Inter-Sections

A bat signal for the internet

2012-05-26T07:15:57Z

Although I don't like the idea of being a sock puppet for someone else's cause, I also am genuinely worried about the ceaseless attempts to screw up the internet coming from US lawmakers.

An old saying is that each country gets the government that they deserve. Unfortunately, given the US's disproportionate influence on the internet (for now, anyway), we all get the government that they deserve. If the US passes a SOPA/PIPA-like laws, which they will if american voters are not vigilant, we'll all pay for that. The copyright industries in the US are willing to attack the fundamental principles that allow the internet to operate, in order to delay the death of their obsolete business models for a few more years. They have money, lobbyists, access, and persistence.

I believe the best way forward is to stop being defensive and go on the offense. This would mean, rather than a bat signal, we need a batman to go and take down these cartels where they are (no, Anonymous is not it). Or even better than a batman, we need that other guy, before half his face gets burned off, to go and start submitting bills (and getting support for them) that the copyright industries will have to defend against (no, Ron Paul is not it).

As long as we're on the defensive, we only need to fail once to lose, and we have to be vigilant forever. It's a game that's guaranteed to end badly.

Switch to the offensive, and we only need to win once to win.

I understand that truly important rights are enshrined in the numerous amendments to the US constitution. The rights that the internet depends on belong there too, along with freedom of speech, habeas corpus, the right to fair trial, freedom from slavery, and universal suffrage. A law that endangers the internet's basic functioning should be as difficult to pass as a law that allows corporations to buy slaves.

In the meantime, though, a bat signal is a good idea as an intermediate defense measure. I've signed up to this, and will add the script that will enable swombat.com to participate in future group actions against internet-threatening bills (which will no doubt come thick and fast in the next few years).

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A novel way to reduce your startup's cost

2012-05-25T13:16:10Z

Eric Simons had run out of seed funding, but happened to have been incubated in a building with lax security, so he lived there for two months, taking advantage of the couches, gym, showers, free food and office space:

This was his routine: He'd work until midnight or later, and then fall asleep around 2 a.m. on one of the couches. At 7 a.m. -- and no later than 8 a.m. so he'd be safely out of his field bed before anyone else arrived -- he'd wake up, go down to the gym for a workout and a shower, and then go back upstairs and scarf a breakfast of cereal and water or Coke. Then he'd work all day, finally waiting until everyone else in the building had gone home before returning to one of his three favored couches.

In some circles that would be known as desperate. But in entrepreneurial circles, this is simply known as remarkably resourceful. Even more resourceful is the fact that he leveraged this adventure into press coverage that will (hopefully) help his startup.

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Cheap startup advertising

2012-05-24T18:15:59Z

Rob Walling, following on an earlier article about the half-life of traffic sources (go read it if you haven't yet), describes some concrete ways to use paid advertising to get some bursts of usage that (if your site is sticky enough) will then hopefully result in some customers or at least some validated learning. He covers:

Niche Advertising
Google AdWords
Facebook
StumbleUpon
Reddit

Each is broken down and detailed. Definitely worth a read if you're considering using paid advertising to drive some initial traffic to your site. As Rob points out:

To conclude, I want to reiterate what I said early in this article: unless you have deep pockets think of advertising not as a long-term traffic strategy, but as a testing tool to improve your website and find out more about your ideal visitor. Few bootstrapped startups can withstand the cash outlay required to turn advertising into a marketing activity with a positive ROI, but that shouldn't keep you from testing the waters to find out for yourself.

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Cyclical tools

2012-05-24T13:15:59Z

Excellent essay by Sep Kamvar, via Fred Wilson. Highly relevant to startups that want to change the world:

But if I were to suggest one mission for all tools, it might be this:

Every tool should nourish the things upon which it depends.

We see this principle at varying levels in some of our tools today. I call them cyclical tools. The iPhone empowers the developer ecosystem that helps drive its adoption. A bike strengthens the person who pedals it. Open-source software educates its potential contributors. A hallmark of cyclical tools is that they create open loops: the bike strengthens its rider to do things other than just pedal the bike.

(...)

But you can’t measure the impact of tools on their own. You must measure them by the ecosystems that they co-create.

An interesting viewpoint to analyse how worthwhile a product is in the long term. Does it create a positive feedback cycle with open loops?

