Working with VCs part 2: reverse due diligence

Earlier this week, I posted part 1 of a currently 2 part series on working with VCs.  As I mentioned there, and as I’ll repeat basically any chance I get: working with venture capitalists isn’t summer camp.  It shouldn’t be.  My personal experience and view is mixed–I’ve had great experiences and some bowsers.  But as I’m generally an optimistm, my basic view is that you’re served best by approaching the relationship with a well-grounded, objective perspective.  Again, this is business, not summer camp; you should know this as the venture capitalists with whom you might work certainly know this.  Not a ding on them, just the reality that you and they should share.

Alright so this post is about tips and tricks to drive reverse due diligence.  In other words, these are the questions and steps to take if you actually get a venture capitalist involved and you want to research whether they’re worth partnering with in building a company.  Feel free to suggest other ideas in comments.  FWIW, these are my concrete ideas and steps.

First, probably the #1 most useful data point would be a VC working with repeat entrepreneurs who’ve had sizeable exits in the past.  Founders who’ve achieved exits previously are the “A-Listers” of the Silicon Valley star system.  The Max Levchin’s or Kevin Rose’s are the Tom Cruises or Tom Hanks of Silicon Valley.   To a degree, they have a choice in working with the VCs they want to work with.  A successful founder who chooses to work with the same VC again is a signal that that VC is solid.  (Otherwise, why would the founder keep working with the person?)  Ask the VC which founders he’s currently working with, and research their track records on this specific dimension.  I’ve met and gotten to know a few VCs who can point to successful rockstar founders who continue working with them–these VCs are the guys you want to work with before anyone else.

Second, find out if the VC on your deal is working with founders on a repeat basis who did not have an exit.  Very similar to the above, except with founders who didn’t exit.  This is somewhat interesting, in that it conveys that both parties still think enough of each other to work together again.  There’s a slight flag here that you should check out, but in generla I’d interpret this as a positive.

Third, ask the venture capitalist to get intros to the founders he’s working with currently, and call them up.  Ideally you meet these folks in person, and you really get them speaking frankly.  This can be easier said than done, but you’ve got to do this. Here are the questions I’d ask them:

• Please describe your experience with them in depth.
• What is the best thing that has occurred in this experience. (This should be concrete.)
• What is the worst thing that’s happened.  (This should be concrete. )
• If you were to have a successful exit and you could work with anyone, would you work with this person again?
• What is the biggest and most significant impact this person ahs made on your business?

The purpose here is not to drive a gotcha type conversation.  You are just trying to get information as clearly as you can on the pros and cons of this specific VC.  I consider this must do work.  What I’m providing here is just a basic set of guidelines.  For your speicifc business, there will be a whole host of individualized issues that you need to drill in on.  The point isn’t so much that there’s a single list; its that you’ve got to go through it.

I’ll probably add more to this list as I mull, but here I thought I’d take the approach of getting this out there and then adding as I think further about it.  Comments welcome.

Filed under: business, entrepreneurship, free stuff for startups, venture capital , due diligence, entrepreneurship, Startups, venture capital

Working with VCs part 1 : its not summer camp (nor should it be)

This week in the geekosphere, this presentation on venture capitalists has been making the rounds.

Its funny, and as an entrepreneur who’s met and worked with VCs, I can relate to this.  Some are clueless, herd following clowns, and there’s no small amount of glee we all take in poking fun at those folks.  Many aren’t, though.

Irrespective, if you’re working as an entrepreneur and you want or need venture folks to build out your company, then it’s important to have a clear-eyed, rational view of what venture capitalists are doing.  Having this perspective will help you more effectively set your own expectations, and ideally, will help you do a better job in working with them.  This thinking led me to a two part post.  Part I, below, is meant to provide a different perspective from a founder’s poin

t of view on VCs.  I think its useful for founders starting out to have this perspective.  Part II, which I’ll get to later, is about how I’d suggest doing reverse diligence on investors or VCs–who do you speak to and what questions do you ask them–this is more concrete.

