I have been a fan of The Industry Standard for a long-time – I have written about them before, and many of you will remember the magazine version of The Industry Standard as being the fastest growing magazine of all time before the bubble burst, taking The Standard down in its wake. Now The Standard is back, with an online-only site that focuses on a prediction marketplace.

And I’m the newest writer/contributor to the site.

My first article is up now – Five reasons why a recession is a good time to start a company. Go read it, comment on it, let everyone know what you think about it. And then come back to 16thletter and let me know what you think.

Popularity: unranked [?]

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

Popularity: unranked [?]

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.

Popularity: unranked [?]

Starting a business all begins with the first step - the statement, which then turns into a belief, that later turns into a mantra  – that I AM STARTING A BUSINESS. This step happens differently for everyone, but this is my story of how I got over the fear and started a business, supplemented with the stories of friends and acquaintances and the entrepreneurs featured in the book Founders at Work: Stories of Startups’ Early Days. (All the quotes below are from that great book. If you are an entrepreneur, buy it today, it will inspire you.)

I’m convinced that in order to be able to get over the fear and start your own business, most people go through some combination of the following things:

You can’t keep doing what you have been doing. I am pretty sure that starting a business involves some level of desperation. For me, when I made the decision to start my own thing, it was early 2007, I was working for Ziff Davis Media, heading the product development team for the Web Buyer’s Guide. Things were going great with the division – we were one of the favorites in the company, making money hand over fist with a long list of the top clients in the industry. I was working with an amazing team of people, I truly liked and respected my bosses and the people who worked for me. But I was growing increasingly dissatisfied with my job. The problem was, with things going so well, I had little hope that they would ever change. The better things went with the group, the worse I felt about the job because I had to keep things going, to make sure that the clients stayed happy, to just do more and more and more and more of the same.

I love building new things. I like the creativity of it, the innovation of it, the challenge of trying to figure out how to solve problems. I enjoy gathering a team of people who can all collaborate to get something done. And I like the thrill of launching something new. I couldn’t possibly stand to stay still, the lack of creativity was sucking me dry. I had to do something else.

You realize that the only way to do what you want to do is to start your own thing.  Once I knew that I wanted to do something else, I knew that I wanted it to be related to using the Internet, and I knew that I wanted it to be creative. But the more that I thought about it, the more that I knew that going to just some other company wasn’t going to solve my problems. I already worked with really great, smart people. And another company would make me specialize, as well. I realized that what I really wanted to do was have the flexibility to do lots of different things, all the time, just the way that I wanted them done. There is no job description that reads that way.

“I think the hallmark of a really good entrepreneur is that you’re not really going to build one specific company. The goal – at least the way I think about entrepreneurship – is you realize one day that you can’t really work for anyone else. You have to start your own thing. It almost doesn’t matter what that thing is.” – Max Levchin, Cofounder PayPal

You understand the odds are against you, but you believe that you will beat the odds. The statistics for businesses to fail are staggering. It’s something like 8 out of 10 businesses don’t make it past the first year, and 8 out of 10 of those don’t make it past the second year. Something horrible like that. But, I believe I will be one of the successful ones. Why? Because I know I can do it, which is not a good reason, I’m sure. But if I didn’t believe that I would succeed, I would never have started in the first place. There has to be some level of (sometimes irrational) optimism in every business founder.

You figure out your biggest points of fear and try to work around them. For me, the prospect of starting a company led to three major fears. One, I didn’t know how to do the stuff related to starting a business because I hadn’t done it before. So I found some mentors and a business partner who have vast experience in this area and who can help me when I have questions. Two, I was concerned about putting Chris (my husband) and I in debt because of the business. I overcame that fear by taking a very small salary out of the initial seed money. I took a fairly substantial pay cut, but having just a small monthly income gives me the peace of mind that I am at least not going backward in my financial situation. Three, I was concerned that everyone I knew would think I was crazy. That issue was not something I could fix, but it was a personality flaw anyway, so I decided that being faced with that type of opposition would help me to grow as a person so it was worth facing the fear. The fears will be different for everyone, but all business owners will have to figure out how to face them.