Interestingly, Sep dismisses the car as not cyclical:

It’s difficult to build cyclical tools because the alternative is so tempting. Cars are faster than bikes. FishVille reaches more people than Moby Dick. At first, cyclical tools appear to be lower-power, slower-growth, and more expensive than extractive tools.

I think that's an easy stance to take but not very defensible. Cars certainly do empower their users and create many open loops, just not in the context of personal health (unless you happen to drive to places where you then do sports like mountain climbing).

Perhaps a slightly more gradated classification is needed. The world is never black and white. Some products (like most computer games) are very close to one end of the scale, while others (like the iPhone) are very close to the other.

In any case, this, and other essays by Sep, are very much worth reading.

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Why pitches fail

2012-05-24T07:17:13Z

Here's a great article from a few years back, by Eric Ries. It breaks down pitches into several types, and examines the key questions that need to be answered by each type of pitch. Worth reading alongside this article, posted a couple of weeks, ago, about startup itch archetypes.

Eric outlines the following pitch types with their relevant "key questions":

Printing money
Promising results
Micro-scale results
Working product
Prototype product
Breakthrough technology
All-star team
Good product idea

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Comic books and web pages

2012-05-24T05:16:44Z

This great article by comic artist Rachel Nabors drawing parallels between the construction of a comic book page and the design of web page. Killer quote:

Both mediums tell stories and convey ideas using words and pictures. People will scan boring or confusing sites as well as comics. In both mediums, you have to either pull readers into a narrative or immediately offer up the meatiest part of the content, lest readers skip to the next page.

Emphasis mine. I'd never thought of it like that, but it makes sense as a general concept of how to think about a page you're designing. Are you offering "the meat" up front, or are you drawing the reader into a narrative?

The article is worth reading if only for all the neat illustrations.

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The mid-size market

2012-05-23T18:16:04Z

My first startup targeted the impossible market of "small businesses online". This was a disaster, since such a wide market presents a couple of insurmountable challenges. First, it's so wide that it doesn't have any specific needs. The problem with that is that the only way to get a new product out on a low budget is to focus on a clearly defined niche and be very specific and therefore better than the generic solutions out there. The second problem was one of marketing: it's impossible to target such a wide market.

Jason Cohen describes another mythical, unattainable market: that of companies with 50-500 employees, or the "mid-size market".

They’re not “small enough to be nimble,” because at fifty employees they’ve already established much of the lumbering process and bureaucracy of companies a hundred times their size. Shackled by budgets and internal politics, technology changes require expensive coordination and retraining, and fear of change trumps potential rewards of improvement.

All this makes for an arduous sales process just like with big companies. But although they have the process and controls of a large company, they don’t have the budgets to match; there’s no large reward for successfully navigating the painful, Herculean sales adventure.

His conclusion:

So my immediate reaction to anyone “selling to middle” is the same: Yuck. If you’re going to do it anyway, I hope you have some nice, extenuating circumstances that truly makes you the exception to the rule.

Jason also rightly points out that "50 people" can mean very different things in different industries. As Peter Drucker points out in some of his books on management, a 500-people factory is a relatively small factory with fairly straightforward operations (this was back in the days when there was less automation, mind you), while a 500-people consulting firm is a very large and complex firm.

Is it possible to crack the 50-500 market with some kind of innovative sales process? I'm not sure. If it is, I certainly don't know how.

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The Toolbox: From idea to launch in 10 hours

2012-05-23T13:16:00Z

The Toolbox is a great little project by Sacha Greif that seems to be "sticking", so to speak. Sacha describes how he built the site in 10 hours:

I realized that there was no such list available yet (or at least, that I knew of) and it seemed like the perfect week-end project. Never mind that it was actually wednesday, that’s just one of the perks of being self-employed!

(...)

The thing is, we’re so busy with client projects and bigger undertakings that we rarely fully exercise those skills. For once, I wanted to have an idea and just do it, instead of writing it down in “the List of Doom” (you know, that list of all the great ideas you’ve had that will never see the light of day).

Great write-up. Have a read here.

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A good day's work

2012-05-22T18:16:02Z

DHH:

You can dangle yourself the carrot that it’s just until you get out of the first hole: “Once we’re live, it’ll all calm down and I’ll be able to relax”.