So, Part I has the risk of labeling me a VC apologist, a kiss-ass. Whatever.   I’ll share this not because I think VCs need defending.  Rather, I think its important for founders to have a rational view of VCs, in order that founders are thinking clearly about what VCs can do, and how to think about working with them.   If you’re a good entrepreneur, you need to be thinking clearly and rationally about what you’re doing.

Here are the key 3 things I try to remember when I think about venture capitalists.

1. At their core, VCs are the money.  VCs, at their core, represent the money.  At times and at their best, they represent more, but at the end of the day, they are ‘the money.’   This is not meant as a negative–within the sphere of ‘money,’ I view VCs as useful and constructive. They’ll try to be useful, and they’ll (hopefully) try to remember that they’re not magicians.   They want to help, but they’ve got 7 or so boards to work on, in addition to other companies to look at, in addition to raising money themselves.  They want you to succeed and they want to spend less time worrying about problems, more time helping you accelerate, recruit, get press, etc.

They’re way better money than any other institutions out there.  They’re generally not like private equity funds–looking to lever up and sell off! They’re not (generally) in the turn-around business, looking to squeeze costs, downsize, etc.  In general, they are looking to build companies that swing for the fences–they want ideas generally big and wild and possibly able to make an outsized return.  They may do self-interested things, but they’re going to be more aligned with you than any other money you’re likely going to find in the institutional private equity space.  (If you think VCs can be difficult to deal with, try working with guys at hedge funds to finance your business.  Good luck!)

2. The water-finding stick pitch. VCs are funding ideas sooner than most any rationale investor would–that’s why they’re in the business.   While VCs as a group will have different focus, stage, etc., there are many instances where they will give money to people who have nothing more than a powerpoint, a cocktail napkin, sky-writing, whatever.   Some of those who get funded have no professional track record to speak of, with unproven models, unproven businesses.  (!)  Think for a second how crazy that sounds.

Image by Sentience via Flickr

Here’s how crazy I think this sounds.  When I was a wee pup growing up on the farm in Latrobe, we once needed a new well.  (Ours had run dry, and we were literally out of water.)  We called up the well digging people, and out they came.  Their gear consisted of a huge drilling type rig to drill the well, and a ‘diviner,’ a guy who figures out where to drill.   The diviner walks around holding a Y-shaped stick by the Y’s ends in his hands.  The bottom of the Y-shaped stick, the theory goes, will point down to the ground when he walks over a spot in the earth where there is water.  I’ve not yet seen any scientific explanation for why this exists.  All I can tell you is that it worked.  Within about 15 minutes, he’d identified 2 spots, and he suggested one that hasn’t run dry in the 20 years since that well was drilled.

So that’s a cool story, but the epilogue is what’s relevant to this.  After the drill diggers had left, my dad, an entrepreneur in his own right, shook his head and asked “could you imagine those guys going to a bank looking for a loan?  Their pitch would be: ‘we find water using a stick!’”

If the water finding stick guys showed up on to VCs, VCs would at least want to see a demo before telling them they were crazy.  Every other institutional money source would likely just throw them out of their office.  Remember that.  I remember that and think it’s pretty awesome that I live in the US where there’s a whole industry of folks who will do that.

Image via Wikipedia

3. “Its not summer camp.” I once worked on a turn-around situation in business.  It had a bunch of difficult people issues involved.  My boss at the time and I were talking about some of the moves, and whether the team would be comfortable with all the changes.  My boss said something that I say a lot on this topic: “It’s not summer camp, Jay.”  He meant it both for me and for the team, and he meant that I needed to get tough, and the team did as well.  And he was right–we’re responsible to share holders, customers, employees, etc.  Getting a VC involved does not mean that we all spend time making hot cocoa and gazing lovingly into each others eyes.  It’s a business transaction, and founders need to deliver.  You’re not in summer camp.

Now, with that said, know that there will be days that stink.  Investors will move goal posts or get squirrelly.  Commitments won’t quite be met in the way that we might have thought.  Etc.  And you can get embittered, or you can pick yourself up and realize point one and two above–these guys are the money, and they’re funding water-finding stick businesses.  On the whole, with whatever else goes south, I feel generally pretty lucky to have the opportunity to work with smart people to build a kick ass business.

