Category Archives: Starting a Business
No Let’s Not Have Meetings; Let’s Effing Do It
I love this quote:
“I remember a great quote from Andrea Breanna, former CTO of the Huffington Post, which went something like ‘Lets have an idea on Monday. Instead of having lots of meetings about that idea, lets just effing do that idea. By Wednesday we’ll have realized the flaw and iterated … and by Friday it’s either executed or almost done.’”
That’s from a post called Titanic vs speedboat: four tips for publishers in the digital age by @JamesHaycock in Brand Republic News. 
Andrea Breanna is my daughter and founder of Rebelmouse. And that quote is a perfect description of my take on entrepreneurship. Don’t spend too much time talking about it. Instead, do it, quickly, and then watch results and change it quickly too if it didn’t work. That’s good for most startups.
A related quote:
“Perfect is the enemy of Done.”
That one get’s attributed to multiple authors, going back to as far as Voltaire, also Jim Collins, and others. It’s one of my favorite quotes. And it means: “No, let’s not have a lot of meetings. Let’s just do it.”
(Image: that’s the Rebelmouse logo)
Trading Ownership for Services is Risky Business
Over the holidays I received this question from my ask-me form on my timberry.com website:
In todays economy with corporate streamlining and all that technology has to offer, how can one attract investment in the form of an ‘equity swap’? I am in need of web development and am willing to trade this for a generous portion of the company. [Business description omitted]
My answer:
Would you marry somebody you’d never met?
Never use shares of ownership to pay for services. What you’re calling an equity swap is really a bad idea. Sharing a company is an intimate partnership for the rest of that business’ life. It’s like marrying somebody you’ve never met, the business equivalent of a mail-order bride. Minority shareholders end up with some serious rights regarding second-guessing your strategy, your decisions. Having an incompatible partner in business is a really bad situation.
There are exceptions to this rule: When you have somebody you know well, trust, would be happy to work with forever and ever, who also provides a service, that can be ideal. But you already have the relationship. This is somebody you’d be pleased to partner with.
And furthermore, finding a way to trade money now for money later, the underlying idea, is not so bad. But do it right.
A couple of years ago I wrote 5 non-traditional ways to get startup funding, which is still valid. Find entrepreneurial web development that will work for percent of future revenues, or royalties, or some innovative formula like “I’ll pay you three times more if I make it, so you share the risk.”
I have real experience with this, with my own company. In the early days of Palo Alto Software I found programmers for hire who agreed to work for a small minimum fee plus a percent of future revenues. It was win-win. They made good money eventually, way more than they would have if they hadn’t agreed to take a risk. And I found a way to get started without having any capital. It was really a good deal for all.
However, they never had a share in the ownership of the company. We owed them money. Not shares.
Also, in the interest of full disclosure, I benefitted enormously from a deal like this as a consultant and service provider, once. Some 30 years later, I’m still grateful to Philippe Kahn (founder of Borland International) for that one. But that was one of the exceptions.
(Image: wikimedia creative commons)
How — and how not — to Find a Mentor
So you want a mentor to help you start or grow your business?
Never ask somebody to be your mentor. Instead, ask a person who might be a mentor a specific question. Find a question an expert can answer quickly without having a lot of specific knowledge about your case in detail. Make it a question that’s interesting or even fun to answer.
If you get an answer, follow quickly with thanks. And follow not so quickly with another question, ideally a follow-up to that first question. After that, another question. Find a way to show thanks — testimonials are nice — and keep asking. But go slow.
The best mentoring I’ve seen happened without the formal label “mentoring.” Nobody asked anybody to go steady, nobody gave anybody a ring. Thoughts were shared and advice given, and it was clearly helpful.
And my apologies to the exceptions. I’m sure some formal mentorship programs work. Volunteer mentors always have good intentions. There are exceptions to every rule. Still, what I’ve seen in practice is this:
Mentorship is far more likely when it isn’t formally packaged as mentorship
8 Successful Companies That Had to Pivot (Infographic)
My thanks to Paula Andruss for this infographic on Entrepreneur.com:
The Best-Kept Secrets of Startups
I’m amazed at the quality of questions and answers on Quora. Do you know Quora? If not, you’re missing a really intriguing resource.
Recently I found this question on Quora:
What are the best-kept secrets about startups? What are some things that people could benefit from knowing that is largely secret – in the sense that very few people know about it?
There are some great answers there. Furthermore, the voting on answers puts them in exactly the same order I’d put them. The most popular answer has more than 800 votes:
The startup CEOs who get asked to tell their stories have survivorship bias. They get to tell their stories looking backwards and fit a narrative that makes it all make sense and where every move was part of a master plan. I think a much more realistic but less flattering version that most could tell: Our hair was on fire the whole time. We thought we were going out of business until the day we sold. There’s a lot of luck involved. Told anonymously because if you ask me publicly, I’ll tell you the exact opposite of this story.
That’s the best possible answer. And please note the last sentence, which doubles its value.
And the next highest answers, in order:
- You don’t have to re-invent the wheel to be successful.
- It’s often about choosing a hard enough problem — though not too hard a problem! — and being the “last one standing” when opportunity comes a-knocking.
- You don’t have to move to the Bay Area to be successful.
And it goes on from there, with answers very much worth reading.
