Posts Tagged ‘Groove Networks’

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

7 ways to raise money for your start-up

Tuesday, February 19th, 2008

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.

SevenThe 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.