I define this as the day-to-day changing of emotions and state of mind, often based on absolutely nothing.

“You wake up one morning and you feel great about the day, and you think, “We’re kicking ass.” And then you wake up the next morning, and you think “We’re dead.” And literally nothing’s changed…It’s completely irrational, but it’s exactly what you go through.” – Joe Kraus, cofounder, Excite

Photo by psd

The #1 most important personality trait of an entrepreneur

Friday, February 22nd, 2008

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.”

Changed priorites ahead signYesterday, 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

5 ways to save money on your start-up

Thursday, February 14th, 2008

After you’ve made the decision to start your own company, and have gotten past some of the early emotional hurdles, the next issue that comes up is usually money. Specifically, how you can you use the money that you have – which is usually limited – and make it last as long as possible. In fact, when Jessica Livingston asked the founders that she interviewed for the book, Founders at Work, about their advice for would-be entrepreneurs, it was often “spend as little as possible.” (All the quotes that are used here are from that book.)

Here are five great ways to save money with your start-up:

1) Take as little salary as possible. When I quit my job to start Pure Incubation, I took a huge pay cut. I didn’t go salary-free, but Chris and I came to an agreement about the lowest salary I could take so that we could still afford to live the lifestyle that we wanted. I still take trips, I still eat out, but we have cut back in a lot of areas. Some people are even able (and willing) to not take a salary at all. Obviously, if you can go this route it’s ideal. Overhead costs from salaries often are a huge burden to businesses, and the lower the salary you take, the longer your money will last.

Some people aren’t able to take such a huge pay cut, so they keep their day jobs. This works for some people, who either don’t work long hours, have a job that isn’t very demanding, or don’t need to put in a ton of hours to get their business off the ground, either because they’re patient, or their business/idea isn’t time-sensitive. This is a great way to keep your salary down if you can do it – essentially, you’re being paid by the company for which you’re working 9-5, which is helping to support your start-up.

“We were…both working, so we decided to spend all of the time on the weekends and evenings building this product. Then it came to a point that one of us had to quit our job to focus full-time on it, so I told Jack, ‘I’m single and don’t have a family. Why don’t you quit and start working on this and I’ll give you half of my salary?’ So at least he could support his family. I didn’t need that much money.” – Sabeer Bhatia, cofounder, Hotmail

“Initially we put in a little bit of money, I think $25,000 each. If you don’t take a salary, that can last you a long time.” – Arthur van Hoff, cofounder, Marimba

2) Don’t get traditional office space. I live in a two-bedroom apartment. It’s a great apartment, second floor, ocean view – and it’s plenty of space for me and Chris. When I first started thinking about starting a company, I was planning on setting up shop in our second bedroom, which is where Chris worked when he was starting his company. But as I looked at the space, I realized that I wouldn’t be happy in that room. So I got a new desk (from IKEA, definitely don’t spend a lot of money on office furniture!) and it matched the rest of the house well enough that I could set it up in our sunroom – the view from my office is of the ocean and I love “going to work” every day.

Front porch officeIf you have a space in your house that you use for your office, do it. After overhead, the next biggest cost of business is often office space – and renting office space is like throwing money out the window. If you work with other people, see if they can work from home, too. Use IM, email and phone calls to communicate, and have meetings at your local coffee shop or at your dining room table.

If you must be in the same location, find as inexpensive a space as possible. When Chris got his first office, it was a tiny little space that cost about $400 per month in the Cummings Center, a converted shoe factory in Beverly, MA. But the great thing about that space is that there are hundreds of other office spaces in the building, so when he outgrew the space (which happened quickly), he was able to transfer the lease to a bigger office. The other great thing about the Cummings Center is that it’s close to the commuter rail, so when he needs to hire more people, he can look in Boston, as well as the outlying communities for talent.

“[We worked] in Robert’s apartment. His housemate was away that summer, and I moved into his room. Robert used to get up early, whereas I stayed up till four and got up at noon. So we would kind of work a 24-hour schedule.” – Paul Graham, cofounder, Viaweb

“We had a friend who was subletting a space, and he had a contract job that kept him out of the office all the time, so we sublet his subletted space. This was in 2002…there were failed dot-coms all over the place, so office space was cheap.” – Caterina Fake, cofounder, Flickr

3) Hire contractors vs. full-time employees. There are many reasons to start off hiring contractors vs. full-time employees. For one thing, contractors usually expect to work from home (allowing you to forgo the office space), and they often have their own equipment. Employers aren’t expected to pay for healthcare or 401k costs for contractors, and if you hire a contractor and they aren’t doing a good job, you can fire them without paying a severance or feeling completely terrible since contract work, by its nature, isn’t permanent. Chris’ first full-time hire didn’t end up working out, so he had to let her go, and it was one of the most traumatic things that he had to do in the early days of his business. He didn’t sleep for a week, and they ended up paying her a month’s salary in severance (mostly out of guilt, I think). Since then, he’s started hiring contractors and moving them to full-time when he’s ready.

I’m currently working with about 20 contractors. I’m the only full-time employee, but I am still able to get everything done, and I don’t have the worry about overhead depleting my bank account. And if there is a month when money is tight, I can cut back on contractors. Plus, often when you’re starting out, you don’t need 40 hours a week of a specific skill set – or if you do, it’s a temporary thing that will end after a project is complete. It is only when your business is at a point when it needs a dedicated 40 hours per week committed to a specific task or set of tasks that it’s time to hire a full-time employee.

