Third Year MBA

Changing Domains

2010-03-12T03:02:00.000-08:00

I've moved this blog to Posterous. It now resides at blog.thirdyearmba.com

Playing To Your Strengths - A Cautionary Tale

2010-03-10T09:47:00.000-08:00

A few months ago, I was speaking to a now ex-cofounder. We had hit a rough patch where we invalidated our original hypothesis, and were thinking about new directions for our business. I was trying to figure out the least expensive strategy that would allow us to get back on track, while he kept proposing things that would require several months of engineering effort.

At the time, I was thinking about leaving his team, mostly because he seemed to be dead-set on following a single path, come hell or highwater. He had spent several years working on this product without really launching anything, and had brought me in much later as an engineering cofounder. His excuse for his failure thus far was "I didn't have a competent engineer."

Then, it sort of hit me. Based on your personal talents and the talents of your founding team, certain courses of action are MUCH more expensive than others. If you are an enterprise salesperson (as this guy was before he left to start a company), sales is fairly cheap. Engineering, however, was pretty expensive for him. It took him years to find a good engineering team, and it would have cost him 30-50% of the company if we had stayed. In hindsight, those years could have been spent making an enterprise play. Once he did the sales, he could hire the engineers to build the product.

For me, an engineer by trade, building is cheap, but selling is expensive. I spent all summer trying unsuccessfully to sell my product to enterprises, and I had no idea where to find people who actually knew how to sell. This showed me that I need to primarily focus on building products, because that best leverages my talents. Unless I have a salesperson or a marketer on my cofounding team, it doesn't make sense to do something that requires heavy sales.

So, what can we learn from this? First of all, when you evaluate business ideas, choose ones that play to your strengths. Take an honest look at the skills of your founding team, and ask yourselves, "do we have what it requires to execute here?" Sure, an engineer can sell a little bit, but most engineers will get demotivated pretty quickly if they spend most of their time selling. Likewise, if your core competency is sales, you should be thinking up things that you can sell BEFORE they are built (and that don't require two years of engineering work before sales can start working).

Furthermore, you may want to make tweaks to your founding team to account for the business idea. If you have two engineers on your team, you might not want to bring on a third engineering cofounder. Maybe that third guy should know sales, or maybe he should be an Internet marketer. It all depends on what you need to make your company successful. If you pick the wrong person, it could be worse than doing nothing.

So, here's an exercise: think of the first (or next) few milestones that you need to hit to build your company. Now, think about what skills are required to hit those milestones, and then ask yourself whether these skills are present in the founding team. If not, then you should consider changing either the idea or the team. Pick a product strategy that's reasonably cheap for your team to execute, because starting a company is already pretty hard, and you don't need to make your lives any more difficult.

Three Personality Traits of The Ideal Co-founder

2010-03-06T11:23:00.000-08:00

After working with a lot of potential co-founders who didn't quite fit the bill, I've distilled the ideal co-founder down to three core characteristics:

1) Smart
2) Trustworthy
3) Hardworking

This may sound obvious, but the core problem is that a lot of seemingly great people only fulfill two of the three. Which means that they won't work out as your cofounder. I think that the definition of each characteristic is pretty self-explanatory, so I'll describe the trait combinations that don't quite work.

QUICK NOTE: These are caricatures. Everyone will probably have one or more of these to some extent. The thing that really matters is the magnitude of that extent, and how the flaw interacts with your personality.

Smart and Hardworking (But Inconsistent)
You meet this guy (or girl), and you can see the spark in his eyes. He has lots of interesting ideas, and is always in a rush to implement them. The quality of his work is high, and he seems like he is going places. But there is something about him that you just don't quite trust. Maybe it's something concrete (like constantly being late, or blowing you off inexplicably), or maybe it's just a feeling of unease in the pit of your stomach. Whatever the case, this isn't going to work. One day, this guy is going to sell you out when something better comes along. Or he's going to exploit your work and then use a loophole to con you out of your equity. Soak up everything you can get from this guy, but keep your eyes on the knife drawer

Hardworking and Trustworthy (But a Bit Inept)
Honestly, this combination is the hardest to ditch. This guy is sweet - he's obviously super-loyal, and he works tirelessly. But... his work isn't quite what you could have produced. When you give him a task that you could have finished in a day, he finishes it in three or four days. And he needs a lot of direction - the only way to guarantee that his work is top-quality is to hold his hand through all of it.

This guy could be a great employee at a larger company, but he just won't cut it as a cofounder. The startup needs to move fast, and everyone needs to contribute on a reasonably equal basis. Some cofounders will be unable to do the work that you do because they have a completely different set of talents, and that's fine. But, when there is a lot of overlap, you should feel like your cofounder is roughly equal to you, if not better in many respects.

