Today is Demo Day for Techstars Boston.  I love Techstars Demo Days for many reasons, not the least of which is the amazing community that gathers to hear the brief, well-rehearsed pitches from the various start-ups who have spent months planning for this big event.

As accelerators like Techstars gain in popularity, many entrepreneurs wonder whether they should be applying and, if admitted, joining an accelerator and when they shouldn't.  I get this question a lot from my students, particularly as they're graduating and scrambling to figure out where they should start their company, how to raise capital and whether an accelerator is right for them.  Here are a few guidelines that I would think about if I were an entrepreneur making such a decisions.

First, broadly speaking, accelerators serve a very valuable role in the entrepreneurial ecosystem.  In many ways, as Eugene Chung of Techstars NY points out, they are like finishing schools for entrpreneurs.  Like a college, there is a rigorous admissions process.  And once admitted, the participant receives an extraordinarily rich education, in this case in the field of entrepreneurship.  Also like college, the best accelerators represent valuable networks, where your "classmates" and even other alumni as well as boosters all become a part of your professional support system.  Finally, the brand of the network will always be associated with your brand.  Dropbox and Airbnb will always be known as "Y Combinator companies", which initially helped buttress their brand, and more in more is helping enhance the Y Combinator brand.

So with that in mind, here are a few reasons when I think an accelerator is a great choice for the entrepreneur:

That said, not all accelerators are created equal.  Just like with a college, your personal and professional brand will always be associated with that particular accelerator, so choose wisely.  Some accelerators specialize in certain domains (e.g., Rock Health for healthcare or Learn Launch for edtech).  Others have stronger reputations for fundraising vs. product development.

If you want to get a sense of the quality of the particular accelerator you are considering, you should ask around about them - graduates, senior entrepreneurs, VCs, start-up lawyers, bankers and accounting firms will all have their opinions.  One tech reporter, Frank Gruber, publishes an annual ranking of accelerators that is pretty good, although it leaves out hybrid organizations that aren't technically accelerators, like Boston's Mass Challenge (which is a contest) and NYC's First Growth Venture Network (which doesn't take any equity).

Accelerators are thus not for everyone.  If you are already well-connected to a particular entrepreneurial community, have a entrepreneurial track record and network, and are comfortable with your fundraising skills and relationships, then an accelerator probably isn't worth it for you.  But if those attributes don't describe you as an entrepreneur, an accelerator may be an excellent choice.

Now...off to demo day!

I was invited to testify at a Senate hearing tomorrow in front of the US Senate Committee on Commerce, Science and Transportation.  Below is my planned testimony.

(update: the video of my initial statement is below and the full hearing video is here) 

My other SlideShare presentations are here.

My first time jumping into the start-up world was as a freshly minted Harvard MBA in 1995.  As my classmates were rushing off to high-paying, high-powered jobs on Wall Street, I joined a Series A start-up with 30 employees as a product manager, making $65,000 per year - lower than my pre-MBA salary at management consultancy The Boston Consulting Group.  Since then I've had a terrific ride, but I often think of that fateful decision when I get asked, repeatedly, by other freshly minted MBAs:  "How do I get a job in a start-up?"  Or, more generally, "How do I even begin to find and assess start-up job opportunities - I don't even know where to start?"

The start-up universe is a large one and can seem overwhelming and impenetrable to the uninitiated.  In order to narrow things down, I recommend following a simple, four-step heuristic.  Here's the advice I give:  

• Pick a Domain.  First, figure out your passion in terms of domain.  Are you more of a B2C type or a B2B type?  What blogs are you reading?  What articles in Techcrunch or the Wall Street Journal capture your attention?  What companies are your dream companies to work for?  Answering these questions will help narrow down a set of domains that you are excited about.  It can be more than one, but it shouldn't be more than, say, three.

• Pick a City.  Next, figure out where you want to live.  Again, there may be multiple options, but ideally one or two favorites.  Each start-up community has its own plusses and minuses, quirks and idiosyncracies.  I find that once young people choose a particular start-up community, they stay there.  It's a natural phenomenon - they build relationships over time that lead to one opportunity after the next.  Your co-workers in one start-up become your co-founders in another.  Thus, young professionals should be thoughtful about choosing a city early in their career because of this "settling in" phenomenon.