But that’s rarely how it goes. The reality is that you’re never going to be done. There’s always more work. New initiatives, new customers, new competition, new technology, new ideas.

(...)

One pattern to help yourself fight the mad dash for the mirage of being done is to think of a good day’s work. Look at the progress of the day towards the end and ask yourself: “Have I done a good day’s work?”

Entrepreneurship a marathon, not a sprint. Set yourself targets, beat them, then allow yourself to feel good and relax.

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Perspective on the billion-dollar exit

2012-05-19T18:15:56Z

Adam Siegel:

Instagram sells for $1B. Evernote is now valued at $1B. Pinterest at $1.5B. 3 month old companies coming out of YCombinator are getting investments based on $10M+ valuations. And today will be the Facebook IPO which will likely put a market cap on the company north of $100B.

(...)

As the founder of a small company in Chicago who only took $17k from YCombinator 6 years ago (YC-W06) and now runs a classic “lifestyle” business that support myself and a small team from client revenues, I find myself wavering between being fairly satisfied with the state of my business life to mild depression and jealousy that I’m not in a situation to be cashing in myself.

Adam goes on to offer numerous tips for maintaining perspective while working on a "lifestyle business":

Spend time with friends who are not in tech or startups
Read the newspaper
Go for a lot of walks
Go visit some of your customers in person
Maintain a healthy relationship with parents
Keep a journal (not a blog)
Find a therapist, life coach or mentor
Appreciate your time more

Those seem like good things to do whether or not you run a billion-dollar startup.

However, addressing the point of billion-dollar-depression head on, it seems to me that the problem is more to do with a fundamentally incorrect perspective than with specific daily habits.

Generally, people looking to build those mega wealth successes are either insanely obsessed with money/control/power/etc (I'm not addressing this post to them), or just wish to have a great impact on the world - to make a dent in the universe, in other words.

It's a commonly repeated fact that the difference to your lifestyle from having $10m (or revenues that provide an equivalent lifestyle, e.g. $500k-1m/year of revenues) versus having $100m is much smaller than the difference between $0 and $10m. There's a very strong law of diminishing returns in application to the value of money. So as far as money goes, having a "lifestyle business" that provides you great but not headline-grabbing returns seems like a perfectly fine deal.

The depression can then only come from the lack of impact. It seems perfectly reasonable to me that people should wish to have a great impact on the world, to make a lot of people's lives better, to be a force for good and improvement and progress. So far, so good (though not everyone feels like that - some people are happy to simply enjoy their lives and be good people).

It's well-known that luck plays a huge part in mega-successes like Facebook, Instagram, and so on. There's a good reason why this merry game is called the "startup lottery". The chances that you will pull a billion-dollar business from the magic hat are very slim. Obviously, if you do, great - but you can never count on such an outcome.

The fallacy in that depression is the implicit assumption that your current business is the only or greatest thing you'll ever do with your life. This may be true for someone like Mark Zuckerberg. Topping Facebook is going to be a struggle. To an extent, it's Mark who should be depressed. How will he top what he's already achieved? How can he give his life a meaningful direction upwards?

For most of us, though, we have not only the current business we're working on, but the rest of our lives (short or long) to make an impact and change the world. That your current business will not change the world doesn't mean that your next one won't. If you want to change the world, you are even more likely to be able to do so from a base of wealth and competence (after running a successful business for a few years and becoming a millionaire in the process) than when you're broke and fresh out of uni.

Keep in mind that changing the world takes time, and that you don't have to hit the ball out of the park first time. Changing the world in your twenties is a lottery ticket, not a plan. Viewed through this lens, the "billion-dollar depression" seems, well, absurd.

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Email subscriptions and linked posts

2012-05-19T10:20:36Z

First of all, it's awesome for me to be able to say that there are as of today 620 subscribers to swombat.com. Thanks to all those who have subscribed! I feel that email is a much better medium than RSS or Twitter to get user engagement.

If you're reading this in your email, you should know that if you ever have comments on one of my articles, you can simply reply to it and I will receive your email (and read it!). My speed of reply has been less than stellar, but I do read every single email I get, and eventually get around to replying to it.