Smart and Trustworthy (But A Bit Lazy)
You geninely enjoy being around this guy, and he has so many great ideas. He can think through literally anything - you're sure that you and he are toe-to-toe in the brains department. But he doesn't get that much done, unless you push him. I'm sorry to say it, but this guy is lazy. At a large company, he could be at home in the strategy department. But, at a startup, there are no strategy roles. Everyone needs to be building or selling the product at all times. There is no place for the non-self motivated. It's a tough world out there.

Conclusions?
So, something I've realized is that there is no perfect cofounder. Everyone has one or more of these flaws. They are either inconsistent, inept, lazy, or a combination of the above. As an aside, when I say inept and lazy, I'm talking about a lot of people who would be considered brilliant and hardworking in comparison to 95% of the people out there. It's important to be honest about everyone's flaws (including your own), and to find people whose talents complement your flaws. Maybe you are lazy, and can find a cofounder who is happy to do do your work. Or maybe you are inconsistent, and can find someone who is trustworthy and won't double-cross you (until you find someone better).

This is one major reason why the smart money in the startup world suggests that you date your cofounder before you take the plunge. After dating, joining, and even splitting from a bunch of cofounders, I can say that you need to tread carefully...

Enduring Critical Devalidation (AKA How To Keep Your Startup From Dying)

2010-02-11T16:05:00.000-08:00

So you get a great idea, and you decide to turn it into a company. You get together with a few friends, and start hacking. But at some time, you may encounter what I call a critical devalidation. Essentially, this is the point where you realize that it just isn't going to work. Maybe you don't have the right team, or people just don't want the product, or it costs you too much to sell relative the revenue it will bring in. For some reason, you cannot keep holding the current course any longer. You need to abandon your current efforts and go back to the drawing table.

The first thing I can say is that you want to encounter these points as quickly as possible. It is much easier to cope with abandoning something you have worked on for a few weeks than something you have been doing for a few years. If you are talking to your customers and validating your ideas, you should pretty quickly get an indicator that something isn't right. However, regardless of when it happens, this is always a crushing moment. You can literally see the spark in someone's eyes fade as they have that realization.

So how do you deal with this? I'm going to confess that I haven't been terribly good at dealing with it in the past, but I will give you a bunch of options that don't work, and then I will recommend a few options that seem reasonable.

What Doesn't Work
Here are some things I have tried in the past. None have worked well for me, so I will tell you about the possible pitfalls of each.

Giving Up
If you give up, there is no way you will possibly succeed. Sure this is hard, but that's why the potential rewards are high. Sure you could go back to Corporate America and make a nice steady paycheck working for some big corporation, but that isn't what you want to do. You want to make this work. You have this stuff in your blood.

Doing Nothing
The first thing that doesn't work is doing nothing. You can sit around moping, thinking about what could have happened if your idea made it big. Sure, it's fine to take a little while to mourn. In fact, it is better to mourn for a little while than it is to jump immediately into something new. But don't take too long. Realize that the sooner you get back to work, the sooner you will find the idea that makes you successful.

Keep the Same Course
A second option is to ignore the critical devalidation, and to keep on going. This actually could be a reasonable option in some cases. Maybe you made some bad assumptions, which led you to unfairly conclude that your product is the wrong one. Possibly there is a different market for the same product, or you can figure out how to reach the actual people who want your product. Remember that startups are outliers - I would never immediately dismiss an idea because there isn't a $1 billion addressable market (I have seen people do this). Many of the best companies start out small, and hit it big later on.

However, it is important to be realistic. If people don't want your product, they don't want it. Don't keep beating a dead horse. If you can figure out how to make them want it, do that, but it isn't going to magically happen. Sure, Hail Mary shots hit the basket once in a blue moon, but each Hail Mary shot will prevent you from getting back to two-point attempts. Build something people want. You can build the best product, but if no one wants it, then you won't make any money (or make the world a better place).

Quickly Jump to Another Product in the Same Vertical
So you have spent a while understanding a vertical. You don't want to abandon that and start again. So you tell your team, "why don't we build Y instead of X?" The problem with this is that you may not be passionate about product Y. My original startup killed our first idea because of lack of addressable market. We quickly jumped to another product that catered to the same industry. Honestly, we weren't as passionate about the second product as we were about the first. So it never quite felt the same. Plus, we pretty much failed for the same reasons the second time around.

Leap Without Looking
It is easy to jump to the next reasonable sounding idea. After all, it is better to be working on something than to sit around twiddling your thumbs. However, if you jump too quickly, you may end up making the same mistakes all over again. It took a lot of effort to get to the point where you abandoned your last idea, so don't waste that. Look around, and some time really thinking before you start working on something new.