• Pick a Stage.  Next, determine what stage company you prefer to work in.  Do you want a company that is still in the jungle phase (hacking through and trying to establish a path to success), the dirt road phase (established initial product-market fit and now trying to execute and scale in a relatively clear direction) or the highway phase (optimizing and scaling along a well-trod path)?  This decision should be made somewhat based on risk appetite and somewhat on personal makeup and preferences.  If you are a risk-taker and enjoy the challenges and roller-coaster ride, then the jungle phase is for you and you should bias towards seed funded or recently Series A funded companies that are pre-revenue.  If you are more conservative, want a good salary and prefer to pick a "safe" winner, then a highway phase company that is pre-IPO or recently IPO'ed is the right choice. 

• Pick a Winner.  Now that you have your target domain, geography and stage, focus on picking out a few winners - the hot companies that everyone thinks has great momentum and potential.  After all, why would you want to work for anyone other than the absolute hottest company in a given category?  How does an outsider figure out who the winners are in a given domain, market and stage?  Ask a handful of insiders.  Find the top 3 VCs, angels, tech lawyers and headhunters in your target geographical market and ask them for the two or three hottest companies that match the domain and stage you are interested in.  Compile this list, pressure test it, and see what patterns you find.  The firms who get the most mentions with the most compelling underlying evidence will naturally rise to the top.

Below is a sample chart that I put together answering the question for someone interested in either e-commerce, mobile or SaaS companies in SF/SV, NYC or Boston.  The first company listed is an earlier stage company (either jungle or dirt road) and the second company is a later stage company (either dirt road or highway).  This list is illustrative - just to make the point - not in any way attempting to be comprehensive.

(full disclosure:  tracx, 10gen and Savingstar are Flybridge portfolio companies)

Once this heuristic is complete, you now have your target list.  The next step is to get warm introductions to the target.  This is easier than you would think.  LinkedIn is an incredibly powerful tool, as are the various alumni databases.  VCs are often happy to pass along your resume and background to their portfolio companies - after all, they are doing them a favor by sending them highly qualified talent.

In general, the start-up community is so incredibly generous with its time and has such a strong "pay it forward" culture, that with tenacity and time, you can get to almost anyone.   In fact, I recommended you aim high.  Use this heuristic to narrow down your search and then list out the 10 people that would be your absolute top choices to sit down for 30 minutes with face to face.  Then, go after those 10 people in any way you can (without stalking them or being a nudge!).  These networking meetings will help you establish valuable relationships, even if the job fit isn't there.

In short, be organized, focused and tenacious.  Aim high, seek out the incremental networking meetings and pick yourself out a winner.  Things may not work out, but at least you're putting yourself in a position for a little positive serendipity.

In classic economics, deflation - a downward trend in prices - is a dangerous force that leads to recessions (see:  Japan, economic disaster - a case study).  In the world of the Internet, deflation viewed as a positive force, leading to massive consumer gains.  How can we reconcile these two competing beliefs?  And what impact will this deflationary pressure have on the production of high quality content?

I've been thinking a lot about deflation and its impact on the Internet economy since reading two articles in two different newspapers this last week.  The first was this article in The Economist about the music business.  The article contained a chart showing music industry revenues peaking in 1999 at $27 billion and dropping consistently as a result of the disruptive power of digital music and iPods/iPhones.  Industry revenue may have finally flattened out at $16.5 billion, but the bigger story is that over $10 billion of value has been taken out of the music business thanks to over a dozen years of digital disruption.  Artists are still producing a ton of music (I would guess music proliferation has grown during this period, although I haven't seen the data), yet the Internet has produced massive deflationary pressure.

The second article that I was struck by was in the Wall Street Journal, depicting the explosion of online video.  Titled, "Web Video:  Bigger and Less Profitable", the article reports on the rapid growth in online video views (39 billion in December), yet the fact that prices are dropping rapidly due to the oversupply of video inventory.  The CPM (cost per thousand views) that advertisers are paying has dropped from $17-25 in 2011 to $15-20 in 2012.  Advertisers and content producers are used to this trend.  Whenever a new advertising medium emerges, prices are high at first, and then steadily drop as inventory swells (I wrote about this in a post that provided a bearish analysis of Groupon back in 2010).  Every content business today faces this rapid drop in CPMs across every category, resulting in severe cost pressures.