Linked posts

The other bit of news is that back in February, I added email options that enabled people to select whether they received full articles, linked posts or even reposts in their mailboxes. I set the default to full articles only (max of 1 per day).

Then, recently, I thought I'd try changing that default. So I've checked the "linked posts" checkbox by default for people who sign up. I did that just a week ago, and the result is a whopping 122 people signed up for linked posts.

Linked posts are those articles where I link to someone else's awesome article. In many cases, those articles are better than my own, so it makes perfect sense for people to be signed up to those. I also post them more frequently than my own articles (max 4 times a day), and they include some additional insight when I can provide it.

If you subscribed before May 11th, you are probably not receiving linked posts. I warmly encourage you to give those a try: click on "change your options here" at the top or bottom of this email (if you got this by email) and you can check that checkbox and give linked posts a try.

If it turns out you don't like linked posts, you can always uncheck that box later.

If you're not reading this via your email client, subscribe now! It's completely free, of course, and you can unsubscribe any time if you don't like it.

Let me know what you think

Few people have taken advantage of the ability to reply and have your email go straight to me. I guess it's unusual for a feed to allow replies (everyone sends emails from "no-reply" email addresses - imho, they miss out on ways to engage with users because of this). Feel free to reply to this or any other email you get, if you have thoughts, opinions, feedback, etc.

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How to increase user engagement

2012-05-19T05:16:27Z

Des Traynor runs one of the best blogs on User Experience around. If you're not subscribed, I highly recommend you do. He's consistently pushed out excellent, thoughtful, instructive, beautifully illustrated, useful articles about various aspects of designing a startup's product as well as the hidden bits like analysing user behaviour.

This particular article focuses on how to increase user engagement, and suggests several specific techniques:

Make a strong impression
Always show a welcome message (presented in such a way as to start a discussion)
Gradually expose the depth of your product
Define a message schedule
Announce features and improvements in-app
Talk with customers during trials

Great stuff. Read it.

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How to price seed, angel and VC rounds

2012-05-18T18:15:47Z

Great article by Charlie O'Donnell:

More simply, the better the team, the lower the risk, and the higher the expected outcome, the more you're going to be willing to give a team and the longer you'll let them go until their next fundraising.

(...) Usually, teams are asking for enough money, plus a cushion, to get to some milestone roughly 12-18 months out.

So, ask for more and you're get a higher price IF the investors think you can handle it and you need it.

Generally, each round is going to set you back between 15-30%.

The way that rounds always end up diluting by 15-30% seems mystifying to industry outsiders. How much will I get diluted if I raise $500k? 15-30%. What if I raise $1m? 15-30%! $10m? 15-30%!

This reflects a deep pragmatism of entrepreneurship and venture/angel investment, based on the fact that no one has any god damn idea what a startup is worth anyway, so the figure is instead chosen based on a balance of:

Not diluting the entrepreneur so much that they become demotivated
Leaving room for further funding rounds without demoralising the founders
Providing enough cash so that, if the founder was roughly in the right ballpark, they will get 12-18 to execute on their vision before needing to raise another round or become cash-flow positive.

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The bastards book of Ruby

2012-05-16T18:15:54Z

The best way, and reason, to learn a programming language is to do something with it. Here's a book that describes itself thus:

The Bastards Book of Ruby is an introduction to programming and its practical uses for journalists, researchers, scientists, analysts, and anyone else whose job is to seek out, make sense from, and show the hard-to-find data.

This does not require being "good at computers", having a background in programming, or the desire (yet) to be a full-fledged hacker/developer. It just takes an eagerness to be challenged.

This practical focus (also mentioned in comments on HN by people who have read/used the book), along with the fact that it's designed for people who don't know how to program, and also along with the fact that Ruby is a delightful language to program in (a completely non-controversial statement!), makes it a great starting point for people who are willing to shun Jeff Atwood's terrible advice and instead follow Sacha Greif's, Zed Shaw's, or even mine.

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How to generate startup ideas

2012-05-16T13:15:51Z

Wesley Tansey proposes a number of techniques for generating startup ideas. The techniques are useful tools to expand your repertoire of techniques, but the key point, in my opinion, is after the list:

One important thing to remember is that these are not meant to be options that you choose at the start. Rather, consider each of these strategies to be a background process that runs continuously in your mind. Every time you encounter a problem, if it may be solvable by one of these strategies, that’s a potential startup idea!