What to Try
Here are some things that I have tried. None of them have worked yet because I haven't hit it big, but they all seem like reasonable approaches. I'm probably going to focus more on them in the future.

Reevaluate Your Team
Do you have the right team? If you failed because of lack of sales talent, find sales people. If you couldn't reach enough users, find marketing people. If you don't have an engineer on your core team, get one. This is not to say that you should spend your time pointing fingers, but definitely think about what it takes to get the job done, and figure out whether you have that. If not, this is a good time to switch.

Find Something That Caters to Your Strengths
Everyone has certain talents. There are products that cater to those talents, and products that don't. Maybe one of you is an experienced Enterprise Salesperson. Well, if you are creating Consumer Internet products, their talents probably aren't going to best use. Maybe you love bikes but are spending your time trying to create a product that sells bowling balls. It's easier to do something you know how to do than something completely new. Starting a company is hard enough without having to do things that you have no particular talent for or interest in.

Build Something Exciting
This is easy. What are you passionate about? Build that. Build a product that solves one of your major problems. In business school, I learned a lot about Kaizen. Hold a Kaizen for your life. Keep a pen and paper with you at all times. Every time something annoys you, write it down. Every time you feel like it would be nice to have "X", write it down. After a while, look at your list, and there are probably a whole slew of new product ideas.

Start Testing Early
So you probably waited too long to test your last idea. After all, it was your baby, and it wasn't ready to face the big bad world. But it still got trampled by elephants as soon as you let it out there. So accept that some ideas will fail, and write that off as the casualty rate. Think up several ideas, and test all of them as quickly as possible. Think up the tests before you build the product, so that you can build a minimum implementation with the fewest possible features. Then you can build, test, pick the best idea, and focus on making that one successful. Or maybe none of them pass your tests. Then you have saved yourself a lot of time and trouble.

Keep Going
Regardless of what you do, keep going. You will miss 100% of the shots you don't take. A lot of people give up too early; it is easy to give up. After all, you put your neck out there, worked your butt off for a while building something, and got rejected hard. But the most successful entrepreneurs keep going until they succeed. If your product fails, build another one. If your team falls apart, build another one. If you are out of money, figure out how you can get by for a little longer (maybe some consulting work or a part-time gig). If you are dejected, tap into your support network. Make sure that they are people who will provide encouragement to the end - some well-meaning people will prematurely tell you to quit.

This isn't easy, but you can succeed if you keep trying (and learning from your mistakes).

Quickly and Cheaply Validating Your Ideas

2010-02-10T21:52:00.000-08:00

So you have a great product idea, but how do you prove that the world wants it? Well, one way to do this is to spend 3-6 months building that product (for your sake, we assume that's all it will take). You hack away, building the features that you want. When it is finished, you attempt to get some people to come to your site and try it out. If all goes well, you get a bunch of people to try it, and they give you feedback on whether they like it. Hopefully they do, and if not, well, it's back to the drawing table. Maybe they even tell you what they want to build next time. However, you have just burnt 3-6 months of runway (which could be coming out of your pocket). It's also pretty dejecting to build a product that no one wants.

There has to be an easier way to do this. Well, there is. Until recently, it was pretty expensive and difficult to validate your ideas (pay someone to run a focus group), but recently this has become easy, thanks to two inventions: Google Adwords and rapid development frameworks (Ruby on Rails and Django are two that come to mind).

So there are two things that every web startup needs to do: user behavior studies and experiments. These can save you a lot of time and money, and can help put your product on the right track in minimal time. If you haven't already started. you should be doing them now. So what are these things, and why are they important?

User Behavior Studies
I'll start with these first, because they are simple. This could more simply be called "talking to users," but they are actually better than talking to users, because you get to see how a user truly feels about your application (and this is pretty obvious when you do a user behavior study). To your face, a lot of users will tell you that your product idea sounds great, but that doesn't mean that they truly mean it (or that they will use it).

If you were a big company like Google, you would have a fancy usability lab. You would have people who were hired just to do usability testing. They would run users through a set of actions, and the product managers and engineers would watch behind one-way glass (the product managers would furiously scribble notes about every move that the user made). There would even be fancy computerized systems tracking where the user is looking at all time. In the end, you would be able to see real users use the product. It would be a big production. No one would get any work done for days, and then you would have a big meeting to discuss the "learnings."