So if the producers of music, video and other content are getting hammered on deflation, who is benefiting?  Consumers.  Consumers are getting access to music, video and other sources of content for less.  They're also getting subsidized by business advertisers through social networks and search.  McKinsey did a study a few years ago that sized the consumer surplus from the Internet at over 100 billion euros.  Interestingly, they concluded that in measuring this surplus, consumers have benefited 85% of the gains from the Internet as compared to 15% for producers.

Thus, while the business press is full of stories of disruptive gains in business transformation, the real story of the Web is the power of the consumer and the massive gain consumers are receiving.

Although I am thrilled with the consumer surplus, I struggle with where this logical chain is eventually leading us.  I worry that if there is too much deflation in content, that this consumer surplus will hit a natural limit.  That natural limit will be that content producers will stop investing to produce high quality content.  After all the inefficiencies have been wrung out of the system, eventually fewer producers of content will be willing to produce great content because the rewards just are no longer there.  If this were to happen, consumers would be all the poorer for it.

My conclusion:  although deflation has produced awesome consumer gains in the last decade, it is emerging as a real threat to content producers.  But at some point, perhaps soon, it will tip to being a negative force that will cause high quality content produers to turn away and pursue other methods of financial gain.  If that were to happen, we might regret allowing deflation to run rampant on the Web.

All the focus on the Pope's departure from the Vatican has got me thinking about the meaning of religion.  Those ruminations have led me to a surprising conclusion:  one of the reasons the force of entrepreneurship has become so powerful in recent years around the world is that entrepreneurship has evolved into a global religious movement.

Wikipedia defines religion as follows:

Religion is an organized collection of belief systems, cultural systems, and world views that relate humanity to spirituality and, sometimes, to moral values.

Similarly, the start-up world has evolved into a set of shared beliefs and values.  For example, the notion of Pay it Forward has become a core part of the entrepreneurial ethos.  In religious communities, when someone is in need, the community rallies around them.  People do kind things to other people just because it is the right thing to do.  The start-up world has a similar share value - investors, CEOs and service providers throughout the entrepreneurial ecosystem are always willing to lend a hand, donate time and provide guidance and counsel.  When I talk to entrepreneurs I've never met before, I always have a sense that we are kindred spirits on a shared journey.  There is an immediate connection and mutual respect, just as I feel when I meet a member of my religion (Judaism).

The canonical texts of the entrepreneurial world are firmly established and widely read.  Although they haven't sold as well as the Bible, there are a set of books that nearly every member of the entrepreneurial ecosystem has read, including:  Crossing the Chasm, The Lean Start-Up and Four Steps to the Epiphany.  Even those who have not studied these books and their derivative works are familiar with the concepts.  

The cultural force of entrepreneurship is a powerful one.  This force and the cultural norms they impose can vary from the profound (it is no longer ok to look down on the "little guy/gal" in business, young people are now listened to more carefully and given more opportunities to have an impact) to the mundane (it is now ok to wear jeans to a serious professional meeting, it is no longer ok to pull out a Blackberry in a meeting as opposed to the iPhone).  The binds that tie the community together are strong.  I can walk into a start-up event in Sao Paolo, Jakarta or Little Rock and have the same dialog about the same concepts - just as I can when I walk into a synagogue on Friday night anywhere in the world and feel at home.

The prophets of entrepreneurship have been firmly established.  Paul Graham, Steve Blank, Eric Ries and a few others have risen to a status such that anything they say or write is followed closely by hundreds of thousands of followers.  The entrepreneurial community reads all the same blogs and debates the same issues around the world.  Certain corporate leaders, such as Steve Jobs (who, arguably, was practically deified in the wake of his tragic death) are also viewed with such reverence that they can command massive followings and sway opinion.

I could go on, but you get the point.  I'm not sure what to do with this observation, but I think it represents a profound undercurrent that drives the start-up system in a very positive way.  I'd be curious if others see it similarly.