This echoes what I've pointed out before: the way to generate ideas for businesses begins with a continuous process of evaluating business opportunities, rather than business ideas, around you.

That said, once an opportunity has been flagged, Wesley's techniques can help to define what sort of opportunity it is.

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Cold calling versus AdWords

2012-05-14T07:15:45Z

Here's a great article by Robert Graham, where he explains how he developed a cold-calling approach to generate early leads and enable himself to figure out what his intended customers wanted.

Robert takes us through the evolution of his cold call pitch, culminating with a win-win approach that worked out for him:

Sure enough, each and every prospect, skeptical or not, I used this pitch on agreed to have me out. I booked a week of appointments in a handful of calls. I was so successful, I was forced to start telling people I would contact them the following month to set a date. I had too many appointments and too many blog posts to write. Making the pitch a true win for both of us was the magic that generated the 100% conversion to the next step, but each small piece of experience and learning contributed to that success. I learned a lot about my business from each visit. I didn’t close 100% to sales, but those relationships have yielded a lot more than a simple close. Many people have contacted me weeks or months after our first conversation and ask if I’m still solving the problems we talked about.

It's worth noting that this specific approach won't necessarily work for all industries. For example, it would be disingenuous for GrantTree to start posting reviews of tech companies and use that as a bait to get companies talking to us. That being said, looking for a genuine win-win is a great idea.

Read the whole article here.

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How to scale a development team

2012-05-14T05:15:59Z

Here's an interesting article by Heroku founder Adam Wiggins on managing the expansion of a startup's development team through its life, using Heroku as an example.

Some thoughts:

The light touch approach early on feels right to me based on my management experience. More formal processes are more likely to hurt a small team than help it. That said, that depends on the team, and also on whether that team is distributed. If you don't get to be in the same room every day, even with just 3 people you probably need to put in place some kinds of processes to keep everyone in sync.
The split into functional streams in "stage 3" is just one option. Many other companies find that cross-functional teams focused around specific features or subprojects work better as an organisational approach. Being a very technical product with very heavy infrastructure demands, a functional split may have worked well for Heroku, but be sure to consider cross-functional teams too.

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The right kind of ambition

2012-05-11T18:15:35Z

A comment by Marcus Frödin pointed me to this excellent article by Ben Horowitz, that I somehow missed when it came out.

Ben offers some great advice on how to select the right kind of people to join your company, particularly when it comes to salespeople:

People who view the world through the me prism might describe a prior company’s failure in an interview as follows: “My last job was my e-commerce play. I felt that it was important to round out my resume.” Note the use of “my” to personalize the company in a way that it’s unlikely that anyone else at the company would agree with. In fact, the other employees in the company might even be offended by this usage. People with the right kind of ambition would not likely use the word “play” to describe their effort to work as a team to build something substantial. Finally, people who use the “me” prism find it natural and obvious to speak in terms of “building out my resume” while people who use the “team” prism find such phrases to be somewhat uncomfortable and awkward, because they clearly indicate an individual goal which is separate from the team goal.

(...)

Throughout our interview process, candidates would take sole credit for landing extremely large deals, achieving impressive goals, and generating company success. Invariably, the candidates who claimed the most credit for deals would have the most difficult time describing the details of how the deal was actually won and orchestrated. During reference checks, others involved in the deals would tell a much different story.

Read the full article here.

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What is a technology company?

2012-05-11T13:15:35Z

Here's a thoughtful article by Alex Payne trying to pin down what a technology company is, and what we should call businesses that rely heavily on technology but don't strictly sell technology.

As Alex points out:

...this mis-labeling results in the conflation of companies in totally different industries applying totally different business models, all being funded and staffed and reported on by the same pool of people. If we remove the label of “tech startup” – and with it the hypothetically stellar trajectory we like to imagine such businesses are on – we’re forced to confront the reality of a business’s model, independent of the reverberations of the echo chamber.

At the same time, it's interesting to note (as Alex does) that all businesses are converging towards being heavily technology-driven. Because of this, and because of the extent to which companies end up relying on technology, I don't think it's clear that a company is not a technology company just because they don't "sell technology".