How do startups hack this process to their advantage? Well, you can put together a quick demo of your product, and load it on your laptop. Build the simplest possible demo that exposes the functionality you want to test. Then head out to the nearest busy coffee shop. Talk to some random people, and ask them if they will take part in a quick test (most people are pretty nice about this). I know it's scary to talk to random people, but much less scary than spending 6 months on a product that flops. Start by asking general questions about how they already accomplish what your product wants to help them do. If, for example, your product helps them to shop, show them a blank browser, and ask them to shop for a product that they want to buy. Observe what they do. Encourage them to speak their thought process aloud. Observe what pains they encounter.

Next, whip out your demo. Ask users to attempt to "use" it. Give them as little instruction as possible. Mostly, just watch. Encourage them to narrate. If they get stuck, observe that before you tell them what to do.

Watching a few users can give you invaluable feedback. My current team had some conflicting hypotheses about how users would use our product, so we resolved this by showing the product to five random people at a coffee shop. In two and a half hours, and pretty much for free (I got a parking ticket for being over time in a two hour zone), we learned key facts about how people shop for products on the Internet. And we probably saved ourselves one to two months of wasted effort.

If you haven't done this yet, do it tomorrow.

Experiments
So while user behavior studies are descriptive, these give you hard data. To do this, you hack together several possibilities, and you put it out to the users to vote. But you don't tell them what you are doing - you can randomize the behavior of your site. First of all, build the minimum possible experience required to expose a feature. Then build a few alternatives, and make your application randomly serve one of the possibilities (be sure to keep track of which possibility you are testing). Then, use analytics software such as Mixpanel to record what the user does in each situation.

Finally, drive some Google or Facebook Ads to your page. Don't pay a lot of money - you often don't need all that many impressions to figure out what is going on (I think it cost us $6 to run one test that gave us valuable information). You may need to do some work figuring out which creatives lead to the highest click-through rates. Click-through rates don't matter terribly much, although Google will stop serving your ads if your CTR is too low. Plus, you will probably need to learn how to do this for when your product launches.

In the end, you can analyze the results, and draw conclusions based on what happens. It can be surprisingly quick - each time we have run an experiment, we have had fairly convincing results within a few hours. Of course, it is important to control the variables. If you change too many things between conditions, it may be hard to figure out what the true differences are.

In our case, we looked to see what would lead users to give us their email address (a big portion of our functionality involves emailing updates to users). We tried three conditions:

1) We immediately prompt the user for their email address.
2) We wait until the user does something on our site, and then we prompt them for their email address.
3) We display some site functionality related to the query term that the user clicked through on, and then we ask for the email.

Interestingly, the third condition had a massively higher conversion rate (actually pretty respectable), followed by the second condition, and no users gave us their email in the firstcondition (big shocker).

Ego Check
If you love your product idea more than your first-born child, you probably don't want to do this. There is nothing more crushing than having your product idea completely devalidated by an experiment or user behavior study. But it is even more crushing to spend six months to a year working on something that you end up killing because no one wants it. I've done both, and I would drastically prefer the former to the latter.

So get out there and start already.

Three Things (AKA Your Core Value Proposition)

2010-02-09T06:31:00.000-08:00

I just came across this post by Paul Buchheit. In it, he talks about how you should focus on doing three things extremely well. If you can succeed at that, people will use your product, and you can build the rest later.

I've been working on a new startup with a new team (more on that later), and we're trying to nail down the product. When I came in, we started talking about getting out the minimum viable product. One of my cofounders has been working on the product for quite some time, and he already had a demo up, but for various reasons, we essentially started from scratch. So we mapped out the "minimum viable product," and started building.

Sounds good so far, but there were some issues. The first was a lack of customer development (I need to talk about that more later), but more importantly, the minimum viable product was defined in functional terms. So, for example, if the product were a task list (it isn't), the MVP would be:

1) add task
2) check off task
3) edit task

The problem with this is that we didn't define the MVP in terms of any sort of core value proposition. When I thought about it (after about a month of hacking), I realized that what we were building differed significantly from the original stated vision. We were building something that didn't really accomplish any of our key goals (as I understood them). Sure, it was usable, but it seemed like a compromise. To be completely honest, I was unconvinced that people would want to use what we were building (this became more obvious once we started talking to real customers).

So we started talking about our core value proposition, and how we were going to deliver on it. I came across Paul's blog post later, but it actually simplifies a lot of what we have been talking about. You have to focus on defining and delivering a few key features. These features should differentiate you from everything else that is out there. If you trying to be all things to all people, you don't make anyone happy. I have heard nerds gush about all of the features that Archos puts into their media players. The problem is that I don't know anyone who actually owns an Archos (whereas most people seem to own an iPod or iPhone). I don't want an Archos. It fails to create a compelling core value proposition.