So those are my 3 key perspective points that I’d share as you think about building your business and working with VCs.  Its high level, but I find these 3 points useful to remember.  Stay tuned for Part II, where we talk more concretely about how to run a diligence process on vetting and double checking the investors you might be workign with .

Filed under: entrepreneurship, venture capital , Hedge fund, Startups, venture capital

My Founder’s Institute Talk on Branding & Naming Your Startup

Last week, I had the pleasure of speaking as a Mentor at Adeo Ressi’s TheFunded’s Founder’s Institute with entrepreneurial superstars James Hong and Bryan Thatcher.  

First off, before I get into the topic, let me say that I think the TheFunded Founder’s Institute is innovating the approach to startups in an important way.  The approach is a mix of company building philosophies.  It’s one part bigger hammer–that is bring in lots of smart people as founders.  It’s also another part strong social networks, connect those founders to each other and to experienced, proven entrepreneurs.  Add top-tier, discounted, startup services (legal, accounting, etc.) and that gets at crux of the approach.  The new stock class—F-Class—which Ressi’s introduced is also super interesting.

There are a lot more unique details to how Ressi’s going about this, which I’ll not go into here.  But suffice to say, it is both empowering for entrepreneurs and it has a bunch of detailed thought behind it.  Ressi’s vision is big and broad.  It is exciting to be a part of, and I’m eager to help it succeed.   More concretely, I wish I had had access to such a thing when I was trying to start out as an entrepreneur.

Ok, so that’s the Founder’s Institute, now onto what I was talking about when James, Bryan and I spoke last week.  Our topic was Naming—as in, you’ve now figured out what customer problem you think you’re solving and what you want to do, now what do you call this thing?

This is a fantastically rich and interesting topic.  It’s also, IMHO, super super important.  When you’re a startup, your name is about the only marketing you really have at first.  Also, everyone—customers, potential employees, and potential investors—will ask you about your company’s name.  So whatever you name and brand your company had better be good.

My slides from the presentation are embedded here (hat tip to the folks at Igor International, who’s free naming guide was very influential):

(Shared with permission from TheFunded Founder’s Institute.)

It was a good discussion, and my sense is that this provides a useful prescription for startups thinking about what to name their company and how to approach their brands.  Some key points for reinforcement.

Having a process for naming helps.  What I think is particularly useful about this approach is that you can put numerical scores next to how you think about names.  This enables you and your team to have a concrete discussion about why someone likes versus dislikes a certain name.  This is important, as it enables your team to come to a more objective decision, as opposed to just who yells loudest.

Think BIG picture first, then worry about finding the .com or URL that’ll work. Following my talk, one common theme in speaking with people afterwards is that I think many people get hung up on the challenge of finding a good .COM URL that’s not already been picked up.  While certainly a challenge, I think that worrying about this tends to drive entrepreneurs to small thinking.  You’ll have to work through it, but that’s an end point, not the beginning.

As I’ve said in other posts—as an entrepreneur, my advice to other entrepreneurs is to think big in everything you do.  So when it comes to naming and branding your company, think big.  Go for a big name, figure out what that makes sense and helps position you strongly relative to your potential competitors.  Figure out a name that really delivers on the strategy that you’ve put in place.  Get that strategy right and solid.  Then you can go and figure out the more tactical issues of what the URL hunting strategy needs to be.

Commit to going through the process.  The other thing that I’d encourage people to do is really commit to going through the process that I’ve described in the PPT deck.  I’ve met with several companies over the past year who’ve listened to this process, ignored it, and then have ended up hiring a naming consultant to basically help them go through the same thing.

Acknowledgments to the folks at Igor International. Igor International have open sourced their naming guide, which is a great thing.  My deck basically walks through how I used that free information to secure Moonshoot, an awesome brand name, IMHO .  The tool Igor’s provided is for frugal founders like us a tool to go figure this out on our own.  Invest the time to commit to doing it.

Filed under: business, entrepreneurship, free stuff for startups, internet, marketing, technology , Branding, entrepreneurship, Founder's Institute, marketing, Naming, Start-ups, Startups

DriverSavers & Its Awesome Customer Experience

Cover of The Incredibles [UMD for PSP]

This mail is a big shout out to the Incredible folks at DriverSavers, who saved over 20K of our photos from a HD and backup regimen that went horribly wrong.  I also think that there are some terrific lessons here that any company–large or small–can take in terms of delivering a great customer experience.