“About the next day after I said no to starting Apple…my friend Allen Baum called me in the afternoon and he said, ‘Look, you can start Apple and go into management and get rich, or you can start Apple and stay an engineer and get rich.’ As soon as he said it was OK to do engineering, that really freed me up. My psychological block was really that I didn’t want to start a company. Because I was just afraid. In business and politics, I wasn’t going to be a real strong participant. I wasn’t going to tell other people how to do things. I wasn’t going to run things ever in my life…I just couldn’t run a company. But then one person said I could be an engineer. That was all I needed to know, that ‘OK, I’ll start this company and I’ll just be an engineer.’ To this day, I’m still on the org chart, on the bottom of the org chart – never once been anything but an engineer who works.” -Steve Wozniak, Cofounder, Apple Computer

You realize that other people do this all the time. The other thing that really helped me was to realize that other people start companies all the time, which led to the feeling that if they could do it, I could do it too. Chris started a business in 2006, and it was doing well, so that was encouraging. I was part of a company that was a start-up that was acquired by Ziff Davis, so I had seen how it was done firsthand. Although starting a company was daunting, just knowing that other people had started companies in the past was helpful.

“We both had parents who were entrepreneurs, so the idea of running your own business was a normal thing. There are people who come from backgrounds where they’re used to working for a company, and they couldn’t dream of doing it themselves and not having that safety net. When your parents and family are entrepreneurs, you know it’s nothing special. I worked at big businesses and I worked at small businesses beforehand, so the idea of starting your own business was just a normal thing.” – Dan Bricklin, cofounder, Software Arts

You weigh the benefits vs. the risks and responsibilities. For me, the timing was right to start a business. I was married, with an income-producing husband (who is also an entrepreneur, but his company, which builds medical devices for spine surgeries, had four submissions into the FDA for approval and it looked good that they were going to make it). I didn’t have any kids, no mortgage, no debt. My risk was very low because my responsibility was light. This is one of the reasons that so many young people are starting companies, because it doesn’t hurt them too much to do it. If things fail, they can always put on their resumes that they were the founder of a company. People who have a lot of responsibility have a harder time making this jump, and it is really important that they carefully weigh the risks before starting anything.

You jump in, even if it’s stupid. At some point, after you consider all these things, you just take the plunge. For me, that involved going to my bosses, thanking them for everything they had done for me, and resigning from my job. I was lucky because I was able to make a slow transition, I gave them a lot of notice, and I took some time off between Ziff Davis and my new business. Not everyone will have the luxury, but at some point, that statement has to be made: “I’m going to start a company.”

“There are a lot of programmers that are very tentative about starting their own companies. There are a lot of working programmers doing something they hate, with some company that they hate, but they need money to pay the mortgage. So they figure, ‘I’ll develop something in my spare time. I’ll put in 1 hour every night and 2 hours on the weekends and I’ll start selling it by downloads.’…But because they never really take the leap and quit their job, they can give up their dream at any time. And 99.9% of them will actually give up their dream. If they take the leap, quit their job, go do it full-time – no matter how much it sucks – and convince one other person to do the same thing with them, they are going to have a much, much higher chance of actually getting somewhere. Because they either have to succeed or get a job. Sometimes ‘succeed’ seems like the easier path than actually getting a job, which is depressing. So quit your day job.” – Joel Spolsky, cofounder, Fog Creek Software

Tomorrow, I’ll talk about what happens after you make the leap.

Popularity: unranked [?]

As I mentioned in my last post, I just finished my first board meeting for Pure Incubation, and I thought I would share my favorite statistic and slide from the meeting. One of the things that I like the best about this business is that, by design, I am working with people from all over the world. Currently, I am working with 17 different writers, designers, developers, marketing people and consultants, in 6 countries on 4 continents. To illustrate this, I put together a world map with the locations of my various consultants and contractors. I’m not a designer so forgive the bad graphics!

Popularity: unranked [?]

Hands down, the most frequent question I get about this blog is about its name and what 16th Letter means. I’m glad that everyone who asks thinks that it must mean something, but so far, no one has figured it out without me telling them. So here’s the scoop.