So three actually seems like a good number of core features. It is enough to give your product some definition, but not so much that you try to do everything. It is actually an interesting exercise to limit yourself to three features, especially if you are an engineer "but it would only take ten minutes to add one more thing".

So what would be a compelling core value feature set for our hypothetical task list product? (I'm actually building this as a side project).

1) Makes it super easy to enter your tasks from anywhere
2) Uncluttered and simple interface that is accessible from any device
3) Bugs you relentlessly to complete the things that you put on your list

Now that I think about it, I accomplished goals 1) and 2) relatively quickly, but didn't focus on 3). The interface became cluttered with features, but not the one that mattered. Recently, I have slid into not using my own product. I'm going to refocus on my core value proposition, and hopefully I will get back to creating something that is useful for me.

I would actually argue that, of your three features, one has to be a draw, one has to become immediately obvious once people start using it, and one functions to keep users coming back. With the iPod, people bought it either because it was easy to use (simple interface, easy syncing with the mac) or because it had a large capacity. Once they started using it, the other features became obvious ("wow. I can store all my music on this" or "wow. this is easy to use"). I would argue that the stickiness was that it was small. You could effortlessly carry it with you (especially the iPod mini and Nano). Unlike a portable CD player (and the hard drive-based mp3 players of the time looked like a CD player), it fit in your pocket.

What are your product's three features?

10 companies that I would consider working for

2010-01-12T17:44:00.000-08:00

Someone recently asked me which companies I would work for if I were looking for a job. I'm not looking for a job, but I figured that it would be a fun exercise to think about. I spent a while coming up with a list, so I figured that I would post it here.

So here goes (in no particular order):

Zynga - They are doing ridiculously well, and focusing on a big market that is just shaping up. Seems like a company where you could have a lot of impact. The CEO is a really interesting guy and has a lot of interesting ideas (and is supposedly very approachable). If I were looking for a job at a company, this might actually be my top pick.

Facebook - Probably the most engineering-centric of the larger internet companies. Not really a startup any more, but still has lots of potential (once they better monetize their application platform).

LinkedIn - Social Networking is hot. Plus I hear that they are a good company to work for (lots of opportunities). I don't think that they will be as big as Facebook, but they cater to a crowd that's actually willing to pay them money to use the service.

Playdom - Another Facebook applications company. Probably second to Zynga

Twitter - I have no idea how big they are going to be in the long-term, but they define hot right now. They are doing lots of interesting and innovative things.

Foursquare - People use it like crack. I don't know if they are hiring, but I'm sure that they will soon. Also Gowalla, although they aren't in the bay area.

Yelp - I think that they will get acquired soon (rumor has it by Google). The business model is a bit shady, but they've created a great service and built a rabid following.

Square - Credit card processing from any mobile phone. Started by the guy who created Twitter. Could potentially be a game changer. And they are hiring.

Eventbrite - Well-done product and they actually have a pretty straightforward business strategy (unlike a lot of the companies I have mentioned). They are hiring aggressively.

Bump - They are great guys and have a lot of potential. Just took a bunch of money from Sequoia, and I believe that they are staffing up a bit. If they can figure out how to turn all of those bumps into money, they will be golden.

Stop Fighting Yourself

2010-01-01T12:19:00.000-08:00

I just got back from a 10-day Vipassana meditation retreat. This was my second retreat, and it was a much different experience from the first. Very tough, but one of the most rewarding things that I've done.

One of my biggest takeaways happened on the final day, as I was doing a last bit of deep work. Since I began practicing Vipassana, I have noticed a certain heaviness in my muscles as I meditate. After a while, I started to ignore this. But it came back during the retreat, and I realize that this heaviness was in fact tension. If I actively relaxed my muscles, the tension went away, and I became much more comfortable and peaceful. So the whole time I was making my life more difficult by unconsciously resisting the process that I was putting myself through.

I realized that we spend a lot of our time fighting ourselves. We doubt, undermine and second guess. This is wasted effort - very little is gained by doubting a decision that you have already made. It does make sense to reexamine a decision after sufficient time has passed, but this is much different from constantly worrying or reanalyzing.

Sometimes we fight ourselves by doing things that are contrary to our nature. I am at the heart a product engineer. I build cool products that people find useful. This is what makes me happy, and motivates me to work day after day. If I need to sell a product to make my business succeed, I am perfectly willing to do that. However, I will never be a sales person. I will be a product engineer who happens to also sell products. Everything that I do will start from my core skillset and motivation, and flow naturally from there. To do anything else is to deny my nature.