“One of the things that I did…with Bloglines was rely upon an outsourcing site, in this case eLance, for a lot of things…So, if I wanted to put together a presentation and I needed a couple of graphics, I put up a proposal on eLance and ended up working with some lady in Australia who turned things around in 6 hours, for $50. So sites like that are so amazingly powerful, which is just one more reason why it’s really easy to do very small companies, because you don’t need a graphic designer necessarily.” – Mark Fletcher, founder, Bloglines

Save money sign4) Cut back on everything you possibly can. The other places where you can really save money will be different for every business. For me, I have kept expenses down by taking a chance on some less-experienced writers and designers who are working on building some of my sites and writing content. When I need a stellar design that only someone with vast experience can pull together, I’ll hire that person – but until then, I’m comfortable with getting my business cards designed professionally for $150 and printing them out at Staples (on high-quality card stock, of course). Other people find other areas to save.

“Do everything as cheaply as you possibly can.” – Paul Graham, cofounder, Viaweb

“Reduce. Do as little as possible to get what you have to get done. Do less of it; get it done.” – Joshua Schachter, founder, del.icio.us

“Even if you raise money, spend it as if it’s your own and you have none. Your organization has got to remain smart and lean. Be cheap. There’s no shame in being cheap. I still fly coach.” – James Hong, cofounder, HOT or NOT

“We basically sat in the garage coding for around 18 months. In retrospect, it was really fun…It got cold in the garage and we didn’t have a heater, so we would use the dryer for heat. We’d tape the little button down that made it run with the door open.” – Joe Kraus, cofounder, Excite

5) Take on some contract work. This isn’t exactly a money-saving strategy, but it is a way to build a little extra cash, which amounts to the same thing. I have been offered a number of contract projects since starting Pure Incubation, most of which I’ve turned down. But on a selective basis, I have taken on a few projects. The ones that I’ve chosen have either been in my power alley of experience (meaning that I didn’t have to work too hard to get them done and could charge a premium for my expertise), or have allowed me to be paid to extend my skill set in an area that I didn’t previously have experience.

For example, I recently took on a marketing project that involved sending out a direct mail piece. I own an Internet-based company, I do everything online, typically. But I realize that I may need to do some direct mail at some point in the future. By taking on this project, I learned about the issues with the U.S. Postal Service, international mailing and made contact with local printers and marketing copywriters. The best part – I was paid to learn.

“The consulting company was a means to an end. It was to get cash flow, so that you could build a real software company.” – Joel Spolsky, cofounder, Fog Creek Software

“We were chosen under a Request for Proposal bid to build a student accounting system for a vocational school in the state of Minnesota, which helped us focus on what we were going to do…It was really a one-off. It also told us how we could underestimate a project, how we would manage a project, how we would manage engineers, how we would manage or own time. And we got paid for learning on the job.” – Ann Winblad, cofounder, Open Systems

Although it’s great to save as much as possible, there are times when you still need to spend. I’ll talk about those times tomorrow.

Front porch office photo by Daniel Morrison
Do it Yourself photo by colros

Snowboarding

Friday, February 8th, 2008

I’m heading on vacation for the weekend, going to Jay Peak for a couple of days of snowboarding and relaxing with Chris and some friends. Next week, I’m going to be writing a series of posts related to entrepreneurship and starting a business based personal experience and the book Founders at Work. You won’t want to miss it, so subscribe to my RSS feed, or sign up to the email newsletter, and make sure you catch all the posts.

Until then…

Snowboarding
Photo by th0mi

Snowboarding 2
Photo by t a k k

Snowboarding 3
Photo by arriba 

(I don’t do anything hard like this, by the way. I mean, I can ride the lift up like the folks in the first picture, but the one time that I tried a jump and got 2 inches of air I was happy.   -melissa)

Inspiration from books

Friday, December 7th, 2007

I have posted before about how I like to read books for encouragement. But my favorite thing is when I can read a book and be inspired.

Founders At WorkStarting a company is hard. There are lots of things about it that are challenging at one point or another, but the past few weeks have been particularly difficult for me. Mostly, it’s the isolation of working from home and waiting waiting waiting for some technology to be developed so I can move forward with the business. Plus, it’s cold. And dark by 4:15, which seems ridiculously early. Also, I have had a number of conversations with people about the businesses that I am starting in which the people just did not get it. At all.

Thankfully, they aren’t the people who are supposed to get it, they aren’t in my industry, they are not even my target audience. But it’s still not fun when someone doesn’t understand what you’re doing. Especially when you are isolated. And waiting. And it’s dark outside.

So I was psyched when I picked up the book that I’m reading now, Founders at Work: Stories of Startups’ Early Days, and read this in the introduction:

Founders live day to day with a sense of uncertainty, isolation, and sometimes lack of progress. Plus, startups, by their nature, are doing new things – and when you do new things, people often reject you.

This I can relate to. (Apparently, so can other entrepreneurs. I just came across this review of the book on Guy Kawasaki’s blog. He included a picture of the book with his post-it notes and comments in the pages – check it out, it’s worth the visual.)

And here’s where the inspiration comes in:

I’d say determination is the single most important quality in a startup founder. If the founders I spoke with were superhuman in any way, it was in their perseverance.