The background

My wife is a serious amateur photographer.  She takes a lot of pictures that are artistic, and as we have two young children, she also takes tons of pictures of our children.  Our approach to backing these up was to use an attached HD to her mac, with a backup HD that used Apple’s Time Machine.

The problem we faced was that the HD failed slowly.  When my wife would look at photo thumbnails, they would appear to all be there.  When the HD finally failed, and we went to Time Machine, we weren’t able to find any archived copy that had the actual JPEGs of the 25K photos that it was supposed to be backing up.  Disaster time.

After a few trips to the Apple Store and elsewhere, we got pointed to DriveSavers.  DriveSavers is a data recovery service in Novato, California, that promises to deliver data from hard drives that have suffered massive failure.  They’ve apparently been involved in recovering data from drives damaged in 9/11, drives that have been in fires, underwater, etc.

From the beginning of this experience, DriveSavers approach impresses.

First call. Upon my first call to them, I was instantly connected with a real human being–no long number prompt trees.  Despite the fact that I was *desperate* to get a solution, my advisor at DriveSavers slowly and calmly asked me to walk through the situation in detail.  This works to his favor, as it lets me and my wife get out all the concern and anxiety around having lost all the photos our children.  He listened very patiently, would have let me go all afternoon, if that was going to be needed.  As he listened, he then started asking a few questions about what happened with the specific drive, how big it was, when it had failed, had we continued trying to use it after we had had it fail, etc.

After about 20 minutes, our Advisor suggested his path forward.  First off, as we only needed photos recovered, he thought we’d qualify for a price point that was roughly 40% less than their normal drive recovery.  This was a relief as this ain’t cheap.  Second, and frankly more important, he was confident that they could have excellent chances for successful retrieval.  This is what I wanted to hear.

I wanted to hang up immediately and get myself up there to hand off the disk, but he then asked that I work with him to answer some more questions, as he walked through what they woudl do with the disk and how it would work.  This turned out to be awesome–he made me understand that they do this all the time, that the disk failure I experienced was very common, etc.  Now I was in the car and ready to run stop lights to get to him to save our photos.

DriveSavers Office.

DriveSavers office in Novato has its entry wall covered with photos of celebrities who have had their drives saved by them.  The Late President Gerald Ford, Bruce Willis, Brad Bird (writer/director of Pixar’s The Incredibles), Johnny Depp, etc.  That wall dropped my blood pressure even further.

The people in their offices had the same message as our initial advisor–they’d have the disk back to us in about 5 business days, all the content they could recover put onto a brand new drive we provided.  They also gave us a phone number to call anytime–24/7–in case we wanted to check in.

Very impressive.

5 days later.

5 days later, they called me to let me know that our engineering supervisor, Bohi Nadler, had successfully signed off on a saved data set that we could pick up at our convenience. My wife drove up to pick up the photos.  We have the business cards of the specific engineer who did the work, a set of new tips on how to manage data backup and recovery at home to a stronger degree than ever before.  (We now use 2 HD backups and have all our photos on Smugmug as well.)

I love these guys, and had to share the experience a bit.

Lessons on customer service

This experience really showed me how few companies really get on it regardign customer service.  Here are some of the key tips and techniques that I think are important:

• Have someone answer the phone, and if not, then at least be super responsive.
• Let your customers vent, listen, and guide them through your solution.  This both disarmed me and gave me a sense of hope.
• Always offer a deal.  It was very smart of them to offer me 40% off for a Photos Only recovery.  I felt it was expensive, but at least not full price.  I was “saving” money.  Help your customers feel like they’re saving money, always.
• Get every human at your company to have a consistent message to your custoemrs.  Having the receptionist have the same information as the sales advisor and the engineer made a difference, I felt as though they knew who I was and were willing to help me.
• Humanize the service–they told me the name of the perrson who actually did the work.  Having a name behind the work made me feel even happier about hte experience.