Building a Team

2009-11-19T23:01:00.000-08:00

So you can't do it by yourself. That's what everyone told me getting into this, but the last several months have cemented that. In order to survive as a startup founder, you need to build a team. Figure out what your skills are, and find people whose skills complement yours. At the same time, you need a shared vision and passion. To be honest, the idea isn't as important as a shared love for a given process

What does this mean? You need to find people who have both the right skills and the right goals. In my case, that requires finding people who can do the things that I can't, who are passionate about building a company, and who are willing to stick with it no matter what. When I talk to the founders of successful startups, I'm amazed by what they were willing to do to succeed. Some of the stories are actually pretty incredible (on some level, it even sounds glamorous in the aftermath, although they were just doing what it took to scrape by). Sometimes I wonder whether I have what it takes, but then I remember that every path is different, and that you need to be willing to follow your own path.

So, to get back to the original topic, I think that there are two major types of companies. There is the hub and spoke, where there is a single founder, and everyone else plays a support role. Some people manage to make this work - usually the strong personalities who always need to be in control. The startup founder is kind of like the dictator of a small nation or the founder of a cult. Everything goes through him, and other people are sort of drawn to the energy that he puts out. I don't think this is for me.

Then there is the collaborative model, where you have a couple of core founders, each of whom has an equal (or mostly equal) stake in the company. Decisions diffuse out of this group. Each founder has control over a sphere of influence, and although everything is discussed among this group, the controller of each function is responsible for the execution and the outcome. In order for this to work, you need fairly equal strengths, and everyone needs to be both willing to stand up to the others and to yield when appropriate.

I'm not sure whether this post makes much sense. I'm trying to reason some of this stuff out as I write it.

Do It Again

2009-11-18T16:38:00.000-08:00

I was at a conference today doing Guerrilla marketing (we showed up and were randomly approaching people on the expo floor), and I realized one of the important principles of succeeding at a startup and at life. I have been doing this for a while in other areas of my life, but had never formalized it. I can simply sum it up as "do it again." In short, whatever you are doing, do it one "bonus time" before you give up. If you're going to call it a day, follow up with one more customer. Build one more feature. Do one more thing.

In today's case, I was pitching a product. I would approach a customer, do a short pitch, and hand them a sticker. A couple of times during the day, I had to go to the bathroom or to get a snack. On the way to the break, I had to find and pitch one more customer. Often times, that pitch would go surprisingly well, and I could feel good about taking a break. Even if it didn't, I had still accomplished my goal.

The Theory
This tactic works well for a number of reasons. First of all, there is a motivation to do that last pitch (getting to go home/to lunch/to the bathroom), so you are inspired to do it. In addition, we seem to be motivated to quit at a high note. To get optimal efficiency, you always want to push yourself just a little farther than that high note...

I view any practice session as kind of a bell curve. The first few times you do something in a day, you are rusty, or maybe you don't have the skillset down. After you do it for a while, you start to rapidly get into the zone, and your performance improves. Then you peak, and it levels off. This is typically where you first want to quit. You feel good about yourself (validated), and don't need to keep going. If you keep pushing yourself, apathy and fatigue sets in, and you start to fade slowly, and then quickly. Finally, it starts to level off as your performance approaches zero.

So where do you want to quit? Most people quit at one of two places. At the top or the bottom. I would argue that neither is the correct place. if you quit at the top, you feel great about yourself, but you have untapped potential (half of the bell curve). If you quit at the bottom, you maximize your potential for that day, but you probably damage your self-confidence. The next time you try, you will remember the hard part at the end, and this will damage your performance. Obviously it depends on what you are doing - if you are pitching at a once-a-year conference, you might want to go all-out to fatigue. But if you're going to do this again tomorrow or next week, this may be counterproductive

My System
Here's my system for figuring out where to quit. You wait until you hit the first point where your brain tells you it's time to quit. At this point, you come up with a count. Typically not a high number (I usually do one or two, although in some rare cases it will be five or ten). You tell yourself that these are just bonuses, and that if they don't come out as expected, who cares? At this point, you force yourself to do that many more iterations of whatever you are doing. As soon as these are finished, you quit (regardless of the outcome). If you do this correctly, you should still feel good about yourself, and you shouldn't feel burned out. The first iteration should be about as good as the peak, and the second iteration should be slightly worse (but still pretty good).

Startups are a Journey of Self-Discovery

2009-09-21T17:31:00.000-07:00

When I got into this, I thought that a startup was a road. You started at one end, and marched along to the end. It could be a long and winding road, but you essentially moved in a straight line. It starts with a concept, and progresses to a business plan, and then to a demo. You build a product, get customers, funding, etc...

What I have realized along the way is that this concept isn't necessarily true. Maybe your business "catches at some point," and then you race on towards the goal. I suppose that, if you are either exceptionally lucky or exceptionally skilled, that you might always be making progress.