 

Despite being a Wharton and MIT guy, my friend Fred Wilson has been kind enough to attend my class at HBS for the last few years.  Yesterday was another terrific one.

Instead of a final exam, I assign my students the task of blogging.  You can see the the class blog here, where the students wrestle with the limitations of the lean methodology, challenges in seeking product-market fit, premature scaling and other important startup topics.

I encouraged the students to live tweet the class and it was a huge success.  You can see the Twitter stream from the class here.  A few highlights/quotes that I thought were particularly salient:

"We should always bet on the team and, in this case, ignored that it looked like a niche market." (Fred on lessons learned on passing up the opportunity to invest in AirBnB)

 "It’s a lot better to fail with professional investors’ money than with friends and family money. We’re used to losing money."

"Don't let your own reality distortion field convince you, as a founder, that you've hit product market fit."

"As an entrepreneur, stay a 'free agent' as long as possible." (i.e., don't pick a VC  partner too early in your lifecycle - Union Square and Flybridge aside...:-)

"[When pitching investors,] focus on the big vision, how you will be the market leader in 10 years, don't get stuck in the operational details."

On career choices:  "You'll learn more doing your own startup [versus joining someone else's]. But doing a startup for the sake of doing a startup isn't a good idea. "

"VCs look for passionate, authentic founders who actually believe they can defy gravity" (I think this was me but Fred seemed to agree)

"There's value in having a founding team with a crazy person with vision alongside a cofounder grounded in logic and analytics."

Thanks again to Fred for coming out and helping make a memorable class experience!

 

Living the startup life is a hard roller coaster.  One day you think you're on the verge of building a billion-dollar company, the next you wake up in a cold sweat, paranoid that you are about to run out of cash and have to shut the whole thing down.

There a lot of good books on how to develop a customer value proposition, rigorously test it and raise money.  But I have never seen a book address the hard issues of how to live your life while you're working 80 hours a week trying to do all those things.  Until now.

My friend, Brad Feld, has written precisely that book with his wife Amy Batchelor, called Startup Life. The couple tackle how to manage your relationship with your significant other while trying to live in the mad, crazy, demanding world of startups.  Nothing is off limits for this book - Brad shares how he screwed up his first marriage, how they manage their highs and lows together and even addresses the topic of how to find time for sex while running startup.

Brad asked me to share a few thoughts on my perspective on the topic and whether I had any additional tips.  I have been happilly married for 19 years and have known my wife, Lynda, over 25 years (we met our first day freshman year in college while moving in to the same dormitory entryway).  Like Amy, Lynda is not in the startup world at all, but rather has a completely different work and personal profile than I do (she is a former professional Broadway-style performer and is now a pioneer in the world of aging and multi-generational programming).  Additional context:  we have three kids (now ages 16, 13 and 10).  Brad and Amy don't have kids, so they were light on addressing this additional challenge - a topic I struggled with when I was an entrepreneur and still struggle with today as a multi-tasking, over-scheduled venture capitalist trying to be an accessible, loving Dad for my three high-energy children.  

Be Predictable, Even If It's Bad News.  

One of the hardest thing about being an entrepreneur is the unpredictable schedule you face.  A customer calls with a bug and there's a crisis.  A new product needs to get pushed out the door and it's a crisis.  Or you're trying to raise money and you need to prepare all night for tomorrow's investor meeting.  It would drive my wife absolutely nuts when I would say I would be home by a certain time, and then not show up until one or two hours later.  Dinner would be cold, kids would be mad and all hell would break loose.  

I finally swore I'd get better at is keeping track of time and setting expectations better with my wife about when I come home.  So we developed a system together:  at the beginning of each month, I email her when to expect me home at night that month (or not at all if travelling) with a 15 minute range.  Many nights the range is "945-1000pm" if I'm in NYC that day or have an evening event.  But it is what it is and I don't try to sugercoat it.  Then, I work very hard to stick to that hour, treating that deadline as if it were a meeting with an entrepreneur or a portfolio company board meeting.  If I know I am going to miss the deadline for being home (sure, stuff comes up), I always give her the heads up.  This creates a sense of predictability for her and the kids.  