I can hardly believe that a data recovery service can create such a positive feeling in their customers–part of it surely is the magic of finding what is lost that is valueable.  But I truly believe that their ability to think through the experience they want their customers to have is waht makes their business truly stnadout.  We can all learn from this, and I wanted to both share my tgratitude and my lessons.

Filed under: entrepreneurship, marketing, technology , business, customer service, marketing, technology

Founder’s Tips: The Forbes 400 Test for Ideation

This week, I had the opportunity to speak on naming / branding as a Mentor at Adeo Ressi’s TheFunded Founder’s Institute on Naming & Branding.  (I may post slides in an update, depending on permissions.)  The presentation went very well.

One of my favorite things about Silicon Valley and about the Founder’s Institute in particular is getting the opportunity to meet and interact with so many founders and entrepreneurs, people taking big risks to bring something new to the world.  It’s hard hard work, and the people willing to truly put in the time and focus to make the world a better place are worthy and interesting–whether their idea wins or loses in the marketplace.

After my presentation on Tuesday, I had the opportunity to catch up  with a number of the founders participating in the Founder’s Institute.  A lot of passionate energetic folks, working through the process of starting a company.  As I reflected on my conversations, one theme we discussed was around the idea and how I think about them.  Trip Adler, who spoke at the Founder’s Institute a few weeks ago, talked in his session about ideas, and different philosophies and strategies on this.  Y-Combinator’s Paul Graham asks teams to build something people want–a good idea, simple and hard to do.  Trip suggested other approaches as well–e.g., build something that fixes a problem of yours, adapt a successful business idea in one sector to another, etc.  These are all good and useful.

For me though, I  think its important to be able to cross-check your idea for ‘bigness.’  Starting a company is a big risk. To justify the opportunity cost of taking such a big risk, in my mind, the idea also has to be big.  Most seem to go through the work of sizing and scoping the bigness of the idea by doing market research, looking at industries, etc.  That’s good to do.

Image via Wikipedia

I make one addition though, and that’s what I call loosely the “Forbes 400 test.”   The Forbes 400 is a list of the wealthiest 400 people on earth, and what they’ve done to earn this money. Every year, I read this list, but not in the way you might think.  I’m not reading it to learn about wether Larry Ellison or Paul Allen have a bigger yacht.  I’m not really interested in the bling, although there’s a picture of Paul’s boat Octopus, rumored ot have a crew in the hundreds, including 15 ex-Navy SEALS.  What I get from reading and studying the list is an intuitive sense of what an idea needs to be in order to be large.  Think about it.  Many of these folks created entrepreneurial businesses that have been massively successful, based on big ideas.  When I pattern match thos ideas, I see ideas that are broad in scope and impact, while at the same time being simple to understand as a value proposition.  (Think Wal-Mart–’we sell for less.’)  For me, spending 45 minutes, reading up on these folks and then looking back at an idea is quite grounding.  It helps me assess whether my idea would ever have an opp

ortunity to be that broad in scope and a value proposition that simple.

I’m not saying you need to aspire to be on the Forbes 400 (I don’t begrudge you if you do!).  This is purely an exercie to cross-check your idea at an intuitive level.  I’d argue that your idea had better be big to justify doing it.  Reading about the folks who’ve started some of the biggest entrepreneurial waves on earth is a good way to get your mind oriented towards whether your idea could ever stand on that stage.

Filed under: entrepreneurship, venture capital , entrepreneurship, Ideation, Silicon Valley

HPs bet on touchscreens–forgot to tell us why a customer will care

I saw this article in the WSJ, talking about HP’s bet on touchscreen technology to review PC sales.  They are apparently getting these things solds in to things like airports and luxury boxes, etc., and that’s great.   We will need this technology to be mainstream and everywhere, so I’m thrilled that HP’s doing this work.  We will all want this stuff someday– I want my bathroom mirror or my desk surface to someday be a touchscreen PC that can let me scroll through email, tracking key news or whatever.  Seems a reasonable and easy thing to foresee.