I started a company this year called Pure Incubation. The naming process was difficult, but when Pure Incubation came up as an initial idea, part of the appeal of the name was that the initials are “PI” – like pi (or pie). The super-geeky part of me really liked some of the symbolically interesting things about naming a company after pi (the 3.14 version), if you read up on the listing in Wikipedia you’ll see what I mean, but here are the highlights:

• Pi is related to math. I am not a big math-lover, so I like the irony.
• Pi is “transcendental” - in math definition is too hard to explain, but its other definition is “surpassing all others” or “beyond common thought or experience.”
• People often say that pi is infinite, but it isn’t – it’s “irrational.” This is another math term that means that a number can’t be written as the ratio of two integers - you cannot reach the end of trying to calculate the exact value of the number.
• There were many people who worked extensively on calculating pi across many nations and cultures and centuries. The first was Archimedes around 250 B.C. Over the years, mathematicians from Greece, China, Babylonia, Egypt, India, Scotland, Germany and France dedicated their entire lives to working on the calculation. It was considered to be a great breakthrough in 1424 when a Persian calculated the number to 16 decimals. There was something so appealing about this number that people dedicated their lives to discovering more about it.
• With the advent of computers, work on pi was revolutionized. In 1949, John von Neumann used ENIAC to compute 2,037 digits of pi – a calculation that took 70 hours. The current record (set in 2002) is pi calculated to 1,241,100,000,000 decimals.

That was likely more information than you ever wanted to know about pi.

After I figured out the company name, I needed to come up with a name for my blog. I wanted it to be related to Pure Incubation, but not tied so closely to it that it couldn’t stand alone. Finally, it dawned on me that pi is the 16th letter of the Greek alphabet.

Photo by jaqian

Popularity: unranked [?]

As part of the process of founding a start-up, I’m learning how to be more independent than ever before in my professional career. I have always favored working independently, but this experience has taken solo to a whole new level. In the past, even if I was working on a project alone, there would be other people who knew about my project and were in on the endeavor. Now, my only allies are a few contractors and a couple of friends who let me bounce ideas off of them. Primarily, though, I’m on my own.

As part of this process of becoming more solitary, I have had to figure out ways to combat the bad parts of spending so much time alone, in my house, staring at the walls, for hours on end. One thing that I have started doing is working from home office in the morning, and then going somewhere that has free wi-fi for the afternoon. My current favorite places are Panera Bread and the Beverly Public Library. Both are comfortable, friendly places to work and they are packed with people. There is something about having background noise that really helps me concentrate.

Also, I also have started reading books written about, by and for people who have started companies. I’m not reading these books so much for the information that they are giving me about how to start a company (although I’ll use any tips that I get), but more for the camaraderie that I feel with the authors. There is something very helpful about knowing that other people have gone through this before me, that they understand, that I am not insane or losing my mind or crazy for doing this. (OK, well may be a little, but I’m not totally over the edge – yet.)

Currently, I’m reading a book called Entrepreneur’s Notebook: Practical Advice for Starting a New Business Venture, written by Steven K. Gold. This bit in Chapter 1 is something that I can totally relate to, something that I feel whenever I tell someone that I’m starting a company. And it’s for this encouragement, this feeling that someone else gets it, that I am reading this book and every one like it that I can get my hands on.

“…no matter what your age or experience, entrepreneurship involves such things as obsession, compulsion, creative surges, and a roller coster of emotional highs and lows. All of this can make you appear mad, whether or not it’s true.

The life of an entrepreneur does not resemble normal behavior by most people’s standards. This may explain why many of your friends give you a blank stare when you tell them you’re starting a company, or why you get the sense that family members are talking about you behind your back. Go easy on them. Few of us are fated to be entrepreneurs, or even to understand why anyone else would want to subject himself to all of the risks and hard work. It’s difficult for many people to appreciate the appeal of entrepreneurship versus the perception of stability and a regular paycheck that comes with a “real job.” The best suggestion is to swallow your pride and concentrate on building your new venture. Ultimately, there is nothing more convincing than success.”

Popularity: unranked [?]

I started posting to 16th Letter in early September, at the same time that I launched my new company – Pure Incubation. I can’t link to my company Web site because it’s still a work in progress, but hopefully before the end of the month the Web site and my new blog design will be live. In the meantime, I just wanted to mention that I have heard from a bunch of you that you want me to blog about what it’s like to start a company so I’ve decided to sprinkle in some Pure Incubation posts here and there…when and if I have something to say about it. You’ll be able to find the posts in the “Pure Incubation” category, I’ll make sure to tag them all that way so that they are easy to find.

Popularity: unranked [?]