However, the startup life is more often a journey. Imagine wandering through the jungle, trying not to get eaten by a lion or tiger. Maybe you have a jeep, or possibly you are on foot. I feel like we are on foot. You wander for a while, and maybe you eventually come to a road. Sometimes you hit a dead end, and have to backtrack a bit to find the route. At other times, you become so entangled in the thicket that you have to hack your way out (is there even a thicket in the jungle?)

So, enough of the metaphors - let's try to be concrete. One of my most interesting/important learnings is that there is no one telling you what to do. You need to figure it out, based on imperfect information. There isn't even a single correct move to make at each point in time. Every day, you need to figure out whether what you are doing is correct, or whether it makes sense to bag it and change directions.

Is your idea stalled, or is it dead in the water? Should you give up on selling to restaurants and move over to Facebook Applications (to take an example from my current situation)? Is it better to focus on one project, or to make smaller bets on a bunch? Is direct sales or internet marketing the best way to sell a product? Should you keep going in the same direction for a few days longer, or should you cut your losses and bail?

The life of the startup founder is one of many hazy possibilities. I think that my next post is going to be about advisors...

Why I'm Doing This

2009-08-15T12:06:00.000-07:00

So, there is one question that I constantly ask myself, and that's "Why am I doing this this?"

I think that it's a question that every startup founder should be able to answer for himself. In my case, it comes down to a few different things.

Before I went to b-school school, I was an engineer at Google. It was a comfortable existence, but I felt like my potential impact was fairly low. Big company, lots of bureaucracy, and even though there was lots of total impact, the impact of the average engineer was pretty low. When we launched Google Page Creator, it literally took me six months to get through the launch approval process (lots of checks and reviews by various people). I understand why they were in place (to be honest, we were still under prepared when we launched), but it ate up a LOT of my time. Time that I could have spent making the product better (we were understaffed for pretty much our entire existence).

Google paid me well (I can't complain about that), but overall, it seemed fairly hard to do something big-risk/big-reward. Rewards (as they should be) are generally distributed according to how much risk you take, which often equates to how early you join. Paul Buchheit made a lot of money from Google not because he created Gmail, but because he was one of the earliest employees. I would actually argue that his earlier contributions had higher impact to the company than creating Gmail (which has high mind share but AFAIK hasn't been hugely profitable). There were some big rewards for contributions that had high impact, but these were somewhat arbitrary, and typically went to teams fairly close to the company's core business (usually having to do with the ads system). For the average person working on a non-search product, the upside was essentially a nice salary, a generous bonus, and some fairly good stock options (depending on when you joined).

For most people, this was great. Many of the people I worked with are still at Google (with the exception of some of the most ambitious). I have a bunch of friends who left school and are working at comfortable corporate jobs. I can't criticize these people. They are doing important work for important companies that have impact on our daily lives. In my case, however, I wanted something more. I really wanted a few things (in order of importance):

1) To create new things that were my own. There is nothing more rewarding than creating a product and having people actually use it. I love thinking up ideas and putting them into practice. There are definitely advantages to doing some of this within the framework of a big company, but in this case, you don't really own the resulting product. I wanted to create things and get them out there.

2) To learn about business. As an engineer and as a consultant, I was exposed to a small slice of the business as a whole. The best way to learn is to actually do it. While I have no intention of working a corporate job moving forward, I would argue that entrepreneurship is actually the best career move I can take at this point. I will learn what I'm good at, what I'm not good at, and what I can develop.

3) To take more risks. I don't mind taking risks in exchange for reward. I felt like I was too risk-averse in my career up to that point. While I'm a fairly calculating person, one of my current goals is to take smart risks. I feel like (especially at this point in my life) a startup is a fairly low-risk endeavor that potentially has huge upside. For me, the upside isn't a huge thing (I really can't see how my life would be significantly different if I had a few million in the bank), but there is definitely a thrill in knowing that my actions directly influence my outcome. Every morning, I wake up and think about what I'm going to do and how that will affect the company's outcome.

So that's why I'm doing this. What would be your reasons?

Different Languages

2009-08-13T16:54:00.001-07:00

A startup founder needs to speak at least two different languages. And I'm not talking about speaking Chinese and English, or Ruby and Java. Those are nice, but definitely not essential. What I'm talking about are the languages "customer" and "investor."

So why do we need multiple languages? When I started doing this, I assumed that you came up with a single vision of what your company was doing, and that everyone would understand it. One consistent vision internally and externally - boy was I naive. It all started to gel when we decided to switch directions with our product. We were feeling sort of lost, so we had a conversation with our seed investor. He mentioned "demand pricing." We were excited - this was going to be the next big thing.