The thing that this article didn’t have and what I think is limiting this technology today is  this: a scenario that a user would care about.  This was a miss in the article, from a PR point, or whatever, it’s notable that there’s not a single mention of what a customer might actually care about using the technology for.  Lesson for any marketer here–make sure taht you are pitching very hard this statement whenever you’re gettin gan article written: “here’s why a customer will care…”

It’s an interesting contrast to look at the side project that TechCrunch has been putting together on their little touchscreen web appliance thingy.  They ooze passion about the user scenario they care about–I’m sitting on a sofa and I want to surf the web with a screen.  Easy to grok, clear why customers would want it.  I’d argue strongly that this is a more approporiate use of the opportunity for press than the HP WSJ article.

Filed under: entrepreneurship, technology , HP, marketing, PR, technology

Week of 5/8/09 Tech Roundup in 15 minutes

I’m going to try something new this Friday–a mini-blog post where I time bound to 15 minutes observations, etc. on the week in tech.  Feedback welcome on whether useful. 

What a week, just to cover a few of the high points that I thought were interesting in 15 minutes:

• Amazon launched a new Kindle.  Here’s what I find so amazing, having been in software platforms for 10 years—basically everyone had declared hardware to be dead.  Now if you look at two of the 800# gorillas of technology, Apple and Amazon, the wind is at their back precisely because they built dedicated, innovative hardware.  Lesson for entrepreneurs—ignore people who pronounce stuff dead, unless their an MD.  Awesome.
• Twitter rumors hit pretty strong peak, now looks like no sale.  I admire Twitter’s approach and have come to really enjoy their product.  I love that they’re in no hurry to sell, and I’d say rightly so.  The wind is at their back and will continue to be so.
• Speaking of which, I heard someone today talk about Twitter’s 40% account drop off cliff after a month.  My answer: who cares! ?!  The glass is more than half-full—60% of their accounts stay on for more than a month.  That’s goodness!  In all seriousness, the increasingly powerful thing that Twitter does is it creates a real-time web.  Just like YouTube with user videos or with blog platforms, whatever, you have some number of creators and some number of consumers.  In Twitters case, they’ll quickly have the biggest number of creators worldwide, for a scenarios that’s useful—real-time information.  I predict that in short order we will use Twitter as a search front-end for real-time events—this applies whether I”m a Twitter account holder or not.  In this future, you don’t need everyone sticking around with their accounts.  And of course,once ore and more people use the network the draw will get increasingly strong to draw people back.
• Microsoft Windows 7 RC release, and it looks like its going to be a hit.  I predict MSFT gets a strong step forward in its momentum with the release of Windows 7.  There is enough hardware innovation in the ecosystem and the power of the software is looking great.  The public download experience was clean and simple—note there was no real outcry about this.  The buzz from even MS haters is that W7 is looking pretty good—here me now and believe me later, W7 is going to be a hit.  This will provide good wind at the back of MSFT as they take next steps on Silverlight, Azure, etc. 
• Wolfram Alpha ran the gauntlet in the press.  Geesh, you’d think that Google wasn’t just destroying the news, but that they actually at this point owned it all too.  WA did a public talk-through of their product, which got lambasted for not first showing screenshots.  Then folks reviewed it in comparison with Google a product that’s been in market for 10 years.  I’m glad RWW at least was willing to admit that WA looked like it had some benefit to real academics and so on.  This is a completely legitimate starting place, which I recall was how Google got started.  Of course, that was before they owned the news….
• The Founder’s Institute closes applications for summer session and gets a bumper crop of Mentors (present company excluded) .   Caveat: I’m involved with this, and I’m super excited about the opportunity to work with the great bunch of new founders and existing mentors to create great companies and great entrepreneurs. 
• Seesmic releases new update.  I’m running out of time.  I’d still review Tweetdeck ahead, given that I like its white text on black background more.  but I do think Seesmic does a nice job with search.  I have no idea how either plans to make any money but hey, I”m glad I got them. 
• Final thought/ Post of the week: be sure to read Seth Godin’s thoughtful post Too Much Free.  It takes 30 seconds, and its useful to any entrepreneur.  My quick input—don’t be too lazy on thinking about business model and say ‘free and we’ll figure it out later.’ I can count on 2 hands the number of companies that have succeeded in building a great company built around charging no money to anyone.  If you’re clear on two things when building a business, be clear on what problem you’re solving and be clear on how you’ll pay the bills. 