When is the Right Time to Start a Company
I really like this 2-minute explanation Stanford’s Entrepreneurship Corner: Steve Teig, Tabula – Right Time to Start a Company. He’s clearly focusing on tech companies and the web, but the principals apply elsewhere if you use your imagination.
http://ecorner.stanford.edu/embeddedPlayer.html?mid=3210&width=500
If for any reason you don’t see the video here, you can click this link to go to the original on Stanford’s scorner.
Crowdfunding is Being Oversold
I think so-called “crowdfunding” is being oversold. Many people seem to think it’s going to mean a lot new investment money for U.S. startups. I don’t think so. Not yet. Maybe never.
Crowdfunding, unfortunately, has become one of those bucket terms, that mean different things to different people. I use the term for ease of restrictions on small business and startup investments so more people can invest smaller amounts. And invest means buy shares of ownership. It’s risk investment. I really like KickStarter and the like, platforms startups can use to get financing help in return for prizes, advance purchases, and donations. But that’s not what I’m writing about here. It’s not risk investment.
Maybe that’s why there is so much action on the web. Lots of offers. A google search (my illustration here) would indicate crowdfunding is everywhere. Half a million hits.
The JOBs act of 2012 talked about it. Crowdfunding advocates celebrated., but hasn’t changed much. According to reports in VentureBeat and elsewhere, the most recent SEC ruling has as much bad news as good news for startups and angel investors. And some say the latest regulations make things worse, not better. The best summary I’ve seen of that negative view is Naval Ravikant’s letter to the SEC last month. Naval is the founder of Angellist. I posted my view on that a few weeks ago on Huffington Post, talking about some good news and some bad. And Alan McGlade has a good analysis posted as Crowdfunding will Flourish Regardless of What the SEC Does in Forbes.com yesterday.
Action point? Conclusion? If you’re one of those people thinking crowdfunding is coming soon, don’t hold your breath.
Q&A: Is This Partner Arrangement Fair?
I get these emails, summarizing one side of an argument, asking me to guess or comment on fairness. For example, in an email I just received, the one asking me has worked for 18 months “with significant intellectual contribution.” He’s apparently resenting the other partner, who has shelled out $560,000 and wants a guaranteed payback before other partners get it, and ends up with 65% ownership. The question:
Isn’t that excessive?
I can’t even start to answer that without asking questions first:
- Was there no agreement before you started those 18 months working? Really? Or are you wanting to change what you agreed?
- Did you put in no money? If not, did you work for ownership, without being paid? And if you didn’t work for free, then why doesn’t the partner who put in all the money and paid your salary own it completely? Why only 65%? How can that be excessive?
My advice is to get professional help. Ideally you find somebody you can both trust, with some professional qualifications and experience, and talk it through. Make sure that person understands business, business law, and small business.
There are people who have licenses and professional qualifications to call themselves mediators. Pay somebody to help you solve this.
What I particularly hate in this context is when people spend the time and do the work and develop the business without spelling these things out, and then, when it’s way too late, discover that they had radically different ideas about who owns what.
Way too often, you can add up the percent of ownership in the heads of the partners and discover between them they think they own like 200% of the company. That’s because one thinks the idea was worth 50% or more of the ownership, the other thinks the day-to-day work was worth 50% or more of the ownership, and another thinks having written checks and invested was worth 50% or more of the ownership.
My first instinct is to go with the money. The one who put in all the money deserves all the ownership. That’s simple enough.
On the other hand, if two partners agreed that one would earn ownership by working for free or less than market rate, then that can equate to money. Or if one contributes existing intellectual property such as written material or software code, that can equate to money too. But that should be spelled out and agreed upon before you start.
And I personally don’t believe having had the idea, or not, matters. Ideas have no value. Work has value. Creative work and patents have value. Content has value. And money has value. Ideas don’t.
To me this is yet another example of why I’ve said, and written, over and over again, get it in writing. Not necessarily all legalese like a contract, but at least the basic points of agreements, with signatures. Here‘s what one lawyer (and I’m not a lawyer, so don’t think I’m giving you legal advice here) says about that:
It goes without saying: the best way to deal with a botched verbal contract is to avoid the whole mess in the first place. Get it in writing. People remember things differently. People don’t remember. People lie.
Get it in writing. And then stick to it.
Don’t Drown in That Wave of Bad Startup Advice
“The availability and ubiquity of bad advice has exploded over the past few years,” writes Dave Lerner in How To Avoid Bad Startup Advice. Amen to that. He explains it very well:
This is due to many factors, the primary one being the tidal wave of entrepreneurship washing across the country, which has brought to shore not only many great things, but also a great deal of flotsam and jetsam.
The tremendous personal broadcasting medium of Twitter, as well as blogs, have allowed for an extreme amount of entrepreneurship discussion and advice—so the bad and the good are now delivered via the same firehose and with the same breathless intensity. Who can you trust?
It’s easy to note that wave, and I’ve posted here on bad advice; but Dave, to his credit, offers a specific list of “red flags” to avoid. My favorite is this one:
You go in to talk about your consumer Internet startup and the first person you get paired-up with as a “mentor” is an IP attorney who encourages you to file some patents and “protect your idea.” (Translation: No one knows what they’re doing here—consumer Internet is not patentable, and you better start running away fast.)
That’s just one of several. His list is definitely worth a read.
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