The problem was that when we started to actually discuss this with our potential customers, they had no idea what we were talking about. The concept was completely foreign to them, and even when they understood it, they didn't really like the idea. So we asked them what they wanted, and we built that. When we showed the product to them, they seemed pretty happy, and wanted to buy it. But then we talked to some potential investors, and they were completely lukewarm about the same things customers had loved.

"Sure you can make some money on that, but your sales model is too hard to scale, and it's not a big enough idea. It isn't going to be the next Google." This confused us. How are we supposed to build something that our customers want AND that investors want to invest in? Then it hit me - we need to say the same thing in multiple ways. You tell the investors one thing, and the customers a different. Essentially you're saying the same thing, but in terms that each can understand and relate to (I'm in no way advocating lying to either). One wants a huge potential market opportunity, while the other wants a product that is useful for them.

If you do it just right, everyone ends up happy. The customer gets what they want, and the investor gets a long-term vision that they can invest in. And you as the startup founder only need to do a bit of juggling.

Sales

2009-08-11T09:53:00.000-07:00

So I think that the biggest shock of my short entrepreneurial career has been sales. Sales is hard. It's easy to sit in your ivory tower and build a product, but SOMEONE actually has to sell it. Unless you build a product that no one buys, which is monetized indirectly through ads. Then you build all of the cool features that you want, and hope that people come and click on your ads. But that's a digression, and probably the subject of another post entirely.

Returning to the point, sales takes skill and real work. You build your product, and talk about the millions of users, but then you have to actually go out and get people to pay you money. So you mean they won't just magically come beating down your door and asking to give you money? Well, in some cases it may work this way, but most of the time you will have to seek them out. At least until the "viral effect" kicks in and you experience hockey puck-shaped growth (ha).

So, in our case, we knew next to nothing about sales, at least in our industry. I sold knives the summer between high school and college. My business partner did a bit of telesales in the financial industry. Walking into a restaurant and trying to get them to buy a product was a completely different situation. No worries, though, because we were willing to try. And we've done a lot of trying.

So here's another interesting concept that I didn't quite grasp from business school. Even when the customer interested in the product off the bat, it still seems to take several meetings to get them to buy. I'm starting to understand things like cost-of-sales a bit better. You really can't sell a product for $50 a month if you have to make three pre-sale visits to the customer. They definitely tell you this stuff in business school, but you don't really learn it until you actually experience it. Eventually, you start to understand how much money you need to make to support yourself, and then you can use that to figure out how much each sale should be worth. Sure, you can hire dedicated people to sell, but they add to your fixed costs. As a founder, you can pay yourself next to nothing, but your employees don't expect the same deal.

Which brings me to my next point: switching hats is hard. Paul Graham and Joel Spolsky both talk about the cost of interruptions (skip to point number 8). I have found switching hats between sales and engineering to be very costly. Not only do you have to switch hats, but you also have to switch mindsets. After spending some time selling, I have a lot of trouble switching into engineering mode.

Anyways, more on this later...

Intro

2009-08-09T22:52:00.000-07:00

I'm starting this blog to catalog the journey through my third year of business school. BUT, you say, the MBA is only two years. I guess that it is for most people, but for me, the classwork was just the beginning. One of the chief criticisms of the MBA is that it creates "managers" who know it all but don't actually know how to do anything. I took this to heart, and upon graduating, I decided to undertake the optional one-year practicum, also known as entrepreneurship. After spending two years learning about finance and marketing and sales and operations, I actually get to do all of them (often simultaneously) as a startup founder.

We're starting sort of in medias res, so I'll go back to the start and give you a bit of history. I think that it all started in November 2008, when I had an idea for a new product. Actually, I'll give credit where it is due, and say that it was a joint collaboration between myself and my friends Tyler and Mike. Anyways, we were out drinking, and had one of those aha moments where you are like "why couldn't they do X," and you realize that you might as well be "they." The product (a replacement for the restaurant buzzer that sends you text messages on your cell phone) wasn't nearly as important as the cascade of events it set off.

So, anyways, this one aha moment led to me entering MIT's business plan competition, forming a team (more on that later) getting to the semifinals, applying for and receiving a bit of seed funding (at least a post or two on that as well), and moving to Northern California (highly recommended in any case). I guess that the real story starts around the beginning of June, when we filled out the incorporation paperwork and started doing this full-time. It has been about two months since then, but I feel like it has been about a year.

Paul Graham really wasn't kidding when he said that a startup allows you to compress an entire career into a few years. I've seen a few new gray hairs on my head, and I'm definitely more forgetful these days. Anyways, back to the grind. I have a big demo coming up tomorrow, and we need to push a build before that.