For example, one of our R&D tax credit clients sells flowers. By Alex's definition, this wouldn't count as a technology company. And yet, scratch the surface, and you may find out that this company doesn't just leverage technology as a side-effect. It's part of their competitive advantage. What this specific company has done is custom-build a complex logistics backend that powers their sales and enables them to dynamically adjust and predict pricing and products offered based on the availability of flowers across Europe. Take away this technology, and the company probably wouldn't function.

How about another counter-example, in the other direction: a small shop that builds custom computers to order and ships them out is "selling technology" to their customers. Are they a "technology company"? Not really, because they don't invent any of the technology.

I'm tempted to take a more inclusive view than Alex, so I would argue that a company is a technology company when custom-built technology is critical to what they do. By this definition, large banks are indeed technology companies, since they do enormous amounts of in-house, custom software development and they cannot function at all without that technology.

What about the nefarious effects of calling "tech startup" a company that isn't really a technology company? I'd argue that a company which develops its own technology tends to do so in order to scale better. A company which sells flowers via a dynamic logistics system is radically different (and scales in very different ways) than a company which does all their flower purchasing manually, so they should certainly be treated differently by investors.

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The salesman and the developer

2012-05-11T09:19:23Z

A salesman and a developer go on a bear hunting trip.

They arrive at the cabin in the woods and start unpacking the car, moving stuff into the cabin, getting things ready for a week of bear hunting in the wilderness. The salesman quickly gets bored of this and says:

"Tell you what, you continue unpacking and getting everything ready, and I'm going to go and find us a bear."

The developer sighs and nods (he's used to salesmen), and continues setting up while the salesman vanishes in the woods.

Half an hour later, as the developer is about three quarters done with getting things ready (the cabin is now all neat and tidy at last), he hears a very loud growl as he comes out of the cabin. Twenty metres away, the bushes start shaking. Out shoots the salesman. Right behind him, a huge, snarling, drooling, roaring monster of a bear. It's twice the size of a normal bear, and it's very, very angry.

As the developer hides behind a chair, the salesman runs right up to the cabin, with the bear on his heels, and just as he's about to go through the door he quickly leaps to the side. The bear crashes past him right into the cabin, and the salesman deftly closes the door right behind, locking the bear in. Loud noises can be heard as the bear begins trashing the inside of the cabin.

The developer emerges from behind the chair. The salesman cheers and says:

"Woohoo! That's the first one. Now, you kill him and skin him, I'll go find us another!"

Two perspectives

There are two ways to understand this story, and which way you favoured largely depends on whether you're a "builder" type or a "sales" type.

If you're a builder type, you see this as a great story that illustrates a common problem with salespeople: they don't seem to care about what happens after they make the sale. Actually delivering the project is hard work, but by then the sales guys have moved on to something else, so they don't care (and, as an additional problem, in some industries the salespeople will sell stuff that can't be realistically delivered).

However, if you're a sales type (like my cofounder, Paulina), you have a different perspective on this story. It's yet another story that makes fun of salespeople while completely discounting just how hard it is to not only find that damn bear, but bring it back and get it through the door.

Who's right, then? Both, of course. In business, you need both to find and sell clients, and the ability to then deliver what you sold them. One without the other is not a business.

Sales is not optional

Many people who "do startups" these days are from a technology background. In other words, they're builders rather than salespeople. And, like all builders, they tend to disregard sales as something that can happen later, something secondary that we'll solve when we get to it.

Well, sales isn't secondary. Speaking as a builder type myself, and having experienced businesses both with competent sales and without, I now believe that having someone whose job it is to go and find clients willing to give you money from day one is so important, that I would not start any company without such a person.

Sales don't happen without someone energetically pushing the product, service, or whatever it is you're intending to sell. Some may dream of products that sell themselves, like Dropbox or the original Apple II, but even awesome products like those took serious sales effort to get off the ground. Apple had Steve Jobs, one of the master salesmen of his generation, pushing the product everywhere he could and striking bold deals to get the company off the ground. Dropbox endlessly tweaked their referral scheme before they went viral.

Some few businesses like Google or Facebook or Instagram get to figure out the business model later. They can do without sales, perhaps. But this model only works in one place in the world, and unless you're starting up in the Silicon Valley bubble, your business is not a business without sales.

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