If I see my kids in the morning (which is rare, although I'm working on that), I will tell them verbally what time to expect me rather than try to hide from the fact that I'm travelling or working late that day.  This avoids my family getting more frustrated with my unpredictable schedule than my actual schedule!

You're Just Not That Interesting.

In my early startup days, and the early days of the Internet, we used to refer to the crazy pace that we were living as "Internet Time".  There was this feeling that everyone else was living a slower pace than we were.  Indeed, to me, my 12-14 hour work day was chock full of a week's worth of stories, characters and drama.  Subconsciously, I thought my day-to-day was more exciting than my wife's and would come home eager to share all the drama.  After a few years, I began to realize that as interesting and dramatic as my work life is to me, it's really not that interesting to Lynda.  She cares about the big things, of course, and she cares about how I'm feeling about it, but the ups and downs about new product releases and who's missing the quarter and what competitors are doing are all just noise to her.

So my mantra now is, my work life just isn't that interesting to my family.  I share with them the top-line highs and lows, but I don't think my wife could name each of my portfolio companies.  Instead, when I come home, I focus on them:  the ups and downs of my kids social and academic lives; the ups and downs of my wife's work and social life.  In my head, I try to keep it to "80% them, 20% me" sharing time.  I'm sure it ends up more balanced, but if I aim for 20%, I know I'll come home focused on them rather than on me.  To be clear, I love my work and love being consumed in it.  It's just not that interesting to the four other members of my household.  And I'm ok with that.

Find Together Projects.

My wife and I operate in different professional worlds, but we have found that we love collaborating together on projects beyond the raising of our three kids.  Raising our kids takes an enormous amount of thought and energy.  The topic of our children often dominates our private time together.  We have discussions and make decisions each week about their activities, their school work, who to have a sleepover, who is picking them up when (during the weekend, we often switch to "taxi driver" mode) and what they should do for the summer.  But, we have found that having "adult projects" that we collaborate on is also very rewarding.  We have pored energy into various non-profits, our synagogue and our kids' schools as a way of making a difference, yes, but also spending our outside work time together.  Thus, although our professional communities are very separate, our personal and social communities are totally integrated.

In addition to those few tips and reading Amy and Brad's books, I recommend a few other books:

• The Three Big Questions For a Frantic Family by Patrick Lencioni.  Lencioni is one of my favorite business book writers (see this blog post on his work on team dysfunction) and so this book was a refreshing way to apply some of his core business lessons to family management.
• Raising Cain by Daniel Kindon and Michael Thompson.  I have two boys.  I have read this book twice - once when they were recently born and again recently as they move into the world of teenagers and found both sessions incredibly helpful and informative.
• Nurture Shock: New Thinking About Children by Po Bronson and Ashley Merryman.  David Kidder of Clickale suggested this one to me and I have enjoyed it as a book that cuts against conventional wisdom in many areas of raising children.
• The Talent Code:  Greatness Isn't Born, It's Grown. Here's How by Daniel Coyle.  My partner Jon Karlen recommended this one to me.  Jon was an all-American squash player and his wife was a 12-letter athlete (!) at Harvard, so I take his recommendations about raising talented kids seriously!

Good luck with your own journey for balance and happiness!

I was in synagogue last weekend for a cousin's bat mitzvah and was struck by the entrepreneurial lessons from the weekly Torah portion.  The portion was Exodus 18, where Jethro, Moses' father-in-law, sits down with him and gives him some mentorship:

What is this thing that you are doing for the people? Why do you alone sit, and all the people stand before you from morning until evening...The thing that you do is not good. Both you and these people who are with you will surely wear yourselves out. For this thing is too much for you; you are not able to perform it by yourself.

Moses is the ultimate entrepereneur, trying to do it all himself.  He leads the Israelites out of slavery from Egypt (nice vision!) and then is forced to execute on creating a new society and way of life for his people.  It's too much for one person to bear.  

So like any good mentor, Jethro gives it to him straight - you are going to burn out.  You need to delegate.  Find some good people you trust and let them deal with the minor issues.  Focus your energy on finding the right people, put them in a position to succeed and then save yourself for the really big decisions.

Pretty good advice for an entrepreneur.