I’m out.  15 minutes. 

Filed under: entrepreneurship, technology , Founder's Institute, internet, Kindle, technology, Twitter, Windows 7

Terminator 2 and thoughts on “Are you really an Entrepreneur?”

In the second of Bernard Lunn’s very useful posts Are You Really an Entrepreneur? – ReadWriteStart, Lunn goes through 10 things to think through to assess whether you’re *really* an entrepreneur. Its useful and good, recommended reading.

In considering these questions, I’d suggest an image—that of Arnold as the the Terminator in Terminator 2.  In a way, he’s the ultimate in what you’d want to have as an entrepreneur.  Here’s what I mean:

1. The Terminator has been sent from the future to present day for the purpose of changing the course of history.  That sense of purpose is exactly as focused and driven as you want to be as an entrepreneur. 
2. The Terminator stops at nothing to pursue his goals.  Ditto that for any budding entrepreneur.
3. The Terminator takes in as much data as he can, adapts, and learns.  Throughout the movie, the Terminator in T2 shapeshifts and does generally whatever he needs to in order to stay in pursuit of his goal.
4. And finally, and most importantly, the Terminator really can’t be killed.  Of course, he’s in a movie, but this is emblematic.  This refusal to quit, the mental toughness, this is probably at core one of the biggest and most important single elements to long-term opportunities at success.   Setbacks will appear and they will hit you in the gut when you least expect it.  How you regroup and continue forward is key.  Arnold’s Terminator is an image worth remembering. 

Making a decision to head into the world of startups is a big one—Mr. Lunn’s ideas and writing is useful and efficient.  I’m hopeful that this adds a useful, vivid metaphor for some of the elements and important questions anyone needs ot ask. 

Filed under: entrepreneurship, technology , entrepreneurship

Stackoverflow & MySpace : A study in (stark) contrasts

Two posts over the last 24 hours caught my eye due to the stark contrasts between them.  Imagine you knew nothing about the two companies, just had the video below on StackOverflow or the TechCrunch article on MySpace—which one would you be betting is ramping up on momentum, and which one is basically without clear direction? 

The moral of this story is very simple: companies that articulate concrete, useful end-user scenarios do well; those that don’t struggle. 

Case 1: user-scenario centric.  Joel Spolsky gave a talk at Google’s campus on StackOverflow.com “a free question and answer site built by developers for developers that has fostered a strong and committed online community in under one year.”   

It’s an informative talk, embedded below.  I could happily recommend it to any entrepreneur, as it is does such an effective job walking through the problem Joel saw, the competitive landscape, and how his team worked on StackOverflow as a solution.  It made me interested enough to go to the site and play around – even though I have nearly zero business being on a site for developers. 

 

Contrast this with TechCrunch’s article Former MySpace Chairman Richard Rosenblatt’s Advice To The New Executive Team.  While Rosenblatt goes to lengths to describe why he is hesitant to give advice, he then dispenses with “general thoughts on where MySpace can push forward.”  (BTW, don’t you love how people say they don’t want to give advice, and then they do so?!?)

Anyway, Rosenblatt’s advice is admittedly high level, and that’s probably the right tone.  Still, Mr. Rosenblatt’s core thrusts are pretty lame, even for general advice.  His list:

• Own the spaces that only MySpace can
• Transform your unique UGC into marketable media
• Listen to the community and let them guide YOU

Nowhere in his article is there one mention of a single user scenario that is at all interesting to me as a user and consumer of social media.  Yikes.  I get that its not his place to offer “operational” advice.  But still, when someone who’s been affiliated closely with a company, as Mr. Rosneblatt has, and they cannot articulate a single user scenario, then that to me is a sign of real trouble. 

I’m a Rupert Murdoch fan, mainly because he’s built such an amazing track record, and he’s singularly unbowed by the troubles his industry faces.  I’m hopeful that his team at MySpace will hit the ground running and create fantastically interesting end user scenarios that would get me and others interested and involved in the franchise that they’ve created. 

 

 

Filed under: business, entrepreneurship, social media, technology , MySpace, stackoverflow.com, technology

WSGR’s Yokum Taku – the Valley’s Best Start-up Lawyer?

DISCLAIMER: My company, Moonshoot is a client of WSGR and Yokum Taku.  While I think this is a fair commentary, I’m absolutely not above writing a puff piece as a way to try and build kharma / discounts in the future (I am an entrepreneur after all).  So reader beware; you’ve been warned.

About this post: This is partly a post on WSGR and Yokum Taku.  As title suggests, I’ve been happy with them.  Yokum’s work in the industry in general and for us in particular has been great.  Its also my brief lessons learned on choosing and working with attorneys as a startup founder. 

This week, Wilson Sonsini Goodrich & Rosati’s Yokum Taku released the Automated Term Sheet Generator.  It’s like Quicken for Term Sheets.  This is a great thing for founding teams and entrepreneurs.  It enables them to raise initial capital with a minimum of legal fees and hassle, while still promising to ensure decent hygiene for when the firm gets to a point of needing full-time, professional representation.  If you’re just getting started, this is a great resource.   It’s yet another resource Yokum’s help put together to support entrepreneurs and to drive WSGR’s reputation. 

Yokum is also the author of Startupcompanylawyer.com, a super valuable resource for entrepreneurs who have a need to ‘go deep’ on provisions associated with financings.  I’ve done a few, and I’ve found Yokum’s articles here super in helping me get my head wrapped around complex topics.  If you’re raising money and have questions, before you call a lawyer, go to his site, read and digest. 

Yokum is also our attorney, and I’ve worked with Yokum for over a year as a founder.  I’d give him and his team at WSGR high marks.   I have 3 key reasons. 

WSGR actually keeps costs down by providing rockstar Associates.  Many startup founders whom I asked for a recommendation argued against WSGR, on the grounds that they were too expensive.   WSGR’s rates at an hourly level are at the high end, but this is only really half the story. 

The legal bill you get at the end of a month is the weighted average of the following, in general:

Legal Bill = ((Partner (Hours & Rate)) + (Associate (Hours * Rate)) + (Paralegal (Hours * Rate))

Where Rate (Partner > Associate > Paralegal)

Thus to minimize Legal Bill, you need a few things:

• Minimize total time, of course
• Of time you do spend, maximize time that Paralegal and Associate are working

If you think about the total bill in this way, you’ll find then that the real key in managing legal bills is this: find an awesome Associate and Paralegal.  If you can do this through a great firm, then my strong belief is that you’ll be able to manage the cost. 

Our team beyond Yokum are rock stars—our Associate Jesse Chew has my complete trust, and the paralegal Andrew Wang has also been super efficient and competent. 

So benefit to me is that I’ve got Yokum when I need heavy hitting.  At same time, our associate and paralegal can handle the vast amount of legal billing.  I’d estimate that vast, vast majority of billable hours has not needed Yokum.  This saves us cash, while giving me confidence that if the chips are down, Yokum’s available. 

Yokum calls it like he sees it, and helps figure out what to do.  Pay advisors to advise; pay cheerleaders to cheer.  I’ve met several attorneys who make me feel great everytime I meet them.  I come out of meetings feeling like I walk on water, like Venture Hacks might start quoting me.

Having worked in the industry a while though, cheery lawyers spook me a bit–a little like the feeling I’d get if a doctor came in, looked at an X-Ray, and said “uh-oh”.  I feel much more comfortable with an attorney who says, basically “Look, I’ve done this a few hundred times.  You are nuts to think that [insert idea here] is going to happen.  Here’s my strong belief as to what will likely happen.  Here’s what I’d suggest we do.”  This is much more Yokum’s approach, and for me, it’s what I prefer.  May not be for everyone, I get that. 

Responds to everything within the business day.   Though I’ve never heard it stated, Yokum and WSGR appear to have a policy that ensures they get back to you same day, no matter what time of day.   I’ve got a very early stage company, we’re no Google (yet).  Still, as a client, I’m treated well.  This predictability is very nice to have.  They’re the only service provider I’ve worked with about whom I can claim this.  It stands out. 

 

Filed under: entrepreneurship, technology , Attorneys, Startups, WSGR, Yokum Taku